SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20429
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file Number 333-16867
Outsourcing Solutions Inc.
(Exact name of registrant as specified in its charter)
Delaware 58-2197161
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (314) 576-0022
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
None None
Securities registered pursuant to Section (g) of the Act:
None
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 if this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is not determinable, as the stock is not publicly traded.
APPLICABLE ONLY TO CORPORATE REGISTRANTS: As of March 17, 1998, the following
shares of the Registrant's common stock were issued and outstanding:
Voting common stock 3,425,126.01
Class A convertible nonvoting common stock 391,740.58
Class B convertible nonvoting common stock 400,000.00
Class C convertible nonvoting common stock 1,040,000.00
------------
5,256,866.59
============
DOCUMENTS INCORPORATED BY REFERENCE: None
<PAGE>
PART I
ITEM 1. BUSINESS
General
Outsourcing Solutions Inc., a Delaware Corporation (the "Company" or "OSI") was
formed on September 21, 1995 to build, through a combination of acquisitions and
sustained internal growth, one of the leading providers of accounts receivable
management services.
In September 1995, OSI initiated this strategy with the acquisition of
Atlanta-based Accounts Portfolios, L.P. ("API"), one of the largest purchasers
and managers of non-performing accounts receivable portfolios. In January 1996,
OSI acquired Continental Credit Services, Inc. ("Continental") and A.M. Miller &
Associates ("Miller"), two industry leaders in the contingent fee business.
Continental, which is headquartered in Seattle and operates in eight western
states, provides contingent fee services to a wide range of end markets, with
particular emphasis on public utilities and regional telecommunications. Miller,
based in Minneapolis, provides contingent fee services to the student loan and
bank credit card end markets.
In November 1996, OSI acquired Payco American Corporation ("Payco") with
corporate offices in Brookfield, Wisconsin. Originally founded as a contingent
fee service company, Payco has diversified into other outsourcing services such
as student loan billing, health care accounts receivable billing and management,
contract management of accounts receivable and teleservicing. Upon completion of
the Payco acquisition, the Company became one of the largest providers of
accounts receivable management services in the United States.
In October 1997, OSI acquired North Shore Agency, Inc. ("NSA"), a fee service
company headquartered in Long Island, New York. NSA specializes in "letter
series" collection services for direct marketers targeted at collecting small
balance debts. The majority of NSA's revenues are generated from traditional
contingent collections utilizing letters with the remaining revenues derived
from fixed fee letter services.
In November 1997, OSI acquired Accelerated Bureau of Collections, Inc. ("ABC").
ABC is a Denver-based national fee service company. ABC specializes in credit
card collections and derives approximately 25% of its revenues from early-out
programs with the remaining 75% of revenues derived from standard contingent fee
collections.
In December 1997, the Company entered into a Share Purchase Agreement and Plan
of Merger (the "Merger Agreement") with The Union Corporation ("Union") pursuant
to which Union will become a wholly-owned subsidiary of the Company. The Company
expects to complete the transaction by April 1998.
Industry
As a result of the rapid growth of outstanding consumer credit and the
corresponding increase in delinquencies, credit grantors have increasingly
looked to third party service providers in managing the accounts receivable
process. In addition, rapid consolidation in the largest credit granting
industries, including banking, health care, telecommunications and utilities,
has forced companies to focus on core business activities and to outsource
ancillary functions, including some or all aspects of the accounts receivable
management process. Contingent fee companies dominate the accounts receivable
management industry, with the American Collectors Association estimating that in
1996 there were approximately 6,000 contingent fee agencies. The industry is
currently characterized by a high degree of fragmentation with a corresponding
trend in recent years toward consolidation. Over the past twenty years the
number of contingent fee providers has decreased by approximately twenty percent
and, between 1992 and 1995, the ten largest contingent fee providers increased
their market share from 15% to over 42%.
The accounts receivable management industry has undergone rapid growth over the
past fifteen years. According to the industry research firm of M. Kaulkin &
Associates, account placements to servicers increased at a compounded annual
growth rate of 13.1% from 1980 to 1994 and are projected to continue to grow at
8.5% from 1994 to 2000. New placements in 1994, the last year for which data is
available, totaled $84.2 billion and are expected to grow to $137 billion in
2000. According to the Nilson Report, a leading expert in payment systems, the
total amount of revenues generated by all contingent fee companies was
approximately $5.0 billion in 1995. Two significant trends in the consumer
credit industry are primarily responsible for this industry growth. First,
consumer debt (a leading indicator of current and future business for accounts
receivable management companies) has increased dramatically in recent years.
Between 1990 and 1995, total consumer debt increased 37% from $3.6 trillion to
almost $5.0 trillion. Second, in an effort to focus on core business activities
and to take advantage of the economies of scale, better performance and lower
cost structure offered by accounts receivable management companies, many credit
grantors have chosen to outsource some or all aspects of the accounts receivable
management process.
The customer base for the accounts receivable management industry is dominated
by credit issuers in four end-markets: banks/bankcard, health care, utilities
and telecommunications. According to the American Collectors Association, these
four industries accounted for $66.7 billion in account placements in 1994, or
nearly 80% of the total placement volume. Other significant sources of account
placements for the industry include retail, student loan agencies and oil
companies. The Company believes that the ongoing consolidation in the banking,
utilities, telecommunications and health care industries will create larger
national customers seeking to place accounts with accounts receivable management
companies that have the resources to offer national rather than local and
regional coverage.
The accounts receivable management industry is closely regulated by federal laws
such as the Fair Debt Collection Practices Act ("FDCPA") and similar state laws.
Contingent fee services are the traditional services provided in the accounts
receivable management industry. Creditors typically place non-performing
accounts after they have been deemed non-collectible, usually when 90 to 120
days past due. The commission rate is generally based on the collectability of
the asset in terms of the costs, which the contingent fee servicer must incur to
effect repayment. The earlier the placement (i.e., the less elapsed time between
the past due date of the receivable and the date on which the debt is placed
with the contingent fee servicer), the higher the probability of recovering the
debt, and therefore the lower the cost to collect and the lower the commission
rate. Creditors typically assign their charged-off receivables to contingent fee
servicers for a six to twelve month cycle, and then reassign the receivables to
other servicers as the accounts become further past due. There are three main
types of placements in the contingent fee business, each representing a
different stage in the cycle of account collection. Primary placements are
accounts, typically 120 to 270 days past due, that are being placed with
agencies for the first time and usually receive the lowest commission. Secondary
placements, accounts 270 to 360 days past due, have already been placed with a
contingent fee servicer and usually require a process including obtaining
judgments, asset searches, and other more rigorous legal remedies to ensure
repayment and, therefore, receive a higher commission. Tertiary placements,
accounts usually over 360 days past due, involve legal judgments, and a
successful collection receives the highest commission. Customers are
increasingly placing accounts with accounts receivable management companies
earlier in the collection cycle, often prior to the 120 days past due typical in
primary placements, either under a contingent fee or fixed fee arrangement.
While contingent fee servicing remains the most widely used method by creditors
in recovering non-performing accounts, portfolio purchasing has increasingly
become a popular alternative. Beginning in the 1980's, the Resolution Trust
Company and the Federal Deposit Insurance Company, under government mandate to
do so, began to sell portfolios of non-performing loans. Spurred on by the
success of these organizations in a selling charged-off debt, other creditors
likewise began to sell portfolios of non-performing debt. Management estimates
the total principal value of purchased portfolios at between $2.5 and $5.5
billion per year, and based on the Company's experience, the annual growth rate
of the portfolio purchasing market segment for the period 1990 to 1995 was
between 50% and 80%. The largest percentage of purchased portfolios originate
from the bank card receivable and retail markets and are typically purchased at
a deep discount from the aggregate principal value of the accounts, with an
inverse correlation between purchase price and age of the delinquent accounts.
Once purchased, traditional collection techniques are employed to obtain payment
of non-performing accounts.
Accounts receivable management companies have responded to the increasing need
of credit granting companies to outsource other related services as well. Due to
the rapid growth in consumer credit, credit grantors need assistance in managing
increasingly large and complex call centers and accounts receivable management
companies have stepped in to provide a variety of services. These services
include, among others, third-party billing services and customer teleservicing.
Accounts receivable management companies have found that their traditional
experience in managing a large staff in a telephone-based environment provides a
solid base for entering into these relatively new and rapidly growing market
segments.
The accounts receivable management industry has progressed in technological
sophistication over the past several years with the advancement of new
technology. Today, leading companies in this industry use proprietary databases,
automated predictive dialers, automatic call distributors and computerized skip
tracing capabilities to significantly increase the number of quality
interactions with debtors. This technological advancement is helping to
accelerate industry consolidation and facilitates providing related accounts
receivable management outsourcing services. The firms which have the most
efficient operating system and can best use credit information typically collect
more funds per account dollar and thus are awarded disproportionately more new
accounts.
Business Strategy
The Company's market position and breadth of services distinguishes it as one of
the leading providers of accounts receivable management services in the United
States. The Company's business strategy is to expand this position through the
following initiatives:
FULL SERVICE PROVIDERS/CROSS-SELLING SERVICES TO EXISTING CUSTOMERS. The
Company is a full service firm which currently offers its customers a wide array
of accounts receivable management options beyond traditional contingent fee
services, including letter series and higher margin portfolio purchasing,
contract management of accounts receivable, billing and teleservicing. This
range of services allows the Company to cross-sell its offerings within its
existing customer base, as well as to potential customers in specifically
targeted industries.
EXPANSION OF CUSTOMER BASE. Two of the most important determinants in
selecting an accounts receivable management service provider are reputation and
experience. As the Company develops expertise and recognition with customers in
a particular industry, it markets that expertise to other credit grantors in the
industry. In addition, consolidation in the bank, retail, utility, student loan,
health care and telecommunications industries has created national customers who
are moving part or all of their accounts receivable collection management
business to national service providers. With the ability to offer its services
in all 50 states and experience in successfully managing a high volume of
placements on a national basis, the Company is well positioned to benefit from
this consolidation trend. The Company is also focused on increasing its business
with government agencies at the federal, state and local levels, many of which
have begun to outsource accounts receivable functions for items such as taxes
and student loans to private companies.
LEVERAGING TECHNOLOGY. The Company has invested aggressively in
technological innovations to enhance its competitive advantages over smaller
competitors. The Company has hardware and proprietary software, including
debtor-scoring models and debtor databases, which the Company believes, provides
it with a competitive advantage in pricing portfolios and collecting amounts
from debtors. In addition, the Company utilizes automated predictive dialers and
skip tracing databases in order to allow account representatives to work
accounts more efficiently. Through interface with creditor computer systems, the
Company can efficiently receive new account placements from customers daily and
provide frequent updates to customers on the status of accounts collections. As
the Company begins to provide more comprehensive outsourcing services, the
Company becomes more integrated with its customers' systems, making switching
vendors both costly and inefficient.
GROWTH THROUGH ACQUISITIONS. The Company has built its position through
strategic acquisitions of accounts receivable service providers in each of the
markets in which it participates. The Company plans to selectively pursue
additional acquisitions which complement its existing services or increase its
customer base.
Services
The Company is one of the largest providers of accounts receivable management
services in the United States. The Company offers its customers contingent fee
services, portfolio purchasing services and related outsourcing services.
CONTINGENT FEE SERVICES. The Company is one of the largest providers of
contingent fee services in the United States. The Company offers a full range of
contingent fee services, including early-out programs and letter series, to all
consumer credit end-markets. The Company utilizes it sophisticated MIS and vast
experience with locating, contacting and effecting payment from delinquent
account holders in providing its core contingent fee services. With 53 call
centers in 25 states and approximately 4,100 account representatives, the
Company has the ability to service large volume of accounts with national
coverage. In addition to traditional contingent fee services involving the
placement of accounts over 120 days delinquent, creditors have begun to demand
services in which accounts are outsourced earlier in the collection cycle. The
Company has responded to this trend by developing "early-out" programs, whereby
the Company receives placed accounts that are less than 120 days past due and
earns a fixed fee per placed account rather than a percentage of realized
collections. These programs require a greater degree of technological
integration between the Company and it's customers, leading to higher switching
costs. The Company primarily services consumer creditors although the Company
has a growing presence in the commercial collection business, offering
contingent fee services to commercial creditors as well.
PORTFOLIO PURCHASING SERVICES. The Company offers portfolio purchasing
services to a wide range of educational institutions, financial institutions,
government agencies and retailers. The Company purchases large and diverse
portfolios of non-performing consumer receivables both on an individually
negotiated basis as well as through "forward flow" agreements. Most individually
negotiated transactions involve tertiary paper (i.e., accounts that are between
180 to 360 days past due). Under forward flow agreements, the Company agrees to
purchase charged off receivables on a monthly basis as they become past due.
Creditors selling portfolios to the Company realize a number of benefits,
including increased predictability of cash flow, reduction in monitoring and
administrative expenses and reallocation of assets from non-core business
functions to core business functions.
The Company's purchased portfolios consist primarily of consumer loans and
credit card receivables, student loan receivables and health club receivables,
including portfolios purchased under forward flow agreements. Consumer loans
purchased include automobile receivables, mobile home receivables and commercial
real estate receivables. The Company's most recent portfolio acquisitions have
been primarily purchases pursuant to the Company's health club and bank card
forward flow agreements. The Company continues to pursue acquisitions of
portfolios in various industries for individually negotiated purchases.
The Company has recently established a sourcing relationship with Sherman
Financial Group, L.L.C. ("Sherman"). Sherman's focus is singularly on developing
a distressed debt business on behalf of the Company. The Company expects to
benefit from Sherman's existing client relationships, industry marketing
expertise, pricing technology and negotiating expertise with illiquid products
in "one-off" transactions.
RELATED OUTSOURCING SERVICES. As the volume of consumer credit has expanded
across a number of industries, credit grantors have begun demanding a wider
range of outsourcing services. In response, the Company has developed a number
of other accounts receivable management services. The Company leverages its
operational expertise and call and data management technology by offering the
following services: (1) contract management, through which the Company performs
a range of accounts receivable management services at the customer's location,
(2) student loan billing, whereby the Company provides billing, due diligence
and customer service services, (3) health care accounts receivable management,
whereby the Company assumes responsibility for managing third-party billing,
patient pay resolution, inbound and outbound patient communication services and
cash application functions, and (4) teleservicing, whereby the company offers
inbound and outbound calling programs to perform sales, customer retention
programs, market research and customer service.
Sales and Marketing
The Company has a sales force of approximately 130 sales representatives
providing comprehensive geographic coverage of the United States on a local,
regional and national basis. The Company also markets its services in Puerto
Rico and Mexico. Each of the operating companies maintain its own sales force
and have a marketing strategy closely tailored to the credit-granting markets
that it serves. The Company's primary sales and marketing objective is to expand
its customer base in those customer industries in which it has a particular
expertise and to target new customers in high growth end markets. The Company,
through its established operating company brand names, emphasizes its industry
experience and reputation--two key factors considered by creditors when
selecting an accounts receivable service provider. Increasingly, the Company
will focus on cross-selling its full range of outsourcing services to its
existing customers and will use its product breadth as a key selling point in
creating new business. The Company's overall sales and marketing strategies are
coordinated by the corporate office Chesterfield, Missouri, which is also
responsible for monitoring the sales performance of each of the operating
entities.
Customers
The Company's customer base includes a full range of local, regional and
national creditors. The company's customers include American Express, Citicorp,
Bally's, Time Warner, Discover Card, Ameritech, US West, AT&T, First USA,
Columbia House, New Jersey Department of Treasury, and various student loan
guaranty agencies (including the California Student Aid Commission, USA Group
Guaranty Services Inc. and the Great Lakes Higher Education Corporation). The
Company's largest customer accounted for less than 10% of 1997 revenues.
Employees
The company employs approximately 5,000 people, of which 4,100 are account
representatives, 130 are sales representative and 770 work in
corporate/supervisory and administrative functions. None of the Company's
employees are unionized, and the Company believes its relations with employees
are satisfactory.
The Company is committed to providing continuous training and performance
improvement plans to increase the productivity of its account representatives.
Account representatives receive extensive training in a classroom environment
for several days on Company procedures, information systems and regulations
regarding contact with debtors. The training includes technical topics, such as
use of on-line collection systems and skip-tracing techniques and tools, as well
as instruction regarding the Company's approach to the collection process and
listening, negotiation and problem-solving skills, all of which are essential to
efficient and effective collections.
Account representatives are then assigned to work groups for a training period.
Initially, the trainees only screen incoming calls. This allows less experienced
account representatives to communicate with debtors in a less confrontational
environment than may be experienced with outgoing calls. Additionally, the
trainees are assigned accounts, which based upon scoring by the Company's
information systems, have a higher likelihood of collection. After the training
period, the account representatives begin working accounts directly.
Competition
The accounts receivable management industry is highly fragmented and
competitive. According to the American Collectors Association, there are
approximately 6,000 contingent fee service companies in the United States, with
the 15 largest agencies currently receiving 33% of all accounts placed with
outside collection agencies. Competition is based largely on recovery rates,
industry experience and reputation and service fees. Large volume creditors
typically employ more than one accounts receivable management company at one
time, and often compare performance rate and rebalance account placements
towards higher performing servicers. The largest competitors include Deluxe
Corporation, Equifax Corporation, FCA International and G.C. Services.
Governmental Regulatory Matters
Certain of the Company's operations are subject to compliance with the FDCPA and
comparable statutes in many states. Under the FDCPA, a third-party collection
agency is restricted in the methods it uses to collect consumer debt. For
example, a third-party collection agency is limited in communicating with
persons other than the consumer about the consumer's request. Requirements under
state collection agency statutes vary, with most requiring compliance similar to
that required under the FDCPA. In addition, most states and certain
municipalities require collection agencies to be licensed with the appropriate
authorities before collecting debts from debtors within those jurisdictions. It
is the Company's policy to comply with the provisions of the FDCPA, comparable
state statues and applicable licensing requirements. The Company has established
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.
There have been no further developments in the Federal Trade Commission ("FTC")
inquiry at API. The FTC is conducting an informal inquiry to determine if API
has violated any provision of the FDCPA. The Company is fully cooperating with
the FTC and responding to any and all inquiries. The Company believes that the
ultimate resolution of the FTC's inquiry will not have a material adverse effect
on the financial position or results of operations of the Company.
Subsequent Event
On January 23, 1998, the Company acquired approximately 77% of the outstanding
shares of Union common stock for $31.50 per share. Pursuant to the Merger
Agreement, the Company agreed to acquire any of the remaining outstanding shares
of Union pursuant to a second-step merger in which holders of such shares will
receive $31.50 per share. The Company expects to complete the merger by April
1998. The aggregate purchase price of the common stock will be approximately
$192.0 million. The acquisition will be accounted for under the purchase
accounting method.
Union was originally a conglomerate involved in businesses ranging from
electronic and industrial components to financial services. Today, Union is a
leading provider of a range of outsourcing services to both large and small
clients. Union provides contingent and fixed fee collection services and other
related outsourcing services.
Union provides fee services through the following wholly-owned subsidiaries:
Allied Bond & Collection Agency, Inc. ("Allied"), Capital Credit Corporation
("Capital Credit"), and Transworld Systems, Inc. ("Transworld"). Allied,
headquartered in Trevose, Pennsylvania, provides contingent and fixed fee
collection services for large clients across a broad spectrum of industries.
Capital Credit, headquartered in Jacksonville, Florida, also provides contingent
and fixed fee collection services for large national clients primarily serving
the bankcard, telecommunications, travel and entertainment and government
sectors. Transworld, headquartered in Rohnert Park, California, is the largest
prepaid, fixed fee outsourcer of delinquent account management services.
Transworld's clients are primarily small companies with low balance delinquent
accounts. Transworld provides clients with a two phase system. Phase I is a
fixed fee, computer generated "letter series". Phase II is a traditional
contingent fee collection system designed to collect those accounts that are not
collected during Phase I. Union provides related outsourcing services through
its Interactive Performance, Inc. ("IPI") and High Performance Services, Inc.
("HPSI") subsidiaries. IPI, headquartered in North Charleston, South Carolina,
provides a range of credit and receivables management outsourcing services to
telecommunications companies primarily in the form of teleservicing. IPI's
services include inbound and outbound calling programs for credit authorization,
customer service, usage management and receivables management. HPSI,
headquartered in Jacksonville, Florida, provides services similar to IPI for
clients in the financial services industry.
Environmental Matters
Current operations of OSI and its subsidiaries do not involve activities
affecting the environment. However, Union is party to several pending
environmental proceedings involving the Environmental Protection Agency ("EPA")
and comparable state environmental agencies in Indiana, Maryland, Massachusetts,
New Jersey, Ohio, Pennsylvania, South Carolina, and Virginia. All of these
matters relate to discontinued operations of former divisions or subsidiaries of
Union for which it has potential continuing responsibility. Upon completion of
the Union acquisition, OSI will establish reserves that it believes will be
adequate for the ultimate settlement of these environmental proceedings.
One group of Union's known environmental proceedings relates to Superfund or
other sites where Union's liability arises from arranging for the disposal of
allegedly hazardous substances in the ordinary course of prior business
operations. In most of these "generator" liability cases, Union's involvement is
considered to be de minimus (i.e., a volumetric share of approximately 1% or
less) and in each of these cases Union is only one of many potentially
responsible parties. From the information currently available, there are a
sufficient number of other economically viable participating parties so that
Union's projected liability, although potentially joint and several, is
consistent with its allocable share of liability. At one "generator" liability
site, Union's involvement is potentially more significant because of the volume
of waste contributed in past years by a currently inactive subsidiary.
Insufficient information is available regarding the need for or extent and scope
of any remedial actions which may be required.
Union has recorded what it believes to be a reasonable estimate of its ultimate
liability, based on current information, for this site.
The second group of matters relates to environmental issues on properties
currently or formerly owned or operated by a subsidiary or division of Union.
These cases generally involve matters for which Union or an inactive subsidiary
is the sole or primary responsible party. In one such case, however, although
the affected subsidiary fully performed a settlement with the federal
government, the government has subsequently reopened the matter. A group of
financially solvent responsible parties has completed an extensive investigation
of this Superfund site under a consent order with the EPA and submitted Remedial
Investigation and Feasibility Study Reports (the "Reports") to the EPA, which
outline a range of various remedial alternatives for the site. The EPA issued a
proposed plan which was subject to public comments. Union's environmental
counsel retained several reputable environmental consulting firms to review and
evaluate the Reports and proposed plan. The findings of these experts indicated
that many of the assumptions, purported facts and conclusions contained in the
Reports and proposed plan are significantly flawed. These findings were
submitted to the EPA to challenge the perceived need for and the extent of the
proposed additional remediation. As previously reported by Union, a better
estimate of costs associated with any further remediation to be taken at the
site could not be made until a Record of Decision was issued by the EPA. The EPA
issued such Record of Decision for this site on February 6, 1998 and,
notwithstanding the information contained in the findings submitted by Union,
the cost to perform the remediation selected by the EPA for the site is
estimated by the EPA to be approximately $17.3 million. Notwithstanding the
foregoing and Union's denial of liability because of the prior settlement with
the government, the aggregate amounts reserved by Union for this site is $13.8
million, which represents Union's best estimate of the ultimate legal and
consulting costs for this site, costs to defend its aforementioned settlement
with the government regarding this site, and its portion of the remediation
costs that will ultimately be incurred by them, based on current information, if
Union's prior settlement with the government is not upheld in court. However,
Union may be exposed to additional substantial liability for this site as
additional information becomes available over the long-term. Actual remediation
costs cannot be computed until such remedial action is completed. Some of the
other sites involving Union or an inactive subsidiary are at a state where an
assessment of ultimate liability, if any, cannot reasonably be made at this
time.
It is Union's policy to comply fully with all laws regulating activities
affecting the environment and to meet its obligations in this area. In many
"generator" liability cases, reasonable cost estimates are available on which to
base reserves on Union's likely allocated share among viable parties. Where
insufficient information is available regarding projected remedial actions for
these "generator" liability cases, Union has recorded what it believes to be
reasonable estimates of its potential liabilities. Reserves for liability for
sites on which former operations were conducted are based on cost estimates of
remedial actions projected for these sites. All known environmental claims are
periodically reviewed by Union, where information is available, to provide
reasonable assurance that adequate reserves are maintained. Reserves recorded
for environmental liabilities are not net of insurance or other expected
recoveries.
ITEM 2. PROPERTIES
As of December 31, 1997, the Company and its subsidiaries operated 65 facilities
in the U.S., all of which are leased. The Company believes that such facilities
are suitable and adequate for its business. The Company's facilities are
strategically located across the U.S. to give effective broad geographic
coverage for customers.
ITEM 3. LEGAL PROCEEDINGS
At December 31, 1997, the Company was involved in a number of legal proceedings
and claims that were in the normal course of business and routine to the nature
of the Company's business. The Company has provided for the estimated uninsured
amounts and costs of defense for pending suits and management believes that
reserves established for the ultimate settlement of such suits are adequate at
December 31, 1997.
Payco and its wholly owned subsidiary Payco-General American Credits, Inc. were
party to a class-action lawsuit filed in July 1995 in the Circuit Court of
Etowah County, Alabama. The suit alleged that Payco-General American Credits,
Inc., which was performing contingent fee services on behalf of co-defendant
Transamerica Business Credit Corporation ("Transamerica"), committed violations
of the federal FDCPA and Alabama state law. In January 1996, Transamerica filed
a cross-claim against Payco-General American Credits, Inc., seeking judgment
against Payco-General American Credits, Inc., for any liability, loss cost or
expense Transamerica has or will incur. Payco-General American Credits, Inc.,
has, in turn, filed a similar claim against Transamerica. Payco negotiated a
settlement with the plaintiff class, and on November 18, 1997, the Circuit Court
approved the class settlement. Under the class settlement, Payco agreed to pay
$1.3 million in cash to fund attorneys' fees to class counsel and to make credit
counseling services available to individual class members.
The Company believes that it has meritorious defenses to the cross-claim in the
Transamerica suit and believes that the outcome of that litigation will not have
a material adverse effect on the operations or the financial condition of the
Company.
In addition, Union is party to various legal proceedings and claims that were in
the normal course of business and routine to the nature of its business. Upon
completion of the Union acquisition, OSI will establish reserves that it
believes will be adequate for the ultimate settlement of these legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1997.
<PAGE>
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
No public market currently exists for the Common Stock.
As of March 17, 1998, there were approximately 21 holders of record of the
Common Stock.
The Company has not declared any cash dividends on its Common Stock since the
Company's formation in September 1995. The Indenture (the "Indenture"), dated as
of November 6, 1996, by and among the Company, the Guarantors (as defined
therein) and Wilmington Trust Company, as Trustee, with respect to the 11%
Series B Senior Subordinated Notes due 2006 contains restrictions on the
Company's ability to declare or pay dividends on its capital stock.
Additionally, the Second Amended and Restated Credit Agreement, dated as of
January 26, 1998 by and among the Company, the Lenders listed therein, Goldman
Sachs Credit Partners L.P. and the Chase Manhattan Bank, as Co-Administrative
Agents, Goldman Sachs Credit Partners L.P. and Chase Securities, Inc., as
Arranging Agents and SunTrust Bank, Atlanta, as Collateral Agent (the "Credit
Agreement") contains certain restrictions on the Company's ability to declare or
pay dividends on its capital stock. Both the Indenture and the Credit Agreement
prohibit the declaration or payment of any dividends or the making of any
distribution by the Company or any subsidiary (other than dividends or
distributions payable in stock of the Company under certain circumstances) or a
subsidiary and other than dividends or distributions payable to the Company.
ITEM 6. SELECTED FINANCIAL DATA
The following selected historical financial data set forth below have been
derived from, and are qualified by reference to (i) the audited Consolidated
Financial Statements of OSI for the period from September 21, 1995 to December
31, 1995 and the two years ended December 31, 1997 and (ii) the audited
consolidated financial statements of API (as predecessor) for the year ended
December 31, 1994 and the period January 1, 1995 to September 20, 1995. The
audited financial statements of OSI and API referred to above are included
elsewhere herein. The selected historical financial data set forth below as of
December 31, 1994 and for the year ended December 31, 1993 have been derived
from the audited financial statements of API not included herein. The selected
financial data set forth below should be read in conjunction with, and are
qualified by reference to, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and accompanying notes thereto of API and OSI included elsewhere herein.
<PAGE>
<TABLE>
<CAPTION>
API (as predecessor) OSI (as successor)
----------------------------------------- --------------------------------------
From
From September 21
January 1 to To
Year Ended December 31, September 20, December 31, Year Ended December 31,
----------------------- ------------- ------------ -----------------------
1993 1994 1995 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Operating revenue (a).................... $23,696 $39,292 $21,293 $ 8,311 $106,331 $271,683
Salaries and benefits.................... 1,596 2,646 4,471 2,079 46,997 133,364
Other operating expenses (b)(c).......... 10,692 8,790 7,343 8,953 80,357 156,738
------- ------- ------- ------- -------- --------
Operating income (loss).................. 11,408 27,856 9,479 (2,721) (21,023) (18,419)
Interest expense, net.................... 1,301 2,599 495 1,361 12,131 28,791
Other expense............................ -- 166 -- -- -- --
------- ------- ------- ------- -------- --------
Income (loss) before taxes............... 10,107 25,091 8,894 (4,082) (33,154) (47,210)
Provision for income taxes (benefit)..... -- -- -- (1,605) (11,757) 11,127
------- ------- ------- ------- -------- --------
Net income (loss) (c).................... $10,107 $25,091 $ 8,984 $(2,477) $(21,397) $(58,337)
======= ======= ======= ======= ======== ========
Balance Sheet Data (at end of period):
Working capital.......................... $5,622 $16,897 $3,809 $22,438 $38,080 $18,558
Total assets............................. 8,945 22,941 11,272 85,652 355,207 381,690
Total debt............................... 3,544 -- -- 36,462 247,616 324,966
Partners' capital/Stockholders equity
(deficit)........................... 4,582 22,162 10,559 42,448 51,598 (5,478)
Other Financial Data:
Amortization of purchased portfolios (c). $6,013 $2,667 $2,308 $5,390 $27,317 $52,042 (e)
Other depreciation and amortization...... 57 102 167 331 18,281 33,574
Cash capital expenditures................ 222 463 574 97 2,606 9,489
Portfolio purchases...................... 7,088 6,800 5,502 903 10,373 (f) 46,494
Cash flows provided by (used in):
Operating activities................ 4,759 21,074 5,887 2,902 10,667 32,825
Investing activities................ (2,222) (463) 1,259 (31,007) (200,435) (119,499)
Financing activities................ (3,775) (11,055) (20,587) 29,574 202,796 75,394
EBITDA (d)............................... 17,478 30,625 11,954 3,000 24,575 67,197
Adjusted EBITDA (d)...................... 15,609 18,465 11,954 3,000 25,775 67,197
<FN>
(a) 1993 and 1994 operating revenues include proceeds on sales of purchased
portfolios of $1,869 and $13,325, respectively. The related amortization on
the portfolios sold included in other operating expenses was $54 and
$1,155, respectively. In addition, transaction costs of $1,165 were
incurred in connection with the 1994 sale and are included in other
operating expenses.
(b) Other operating expenses include telephone, postage, supplies, occupancy
costs, data processing costs, depreciation, amortization and miscellaneous
operating expenses.
(c) Effective January 1, 1994, API began amortizing on an individual portfolio
basis the cost of purchased receivables based on the ratio of current
collections to current anticipated future collections for that portfolio
over a maximum period of three years. Prior to 1994, API amortized
purchased receivables under the cost recovery method. The change in method
was a result of API's improved historical collection experience for similar
types of loan portfolios and its ability to estimate expected cash flow.
The effect of this change was accounted for prospectively as a change in
estimate and reduced amortization expense and increased net income by $962
in 1994.
(d) EBITDA is defined as income from continuing operations before interest,
other expense, taxes, depreciation and amortization. Adjusted EBITDA
reflects EBITDA as defined above adjusted for proceeds from portfolio
sales, net of transaction costs, of $1,869 and $12,160 in 1993 and 1994,
respectively, and the non-recurring write-off of acquired technology in
process in connection with the Payco acquisition and relocation expenses
incurred by Continental of $1,000 and $200, respectively, in the year ended
December 31, 1996. EBITDA and Adjusted EBITDA are presented here, as
management believes they provide useful information regarding the Company's
ability to service and/or incur debt. EBITDA and Adjusted EBITDA should not
be considered in isolation or as substitutes for net income, cash flows
from continuing operations, or other consolidated income or cash flow data
prepared in accordance with generally accepted accounting principles or as
measures of a company's profitability or liquidity.
(e) In the fourth quarter of 1997, the Company completed an in-depth analysis
of the carrying value of the purchased portfolios acquired and valued in
conjunction with the Company's September 1995 acquisition of API. As a
result of this analysis, the Company recorded $10,000 of additional
amortization related to these purchased portfolios to reduce their carrying
value to their estimated net realizable value. This amount includes the
$10,000.
(f) In May 1996, a subsidiary of the Company acquired participation interests
in certain loan portfolios, representing the undivided ownership interests
in such portfolios which were originally sold pursuant to existing
Participation Agreements (the "MLQ Interests") for aggregate consideration
of $14,772. This amount excludes the $14,772.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues for the year ended December 31, 1997 were $271.7 million, compared to
$106.3 million for the year ended December 31, 1996. Revenues from fee services
(including outsourcing) were $203.9 million for the year ended December 31, 1997
compared to $60.8 million in the comparable period in 1996. The increase in fee
revenues was a result of the acquisition of Payco in November 1996, the
acquisition of NSA in October 1997 and the acquisition of ABC in November 1997.
Revenues generated from the collection of purchased portfolios increased to
$67.8 million for the year ended December 31, 1997 compared to $45.5 million for
the comparable period in 1996. The increase in collections from purchased
portfolios results from primarily an increase in purchased portfolio levels and
related collection efforts and to a lesser extent from the Payco acquisition.
Operating Expenses for the year ended December 31, 1997 were $290.1 million
compared to $127.4 million for the comparable period in 1996, an increase of
$162.7 million. Operating expenses, exclusive of amortization and depreciation
charges, were $204.5 million for the year ended December 31, 1997 and $80.8
million for the comparable period in 1996. Operating expenses increased as a
result of the Payco acquisition as well as the use of outside collection
agencies to service a portion of purchased portfolios. Of the $290.1 million in
expenses for the year ended December 31, 1997, $52.0 million (including $10.0
million of additional amortization to reduce a portion of purchased portfolios
to their estimated fair value - See Note 12 to the Consolidated Financial
Statements) was attributable to amortization of the purchase price of purchased
portfolios (compared to $27.3 million in 1996), $16.7 million was attributable
to amortization of account inventory (compared to $12.3 million in 1996), $8.0
million was attributable to amortization of goodwill associated with the
acquisitions of API, Miller, Continental, Payco, NSA and ABC (compared to $3.2
million in 1996) and $8.8 million was attributable to depreciation (compared to
$2.8 million in 1996). The increase in amortization and depreciation expense was
the result of additional goodwill and step-up in basis of fixed assets recorded
in connection with the Payco acquisition.
Operating Loss for the year ended December 31, 1997 was $18.4 million compared
to $21.0 million for the comparable period in 1996. The operating loss was a
result of increased amortization related to the step-up in basis of purchased
portfolios related to the API acquisition, goodwill and account placement
inventory related to the acquisition of Payco.
Operating earnings before interest expense, taxes, depreciation and amortization
(EBITDA) for the year ended December 31, 1997 was $67.2 million compared to
$24.6 million for the comparable period in 1996. The increase of $42.6 million
in EBITDA reflects additional revenues associated with the acquisition of Payco,
NSA and ABC and additional portfolios at API, partially offset by the costs
associated with the use of outside collection agencies to service purchased
portfolios.
Interest Expense, net for the year ended December 31, 1997 was $28.8 million
compared to $12.1 million for the comparable period in 1996. The increase was
primarily due to increased debt incurred in 1997 to finance the acquisition of
Payco, NSA and ABC and to finance additional purchased portfolio purchases.
Net Loss for the year ended December 31, 1997 was $58.3 million compared to
$21.4 million for the comparable period in 1996. The increase in net loss was
attributable to increased amortization expense from the step-up in basis of
acquired portfolios related to the API acquisition, goodwill and account
placement inventory recorded in connection with the acquisition of Payco, the
increase in interest expense related to the indebtedness incurred to finance the
Payco, NSA and ABC acquisitions and portfolio purchases and a provision for
income taxes of $11.1 million as a result of the Company recording a net
valuation allowance of $32.4 million to reflect management's assessment, based
on the weight of the available evidence of current and projected future book
taxable income, that there is significant uncertainty that any of the benefits
from the net deferred tax assets will be realized.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues for the twelve months ended December 31, 1996 were $106.3 million,
compared to $29.6 million in the comparable period for 1995. Revenues from
contingent fee services including outsourcing were $51.2 million for the twelve
months ended December 31, 1996 compared to $0.0 in the comparable period in
1995. The increase in contingent fee revenues was a result of the acquisitions
of Miller, Continental and Payco. OSI is experiencing competitive pressure on
prices of contingent fee services. Revenues from purchased portfolios increased
to $45.5 million for the twelve months ended December 31, 1996 compared to $29.6
million for the comparable period in 1995. Purchased portfolio revenues
increased as a result of additional portfolio purchases, the hiring of
additional account representatives at API, facilitating the servicing of a
higher volume of accounts, as well as from the acquisition of the MLQ Interests
and Payco. Revenues from the outsourcing services increased to $9.5 million for
the twelve months ended December 31, 1996 compared to $0.0 in the comparable
period in 1995. The increase was due to the acquisition of Payco.
Operating Expenses for the twelve months ended December 31, 1996 were $127.4
million compared to $22.8 million for the comparable period in 1995, an increase
of $104.6 million. Cash operating expenses were $81.8 million for the twelve
months ended December 31, 1996 and $14.7 million for the comparable period in
1995. Cash expenses increased as a result of the Miller, Continental and Payco
acquisitions, the hiring of additional account representatives at API, the
opening of an API collection facility in St. Louis, Missouri, one-time costs
associated with the relocation of Continental's headquarters, and the addition
of corporate overhead of OSI. Of the $127.4 million in expenses for the twelve
months ended December 31, 1996, $27.3 million was attributable to amortization
of the purchase price of purchased portfolios (compared to $7.7 million in
1995), $12.3 million was attributable to amortization of account inventory
(compared to $0.0 in 1995), $2.7 million was attributable to amortization of
goodwill associated with the acquisitions of API, Miller, Continental and Payco
(compared to $0.3 million in 1995), $0.5 million was attributable to
amortization in non-compete agreements (compared to $0.0 in 1995) and $2.8
million was attributable to depreciation (compared to $0.2 million in 1995). The
increase in amortization expense was the result of additional goodwill recorded
in connection with the Miller, Continental and Payco acquisitions and the
step-up in basis of purchased portfolios related to the acquisition of API.
Operating (Loss) Income for the twelve months ended December 31, 1996 was
$(21.0) million compared to $6.8 million for the comparable period in 1995. The
operating loss was a result of increased amortization related to the step-up in
basis of purchased portfolios, goodwill and account inventory related to the
acquisitions of Miller, Continental and Payco.
EBITDA for the twelve months ended December 31, 1996 was $24.6 million compared
to $15.0 million for the comparable period in 1995. The increase of $9.6 million
in EBITDA reflects additional revenues associated with the acquisitions of
Miller, Continental, the MLQ Interests and Payco, partially offset by the costs
associated with hiring additional account representatives at API.
Interest Expense, net for the twelve months ended December 31, 1996 was $12.1
million compared to $1.9 million for the comparable period in 1995. The increase
was primarily due to indebtedness incurred to finance the acquisitions of
Miller, Continental, the MLQ Interests and Payco during 1996 and the acquisition
of API in September 1995.
Net (Loss) Income for the twelve months ended December 31, 1996 was ($21.4)
million compared to $6.5 million for the comparable period in 1995. The decrease
in net income results primarily from increased amortization expense from the
step-up in the basis of acquired portfolios, goodwill and account inventory
recorded in connection with the acquisition of API, Miller, Continental and
Payco and the increase in interest due to the indebtedness incurred to finance
those acquisitions.
Liquidity and Capital Resources
At December 31, 1997, the Company had cash and cash equivalents of $3.2 million.
At year end, the Company had a $58.0 million revolving credit facility, which
allows the Company to borrow for working capital, general corporate purposes and
acquisitions, subject to certain conditions. As of December 31, 1997, the
Company had outstanding $31.9 million under the revolving credit facility
leaving $26.1 million available under the revolving credit facility.
Cash and Cash Equivalents decreased from $14.5 million at December 31, 1996 to
$3.2 million at December 31, 1997 principally due to the use of $119.5 million
for investing activities primarily for the acquisition of NSA and ABC and the
purchase of portfolios, offset by cash provided by operations and financing
activities of $32.8 million and $75.4 million, respectively. The Company also
held $20.8 million of cash for clients in restricted trust accounts at December
31, 1997.
Purchased Loans and Accounts Receivable Portfolios decreased from $68.0 million
at December 31, 1996 to $62.5 million at December 31, 1997 due to new portfolio
purchases of $46.5 million during the year which were partially offset by
amortization of purchased portfolios of $52.0 million including $10.0 million of
additional amortization as previously mentioned. The amount of purchased loans
and accounts receivable portfolios which are projected to be collectible within
one year increased slightly from $42.5 million at December 31, 1996 to $42.9
million at December 31, 1997.
The purchased loans and accounts receivable portfolios consist primarily of
consumer loans and credit card receivables, commercial loans, student loan
receivables and health club receivables. Consumer loans purchased primarily
consist of unsecured term debt. A summary of purchased loans and accounts
receivable portfolios at December 31, 1997 and December 31, 1996 by type of
receivable is shown below:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
--------------------------------------- -------------------------------------
Original Gross Original Gross
Principal Value Current Long-term Principal Value Current Long-term
(in millions) (in thousands) (in millions) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consumer loans............................ $2,039 $ 8,978 $ 4,948 $1,770 $ 7,445 $ 4,592
Student loans............................. 322 4,629 -- 322 7,456 4,699
Credit cards.............................. 509 12,575 10,765 101 2,359 1,453
Health clubs.............................. 1,309 15,307 2,248 954 23,364 13,865
Commercial................................ 41 1,426 1,576 41 1,857 910
------ ------- ------- ------ ------- -------
$4,220 $42,915 $19,537 $3,188 $42,481 $25,519
====== ======= ======= ====== ======= =======
</TABLE>
Most of the portfolio purchases involve tertiary paper (i.e., accounts more than
360 days past due which have been previously placed with a contingent fee
servicer) with the exception of portfolios purchased under forward flow
agreements under which the Company agrees to purchase subject to due diligence
charged off credit card and health club receivables on a monthly basis as they
become available.
Deferred taxes decreased from an asset of $5.8 million at December 31, 1996 to
an asset of $0.4 million at December 31, 1997. The net deferred tax asset at
December 31, 1997 and December 31, 1996 relates principally to net operating
loss carryforwards. The realization of this asset is dependent on generating
sufficient taxable income prior to expiration of the loss carryforwards in years
through 2012. During 1997, the Company recorded a net valuation allowance of
$32.4 million to reflect management's assessment, based on the weight of the
available evidence of current and projected future book taxable income, that
there is significant uncertainty that any of the benefits from the net deferred
tax assets will be realized. For all federal tax years since the Company's
formation in September 1995, the Company has incurred net operating losses.
During 1997, the Company has significantly increased its total debt from $247.6
million at December 31, 1996 to $325.0 million at December 31, 1997. This
increase in debt primarily resulted from the acquisitions in 1997 of the net
assets of NSA and ABC. In addition, on January 26, 1998, the Company incurred
significant additional borrowings to finance its acquisition of approximately
77% of the shares of common stock of Union. Since the Company has a history of
generating net operating losses and has significantly increased its total
interest expense to be incurred, management does not expect the Company to
generate taxable income in the foreseeable future sufficient to realize tax
benefits from the net operating loss carryforwards or the future reversal of the
net deductible temporary differences. The amount of the deferred tax assets
considered realizable, however, could be increased in future years if estimates
of future taxable income during the carryforward period change.
The Company's debt structure at December 31, 1997 consists of a $219.3 million
bank credit facility, $100.0 million 11% Senior Subordinated Notes ("Notes") and
other indebtedness of $5.7 million. See Note 14 of the Consolidated Financial
Statements of OSI included elsewhere herein for a description of the amended
bank credit agreement, effective January 1998, which provides additional
financing for the Union acquisition. Currently, the Company has borrowed $187.5
million to acquire approximately 80% of the shares of common stock of Union and
plans to borrow an additional $37.5 million to complete the Union acquisition.
The Notes and the bank credit facility contain financial and operating covenants
and restrictions on the ability of the Company to incur indebtedness, make
investments and take certain other corporate actions. The debt service
requirements associated with the borrowings under the facility and the Notes
significantly impact the Company's liquidity requirements. The Company
anticipates that its operating cash flow together with availability under the
bank credit facility will be sufficient to fund its anticipated future operating
expense and to meet its debt service requirements as they become due.
Additionally, future portfolio purchases may require signifi-cant financing or
investment. However, actual capital requirements may change, particularly as a
result of acquisitions the Company may make. The ability of the Company to meet
its debt service obligations and reduce its total debt will be dependent,
however, upon the future performance of the Company and its subsidiaries which,
in turn, will be subject to general economic conditions and to financial,
business and other factors including factors beyond the Company's control.
Capital expenditures for the year ended December 31, 1997 were $9.5 million. The
Company expects to spend approximately $17.0 million on capital expenditures
(exclusive of any expenditures in connection with acquisitions) in 1998.
Historical expenditures have been, and future expenditures are anticipated to be
primarily for replacement and/or upgrading of telecommunications and data
processing equipment, leasehold improvements and continued expansion of the
Company's information services systems. Subject to compliance with the
provisions of its debt agreements, the Company expects to finance future capital
expenditures with cash flow from operations, borrowings and capital leases. The
Company will reduce its future capital expenditures to the extent it is unable
to fund its capital plan. The Company believes that its facilities will provide
sufficient capacity for increased revenues and will not require material
additional capital expenditures in the next several years.
Inflation
The Company believes that inflation has not had a material impact on its results
of operations for the years ended December 31, 1996 and 1997.
Year 2000
The company has numerous computer-based systems and collection applications. The
Company has evaluated its systems and applications to determine whether or not
those systems were Year 2000 compliant. Based upon its review, the Company has
identified those systems which are not compliant and has implemented plans to
update those systems. The cost of the effort is currently not expected to be
material and will be expensed as incurred over the next two years.
Derivative Financial Instruments
From time to time, the Company may employ derivative financial instruments as of
its risk management program. The Company's objective is to manage risks and
exposures and not to trade such instruments for profit or loss.
Forward-Looking Statements
Except for the historical statements and discussions contained herein,
statements contained in this report constitute "forward-looking statements" as
defined in the Securities Act of 1933 and the Securities Exchange Act of 1934,
as amended. These forward-looking statements rely on a number of assumptions
concerning future events, and are subject to a number of risks and uncertainties
and other factors, many of which are outside the control of the Company, that
could cause actual results to differ materially from such statements.
Readers are cautioned not to put undue reliance on such forward-looking
statements, each of which speaks only as of the date hereof. Factors and
uncertainties that could affect the outcome of such forward-looking statements
include, among others, market and industry conditions, increased competition,
changes in governmental regulations, general economic conditions, pricing
pressures, and the Company's ability to continue its growth and expand
successfully into new markets and services. The Company disclaims any intention
or obligation to update publicly or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Financial Statements and Supplementary Schedule
contained in Part IV hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Company are elected annually by its shareholders to serve
during the ensuing year or until a successor is duly elected and qualified.
Executive officers of the Company are duly elected by its Board of Directors to
serve until their respective successors are elected and qualified. The following
table sets forth certain information with respect to the directors and executive
officers of the Company.
Name Age Position or Office
---- --- ------------------
Jeffrey E. Stiefler 52 Chairman of the Board of Directors
Timothy G. Beffa 47 Director, President and
Chief Executive Officer
David E. De Leeuw 53 Director
David E. King 39 Director, Secretary and Treasurer
Tyler T. Zachem 32 Director and Vice President
David G. Hanna 34 Director
Frank J. Hanna, III 36 Director
Dennis G. Punches 62 Director
Nathan W. Pearson, Jr. 46 Director
Daniel J. Dolan 45 Executive Vice President and
Chief Financial Officer
JEFFREY E. STIEFLER (52), Chairman of the Board of Directors since January 10,
1996. Previously, Mr. Stiefler was President and Director of American Express
Company, where he had previously served in various capacities since 1983,
including President and Chief Executive Officer of IDS Financial Services. Prior
to joining the Company, Mr. Stiefler held various positions with the Meritor
Financial Group, including Chairman of the Meritor Savings Bank Florida and the
Meritor Savings Bank Washington D.C., and Citicorp, including Vice President and
Regional Business Manager of the New York Banking Division and Senior Vice
President and Regional Business Manager of Nationwide Financial Services. Mr.
Stiefler currently serves as a director of National Computer Systems and
chairman of International Data Response Corporation.
TIMOTHY G. BEFFA (47), President, Chief Executive Officer and Director of
Outsourcing Solutions Inc. since August 1996. From August 1995 until August
1996, Mr. Beffa served as President and Chief Operating Officer of DIMAC
Corporation ("DIMAC") and DIMAC DIRECT Inc. ("DDI") and as a director of DDI.
From 1989 until August 1995, Mr. Beffa served as a Vice President of DIMAC and
as Senior Vice President and Chief Financial Officer of DDI. Prior to joining
DIMAC, Mr. Beffa was Vice President of Administration and Controller for the
International Division of Pet Incorporated, a food and consumer products
company, where he previously had been manager of Financial Analysis.
DAVID E. DE LEEUW (53), Director of the Company since September 21, 1995. Mr. De
Leeuw is a managing general partner of MDC Management Company III, L.P., which
is the general partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw &
Co. III (Europe), L.P., a managing general partner of MDC Management company
IIA, L.P., which is the general partner of McCown De Leeuw & Co. III (Asia),
L.P. and a member of Gamma Fund, LLC. Prior to founding McCown De Leeuw & Co.
with George E. McCown in 1984, Mr. De Leeuw was Manager of the Leveraged
Acquisition Unit and Vice President in the Capital Markets Group at Citibank,
N.A. Mr. De Leeuw also worked with W.R. Grace & Co. where he was Assistant
Treasurer and manager of Corporate Finance. Mr. De Leeuw began his career as an
investment banker with Paine Webber Incorporated. He currently serves as a
director of Vans, Inc., AmeriComm Holdings, Inc., Nimbus CD International, Inc.,
Aurora Foods Inc. and American Residential Inventory Trust.
DAVID E. KING (39), Secretary, Treasurer and Director of the Company since
September 21, 1995. Mr. King is a general partner of MDC management Company III,
L.P., which is the general partner of McCown De Leeuw & Co. III, L.P., and
McCown De Leeuw & Co. Offshore (Europe) III, L.P. a general partner of MDC
Management Company IIIA, L.P., which is the general partner of McCown De Leeuw &
Co. III (Asia), L.P. and a member of Gamma Fund, LLC. Mr. King has been
associated with McCown De Leeuw & Co. since 1990. He currently serves as a
director of AmeriComm Holdings, Inc., International Data Response Corporation,
Fitness Holdings Inc., RSP Manufacturing Corporation and Sarcom.
TYLER T. ZACHEM (32), Vice President and Director of the Company since September
21, 1995. Mr. Zachem is a principal of MDC Management Company III, which is the
general partner of McCown De Leeuw & Co. III; and McCown De Leeuw & Co. III
(Europe), L.P., and a principal of MDC Management Company IIIA, L.P., which is
the general partner of McCown De Leeuw & Co. III (Asia), L.P. Mr. Zachem has
been associated with McCown De Leeuw & Co. since July 1993. Mr. Zachem
previously worked as a consultant with McKinsey & Co. and as an investment
banker with McDonald & Company. He currently serves as a director of RSP
Manufacturing Corporation, The Brown Schools, Inc., Aurora Foods Inc. and Papa
Gino's Inc.
DAVID G. HANNA (34), Director of the Company since September 21, 1995. From
November 1992 to September 1995, Mr. Hanna served as President of Account
Portfolios, L.P. From 1988 to November 1992, Mr. Hanna served as President of
the Governmental Division of Nationwide Credit, Inc., administering contracts
for government agencies including the Department of Education Student Loans
program. David G. Hanna is the brother of Frank J. Hanna, III.
FRANK J. HANNA, III (36), Director of the Company since September 21, 1995. Mr.
Hanna founded Account Portfolios, L.P. in July 1990, and served as its Chief
Executive Officer until its acquisition by OSI in September 1995. From February
1988 to January 1990, Mr. Hanna served as Group Vice President of Nationwide
Credit, Inc., a large accounts receivable management company. Frank J. Hanna III
is the brother of David G. Hanna. Mr. Hanna currently serves as a director of
Cerulean Companies, Inc.
DENNIS G. PUNCHES (62), Director of the Company since November 1996. From May
1988 to October 1988 and from January 1990 to November 1996, Mr. Punches served
as Chairman of the Board of Directors of Payco American Corporation. From
October 1988 to January 1990, Mr. Punches served as Co-Chairman of the Board of
Directors of Payco American Corporation. From 1969 to January 1990, Mr. Punches
served as President and Chief Executive Officer of Payco American Corporation.
NATHAN W. PEARSON, JR. (46), Director of the Company since July 1997. Mr.
Pearson is an operating affiliate of McCown De Leeuw & Co. Mr. Pearson has been
affiliated with McCown De Leeuw since 1997. Since 1996, Mr. Pearson has been
Managing Director of Commonwealth Holdings, a private investment firm. From 1988
to 1995, Mr. Pearson was Executive Vice President and Chief Financial Officer of
Broadcasting Partners, L.L.C., a radio broadcasting leveraged buyout
organization and since 1995, Mr. Pearson has been a principal of investment and
management of Broadcasting Partners, L.L.C. Prior to joining Broadcasting
Partners, L.L.C., Mr. Pearson was a management consultant with McKinsey and
Company from 1982 to 1988.
DANIEL J. DOLAN (45), Executive Vice President and Chief Financial Officer of
the Company since October 1997. Mr. Dolan has 23 years experience in public
accounting, the last 11 years as a partner of Ernst & Young LLP.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid or
accrued for by the Company for 1995, 1996 and 1997 on behalf of the Company's
Chief Executive Officer and the four other most highly compensated executive
officers of the Company for the year ended December 31, 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
-----------------------------------------------------------------------------
Long Term
Other Annual Compensation All Other
Name and Fiscal Salary Bonus Compensation Awards Compensation
Principal Position Year ($) ($) ($) (#) ($)
- ------------------ ------ ------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Timothy G. Beffa(1)
President and CEO 1997 320,110 457,500
1996 103,846 200,000
Daniel J. Dolan (2)
Executive Vice 1997 56,571 130,000
President and CFO
Patrick Carroll
Executive Vice 1997 186,875 60,000
President, Sales 1996 120,000 200,000 267,000(4)
Michael Meyer (3)
Vice President, Chief 1997 159,812 142,000
Information Officer
James F. Whalen (5)
Senior Vice President, 1997 192,044 100,000
Business Operations 1996 20,533 100,000
Analysts
<FN>
(1) 1996 compensation based on an annual salary of $300,000.
(2) Based on an annual salary of $260,000. Mr. Dolan was hired in October 1997.
(3) Based on an annual salary of $190,000. Mr. Meyer was hired in early March
1997.
(4) Represents value of stock acquired in connection with the acquisition of
Payco by the Company.
(5) 1996 compensation based on an annual salary of $200,000. Mr. Whalen
resigned effective November 30, 1997.
</FN>
</TABLE>
Employment Agreement
On September 1, 1997, OSI entered into an amendment to the employment agreement
with Timothy G. Beffa. Pursuant to the employment agreement, Mr. Beffa serves as
Chief Executive Officer of the Company. Mr. Beffa receives an annual salary of
$350,000 and received a bonus of $457,500 for fiscal year 1997. In fiscal year
1998, Mr. Beffa is eligible for an annual bonus of up to 150% of his annual base
salary. Effective October 9, 1996, Mr. Beffa received options to purchase
131,421.66 shares of common stock of the Company, which options vest upon the
satisfaction of certain performance targets and/or the occurrence of certain
liquidity events. Effective March 14, 1997, Mr. Beffa received additional
options to purchase up to 41,555 shares of common stock of the Company, which
also vest upon the satisfaction of certain performance targets and/or the
occurrence of certain liquidity events.
On October 16, 1997, OSI entered into an employment agreement with Daniel J.
Dolan. Pursuant to the employment agreement, Mr. Dolan serves as Chief Financial
Officer of the Company. Mr. Dolan receives an annual salary of $260,000 and
received a bonus of $130,000 for fiscal year 1997. Commencing in fiscal year
1998, Mr. Dolan is eligible for an annual bonus of up to 66-2/3% of his annual
base salary. Effective December 2, 1997, Mr. Dolan received options to purchase
75,000 shares of common stock of the Company, such options vest upon the
satisfaction of certain performance targets and/or the occurrence of certain
liquidity events.
Director Compensation
Non-employee directors of OSI receive $2,000 per regularly scheduled meeting of
the Board of Directors, $1,000 per special meeting of the Board of Directors and
$500 per committee meeting plus, in each case, reimbursement for travel and
out-of-pocket expenses incurred in connection with attendance at all such
meetings. Except as described below, no director of OSI receives any other
compensation from OSI for performance of services as a director of OSI (other
than reimbursement for travel and out-of-pocket expenses incurred in connection
with attendance at Board of Director meetings). Effective February 16, 1996, Mr.
Stiefler received options to purchase 23,044 shares of common stock of the
Company, which options vest upon the satisfaction of certain performance targets
and/or the occurrence of certain liquidity events.
Option Plans
The Company maintains a 1995 Stock Option and Stock Award Plan (the "Stock
Option Plan"). The Stock Option Plan is administered by the Compensation
Committee of the Board of Directors of the Company. Under the Stock Option Plan,
the Compensation Committee may grant or award (a) options to purchase stock of
the Company (which may either be incentive stock options ("ISOs"), within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
stock options other than ISOs), (b) stock appreciation rights granted in
conjunction with stock options, (c) restricted stock, or (d) bonuses payable in
stock, to key salaried employees of the Company, including officers, as well as
to consultants of the Company, and non-employee directors.
A total of 750,000 shares of common stock of the Company are reserved for
issuance under the Stock Option Plan. As of March 17, 1998, options to purchase
up to 568,520.66 shares of the Company's common stock are outstanding under the
Stock Option Plan.
As of March 17, 1998, the following table sets forth options held by the current
executive officers:
# of Options Exercisable Unexercisable
------------ ----------- -------------
Timothy G. Beffa 172,976.66 13,142 159,834.66
President and CEO
Daniel J. Dolan 75,000 7,500 67,500
Executive Vice President
and CFO
Patrick Carroll 25,000 2,500 22,500
Executive Vice President,
Sales
Michael Meyer 25,000 2,500 22,500
Vice President, Chief
Information Officer
As of the date of this Report, the potential realizable value of each grant of
options is not applicable due to the lack of a public trading market for the
Company's common stock.
Committee Report on Executive Compensation
The Compensation Committee currently consists of Mr. David E. DeLeeuw, Mr. David
E. King and Mr. Tyler T. Zachem.
The Compensation Committee recommends compensation arrangements for the
Company's executive officers and administers the Company's Stock Option Plan.
The Company's compensation program is designed to be competitive with companies
similar in structure and business to the Company.
The Company's executive compensation program is structured to help the Company
achieve its business objectives by:
o Setting levels of compensation designed to attract and retain superior
executives in a highly competitive environment.
o Designing equity-related and other performance-based incentive compensation
programs to align the interests of management with the ongoing interests of
shareholders; and
o Providing incentive compensation that varies directly with both Company
financial performance and individual contributions to that performance.
The Company has used a combination of salary and incentive compensation,
including cash bonuses and equity-based incentives to achieve its compensation
goals.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The authorized capital stock of the Company consists of (i) 1,000,000 shares of
Preferred Stock, no par value (the "Preferred Stock"), of which 935,886.85
shares are issued and outstanding, (ii) 7,500,000 shares of Voting Common Stock,
par value $.01 per share (the "Voting Common Stock"), of which 3,477,126.01 are
issued and outstanding, (iii) 7,500,000 shares of Class A Non-Voting Common
Stock, par value $.01 per share (the "Class A Non-Voting Common Stock"), of
which 391,740.58 are issued and outstanding, (iv) 500,000 shares of Class B
Non-Voting Stock, par value $.01 per share (the "Class B Non-Voting Common
Stock"), of which 400,000 are issued and outstanding, and (v) 1,500,000 shares
of Class C Non-Voting Common Stock, par value $.01 per share (the "Class C
Non-Voting Common Stock" and together with the Class A Non-Voting Common Stock
and the Class B Non-Voting Common Stock, the "Non-Voting Common Stock," and
together with the Voting Common Stock, the "Common Stock"), of which 1,040,000
are issued and outstanding. In addition, a total of 46,088.67 shares of Voting
Common Stock were issuable upon exercise of warrants held by certain warrant
holders, and up to 246,021.20 shares of Voting Common Stock were issuable upon
the exercise of certain management options.
Each Holder of Voting Common Stock has one vote for each share of Voting Common
Stock held by such holder on all matters to be voted upon by the stockholders of
the Company. The holders of Preferred Stock have no voting rights except as
expressly provided by law and the holders of Non-Voting Common Stock have no
voting rights other than the right to vote as a separate class on certain
matters that would adversely the rights of such holders. Each share of Preferred
Stock is convertible into one share of Common Stock at the holder's option at
any time after September 20, 1996. The Company may, at its sole option, upon
written notice to the holders of Preferred Stock, redeem any or all of the
shares of Preferred Stock outstanding for $12.50 per share plus cash equal to
all accrued and unpaid dividends through the redemption date, whether or not
such dividends have been authorized or declared. Each share of Voting Common
Stock is convertible into one share of Class A Non-Voting Common Stock at the
holder's option, and each share of Class A Non-Voting Common Stock is
convertible into one share of Voting Common Stock at the holder's option. Each
share of Class B Non-Voting Common Stock and Class C Non-Voting Common Stock is
convertible into one share of Voting Common Stock, at the holder's option, upon
the occurrence of certain "Conversion Events," as defined in the Company's
certificate of incorporation.
The following table sets forth the number and percentage of shares of each class
of the Company's capital stock beneficially owned as of December 31, 1997 by (i)
each person known to the Company to be the beneficial owner of more than 5% of
any class of the Company's equity securities, (ii) each of the Company's
directors and nominees, and (iii) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Title of Class Name and Address Beneficial Owner Ownership Class(1)
- -------------- --------------------------------- ---------- --------
<S> <C> <C> <C>
Preferred Stock McCown De Leeuw & Co. III, L.P.(2) 623,924.21 66.6%
McCown De Leeuw & Co. III
(Europe), L.P.(2) 623,924.21 66.6%
McCown De Leeuw & Co. III (Asia), L.P.(2) 623,924.21 66.6%
Gamma Fund LLC(2) 623,924.21 66.6%
Rainbow Trust One(3) 155,981.86 16.7%
Rainbow Trust Two(4) 155,980.78 16.7%
David E. De Leeuw(2) 623,924.21 66.6%
David E. King(2) 623,924.21 66.6%
Frank J. Hanna, III(3) 155,981.86 16.7%
David G. Hanna(4) 155,980.78 16.7%
All directors and officers as a group(2)(3)(4) 935,886.85 100.0%
Voting Common Stock McCown De Leeuw & Co. III, L.P.(5) 1,897,793.01 54.6%
McCown De Leeuw & Co. Offshore III
(Europe), L.P.(5) 1,897,793.01 54.6%
McCown De Leeuw & Co. III (Asia), L.P.(5) 1.897,793.01 54.6%
Gamma Fund LLC(5) 1,897,793.01 54.6%
Rainbow Trust One(3) 466,667.00 13.4%
Rainbow Trust Two(4) 466,666.00 13.4%
Peter C. Rosvall 383,600.00 11.0%
David E. De Leeuw(5) 1,897,793.01 54.6%
David E. King(5) 1,897,793.01 54.6%
Frank J. Hanna, III(3) 466,667.00 13.4%
David G. Hanna(4) 466,666.00 13.4%
Nathan W. Pearson 12,000.00 *
All directors and officers as a group(3)(4)(5) 3,238,726.01 92.8%
Class A Non-Voting McCown De Leeuw & Co. III, L.P.(6) 391,740.58 100.0%
Common Stock David E. De Leeuw(6) 391,740.58 100.0%
David E. King(6) 391,740.58 100.0%
All directors and officers as a group(6) 391,740.58 100.0%
Class B Non-Voting Chase Equity Associates, L.P.(7) 400,000.00 100.0%
Common Stock All directors and officers as a group 0.00 0.0%
Class C. Non-Voting MLQ Investors, L.P.(8) 640,000.00 61.5%
Common Stock The Clipper Group(9) 400,000.00 38.5%
All directors and officers as a group 0.00 0.0%
* Less than one percent.
<FN>
(1) The information as to beneficial ownership is based on statements furnished
to the Company by the beneficial owners. As used in this table, "beneficial
ownership" means the sole or shared power to vote, or direct the voting of
a security, or the sole or shared investment power with respect to a
security (i.e., the power to dispose of, or direct the disposition of a
security). A person is deemed as of any date to have "beneficial ownership"
of any security that such person has the right to acquire within 60 days
after such date. For purposes of computing the percentage of outstanding
shares held by each person named above, any security that such person has
the right to acquire within 60 days of the date of calculation is deemed to
be outstanding, but is not deemed to be outstanding for purposes of
computing the percentage ownership of any other person.
(2) Shares of Preferred Stock are convertible, at the holder's option, into an
identical number of shares of Common Stock at anytime after September 20,
1996. Includes 553,732.69 shares owned by McCown De Leeuw & Co. III, L.P.,
an investment partnership whose general partner is MDC Management Company
III, L.P. ("MDC III"), 46,794.35 shares held by McCown De Leeuw & Co. III
(Europe), L.P., an investment partnership whose general partner is MDC III,
10,918.75 shares held by McCown De Leeuw & Co. III (Asia), an investment
partnership whose general partner is MDC Management Company IIIA, L.P.
("MDC IIIA"),and 12,478.42 shares owned by Gamma Fund LLC, a California
limited liability company. The voting members of Gamma Fund LLC are George
E. McCown, David De Leeuw, David E. King, Robert B. Hellman, Jr., Charles
Ayres and Steven Zuckerman, who are also the only general partners of MDC
III and MDC IIIA. Dispositive decisions regarding the Preferred Stock are
made by Mr. McCown and Mr. De Leeuw, as Managing General Partners of each
of MDC III and MDC IIIA, who together have more than the required
two-thirds-in-interest vote of the Managing General Partners necessary to
effect such decision on behalf of any such entity. Dispositive decisions
regarding the Preferred Stock owned by Gamma Fund LLC are made by a vote or
consent of a majority in number of voting members of Gamma Fund LLC.
Messrs. McCown, De Leeuw, King, Hellman, Ayres and Zuckerman have no direct
ownership of any shares of Preferred Stock and disclaim beneficial
ownership of any shares of Preferred Stock except to the extent of their
proportionate partnership interests or membership interests (in the case of
Gamma Fund LLC). The address of all the above-mentioned entities is c/o
McCown De Leeuw & Co., 3000 Sand Hill Road, Building 3, Suite 290, Menlo
Park, California 94025.
(3) Shares of Preferred Stock are convertible, at the holder's option, into an
identical number of shares of Common Stock at any time after September 20,
1996. Frank J. Hanna, III, a director of the Company, is trustee of Rainbow
Trust One. The address of Rainbow Trust One is c/o HBR Capital, Two Ravinia
Drive, Suite 1750, Atlanta, Georgia 30346.
(4) Shares of Preferred Stock are convertible, at the holder's option, into an
identical number of shares of Common Stock at any time after September 20,
1996. David G. Hanna, a director of the Company, is trustee of Rainbow
Trust Two. The address of Rainbow Trust Two is c/o HBR Capital, Two Ravinia
Drive, Suite 1750, Atlanta, Georgia 30346.
(5) Includes 1,640,220.48 shares owned by McCown De Leeuw & Co. III, L.P., an
investment partnership whose general partner is MDC III, 171,715.02 shares
held by McCown De Leeuw & Co. III (Europe), L.P., an investment partnership
whose general partner is MDC III, 40,066.84 shares held by McCown De Leeuw
& Co. III (Asia), L.P., an investment partnership whose general partner is
MDC IIIA, and 45,790.67 shares owned by Gamma Fund LLC, a California
limited liability company. The voting members of Gamma Fund LLC are George
E. McCown, David De Leeuw, David E. King, Robert B. Hellman, Jr., Charles
Ayres and Steven Zuckerman, who are also the only general partners of MDC
III and MDC IIIA. Voting and dispositive decisions regarding the Voting
Common Stock are made by Mr. McCown and Mr. De Leeuw, as Managing General
Partners of each of MDC III and MDC IIIA, who together have more than the
required two-thirds-in-interest vote of the Managing General Partners
necessary to effect such decision on behalf of any such entity. Voting and
dispositive decisions regarding the Voting Common Stock owned by Gamma Fund
LLC are made by a vote or consent of a majority in number of voting members
of Gamma Fund LLC. Messrs. McCown, De Leeuw, King, Hellman, Ayres and
Zuckerman have no direct ownership of any shares of Voting Common Stock and
disclaim beneficial ownership of any shares of Voting Common Stock except
to the extent of their proportionate partnership interests or membership
interests (in the case of Gamma Fund LLC).
(6) Shares of Class A Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock at the
holder's option. See "Security Ownership". The general partner of McCown De
Leeuw & Co. III, L.P. is MDC III. The only general partners of MDC III are
George E. McCown, David De Leeuw, David E. King, Robert B. Hellman, Jr.,
Charles Ayres and Steven Zuckerman. Voting and dispositive decisions
regarding the Voting Common Stock are made by Mr. McCown and Mr. De Leeuw,
as Managing General Partners of each of MDC III and MDC IIIA, who together
have more than the required two-thirds-in-interest vote of the Managing
General Partners necessary to effect such decision on behalf of any such
entity. Voting and dispositive decisions regarding the Voting Common Stock
owned by Gamma Fund LLC are made by a vote or consent of a majority in
number of voting members of Gamma Fund LLC. Messrs. McCown, De Leeuw, King,
Hellman, Ayres and Zuckerman have no direct ownership of any shares of
Class A Non-Voting Common Stock except to the extent of their proportionate
partnership. The address of each of the above mentioned entities is c/o
McCown De Leeuw & Co., 3000 Sand Hill Road, Build 3, Suite 290, Menlo Park,
California 94025.
(7) Shares of Class B Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock upon the
occurrence of certain "Conversion Events," as defined in the Company's
certificate of incorporation. See "Security Ownership." The general partner
of Chase Equity Associates, L.P., is Chase Capital Partners. The address of
each of these entities is c/o Chase Capital Partners, 380 Madison Ave.,
12th Floor, New York, New York 10017.
(8) Shares of Class C Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock upon the
occurrence of certain "Conversion Events," as defined in the Company's
certificate of incorporation. See "Security Ownership." The general partner
of MLQ Investors, L.P. is MLQ, Inc. The address of each of these entities
is c/o Goldman Sachs & Co., 85 Broad Street, New York, New York 10004.
(9) Shares of Class C Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock upon the
occurrence of certain "Conversion Events", as defined in the Company's
certificate of incorporation. See "Security Ownership." Consists of shares
held as follows: Clipper Capital Associates, L.P. ("CCA"), 9,268.50 shares;
Clipper/Merchant Partners, L.P., 102,642.16 shares; Clipper Equity Partners
I, L.P., 90,168.81 shares; Clipper/Merban, L.P. ("Merban"), 120,225.07
shares; Clipper/European Re, L.P., 60,112.54 shares; and CS First Boston
Merchant Investments 1995/96, L.P. ("Merchant"), 17,582.92 shares. CCA is
the general partner of all of the Clipper Group partnerships other than
Merchant. The general partner of CCA is Clipper Capital Associates, Inc.
("CCI"), and Mr. Robert B. Calhoun, Jr. is the sole stockholder and a
director of CCI. Clipper Capital Partners, an affiliate of Mr. Calhoun, has
sole investment power with respect to the shares beneficially owned by
Merchant. As a result, each of Mr. Calhoun, CCA and CCI is deemed to
beneficially own all shares of Class C Non-Voting Common Stock beneficially
owned by the Clipper Group (other than Merchant), and Mr. Calhoun is deemed
to beneficially own the shares of Class C Non-Voting Common Stock
beneficially owned by Merchant. Merchant Capital, Inc. ("Merchant
Capital"), an affiliate of CS First Boston Corporation, is the general
partner of Merchant and the 99% limited partner of Clipper/Merchant
Partners, L.P. CS Holding, an affiliate of CS First Boston Corporation, is
the 99% limited partner of Merban. None of Merchant, Merchant Capital, CS
First Boston Corporation and CS Holding is an affiliate of Clipper or CCA.
The address for Merchant is 11 Madison Avenue, 26th Floor, New York, NY
10010, the address for Clipper/European Re, L.P. and Merban is c/o CITCO,
De Ruyterkade, 62, P.O. Box 812, Curacao, Netherlands Antilles, and the
address for all other Clipper Group entities is 11 Madison Avenue, 26th
Floor, New York, NY 10010.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition Arrangements
OSI invested $5 million for a minority interest in a limited liability
corporation ("LLC") formed for the purpose of acquiring an accounts receivable
portfolio. The majority interest in the LLC is held by an affiliate of one of
the Company's stockholders.
Advisory Services Agreement
On September 21, 1995 the Company entered into an Advisory Services Agreement
(the "Advisory Services Agreement") with MDC Management Company III, L.P. ("MDC
Management"), an affiliate. Under the Advisory Services Agreement, MDC
Management provides consulting, financial, and managerial functions for a
$300,000 annual fee. The Advisory Services Agreement expires September 21, 2005
and is renewable annually thereafter, unless terminated by the Company. The
Company may terminate the Advisory Services Agreement at any time for cause by
written notice to MDC Management authorized by a majority of the directors other
than those who are partners, principals or employees of MDC Management or any of
its affiliates. The Advisory Services Agreement may be amended by written
agreement of MDC Management and the Company. The Company believes that the terms
of and fees paid for the professional services rendered are at least as
favorable to the Company as those which could be negotiated with a third party.
In 1996 upon closing of the acquisition of Payco, the offering by OSI of the 11%
Senior Subordinated Notes and the $200 million credit facility, MDC Management
received a one-time fee of $3 million for financial advisory services provided
to OSI in connection therewith. In 1998 upon closing of the acquisition of
Union, MDC Management received a one-time fee of $2.5 million for financial
advisory services provided to OSI in connection therewith.
Certain Interests of Initial Purchasers
Goldman Sachs and its affiliates have certain interests in the Company in
addition to being an initial purchaser of the 11% Senior Subordinated Notes.
Goldman Sachs also served as financial advisor to OSI in connection with the
acquisitions of Payco and Union and received certain fees and reimbursement of
expenses in connection therewith. Moreover, Goldman Sachs acted as co-arranger
and Goldman Sachs Credit Partners, L.P., an affiliate of Goldman Sachs, acts as
co-administrative agent and lender in connection with its credit facility and
receives certain fees and reimbursement of expenses in connection therewith. MLQ
Investors, L.P., an affiliate of Goldman Sachs, owns a non-voting equity
interest in the Company.
In addition to acting as an initial purchaser of the 11% Senior Subordinated
Notes, Chase Securities Inc. ("Chase Securities") and its affiliates have
certain other relationships with the Company. Chase Securities acted as
co-arranging agent and The Chase Manhattan Bank, an affiliate of Chase
Securities, acts as co-administrative agent and a lender under the credit
facility and each receives customary fees and reimbursement of expenses in
connection therewith. Additionally, Chase Equity Associates, L.P. an affiliate
of Chase Securities, owns a non-voting equity interest in the Company.
Arrangement with Certain Affiliates
Payco leases its corporate headquarters in Brookfield, Wisconsin, its data
processing center in New Berlin, Wisconsin and the office space for three of its
collection operations from partnerships in which certain officers of Payco are
the principal partners. The terms of the leases provided for aggregate annual
payments of approximately $1.8 million and $2.2 million for the years ended
December 31, 1997 and 1996, respectively. Such lease amounts are subject to an
escalation adjustment, not to exceed 5% annually. All operating and maintenance
costs associated with these buildings are paid by Payco. The Company believes
that the terms of these leases are at least as favorable as could have been
obtained in arms-length negotiations with an unaffiliated lessor.
ABC leases its headquarters in Englewood, Colorado from a partnership in which
certain officers of ABC are the principal partners. The terms of the lease
provided for aggregate annual payments of $336,000. All operating and
maintenance costs associated with this building are paid by ABC. The Company
believes that the terms of this lease are at least as favorable as could have
been obtained in arms-length negotiations with an unaffiliated lessor.
Master Services Agreement
API had entered into a Master Services Agreement (the "Master Services
Agreement") with HBR Capital, Ltd. ("HBR"), which is wholly owned by David G.
Hanna and Frank J. Hanna, III. Under the Master Services Agreement, HBR provided
certain management and investment services to API for a monthly fee of $50,000.
The Master Services Agreement expired on October 1, 1997 and was not renewed.
The Company believed that in terms of and the fees paid for the professional
services rendered were at least as favorable to API as those which could have
been negotiated with a third party.
In 1997 upon closing of the acquisitions of NSA and ABC, HBR received a one-time
fee of $600,000 for financial advisory services provided to OSI in connection
therewith.
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See index on page 38 for a listing of consolidated financial
statements filed with this report.
2. Financial Statement Schedule
See index on page 38 for a listing of consolidated financial
statements schedule required to be filed by Item 8 of this Form 10-K.
3. Exhibits
Exhibit No.
- -----------
*2.1 Agreement and Plan of Merger dated as of August 13, 1996 by and among
the Company, Boxer Acquisition Corp. and Payco American Corporation.
*2.2 Purchase Agreement dated as of September 21, 1995 by and among the
Company, Account Portfolios, Inc., Account Portfolios G.P., Inc., AP
Management, Inc., GSC management, Inc., Perimeter Credit Management
Corporation, Account Portfolios Trust One and Account Portfolios Trust
Two.
*2.3 Stock Purchase Agreement dated as of January 10, 1996 by and among the
Company, The Continental Alliance, Inc. and Peter C. Rosvall.
*2.4 Stock Purchase Agreement dated as of December 13, 1995 by and among
the Company, Outsourcing Solutions Inc., A.M. Miller & Associates,
Inc. and Alan M. Miller.
*2.5 Purchase and Inducement Agreement dated as of May 17, 1996 by and
among the Company, Account Portfolios, Inc., Account Portfolios, L.P.,
Gulf State Credit, L.P., Perimeter Credit, L.P., MLQ Investors, L.P.
and Goldman, Sachs & Co.
2.6 Asset Purchase Agreement dated October 8, 1997 by and among NSA
Acquisition Corporation, Outsourcing Solutions Inc., North Shore
Agency, Inc., Automated Mailing Services, Inc., Mailguard Security
System, Inc., DMM Consultants and Certain Stockholders.
2.7 Asset Purchase Agreement dated November 10, 1997 by and among
Outsourcing Solutions Inc., ABC Acquisition Company, Accelerated
Bureau of Collections Inc., Accelerated Bureau of Collections of Ohio,
Inc., Accelerated Bureau of Collections of Virginia Inc., Accelerated
Bureau of Collections of Massachusetts, Inc., Travis J. Justus, and
Linda Brown.
2.8 Share Purchase Agreement and Plan of Merger dated as of December 22,
1997 by and among Outsourcing Solutions Inc., Sherman Acquisition
Corporation and The Union Corporation.
*3.1 Certificate of Incorporation of the Company, as amended to date, filed
with the Secretary of State of the State of Delaware on September 21,
1995.
*3.2 By-laws of the Company
*4.1 Indenture dated as of November 6, 1996 by and among the Company, the
Guarantors and Wilmington Trust Company (the "Indenture").
*4.2 Specimen Certificate of 11% Senior Subordinated Note due 2006
(included in Exhibit 4.1 hereto).
*4.3 Specimen Certificate of 11% Series B Senior Subordinated Note due 2006
(the "New Notes") (included in Exhibit 4.1 hereto).
*4.4 Form of Guarantee of securities issued pursuant to the Indenture
(included in Exhibit 4.1 hereto).
*10.1 Amended and Restated Stockholders Agreement dated as of February 16,
1996 by and among the Company and various stockholders of the Company.
*10.2 Advisory Services Agreement dated September 21, 1995 between the
Company and MDC Management Company III, L.P.
*10.3 Lease Agreement between Payco American Corporation and the Brookfield
Investment Company dated July 12, 1979, as amended to the date hereof.
*10.4 Lease Agreement between Payco American Corporation and the Perncom
Investment Company dated April 27, 1984, as amended to the date
hereof.
*10.5 Lease Agreement between Payco American Corporation and the Westlake
Investment Corporation dated June 1, 1984, as amended to the date
hereof.
*10.6 Lease Agreement between Payco American Corporation and the Dublin
Investment Company dated July 14, 1986, as amended to the date hereof.
*10.7 Lease Agreement between Payco American Corporation and the Hacienda
Investment Company dated October 14, 1986, as amended to the date
hereof.
**10.8 Amended Employment Agreement dated as of August 27, 1997 between the
Company and Timothy G. Beffa.
*10.9 Consulting Agreement dated as of August 13, 1996 between Payco
American Corporation and Dennis G. Punches.
10.10 Employment Agreement dated October 16, 1997 between Outsourcing
Solutions Inc. and Daniel J. Dolan.
*10.11 9% Non-Negotiable Junior Subordinated Note dated January 10, 1996
issued by the Company to Alan M. Miller.
*10.12 1995 Stock Option and Stock Award Plan of the Company.
10.13 First Amendment to 1995 Stock Option and Stock Award Plan of the
Company
*10.14 Form of Non-Qualified Stock Option Award Agreement [A]
*10.15 Form of Non-Qualified Stock Option Award Agreement [B]
10.16 Lease Agreement dated June 1, 1997 between Justus Realty Limited
Partnership and Accelerated Bureau of Collections Inc.
10.17 Earn-out Agreement dated October 8, 1997 by and among NSA Acquisition
Corporation, Outsourcing Solutions Inc., North Shore Agency, Inc.,
Automated Mailing Services, Inc., Mailguard Security Systems, Inc.,
and DMM Consultants.
10.18 Second Amended and Restated Credit Agreement dated as of January 26,
1998 by and among the Company, the Lenders listed therein, Goldman
Sachs Credit Partners L.P. and The Chase Manhattan Bank, as
Co-Administrative Agents, Goldman Sachs Credit Partners L.P. and Chase
Securities, Inc., as Arranging Agents and Suntrust Bank, Atlanta, as
Collateral Agent.
21 Subsidiaries of registrant.
27 Financial Data Schedule.
_________________
* Previously filed with OSI's Registration Statement on Form S-4 filed with
Securities and Exchange Commission on November 26, 1996.
** Previously filed with OSI's Form 10-Q for the period ended September 30,
1997 with the Securities and Exchange Commission on November 14, 1997.
(b) Reports on Form 8-K
During the quarter, the following report on Form 8-K was filed:
Report on Form 8-K under Item 5 dated December 22, 1997 announcing the
Company's tender offer for The Union Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
OUTSOURCING SOLUTIONS INC.
/s/Timothy G. Beffa
-------------------
Timothy G. Beffa
President and Chief Executive Officer
/s/Daniel J. Dolan
------------------
Daniel J. Dolan
Executive Vice President and
Chief Financial Officer
DATE: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey E. Stiefler Chairman of the Board of Directors March 30, 1998
- ------------------------------------
Jeffrey E. Stiefler
/s/ Timothy G. Beffa President and Chief Executive March 30, 1998
- ------------------------------------
Timothy G. Beffa Officer, Director
/s/ David E. De Leeuw Director March 23, 1998
- ------------------------------------
David E. De Leeuw
/s/ David E. King Secretary and Treasurer, Director March 30, 1998
- ------------------------------------
David E. King
/s/ Tyler T. Zachem Vice President and Director March 30, 1998
- ------------------------------------
Tyler T. Zachem
/s/ David G. Hanna Director March 30, 1998
- ------------------------------------
David G. Hanna
/s/ Frank J. Hanna, III Director March 24, 1998
- ------------------------------------
Frank J. Hanna, III
/s/ Dennis G. Punches Director March 26, 1998
- ------------------------------------
Dennis G. Punches
/s/ Nathan W. Pearson, Jr Director March 23, 1998
- ------------------------------------
Nathan W. Pearson, Jr.
</TABLE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Financial Statements
Outsourcing Solutions Inc. and Subsidiaries
Independent Auditors' Report................................................................. F-1
Consolidated Balance Sheets at December 31, 1997 and 1996.................................... F-2
Consolidated Statements of Operations for the years ended December 31, 1997
and 1996 and for the period September 21, 1995 to December 31, 1995...................... F-3
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1997 and 1996 and for the period September 21, 1995 to
December 31, 1995........................................................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1997
and 1996 and for the period September 21, 1995 to December 31, 1995...................... F-5
Notes to Consolidated Financial Statements................................................... F-6
Account Portfolios, L.P. and Subsidiaries
Independent Auditors' Report................................................................. F-21
Consolidated Balance Sheets at December 31, 1994 and September 20, 1995...................... F-22
Consolidated Statements of Operations for the year ended December 31, 1994
and for the period from January 1, 1995 to September 20, 1995............................ F-23
Consolidated Statements of Partners' Capital for the year ended December 31,
1994 and for the period for January 1, 1995 to September 20, 1995........................ F-24
Consolidated Statements of Cash Flows for the year ended December 31,1994
and for the period from January 1, 1995 to September 20, 1995............................ F-25
Notes to Consolidated Financial Statements................................................... F-26
Consolidated Financial Statement Schedule
Independent Auditors' Report..................................................................... F-31
Schedule II - Valuation and Qualifying Accounts and Reserves...................................... F-32
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Outsourcing Solutions Inc.:
We have audited the accompanying consolidated balance sheets of Outsourcing
Solutions Inc. and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the two years in the period ended December 31, 1997 and for
the period from September 21, 1995 (date of inception) to December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Outsourcing Solutions Inc. and
subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1997 and for the period from September 21, 1995 to December 31,
1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
St. Louis, Missouri
February 13, 1998
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS 1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,217 $ 14,497
Cash and cash equivalents held for clients 20,762 20,255
Current portion of purchased loans and accounts receivable portfolios 42,915 42,481
Accounts receivable - trade, less allowance for doubtful receivables of $538 and $641 27,192 20,738
Deferred income taxes - 2,617
Other current assets 2,119 3,453
-------- --------
Total current assets 96,205 104,041
PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS 19,537 25,519
PROPERTY AND EQUIPMENT, net 32,563 36,451
INTANGIBLE ASSETS, net 219,795 173,470
DEFERRED FINANCING COSTS, less accumulated amortization of $2,376 and $337 12,517 12,563
OTHER ASSETS 693 -
DEFERRED INCOME TAXES 380 3,163
-------- --------
TOTAL $381,690 $355,207
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable - trade $ 6,977 $ 6,495
Collections due to clients 20,762 20,255
Accrued severance and office closing costs 6,487 7,558
Accrued compensation 8,332 9,574
Other current liabilities 19,644 12,047
Current portion of long-term debt 15,445 10,032
-------- --------
Total current liabilities 77,647 65,961
LONG-TERM DEBT 309,521 237,584
OTHER LONG-TERM LIABILITIES - 64
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY (DEFICIT):
8% nonvoting cumulative redeemable exchangeable preferred stock, authorized 1,000,000 11,699 10,816
shares, 935,886.85 and 865,280.01 shares, respectively, issued and outstanding, at
liquidation value of $12.50 per share
Voting common stock; $.01 par value; authorized 7,500,000 shares, 3,477,126.01 and 35 35
3,425,126.01 shares, respectively, issued and outstanding
Class A convertible nonvoting common stock; $.01 par value; authorized 7,500,000 4 4
shares, 391,740.58 shares issued and outstanding
Class B convertible nonvoting common stock; $.01 par value; authorized 500,000 4 4
shares, 40,000 shares issued and outstanding
Class C convertible nonvoting common stock; $.01 par value; authorized 1,500,000 10 10
shares, 1,040,000 shares issued and outstanding
Paid-in capital 66,958 65,658
Retained capital (84,188) (24,929)
-------- --------
Total Stockholders' equity (deficit) (5,478) 51,598
-------- --------
TOTAL $381,690 $355,207
======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1996 AND FOR THE PERIOD SEPTEMBER 21, 1995 (DATE OF INCEPTION) TO DECEMBER 31,
1995 (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES $271,683 $106,331 $ 8,311
EXPENSES:
Salaries and benefits 133,364 46,997 2,079
Service fees and other operating and administrative expenses 71,122 33,759 3,232
Amortization of purchased loans and accounts receivable 52,042 27,317 5,390
portfolios
Amortization of goodwill and other intangibles 24,749 15,452 250
Depreciation expense 8,825 2,829 81
Purchased in-process research and development - 1,000 -
--------- --------- --------
Total expenses 290,102 127,354 11,032
--------- --------- --------
OPERATING LOSS (18,419) (21,023) (2,721)
INTEREST EXPENSE - Net 28,791 12,131 1,361
--------- --------- --------
LOSS BEFORE INCOME TAXES (47,210) (33,154) (4,082)
PROVISION FOR INCOME TAXES (BENEFIT) 11,127 (11,757) (1,605)
--------- --------- --------
NET LOSS (58,337) (21,397) (2,477)
PREFERRED STOCK DIVIDEND REQUIREMENTS 922 830 225
--------- --------- --------
NET LOSS TO COMMON STOCKHOLDERS $(59,259) $(22,227) $(2,702)
========= ========= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED
DECEMBER 31,1997 AND 1996 AND FOR THE PERIOD SEPTEMBER 21,1995 (DATE OF
INCEPTION) TO DECEMBER 31,1995 (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NON-VOTING
CUMULATIVE
REDEEMABLE
EXCHANGEABLE COMMON STOCK
PREFERRED VOT- CLASS CLASS CLASS PAID-IN RETAINED
STOCK ING A B C CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 21,1995 $ - $ - $ - $ - $ - $ - $ - $ -
Issuance of 800,000.01 shares
of preferred stock 10,000 - - - - - - 10,000
Issuance of 2,812,000 shares
of common stock - 28 - - - 35,122 - 35,150
Preferred stock dividend
requirements of
$0.28 per share - - - - - - (225) (225)
Net loss - - - - - - (2,477) (2,477)
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1995 $ 10,000 $28 - - - $ 35,122 $(2,702) $42,448
Issuance of 118,866.59 shares of
common stock in exchange for
notes payable to stockholders - 2 - - - 1,484 - 1,486
Issuance of 2,326,000 shares
of common stock - 7 10 - 6 29,052 - 29,075
Conversion of common stock - (2) (6) 4 4 - - -
Payment of preferred stock dividends
through issuance of 65,290
shares of preferred stock and
recorded preferred stock dividend
requirements of $1 per share 816 - - - - - (830) (14)
Net loss - - - - - - (21,397) (21,397)
--------- --------- --------- --------- --------- --------- -------- --------
BALANCE, DECEMBER 31, 1996 10,816 35 4 4 10 65,658 (24,929) 51,598
Issuance of 52,000 shares
of common stock - - - - - 1,300 - 1,300
Payment of preferred stock dividends
through issuance of 70,606.84
shares of preferred stock and
recorded preferred stock dividend
requirements of $1 per share 883 (922) (39)
Net loss - - - - - - (58,337) (58,337)
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31,1997 $ 11,699 $35 $ 4 $ 4 $ 10 $ 66,958 $(84,188) $ (5,479)
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1996 AND FOR THE PERIOD SEPTEMBER 21, 1995 (DATE OF INCEPTION) TO DECEMBER 31,
1995 (In thousands)
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (58,337) $ (21,397) $ (2,477)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 35,613 18,618 331
Amortization of purchased loans and accounts receivable portfolios 52,042 27,317 5,390
Deferred taxes 10,877 (11,757) (1,605)
Other 48 - -
Change in assets and liabilities:
Other current assets 147 (578) (233)
Accounts payable and other current liabilities (7,565) (1,536) 1,496
-------------- -------------- --------------
Net cash provided by operating activities 32,825 10,667 2,902
-------------- -------------- --------------
INVESTING ACTIVITIES:
Purchase of loans and accounts receivable portfolios (46,494) (13,645) (903)
Payments for acquisitions, net of cash acquired (62,913) (184,184) (30,007)
Acquisition of property and equipment (9,489) (2,606) (97)
Other (603) - -
-------------- -------------- --------------
Net cash used in investing activities (119,499) (200,435) (31,007)
-------------- -------------- --------------
FINANCING ACTIVITIES:
Proceeds from term loans 55,000 337,000 -
Borrowings under revolving credit agreement 66,150 - -
Repayments under revolving credit agreement (34,300) - -
Repayments of debt (9,763) (136,615) (576)
Deferred financing fees (1,993) (12,563) -
Proceeds from issuance of common stock 300 14,974 30,150
-------------- -------------- --------------
Net cash provided by financing activities 75,394 202,796 29,574
-------------- -------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (11,280) 13,028 1,469
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 14,497 1,469 -
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,217 $ 14,497 $ 1,469
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during period for interest $ 26,372 $ 7,655 $ 543
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION POLICY - The consolidated financial statements include the
accounts of Outsourcing Solutions Inc. ("OSI") and all of its
majority-owned subsidiaries (collectively, the "Company"). Ownership in
entities of less than 50% are accounted for either under the equity or
proportionate consolidation method. All significant intercompany accounts
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of cash,
money market investments, and overnight deposits. Cash equivalents are
valued at cost, which approximates market. Cash held for clients consist of
certain restricted accounts which are used to maintain cash collected and
held on behalf of the Company's clients.
PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS - Purchased loans and
accounts receivable portfolios ("Receivables") acquired in connection with
acquisitions in September 1995 and November 1996 were recorded at the
present value of estimated future net cash flows. Receivables purchased in
the normal course of business are recorded at cost. The Company
periodically reviews all Receivables to assess recoverability. Impairments
are recognized in operations if the expected discounted future net
operating cash flows derived from the individual portfolios are less than
their respective carrying value (see Note 12).
The Company amortizes on an individual portfolio basis the cost of the
Receivables based on the ratio of current collections for a portfolio to
current and anticipated future collections including any terminal value for
that portfolio. Such portfolio cost is amortized over the expected
collection period as collections are received which, depending on the
individual portfolio, generally ranges from 3 to 5 years.
REVENUE RECOGNITION - Collections on Receivables are generally recorded as
revenue when received. Revenue from loan servicing is recorded as such
services are provided.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation is computed on the straight-line method based on the estimated
useful lives (3 years to 10 years) of the related assets. Leasehold
improvements are amortized over the term of the related lease.
INTANGIBLE ASSETS - The excess of cost over the fair value of net assets of
businesses acquired is amortized on a straight-line basis over 20 to 30
years. Other identifiable intangible assets are primarily comprised of the
fair value of existing account placements acquired in connection with
business combinations and non-compete agreements. These assets are
short-lived and are being amortized over the assets' periods of
recoverability, which are estimated to be 1 to 3 years. The Company
periodically reviews goodwill and other intangibles to assess
recoverability. Impairments will be recognized in operations if the
expected future operating cash flows (undiscounted and without interest
charges) derived from such intangible assets are less than its carrying
value.
INCOME TAXES - The Company accounts for income taxes using an asset and
liability approach. The Company recognizes the amount of taxes payable or
refundable for the current year and deferred tax liabilities and assets for
expected future tax consequences of events that have been recognized in the
consolidated financial statements.
DEFERRED FINANCING COSTS - Costs incurred to obtain financing are
capitalized and amortized over the term of the underlying debt using the
straight line method.
STOCK-BASED COMPENSATION - The Company accounts for its stock-based
compensation plan using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for
Stock-Based Compensation, requires that companies using the intrinsic value
method make pro forma disclosures of net income as if the fair value-based
method of accounting had been applied. See Note 9 for the fair value
disclosures required under SFAS No. 123.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS - In February 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 128, Earnings per Share, which
requires adoption in the quarter ended December 31, 1997, and prohibits
early compliance. SFAS No. 128 simplifies the calculation of earnings per
share and is applicable only to public companies. Under generally accepted
accounting principles' and Securities and Exchange Commission's disclosure
requirements, SFAS No. 128 is not currently applicable to the Company and,
accordingly, earnings per share is not presented.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of comprehensive
income and its components in financial statements.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information, which is effective for fiscal years
beginning after December 15, 1997. The statement changes the method of
determining segments from that currently required and requires the
reporting of certain information about segments. The Company has not
determined how its segments will be reported, or whether and to what extent
segment information will be presented.
RECLASSIFICATIONS - Certain amounts in prior periods have been reclassified
to conform to the current year presentation.
2. ORGANIZATION & ACQUISITIONS
OSI was formed on September 21, 1995 to build, through a combination of
acquisitions and sustained internal growth, one of the leading providers of
accounts receivable management services. The Company purchases and collects
portfolios of non-performing loans and accounts receivable for the
Company's own account, services accounts receivable placements on a
contingent and fixed fee basis and provides contract management of accounts
receivable. The Company's customers are mainly in the educational,
utilities, telecommunications, retail, healthcare and financial services
industries. The markets for the Company's services currently are the United
States, Puerto Rico and Mexico.
In September 1995, the Company acquired Account Portfolios, L.P. ("API"), a
partnership in the business of purchasing and managing large portfolios of
non-performing consumer loans and accounts receivable, for cash of $30,000,
common stock of $15,000 and notes of $35,000, which were subsequently paid
in March 1996.
In January 1996, the Company acquired A.M. Miller & Associates and
Continental Credit Services, Inc., accounts receivable and fee services
companies, for total cash consideration of $38,500 including transaction
costs of $3,600, common stock of $6,000, a 9% unsecured, subordinated note
of $5,000 and a 10% unsecured, subordinated note of $3,000, which was
subsequently paid in November 1996.
In November 1996, the Company acquired all of the outstanding common stock
of Payco American Corporation ("Payco"), an accounts receivable management
company primarily focused on healthcare, education and bank/credit cards,
in a merger transaction for cash of approximately $154,800 including
transaction costs of $4,600. The Company allocated the total purchase price
including additional liabilities reserves to the fair value of the net
assets acquired resulting in goodwill of approximately $123,000. In
addition, the Company allocated $1,000 of the purchase price to in-process
research and development that had not reached technological feasibility and
had no alternative future uses, which accordingly was expensed at the date
of the acquisition.
In October and November 1997, the Company acquired The North Shore Agency,
Inc. ("NSA"), a fee service company specializing in letter series
collection services, and Accelerated Bureau of Collections, Inc. ("ABC"), a
fee service company specializing in credit card collections, for total cash
consideration of approximately $53,800 including transaction costs of
$1,173 and common stock of $1,000. One of the acquisitions contains certain
contingent payment obligations, $1,520 through December 31, 1997, based on
the attainment by the newly formed subsidiary of certain financial
performance targets over each of the next three years. Future contingent
payment obligations, if any, will be accounted for as additional goodwill
as the payments are made.
The above acquisitions were accounted for as purchases. The excess of cost
over the fair value of net assets of businesses acquired is amortized on a
straight-line basis over 20 to 30 years. Results of operations were
included in the consolidated financial statements from their respective
acquisition dates.
In May 1996, a subsidiary of the Company acquired participation interests
in certain loan portfolios for cash of $3,300, Class C Nonvoting common
stock of $8,000 and a 10% unsecured promissory note of $3,500, which was
subsequently paid in November 1996.
The unaudited pro forma consolidated financial data presented below
provides pro forma effect of the acquisitions as if such acquisitions had
occurred as of January 1, 1996. The unaudited results have been prepared
for comparative purposes only and do not necessarily reflect the results of
operations of the Company that actually would have occurred had the
acquisitions been consummated as of January 1, 1996, nor does the data give
effect to any transactions other than the acquisitions.
PRO FORMA
1997 1996
Net revenues $313,219 $299,542
========= =========
Net loss $(58,005) $(39,945)
========= =========
3. PROPERTY AND EQUIPMENT
Property and equipment, which is recorded at cost, consists of the
following at December 31:
1997 1996
Furniture and fixtures $ 4,478 $ 3,591
Machinery and equipment 716 -
Data processing equipment 21,452 19,647
Telephone equipment 5,956 3,670
Leasehold improvements 1,599 1,090
Computer software 10,494 11,310
-------- --------
44,695 39,308
Less accumulated depreciation (12,132) (2,857)
-------- --------
$32,563 $36,451
======== ========
4. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
1997 1996
Goodwill $226,770 $155,693
Value of favorable contracts and placements 29,000 29,000
Covenants not to compete 4,498 4,514
--------- ---------
260,268 189,207
(40,473) (15,737)
--------- ---------
Less accumulated amortization $219,795 $173,470
======== ========
5. DEBT
Long-term debt consists of the following at December 31:
1997 1996
Term Loan A Credit Facility $ 62,500 $ 71,000
Term Loan B Credit Facility 124,922 71,000
Revolving Credit Facility 31,850 -
11% Senior Subordinated Notes - 100,000
11% Series B Senior Subordinated Notes 100,000 -
Note payable to stockholder 4,429 5,000
Other 1,265 616
-------- --------
Total debt 324,966 247,616
Less current portion of long-term debt 15,445 10,032
-------- --------
Long-term debt $309,521 $237,584
======== ========
In November 1996, the Company issued $100,000 of 11% unregistered Senior
Subordinated Notes (the "Notes") in conjunction with the acquisition of
Payco. Interest on the Notes is payable semi-annually on May 1 and November
1 of each year. The Notes are general unsecured obligations of the Company
and are subordinated in right of payment to all senior debt of the Company
presently outstanding and incurred in the future. The Notes contain certain
restrictive covenants the more significant of which are limitations on
asset sales, additional indebtedness, mergers and certain restricted
payments.
On April 28, 1997, the Company registered $100,000 of 11% Series B Senior
Subordinated Notes (Senior Notes), with no material alteration in terms,
with the Securities and Exchange Commission to exchange for the existing
Notes. The exchange offer was completed by May 29, 1997.
In November 1996, the Company entered into a new $200,000 financing
commitment ("Credit Facility") from a group of banks to finance a portion
of the Payco acquisition and refinance existing outstanding indebtedness.
The Credit Facility was subsequently amended with the Amended and Restated
Credit Agreement ("Amended Facility") in October 1997 to finance the NSA
and ABC acquisitions (see Note 4).
The Amended Facility consists of a $189,877 term loan facility and a
$58,000 Revolving Credit Facility (the "Revolving Facility"). The term loan
facility consists of a term loan of $64,627 ("Term Loan A") and a term loan
of $125,250 ("Term Loan B"), which mature on October 15, 2001 and 2003,
respectively. The Company is required to make quarterly principal
repayments on each term loan. Term Loan A bears interest, at the Company's
option, (a) at a base rate equal to the greater of the federal funds rate
plus 0.5% or the lender's customary base rate, plus 1.5% or (b) at the
reserve adjusted Eurodollar rate plus 2.5%. Term Loan B bears interest, at
the Company's option, (a) at a base rate equal to the greater of the
federal funds rate plus 0.5% or the lender's customary base rate, plus 2.0%
or (b) at the reserve adjusted Eurodollar rate plus 3.0%.
The Revolving Facility has a term of five years and is fully revolving
until October 15, 2001. The Revolving Facility bears interest, at the
Company's option, (a) at a base rate equal to the greater of the federal
funds rate plus 0.5% or the lender's customary base rate, plus 1.5% or (b)
at the reserve adjusted Eurodollar rate plus 2.5%.
The Amended Facility is guaranteed by all of the Company's present domestic
subsidiaries and is secured by all of the stock of the Company's present
domestic subsidiaries and by substantially all of the Company's domestic
property assets. The Amended Facility contains certain covenants the more
significant of which limit dividends, asset sales, acquisitions and
additional indebtedness, as well as requires the Company to satisfy certain
financial performance ratios.
The Senior Notes are fully and unconditionally guaranteed on a joint and
several basis by each of the Company's current domestic subsidiaries and
any additional domestic subsidiaries formed by the Company that become
guarantors under the Amended Facility (the "Restricted Subsidiaries").
The Restricted Subsidiaries are wholly-owned by the Company and constitute
all of the direct and indirect subsidiaries of the Company except for three
subsidiaries that are individually, and in the aggregate inconsequential.
The Company is a holding company with no separate operations, although it
incurs some expenses on behalf of its operating subsidiaries. The Company
has no significant assets or liabilities other than the common stock of its
subsidiaries, debt, related deferred financing costs and accrued expenses
relating to expenses paid on behalf of its operating subsidiaries. The
aggregate assets, liabilities, results of operations and stockholders'
equity of the Restricted Subsidiaries are substantially equivalent to those
of the Company on a consolidated basis and the separate financial
statements of each of the Restricted Subsidiaries are not presented because
management has determined that they would not be material to investors.
Summarized combined financial information of the Restricted Subsidiaries is
shown below:
1997 1996
Current assets $ 96,133 $ 96,146
========== ==========
Noncurrent assets $ 272,730 $ 238,003
========== ==========
Current liabilities $ 57,169 $ 47,909
========== ==========
Noncurrent liabilities $ 5,284 $ 5,461
========== ==========
Operating revenue $ 271,683 $ 106,331
========== ==========
Loss from operations $ (14,679) $ (15,325)
========== ==========
Net loss $ (23,857) $ (15,143)
========== ==========
Maturities of long-term debt and capital leases at December 31, 1997 are as
follows:
Debt Capital
Leases
--------- ---------
1998 $ 15,035 $ 504
1999 15,117 463
2000 18,783 333
2001 57,062 13
2002 49,922 -
Thereafter 167,867 -
--------- ---------
Total payments 323,786 1,313
Less amounts representing interest 133
---------
Present value of minimum lease payments 1,180
Less current portion 15,035 410
========= =========
$308,751 $ 770
========= =========
During 1997, the Company entered into interest rate cap agreements to
reduce the impact of increases in interest rates on its floating-rate
long-term debt. At December 31, 1997, the Company had three interest rate
cap agreements outstanding. The agreements effectively entitle the Company
to receive from a bank the amount, if any, by which the Company's interest
payments on specified principal of its floating-rate term loans for a
specified period exceed 10%. The amounts paid for these agreements of $243
are included in deferred financing costs and are being amortized to
interest expense over the terms of the various agreements through November
1999.
6. STOCKHOLDERS' EQUITY
On September 21, 1995, the Company issued 800,000.01 shares of 8% Nonvoting
Cumulative Redeemable Exchangeable Preferred Stock ("Preferred Shares").
The liquidation value of each Preferred Share is $12.50 plus accrued and
unpaid dividends. Dividends, as may be declared by the Company's Board of
Directors, are cumulative at an annual rate of 8% of the liquidation value
and are payable in equal semi-annual installments of $.50 per preferred
share on the dividend payment date, as defined in the Certificate of
Incorporation. The Company may, at its sole option and upon written notice
to preferred shareholders, redeem all or any portion of the outstanding
Preferred Shares for $12.50 per share plus cash equal to all accrued and
unpaid dividends, through the redemption date, whether or not such
dividends have been authorized or declared. Pursuant to the Company's
financing arrangements, the payment of dividends and/or the repurchase of
Preferred Shares is prohibited until the Company attains certain covenants.
The Company may, at its sole option, pay dividends in the form of
additional Preferred Shares. Each holder of Preferred Shares has the right,
at their option, to exchange any or all of their Preferred Shares for the
same number of shares of Voting Common Stock ("Voting Common Shares"). The
Company must reserve, out of its authorized but unissued Voting Common
Shares, the appropriate number of Voting Common Shares to affect the
exchange of all outstanding Preferred Shares. Upon the exchange of any
Preferred Shares, such Preferred Shares are to be retired and not reissued.
7. INCOME TAXES
Major components of the Company's income tax provision (benefit) are as
follows:
1997 1996 1995
Current:
Federal $ - $ - $ -
State 250 - -
-------- -------- --------
Total current 250 - -
-------- -------- --------
Deferred:
Federal 9,513 (10,250) (1,437)
State 1,364 (1,507) (168)
-------- --------- --------
Total deferred 10,877 (11,757) (1,605)
-------- --------- --------
Provision for income taxes (benefit) $ 11,127 $(11,757) $(1,605)
======== ========= ========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting purposes.
The Company's deferred income taxes result primarily from differences in
loans and accounts receivable purchased, amortization methods on other
intangible assets and depreciation methods on fixed assets. The tax effects
of the temporary differences that give rise to significant portions of the
deferred tax assets and liabilities at December 31, 1997 and 1996 are as
follows:
1997 1996
Deferred tax assets:
Net operating loss carryforwards $ 12,759 $ 6,302
Accrued liabilities 5,882 5,957
Other 2,153 747
--------- ---------
Gross deferred tax assets 20,794 13,006
Deferred tax liabilities:
Loans and account receivable 6,737 (4,087)
Property and equipment 724 (2,375)
Intangible assets 4,557 (764)
---------- ---------
Gross deferred tax liabilities 12,018 (7,226)
Total deferred tax assets 32,812 5,780
Less valuation allowance (32,432) -
========== =========
Net deferred tax assets $ 380 $ 5,780
========== =========
During 1997, the Company recorded a net valuation allowance of $32,432 to
reflect management's assessment, based on the weight of the available
evidence of current and projected of future book taxable income, that there
is significant uncertainty that any of the benefits from the net deferred
tax assets will be realized. For all federal tax years since the Company's
formation in September of 1995, the Company has incurred net operating
losses.
At December 31, 1997 for income tax purposes, the Company has the following
net operating loss carryforwards:
Amount Expiration
------ ----------
1997 $19,600 2012
1996 3,950 2011
1995 9,200 2010
During 1997, the Company has significantly increased its total debt from
$247,616 at December 31, 1996 to $324,966 at December 31, 1997. This
increase in debt primarily resulted from the acquisitions in 1997 of the
net assets of NSA and ABC. In addition, on January 26, 1998 and as more
fully described in Note 14, the Company incurred significant additional
borrowings to finance the acquisition of The Union Corporation. Since the
Company has a history of generating net operating losses and has
significantly increased its total interest expense to be incurred,
management does not expect the Company to generate taxable income in the
foreseeable future sufficient to realize tax benefits from the net
operating loss carryforwards or the future reversal of the net deductible
temporary differences. The amount of the deferred tax assets considered
realizable, however, could be increased in future years if estimates of
future taxable income during the carryforward period change.
Net deferred tax assets are reflected in the accompanying consolidated
financial statements as follows:
1997 1996
Current assets:
Deferred tax assets $ 11,698 $
Less valuation allowance (11,698) -
--------- ---------
Net current deferred tax assets - 2,617
--------- ---------
Long-term assets:
Deferred tax assets 21,114 3,163
Less valuation allowance (20,734) -
--------- ---------
Net long-term deferred tax assets 380 3,163
--------- ---------
Net deferred tax assets $ 380 $
========= =========
A reconciliation of the Company's reported income tax provision to the U.S.
federal statutory rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Federal taxes at statutory rate $(16,052) $(11,272) $ (1,388)
State income taxes (net of federal tax benefits) (2,092) (1,521) (111)
Nondeductible amortization 1,406 879 85
Other (4,567) 157 (191)
Deferred tax valuation allowance 32,432 - -
--------- --------- ---------
Provision for income taxes (benefit) $ 11,127 $(11,757) $ (1,605)
========= ========= =========
</TABLE>
8. RELATED PARTY TRANSACTIONS
The Company had an agreement with an affiliate of certain Company
stockholders to provide management and investment services for a monthly
fee of $50. The Company recorded management fees to this entity of $450,
$600, and $150 for the years ended December 31, 1997 and 1996 and for the
period September 21, 1995 to December 31, 1995, respectively. The agreement
was terminated September 30, 1997.
Subject to the agreements executed in connection with the acquisitions and
the private placement discussed in Note 2, the Company has paid to certain
Company stockholders transaction costs and advisory fees. Such costs were
$1,600, $9,100 and $1,500 for the years ended December 31, 1997 and 1996
and for the period September 21, 1995 to December 31, 1995, respectively.
Under various financing arrangements associated with the Company's
acquisitions and Amended Facility, the Company incurred interest expense of
$3,317 and $2,900 for the years ended December 31, 1997 and 1996,
respectively, to certain Company stockholders of which one is a financial
institution and is co-administrative agent of the Company's Amended
Facility.
During December 1997, the Company invested $5,000 for a minority interest
in a limited liability corporation ("LLC") formed for the purpose of
acquiring an accounts receivable portfolio. The majority interest in the
LLC is held by an affiliate of one of the Company's stockholders. The LLC
is managed by the Company and had insignificant activity for 1997.
9. STOCK OPTION AND AWARD PLAN
The Company has established the Outsourcing Solutions Inc. 1995 Stock
Option and Stock Award Plan (the "Plan"). The Plan is a stock award and
incentive plan which permits the issuance of options, stock appreciation
rights ("SARs") in tandem with such options, restricted stock, and other
stock-based awards to selected employees of and consultants to the Company.
The Plan reserved 304,255 Voting Common Shares for grants and provides that
the term of each award, not to exceed ten years, be determined by the
Compensation Committee of the Board of Directors (the "Committee") charged
with administering the Plan. In February 1997, the Board of Directors
approved an increase to the reserve of Voting Common Shares to 500,000 with
an additional approval to 750,000 in December 1997.
Under the terms of the Plan, options granted may be either nonqualified or
incentive stock options and the exercise price may not be less than the
fair market value of a Voting Common Share, as determined by the Committee,
on the date of grant. SARs granted in tandem with an option shall be
exercisable only to the extent the underlying option is exercisable and the
grant price shall be equal to the exercise price of the underlying option.
The awarded stock options vest over various periods and vesting may be
accelerated upon the satisfaction of certain performance targets and/or the
occurrence of certain liquidity events. The options shall expire ten years
after date of grant.
A summary of the 1995 Stock Option and Stock Award Plan is as follows:
Number Weighted Average
of Exercise Price
Shares Per Share
---------- ----------------
Outstanding at December 31, 1995 - $ -
Granted 395,809 13.57
Forfeited (149,788) 12.50
----------
Outstanding at December 31, 1996 246,021 14.23
Granted 397,500 27.99
Forfeited (75,000) 22.33
==========
Outstanding at December 31, 1997 568,521 22.78
==========
Reserved for future option grants 181,479
==========
At December 31, 1997, 49,647 shares were exercisable with an exercise price
range of $12.50 to $25.00 and the weighted average remaining contractual
life for the options outstanding was 9.0 years.
The Company accounts for the Plan in accordance with Accounting Principles
Board Opinion No. 25, under which no compensation cost has been recognized
for stock option awards. As required by SFAS No. 123, the Company has
estimated the fair value of its option grants since January 1, 1996. The
fair value for these options was estimated at the date of the grant based
on the following weighted average assumptions:
1997 1996
Risk free rate 5.44% 6.33%
Expected dividend yield of stock 0% 0%
Expected volatility of stock 0% 0%
Expected life of option (years) 10.0 10.0
Given that the Company is not publicly traded, the expected stock price
volatility is assumed to be zero. The weighted fair values of options
granted during 1997 and 1996 were $12.29 and $6.67, respectively. The
Company's pro forma information is as follows:
1997 1996
Net loss:
As reported $(58,337) $(21,397)
Pro forma (59,570) (21,758)
-------------------------------------------------------------------
In addition, the Committee may grant restricted stock to participants of
the Plan at no cost. Other than the restrictions which limit the sale and
transfer of these shares, recipients of restricted stock awards are
entitled to vote shares of restricted stock and dividends paid on such
stock. No restricted stock has been granted at December 31, 1997.
10. COMMITMENTS AND CONTINGENCIES
From time to time, the Company enters into servicing agreements with
companies which service loans for others. The servicers handle the
collection efforts on certain nonperforming loans and accounts receivable
on the Company's behalf. Payments to the servicers vary depending on the
servicing contract. Current contracts expire on the anniversary date of
such contracts but are automatically renewable at the option of the
Company.
The Company has a business alliance agreement with a partnership which
provides for the payment of fees for services performed in connection with
the acquisition of loan portfolios. Such fees include a monthly retainer
and commission based on the Company's ultimate financial return on each
purchased portfolio. The Company recorded fee expense to this partnership
of $170 for 1997.
A subsidiary of the Company has two Portfolio Flow Purchase Agreements
whereby the subsidiary has a monthly commitment to purchase nonperforming
loans meeting certain criteria for an agreed upon price subject to due
diligence. The purchases under the Portfolio Flow Purchase Agreements were
$20,661, $5,986 and $903 for the years ended December 31, 1997 and 1996 and
for the period September 21, 1995 to December 31, 1995, respectively.
The Company leases certain office space and computer equipment under
operating leases. These operating leases, with terms in excess of one year,
are due in approximate amounts as follows:
Amount
------
1998 $ 8,744
1999 8,019
2000 5,971
2001 4,322
2002 2,903
Thereafter 4,849
------
Total lease payments $34,808
Rent expense under operating leases was $8,100, $3,600 and $150 for the
years ended December 31, 1997 and 1996 and for the period September 21,
1995 to December 31, 1995, respectively.
11. LITIGATION
At December 31, 1997, the Company was involved in a number of legal
proceedings and claims that were in the normal course of business and
routine to the nature of the Company's business. The Company has provided
for the estimated uninsured amounts and costs of defense for pending suits
and management believes that reserves established for ultimate settlement
are adequate at December 31, 1997.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values and the methods and assumptions used to estimate
the fair values of the financial instruments of the Company as of December
31, 1997 and 1996 are as follows. The carrying amount of cash and cash
equivalents and long-term debt approximate the fair value. The fair value
of the long-term debt was determined based on current market rates offered
on notes and debt with similar terms and maturities. The fair value of
Receivables was determined based on discounted expected cash flows. The
discount rate was based on an acceptable rate of return adjusted for the
risk inherent in the Receivable portfolios. The estimated fair value of
Receivables approximated its carrying value at December 31, 1997 and 1996.
In December 1997, the Company completed an in-depth analysis of the
carrying value of the purchased portfolios acquired in September 1995 in
conjunction with the Company's acquisition of API. This analysis included
an evaluation of achieved portfolio amortization rates, historical and
estimated future costs to collect, as well as projected total future
collection levels. As a result of this analysis, the Company recorded
$10,000 of additional amortization relating to these purchased portfolios
to reduce their carrying value to estimated fair value.
13. EMPLOYEE BENEFIT PLAN
The Company has five defined contribution plans which provide retirement
benefits to the majority of all full time employees. The Company matches a
portion of employee contributions to the plans. Company contributions to
these plans, charged to expense, were $276 and $98 for the years ended
December 31, 1997 and 1996, respectively.
Effective January 1, 1998, three of these defined contribution plans were
combined into a new defined contribution plan sponsored by the Company. The
Company also anticipates to combine the other defined contribution plans
into the new defined contribution plan during 1998.
14. SUBSEQUENT EVENTS
On January 23, 1998, the Company acquired approximately 77% of the
outstanding shares of The Union Corporation's ("Union") common stock for
$31.50 per share. The Company agreed to acquire any of the remaining
outstanding shares of Union pursuant to a second-step merger in which
holders of such shares will receive $31.50 per share. The Company expects
to complete the merger by April 1998. The aggregate purchase price of the
common stock will be approximately $192,000.
Also in January 1998, the Company finalized an amended $470,422 credit
agreement ("Agreement") with a group of banks to fund the Union
acquisition. The Agreement consists of $412,422 of Term Loans A, B and C
due through October 2004 and a $58,000 Revolving Credit Facility due
October 2001. Interest rates on borrowings under the Agreement are based on
the Eurodollar rate or other alternatives plus a margin of 3.0% or lower.
The Agreement amended the Amended Facility.
Union reported revenues of $121,709 and net income of $8,096 for their
fiscal year ended June 30, 1997. Union also reported total assets of
$126,019 and stockholders' equity of $71,612 at June 30, 1997.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners of Account Portfolios, L.P.:
We have audited the accompanying consolidated balance sheets of Account
Portfolios, L.P (a Georgia Limited Partnership, the "Partnership") and its
subsidiaries as of September 20, 1995 and December 31, 1994 and the related
consolidated statements of operations, partners' capital, and cash flows for the
period from January 1, 1995 to September 20, 1995 and for the year ended
December 31, 1994. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Partnership and its
subsidiaries as of September 20, 1995 and December 31, 1994 and the results of
their operations and their cash flows for the period from January 1, 1995 to
September 20, 1995 and for the year ended December 31, 1994 in conformity with
generally accepted accounting principles.
/s/Deloitte & Touche LLP
- ------------------------------
Deloitte & Touche LLP
Atlanta, Georgia
August 9, 1996
(November 26, 1996 as to Note 7)
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
SEPTEMBER 20, DECEMBER 31,
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 557 $ 13,998
Loans and accounts receivable purchased 3,788 1,672
Accounts receivable - trade 3 93
Investment in partnership 1,833
Other current assets 174 80
-------- --------
Total current assets 4,522 17,676
LOANS AND ACCOUNTS RECEIVABLE PURCHASED 5,667 4,589
PROPERTY AND EQUIPMENT - Net 1,083 676
-------- --------
Total assets $ 11,272 $ 22,941
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable - trade $ 164 $ 331
Accrued consulting fees 145 289
Accrued salaries and wages 304 51
Accrued vacation 57 31
Other current liabilities 43 77
-------- --------
Total current liabilities 713 779
PARTNERS' CAPITAL 10,559 22,162
-------- --------
Total liabilities and partners' capital $ 11,272 $ 22,941
======== ========
See notes to consolidated financial statements.
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
PERIOD FROM
JANUARY 1, 1995 YEAR ENDED
TO SEPTEMBER 20, DECEMBER 31,
1995 1994
REVENUES $ 21,293 $ 39,292
EXPENSES:
Amortization of loans and accounts receivable 2,308 2,667
Service fees and other operating and
administrative expenses 8,595 6,131
Professional fees 911 2,638
-------- --------
OPERATING INCOME 9,479 27,856
OTHER INCOME (EXPENSE):
Interest expense (955) (2,941)
Interest income 460 342
Other expense (166)
-------- --------
NET INCOME $ 8,984 $ 25,091
======== ========
See notes to consolidated financial statements.
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS OF DOLLARS)
GENERAL LIMITED
PARTNER PARTNERS TOTAL
BALANCE - January 1, 1994 $ 46 $ 4,536 $ 4,582
Distributions to partners (75) (7,436) (7,511)
Net income 251 24,840 25,091
------ -------- --------
BALANCE - December 31, 1994 222 21,940 22,162
Contributions by partners 1 134 135
Distributions to partners (207) (20,515) (20,722)
Net income 90 8,894 8,984
------ -------- --------
BALANCE - September 20, 1995 $ 106 $ 10,453 $ 10,559
====== ======== ========
See notes to consolidated financial statements.
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
PERIOD FROM
JANUARY 1, 1995 YEAR ENDED
TO SEPTEMBER 20, DECEMBER 31,
1995 1994
OPERATING ACTIVITIES:
Net income $ 8,984 $ 25,091
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 167 102
Amortization of loans and accounts receivable 2,308 2,667
Loss on withdrawal from long-term investment 166
Change in assets and liabilities:
Accounts receivable - trade 90 (93)
Loans and accounts receivable purchased (5,502) (6,800)
Other current assets (94) (19)
Accounts payable, accrued expenses, and
other current liabilities (66) (40)
-------- --------
Net cash provided by operating activities 5,887 21,074
INVESTING ACTIVITIES:
Acquisition of fixed assets (574) (463)
Proceeds from sale of long-term investment 1,833
--------
Net cash provided by (used in) investing 1,259 (463)
activities
FINANCING ACTIVITIES:
Payments on debt (3,544)
Contributions from partners 135
Distributions to partners (20,722) (7,511)
-------- --------
Net cash used in financing activities (20,587) (11,055)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (13,441) 9,556
CASH AND CASH EQUIVALENTS:
Beginning of period 13,998 4,442
-------- --------
End of period $ 557 $ 13,998
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during period for interest $ 967 $ 2,920
======== ========
See notes to consolidated financial statements.
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 20, 1995 AND DECEMBER 31, 1994 AND
FOR THE PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND YEAR ENDED DECEMBER 31, 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Account Portfolios, L.P. (a Georgia Limited Partnership, the
"Partnership") is a limited partnership organized for the purpose of
purchasing portfolios of nonperforming loans and accounts receivable
("Receivables"). The Receivables are purchased by the Partnership without
recourse to the seller. The Partnership Agreement ("Agreement") provides
that the Partnership shall continue in existence until December 31, 2050
unless sooner terminated, liquidated, or dissolved by law or by terms
within the Agreement. The shareholders of the General Partner are also
trustees of the Limited Partners.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Consolidation Policy - During 1995 and 1994, the Partnership invested in
various subsidiaries which purchased portfolios of nonperforming
Receivables. The consolidated financial statements include the Partnership
and all of its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Revenue Recognition - Collection on Receivables are recorded as revenue
when received. Revenue from loan servicing is recorded as such services are
provided. Fees, paid on the closing of each portfolio of purchased
Receivables, are capitalized and included in the amortization of the
portfolio. Effective January 1, 1994, the Partnership began amortizing on
an individual portfolio basis the cost of the Receivables based on the
ratio of current collections for a portfolio to current and anticipated
future collections for that portfolio. If not amortized earlier, a
Receivable portfolio's loan cost becomes fully amortized by the end of
three years from date of purchase. Prior to 1994, the Partnership amortized
purchased loan costs under the cost recovery method. The change in method
was a result of the Partnership's improved historical collection experience
for similar types of loan portfolios and its ability to estimate expected
cash flow. This change was accounted for prospectively as a change in
estimate and the effect was to reduce amortization expense and increase net
income by $962,000 in 1994.
Allocation of Net Earnings (Loss) - Income, losses, and the net cash from
operations of the Partnership are allocated 1% to the General Partner and
99% to the Limited Partners. Net cash from operations is defined as cash
flow from operations less amounts used to pay or establish reserves for all
Partnership expenses, debt payments, capital improvements, replacements,
and contingencies as determined by the General Partner.
In the event of the sale of Partnership property, profits or losses are
allocated to the Partners as follows:
o First, to the Partners so as to take account of any variation between
the adjusted basis of the property and its initial gross asset value.
o Second, to any Partner who has a negative capital account at the time
of disposition.
o Third, to all Partners in accordance with their interests in the
income and losses of the Partnership as set forth in the Agreement.
Cash and Cash Equivalents - Cash and cash equivalents consist of cash,
money market investments, and overnight deposits. The Partnership considers
all other highly liquid temporary cash investments with low interest rate
risk to be cash equivalents. Cash equivalents are valued at cost, which
approximates market.
Fixed Assets - Fixed assets are recorded at cost. Depreciation is computed
on the straight-line method based on the estimated useful lives of the
related assets.
Income Taxes - No provision for income taxes is made in the financial
statements of the Partnership. Taxable income or loss of the Partnership is
reported in the income tax returns of its partners.
2. PROPERTY AND EQUIPMENT
Property and equipment, which is recorded at cost, consists of the
following at September 20, 1995 and December 31, 1994 (in thousands):
1995 1994
Furniture and fixtures $ 201 $ 111
Data processing equipment 688 377
Telephone equipment 496 347
Leasehold improvements 30 13
Computer software 7
------
1,422 848
Less accumulated depreciation (339) (172)
------ ------
Fixed assets, net $1,083 $ 676
====== ======
3. INVESTMENT IN PARTNERSHIP
At December 31, 1994, the investment in partnership consisted of the
Partnership's limited partner investment in a private investment limited
partnership whose emphasis is on capital appreciation through investments.
A $2.0 million capital contribution was made on December 30, 1993 and was
recorded at cost. The Partnership withdrew its investment during the year
ended December 31, 1994 and received 80% of the total anticipated
distribution in January 1995. The remaining 20% was distributed to the
Partnership in 1995 upon completion of the audit of the private investment
limited partnership. Estimated losses of $166,473 on this investment were
included in 1994 other expense.
4. NOTE PAYABLE
The Partnership entered into a two-year Master Loan Agreement with Cargill
Financial Services Corporation ("Cargill") on May 14, 1992 ("the Loan
Agreement") which allowed it to borrow up to $50.0 million for the purchase
of portfolios of nonperforming loans and accounts receivable approved by
both parties. Under the terms of the Loan Agreement, interest accrues at a
rate of prime plus 7% and all borrowings are payable in 24 months. There
were no principal amounts outstanding under the Loan Agreement as of
September 20, 1995 and December 31, 1994. Borrowings were collateralized by
current and future loans purchased under the Loan Agreement.
Under the terms of the Loan Agreement, after payment of principal,
noncontingent interest, and return of the Partnership's investment, the
Partnership is required to pay an additional 20% of all future collections
less service fees (as defined) as contingent interest to the lender. The
Partnership paid contingent interest of $955,290 and $2,940,593 under the
Loan Agreement for the period from January 1, 1995 to September 20, 1995
and for the year ended December 31, 1994, respectively, which was charged
to interest expense.
The Partnership was obligated to pay a fee to an investment bank on all
amounts borrowed from Cargill up to total borrowings of $50.0 million.
There are no outstanding borrowings from Cargill as of September 20, 1995
and December 31, 1994 and all related consulting fees have been paid. The
Partnership recorded consulting fees relating to the Cargill borrowing of
$198,730 for the year ended December 31, 1994. No consulting fees were paid
during the period from January 1, 1995 to September 20, 1995.
5. RELATED PARTY TRANSACTIONS
On October 1, 1992, the Partnership entered into a management and
investment services agreement with a related party. The agreement provides
for the payment by the Partnership of monthly management fees of $75,000
through March 1993 and monthly fees of $50,000 thereafter. The Partnership
recorded management fees to this entity of $450,000 and $600,000 for the
period from January 1, 1995 to September 20, 1995 and the year ended
December 31, 1994, respectively.
6. EMPLOYEE BENEFIT PLAN
The Partnership adopted a 401(k) profit sharing plan and trust (the "Plan")
on March 1, 1994 which covers all full-time employees who have completed
three months of service. Employees may contribute up to 15% of their annual
compensation and employer contributions are discretionary. The Partnership
did not make any contributions to the Plan during the period from January
1, 1995 to September 20, 1995 and for the year ended December 31, 1994,
respectively. Effective December 22, 1995, the Partnership terminated the
Plan. Participants in the Plan were given the option to roll over their
account balance into another qualified plan or to receive a lump-sum
distribution to the Plan.
7. COMMITMENTS AND CONTINGENCIES
From time to time, the Partnership enters into servicing agreements with
companies which service loans for others. The servicers handle the
collection efforts on certain nonperforming loans and accounts receivable
on the Partnership's behalf. Payments to the servicers vary depending on
the servicing contract. Current contracts expire in 1995 but are
automatically renewable at the option of the Partnership.
The Partnership has a consulting agreement with an individual which
provides for the payment of fees for services performed in connection with
the acquisition of loan portfolios. Such fees are based on the portfolio
purchase price and future collections. The Partnership recorded consulting
expenses of $556,000 and $2,279,000 during the period from January 1, 1995
to September 20, 1995 and for the year ended December 31, 1994,
respectively.
The Partnership has a three-year employment agreement with an employee
which provides for the payment of additional compensation based on future
collections of loan portfolios identified by the employee. No additional
compensation was paid to this individual during the period from January 1,
1995 to September 20, 1995 and for the year ended December 31, 1994,
respectively.
During August 1994, a subsidiary of the Partnership entered into a two-year
Portfolio Flow Purchase Agreement whereby the subsidiary has a monthly
commitment to purchase nonperforming loans meeting certain criteria for an
agreed upon price up to a total purchase price of $1,000,000 per month .
The purchases under the Portfolio Flow Purchase Agreement were $2,515,480
and $1,156,485 for the period from January 1, 1995 to September 20, 1995
and for the year ended December 31, 1994, respectively. The subsidiary also
entered into certain Participation Agreements whereby from time to time it
may sell (at its sole discretion) undivided interests in the loan
portfolios purchased under the Portfolio Flow Purchase Agreement. The
subsidiary records the loan portfolios purchased net of the participation
interests sold.
The Partnership is obligated under operating lease agreements with terms in
excess of one year as follows (in thousands):
1995 $ 108
1996 422
1997 316
1998 251
1999 and thereafter 349
-------
$ 1,446
=======
Rent expense under operating leases was $200,680 and $118,806 for the
period from January 1, 1995 to September 20, 1995 and for the year ended
December 31, 1994, respectively.
The Partnership is a party to certain legal matters arising in the ordinary
course of business. In the opinion of management, none of these matters are
expected to have a material effect on the financial position or results of
operations of the Partnership.
8. SUBSEQUENT EVENTS
Pursuant to a Purchase Agreement dated September 21, 1995 (the "Purchase
Agreement"), OSI Holdings Corp. (the "Company"), a Delaware corporation,
acquired the Class A limited partnership interests in Account Portfolios,
L.P. for 933,333 shares of the Company common stock and 266,667 shares of
the Company 8% Non-Voting Cumulative Redeemable Exchangeable Preferred
Stock. The Company contributed the Class A partnership interests, valued at
$15.0 million, to Account Portfolios, Inc. ("AP, Inc."), a subsidiary of
the Company. AP, Inc. acquired the Class B limited partnership interests in
the Partnership for cash of approximately $28.8 million and notes of $35.0
million. Account Portfolios, G.P., Inc. ("APGP, Inc."), another subsidiary
of the Company, acquired the general partnership interests of the
Partnership and its subsidiaries for cash of approximately $1.2 million.
The total value of this transaction was $80.0 million.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Outsourcing Solutions Inc.:
We have audited the consolidated financial statements of Outsourcing Solutions
Inc. and its subsidiaries as of December 31, 1997 and 1996, and for each of the
two years in the period ended December 31, 1997 and for the period from
September 21, 1995 (date of inception) to December 31, 1995, and have issued our
report thereon dated February 13, 1998; such report is included elsewhere in
this Form 10-K. Our audits also included the consolidated financial statement
schedule of Outsourcing Solutions Inc. and its subsidiaries, listed in the
accompanying index at Item 14(a)2. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Deloitte & Touche LLP
- --------------------------
Deloitte & Touche LLP
St. Louis, Missouri
February 13, 1998
<PAGE>
Outsourcing Solutions Inc. and Subsidiaries Schedule II
Valuation and Qualifying Accounts and Reserves
For the year ended December 31, 1997 and 1996
and the period ended December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- --------- ---------------------------- -------- --------
Additions (B)
----------------------------
Balance Charged to Deductions Balance
@ beg. of Charged to Other (Please @ end of
Description Period Expense Accounts (A) explain) Period
----------- --------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1997 641 367 - 470 538
==== ==== ==== ==== ====
1996 - 117 671 147 641
==== ==== ==== ==== ====
1995 - - - - -
==== ==== ==== ==== ====
<FN>
(A) Payco balance at date of acquisition.
(B) Accounts receivable write-offs and adjustments, net of recoveries.
</FN>
</TABLE>
ASSET PURCHASE AGREEMENT
by and among
Outsourcing Solutions Inc.,
NSA Acquisition Corporation,
North Shore Agency, Inc.,
Automated Mailing Services, Inc.,
Mailguard Security Systems, Inc.,
DMM Consultants,
and
Certain Stockholders
<PAGE>
TABLE OF CONTENTS
ASSET PURCHASE AGREEMENT
SECTION PAGE
ASSET PURCHASE AGREEMENT......................................................1
RECITALS......................................................................1
ARTICLE I.....................................................................1
DEFINITIONS................................................................1
AFFILIATE..................................................................1
ARBITER....................................................................1
ASSETS.....................................................................1
ASSIGNMENT AND ASSUMPTION AGREEMENT........................................2
ASSUMED LIABILITIES........................................................2
BALANCE SHEET DATE.........................................................3
BILL OF SALE...............................................................3
BUSINESS...................................................................3
BUYER......................................................................3
CANADIAN SHARES............................................................3
CLOSING....................................................................3
CLOSING CASH CONSIDERATION.................................................3
CLOSING DATE...............................................................3
CLOSING DATE BALANCE SHEET.................................................3
CLOSING DATE STATEMENT.....................................................3
CLOSING FINANCIAL STATEMENTS...............................................3
CLOSING STOCK CONSIDERATION................................................3
CLOSING WORKING CAPITAL....................................................3
CODE.......................................................................3
CONTRACT...................................................................4
COURT......................................................................4
CURRENT ASSETS.............................................................4
CURRENT LIABILITIES........................................................4
DOLLARS....................................................................4
EARN-OUT AGREEMENT.........................................................4
EFFECTIVE TIME.............................................................4
EMPLOYMENT AGREEMENTS......................................................4
EXCLUDED ASSETS............................................................4
FINAL PURCHASE PRICE.......................................................4
FINANCIAL STATEMENTS.......................................................4
GAAP.......................................................................4
GOVERNMENT.................................................................4
INTELLECTUAL PROPERTY......................................................5
INTERIM BALANCE SHEET......................................................5
INTERIM STATEMENTS.........................................................5
LAW........................................................................5
LIABILITIES................................................................5
LIEN.......................................................................5
NORTH SHORE AFFILIATED GROUP...............................................5
NORTH SHORE CANADA.........................................................5
NOTICE OF DISPUTE..........................................................5
ORDINARY COURSE............................................................6
PARTY......................................................................6
PERMITTED LIENS............................................................6
PERSON.....................................................................6
PLAN.......................................................................6
PURCHASED ASSETS...........................................................6
RETURNS....................................................................6
SELLERS....................................................................6
SELLERS GROUP..............................................................6
SELLERS GROUP PERSON.......................................................6
TAXES......................................................................7
ARTICLE II....................................................................7
PURCHASE AND SALE OF ASSETS................................................7
2.1 ASSETS TO BE PURCHASED.................................................7
2.2 ASSUMED LIABILITIES....................................................7
2.3 CLOSING CONSIDERATION..................................................7
2.4 POST-CLOSING ADJUSTMENTS TO CLOSING CONSIDERATION......................8
2.5 ALLOCATION OF CONSIDERATION............................................8
2.6 CLOSING................................................................8
2.7 DELIVERIES OF SELLERS AT CLOSING.......................................8
2.8 DELIVERIES OF BUYER AT CLOSING.........................................8
2.9 CLOSING DATE BALANCE SHEET AND STATEMENT...............................9
ARTICLE III..................................................................10
REPRESENTATIONS AND WARRANTIES OF SELLERS.................................10
3.1 CORPORATE EXISTENCE AND POWER OF SELLERS..............................10
3.2 APPROVAL AND ENFORCEABILITY OF AGREEMENT..............................10
3.3 FINANCIAL STATEMENTS..................................................11
3.4 EVENTS SUBSEQUENT TO DECEMBER 31, 1996................................12
3.5 ASSETS IN POSSESSION OF OTHERS........................................13
3.6 ACCOUNTS AND NOTES RECEIVABLE.........................................13
3.7 UNDISCLOSED LIABILITIES...............................................13
3.8 TAXES.................................................................13
3.9 REAL PROPERTY - OWNED.................................................14
3.10 PERSONAL PROPERTY - OWNED............................................14
3.11 REAL AND PERSONAL PROPERTY - LEASED FROM SELLERS.....................14
3.12 REAL AND PERSONAL PROPERTY - LEASED TO SELLERS.......................15
3.13 INTELLECTUAL PROPERTY................................................16
3.14 NECESSARY PROPERTY AND TRANSFER OF PURCHASED ASSETS..................16
3.15 USE AND CONDITION OF PROPERTY........................................17
3.16 LICENSES AND PERMITS.................................................17
3.17 CONTRACTS--DISCLOSURE................................................17
3.18 CONTRACTS--VALIDITY, ETC.............................................19
3.19 NO BREACH OF LAW OR GOVERNING DOCUMENT...............................19
3.20 LITIGATION AND ARBITRATION...........................................20
3.21 DIRECTORS, OFFICERS, EMPLOYEES AND CONSULTANTS.......................20
3.22 INDEBTEDNESS TO AND FROM DIRECTORS, OFFICERS AND OTHERS..............20
3.23 OUTSIDE FINANCIAL INTERESTS..........................................21
3.24 PAYMENTS, COMPENSATION AND PERQUISITES OF AGENTS AND EMPLOYEES.......21
3.25 LABOR CONTRACTS, EMPLOYEE BENEFIT PLANS, AND EMPLOYMENT CONTRACTS....21
3.26 ERISA................................................................21
3.27 TERMINATED PLANS.....................................................22
3.28 OVERTIME, BACK WAGES, VACATION AND MINIMUM WAGES.....................22
3.29 DISCRIMINATION AND OCCUPATIONAL SAFETY AND HEALTH....................22
3.30 ALIEN EMPLOYMENT ELIGIBILITY.........................................23
3.31 LABOR DISPUTES; UNFAIR LABOR PRACTICES...............................23
3.32 INSURANCE POLICIES...................................................23
3.33 GUARANTEES...........................................................23
3.34 ENVIRONMENTAL MATTERS................................................23
3.35 BROKER'S FEES........................................................25
3.36 CAPITALIZATION AND RELATED MATTERS...................................25
3.37 CANADIAN LAW.........................................................25
3.38 FOREIGN ASSETS AND OPERATIONS........................................26
3.39 METER MAIL PROGRAMS..................................................26
3.40 BOOKS AND RECORDS....................................................26
3.41 TRUTHFULNESS.........................................................26
ARTICLE IV...................................................................26
REPRESENTATIONS AND WARRANTIES OF BUYER...................................26
4.1 CORPORATE EXISTENCE OF BUYER..........................................26
4.2 APPROVAL OF AGREEMENT.................................................27
4.3 NO BREACH OF ARTICLES OR INDENTURES...................................27
4.4 INVESTMENT REPRESENTATION.............................................27
4.5 BROKER'S FEES.........................................................27
4.6 CAPITAL STOCK ETC.....................................................28
ARTICLE V....................................................................28
COVENANTS CONCERNING SELLERS..............................................28
5.1 OPERATION OF THE BUSINESS.............................................28
5.2 PRESERVATION OF BUSINESS..............................................30
5.3 INSURANCE AND MAINTENANCE OF PROPERTY.................................30
5.4 FULL ACCESS...........................................................30
5.5 BOOKS, RECORDS AND FINANCIAL STATEMENTS...............................30
5.6 GOVERNMENTAL FILINGS..................................................30
5.7 TAX MATTERS...........................................................31
ARTICLE VI...................................................................31
OTHER AGREEMENTS..........................................................31
6.1 CHANGE OF NAME........................................................31
6.2 EMPLOYEES.............................................................31
6.3 SUPPLEMENTAL DISCLOSURE...............................................32
ARTICLE VII..................................................................32
CONDITIONS TO BUYER'S OBLIGATIONS.........................................32
7.1 REPRESENTATIONS AND WARRANTIES OF SELLERS.............................32
7.2 PERFORMANCE OF THIS AGREEMENT.........................................32
7.3 MATERIAL ADVERSE CHANGE AND EXTRAORDINARY DISTRIBUTIONS...............32
7.4 CERTIFICATE OF SELLERS................................................33
7.5 OPINION OF COUNSEL....................................................33
7.6 EMPLOYMENT AGREEMENTS.................................................33
7.7 EARN-OUT AGREEMENT....................................................33
7.7 NO LAWSUITS...........................................................33
7.8 NO RESTRICTIONS.......................................................34
7.9 CONSENTS..............................................................34
7.10 RELEASES.............................................................34
7.11 DOCUMENTS............................................................34
7.13 LEASE ASSIGNMENT AND OTHER MATTERS...................................34
7.14 FURTHER ASSURANCES...................................................35
ARTICLE VIII.................................................................35
CONDITIONS TO SELLERS' OBLIGATIONS........................................35
8.1 REPRESENTATIONS AND WARRANTIES OF BUYER...............................35
8.2 PERFORMANCE OF THIS AGREEMENT.........................................35
8.3 CERTIFICATE OF BUYER..................................................35
8.4 EARN-OUT AGREEMENT....................................................35
8.5 EMPLOYMENT AGREEMENTS.................................................35
8.6 PAYMENT OF CLOSING CONSIDERATION AND ASSUMPTION OF ASSUMED LIABILITIES36
8.7 NO LAWSUITS...........................................................36
8.8 OPINION OF COUNSEL....................................................36
8.9 BANK LOAN.............................................................36
8.10 FURTHER ASSURANCES...................................................36
ARTICLE IX...................................................................37
INDEMNIFICATION...........................................................37
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................37
9.2 SELLERS' INDEMNIFICATION..............................................37
9.3 BUYER'S INDEMNIFICATION...............................................37
9.4 NOTICE OF CLAIM.......................................................37
9.5 RIGHT TO CONTEST CLAIMS OF THIRD PERSONS..............................38
9.6 SOURCES OF INDEMNIFICATION............................................39
9.7 LIMITATIONS...........................................................39
ARTICLE X....................................................................40
MISCELLANEOUS.............................................................40
10.1 ASSIGNMENT; BINDING AGREEMENT........................................40
10.2 TERMINATION OF AGREEMENT.............................................40
10.3 MANNER AND EFFECT OF TERMINATION.....................................40
10.4 NON-DISCLOSURE OF INFORMATION........................................41
10.5 TRANSFER TAXES AND EXPENSES..........................................41
10.6 BULK SALES...........................................................41
10.7 REMEDIES.............................................................41
10.8 ENTIRE AGREEMENT AND MODIFICATION....................................42
10.9 SEVERABILITY.........................................................42
10.10 COUNTERPARTS........................................................42
10.11 HEADINGS; INTERPRETATION............................................42
10.12 GOVERNING LAW.......................................................42
10.13 PAYMENT OF FEES AND EXPENSES........................................42
10.14 SELLERS GROUP REPRESENTATIVE........................................42
10.15 NOTICES.............................................................43
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 8th day
of October 1997, by and among, on one hand, Outsourcing Solutions Inc., a
Delaware corporation ("OSI"), and NSA Acquisition Corporation, a New York
corporation and a subsidiary of OSI ("Buyer"), and on the other hand, North
Shore Agency, Inc., a New York corporation ("North Shore"), Automated Mailing
Services, Inc., a New York corporation ("AMS"), Mailguard Security Systems,
Inc., a New York corporation ("Mailguard"), and David Klein, in connection with
his sole proprietorship operated as DMM Consultants("DMM Consultants") (each, a
"Seller" and together, the "Sellers") and those certain individual stockholders
listed and identified on Exhibit 1 attached hereto (the "Stockholders"). Certain
defined terms are set forth in Article I.
RECITALS
Buyer desires to purchase from Sellers the Purchased Assets on the
following terms and conditions; and
Sellers desire to sell to Buyer the Purchased Assets on the following terms
and conditions.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants, representations, warranties, conditions and agreements hereinafter
expressed, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Person referred to. In this definition, "control" means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of securities, by contract, or
otherwise.
"Arbiter" means the individual appointed under Section
2.9(d).
"Assets" means all assets and property and associated rights and interests,
real, personal and mixed, tangible and intangible, of whatever kind, owned or
used by Sellers; provided, however, with respect to the assets of David Klein,
Assets shall only mean those used in connection with the Business. Without
limiting the generality of the foregoing, the Assets include the following
items:
(a) all assets reflected and/or described on the Interim Balance
Sheet, except any such assets which have been disposed of in the Ordinary Course
since the Balance Sheet Date;
(b) all assets owned or used by Sellers which have been fully
depreciated or written off;
(c) all assets acquired by Sellers since the Balance Sheet Date;
(d) all accounts receivable of Sellers;
(e) all inventories of Sellers, including but not limited to all
supplies;
(f) all Intellectual Property of Sellers and documentation thereof
and the right and power to assert, defend and recover title thereto and the
right to recover for past damages on account of the infringement, misuse, or
theft thereof;
(g) all records, including business, computer, engineering and other
records, and all associated documents, discs, tapes and other storage or
recordkeeping media of Sellers, including but not limited to all sales data,
customer lists, accounts, bids, contracts, supplier records and other data and
information of the Business;
(h) the Canadian Shares;
(i) all of Sellers' rights and claims against others under
Contracts; and
(j) all other claims against others, rights and choses in action,
liquidated or unliquidated, of Sellers arising from the Business, including
those arising under insurance policies and those related to the Assumed
Liabilities.
"Assignment and Assumption Agreement" means the form of
instrument set forth as Exhibit 1.1(a).
"Assumed Liabilities" means Liabilities of Sellers to the
extent they are:
(a) Current Liabilities that are (i) quantified on the Closing Date
Balance Sheet and the Closing Date Statement, and if incurred on or before the
Balance Sheet Date, quantified thereon, (ii) included in the calculation of the
Final Purchase Price or (iii) if incurred after the date of this Agreement,
incurred in compliance with this Agreement; or
(b) executory obligations arising from the Business which are not
required under GAAP to be quantified and included in the financial statements of
the Business and which (i) if required to be set forth on a Schedule, are so set
forth, (ii) are incurred under a Contract with a Person other than a Sellers
Group Person for the sale of goods or services by Sellers, (iii) are to be
performed after the Effective Time or (iv) if incurred after the date of this
Agreement, are incurred in compliance with this Agreement.
"Balance Sheet Date" means May 31, 1997.
"Bill of Sale" means the form of instrument set forth as
Exhibit 1.1(b).
"Business" means the business and operations of Sellers including without
limitation the business generally conducted under the trade names "North Shore
Agency, Inc.," "Automated Mailing Services, Inc.," "Mailguard Security Systems,
Inc." and/or "DMM Consultants."
"Buyer" means NSA Acquisition Corporation, a New York
corporation.
"Canadian Shares " means all of the capital stock of North Shore Canada
owned by North Shore.
"Closing" means the consummation of the transactions
contemplated by this Agreement.
"Closing Cash Consideration" means Nineteen Million Five
Hundred Thousand Dollars ($19,500,000) in cash.
"Closing Date" means October 8, 1997 or, if the conditions to Closing are
not by then satisfied, on such Closing Date as the Parties may agree to in
writing.
"Closing Date Balance Sheet" means the balance sheet prepared pursuant to
Section 2.9.
"Closing Date Statement" means the statement prepared
pursuant to Section 2.9.
"Closing Financial Statements" means the Closing Date
Balance Sheet and the Closing Date Statement prepared pursuant to
Section 2.9.
"Closing Stock Consideration" means 40,000 shares of voting common stock
of OSI ($25.00 per share for $1 million).
"Closing Working Capital" means total Current Assets minus total Current
Liabilities, as determined on the Closing Date Statement pursuant to Section
2.9.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Contract" means any contract, agreement, binding commitment or
instrument, purchase order or offer, written or oral, entered into or made by or
on behalf of Sellers.
"Court" means any court or judicial body of any
Government.
"Current Assets" shall be determined in accordance with GAAP and shall
mean (a) cash, (b) accounts receivable (less an allowance for doubtful accounts)
and (c) prepaid expenses and supplies.
"Current Liabilities" shall be determined in accordance with GAAP and
shall mean (a) accounts payable and accrued expenses, (b) current obligations
under capital leases and (c) bank loans payable.
"Dollars" or "$" means United States Dollars.
"Earn-out Agreement" means the form of earn-out agreement set forth
hereto as Exhibit 2.3.
"Effective Time" means the effective time of the Closing,
which shall be as of 12:01 a.m. on October 1, 1997.
"Employment Agreements" means the forms of employment and non-competition
agreements set forth as Exhibits 7.6(a), 7.6(b) and 7.6(c).
"Excluded Assets" means the Assets identified in
Schedule 1.1(a).
"Final Purchase Price" means the Closing Cash Consideration as adjusted
pursuant to Section 2.4.
"Financial Statements" means the 1996 Financial Statements and the 1995
Financial Statements. "1996 Financial Statements" means the North Shore
Affiliated Group's audited combined balance sheet at December 31, 1996 and the
related statements of income and retained earnings and combined statements of
cash flows for the 12 month period then ended, together with any notes or
schedules thereto. "1995 Financial Statements" means the North Shore Affiliated
Group's reviewed combined balance sheet at December 31, 1995 and the related
statements of income and retained earnings and combined statements of cash flows
for the 12 month period then ended, together with any notes or schedules
thereto.
"GAAP" means generally accepted accounting principles.
"Government" means the United States of America, any other nation or
state, and any federal, bilateral or multilateral governmental authority; and
any possession, territory, county, district, municipality, city or other
governmental unit or subdivision of any of the foregoing.
"Intellectual Property" means trademarks, trade names, corporate names,
service marks and registrations thereof and applications therefor, together with
that part of the goodwill of the Business connected with the use of and
symbolized by such marks; patents, copyrights and computer software, both source
code and executable code (but excluding any non-transferable licenses of
commercially available software not created or customized for the Business), and
registrations thereof and applications therefor; inventions, discoveries,
processes, ideas, designs, methods, formulae, trade secrets, unregistered
copyrights, proprietary technical information, know-how and data; licenses,
sublicenses, assignments and agreements with respect to the foregoing; and all
manuals, records and documentation with respect to the foregoing.
"Interim Balance Sheet" means the balance sheet at May 31, 1997 included
in the Interim Statements.
"Interim Statements" means the Interim Balance Sheet and the related
statements of income and retained earnings and combined statements of cash flows
of the North Shore Affiliated Group for the five month period then ended,
together with any notes or schedules thereto.
"Law" means any statute, law, treaty, ordinance, rule, regulation,
instrument, directive, decree, order or injunction of any Government,
quasi-governmental authority or Court, and includes rules or regulations of any
regulatory or self-regulatory authority compliance with which is required by
Law.
"Liabilities" means all liabilities and/or obligations, whether or not
required to be reflected on the financial statements of a business.
"Lien" means any security interest, mortgage, pledge, charge, adverse
claim or other encumbrance.
"North Shore Affiliated Group" means North Shore, AMS, Mailguard and
North Shore Canada and for purposes of Article III (other than Sections 3.1(a)
and (b) and 3.3) and Article V, the term North Shore Affiliated Group shall
include DMM Consultants.
"North Shore Canada" means North Shore Agency Collection
Corporation, Canada.
"Notice of Dispute" means a notice to Buyer delivered pursuant to Section
2.9, specifying in reasonable detail all points of disagreement with the Closing
Date Balance Sheet and Closing Date Statement.
"Ordinary Course" means, with respect to the Business, only the ordinary
course of commercial operations customarily engaged in by such business and
specifically does not include (a) activity (i) involving the purchase or sale of
such business or of any product line or business unit, (ii) involving
modification or adoption of any Plan or (iii) which requires approval by the
board of directors or shareholders of an entity engaged in such business or (b)
the incurrence of any liability for any breach or violation of any Law.
"Party" means any of Buyer, OSI, Sellers or Stockholders,
and "Parties" means all of them.
"Permitted Liens" means liens set forth on Schedule
1.1(b).
"Person" means any natural person; any corporation, partnership, company
or other corporate entity; and any Government.
"Plan" means any agreement, arrangement, plan or policy, qualified or
non-qualified, whether or not considered legally binding, that involves (a) any
pension, retirement, profit sharing, deferred compensation, bonus, stock option,
stock purchase, phantom stock, health, welfare or incentive plan; or (b) welfare
or "fringe" benefits, including without limitation any voluntary employees'
beneficiary associations or related trusts, vacation, severance, disability,
medical, hospitalization, dental, life and other insurance, tuition, company
car, club dues, income tax preparation, sick leave, maternity, paternity or
family leave, child care or other benefits.
"Purchased Assets" means the Assets excluding the Excluded Assets. In
addition, for purposes of Article III and Article V of this Agreement, Purchased
Assets shall include all assets of North Shore Canada.
"Returns" means returns, reports, estimated tax and informational
statements and returns relating to Taxes which are, were or will be required by
Law to be filed by Sellers, and all information returns (e.g., Form W-2, Form
1099) and reports relating to Taxes or Plans. Any one of the foregoing Returns
may be referred to sometimes as a "Return."
"Sellers" means North Shore, AMS, Mailguard, and David
Klein.
"Sellers Group" means Sellers and Stockholders.
"Sellers Group Person" means a Person included in the
Sellers Group.
"Taxes" means all taxes, charges, fees, levies or other like assessments
imposed or assessed by any Government, including without limitation income,
gross receipts, profits, windfall profit, employment (including Social Security,
state pension plans and unemployment insurance), withholding, payroll,
franchise, gross receipts, sales, use, transfer, stamp, occupation, real or
personal property, ad valorem, value added, premium and excise taxes; Pension
Benefit Guaranty Corporation premiums and any other like Government charges; and
shall include all penalties, fines, assessments, additions to tax and interest
resulting from, attributable to, or incurred in connection with such Taxes or
any contest or dispute thereof. Any one of the foregoing Taxes may be referred
to sometimes as a "Tax."
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Purchased. Subject to the terms and conditions hereof, on
the Closing Date and as of the Effective Time, Sellers agree to sell to Buyer,
free and clear of all Liens other than Permitted Liens, all right, title and
interest of Sellers to and in all of the Purchased Assets.
2.2 Assumed Liabilities
(a) Subject to the terms and conditions hereof, on the Closing Date
and as of the Effective Time, Buyer agrees to assume only the Assumed
Liabilities.
(b) Notwithstanding the foregoing, if the assignment or transfer of
any obligation or instrument would cause a breach thereof and if a required
consent to such assignment or transfer has not been obtained, then, at Buyer's
election and in its sole discretion, and subject to Buyer's right to require
strict compliance with Section 7.10 hereof, such obligation or instrument shall
not be assigned or transferred to Buyer, but Buyer shall act as agent for
Sellers in order to obtain for Buyer the benefits under such obligation or
instrument.
(c) EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED IN THIS SECTION
2.2, NEITHER BUYER NOR ANY AFFILIATE OF BUYER ASSUMES OR AGREES TO BECOME LIABLE
FOR OR SUCCESSOR TO ANY LIABILITIES OR OBLIGATIONS WHATSOEVER, LIQUIDATED OR
UNLIQUIDATED, KNOWN OR UNKNOWN, CONTINGENT OR OTHERWISE, WHETHER OF SELLERS, ANY
AFFILIATE OF SELLERS, ANY PREDECESSOR THEREOF, OR ANY OTHER PERSON, OR OF THE
BUSINESS. NO OTHER STATEMENT IN OR PROVISION OF THIS AGREEMENT AND NO OTHER
STATEMENT, WRITTEN OR ORAL, ACTION OR FAILURE TO ACT INCLUDES OR CONSTITUTES ANY
SUCH ASSUMPTION OR AGREEMENT, AND ANY STATEMENT TO THE CONTRARY BY ANY PERSON IS
UNAUTHORIZED AND HEREBY DISCLAIMED.
2.3 Closing Consideration. The consideration for the Purchased Assets shall
consist of (i) the Closing Cash Consideration payable on the Closing Date by
wire transfer of immediately available funds to the account or accounts
specified in writing by the Sellers two business days prior to the Closing Date
(subject to adjustment as described in Section 2.4), (ii) the Closing Stock
Consideration, (iii) the earn-out consideration provided for in Section 2 of the
Earn-out Agreement, the form of which is set forth hereto as Exhibit 2.3, and
(iv) the assumption by Buyer of the Assumed Liabilities.
2.4 Post-Closing Adjustments to Closing Consideration
(a) To the extent the Closing Working Capital is greater than $750,000
(the "Working Capital Target"), the Closing Cash Consideration shall (on a
post-closing basis pursuant to Section 2.4(b)) be increased on a
dollar-for-dollar basis by an amount equal to such excess. To the extent the
Closing Working Capital is less than the Working Capital Target, the Closing
Cash Consideration shall (on a post-closing basis pursuant to Section 2.4(b)) be
decreased on a dollar-for-dollar basis by an amount equal to such deficit. The
Closing Cash Consideration as so adjusted is hereinafter referred to as the
"Final Purchase Price." The Closing Working Capital and the Final Purchase Price
shall be determined based on the Closing Date Balance Sheet and Closing Date
Statement (as finally determined under Section 2.9).
(b) Not more than 5 business days after final determination of the
Final Purchase Price, (i) Buyer shall pay to Sellers the amount, if any, by
which the Final Purchase Price exceeds the Closing Cash Consideration and (ii)
Sellers shall pay to Buyer the amount, if any, by which the Final Purchase Price
is less than the Closing Cash Consideration. Any payment or distribution from
Buyer or Sellers so required to be made shall be by wire transfer of immediately
available funds and shall bear interest from the Closing Date through the date
of payment at the prime lending rate of Citibank, N.A. from time to time
prevailing.
2.5 Allocation of Consideration. The consideration provided for in Section
2.4 shall be allocated among the Sellers and the Purchased Assets as provided in
Schedule 2.5 hereto, or as mutually agreed to in writing by the Parties after
the determination of the Final Purchase Price. Such allocation shall be prepared
in accordance with Section 1060 of the Code.
2.6 Closing. The Closing shall take place at 10:00 a.m. on the Closing Date
at the offices of Pryor, Cashman, Sherman & Flynn, New York, New York. --------
2.7 Deliveries of Sellers at Closing. At Closing, subject to the conditions
to the Sellers' obligations in Article VIII, Sellers shall execute and deliver
or cause to be delivered the documents identified in Article VII.
2.8 Deliveries of Buyer at Closing. At Closing, subject to the conditions
to the Buyer's obligations in Article VII, Buyer shall (a) execute and deliver
or cause to be delivered the documents identified in Article VIII, (b) transfer
the Closing Cash Consideration by wire transfer of immediately-available funds
to an account or accounts designated by Sellers and (c) transfer the Closing
Stock Consideration to the Stockholders, as assignees of Sellers and David
Klein.
2.9 Closing Date Balance Sheet and Statement.
(a) Buyer, in cooperation with Sellers, shall prepare a closing date
balance sheet of the North Shore Affiliated Group ("Closing Date Balance Sheet")
and a closing date statement (the "Closing Date Statement"), each as of the
Effective Time and each prepared in accordance with Section 2.9(b). The Closing
Date Balance Sheet shall also be prepared in accordance with Section 5.7(a). The
Closing Date Statement shall reflect Closing Working Capital, as of the
Effective Time. The Closing Date Balance Sheet and the Closing Date Statement
are herein referred to as the "Closing Financial Statements." Buyer shall
deliver the Closing Financial Statements to Sellers Group Representative not
later than 60 calendar days after the Closing Date. After such delivery and upon
request of the Seller Group Representative, Buyer will provide the Seller Group
Representative with reasonable access to its records relating to the preparation
of the Closing Date Balance Sheet and the Closing Date Statement.
(b) The Closing Date Balance Sheet shall be prepared in accordance
with GAAP with all appropriate accruals and reserves consistent with past
practice.
(c) If Sellers dispute the Closing Financial Statements as delivered
by Buyer, Sellers Group Representative shall deliver to Buyer a Notice of
Dispute within 30 calendar days after the date Sellers Group Representative
receives the Closing Financial Statements(the "Dispute Period"). If during the
Dispute Period Sellers Group Representative fails to deliver a Notice of
Dispute, the Closing Financial Statements shall be deemed final and binding at
the end of the Dispute Period.
(d) Upon receipt of the Notice of Dispute within the Dispute Period,
Buyer shall promptly consult with Sellers Group Representative with respect to
Sellers' specified points of disagreement in an effort to resolve the dispute.
If any such dispute cannot be resolved by Buyer and Sellers Group Representative
within 20 calendar days after Buyer receives the Notice of Dispute, they shall
refer the dispute to a partner in Price Waterhouse LLP, certified public
accountants (the "Arbiter"), as an arbitrator to finally determine, as soon as
practicable, and in any event within 30 calendar days after such reference, all
points of disagreement with respect to the Closing Financial Statements. For
purposes of such arbitration, each Party shall submit proposed Closing Financial
Statements. The Arbiter shall apply the terms of Section 2.9(b) of this
Agreement and shall otherwise conduct the arbitration under such procedures as
the Parties may agree or, failing such agreement, under the Commercial Rules of
the American Arbitration Association. The fees and expenses of the arbitration
and the Arbiter incurred in connection with the arbitration of the Closing
Financial Statements shall be allocated, to the extent practical, between the
Parties by the Arbiter in proportion to the extent either Party did not prevail
on items in dispute in the Closing Financial Statements; provided, that such
fees and expenses shall not include the other Party's outside counsel or
accounting fees. All determinations by the Arbiter shall be final, conclusive
and binding with respect to the Closing Financial Statements and the allocation
of arbitration fees and expenses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and Stockholders, jointly and severally, hereby make the following
representations and warranties, each of which Sellers and Stockholders represent
and warrant is true and correct on the date hereof and each of which shall
survive the Closing Date and the transactions contemplated hereby pursuant to
Section 9.1.
3.1 Corporate Existence and Power of Sellers.
(a) Each member of the North Shore Affiliated Group has delivered to
Buyer a copy of its certificate of incorporation. Each member of the North Shore
Affiliated Group is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation.
(b) Each member of the North Shore Affiliated Group has the corporate
power and authority to own and use its assets and to transact the business in
which it is engaged, is duly licensed (other than as set forth in Schedule 3.16)
or qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such license or qualification is required except to the
extent such failure to qualify or be authorized would have a material adverse
effect on the business, condition (financial or otherwise) or operations of the
North Shore Affiliated Group, taken as a whole (a "Material Adverse Effect").
Each Seller has the power to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
(c) North Shore is, and will at Closing be, a holder of record and
beneficial owner of the Canadian Shares. The Canadian Shares consist of 10 Class
A shares and 10,000,000 Class B shares of North Shore Canada and are owned by
North Shore free and clear of all security interests, claims and restrictions.
3.2 Approval and Enforceability of Agreement.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized, approved and
ratified by all necessary action on the part of the Sellers Group. At the
Closing, each Seller will deliver to Buyer correct and complete copies of the
resolutions of such Seller, certified by its secretary, giving authorization and
approval of the transactions contemplated hereby. Such resolutions shall not
have been altered, amended or revoked. Each Seller has full authority to enter
into and deliver this Agreement and the Earn-out Agreement, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
(b) Assuming due execution and delivery hereof by Buyer, this
Agreement is the legal, valid and binding obligation of each Sellers Group
Person, enforceable against each according to its terms except that (i) such
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or limiting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) Sellers are acquiring the shares of common stock consisting of the
Closing Stock Consideration for their own account, for investment purposes and
without any view to resale or distribution of such shares or any portion thereof
except that such shares may be distributed to the Stockholders and David Klein.
Jerome Goodman and David Klein are "accredited investors" as defined in Rule 501
of Regulation D under the Securities Act of 1933, as amended. The Stockholders
and Sellers acknowledge receipt of Amendment No. 5 to OSI's Registration
Statement on Form S-4, as filed with the Securities and Exchange Commission on
April 24, 1997, and OSI's quarterly reports on Form 10-Q for the periods ending
March 31 and June 30, 1997 (collectively, "OSI SEC Reports"). Each Stockholder
and Seller represents that he has had a reasonable time prior to the execution
of this Agreement to review the OSI SEC Reports and has had the opportunity of
ask an officer of OSI questions related to the OSI SEC Reports.
3.3 Financial Statements.
(a) Sellers have delivered to Buyer correct and complete copies of the
Financial Statements and Interim Statements. The 1996 Financial Statements are
audited by Weisberg, Polonsky, Kulberg, Einhorn & Mole, LLP, certified public
accountants, and their report is appended thereto. The 1995 Financial Statements
are reviewed by Weisberg, Polonsky, Kulberg, Einhorn & Mole, LLP, certified
public accountants, and their review report is appended thereto.
(b) The Financial Statements and Interim Statements were derived from
the books and records of the North Shore Affiliated Group and (i) are true,
complete and correct in all material respects, (ii) present fairly, in all
material respects, the financial position, results of operations and cash flows
of the Business at the dates and for the periods indicated and (iii) have been
prepared in accordance with GAAP applied on a basis consistent with previous
periods.
3.4 Events Subsequent to December 31, 1996. Since December 31, 1996, except
as set forth on Schedule 3.4, there has been no: (a) change in the business,
condition (financial or otherwise) or operations of any member of the North
Shore Affiliated Group other than changes in the Ordinary Course, which
individually or in the aggregate has been materially adverse to the Business;
(b) material damage, destruction or loss, whether covered by insurance
or not, affecting any Purchased Assets;
(c) declaration, setting aside or payment of any distribution (in cash
or in kind) with respect to any securities of Sellers or with respect to any
securities of North Shore Canada, including without limitation the Canadian
Shares;
(d) increase in or commitment to increase compensation, benefits or
other remuneration to or for the benefit of any officer, employee or agent of
any member of the North Shore Affiliated Group, or, in connection with the
Business, any other Person or any benefits granted under any Plan with or for
the benefit of any such officer, employee, agent or Person;
(e) transaction entered into or carried out by any member of the North
Shore Affiliated Group other than in the Ordinary Course;
(f) borrowing or incurrence of any indebtedness, contingent or other,
by or on behalf of any member of the North Shore Affiliated Group, or any
endorsement, assumption or guarantee of payment or performance of any
Indebtedness or Liability of any other Person or entity by any member of the
North Shore Affiliated Group;
(g) change made by any member of the North Shore Affiliated Group in
its Tax or financial accounting or any Tax election including without limitation
the election to be treated as an S Corporation within the meaning of Section
1361 of the Code;
(h) grant of any Lien with respect to the Purchased Assets;
(i) transfer of any Assets other than arm's length sales, leases or
dispositions in the Ordinary Course;
(j) modification or termination (other than a termination due to
expiration) of any material Contract or any material term thereof;
(k) lease or acquisition of any capital assets included in the
Purchased Assets with a value greater than $25,000 per item;
(l) loan or advance to any Person; or
(m) commitment or agreement by any member of the North Shore
Affiliated Group to do any of the foregoing items (c) through (l).
3.5 Assets in Possession of Others. No member of the North Shore Affiliated
Group holds title to or ownership of any Assets in the possession of Persons
others than members of the North Shore Affiliated Group.
3.6 Accounts and Notes Receivable. All accounts and notes receivable
reflected on the Interim Balance Sheet, and all accounts and notes receivable
accruing subsequently to the Balance Sheet Date (except those which have been
collected since the Balance Sheet Date and except with respect to applicable
reserves), are (a) valid, genuine and subsisting, (b) subject to no defenses,
set-offs, counterclaims, security interests or other encumbrances, and (c)
current and collectible. All accounts receivable of Sellers in existence on the
Closing Date will be paid in full, net of applicable reserves, on or before 240
calendar days after the Closing Date.
3.7 Undisclosed Liabilities. No member of the North Shore Affiliated Group
has any Liabilities whatsoever, known or unknown, asserted or unasserted,
liquidated or unliquidated, accrued, absolute, contingent or otherwise, and, to
the best knowledge of any Sellers Group Person, there is no basis for any claim
against any member of the North Shore Affiliated Group for any such Liability
except (a) to the extent reflected on the Interim Balance Sheet, (b) to the
extent set forth on Schedule 3.4 and 3.7, or (c) Liabilities incurred in the
Ordinary Course of the Business since the Balance Sheet Date, none of which
will, or could, have a material adverse effect upon the business, condition
(financial or otherwise) or operations of the Business.
3.8 Taxes.
(a) Each member of the North Shore Affiliated Group has paid all Taxes
due and payable prior to the Closing and filed all Returns required to be filed
prior to the Closing with respect to each North Shore Affiliated Group and the
Business for which the Buyer could be held liable or a claim made against the
Purchased Assets. Except as set forth on Schedule 3.20, there are no audits or
other proceedings by any Government pending or, to the knowledge of any Sellers
Group Person, threatened, with respect to Taxes of any North Shore Affiliated
Group or the Business for which the Buyer could be held liable or a claim made
against the Purchased Assets. No assessment of Taxes is currently proposed
against any North Shore Affiliated Group or the Purchased Assets. Since the
Balance Sheet Date, no member of the North Shore Affiliated Group has assumed
any liabilities that would otherwise constitute Assumed Liabilities to pay any
Taxes. No member of the North Shore Affiliated Group is a party to, and has no
liability under any indemnification, allocation or sharing agreement with
respect to Taxes.
(b) (i) All Returns of the North Shore Affiliated Group are true,
correct and complete in all material respects; (ii) there is no waiver or
extension of any statute of limitations in effect with respect to any of the
Returns; and (iii) any unpaid Taxes which relate to any period or portion
thereof prior to the Effective Time will be properly reflected as a reserve on
the Closing Date Balance Sheet in an amount sufficient to fully pay the same
("Reserved Taxes").
(c) Each member of the North Shore Affiliated Group and/or each Seller
is not and has not been a member of an "affiliated group" within the meaning of
Section 1504 of the Code.
3.9 Real Property - Owned. No member of the North Shore Affiliated Group
has any interest in, or any right or obligation to acquire any interest in, any
parcel of real property.
3.10 Personal Property - Owned. Except for Permitted Liens or as set forth
on Schedule 3.10 hereto, each member of the North Shore Affiliated Group has
good and marketable title to all of the personal property included in the
Purchased Assets owned by such member, including all personal property reflected
on the Interim Balance Sheet or acquired after the date thereof (except any
personal property subsequently sold in the Ordinary Course), free and clear of
all options, Liens, leases, covenants, conditions, agreements and other
restrictions of every kind and there exists no restriction on the use or
transfer of such property.
3.11 Real and Personal Property - Leased from Sellers. Set forth on
Schedule 3.11(a) hereto is a list of each lease under which any member of the
North Shore Affiliated Group or Wayne Street Associates is the lessor or
sublessor of any real property, and on Schedule 3.11(b) hereto is a description
of each lease under which any member of the North Shore Affiliated Group is the
lessor of any personal property. Sellers have delivered to Buyer a true, correct
and complete copy of each written lease identified on Schedules 3.11(a) or
3.11(b). The premises described in such leases are presently occupied by the
respective lessees under the terms of such leases. All rentals or other payments
due under such leases have been paid, and, to the best knowledge of any Sellers
Group Person, there exists no default under the terms of any of such leases,
and, to the best knowledge of any Sellers Group Person, no event has occurred
which, upon passage of time or the giving of notice, or both, would result in
any event of default or prevent the applicable Sellers or members of the North
Shore Affiliated Group from exercising and obtaining the benefits of any rights
contained therein. No consent is necessary for the assignment or conveyance of
such leases to Buyer, and upon Closing, Buyer will have all right, title and
interest of the lessor under the terms of such leases, free of all Liens.
3.12 Real and Personal Property - Leased to Sellers.
(a) Set forth on Schedule 3.12(a) hereto is a list of each lease under
which any member of the North Shore Affiliated Group is the lessee of any real
property, and on Schedule 3.12(b) hereto is a description of each lease under
which any member of the North Shore Affiliated Group is the lessee of any
personal property. Sellers have delivered to Buyer a true, correct and complete
copy of each lease identified on Schedules 3.12(a) or 3.12(b). The premises or
property described in said leases are presently occupied or used by such member
of the North Shore Affiliated Group as lessee under the terms of such leases.
Except as set forth on Schedules 3.12(a) or 3.12(b), all rentals due under such
leases have been paid, and, to the best knowledge of any Seller Group Person,
there exists no default under the terms of such leases, and, to the best
knowledge of any Seller Group Person, no event has occurred which, upon passage
of time or the giving of notice, or both, would result in any event of default
or prevent Sellers from exercising and obtaining the benefits of any rights or
options contained therein. Sellers have all right, title and interest of the
lessee under the terms of said leases, free of all Liens and all such leases are
valid and in full force and effect.
(b) Except as set forth on Schedules 3.12(a) or 3.12(b), no consent is
necessary for the assignment of such leases under which any member of the North
Shore Affiliated Group or any Seller is lessee to Buyer. Upon Closing, Buyer
will have all right, title and interest of the lessee under the terms of such
leases, free of all Liens other than Permitted Liens.
(c) To the best knowledge of any Sellers Group Person, there is no
default or basis for acceleration or termination under, nor has any event
occurred nor does any condition exist which with the passage of time or the
giving of notice, or both, would constitute a default or basis for acceleration
under any underlying lease, agreement, mortgage or deed of trust, which default
or basis for acceleration would materially adversely affect any lease described
on Schedules 3.12(a) or 3.12(b) or the property or use of the property covered
by such lease. There will be no default or basis for acceleration under any such
underlying lease, agreement, mortgage or deed of trust as a result of the
transactions provided for in this Agreement.
3.13 Intellectual Property. Set forth on Schedule 3.13 hereto is a complete
list of all licenses, patents, trade names, trademarks, copyrights, and service
marks included in the Intellectual Property of the Sellers. Except as set forth
on Schedule 3.13:
(a) all Intellectual Property included in the Purchased Assets
("Sellers' Intellectual Property") is valid and enforceable;
(b) good and marketable title to, or the unrestricted right to use,
all Sellers' Intellectual Property, together with all common law rights to the
subject matter thereof, is held by Sellers and/or any member of the North Shore
Affiliated Group, free and clear of all Liens;
(c) the use, licensing or sale by or to Sellers and/or any member of
the North Shore Affiliated Group of any of the Sellers' Intellectual Property
does not require the acquiescence, agreement or consent of any third party, and
there exists no restriction on the use or transfer of any such item;
(d) to the best knowledge of each Sellers Group Person, the conduct of
the Business does not contravene, conflict with, violate or infringe upon any
Intellectual Property right of a third party and no proprietary information or
trade secret has been misappropriated by any member of the North Shore
Affiliated Group and/or from any other Seller from any third party.
(e) to the best knowledge of each Sellers Group Person, Sellers'
Intellectual Property is not subject to a challenge or claim of infringement,
interference or unfair competition or other claim and, to the best knowledge of
each Sellers Group Person, Sellers' Intellectual Property is not being infringed
upon or violated by any third party.
(f) there are no interferences, challenges, proceedings or
infringement suits pending or, to the best knowledge of each Sellers Group
Person, threatened with respect to any of Sellers' Intellectual Property; and
(g) except as set forth on Schedule 3.13, no Sellers Group Person has
granted a license in Sellers' Intellectual Property to any other party, and to
the best knowledge of each Sellers Group Person, no license, assignment or other
transfer of Sellers' Intellectual Property has been granted or made by any third
party having a right to do so that would materially adversely affect the
Business.
3.14 Necessary Property and Transfer of Purchased Assets. The Purchased
Assets constitute all of Sellers' property and property rights now used, useful
or necessary for the conduct of the Business in the manner and to the extent
presently conducted by Sellers. Except as set forth on Schedule 3.12, 3.14, 3.16
or 3.18 hereto, no consent is necessary to, and there exists no restriction on,
the transfer of any of the Purchased Assets to Buyer. To the best knowledge of
any Sellers Group Person, there exists no condition, restriction or reservation
affecting the title to or utility of the Purchased Assets or Assumed Liabilities
which would prevent Buyer from occupying or utilizing the Purchased Assets or
enforcing the rights thereunder, or any part thereof, to the same full extent
that Sellers might continue to do so if the sale and transfer contemplated
hereby did not take place. Upon the Closing, good and marketable title to the
Purchased Assets shall be vested in Buyer free and clear of all taxes and Liens
other than Permitted Liens.
3.15 Use and Condition of Property.
(a) All of the Purchased Assets are in good operating condition and
repair (normal wear and tear excepted) as required for their use in the Business
as presently conducted. No notice of any violation of any Law relating to any of
the Purchased Assets has been received by Sellers except such as have been fully
complied with. All improvements located on, and the use presently being made of
all real property included in, the Purchased Assets or leased pursuant to the
Assumed Liabilities comply with all applicable zoning and building code
ordinances and all applicable fire, environmental, occupational safety and
health standards and similar standards established by Law, and the same use
thereof by Buyer will not result in any violation of any such code, ordinance or
standard. There is no pending or proposed or, to the best knowledge of any
Sellers Group Person, threatened change in any such code, ordinance or standard
which would have a Material Adverse Effect.
(b) There is no pending or proposed or, to the best knowledge of any
Sellers Group Person, threatened condemnation proceeding or similar action
affecting the Purchased Assets or with respect to any streets or public
amenities appurtenant thereto or in the vicinity thereof which would have a
Material Adverse Effect.
3.16 Licenses and Permits. To the best knowledge of any Sellers Group
Person, set forth on Schedule 3.16 hereto is a list of each license or permit
required for the conduct of the Business and a list of where licenses or permits
may be required together with the name of the government agency or entity
issuing such license or permit. The licenses and permits set forth on Schedule
3.16 (other than those listed in Section 1b and 1c of Schedule 3.16) are valid
and in full force and effect. Except as noted on Schedule 3.16, to the best
knowledge of any Sellers Group Person, such licenses and permits are freely
transferable by Sellers, and upon Closing Buyer will have all right, title and
interest of the holder thereof.
3.17 Contracts--Disclosure. Except as set forth in Schedule 3.17 there is
not outstanding:
(i) Any single Contract providing for an expenditure by any of
Sellers in excess of $25,000 over the remaining life of such Contract for the
purchase of any real property, machinery, equipment or other items which are in
the nature of capital investment.
(ii) Any single Contract providing for an expenditure by any of
Sellers in excess of $25,000 over the remaining life of such Contract for the
purchase of raw materials, supplies, component parts or any other items or
services.
(iii) Any Contract to sell products or to provide services to
third Persons which (a) is at a price which would result in a net loss on the
sale of such products or providing of such services or (b) is pursuant to terms
or conditions which any of Sellers or any member of the North Shore Affiliated
Group cannot reasonably expect to satisfy or fulfill in their entirety.
(iv) Any Contract for materials, supplies, component parts or
other items or services in excess of the normal, ordinary, usual and current
requirements of the Business or at a price in excess of the current reasonable
market price.
(v) Any revocable or irrevocable indemnity or power of attorney.
(vi) Any evidence of indebtedness, loan agreement, indenture,
promissory note, letter of credit, foreign exchange contract, conditional sales
agreement or other similar type of agreement.
(vii) Any Contract which involves (i) a sharing of profits with a
Person other than a member of the North Shore Affiliated Group or (ii) any joint
venture, partnership or similar arrangement.
(viii) Any Contract involving any sales agency, sales
representation, distributorship or franchise.
(ix) Any Contract containing covenants expressly limiting the
freedom of any of Sellers to compete in any line of business or with any Person
or in any area.
(x) Any Contract not made in the Ordinary Course providing for an
expenditure in excess of $10,000 over the remaining life of such Contract.
(xi) Any other material Contract which is not cancelable without
penalty on 30 calendar days' notice or less and which is not set forth on
another Schedule.
3.18 Contracts--Validity, Etc.
(a) Each Contract is a valid and binding obligation of the member of
the North Shore Affiliated Group, enforceable in accordance with its terms and
in full force and effect and to the best knowledge of any member of the North
Shore Affiliated Group each Contract is a valid and binding obligation of the
other party thereto.
(b) No member of the North Shore Affiliated Group is in material
breach or material violation thereof or material default under any Contract. To
the best knowledge of any member of the North Shore Affiliated Group, no other
party to any such Contract is in material breach or material violation thereof
or material default thereunder. No event has occurred which, through the passage
of time or the giving of notice, or both, would constitute, and neither the
execution of this Agreement nor the completion of the Closing does or will
constitute or result in, a material breach or material violation of or material
default under any Contract, or would cause the acceleration of any obligation of
any party thereto or the creation of a Lien upon any Asset.
(c) Each Contract will be duly assigned to Buyer on the Closing Date
and upon such assignment, subject to obtaining any consents, Buyer will acquire
all right, title and interest of Sellers in and to such Contract and will be
substituted for such Sellers under the terms of such Contract. Except as set
forth on Schedule 3.18, no consent is required for such assignment.
3.19 No Breach of Law or Governing Document. No member of the North Shore
Affiliated Group is in default under or in violation of, in any material
respect, (a) any applicable Law of any Government (including, without
limitation, the Fair Debt Collection Practices Act and any state or local
counterpart or equivalent), (b) any franchise or license, or (c) any provision
of its articles or certificate of incorporation or association or bylaws;
provided, however, that the representations contained in clauses (a) and (b)
shall be without regard to whether any state license or permit is required,
which matter is covered by Section 3.16. Neither the execution of this Agreement
nor the completion of the Closing does or will constitute or result in any such
default, breach or violation. Except as set forth on Schedule 3.19(a), no member
of the North Shore Affiliated Group is required to obtain any Government permits
or consents to effect the transactions contemplated hereby. Based upon and in
reliance upon the correspondence, dated August 25, 1997 to Richard B. Smith of
the Federal Trade Commission (the "FTC Letter") and the related voice mail
transcription from Mr. Smith, all attached as Schedule 3.19(b), no Ultimate
Parent Entity of Sellers, together with all entities it controls, is a $10
million person under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, or
the rules relating thereto (the "H-S-R"). As used in this Section 3.19, the
terms "Ultimate Parent Entity," "control" and "$10 million person" shall be
defined by the H-S-R. The factual matters set forth in the FTC Letter are true,
complete and correct.
3.20 Litigation and Arbitration. Except as set forth on Schedule 3.20
hereto, there is no suit, claim, action or proceeding now pending or, to the
best knowledge of any Sellers Group Person, threatened before any Court, grand
jury, administrative or regulatory body, governmental agency, arbitration or
mediation panel or similar body, to which any of Sellers and/or any member of
the North Shore Affiliated Group is a party or which may result in any judgment,
order, decree, liability, award or other determination which will, or could,
have any material adverse effect upon any Purchased Asset or upon the business,
condition (financial or otherwise) or operations of the Business. No such
judgment, order, decree or award has been entered against any of Sellers or
against any member of the North Shore Affiliated Group, nor has any such
liability been incurred which has, or could have, such effect. There is no
claim, action or proceeding now pending or, to the best knowledge of any Sellers
Group Person, threatened before any Court, grand jury, administrative or
regulatory body, governmental agency, arbitration or mediation panel or similar
body which will, or could, prevent the consummation of the transactions
contemplated by this Agreement.
3.21 Directors, Officers, Employees and Consultants. Set forth on Schedule
3.21 hereto is a complete list of:
(a) all directors of each of Sellers;
(b) all officers (with office held) of each of Sellers;
(c) all hourly employees of Sellers who earn $25,000 or more per year
and all salaried employees of Sellers; and
(d) all consultants to Sellers who were paid more than $10,000 by
Sellers during the first six months of 1997;
together, in the case of officers and employees of Sellers, with the current
rate of compensation payable to each.
3.22 Indebtedness to and from Directors, Officers and Others. Except as set
forth on Schedule 3.22, (a) no member of the North Shore Affiliated Group or
other Seller is indebted to any director, officer, employee or agent of any
member of the North Shore Affiliated Group or other Seller except for amounts
due as normal salaries, wages and bonuses and in reimbursement of ordinary
expenses on a current basis and (b) no officer, employee or agent of any member
of the North Shore Affiliated Group or other Seller is indebted to any member of
the North Shore Affiliated Group or other Seller.
3.23 Outside Financial Interests. No director or officer of any member of
the North Shore Affiliated Group or other Seller has any direct or indirect
financial interest in any competitor with or supplier or customer of any such
member or Sellers; provided, however, that for this purpose ownership of
corporate securities having no more than 5% of the outstanding voting power of
any competitor, supplier or customer for which securities are listed on any
national securities exchange or authorized for quotation on the Automated
Quotations System of the National Association of Securities Dealers, Inc. shall
not be deemed to be such a financial interest provided such Person has no other
connection or relationship with such competitor, supplier or customer.
3.24 Payments, Compensation and Perquisites of Agents and Employees. To the
best knowledge of any Sellers Group Person, all payments to agents, consultants
and others made by any member of the North Shore Affiliated Group or other
Seller in connection with the Business have been in payment of bona fide fees
and commissions and not as bribes, illegal or improper payments. Each member of
the North Shore Affiliated Group or other Seller has properly and accurately
reflected on its books and records all compensation paid to and perquisites
provided to or on behalf of its consultants, agents and employees. Such
compensation and perquisites have been properly and accurately disclosed in the
Financial Statements and Interim Statements and other public or private reports,
records or filings of any member of the North Shore Affiliated Group or other
Seller, to the extent required by Law.
3.25 Labor Contracts, Employee Benefit Plans, and Employment Contracts.
Except as set forth on Schedule 3.25 hereto, no member of the North Shore
Affiliated Group is a party to (a) any union collective bargaining, works
council, joint or multi-employer association, employee committee or similar
Contract, (b) any Plan or (c) any employment Contract. True, correct and
complete copies of all documents creating or evidencing any such Contract or
Plan listed on Schedule 3.25 have been delivered to Buyer. There are no
negotiations, demands or proposals which are pending or which have been made
since January 1, 1994 which concern matters now covered, or that would be
covered, by the type of Contracts or Plans listed in this Section.
3.26 ERISA.
(a) All Plans disclosed on Schedule 3.26 comply in all material
respects with, and have been operated and maintained in compliance with, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other applicable Laws, to the extent applicable. No "reportable event" (as
defined in Section 4043(b) of ERISA) or "prohibited transaction" (as defined in
Section 4975(c)(1) of the Code or Section 406 of ERISA) has occurred with
respect to any Plan and, except as may result from Closing, there is no fact or
circumstance which may lead to the occurrence of any reportable event or
prohibited transaction. Sellers do not maintain and are not required to
contribute to, nor have they ever maintained or been required to contribute to
(i) a defined benefit pension plan or (ii) a defined contribution plan which
requires minimum contributions.
(b) No member of the North Shore Affiliated Group or Sellers has ever
been a party to or participant in, or been required to contribute to, any
multi-employer plan (as defined in Section 3(37) of ERISA).
(c) All members of the North Shore Affiliated Group and other Sellers
have complied in all material respects with the health care continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA").
3.27 Terminated Plans. Except as set forth on Schedule 3.27, none of
Sellers, nor any member of the North Shore Affiliated Group, has terminated or
taken action to terminate any employee benefit plan. None of Sellers, nor any
member of the North Shore Affiliated Group, has any liability to any Person or
entity, including without limitation the Pension Benefit Guaranty Corporation,
any other Government agency or any participant in or beneficiary of any employee
plan of another entity, and none of Sellers is liable for any excise, income or
other tax or penalty as a result of the termination of any employee benefit
plan.
3.28 Overtime, Back Wages, Vacation and Minimum Wages. To the best
knowledge of any Sellers Group Person, no present or former employee of any
member of the North Shore Affiliated Group has any claim against the Sellers
Group (whether under U.S., federal, state or local law, foreign law, any
employment agreement, or otherwise) on account of or for (a) overtime pay, other
than overtime pay for the current payroll period, (b) wages or salary (excluding
current bonus, accruals and amounts accruing under pension and profit-sharing
plans) for any period other than the current payroll period, (c) vacation, time
off or pay in lieu of vacation or time off, other than that earned in respect of
the current fiscal year or (d) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work.
3.29 Discrimination and Occupational Safety and Health. To the best
knowledge of any Seller Group Person, no Person or party (including, but not
limited to, any Government) has any claim, or basis for any action or
proceeding, against any member of the North Shore Affiliated Group or other
Seller arising out of any statute, ordinance or regulation relating to
discrimination in employment or employment practices or occupational safety and
health standards. Since January 1, 1990, no member of the North Shore Affiliated
Group or other Seller has received any notice from any U.S. federal, state,
local or foreign Government alleging a violation of occupational safety or
health standards.
3.30 Alien Employment Eligibility. With respect to each Person employed by
any member of the North Shore Affiliated Group or of Sellers on or after May 1,
1987, and who actually commenced such employment on or after November 6, 1986,
(a) such member or Seller hired such Person in compliance with the Immigration
Reform and Control Act of 1986 and the rules and regulations thereunder ("IRCA")
and (b) each of Sellers and/or each member of the North Shore Affiliated Group
has complied in all material respects with all recordkeeping and other
regulatory requirements under IRCA.
3.31 Labor Disputes; Unfair Labor Practices. There is neither pending nor,
to the best knowledge of any Sellers Group Person, threatened, any labor
dispute, strike or work stoppage which affects or which may affect the Business,
and no member of the North Shore Affiliated Group is currently covered by any
injunction issued by any Court. Since January 1, 1994, neither Sellers nor any
member of the North Shore Affiliated Group, nor the agents, representatives or
employees of each of them, has committed any unfair labor practice as defined in
the National Labor Relations Act of 1947, as amended. There is not now pending
or threatened any charge or complaint against any member of the North Shore
Affiliated Group or other Seller by the National Labor Relations Board, any
state or local labor or employment agency or any representative thereof, and the
execution of this Agreement and the Closing hereunder will not result in any
such charge or complaint, nor is there pending or threatened any grievance or
arbitration under any labor or employment Contract. No right of representation
by a labor organization exists respecting the employees of any member of the
North Shore Affiliated Group or other Seller, nor is there pending a
representation election. No collective bargaining Contract is currently being
negotiated and no organizing effort is currently being made with respect to the
employees of any member of the North Shore Affiliated Group or other Seller. No
member of the North Shore Affiliated Group and none of Sellers has any ongoing
or future liabilities or obligations under any settlement Contract or consent
decree with respect to labor matters.
3.32 Insurance Policies. Set forth on Schedule 3.32 hereto is a list of all
insurance policies and bonds in force covering or relating to the Purchased
Assets or the Business, including without limitation all properties, operations
or personnel of each of Sellers.
3.33 Guarantees. Except as set forth on Schedule 3.33 hereto, none of
Sellers is a guarantor, indemnitor, surety or accommodation party or otherwise
liable for any indebtedness of any other Person, firm or corporation, except as
endorser of checks received and deposited in the Ordinary Course.
3.34 Environmental Matters
(a) Except as disclosed on Schedule 3.34(a) attached hereto, each
member of the North Shore Affiliated Group's use of the real property set forth
on Schedule 3.12(a) ("Property") complies in all material respects with all
Laws, including without limitation the codes, licenses and permits of all
Governments relating to the protection of health, safety or the environment,
including by way of illustration and not by way of limitation: the Clean Air
Act; the Federal Water Pollution Control Act; the Resource Conservation and
Liability Act; the Toxic Substance Control Act; the Comprehensive Environmental
Response and Liability Act; the Hazardous Materials Transportation Act; the
Atomic Energy Act; the Emergency Planning and Community Right-to-Know Act; and
the Oil Pollution Prevention Act; and all amendments to each thereto, and all
other applicable environmental Laws (collectively, "Environmental Laws"). Except
as disclosed on Schedule 3.34(a) attached hereto, to the best knowledge of any
Sellers Group Person, each member of the North Shore Affiliated Group's use of
the Property has at all times complied in all material respects with all
Environmental Laws. Except as disclosed on Schedule 3.34(a) attached hereto,
none of Sellers or members of the North Shore Affiliated Group is in violation
in any material respect, in connection with the ownership, use, maintenance or
operation of the Property and the conduct of the Business, of any Environmental
Laws.
(b) Except as set forth on Schedule 3.34(b) attached hereto, there are
no past, pending or, to the best knowledge of any Sellers Group Person,
threatened investigations, inquiries, notices or other proceedings by any
Government or any foreign governmental entity with respect to any of Sellers in
connection with the actual or alleged violation of, or liability arising under,
any Environmental Laws with respect to the Property.
(c) Except as disclosed on Schedule 3.34(c) attached hereto, each
member of the North Shore Affiliated Group has all necessary material permits,
registrations, approvals, certificates and licenses relating to the protection
of health, safety or the environment as required by the Environmental Laws,
except for such permits, registration, approvals, certificates and licenses the
failure of which to obtain would not have a Material Adverse Effect. Sellers
have previously delivered to Buyer or its representatives true, accurate and
complete copies of any and all such permits, registrations, approvals,
certificates and licenses.
(d) Except as disclosed on Schedule 3.34(d) attached hereto, to the
best knowledge of any Sellers Group Person, there are no Environmental Laws
which require any work, repairs, construction or capital expenditures with
respect to the Property, nor has any Seller and/or any member of the North Shore
Affiliated Group received any notice of any of the same.
(e) Except as disclosed on Schedule 3.34(e), to the best knowledge of
any Sellers Group Person, during any member of the North Shore Affiliated
Group's or of Sellers' occupancy of the Property there has been no spill,
discharge, leak, emission, injection, disposal, dumping, emptying, escape,
leaching, pumping or release of any kind on, beneath or above the Property or
into the environment surrounding or adjoining the Property of any pollutants,
contaminants, hazardous substances, hazardous chemicals, toxic chemicals,
extremely hazardous substances, petroleum products, petroleum substances, toxic
substances, hazardous wastes, infectious wastes, radioactive materials, asbestos
fibers or solid wastes (collectively as "Hazardous Materials"), including but
not limited to those defined in the Environmental Laws.
(f) Except as disclosed on Schedule 3.34(f), to the best knowledge of
any Sellers Group Person, during any member of the North Shore Affiliated
Group's or of Sellers' period of occupancy of the Property there has been no
past, and there is no current or anticipated, storage, disposal, use,
generation, manufacture, refinement, transportation, production or treatment of
any Hazardous Materials at or upon the Property.
(g) Except as disclosed on Schedule 3.34(g) attached hereto, no member
of the North Shore Affiliated Group or of Sellers knows of any information that
any person, including any employee, may have any life threatening health
condition or long term disability as a result of the prior use of the Property
or as a result of the release of any Hazardous Materials on the Property or into
the environment surrounding the Property.
(h) Except as disclosed on Schedule 3.34(h), to the best knowledge of
any Sellers Group Person, no asbestos fibers or materials or polychlorinated
biphenyls (PCBs) are on the Property.
3.35 Broker's Fees. Except as described on Schedule 3.35, none of Sellers
nor any other member of Sellers Group has retained any broker, finder or agent
or agreed to pay any brokerage fees, finder's fees or commissions with respect
to the transactions contemplated by this Agreement.
3.36 Capitalization and Related Matters. The authorized capital of North
Shore Canada consists solely of an unlimited number of Class A Shares and Class
B Shares. All of the Canadian Shares were validly issued and are outstanding as
fully paid and non-assessable shares. Except for the Canadian Shares and 90
Class A Shares of North Shore Canada registered in the name of Perry Simardone,
(a) there are no outstanding (i) other securities of North Shore Canada, or (ii)
rights or options to acquire securities of North Shore Canada (excluding Buyer's
rights hereunder) except as set forth in the Unanimous Shareholders' Agreement
dated April 27, 1994 between Simardone, North Shore and North Shore Canada, and
(b) neither Sellers nor North Shore Canada is subject to any obligation to
issue, deliver, redeem or otherwise acquire or retire the Canadian Shares or any
other securities of North Shore Canada.
3.37 Canadian Law.North Shore Canada is in compliance in all material
respects with the Laws of Canada and its provinces relating to or in connection
with the collection of debts.
3.38 Foreign Assets and Operations. Except as set forth on Schedule 3.38,
none of Sellers has an interest in any real property or tangible or intangible
property located outside of the United States, including any stock, securities
or investments in, claims against, or receivables from any entities or Persons
with substantially all their property or business so located. Except as set
forth on Schedule 3.38 and for the operations of North Shore Canada, no member
of the North Shore Affiliated Group has conducted the Business outside the
United States.
3.39 Meter Mail Programs . As of the date of this Agreement, no
correspondence is being mailed pursuant to which such correspondence appears to
be from a member of the North Shore Affiliated Group (whether because of the
letterhead utilized or otherwise) but such correspondence is not produced by and
delivered to the postal authorities by a member of the North Shore Affiliated
Group (a "Meter Mail Program"). There are no current plans by any member of the
North Shore Affiliated Group to initiate a Meter Mail Program.
3.40 Books and Records. The books of account, stock record books and minute
books and other corporate records of each of Sellers are in all material
respects complete and correct, have been maintained in accordance with good
business practices and the matters contained therein are accurately reflected on
the Financial Statements and Interim Statements, to the extent appropriate.
3.41 Truthfulness. To the best knowledge of any Sellers Group Person, no
representation or warranty of Sellers herein and no statement or certificate
furnished or to be furnished by or on behalf of Sellers pursuant to this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and OSI hereby make the following representations and warranties,
each of which is true and correct on the date hereof and each of which shall
survive the Closing Date and the sale contemplated hereby pursuant to Section
9.1.
4.1 Corporate Existence of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
Buyer has the corporate power and authority to own and use its properties and to
transact the business in which it is engaged. OSI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. OSI has the corporate power and authority to own and use its
properties and to transact the business in which it is engaged.
4.2 Approval of Agreement.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized and approved
by all necessary corporate action of Buyer and OSI, and such authorization and
approval have not been revoked. Pursuant to such authorization and approval,
each of Buyer and OSI has full power and authority to enter into this Agreement,
the Earn-out Agreement and the Employment Agreements, and to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby.
(b) Assuming due execution and delivery hereof by each Sellers Group
Person, this Agreement is the legal, valid and binding obligation of each Buyer
and OSI, enforceable against each according to its terms except that (i) such
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or limiting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither Buyer nor OSI is required to obtain any third party
contractual consents to effect the transactions contemplated hereby
4.3 No Breach of Articles or Indentures. The execution of this Agreement
and the consummation of the transactions contemplated hereby have not and will
not constitute or result in the breach of any of the provisions of, or
constitute a default under any material indenture, evidence of indebtedness or
other commitment to which Buyer or OSI is a party or by which either is bound,
which breach or default would have a material adverse effect on OSI and its
subsidiaries, taken as a whole. The execution of this Agreement and the
consummation of the transactions contemplated hereby have not and will not
constitute or result in the breach of any of the provisions of the articles of
incorporation or by-laws of Buyer or the certificate of incorporation or by-laws
of OSI.
4.4 Investment Representation. Buyer is acquiring the Canadian Shares for
its own account, for investment purposes and without any view to resale or
distribution of the Canadian Shares or any portion thereof.
4.5 Broker's Fees. OSI has retained Bowles Hollowell Conner & Co. and
agreed to pay its fees with respect to the transactions contemplated by this
Agreement. Except with respect to its agreement with Bowles Hollowell Conner &
Co., neither Buyer nor OSI has retained any broker, finder or agent or agreed to
pay any brokerage fees, finder's fees or commissions with respect to the
transactions contemplated by this Agreement.
4.6 Capital Stock, Capitalization of OSI; SEC Filings
(a) The shares of common stock of OSI to be received by the Sellers in
accordance with the terms of this Agreement will be duly authorized, validly
issued, fully paid and nonassessable.
(b) The authorized capital stock of OSI consists of (i) 7,500,000
shares of OSI voting common stock, of which 3,425,126.01 shares are duly
authorized and validly issued and outstanding, fully paid and nonassessable on
the date hereof, (ii) 7,500,000 shares of OSI Class A nonvoting common stock, of
which 391,740.58 shares are duly authorized and validly issued and outstanding,
fully paid and nonassessable on the date hereof, (iii) 500,000 shares of OSI
Class B nonvoting common stock, of which 400,000 shares are duly authorized and
validly issued and outstanding, fully paid and nonassessable on the date hereof,
(iv) 1,500,000 shares of OSI Class C nonvoting common stock, of which 1,040,000
shares are duly authorized and validly issued and outstanding, fully paid and
nonassessable on the date hereof and (v) 1,000,000 shares of OSI preferred
stock, of which 935,886.85 shares are duly authorized validly issued and
outstanding, fully paid and nonassessable as of the date of this Agreement.
Except for the OSI preferred stock, OSI nonvoting common stock, for rights
contained in that certain Amended and Restated Stockholders Agreement dated as
of February 16, 1996, by and among OSI and certain stockholders of OSI (the
"Stockholders Agreement") and for options to be granted under OSI's 1995 Stock
Option and Stock Award Plan, there are no outstanding securities convertible
into or exchangeable for the capital stock of OSI and no outstanding options,
rights (preemptive or otherwise), or warrants to purchase or to subscribe for
any shares of such stock or other securities of OSI.
(c) The reports and other documents filed by OSI under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), complied as to form and
content in all material respects with all requirements under the 1934 Act as of
the respective dates of filing.
(d) The most recent stock option grants awarded under OSI's 1995 Stock
Option and Stock Award Plan have an exercise price of $25.00 per share.
ARTICLE V
COVENANTS CONCERNING SELLERS
Each of Sellers covenants and agrees with Buyer that:
5.1 Operation of the Business. Without the prior written consent of Buyer,
from and after the date of this Agreement and until the Closing Date, no member
of the North Shore Affiliated Group will:
(a) Grant any increase in the rate of pay of any of its employees,
grant any increase in the salaries of any officer, employee or agent, enter into
or increase the benefits provided under any bonus, profit-sharing, incentive
compensation, pension, retirement, medical, hospitalization, life insurance or
other insurance plan or plans, or other contracts or commitments, or in any
other way increase in any amount the benefits or compensation of any such
officer, employee or agent.
(b) Enter into any employment Contract or collective bargaining
agreement.
(c) Enter into any Contract or engage in any transaction which is not
in the usual and Ordinary Course or which is inconsistent with past practices.
(d) Sell or dispose of or encumber any Assets other than in the
Ordinary Course.
(e) Make, or enter into any Contract for, any capital expenditure or
enter into, modify, amend, or cancel any lease of capital equipment or real
property other than in the Ordinary Course.
(f) Enter into any Contract, whether for the purchase or sale of
inventory, supplies, other products or services or otherwise other than in the
Ordinary Course.
(g) Create, assume, incur or guarantee any indebtedness other than (i)
in the usual and Ordinary Course of the Business and with a maturity date of
less than one year or (ii) that incurred pursuant to existing Contracts
disclosed in the Schedules delivered pursuant to this Agreement.
(h) Declare or pay any dividend or make any sale of or distribution in
respect of its capital stock or directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock.
(i) Make or institute any unusual method of transacting business or
change any accounting procedures or practices or its financial structure.
(j) Make any amendments to or changes in its articles or certificate
of incorporation or association or bylaws.
(k) Perform any act, or attempt to do any act, or permit any act or
omission to act, which will cause a breach of any material Contract.
5.2 Preservation of Business. From and after the date of this Agreement and
until the Closing Date, each member of the North Shore Affiliated Group shall:
(a) Use reasonable commercial efforts to carry on the Business
substantially in the same manner as heretofore conducted.
(b) Use reasonable commercial efforts to keep its business
organization intact, including keeping available the services of its present
employees and preserving its present relationships with suppliers and customers
and others having business relations with it.
(c) Perform all obligations required to be performed by it under any
Contract or lease.
5.3 Insurance and Maintenance of Property. From and after the date of this
Agreement and until the Closing Date, Sellers and each member of the North Shore
Affiliated Group will maintain all insurance policies and bonds set forth on
Schedule 3.32, and will maintain the Purchased Assets in good condition and
repair.
5.4 Full Access. From and after the date of this Agreement and until the
Closing Date, representatives of Buyer shall have full access at all reasonable
times to all premises, properties, books, records, Contracts, tax records and
documents of Sellers and of the North Shore Affiliated Group relating to the
Business and/or the Canadian Shares, and Sellers will furnish to Buyer any
information in respect of the Business as Buyer may from time to time request.
Such examination and investigation by Buyer shall not affect the warranties and
representations of Sellers contained in this Agreement.
5.5 Books, Records and Financial Statements. From and after the date of
this Agreement and until the Closing Date, each of Sellers shall maintain its
books and financial records in accordance with GAAP consistently applied, and on
a basis consistent with the past practices of such Seller. Said books and
financial records shall fairly and accurately reflect the operations of the
Business. Each of Sellers shall furnish to Buyer promptly, as available,
financial statements and operating reports applicable to the Business since
March 31, 1997, all of which shall be prepared in accordance with GAAP
consistently applied and shall present fairly the financial position and results
of operations of the Business at the dates and for the periods indicated.
5.6 Governmental Filings. Each of Sellers will cooperate with Buyer in
making, as soon as practicable following the execution hereof, all filings
required by any Government in connection with the transactions contemplated by
this Agreement. All information provided by Sellers in connection with such
filings will, to the best knowledge of the Seller Group Persons, be true,
accurate and complete and will comply with all applicable laws and regulations.
5.7 Tax Matters.
(a) The Parties agree that the amount for Reserved Taxes on the
Closing Date Balance Sheet will be broken down on a schedule to the Closing Date
Balance Sheet into its separate components, with each component identifying the
specific taxable period and specific Tax for which a particular reserve is being
created or continued (each separate component being referred to herein as a
"Reserve").
(b) Each of Sellers agrees to furnish, or cause to be furnished, to
Buyer, upon request, as promptly as practicable, such information and assistance
(including access to books and records) relating to the Purchased Assets and the
Assumed Liabilities as is reasonably necessary for the preparation of any Tax
Return, claim for refund or audit or prosecution or defense of any claim, suit
or proceeding relating to any Taxes.
(c) All real estate, personal property, ad valorem and any other local
or state taxes relating to the Purchased Assets or the Business which shall be
accrued but unpaid as of the Effective Time, or which shall be paid as of the
Effective Time but relate in whole or in part to periods after the Closing Date,
shall be prorated to the Effective Time and shall be reflected on the Closing
Date Balance Sheet. Any such prorated taxes which may be ultimately assessed
after the Effective Time shall be paid by Sellers to Buyer or Buyer to Sellers,
as the case may be, within 30 calendar days of such determination.
ARTICLE VI
OTHER AGREEMENTS
6.1 Change of Name. Within ten business days after the Closing Date, North
Shore, AMS, and Mailguard, in such manner as is reasonably requested by Buyer,
shall each change its name to some name other than "North Shore Agency, Inc.,",
"Automated Mailing Services, Inc.," or "Mailguard Security Systems, Inc." or any
variations or abbreviations thereof, and file appropriate notification of its
change of name in all jurisdictions where such notification is required.
6.2 Employees. As of 12:01 a.m. on the Closing Date, all employees of each
North Shore Affiliated Group shall cease to be employees of each North Shore
Affiliated Group and shall become employees of the Buyer, unless such employees
are listed on Schedule 6.2(a) as individuals who will not become employees of
Buyer. At Closing, each member of the North Shore Affiliated Group shall
transfer sponsorship to Buyer of all of the Plans set forth on Schedule 6.2(b)
and Buyer agrees to assume all such Plans pursuant to the terms of the Change of
Sponsorship and Assumption Agreement attached as Exhibit 6.2 ("Change of
Sponsorship Agreement").
6.3 Supplemental Disclosure. The Sellers shall have the right from time to
time prior to the Closing to supplement or amend their disclosure schedules,
with respect to any matter hereafter arising which, if existing or known as of
the date of this Agreement, would have been required to set forth or described
in such Schedule. Any such supplemental disclosure, however, will not be deemed
to have been disclosed as of the date of this Agreement for purposes of
determining whether or not the conditions set forth in Section 7.1 hereof have
been satisfied. If Buyer determines to consummate the transactions contemplated
by this Agreement notwithstanding such supplemental disclosure, however, such
supplemental disclosure will be deemed to have cured any breach of any
representation or warranty made in this Agreement for purposes of the
indemnification obligations set forth in Article IX hereof unless otherwise
agreed to in writing by the parties.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to waive
any one or more of such conditions:
7.1 Representations and Warranties of Sellers. The representations and
warranties of Sellers and the Stockholders contained in this Agreement and in
the certificates and papers to be delivered to Buyer pursuant hereto and in
connection herewith shall be true and correct in all material respects on the
date hereof and on the Closing Date (except for changes specifically permitted
hereunder) as though such representations and warranties were made on the
Closing Date.
7.2 Performance of this Agreement. Each of Sellers and each member of the
North Shore Affiliated Group shall have duly performed or complied with all of
the obligations to be performed or complied with by it under the terms of this
Agreement on or prior to the Closing Date.
7.3 Material Adverse Change and Extraordinary Distributions. There shall
have been no material adverse change in the Business (including the Purchased
Assets and Assumed Liabilities), whether or not covered by insurance. Between
the date of this Agreement and the Closing Date, there shall have been no
extraordinary distribution by any member of the North Shore Affiliated Group, by
the officers of such member, or by any of Sellers, by the officers of Sellers or
by any Stockholders of any assets or dividends of the Business.
7.4 Certificate of Sellers. Buyer shall have received a certificate signed
by the President and Treasurer of each of Sellers dated as of the Closing Date
and subject to no qualification certifying that the conditions set forth in
Sections 7.1, 7.2, 7.3, 7.8, 7.9 and 7.11 hereof have been fully satisfied. Such
certificate shall be deemed a representation and warranty of Sellers and
Stockholders under this Agreement.
7.5 Opinion of Counsel. Buyer shall have received from Pryor, Cashman,
Sherman & Flynn counsel to the Sellers Group, an opinion dated the Closing Date,
to the effect that:
(a) Each member of the North Shore Affiliated Group, other than DMM
Consultants, is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation.
(b) This Agreement and the Earn-out Agreement have received all
requisite approval by the Stockholders and by the Board of Directors of each of
Sellers, have been duly executed and delivered by each Sellers Group Person, and
are binding and enforceable against each Sellers Group Person in accordance with
their terms, except that (i) such enforcement may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or limiting creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
7.6 Employment Agreements. Jerome Goodman shall have executed and delivered
an Employment Agreement in substantially the form attached hereto as Exhibit
7.6(a), David M. Klein shall have executed and delivered an Employment Agreement
in substantially the form attached hereto as Exhibit 7.6(b) and the employees
listed on the schedule to Exhibit 7.6(c) shall have executed and delivered an
Employment Agreement in substantially the form attached hereto as Exhibit
7.6(c).
7.7 Earn-Out Agreement. Sellers shall have executed and delivered the
Earn-out Agreement in substantially the form attached hereto as Exhibit 2.3.
7.8 No Lawsuits. No suit, action or other proceeding or investigation shall
be threatened or pending before or by any Court or Government concerning this
Agreement or the consummation of the transactions contemplated hereby, or in
connection with any claim against any member of the North Shore Affiliated Group
or of Sellers not disclosed on the Schedules hereto. No Government shall have
threatened or directed any request for information concerning this Agreement,
the transactions contemplated hereby or the consequences or implications of such
transaction to Buyer, to the members of the North Shore Affiliated Group or to
Sellers, or any officer, director, employee or agent of any of them.
7.9 No Restrictions. Except with respect to obtaining the licenses set
forth on Schedule 3.16 and not obtaining the consents set forth on Schedule
7.10, there shall exist no conditions, restrictions or reservations affecting
the title to or utility of the Purchased Assets which would prevent Buyer from
occupying and utilizing the Purchased Assets, or any part thereof, to the same
full extent that Sellers might continue to do so if the sale and transfer
contemplated hereby did not take place.
7.10 Consents. All consents and approvals necessary to ensure that Buyer
will continue to have the same full rights in respect to the Purchased Assets as
Sellers had immediately prior to the consummation of the transaction
contemplated hereunder shall have been obtained; provided, however, with respect
to the consent to the assignment of customer agreements, Sellers shall not be
required to obtain the consents required in connection with the assignment of
the agreements listed on Schedule 7.10.
7.11 Releases. At or prior to the Closing Date, Sellers shall have
delivered to Buyer the written release of all Liens other than Permitted Liens
relating to the Purchased Assets executed by the holder of or parties to each
such Lien. The releases shall be reasonably satisfactory in substance and form
to Buyer and its counsel.
7.12 Documents. Buyer shall have received from each of Sellers on the
Closing Date:
(a) Bills of Sale and other appropriate documents conveying to Buyer
good and marketable title to the Purchased Assets.
(b) The Assignment and Assumption Agreement and other appropriate
assignments, with related consents, if any are so required.
(c) A certificate or certificates evidencing the Canadian Shares, duly
endorsed or accompanied by a duly executed stock power.
(d) A Change of Sponsorship Agreement.
7.13 Lease Assignment and Other Matters.
(a) Wayne Street Associates shall have assigned all of its rights
under the Leases with Kermit Enterprises, dated as of July 12, 1995 and May 15,
1996, to Buyer.
(b) North Shore shall have assigned all of its rights under the lease
agreement for 117 Cuttermill Road in substantially the form attached hereto as
Exhibit 7.13(a) to Buyer.
(c) The Stockholders and David Klein shall have executed the
Stockholders Agreement.
(d) Jerome Goodman and Buyer shall have executed the License Agreement
in substantially the form attached hereto as Exhibit 7.13(b) (the "License
Agreement").
7.14 Further Assurances. Buyer shall have received such further instruments
and documents as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained and the performance of all conditions to the consummation of such
transactions.
ARTICLE VIII
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Sellers to
waive any one or more of such conditions:
8.1 Representations and Warranties of Buyer. The representations and
warranties of Buyer contained in this Agreement and in the certificates and
papers to be delivered to Sellers pursuant hereto and in connection herewith
shall be true and correct in all material respects on the date hereof and on the
Closing Date (except for changes specifically permitted hereunder) as though
such representations and warranties were made on the Closing Date.
8.2 Performance of this Agreement. Buyer shall have duly performed or
complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
8.3 Certificate of Buyer. Sellers shall have received a certificate signed
by an officer of Buyer dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 8.1, 8.2, 8.7
and 8.9 hereof have been fully satisfied. Such certificate shall be deemed a
representation and warranty of Buyer hereunder.
8.4 Earn-out Agreement. Buyer and OSI shall have executed and delivered an
Earn-out Agreement in substantially the form attached hereto as Exhibit 2.3.
8.5 Employment Agreements. Buyer and OSI shall have executed and delivered
Employment Agreements in substantially the form attached hereto as Exhibits
7.6(a), 7.6(b) and 7.6(c).
8.6 Payment of Closing Consideration and Assumption of Assumed Liabilities.
On the Closing Date, Sellers shall have received from Buyer the Closing Cash
Consideration, the Closing Stock Consideration, the Assignment and Assumption
Agreement, the Change of Sponsorship Agreement and the License Agreement. In
addition, Jerome Goodman shall be released from any and all guarantees he has
made on behalf of the North Shore Affiliated Group.
8.7 No Lawsuits. No suit, action or other proceeding or investigation shall
be threatened or pending before or by any Court or Government concerning this
Agreement or the consummation of the transactions contemplated hereby. No
Government shall have threatened or directed any request for information
concerning this Agreement, the transactions contemplated hereby or the
consequences or implications of such transaction to Buyer, to the members of the
North Shore Affiliated Group or to Sellers, or any officer, director, employee
or agent of any of them.
8.8 Opinion of Counsel. Sellers shall have received from Bryan Cave LLP,
counsel to Buyer and OSI, an opinion dated the Closing Date, to the effect that:
(a) Each of Buyer and OSI is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
(b) This Agreement and the Earn-out Agreement have received all
requisite approval by the Board of Directors of each of Buyer and OSI, have been
duly executed and delivered by each of Buyer and OSI, and are binding and
enforceable against each of Buyer and OSI in accordance with their terms, except
that (i) such enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to or limiting creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(c) The shares of common stock of OSI to be delivered to the
Stockholders on the date hereof have been duly authorized by OSI and, when
delivered in accordance with the terms of the Asset Purchase Agreement, will be
fully paid and non-assessable.
8.9 Bank Loan On the Closing Date, the bank loan payable of the North Shore
Affiliated Group included within the Assumed Liabilities shall have been paid in
full by Buyer pursuant to instructions contained in a pay-off letter obtained
from such bank by North Shore.
8.10 Further Assurances. Sellers shall have received such further
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The representations and
warranties made in this Agreement shall survive the Closing and sale
contemplated hereby for a period of 18 months from the Closing Date; provided,
however the foregoing shall not apply to representations and warranties under
Sections 3.2(b), 3.8 and 3.34 and the last sentence of Section 3.14, which shall
survive until the expiration of the applicable statute of limitations.
9.2 Sellers' Indemnification. Each Sellers Group Person, jointly and
severally, hereby agrees to hold Buyer, OSI and the shareholders, directors,
officers, successors, assigns and agents of each of them (the "Buyer Indemnified
Persons") harmless and indemnify each of them from and against any and all
claims, losses, damages, liabilities, expenses or costs ("Losses"), plus
reasonable attorneys' fees and expenses incurred in connection with Losses
and/or enforcement of this Agreement, plus interest from the date incurred
through the date of payment at the prime lending rate of Citibank N.A. from time
to time prevailing (in all, "Indemnified Losses") incurred or to be incurred by
any of them (a) to the extent resulting from or arising out of any breach or
violation of the representations, warranties, covenants or agreements of any
Sellers Group Person contained in this Agreement, including the provisions of
this Article IX, (b) to the extent resulting from or arising out of the matters
disclosed on Schedule 3.20 and (c) to the extent resulting from or arising out
of any liability or obligation of any Sellers Group Person not expressly assumed
by Buyer hereunder as an Assumed Liability (such non-assumed liabilities to
include without limitation any violation by any member of the North Shore
Affiliated Group of the Fair Debt Collection Practices Act and any state or
local counterpart or equivalent prior to the Closing Date).
9.3 Buyer's Indemnification. Buyer and OSI hereby agree to hold Sellers and
the Stockholders (the "Sellers Indemnified Persons") harmless and indemnify each
of them from and against any and all Indemnified Losses incurred or to be
incurred by any of them, (a) to the extent resulting from or arising out of any
breach or violation of the representations, warranties, covenants and agreements
of Buyer and OSI contained in this Agreement, including the provisions of this
Article IX and (b) to the extent resulting from or arising out of any liability
or obligation of Buyer with respect to the Assumed Liabilities.
9.4 Notice of Claim. In the event that Buyer seeks indemnification on
behalf of a Buyer Indemnified Person, or any of Sellers seeks indemnification on
behalf of a Sellers Indemnified Person, such Party seeking indemnification (the
"Indemnified Party") shall give written notice to the Indemnifying Party
specifying the facts constituting the basis for such claim and the amount, to
the extent known, of the claim asserted. With respect to claims other than Third
Person Claims (as defined below), the Indemnifying Party shall have 20 calendar
days after the Indemnified Party provides notice to the Indemnifying Party to
make such investigation of the claim as the Indemnifying Party deems necessary
or desirable. For purposes of such investigation, the claimant agrees to make
available to the Indemnifying Party or its authorized representative(s) the
information relied upon by the claimant to substantiate the claim. If the
claimant and the Indemnifying Party agree at or prior to the expiration of such
20 day period (or any mutually agreed upon extension thereof) to the validity
and amount of such claim, the Indemnifying Party shall pay the amount of such
claim not more than 10 calendar days after agreement. If the claimant and the
Indemnifying Party do no agree within such period (or any mutually agreed upon
extension thereof), the Claimant may seek any available legal remedy.
9.5 Right to Contest Claims of Third Persons. If an Indemnified Party is
entitled to indemnification hereunder because of a claim asserted by any
claimant (other than an indemnified person hereunder) ("Third Person"), the
Indemnified Party shall give the Indemnifying Party reasonably prompt notice
thereof after such assertion is actually known to the Indemnified Party;
provided, however, that the right of a person to be indemnified hereunder in
respect of claims made by a Third Person shall not be adversely affected by a
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, and using counsel
reasonably satisfactory to the Indemnified Party, to investigate, secure,
contest or settle the claim alleged by such Third Person (a "Third-Person
Claim"), provided that the Indemnifying Party has unconditionally acknowledged
to the Indemnified Party in writing his or its obligation to indemnify the
persons to be indemnified hereunder with respect to such Third-Person Claim; the
Indemnified Party may thereafter participate in (but not control) the defense of
any such Third-Person Claim with its own counsel at its own expense, unless
separate representation is necessary to avoid a conflict of interest, in which
case such representation shall be at the expense of the Indemnifying Party.
Unless and until the Indemnifying Party so acknowledges his or its obligation to
indemnify, the Indemnified Party shall have the right, at its option, to assume
and control defense of the matter and to look to the Indemnifying Party for the
full amount of the costs of defense. The failure of the Indemnifying Party to
respond in writing to the aforesaid notice of the Indemnified Party with respect
to such Third-Person Claim within 20 calendar days after receipt thereof shall
be deemed an election not to defend the same. If the Indemnifying Party does not
so acknowledge his or its obligation to indemnify and assume the defense of any
such Third-Person Claim, (a) the Indemnified Party may defend against such
claim, in such manner as it may deem appropriate, including, but not limited to,
settling such claim, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party may participate in (but not control) the defense of such
action, with its own counsel at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such Third-Person Claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by clear and convincing
evidence that conduct of the Indemnified Party in the defense and/or settlement
of such Third-Person Claim constituted gross negligence or willful misconduct.
The Parties shall make available to each other all relevant information in their
possession relating to any such Third-Person Claim and shall cooperate in the
defense thereof.
9.6 Sources of Indemnification Subject to complying with the procedures of
Sections 9.4 and/or 9.5, Buyer or OSI shall have the right to seek, in their
sole discretion, satisfaction of Indemnified Losses: subject to the limitations
of Section 9.7, (a) from any Sellers Group Person or (b) by offsetting
Indemnified Losses against the payments of additional earn-out consideration
otherwise payable to Sellers pursuant to Section 2.3 and Exhibit 2.3.
9.7 Limitations.
(a) The Buyer Indemnified Persons shall not be entitled to recover
Indemnified Losses to the extent such Indemnified Losses exceed the sum of
$10,000,000 (the "Cap"), once any Sellers Group Person has made payments to or
on behalf of Buyer Indemnified Persons with respect to such Indemnified Losses
in such amount.
(b) The Buyer Indemnified Persons shall not be entitled to recover
Indemnified Losses(i) for a breach of a representation or warranty (other than
those in Section 3.2, Section 3.6 and the last sentence of Section 3.14) or (ii)
pursuant to Section 9.2(b) unless such Indemnified Losses exceed $375,000 in the
aggregate, and only to the extent such Indemnified Losses exceed such amount.
(c) Each Stockholder (other than Jerome Goodman, who shall have no
limitation pursuant to this Section 9.7(c)) and David Klein shall not be
obligated to indemnify the Buyer Indemnified Persons in excess of the amount set
forth opposite his name on Schedule 9.7(c). Schedule 9.7(c) reflects the
proportional interest of each Stockholder (other the Jerome Goodman) and David
Klein in the Cap.
(d) For purposes of Section 9. 2, "Indemnified Losses" for a breach of
Section 3.19 shall not include or be recoverable by any person to the extent
covered by insurance carried by the indemnified person.
9.8 Exclusive Remedy. The obligations of each Seller Group Person to
indemnify the Buyer for any breach described in Section 9.2 shall constitute the
Buyer's sole and exclusive remedy with respect to any such breaches to the
exclusion of any statutory, contractual or common law rights. Buyer's obligation
to indemnify Sellers Indemnified Persons for any breach described in Section 9.3
shall constitute the sole and exclusive remedy of the Sellers Indemnified
Persons with respect to any such breaches to the exclusion of any statutory,
contractual or common law rights.
ARTICLE X
MISCELLANEOUS
10.1 Assignment; Binding Agreement.
(a) This Agreement and all or any part of Buyer's rights and
obligations hereunder may be assigned by Buyer at any time to any one or more
Affiliates of Buyer. Buyer shall cause such Affiliate(s) to perform any of
Buyer's obligations hereunder which are assigned to such Affiliate(s).
(b) Neither this Agreement nor any of the Sellers Group's rights or
obligations hereunder may be assigned by any member of the Sellers Group without
Buyer's prior written consent.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective successors and permitted
assigns.
10.2 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing Date only as follows:
(a) By mutual consent of Buyer and Sellers.
(b) By either Buyer or Sellers if the Closing shall not have occurred
on or before October 15, 1997, or such other date, if any, as Buyer and Sellers
shall agree upon.
10.3 Manner and Effect of Termination.
(a) Any action by Sellers to terminate this Agreement and the
transactions contemplated hereby, as provided in Section 10.2 hereof, shall be
taken by the Sellers Group Representative (as defined in Section 10.14). Any
such action by Buyer shall be taken by its Chairman of the Board, its President
or any appropriately authorized officer.
(b) If this Agreement is terminated pursuant to Section 10.2 hereof
without fault of either party or breach of this Agreement, all obligations of
Sellers and Buyer hereunder shall terminate, without liability of Sellers to
Buyer or of Buyer to Sellers. In such event, each party hereto shall pay all
legal and other costs and expenses incurred by such party in connection with
this Agreement and the transactions contemplated hereby.
(c) Subject to Section 9.8, nothing in this Section or elsewhere in
this Agreement shall impair or restrict the rights of any party to any and all
remedies at law or in equity in the event of a breach of or default under this
Agreement.
10.4 Non-Disclosure of Information. Without the prior written consent of
Buyer, Sellers will not disclose or reveal to any third Person any confidential,
non-public or commercially valuable information (a) concerning Buyer to which
Sellers were exposed in connection with this Agreement or (b) concerning the
Business. Notwithstanding anything to the contrary contained herein, if this
Agreement is terminated pursuant to Section 10.2 hereof, the terms of the
Confidentiality Agreement among Sellers and OSI shall remain in full force and
effect.
10.5 Transfer Taxes and Expenses.
(a) Sellers shall pay all documentary stamp, intangible and other
transfer taxes which arise as a result of the sale of the Purchased Assets
contemplated under this Agreement.
(b) Buyer and Sellers shall use their respective reasonable efforts to
provide or obtain from any taxing authority any certificate or other document
necessary to mitigate, reduce or eliminate any Taxes (including additions
thereto or interest and penalties thereon) that otherwise would be imposed with
respect to the transactions contemplated in this Agreement.
10.6 Bulk Sales. Buyer hereby waives compliance with any applicable State
Uniform Commercial Code or other statutory provisions governing bulk sales.
Sellers agree to indemnify, defend and hold harmless Buyer from any and all
loss, cost or expenses, resulting from the assertion of claims made against the
Purchased Assets sold hereunder or against Buyer by creditors of Sellers under
any bulk sales law with respect to liabilities and obligations of Sellers not
assumed by Buyer hereunder, such indemnity to be in accordance with the
provisions of Article IX hereof.
10.7 Remedies. Except as expressly set forth in Section 9.8, nothing
contained herein is intended to or shall be construed to limit the remedies
which either party may have against the other in the event of a breach of or
default under this Agreement, it being intended that any remedies shall be
cumulative and not exclusive.
10.8 Entire Agreement and Modification. This Agreement, including the
Schedules attached hereto and the documents to be delivered pursuant to Article
VII and Article VIII, and Exhibits, constitutes the entire agreement between the
parties, subject to the last sentence of Section 10.4. No changes of,
modifications of, or additions to this Agreement shall be valid unless the same
shall be in writing and signed by all parties hereto.
10.9 Severability. If any provision of this Agreement shall be determined
to be contrary to law and unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
10.10 Counterparts. This Agreement may be executed in one or more identical
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed and thereafter transmitted by telecopier, and the telecopier receipt
shall constitute an original.
10.11 Headings; Interpretation. The table of contents and article and
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of the Agreement.
Both parties have participated substantially in the negotiation of this
Agreement, and each party hereby disclaims any defense or assertion in any
litigation or arbitration that any ambiguity herein should be construed against
the draftsman.
10.12 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of New York without regard to the conflict of
laws rules of such state.
10.13 Payment of Fees and Expenses. Each Party hereto shall pay all fees
and expenses incurred by such Party incident to the negotiation, preparation and
execution of this Agreement and the consummation of the transaction contemplated
hereby, including the fees of counsel, accountants and other experts of such
Party and any finder's or brokerage fees incurred by such Party.
10.14 Sellers Group Representative By execution and delivery of this
Agreement, each Sellers Group Person hereby constitutes and appoints Jerome
Goodman as the representative of such person hereunder (the "Sellers Group
Representative") with full power and authority to give or make all notices,
objections, directions and other communications to be given or made by or on
behalf of any Sellers Group Person, to take any actions or give any consents of
waivers which may be taken or given by or on behalf of any Sellers Group Person,
to bind and act on behalf of the Sellers Group with respect to any matters which
may arise or in connection with this Agreement and the exhibits hereto
(including without limitation the Earn-out Agreement, but excluding the
Employment Agreements) and to otherwise act for and on behalf of the Sellers
Group (except in connection with the Employment Agreements). In the event that
the Sellers Group Representative should die or become incapacitated, his
successor shall be selected by the estate or personal representative of Sellers
Group Representative, and written notice of such selection shall be given to
Buyer and OSI.
10.15 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered (i) personally, (ii) by registered or certified
mail, postage prepaid, (iii) by facsimile transmission or (iv) by overnight
delivery service and addressed as set forth below:
(a) If to Buyer or OSI:
Outsourcing Solutions, Inc.
390 South Woods Mill Road, Suite 150
Chesterfield, MO 63017
Attention: Timothy G. Beffa
Fax: 314-576-1867
copy to (which shall not constitute notice):
Bryan Cave LLP
One Metropolitan Square
N. Broadway, Suite 3600
St. Louis, MO 63102
Attention: Peter D. Van Cleve
Fax: 314-259-2020
(b) If to any member of the Sellers Group:
Jerome Goodman and Kevin Goodman
North Shore Agency, Inc.
117 Cuttermill Road
Great Neck, NY 11021
Fax: (516)466-9391
copies to(which shall not constitute notice):
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, NY 10022
Attention: Eric B. Woldenberg
Fax: (212) 326-0806
and
David Klein
2 Richmond Road
Lido Beach, NY 11561
Any such notice shall be effective upon receipt. Any party may change the
address to which notices are to be addressed by giving the other parties notice
in the manner herein set forth.
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE
PARTIES HERETO.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on the
day and year first above written.
NSA ACQUISITION CORPORATION
By: /s/ Peter D. Waldstein
-----------------------------------
Peter D. Waldstein
Vice President
OUTSOURCING SOLUTIONS INC.
By: /s/ Timothy G. Beffa
-----------------------------------
Timothy G. Beffa
President and Chief Executive Officer
NORTH SHORE AGENCY, INC.
By: /s/ Jerome Goodman
-----------------------------------
Jerome Goodman
President
AUTOMATED MAILING SERVICES, INC.
By: /s/ Jerome Goodman
-----------------------------------
Jerome Goodman
President
MAILGUARD SECURITY SYSTEMS, INC.
By: /s/ Jerome Goodman
-----------------------------------
Jerome Goodman
President
/s/ David Klein
- --------------------------------------
David Klein, as sole proprietor of
DMM Consultants
/s/ Jerome Goodman
- --------------------------------------
Jerome Goodman
/s/ Kevin Goodman
- --------------------------------------
Kevin Goodman
/s/ Abby Goodman
- --------------------------------------
Abby Goodman
/s/ Peter Goodman
- --------------------------------------
Peter Goodman
<PAGE>
TABLE OF SCHEDULES
1.1(a) Excluded Assets
1.1(b) Permitted Liens
2.5 Allocation of Consideration
3.4 Events Subsequent to December 31, 1996
3.7 Undisclosed Liabilities
3.10 Personal Property - Owned
3.11(a) Real Property - Leased from Sellers
3.11(b) Personal Property - Leased from Sellers
3.12(a) Real Property - Leased to Sellers
3.12(b) Personal Property - Leased to Sellers
3.13 Intellectual Property
3.14 Necessary Property and Transfer of Purchased Assets
3.16 Licenses and Permits
3.17 Contracts--Disclosure
3.18 Contracts--Validity
3.20 Litigation and Arbitration
3.21 Directors, Officers, Employees and Consultants
3.22 Indebtedness to and from Officers, Directors and Others
3.25 Labor Agreements, Employee Benefit Plans and Employment
Agreements
3.26 ERISA
3.32 Insurance Policies
3.33 Guarantees
3.34(a)-(h) Environmental Matters
3.35 Broker's Fees
3.38 Foreign Assets
7.10 Consents
ASSET PURCHASE AGREEMENT
by and among
Outsourcing Solutions Inc.,
ABC Acquisition Company,
Accelerated Bureau of Collections Inc.,
Accelerated Bureau of Collections of Ohio, Inc.,
Accelerated Bureau of Collections of Virginia Inc.,
Accelerated Bureau of Collections of Massachusetts Inc.
and
Travis L. Justus
<PAGE>
TABLE OF CONTENTS
ASSET PURCHASE AGREEMENT
SECTION PAGE
ASSET PURCHASE AGREEMENT.....................................................1
RECITALS.....................................................................1
ARTICLE I....................................................................1
DEFINITIONS...............................................................1
ADS.......................................................................1
ADS.......................................................................1
Affiliate.................................................................1
Arbiter...................................................................1
Assets....................................................................1
Assignment and Assumption Agreement.......................................2
Assumed Liabilities.......................................................2
Balance Sheet Date........................................................3
Bill of Sale..............................................................3
Business..................................................................3
Buyer.....................................................................3
Closing...................................................................3
Closing Consideration.....................................................3
Closing Date..............................................................3
Closing Date Balance Sheet................................................3
Closing Date Statement....................................................3
Closing Financial Statements..............................................3
Closing Working Capital...................................................3
Code......................................................................3
Contract..................................................................4
Court.....................................................................4
Current Assets............................................................4
Current Liabilities.......................................................4
Dollars...................................................................4
Effective Time............................................................4
Employment Agreements.....................................................4
Excluded Assets...........................................................4
Final Purchase Price......................................................4
Financial Statements......................................................4
GAAP......................................................................4
Government................................................................4
Intellectual Property.....................................................4
Interim Balance Sheet.....................................................5
Interim Statements........................................................5
"Knowledge"...............................................................5
Law.......................................................................5
Liabilities...............................................................5
Lien......................................................................5
Notice of Dispute.........................................................5
Ordinary Course...........................................................5
Party.....................................................................6
Permitted Liens...........................................................6
Person....................................................................6
Plan......................................................................6
"Premises"................................................................6
Purchased Assets..........................................................6
Returns...................................................................6
Sellers...................................................................6
Sellers Group.............................................................6
Sellers Group Person......................................................6
Taxes.....................................................................6
"Working Capital Target"..................................................7
ARTICLE II...................................................................7
PURCHASE AND SALE OF ASSETS...............................................7
2.1 Assets to be Purchased................................................7
2.2 Assumed Liabilities...................................................7
2.3 Closing Consideration.................................................7
2.4 Post-Closing Adjustments to Closing Consideration....................7
2.5 Allocation of Consideration...........................................8
2.6 Closing...............................................................8
2.7 Deliveries of Sellers at Closing......................................8
2.8 Deliveries of Buyer at Closing........................................8
2.9 Closing Date Balance Sheet and Statement..............................8
ARTICLE III.................................................................10
REPRESENTATIONS AND WARRANTIES OF SELLERS................................10
3.1 Corporate Existence and Power of Sellers.............................10
3.2 Approval and Enforceability of Agreement.............................10
3.3 Financial Statements.................................................10
3.4 Events Subsequent to December 31, 1996...............................11
3.5 Assets in Possession of Others.......................................12
3.6 Accounts and Notes Receivable........................................12
3.7 Undisclosed Liabilities..............................................12
3.8 Taxes................................................................12
3.9 Real Property - Owned................................................14
3.10 Personal Property - Owned...........................................14
3.11 Real and Personal Property - Leased from Sellers....................14
3.12 Real and Personal Property - Leased to Sellers......................14
3.13 Intellectual Property...............................................15
3.14 Necessary Property and Transfer of Purchased Assets.................16
3.15 Use and Condition of Property.......................................16
3.16 Licenses and Permits................................................16
3.17 Contracts--Disclosure...............................................17
3.18 Contracts--Validity, Etc............................................18
3.19 No Breach of Law or Governing Document..............................18
3.20 Litigation and Arbitration..........................................19
3.21 Directors, Officers, Employees and Consultants......................19
3.22 Indebtedness to and from Directors, Officers and Others.............19
3.23 Outside Financial Interests.........................................19
3.24 Payments, Compensation and Perquisites of Agents and Employees......20
3.25 Labor Contracts, Employee Benefit Plans, and Employment Contracts...20
3.26 ERISA...............................................................20
3.27 Terminated Plans....................................................21
3.28 Overtime, Back Wages, Vacation and Minimum Wages....................21
3.29 Discrimination and Occupational Safety and Health...................21
3.30 Alien Employment Eligibility........................................21
3.31 Labor Disputes; Unfair Labor Practices..............................22
3.32 Insurance Policies..................................................22
3.33 Guarantees..........................................................22
3.34 Environmental Matters...............................................22
3.35 Broker's Fees.......................................................23
3.36 Foreign Assets......................................................23
3.37 Foreign Operations and Export Control...............................24
3.38 Books and Records...................................................24
3.39 Truthfulness........................................................24
ARTICLE IV..................................................................24
REPRESENTATIONS AND WARRANTIES OF BUYER..................................24
4.1 Corporate Existence of Buyer.........................................24
4.2 Approval of Agreement................................................24
4.3 No Breach of Articles or Indentures..................................24
ARTICLE V...................................................................25
COVENANTS CONCERNING SELLERS.............................................25
5.1 Operation of the Business............................................25
5.2 Preservation of Business.............................................26
5.3 Insurance and Maintenance of Property................................26
5.4 Full Access..........................................................26
5.5 Books, Records and Financial Statements..............................26
5.6 Governmental Filings.................................................27
5.7 Tax Matters..........................................................27
5.8 Employees............................................................27
ARTICLE VI..................................................................28
CHANGE OF NAME...........................................................28
6.1 Change of Name.......................................................28
ARTICLE VII.................................................................28
CONDITIONS TO BUYER'S OBLIGATIONS........................................28
7.1 Representations and Warranties of Sellers............................28
7.2 Performance of this Agreement........................................28
7.3 Material Adverse Change and Extraordinary Distributions..............28
7.4 Certificate of Sellers...............................................29
7.5 Opinion of Counsel...................................................29
7.6 Employment Agreements................................................29
7.7 No Lawsuits..........................................................29
7.8 No Restrictions......................................................30
7.9 Consents.............................................................30
7.10 Releases............................................................30
7.11 Documents...........................................................30
7.12 Further Assurances..................................................30
ARTICLE VIII................................................................30
CONDITIONS TO SELLERS' OBLIGATIONS.......................................30
8.1 Representations and Warranties of Buyer..............................31
8.2 Performance of this Agreement........................................31
8.3 Certificate of Buyer.................................................31
8.5 Employment Agreements................................................31
8.6 Payment of Closing Consideration and Assumption of
Assumed Liabilitie...................................................31
8.7 Further Assurances...................................................31
ARTICLE IX..................................................................31
INDEMNIFICATION..........................................................31
9.1 Survival of Representations and Warranties...........................31
9.2 Sellers' Indemnification.............................................31
9.3 Buyer's Indemnification..............................................32
9.4 Notice of Claim......................................................32
9.5 Right to Contest Claims of Third Persons.............................32
9.6 Limitations..........................................................33
ARTICLE X...................................................................33
MISCELLANEOUS............................................................33
10.1 Assignment; Binding Agreement.......................................33
10.2 Termination of Agreement............................................34
10.3 Manner and Effect of Termination....................................34
10.4 Non-Disclosure of Information.......................................34
10.5 Transfer Taxes and Expenses.........................................35
10.6 Bulk Sales..........................................................35
10.7 Remedies............................................................35
10.8 Entire Agreement and Modification...................................35
10.9 Severability........................................................35
10.10 Counterparts.......................................................35
10.11 Headings; Interpretation...........................................36
10.12 Governing Law......................................................36
10.13 Payment of Fees and Expenses.......................................36
10.14 Sellers Group Representative.......................................36
10.15 Liabilities After Effective Time...................................36
10.16 Notices............................................................36
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the"Agreement") is made as of this 10th day
of November 1997, by and among, on one hand, Outsourcing Solutions Inc., a
Delaware corporation ("OSI"), and ABC Acquisition Company, a Colorado
corporation and a wholly-owned subsidiary of OSI ("Buyer"), and on the other
hand, Accelerated Bureau of Collections, Inc., a Colorado corporation ("ABC
Inc."), Accelerated Bureau of Collections of Ohio, Inc., a Ohio corporation
("ABC Ohio"), Accelerated Bureau of Collections of Virginia, Inc., a Virginia
corporation ("ABC Virginia") and Accelerated Bureau of Collections of
Massachusetts, Inc., a Massachusetts corporation ("ABC Massachusetts") (each,
a"Seller" and together, the"Sellers") and Travis L. Justus (the"Stockholder").
Certain defined terms are set forth in Article I.
RECITALS
Buyer desires to purchase from Sellers the Purchased Assets on the
following terms and conditions; and
Sellers desire to sell to Buyer the Purchased Assets on the following terms
and conditions.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants, representations, warranties, conditions and agreements hereinafter
expressed, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"ADS" means Accelerated Data Systems, Inc., a Colorado
corporation.
"ADS Collection System" means that collection of computer software,
programs, source code and design documents which support the business of
Sellers.
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Person referred to. In this definition,"control" means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of securities, by contract, or
otherwise.
"Arbiter" means the individual appointed under Section 2.9(d).
"Assets" means all assets and property and associated rights and interests,
real, personal and mixed, tangible and intangible, of whatever kind, owned or
used by Sellers. Without limiting the generality of the foregoing, the Assets
include the following items:
(a) all assets reflected and/or described on the Interim Balance
Sheet, except any such assets which have been disposed of in the Ordinary Course
of the Business since the Balance Sheet Date;
(b) all assets owned or used by Sellers which have been fully
depreciated or written off;
(c) all assets acquired by Sellers since the Balance Sheet Date;
(d) all accounts receivable of Sellers;
(e) all inventories of Sellers, including but not limited to all
supplies;
(f) all Intellectual Property of Sellers (and for the avoidance of
doubt this does not include Intellectual Property of ADS including but not
limited to the ADS Collection System as more specifically described herein) and
documentation thereof and the right and power to assert, defend and recover
title thereto and the right to recover for past damages on account of the
infringement, misuse, or theft thereof;
(g) all records, including business, computer, engineering and other
records, and all associated documents, discs, tapes and other storage or
recordkeeping media of Sellers, including but not limited to all sales data,
customer lists, accounts, bids, contracts, supplier records and other data and
information of the Business;
(h) all of Sellers' rights and claims against others under Contracts;
and
(i) all other claims against others, rights and choses in action,
liquidated or unliquidated, of Sellers arising from the Business, including
those arising under insurance policies and those related to the Assumed
Liabilities.
"Assignment and Assumption Agreement" means the form of
instrument set forth as Exhibit 1.1(a).
"Assumed Liabilities" means Liabilities of Sellers to the
extent they are:
(a) Liabilities that are (i) Current Liabilities quantified on the
Closing Financial Statements, (ii) the long-term liabilities reflected on the
Closing Date Balance Sheet and (iii), if incurred after the date of this
Agreement, incurred in compliance with this Agreement; or
(b) executory obligations arising from the Business which are not
required under GAAP to be quantified and included in the financial statements of
the Business and which (i) if required to be set forth on a Schedule, are so set
forth, (ii) are incurred under a Contract for the sale of goods or services by
Sellers (other than Contracts between any Seller and another Sellers Group
Person), (iii) are to be performed after the Effective Time and (iv), if
incurred after the date of this Agreement and prior to the Effective Time, are
incurred in compliance with this Agreement.
"Balance Sheet Date" means September 30, 1997.
"Bill of Sale" means the form of instrument set forth as Exhibit 1.1(b).
"Business" means the business and operations of Sellers including without
limitation the business generally conducted under the trade names"Accelerated
Bureau of Collections."
"Buyer" means ABC Acquisition Company, a Colorado corporation.
"Closing" means the consummation of the transactions contemplated by this
Agreement.
"Closing Consideration" means Thirty Two Million Dollars ($32,000,000).
"Closing Date" means November 10, 1997 or, if the conditions to Closing are
not by then satisfied, on such Closing Date as the Parties may agree to in
writing.
"Closing Date Balance Sheet" means the balance sheet prepared pursuant to
Section 2.9.
"Closing Date Statement" means the statement prepared pursuant to Section
2.9.
"Closing Financial Statements" means the Closing Date Balance Sheet and the
Closing Date Statement prepared pursuant to Section 2.9.
"Closing Working Capital" means total Current Assets minus total Current
Liabilities, as determined on the Closing Date Statement pursuant to Section
2.9.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any contract, agreement, binding commitment or instrument,
purchase order or offer, written or oral, entered into or made by or on behalf
of Sellers.
"Court" means any court or judicial body of any Government.
"Current Assets" shall be determined in accordance with GAAP.
"Current Liabilities" shall be determined in accordance with GAAP but shall
not include the current portion of long-term liabilities.
"Dollars" or"$" means United States Dollars.
"Effective Time" means the effective time of the Closing, which shall be as
of 12:01 A.M. on November 1 1997.
"Employment Agreements" means the forms of employment and non-competition
agreements set forth as Exhibits 7.6(a), 7.6(b) and 7.6(c).
"Excluded Assets" means the Assets identified in Schedule 1.1(b).
"Final Purchase Price" means the Closing Consideration as adjusted pursuant
to Section 2.4.
"Financial Statements" means the 1996 Financial Statements and the 1995
Financial Statements. "1996 Financial Statements" means the Sellers' compiled
combined statement of assets and liabilities - income tax basis at December 31,
1996 and the related statements of revenues and expenses for the 12 month period
then ended."1995 Financial Statements" means the Sellers' compiled combined
statement of assets and liabilities - income tax basis at December 31, 1995 and
the related statements of revenues and expenses for the 12 month period then
ended.
"GAAP" means United States generally accepted accounting principles.
"Government" means the United States of America, any other nation or state,
and any federal, bilateral or multilateral governmental authority; and any
possession, territory, county, district, municipality, city or other
governmental unit or subdivision of any of the foregoing.
"Intellectual Property" means, to the extent any of the following are owned
by any Seller, trademarks, trade names, corporate names, service marks and
registrations thereof and applications therefor, together with that part of the
goodwill of the Business connected with the use of and symbolized by such marks;
patents, copyrights and computer software, both source code and executable code
(but excluding any non-transferable licenses of commercially available software
not created or customized for the Business), and registrations thereof and
applications therefor; inventions, discoveries, processes, ideas, designs,
methods, formulae, trade secrets, unregistered copyrights, proprietary technical
information, know-how and data; licenses, sublicenses, assignments and
agreements with respect to the foregoing; and all manuals, records and
documentation with respect to the foregoing.
"Interim Balance Sheet" means the statement of assets and liabilities at
September 30, 1997 included in the Interim Statements.
"Interim Statements" means the Interim Balance Sheet and the related
statements of revenues and expenses of the Sellers for the nine month period
then ended, together with any notes or schedules thereto.
"Knowledge" of any Person of or with respect to any matter means that such
Person (if a natural person) or any of the officers or directors of such Person
(if not a natural person) has actual awareness or knowledge of such matter or
would have actual knowledge or awareness after due inquiry of the books and
records of Sellers.
"Law" means any statute, law, treaty, ordinance, rule, regulation,
instrument, directive, decree, order or injunction of any Government,
quasi-governmental authority or Court, and includes rules or regulations of any
regulatory or self- regulatory authority compliance with which is required by
Law.
"Liabilities" means all liabilities and/or obligations, whether or not
required to be reflected on the financial statements of a business.
"Lien" means any security interest, mortgage, pledge, charge, adverse claim
or other encumbrance.
"Notice of Dispute" means a notice to Buyer delivered pursuant to Section
2.9, specifying in reasonable detail all points of disagreement with the Closing
Date Balance Sheet and Closing Date Statement.
"Ordinary Course" means, with respect to the Business, only the ordinary
course of commercial operations customarily engaged in by such business and
specifically does not include (a) activity (i) involving the purchase or sale of
such business or of any product line or business unit, (ii) involving
modification or adoption of any Plan or (iii) which requires approval by the
board of directors or shareholders of an entity engaged in such business or (b)
the incurrence of any liability for any tort or any breach or violation of or
default under any agreement or Law.
"Party" means any of Buyer, OSI, Sellers or Stockholder, and"Parties" means
all of them.
"Permitted Liens" means liens set forth on Schedule 1.1(c).
"Person" means any natural person; any corporation, partnership, company or
other corporate entity; and any Government.
"Plan" means any agreement, arrangement, plan or policy, qualified or
non-qualified, whether or not considered legally binding, that involves (a) any
pension, retirement, profit sharing, deferred compensation, bonus, stock option,
stock purchase, phantom stock, health, welfare or incentive plan; or (b) welfare
or"fringe" benefits, including without limitation any voluntary employees'
beneficiary associations or related trusts, vacation, severance, disability,
medical, hospitalization, dental, life and other insurance, tuition, company
car, club dues, income tax preparation, sick leave, maternity, paternity or
family leave, child care or other benefits; or (c) any employment, consulting,
engagement or retainer agreement or arrangement.
"Premises" means the Business premises leased by any Seller the lease with
respect to which will be assumed by Buyer.
"Purchased Assets" means the Assets excluding the Excluded Assets.
"Returns" means returns, reports, estimated tax and informational
statements and returns relating to Taxes which are, were or will be required by
Law to be filed by Sellers, and all information returns (e.g., Form W-2, Form
1099) and reports relating to Taxes or Plans. Any one of the foregoing Returns
may be referred to sometimes as a"Return."
"Sellers" means ABC Inc., ABC Ohio, ABC Virginia and ABC Massachusetts
"Sellers Group" means Sellers and Stockholder.
"Sellers Group Person" means a Person included in the Sellers Group.
"Taxes" means all taxes, charges, fees, levies or other like assessments
imposed or assessed by any Government, including without limitation income,
gross receipts, profits, windfall profit, employment (including Social Security,
state pension plans and unemployment insurance), withholding, payroll,
franchise, gross receipts, sales, use, transfer, stamp, occupation, real or
personal property, ad valorem, value added, premium and excise taxes; Pension
Benefit Guaranty Corporation premiums and any other like Government charges; and
shall include all penalties, fines, assessments, additions to tax and interest
resulting from, attributable to, or incurred in connection with such Taxes or
any contest or dispute thereof. Any one of the foregoing Taxes may be referred
to sometimes as a"Tax."
"Working Capital Target" shall mean $100,000 plus one- half the aggregate
amount of the long-term liabilities reflected in the Closing Date Balance Sheet
(including the current portion thereof).
<PAGE>
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Purchased. Subject to the terms and conditions hereof, on
the Closing Date and as of the Effective Time, Sellers agree to sell to Buyer,
free and clear of all Liens other than Permitted Liens, all right, title and
interest of Sellers to and in all of the Purchased Assets.
2.2 Assumed Liabilities
(a) Subject to the terms and conditions hereof, on the Closing Date
and as of the Effective Time, Buyer agrees to assume only the Assumed
Liabilities.
(b) Notwithstanding the foregoing, if the assignment or transfer of
any obligation or instrument would cause a breach thereof and if no required
consent to such assignment or transfer has been obtained, then, at Buyer's
election and in its reasonable discretion such obligation or instrument shall
not be assigned or transferred, but Buyer shall act as agent for Sellers in
order to obtain for Buyer the benefits under such obligation or instrument.
(c) EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED IN THIS SECTION 2.2
OR ELSEWHERE IN WRITING, NEITHER BUYER NOR ANY AFFILIATE OF BUYER ASSUMES OR
AGREES TO BECOME LIABLE FOR OR SUCCESSOR TO ANY LIABILITIES OR OBLIGATIONS
WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, CONTINGENT OR
OTHERWISE, WHETHER OF SELLERS, ANY AFFILIATE OF SELLERS, ANY PREDECESSOR
THEREOF, OR ANY OTHER PERSON, OR OF THE BUSINESS.
2.3 Closing Consideration. In consideration for the sale of the Purchased
Assets, Buyer shall (i) pay to Sellers the Closing Consideration, adjusted as
described in Section 2.4 and (ii) assume the Assumed Liabilities.
2.4 Post-Closing Adjustments to Closing Consideration
(a) To the extent the Closing Working Capital is greater than the
Working Capital Target, the Closing Consideration shall (on a post-closing basis
pursuant to Section 2.4(b)) be increased on a dollar-for-dollar basis by an
amount equal to such excess. To the extent the Closing Working Capital is less
than the Working Capital Target, the Closing Consideration shall (on a
post-closing basis pursuant to Section 2.4(b)) be decreased on a
dollar-for-dollar basis by an amount equal to such deficit. The Closing
Consideration as so adjusted is hereinafter referred to as the"Final Purchase
Price." The Closing Working Capital and the Final Purchase Price shall be
determined based on the Closing Financial Statements (as finally determined
under Section 2.9).
(b) Not more than 5 business days after final determination of the
Final Purchase Price in the manner specified in Section 2.9, (i) Buyer shall pay
to Sellers the amount, if any, by which the Final Purchase Price exceeds the
Closing Consideration, or (ii) Sellers shall pay to Buyer the amount, if any, by
which the Final Purchase Price is less than the Closing Consideration. Any
payment or distribution from Buyer or Sellers so required to be made shall be by
wire transfer of immediately available funds and shall bear interest from the
Closing Date through the date of payment at the prime lending rate of Citibank,
N.A. from time to time prevailing.
2.5 Allocation of Consideration. The consideration provided for in Section
2.4 shall be allocated among the Sellers and the Purchased Assets as provided in
Schedule 2.5 hereto, or as mutually agreed to in writing by the Parties after
the determination of the Final Purchase Price. Such allocation shall be prepared
in accordance with Section 1060 of the Code.
2.6 Closing. The Closing shall take place at 10:00 a.m. on the Closing Date
at the offices of Bryan Cave LLP, St. Louis, Missouri.
2.7 Deliveries of Sellers at Closing. At Closing, subject to the conditions
to the Sellers' obligations in Article VIII, Sellers shall execute and deliver
or cause to be delivered the documents identified in Article VII.
2.8 Deliveries of Buyer at Closing. At Closing, subject to the conditions
to the Buyer's obligations in Article VII, Buyer shall (a) execute and deliver
or cause to be delivered the documents identified in Article VIII and (b)
transfer the Closing Consideration by wire transfer of immediately-available
funds to an account or accounts designated by Sellers.
2.9 Closing Date Balance Sheet and Statement.
(a) Buyer, in cooperation with Sellers, shall prepare a closing date
balance sheet of the Sellers ("Closing Date Balance Sheet") and a closing date
statement (the"Closing Date Statement"), each as of the Effective Time and each
prepared in accordance with Section 2.9(b). The Closing Date Balance Sheet shall
also be prepared in accordance with Section 5.7(a). The Closing Date Statement
shall reflect Closing Working Capital, as of the Effective Time. The Closing
Date Balance Sheet and the Closing Date Statement are herein referred to as
the"Closing Financial Statements." Buyer shall deliver the Closing Financial
Statements to Sellers Group Representative not later than 60 calendar days after
the Closing Date.
(b) Notwithstanding that Sellers' historical financial statements have
been prepared with certain variations from GAAP (as set forth on Schedule 3.3),
the Closing Financial Statements shall be prepared in accordance with GAAP, with
all appropriate accruals and reserves.
(c) If Sellers dispute the Closing Financial Statements or the
resulting calculation of the Final Purchase Price, as delivered by Buyer,
Sellers Group Representative shall deliver to Buyer a Notice of Dispute within
ten business days after the date Sellers Group Representative receives the
Closing Financial Statements(the"Dispute Period"). If during the Dispute Period
Sellers Group Representative fails to deliver a Notice of Dispute, the Closing
Financial Statements shall be deemed final and binding at the end of the Dispute
Period.
(d) Upon receipt of the Notice of Dispute within the Dispute Period,
Buyer shall promptly consult with Sellers Group Representative with respect to
Sellers' specified points of disagreement in an effort to resolve the dispute.
If any such dispute cannot be resolved by Buyer and Sellers Group Representative
within 20 calendar days after Buyer receives the Notice of Dispute, they shall
refer the dispute to a partner in KPMG Peat Marwick, certified public
accountants (the"Arbiter"), as an arbitrator to finally determine, as soon as
practicable, and in any event within 30 calendar days after such reference, all
points of disagreement with respect to the Closing Financial Statements. For
purposes of such arbitration, each Party shall submit proposed Closing Financial
Statements. The Arbiter shall apply the terms of Section 2.9(b) of this
Agreement and shall otherwise conduct the arbitration under such procedures as
the Parties may agree or, failing such agreement, under the Commercial Rules of
the American Arbitration Association. The fees and expenses of the arbitration
and the Arbiter incurred in connection with the arbitration of the Closing
Financial Statements shall be allocated between the Parties by the Arbiter in
proportion to the extent either Party did not prevail on items in dispute in the
Closing Financial Statements; provided, that such fees and expenses shall not
include, so long as a Party complies with the procedures of this Section 2.9(d),
the other Party's outside counsel or accounting fees. All determinations by the
Arbiter shall be final, conclusive and binding with respect to the Closing
Financial Statements and the allocation of arbitration fees and expenses.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and Stockholder, jointly and severally, hereby make the following
representations and warranties, each of which Sellers and Stockholder represent
and warrant is true and correct on the date hereof and each of which shall
survive the Closing Date and the transactions contemplated hereby to the extent
provided in Section 9.1.
3.1 Corporate Existence and Power of Sellers.
(a) Each Seller has delivered to Buyer a copy of its certificate of
incorporation, certified by its secretary. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation.
(b) Each Seller has the corporate power and authority to own and use
its assets and to transact the business in which it is engaged, holds all
franchises, licenses and permits necessary and required therefor, is duly
licensed or qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where failure of such Seller to be so licensed or
qualified could be expected to have a material adverse affect on any of the
Assets or on any Seller's ability to perform its obligations under the
Agreement. Each Seller has the power to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby.
3.2 Approval and Enforceability of Agreement.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized, approved and
ratified by all necessary action on the part of the Sellers Group. Each Seller
has delivered to Buyer correct and complete copies of the resolutions of such
Seller, certified by its secretary, giving authorization and approval of the
transactions contemplated hereby. Such resolutions have not been altered,
amended or revoked. Pursuant to such resolutions, each Seller has full authority
to enter into and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby.
(b) Assuming due execution and delivery hereof by Buyer, this
Agreement is the legal, valid and binding obligation of each Sellers Group
Person, enforceable against each according to its terms.
3.3 Financial Statements.
(a) Sellers have delivered to Buyer correct and complete copies of the
Financial Statements and Interim Statements. The Financial Statements are
compiled by Maxwell Pierce Teague, certified public accountant, and his reports
are appended thereto.
(b) The Financial Statements and Interim Statements were derived from
the books and records of the Sellers and (i) are true, complete and correct in
all material respects and (ii) present fairly, in all material respects, the
financial position, results of operations and cash flows of the Business at the
dates and for the periods indicated. The Interim Statements have been prepared
in accordance with GAAP.
3.4 Events Subsequent to December 31, 1996. To the Knowledge of each
Seller, since December 31, 1996, except as set forth in the Interim Statements
and on Schedule 3.4, there has been no:
(a) change in the business, condition (financial or otherwise),
operations or prospects of any Seller other than changes in the Ordinary Course,
which individually or in the aggregate has been materially adverse;
(b) material damage, destruction or loss, whether covered by insurance
or not, affecting any Purchased Assets;
(c) declaration, setting aside or payment of any distribution (in cash
or in kind) with respect to any securities of Sellers;
(d) increase in or commitment to materially increase compensation,
benefits or other remuneration to or for the benefit of any officer, employee or
agent of any Seller, or, in connection with the Business, any other Person or
any benefits granted under any Plan with or for the benefit of any such officer,
employee, agent or Person;
(e) transaction entered into or carried out by any Seller other than
in the Ordinary Course;
(f) borrowing or incurrence of any indebtedness, contingent or other,
by or on behalf of any Seller, or any endorsement, assumption or guarantee of
payment or performance of any Indebtedness or Liability of any other Person or
entity by any Seller;
(g) change made by any Seller in its Tax or financial accounting or
any Tax election including without limitation the election to be treated as an S
Corporation within the meaning of Section 1361 of the Code;
(h) grant of any Lien with respect to the Purchased Assets;
(i) transfer of any Assets other than arm's length sales, leases or
dispositions in the Ordinary Course of the Business;
(j) material modification or termination of any Contract or any
material term thereof;
(k) lease or acquisition of any capital assets included in the
Purchased Assets with a value greater than $10,000 per item;
(l) loan or advance to any Person; or
(m) commitment or agreement by any Seller to do any of the foregoing
items (c) through (l).
3.5 Assets in Possession of Others. To the Knowledge of the Sellers, except
as set forth on Schedule 3.5, no Seller holds title to or ownership of any
material Assets in the possession of others.
3.6 Accounts and Notes Receivable. To the Knowledge of Sellers, all
accounts and notes receivable reflected on the Interim Balance Sheet, and all
accounts and notes receivable accruing subsequently to the Balance Sheet Date
(except those which have been collected since the Balance Sheet Date), are (a)
valid, genuine and subsisting, (b) subject to no defenses, set-offs,
counterclaims, security interests or other encumbrances, and (c) current and
collectible. All accounts receivable of Sellers in existence on the Closing Date
will be paid in full, net of applicable reserves, on or before 270 calendar days
after the Closing Date, less any discounts set forth on Schedule 3.6.
3.7 Undisclosed Liabilities. To the Knowledge of the Sellers, no Seller has
any Liabilities whatsoever, known or unknown, asserted or unasserted, liquidated
or unliquidated, accrued, absolute, contingent or otherwise, and there is no
basis for any claim against any Seller for any such Liability except (a) to the
extent reflected on the Interim Balance Sheet, (b) to the extent set forth on
Schedule 3.4, or (c) Liabilities incurred in the Ordinary Course of the Business
since the Balance Sheet Date, none of which will, or could, have a material
adverse effect upon the business, condition (financial or otherwise), operations
or prospects of the Business.
3.8 Taxes.
(a) All Returns required to be filed by any Seller on or prior to the
Closing Date with respect to Taxes have been or will be timely filed.
(b) All amounts shown on each of such Returns have been paid or will
be paid when due.
(c) Any Taxes which are to be assumed by Buyer in respect of the
Purchased Assets which at the Closing Date are not yet due and owing will be
adequately reflected on the Closing Balance Sheet as a reserve for Taxes.
(d) There are no grounds for the assertion or assessment of any Taxes
against Seller, the Purchased Assets or the Business other than those reflected
or reserved against on the Closing Balance Sheet.
(e) Neither the Purchased Assets nor the Business are and will not be
encumbered by any liens arising out of any unpaid Taxes and there are no grounds
for the assertion or assessment of any liens against the Assets or the Business
in respect of any Taxes.
(f) The transactions contemplated by this Agreement will not give rise
to (i) the creation of any liens against the Purchased Assets or the Business in
respect of any Taxes or (ii) the assertion of any additional Taxes against the
Purchased Assets or the Business.
(g) There is no action or proceeding or unresolved claim for
assessment or collection, pending or threatened, by, or present or expected
dispute with, any governmental authority for assessment or collection from
Seller of any Taxes of any nature affecting the Purchased Assets or the
Business.
(h) There is no extension or waiver of the period for assertion of any
Taxes against any Seller affecting the Purchased Assets or the Business.
(i) No Seller is a"foreign person" within the meaning of Section
1445(f)(3) of the Internal Revenue Code of 1986, as from time to time amended
(the"Code").
(j) None of the Purchased Assets or Assumed Liabilities is subject to,
or constitutes, a safe harbor lease within the meaning of Section 168(f)(8) of
the Code.
(k) None of the Purchased Assets has been financed with, or directly
or indirectly secures, any industrial revenue bonds or debt, the interest on
which is tax exempt under Section 103(a) of the Code.
(l) None of the Purchased Assets or Assumed Liabilities will
constitute a partnership, joint venture, or other arrangement or contract that
could be treated as a partnership for federal income tax purposes.
(m) None of the Purchased Assets consists of stock in a subsidiary of
any Seller.
(n) None of the Purchased Assets is tax-exempt use property within the
meaning of Section 168(h) of the Code.
(o) None of the Purchased Assets is subject to a tax indemnification
agreement.
3.9 Real Property - Owned. No Seller has any interest in, or any right or
obligation to acquire any interest in, any parcel of real property.
3.10 Personal Property - Owned. Each Seller has good and marketable title
to all of the personal property included in the Purchased Assets owned by such
Seller, including all personal property reflected on the Interim Balance Sheet
or acquired after the date thereof (except any personal property subsequently
sold in the Ordinary Course of the Business), free and clear of all options,
Liens, leases, covenants, conditions, agreements and other restrictions of every
kind and there exists no restriction on the use or transfer of such property.
Sellers, as a group, have good and marketable title to all of personal property
included in the Purchased Assets.
3.11 Real and Personal Property - Leased from Sellers. No Seller is a
lessor of any real or personal property.
3.12 Real and Personal Property - Leased to Sellers.
(a) Set forth on Schedule 3.12(a) hereto is a description of each
lease under which any Seller is the lessee of any real property, and on Schedule
3.12(b) hereto is a description of each lease under which any Seller is the
lessee of any personal property. Sellers have delivered to Buyer a true, correct
and complete copy of each lease identified on Schedules 3.12(a) or 3.12(b). The
premises or property described in said leases are presently occupied or used by
such Seller as lessee under the terms of such leases. Except as set forth on
Schedules 3.12(a) or 3.12(b), all rentals due under such leases have been paid,
and there exists no default under the terms of such leases, and no event has
occurred which, upon passage of time or the giving of notice, or both, would
result in any event of default or prevent Sellers from exercising and obtaining
the benefits of any rights or options contained therein. Sellers have all right,
title and interest of the lessee under the terms of said leases, free of all
Liens and all such leases are valid and in full force and effect.
(b) Consent is necessary for the assignment of all leases set forth on
Schedules 3.12(a) or 3.12(b) under which any Seller or any Seller is lessee to
Buyer. Upon Closing, subject to Buyer's obtaining lessor consent, Buyer will
have all right, title and interest of the lessee under the terms of such leases,
free of all Liens.
(c) There is no default or basis for acceleration or termination
under, nor has any event occurred nor does any condition exist which with the
passage of time or the giving of notice, or both, would constitute a default or
basis for acceleration under any underlying lease, agreement, mortgage or deed
of trust, which default or basis for acceleration would materially adversely
affect any lease described on Schedules 3.12(a) or 3.12(b) or the property or
use of the property covered by such lease. There will be no default or basis for
acceleration under any such underlying lease, agreement, mortgage or deed of
trust as a result of the transactions provided for in this Agreement.
3.13 Intellectual Property. Set forth on Schedule 3.13 hereto is a list of
all material Intellectual Property owned, used, licensed or assigned by or to a
Sellers Group Person or by or to any Seller. Except as set forth on Schedule
3.13:
(a) all such Intellectual property is valid and enforceable;
(b) good and marketable title to, or the unrestricted right to use,
all such Intellectual Property, together with all common law rights to the
subject matter thereof, is held by Sellers and/or any Seller, free and clear of
all Liens;
(c) the use, licensing or sale by or to Sellers and/or any Seller of
any of the Intellectual Property does not require the acquiescence, agreement or
consent of any third party, and there exists no restriction on the use or
transfer of any such item;
(d) the conduct of the Business does not contravene, conflict with,
violate or infringe upon any Intellectual Property right of a third party and no
proprietary information or trade secret has been misappropriated by any Seller
and/or from any other Seller from any third party.
(e) such Intellectual Property is not subject to a challenge or claim
of infringement, interference or unfair competition or other claim and, to the
best knowledge of each Sellers Group Person, such Intellectual Property is not
being infringed upon or violated by any third party.
(f) there are no interferences, challenges, proceedings or
infringement suits pending or, to the best knowledge of each Sellers Group
Person, threatened with respect to any such Intellectual Property; and
(g) no Sellers Group Person has granted a license in such Intellectual
Property to any other party, and to the best knowledge of each Sellers Group
Person, no license, assignment or other transfer of such Intellectual Property
has been granted or made by any third party having a right to do so that would
materially adversely affect the Business.
3.14 Necessary Property and Transfer of Purchased Assets. The Purchased
Assets constitute all of Sellers' property and material property rights now
used, useful or necessary in any material respect for the conduct, as of the
Closing Date, of the Business in the manner and to the extent presently
conducted by Sellers. Seller makes no representation or warranty about the
sufficiency of the Purchased Assets in connection with any future or planned
conduct of the Business by Buyer. Except as set forth in Section 3.18 or
elsewhere in the Agreement, to the Knowledge of Sellers, no consent is necessary
to, and there exists no restriction on, the transfer of any of the Purchased
Assets to Buyer. To the knowledge of Sellers, there exists no condition,
restriction or reservation affecting the title to or utility of, in any material
respect, the Purchased Assets or Assumed Liabilities which would prevent Buyer
from occupying or utilizing the Purchased Assets or enforcing the material
rights thereunder, or any part thereof, to the same full extent that Sellers
might continue to do so if the sale and transfer contemplated hereby did not
take place. Upon the Closing, good and marketable title to the Purchased Assets
shall be vested in Buyer free and clear of all taxes and Liens other than
Permitted Liens.
3.15 Use and Condition of Property.
(a) To the Knowledge of each Seller owning the same, all of the
Purchased Assets are in good operating condition and repair as required in all
material respects for their use in the Business as presently conducted or
planned and conform to all applicable Laws, and no notice of any violation of
any Law relating to any of such property or assets has been received by Sellers
except such as have been fully complied with. To the Knowledge of the applicable
Seller, all improvements leased pursuant to the Assumed Liabilities comply with
all applicable zoning and building code ordinances and all applicable fire,
environmental, occupational safety and health standards and similar standards
established by Law, and the same use thereof by Buyer will not result in any
violation of any such code, ordinance or standard which would materially
adversely affect the Business or the Purchased Assets. To the Knowledge of any
Sellers Group Person, there is no pending, proposed, or threatened change in any
such code, ordinance or standard which would materially adversely affect the
Business or the use of the Purchased Assets.
(b) To the Knowledge of any Sellers Group Person, there is no pending,
proposed, or threatened condemnation proceeding or similar action affecting the
Purchased Assets or with respect to any streets or public amenities appurtenant
thereto or in the vicinity thereof which would materially adversely affect the
Business or the use of the Purchased Assets.
3.16 Licenses and Permits. Set forth on Schedule 3.16 hereto is a
description of each license or permit which, to the Knowledge of Sellers, is
required for the conduct of the Business together with the name of the
government agency or entity issuing such license or permit. Such licenses and
permits are valid and in full force and effect. Such licenses and permits are
not transferable by Sellers.
3.17 Contracts--Disclosure. Except as set forth in Schedule 3.17 or
elsewhere in the Agreement and the Schedules hereto, there is not, to the
Knowledge of Sellers, outstanding:
(i) Any single Contract providing for an expenditure by any of
Sellers in excess of $5,000, Contracts with the same or affiliated vendor(s)
providing for an expenditure by any Seller in excess of $10,000, or any
Contracts in the aggregate providing for expenditures by any Seller in excess of
$10,000, for the purchase of any real property, machinery, equipment or other
items which are in the nature of capital investment.
(ii) Any single Contract providing for an expenditure by any of
Sellers in excess of $5,000, Contract with the same or affiliated vendor(s)
providing for an expenditure by any Seller in excess of $10,000, or Contracts in
the aggregate providing for expenditures by any Seller in excess of $10,000, for
the purchase of raw materials, supplies, component parts or any other items or
services.
(iii) Any Contract to sell products or to provide services to
third Persons which (i) is at a price which would result in a net loss on the
sale of such products or providing of such services, (ii) is pursuant to terms
or conditions which any of Sellers or any Seller cannot reasonably expect to
satisfy or fulfill in their entirety, or (iii) involves more than $5,000 or
which, together with all other Contracts to or with the same party or affiliated
parties, involves more than $10,000.
(iv) Any Contract for materials, supplies, component parts or
other items or services in excess of the normal, ordinary, usual and current
requirements of the Business or at a price in excess of the current reasonable
market price.
(v) Any revocable or irrevocable indemnity or power of attorney.
(vi) Any evidence of indebtedness, loan agreement, indenture,
promissory note, letter of credit, foreign exchange contract, conditional sales
agreement or other similar type of agreement.
(vii) Any Contract which involves (i) a sharing of profits, (ii)
future payments of $10,000 or more per annum to other Persons or (iii) any joint
venture, partnership or similar arrangement.
(viii) Any Contract involving any sales agency, sales
representation, distributorship or franchise.
(ix) Any Contract containing covenants limiting the freedom of
any of Sellers to compete in any line of business or with any Person or in any
area.
(x) Any Contract not made in the Ordinary Course of the Business.
(xi) Any other material Contract which is not cancelable without
penalty on 30 calendar days' notice or less and which is not set forth on
another Schedule.
3.18 Contracts--Validity, Etc.
(a) Each Contract is a valid and binding obligation of the parties
thereto, enforceable in accordance with its terms and in full force and effect.
(b) No Seller is in breach or violation of any Contract or default
thereunder. To the Knowledge of the applicable Seller, the other party to any
Contract is not in breach or violation thereof or default thereunder. No event
has occurred which, through the passage of time or the giving of notice, or
both, would constitute, and neither the execution of this Agreement nor the
completion of the Closing does or will constitute or result in, a material
breach or violation of or default under any Contract, or would cause the
acceleration of any obligation of any party thereto or the creation of a Lien
upon any Asset.
(c) Each Contract will be duly assigned to Buyer on the Closing Date
and upon such assignment, subject to Buyer obtaining the consent of the other
party thereto, Buyer will acquire all right, title and interest of Sellers in
and to such Contract and will be substituted for such Sellers under the terms of
such Contract.
3.19 No Breach of Law or Governing Document. To the Knowledge of the
Sellers, no Seller is in default under or in violation of (a) any applicable Law
of any Government (including, without limitation, the Fair Debt Collection
Practices Act and any state or local counterpart or equivalent), (b) any
franchise or license, or (c) any provision of its articles or certificate of
incorporation or association or bylaws. Neither the execution of this Agreement
nor the completion of the Closing does or will, to the Knowledge of Sellers,
constitute or result in any such default, breach or violation. No Seller is
required to obtain any Government permits or consents to effect the transactions
contemplated hereby. No Ultimate Parent Entity of Sellers, together with all
entities it controls, is a $10 million person under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, or the rules relating thereto (the"H-S-R").
As used in this Section 3.19, the terms"Ultimate Parent Entity,""control"
and"$10 million person" shall be defined by the H-S-R.
3.20 Litigation and Arbitration. To the Knowledge of Sellers, except as set
forth on Schedule 3.20 hereto and except with respect to claims from debtors and
employees arising in the Ordinary Course, there is no suit, claim, action or
proceeding now pending or, to the Knowledge of any Seller, threatened before any
Court, grand jury, administrative or regulatory body, governmental agency,
arbitration or mediation panel or similar body, nor except with respect to
potential claims from debtors and employees arising in the Ordinary Course are
there any grounds therefor, to which any of Sellers and/or any Seller is a party
or which may result in any judgment, order, decree, liability, award or other
determination which will, or could, have any material adverse effect upon any
Purchased Asset or upon the business, condition (financial or otherwise),
operations or prospects of the Business. No such judgment, order, decree or
award has been entered against any of Sellers or against any Seller, nor has any
such liability been incurred which has, or could have, such effect. There is no
claim, action or proceeding now pending or, to the Knowledge of any Sellers
Group Person, threatened before any Court, grand jury, administrative or
regulatory body, governmental agency, arbitration or mediation panel or similar
body which will, or could, prevent or hamper the consummation of the
transactions contemplated by this Agreement.
3.21 Directors, Officers, Employees and Consultants. Set forth on Schedule
3.21 hereto is a complete list of:
(a) all directors of each of Sellers;
(b) all officers (with office held) of each of Sellers;
(c) all hourly employees of Sellers who earn $25,000 or more per year
and all salaried employees of Sellers; and
(d) all consultants or professional advisors to Sellers who were paid
more than $10,000 by Sellers during the first six months of 1997;
together, in the case of officers and employees of Sellers, with the current
rate of compensation payable to each.
3.22 Indebtedness to and from Directors, Officers and Others. Except as set
forth on Schedule 3.22, (a) no Seller or other Seller is indebted to any
director, officer, employee or agent of any Seller or other Seller except for
amounts due as normal salaries, wages and bonuses and in reimbursement of
ordinary expenses on a current basis and (b) no officer, employee or agent of
any Seller or other Seller is indebted to any Seller or other Seller.
3.23 Outside Financial Interests. Except as identified on Schedule 3.23
hereto, no director or officer of any Seller has any direct or indirect
financial interest in any competitor with or supplier or customer of any such
Seller; provided, however, that for this purpose ownership of corporate
securities having no more than 2% of the outstanding voting power of any
competitor, supplier or customer for which securities are listed on any national
securities exchange or authorized for quotation on the Automated Quotations
System of the National Association of Securities Dealers, Inc. shall not be
deemed to be such a financial interest provided such Person has no other
connection or relationship with such competitor, supplier or customer.
3.24 Payments, Compensation and Perquisites of Agents and Employees. To the
Knowledge of Sellers, (a) all payments to agents, consultants and others made by
any Seller or other Seller in connection with the Business have been in payment
of bona fide fees and commissions and not as bribes, illegal or improper
payments, (b) each Seller or other Seller has properly and accurately reflected
on its books and records all compensation paid to and perquisites provided to or
on behalf of its consultants, agents and employees, and (c) such compensation
and perquisites have been properly and accurately disclosed in the Financial
Statements and Interim Statements and other public or private reports, records
or filings of any Seller or other Seller, to the extent required by Law.
3.25 Labor Contracts, Employee Benefit Plans, and Employment Contracts.
Except as set forth on Schedule 3.25 hereto, no Seller is a party to (a) any
union collective bargaining, works council, joint or multi-employer association,
employee committee or similar Contract, (b) any Plan or (c) any employment
Contract. True, correct and complete copies of all documents creating or
evidencing any such Contract or Plan listed on Schedule 3.25 have been delivered
to Buyer. There are no negotiations, demands or proposals which are pending or
which have been made since January 1, 1994 which concern matters now covered, or
that would be covered, by the type of Contracts or Plans listed in this Section.
3.26 ERISA.
(a) All Plans disclosed on Schedule 3.26 comply in all material
respects with, and have been operated and maintained in compliance with, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other applicable Laws, to the extent applicable. No"reportable event" (as
defined in Section 4043(b) of ERISA) or"prohibited transaction" (as defined in
Section 4975(c)(1) of the Code or Section 406 of ERISA) has occurred with
respect to any Plan and, except as may result from Closing, there is no fact or
circumstance which may lead to the occurrence of any reportable event or
prohibited transaction. Sellers do not maintain and are not required to
contribute to, nor have they ever maintained or been required to contribute to
(i) a defined benefit pension plan or (ii) a defined contribution plan which
requires minimum contributions.
(b) No Seller or Sellers has ever been a party to or participant in,
or been required to contribute to, any multi-employer plan (as defined in
Section 3(37) of ERISA).
(c) All Sellers have complied in all material respects with the health
care continuation requirements of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA").
3.27 Terminated Plans. To their respective Knowledge, no Seller has
terminated or taken action to terminate any employee benefit plan. None of
Sellers, nor any Seller, has any liability to any Person or entity, including
without limitation the Pension Benefit Guaranty Corporation, any other
Government agency or any participant in or beneficiary of any employee plan of
another entity, and none of Sellers is liable for any excise, income or other
tax or penalty as a result of the termination of any employee benefit plan.
3.28 Overtime, Back Wages, Vacation and Minimum Wages. To the Knowledge of
each Seller, no present or former employee of such Seller has any claim against
the Sellers Group (whether under U.S., federal, state or local law, foreign law,
any employment agreement, or otherwise) on account of or for (a) overtime pay,
other than overtime pay for the current payroll period, (b) wages or salary
(excluding current bonus, accruals and amounts accruing under pension and
profit-sharing plans) for any period other than the current payroll period, (c)
vacation, time off or pay in lieu of vacation or time off, other than that
earned in respect of the current fiscal year or (d) any violation of any
statute, ordinance or regulation relating to minimum wages or maximum hours of
work.
3.29 Discrimination and Occupational Safety and Health. To the Knowledge of
each Seller, except as set forth on Schedule 3.20, (a) no Person or party
(including, but not limited to, any Government) has any claim, or basis for any
action or proceeding, against such Seller arising out of any statute, ordinance
or regulation relating to discrimination in employment or employment practices
or occupational safety and health standards, and (b) since formation, no Seller
or other Seller has received any notice from any U.S. federal, state, local or
foreign Government alleging a violation of occupational safety or health
standards.
3.30 Alien Employment Eligibility. To the Knowledge of each Seller, with
respect to each Person employed by such Seller or of Sellers on or after May 1,
1987, and who actually commenced such employment on or after November 6, 1986,
(a) such Seller hired such Person in compliance with the Immigration Reform and
Control Act of 1986 and the rules and regulations thereunder ("IRCA") and (b)
each of Sellers and/or each Seller has complied with all recordkeeping and other
regulatory requirements under IRCA.
3.31 Labor Disputes; Unfair Labor Practices. There is neither pending nor,
to the Knowledge of any Seller, threatened, any labor dispute, strike or work
stoppage which affects or which may affect the Business, and no Seller is
currently covered by any injunction issued by any Court. Since January 1, 1994,
to the Knowledge of each Seller, neither it nor its agents, representatives or
employees of each of them, has committed any unfair labor practice as defined in
the National Labor Relations Act of 1947, as amended. To the Knowledge of each
Seller, (a) there is not now pending or threatened any charge or complaint
against such Seller by the National Labor Relations Board, any state or local
labor or employment agency or any representative thereof, and the execution of
this Agreement and the Closing hereunder will not result in any such charge or
complaint, nor is there pending or threatened any grievance or arbitration under
any labor or employment Contract, (b) no right of representation by a labor
organization exists respecting the employees of such Seller, nor is there
pending a representation election, (c) no collective bargaining Contract is
currently being negotiated and no organizing effort is currently being made with
respect to the employees of such Seller, and (d) no such Seller has any ongoing
or future liabilities or obligations under any settlement Contract or consent
decree.
3.32 Insurance Policies. Set forth on Schedule 3.32 hereto is a list of all
insurance policies and bonds in force covering or relating to the Purchased
Assets or the Business, including without limitation all properties, operations
or personnel of each of Sellers.
3.33 Guarantees. None of Sellers is a guarantor, indemnitor, surety or
accommodation party or otherwise liable for any indebtedness of any other
Person, firm or corporation, except as endorser of checks received and deposited
in the Ordinary Course of the Business.
3.34 Environmental Matters
(a) To the Knowledge of Sellers and except as set forth on Schedule
3.34, the Premises and all current uses and any previous uses by a Seller have
been and are in compliance with all Legal Requirements. Except as set forth in
Schedule 3.34, each Seller has, to its Knowledge, properly obtained and is in
compliance with all material and necessary permits, registrations, approvals,
and licenses and has properly made all filings with and any submissions to any
Legal Authority required by any Legal Requirement. To the Knowledge of Sellers,
as applicable, no deficiencies have been asserted or alleged by any such Legal
Authority with respect to such items.
(b) Except as forth on Schedule 3.34, to the Knowledge of any Seller
Group Person, there has been no spill, discharge, leak, leaching, emission,
migration, injection, disposal, escape, dumping or release of any kind on
beneath, above, or into the Premises or into the environment surrounding the
Premises of any Hazardous Materials, including without limitation those
materials regulated by any Legal Requirement.
(c) Except as set forth on Schedule 3.34, there are and have been to
the Knowledge of any Seller Group Person, no (i) Hazardous Materials stored,
disposed of, generated, manufactured, refined, transported, produced or treated
at, upon or from the Premises; (ii) asbestos fibers on, in or beneath the
Premises or (iii) underground storage tanks on or beneath the Premises.
(d) Each Seller has delivered to Buyer, as part of the execution and
delivery of this Agreement, complete copies of any and all documents received by
such Seller from or submitted to any Legal Authority relating to the environment
condition of the Premises and any reviews, audits, reports or other analyses
concerning the Premises conducted by the Sellers, any prospective purchaser or
any other party whether or not such reviews, audits, reports or other analyses
were submitted to any Legal Authority.
(e) Except as set forth in Schedule 3.34, no Seller has Knowledge of
any civil, criminal or administrative action, suit, summons, citation,
complaint, claim, notice, demand, request, judgment, order, lien, proceeding,
hearing, study, inquiry or investigation based on or related to any Legal
Requirement related to environmental matters concerning the Premises and
applicable to such Seller.
(f) For purposes of this Section 3.34,"Hazardous Materials" shall mean
any flammable, explosive, radioactive, toxic, infectious, hazardous substance,
waste, pollutant, contaminant, chemical, waste, or other or other material,
including but not limited to petroleum including crude oil or any fraction
thereof, asbestos fibers or solid waste, defined or regulated under any Legal
Requirements; "Legal Authority" shall mean any federal, state, county, municipal
or other governmental department, commission, board, bureau, court, agency, or
instrumentality having jurisdiction or authority over the Premises or its
operations;"Legal Requirement" shall mean any law, statute, code, rule,
regulation, ordinance, order, judgment, decree, writ, injunction, franchise,
permit, certificate, license, authorization, registration, or other direction or
requirement of any Legal Authority, applicable to the Premises.
3.35 Broker's Fees. None of Sellers nor any other member of Sellers Group
has retained any broker, finder or agent or agreed to pay any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement.
3.36 Foreign Assets. None of Sellers has an interest in any real property
or tangible or intangible property located outside of the United States,
including any stock, securities or investments in, claims against, or
receivables from any entities or Persons with substantially all their property
or business so located.
3.37 Foreign Operations and Export Control. No Seller has conducted the
Business outside the United States.
3.38 Books and Records. The books of account, stock record books and minute
books and other corporate records of each of Sellers are in all material
respects complete and correct, have been maintained in accordance with good
business practices and the matters contained therein are accurately reflected on
the Financial Statements and Interim Statements, to the extent appropriate.
3.39 Truthfulness. The representations and warranties of Sellers herein and
the statements and certificates furnished or to be furnished by or on behalf of
Sellers pursuant to this Agreement are and will be materially true and correct.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and OSI hereby make the following representations and warranties,
each of which is true and correct on the date hereof and each of which shall
survive the Closing Date and the sale contemplated hereby pursuant to Section
9.1.
4.1 Corporate Existence of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
Buyer has the corporate power and authority to own and use its properties and to
transact the business in which it is engaged. OSI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. OSI has the corporate power and authority to own and use its
properties and to transact the business in which it is engaged.
4.2 Approval of Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized and approved by all necessary corporate action of Buyer and OSI, and
such authorization and approval have not been revoked. Pursuant to such
authorization and approval, each of Buyer and OSI has full power and authority
to enter into this Agreement and the Employment Agreements, and to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
4.3 No Breach of Articles or Indentures. The execution of this Agreement
and the consummation of the transactions contemplated hereby have not and will
not constitute or result in the breach of any of the provisions of, or
constitute a default under any material indenture, evidence of indebtedness or
other commitment to which Buyer or OSI is a party or by which either is bound,
which breach or default would have a material adverse effect on OSI and its
subsidiaries, taken as a whole. The execution of this Agreement and the
consummation of the transactions contemplated hereby have not and will not (a)
constitute or result in the breach of any of the provisions of the articles of
incorporation or by-laws of Buyer or the certificate of incorporation or by-laws
of OSI or (b) except with respect to H-S-R and any state license or permit
requirements related to the collection of debts, require any consent, approval
or authorization of, of filing of any certificate, notice application, report or
other document with any Government.
ARTICLE V
COVENANTS CONCERNING SELLERS
Each of Sellers covenants and agrees with Buyer that, from and after the
date of this Agreement and until the Closing Date, each of Sellers will conduct
the Business subject to the provisions and limitations in Sections 5.1 through
5.5:
5.1 Operation of the Business. Without the prior written consent of Buyer,
no Seller will:
(a) Except in the Ordinary Course, grant any increase in the rate of
pay of any of its employees, grant any increase in the salaries of any officer,
employee or agent, enter into or increase the benefits provided under any bonus,
profit-sharing, incentive compensation, pension, retirement, medical,
hospitalization, life insurance or other insurance plan or plans, or other
contracts or commitments, or in any other way increase in any amount the
benefits or compensation of any such officer, employee or agent.
(b) Enter into any employment Contract or collective bargaining
agreement.
(c) Enter into any Contract or engage in any transaction which is not
in the usual and Ordinary Course of the Business or which is inconsistent with
past practices.
(d) Sell or dispose of or encumber any Assets except in the Ordinary
Course.
(e) Make, or enter into any Contract for, any capital expenditure or
enter into, modify, amend, or cancel any lease of capital equipment or real
property.
(f) Enter into any Contract, whether for the purchase or sale of
inventory, supplies, other products or services or otherwise except in the
Ordinary Course.
(g) Create, assume, incur or guarantee any indebtedness other than (i)
in the usual and Ordinary Course of the Business and with a maturity date of
less than one year or (ii) that incurred pursuant to existing Contracts
disclosed in the Schedules delivered pursuant to this Agreement.
(h) Declare or pay any dividend or make any sale of or distribution in
respect of its capital stock or directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock.
(i) Make or institute any unusual or novel method of transacting
business or change any accounting procedures or practices or its financial
structure.
(j) Make any amendments to or changes in its articles or certificate
of incorporation or association or bylaws.
(k) Perform any act, or attempt to do any act, or permit any act or
omission to act, which will cause a breach of any material Contract.
(l) Take any action or incur any liability or obligation which, if
taken or incurred prior to the date of this Agreement, would be required to be
disclosed on any Schedule hereto.
5.2 Preservation of Business. Each Seller shall:
(a) Carry on the Business in the Ordinary Course diligently and
substantially in the same manner as heretofore conducted.
(b) Keep its business organization intact, including keeping available
the services of its present employees and preserving its present relationships
with suppliers and customers and others having business relations with it.
(c) Perform all obligations required to be performed by it under any
Contract or lease.
5.3 Insurance and Maintenance of Property. Sellers and each Seller will
maintain all insurance policies and bonds set forth on Schedule 3.32, and will
maintain the Purchased Assets in good condition and repair.
5.4 Full Access. Representatives of Buyer shall have full access at all
reasonable times to all premises, properties, books, records, Contracts, tax
records and documents of Sellers relating to the Business, and Sellers will
furnish to Buyer any information in respect of the Business as Buyer may from
time to time request. Such examination and investigation by Buyer shall not
affect the warranties and representations of Sellers contained in this
Agreement.
5.5 Books, Records and Financial Statements. Each of Sellers shall maintain
its books and financial records in accordance with the past practices of such
Seller. Said books and financial records shall fairly and accurately reflect the
operations of the Business. Each of Sellers shall furnish to Buyer promptly, as
available, financial statements and operating reports applicable to the Business
since September 30 1997, all of which shall be prepared in accordance with past
practices of such Seller and shall present fairly the financial position and
results of operations of the Business at the dates and for the periods
indicated.
5.6 Governmental Filings. Each of Sellers will cooperate with Buyer in
making, as soon as practicable following the execution hereof, all filings
required by any Government in connection with the transactions contemplated by
this Agreement. All information provided by Sellers in connection with such
filings will be true, accurate and complete and will comply with all applicable
laws and regulations.
5.7 Tax Matters.
(a) The Parties agree that the amount for reserved taxes on the
Closing Date Balance Sheet will be broken down on a schedule to the Closing Date
Balance Sheet into its separate components, with each component identifying the
specific taxable period and specific Tax for which a particular reserve is being
created or continued (each separate component being referred to herein as
a"Reserve").
(b) Each of Sellers agrees to furnish, or cause to be furnished, to
Buyer, upon request, as promptly as practicable, such information and assistance
(including access to books and records) relating to the Purchased Assets and the
Assumed Liabilities as is reasonably necessary for the preparation of any Tax
Return, claim for refund or audit or prosecution or defense of any claim, suit
or proceeding relating to any Taxes.
(c) All real estate, personal property, ad valorem and any other local
or state taxes relating to the Purchased Assets or the Business which shall be
accrued but unpaid as of the Closing Date, or which shall be paid as of the
Closing Date but relate in whole or in part to periods after the Closing Date,
shall be prorated to the Closing Date and shall be reflected on the Closing Date
Balance Sheet. Any such prorated taxes which may be ultimately assessed after
the Closing Date shall be paid by Sellers to Buyer or Buyer to Sellers, as the
case may be, within 30 calendar days of such determination.
5.8 Employees. As of 12:01 a.m. on the Closing Date, (but for financial
reporting purposes as of the Effective Time) all employees of each Seller shall
cease to be employees of each Seller and shall become employees of the Buyer. At
Closing, each Seller shall transfer sponsorship to Buyer of all of the Plans set
forth on Schedule 5.8(b) and Buyer agrees to assume all such Plans pursuant to
the Change of Sponsorship and Assumption Agreement, in the form of Exhibit 5.8
(the"Change of Sponsorship Agreement"). Nothing in this Section 5.8 shall
prevent Buyer from terminating the employment of any individual employee for
cause or for other valid business purposes.
ARTICLE VI
CHANGE OF NAME
6.1 Change of Name. Promptly after the Closing Date, each of ABC Inc., ABC
Ohio, ABC Virginia, ABC Massachusetts, and any affiliate of Sellers, in such
manner as is reasonably requested by Buyer, shall each change its name to some
name other than"Accelerated Bureau of Collections, Inc.,","Accelerated Bureau of
Collections of Ohio, Inc.,""Accelerated Bureau of Collections of Virginia, Inc."
or"Accelerated Bureau of Collections of Massachusetts," or any variations or
abbreviations thereof (provided that names including only the term"Accelerated"
shall not be deemed a variation or abbreviation thereof), and file appropriate
notification of its change of name in all jurisdictions where such notification
is required.
<PAGE>
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to waive
any one or more of such conditions:
7.1 Representations and Warranties of Sellers. The representations and
warranties of Sellers and the Stockholder contained in this Agreement and in the
certificates and papers to be delivered to Buyer pursuant hereto and in
connection herewith shall be true and correct in all material respects on the
date hereof and on the Closing Date (except for changes specifically permitted
hereunder) as though such representations and warranties were made on the
Closing Date.
7.2 Performance of this Agreement. Each of Sellers and each Seller shall
have duly performed or complied in all material respects with all of the
obligations to be performed or complied with by it under the terms of this
Agreement on or prior to the Closing Date.
7.3 Material Adverse Change and Extraordinary Distributions. There shall
have been no material adverse change, actual or threatened, in the Business
(including the Purchased Assets and Assumed Liabilities), whether or not covered
by insurance, as a result of any cause whatsoever. There shall have been no
extraordinary distribution by any of Sellers, by the officers of Sellers or by
any stockholders of any assets or dividends of the Business.
7.4 Certificate of Sellers. Buyer shall have received a certificate signed
by the President and Treasurer of each of Sellers dated as of the Closing Date
and subject to no qualification certifying that the conditions set forth in
Sections 7.1, 7.2, 7.3, 7.7, 7.8, 7.9 and 7.10 hereof have been fully satisfied.
Such certificate shall be deemed a representation and warranty of Sellers and
Stockholder under this Agreement.
7.5 Opinion of Counsel. Buyer shall have received from Holland & Hart LLP
counsel to the Sellers Group, an opinion dated the Closing Date, to the effect
that:
(a) Each Seller is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. Each of
Sellers and each Seller has full power and authority to own and use its
properties and carry on its business as it is being conducted immediately prior
to the Closing Date.
(b) This Agreement has received all requisite approval by the
stockholders and by the Board of Directors of each of Sellers, has been duly
executed and delivered by each Sellers Group Person, and is binding and
enforceable against each Sellers Group Person in accordance with its terms,
except as the enforceability thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
Such opinion shall be addressed to Buyer and OSI and shall provide that such
opinion may also delivered to and relied upon by the agents and lenders under
OSI's Amended and Restated Credit Agreement, dated as of October 8, 1997.
7.6 Employment Agreements. Travis L. Justus shall have executed and
delivered an Employment Agreement in substantially the form attached hereto as
Exhibit 7.6(a), Linda Brown shall have executed and delivered an Employment
Agreement in substantially the form attached hereto as Exhibit 7.6(b), and Jeff
Walter shall have executed and delivered an Employment Agreement in
substantially the form attached hereto as Exhibit 7.6(c).
7.7 No Lawsuits. No suit, action or other proceeding or investigation shall
be threatened or pending before or by any Court or Government concerning this
Agreement or the consummation of the transactions contemplated hereby, or in
connection with any claim against any Seller or of Sellers not disclosed on the
Schedules hereto. No Government shall have threatened or directed any request
for information concerning this Agreement, the transactions contemplated hereby
or the consequences or implications of such transaction to Buyer or to Sellers,
or any officer, director, employee or agent of any of them.
7.8 No Restrictions. There shall exist no material restrictions or
reservations affecting the title to or utility of the Purchased Assets which
would prevent Buyer from occupying and utilizing the Purchased Assets, or any
part thereof, to the same full extent that Sellers might continue to do so if
the sale and transfer contemplated hereby did not take place.
7.9 Consents. All consents and approvals necessary to ensure that Buyer
will continue to have in all material respects the same full rights in respect
to the Purchased Assets as Sellers had immediately prior to the consummation of
the transaction contemplated hereunder shall have been obtained; provided,
however, Sellers shall not be required to obtain the consents required in
customer agreements, lease agreements (other than the lease for the Englewood,
Colorado facility), and licenses.
7.10 Releases. Prior to the Closing Date, Sellers shall have delivered to
Buyer the written release of all Liens other than Permitted Liens relating to
the Purchased Assets executed by the holder of or parties to each such Lien. The
releases shall be satisfactory in substance and form to Buyer and its counsel.
7.11 Documents. Buyer shall have received from each of Sellers on the
Closing Date:
(a) Bills of Sale and other appropriate documents conveying to Buyer
good and marketable title to the Purchased Assets.
(b) The Assignment and Assumption Agreement and other appropriate
assignments, with related consents, if any are so required.
(c) The Change of Sponsorship Agreement.
7.12 Further Assurances. Buyer shall have received such further instruments
and documents as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained and the performance of all conditions to the consummation of such
transactions.
ARTICLE VIII
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Sellers to
waive any one or more of such conditions:
8.1 Representations and Warranties of Buyer. The representations and
warranties of Buyer contained in this Agreement and in the certificates and
papers to be delivered to Sellers pursuant hereto and in connection herewith
shall be true and correct in all material respects on the date hereof and on the
Closing Date (except for changes specifically permitted hereunder) as though
such representations and warranties were made on the Closing Date.
8.2 Performance of this Agreement. Buyer shall have duly performed or
complied in all material respects with all of the obligations to be performed or
complied with by it under the terms of this Agreement on or prior to the Closing
Date.
8.3 Certificate of Buyer. Sellers shall have received a certificate signed
by an officer of Buyer dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 8.1 and 8.2
hereof have been fully satisfied. Such certificate shall be deemed a
representation and warranty of Buyer hereunder.
8.4 Employment Agreements. Buyer and OSI shall have executed and delivered
Employment Agreements in substantially the form attached hereto as Exhibits
7.6(a), 7.6(b) and 7.6(c).
8.5 Payment of Closing Consideration and Assumption of Assumed Liabilities.
On the Closing Date, Sellers shall have received from Buyer the Closing
Consideration, the Assignment and Assumption Agreement and the Change of
Sponsorship Agreement.
8.6 Further Assurances. Sellers shall have received such further
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The representations and
warranties made in this Agreement shall survive the Closing and sale
contemplated hereby for a period of 12 months from the Closing Date; provided,
however the foregoing shall not apply to representations and warranties under
Section 3.8, which shall survive until the expiration of the applicable statute
of limitations, and Section 3.2 and the last sentence of Section 3.14, which
shall survive without limitation hereunder.
9.2 Sellers' Indemnification. Each Sellers Group Person, jointly and
severally, hereby agrees to hold Buyer, OSI and the shareholders, directors,
officers, successors, assigns and agents of each of them (the"Buyer Indemnified
Persons") harmless and indemnify each of them from and against, and waives any
claim for contribution or indemnity against Buyer Indemnified Persons with
respect to, any and all claims, losses, damages, liabilities, expenses or costs
("Losses"), plus reasonable attorneys' fees and expenses incurred in connection
with Losses and/or enforcement of this Agreement, plus interest from the date
incurred through the date of payment at the prime lending rate of Citibank N.A.
from time to time prevailing (in all,"Indemnified Losses") incurred or to be
incurred by any of them (a) to the extent resulting from or arising out of any
breach or violation of the representations, warranties of any Sellers Group
Person contained in this Agreement, (b) to the extent resulting from or arising
out of any breach or violation of the covenants or agreements of any Sellers
Group Person contained in this Agreement, including the provisions of this
Article IX, and (c) to the extent resulting from or arising out of any liability
or obligation of any Sellers Group Person not expressly assumed by Buyer
hereunder.
9.3 Buyer's Indemnification. Buyer and OSI hereby agree to hold Sellers and
the Stockholder (the"Sellers Indemnified Persons") harmless and indemnify each
of them from and against any and all Indemnified Losses incurred or to be
incurred by any of them, (a) to the extent resulting from or arising out of any
breach or violation of the representations, warranties, covenants and agreements
of Buyer and OSI contained in this Agreement, including the provisions of this
Article IX and (b) to the extent from or arising out of any Assumed Liability.
9.4 Notice of Claim. In the event that Buyer seeks indemnification on
behalf of a Buyer Indemnified Person, or any of Sellers seeks indemnification on
behalf of a Sellers Indemnified Person, such Party seeking indemnification
(the"Indemnified Party") shall give written notice to the Indemnifying Party
specifying the facts constituting the basis for such claim and the amount, to
the extent known, of the claim asserted. The Indemnifying Party shall pay the
amount of any valid claim not more than 30 calendar days after the Indemnified
Party provides notice to the Indemnifying Party of such amount.
9.5 Right to Contest Claims of Third Persons. If an Indemnified Party is
entitled to indemnification hereunder because of a claim asserted by any
claimant (other than an indemnified person hereunder) ("Third Person"), the
Indemnified Party shall give the Indemnifying Party reasonably prompt notice
thereof after such assertion is actually known to the Indemnified Party;
provided, however, that the right of a person to be indemnified hereunder in
respect of claims made by a Third Person shall not be adversely affected by a
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, and using counsel
reasonably satisfactory to the Indemnified Party, to investigate, secure,
contest or settle the claim alleged by such Third Person (a"Third-Person
Claim"), provided that the Indemnifying Party has unconditionally acknowledged
to the Indemnified Party in writing his or its obligation to indemnify the
persons to be indemnified hereunder with respect to such Third-Person Claim; the
Indemnified Party may thereafter participate in (but not control) the defense of
any such Third-Person Claim with its own counsel at its own expense, unless
separate representation is necessary to avoid a conflict of interest, in which
case such representation shall be at the expense of the Indemnifying Party.
Unless and until the Indemnifying Party so acknowledges his or its obligation to
indemnify, the Indemnified Party shall have the right, at its option, to assume
and control defense of the matter and to look to the Indemnifying Party for the
full amount of the costs of defense. The failure of the Indemnifying Party to
respond in writing to the aforesaid notice of the Indemnified Party with respect
to such Third-Person Claim within 20 calendar days after receipt thereof shall
be deemed an election not to defend the same. If the Indemnifying Party does not
so acknowledge his or its obligation to indemnify and assume the defense of any
such Third-Person Claim, (a) the Indemnified Party may defend against such
claim, in such manner as it may deem appropriate, including, but not limited to,
settling such claim, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party may participate in (but not control) the defense of such
action, with its own counsel at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such Third-Person Claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by clear and convincing
evidence that conduct of the Indemnified Party in the defense and/or settlement
of such Third-Person Claim constituted gross negligence or willful misconduct.
The Parties shall make available to each other all relevant information in their
possession relating to any such Third-Person Claim and shall cooperate in the
defense thereof.
9.6 Limitations. The Buyer Indemnified Persons shall not be entitled to
recover or seek to recover Indemnified Losses (a) to the extent such Indemnified
Losses exceed $2,500,000, once any Sellers Group Person has made payments to or
on behalf of Buyer Indemnified Persons with respect to such Indemnified Losses
in such amount; or (b) for a breach of a representation or warranty (other than
those in Section 3.2, Section 3.6 and the last sentence of Section 3.14) unless
such Indemnified Losses exceed $250,000 in the aggregate, and only to the extent
such Indemnified Losses exceed such amount.
ARTICLE X
MISCELLANEOUS
10.1 Assignment; Binding Agreement.
(a) This Agreement and all or any part of Buyer's rights and
obligations hereunder may be assigned by Buyer at any time to any one or more
Affiliates of Buyer. Buyer shall cause such Affiliate(s) to perform any of
Buyer's obligations hereunder which are assigned to such Affiliate(s).
(b) Neither this Agreement nor any of the Sellers Group's rights or
obligations hereunder may be assigned by any member of the Sellers Group without
Buyer's prior written consent.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective successors and permitted
assigns.
10.2 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing Date only as follows:
(a) By mutual consent of Buyer and Sellers.
(b) By either Buyer or Sellers if the Closing shall not have occurred
on or before November 30, 1997, or such other date, if any, as Buyer and Sellers
shall agree upon.
10.3 Manner and Effect of Termination.
(a) Any action by Sellers to terminate this Agreement and the
transactions contemplated hereby, as provided in Section 10.2 hereof, shall be
taken by the Sellers Group Representative (as defined in Section 10.14). Any
such action by Buyer shall be taken by its Chairman of the Board, its President
or any appropriately authorized officer.
(b) If this Agreement is terminated pursuant to Section 10.2 hereof
without fault of either party or breach of this Agreement, all obligations of
Sellers and Buyer hereunder shall terminate, without liability of Sellers to
Buyer or of Buyer to Sellers. In such event, each party hereto shall pay all
legal and other costs and expenses incurred by such party in connection with
this Agreement and the transactions contemplated hereby.
(c) Nothing in this Section or elsewhere in this Agreement shall
impair or restrict the rights of any party to any and all remedies at law or in
equity in the event of a breach of or default under this Agreement.
10.4 Non-Disclosure of Information. Without the prior written consent of
Buyer, except as required by law, Sellers will not disclose or reveal to any
third Person any confidential, non-public or commercially valuable information
(a) concerning Buyer to which Sellers were exposed in connection with this
Agreement, (b) concerning the Business or (c) the transactions contemplated by
this Agreement. Without the prior written consent of Sellers Group
Representative, except as required by law, Buyer will not disclose or reveal to
any third Person any confidential, non-public or commercially valuable
information concerning the transactions contemplated by this Agreement. Either
party shall have, in addition to other remedies available in law or equity, the
right to enjoin the other from disclosing or revealing information in violation
of this section.
10.5 Transfer Taxes and Expenses.
(a) Sellers shall pay all documentary stamp, intangible and other
transfer taxes which arise as a result of the sale of the Purchased Assets
contemplated under this Agreement.
(b) Buyer and Sellers shall use their respective reasonable efforts to
provide or obtain from any taxing authority any certificate or other document
necessary to mitigate, reduce or eliminate any Taxes (including additions
thereto or interest and penalties thereon) that otherwise would be imposed with
respect to the transactions contemplated in this Agreement.
10.6 Bulk Sales. Buyer hereby waives compliance with any applicable State
Uniform Commercial Code or other statutory provisions governing bulk sales.
Sellers agree to indemnify, defend and hold harmless Buyer from any and all
loss, cost or expenses, resulting from the assertion of claims made against the
Purchased Assets sold hereunder or against Buyer by creditors of Sellers under
any bulk sales law with respect to liabilities and obligations of Sellers not
assumed by Buyer hereunder, such indemnity to be in accordance with the
provisions of Article IX hereof.
10.7 Remedies. Nothing contained herein is intended to or shall be
construed to limit the remedies which either party may have against the other in
the event of a breach of or default under this Agreement, it being intended that
any remedies shall be cumulative and not exclusive.
10.8 Entire Agreement and Modification. This Agreement, including the
Schedules attached hereto and the documents to be delivered pursuant to Article
VII and Article VIII, and Exhibits, constitutes the entire agreement between the
parties. No changes of, modifications of, or additions to this Agreement shall
be valid unless the same shall be in writing and signed by all parties hereto.
10.9 Severability. If any provision of this Agreement shall be determined
to be contrary to law and unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
10.10 Counterparts. This Agreement may be executed in one or more identical
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed and thereafter transmitted by telecopier, and the telecopier receipt
shall constitute an original.
10.11 Headings; Interpretation. The table of contents and article and
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of the Agreement.
Both parties have participated substantially in the negotiation and drafting of
this Agreement, and each party hereby disclaims any defense or assertion in any
litigation or arbitration that any ambiguity herein should be construed against
the draftsman.
10.12 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Colorado without regard to the conflict of
laws rules of such state.
10.13 Payment of Fees and Expenses. Each Party hereto shall pay all fees
and expenses incurred by such Party incident to the negotiation, preparation and
execution of this Agreement and the consummation of the transaction contemplated
hereby, including the fees of counsel, accountants and other experts of such
Party and any finder's or brokerage fees incurred by such Party.
10.14 Sellers Group Representative By execution and delivery of this
Agreement, each Sellers Group Person hereby constitutes and appoints Travis L.
Justus as the representative of such person hereunder (the"Sellers Group
Representative") with full power and authority to give or make all notices,
objections, directions and other communications to be given or made by or on
behalf of any Sellers Group Person, to take any actions or give any consents of
waivers which may be taken or given by or on behalf of any Sellers Group Person,
to bind and act on behalf of the Sellers Group with respect to any matters which
may arise or in connection with this Agreement and the exhibits hereto (but
excluding the Employment Agreements) and to otherwise act for and on behalf of
the Sellers Group (except in connection with the Employment Agreements). In the
event that the Sellers Group Representative should die or become incapacitated,
his successor shall be selected by the estate or personal representative of
Sellers Group Representative, and written notice of such selection shall be
given to Buyer and OSI.
10.15 Liabilities After Effective Time. Except as otherwise provided in
this Agreement, Liabilities incurred by Buyer with respect to the Purchased
Assets after the Effective Time shall be Liabilities of Buyer.
10.16 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered (i) personally, (ii) by registered or certified
mail, postage prepaid, (iii) by facsimile transmission or (iv) by overnight
delivery service and addressed as set forth below:
(a) If to Buyer or OSI:
Outsourcing Solutions, Inc.
390 South Woods Mill Road, Suite 150
Chesterfield, MO 63017
Attention: Timothy G. Beffa
Fax: 314-576-1867
copy to:
Bryan Cave LLP
One Metropolitan Square
N. Broadway, Suite 3600
St. Louis, MO 63102
Attention: Peter D. Van Cleve
Fax: 314-259-2020
(b) If to any member of the Sellers Group:
Travis L. Justus
Accelerated Bureau of Collection, Inc.
5295 DTC Parkway
Englewood, Colorado 80111
Fax: (303) 488-7031
copy to:
Holland & Hart LLP
555 Seventeenth Street, Suite 3200
Denver, Colorado 80202-3979
Attention: Mark D. Safty
Fax: (303) 295-8261
Any such notice shall be effective upon receipt. Any party may change the
address to which notices are to be addressed by giving the other parties notice
in the manner herein set forth.
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE
PARTIES HERETO.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on
the day and year first above written.
ABC ACQUISITION COMPANY
By: /s/ Timothy G. Beffa
---------------------
OUTSOURCING SOLUTIONS INC.
By: /s/ Timothy G. Beffa
--------------------
Timothy G. Beffa
President and Chief Executive Officer
ACCELERATED BUREAU OF COLLECTIONS, INC.
By: /s/ Travis L. Justus
--------------------
ACCELERATED BUREAU OF COLLECTIONS OF OHIO, INC.
By: /s/ Travis L. Justus
--------------------
ACCELERATED BUREAU OF COLLECTIONS OF VIRGINIA, INC.
By: /s/ Travis L. Justus
---------------------
ACCELERATED BUREAU OF COLLECTIONS OF MASSACHUSETTS, INC.
By: /s/ Travis L. Justus
--------------------
/s/ Travis L. Justus
--------------------
Travis L. Justus
TABLE OF SCHEDULES
1.1(b) Excluded Assets
1.1(c) Permitted Liens
2.5 Allocation of Consideration by Seller
3.4 Events Subsequent to December 31, 1996
3.5 Assets in Possession of Others
3.12(a) Real Property - Leased to Sellers
3.12(b) Personal Property - Leased to Sellers
3.13 Intellectual Property
3.16 Licenses and Permits
3.17 Contracts--Disclosure
3.20 Litigation and Arbitration
3.21 Directors, Officers, Employees and Consultants
3.23 Outside Financial Interests
3.25 Employee Benefit Plans and Employment Contracts
3.26 ERISA
3.32 Insurance Policies
3.34 Environmental Matters
SHARE PURCHASE AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OUTSOURCING SOLUTIONS INC.
SHERMAN ACQUISITION CORPORATION
AND
THE UNION CORPORATION
Dated as of December 22, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I--THE TENDER OFFER................................................................................ 2
SECTION 1.1. The Offer............................................................................ 2
SECTION 1.3. Composition of the Board of Directors................................................ 5
SECTION 1.4. Stock Options and Other Plans........................................................ 5
ARTICLE II--THE MERGER AND RELATED MATTERS................................................................. 6
SECTION 2.1. The Merger........................................................................... 6
SECTION 2.2. Conversion of Stock.................................................................. 7
SECTION 2.3. Dissenting Stock..................................................................... 7
SECTION 2.4. Surrender of Certificates............................................................ 8
SECTION 2.5. Payment.............................................................................. 9
SECTION 2.6. No Further Rights of Transfers....................................................... 10
SECTION 2.7. Certificate of Incorporation of the Surviving Corporation............................ 10
SECTION 2.9. Directors and Officers of the Surviving Corporation.................................. 10
SECTION 2.10. Closing.............................................................................. 11
SECTION 2.11. Proxy Statement, Schedule 14D-9 and Schedule 14D-1................................... 11
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE CORPORATION............................................. 12
SECTION 3.1. Corporate Existence and Power........................................................ 12
SECTION 3.2. Corporate Authorization.............................................................. 12
SECTION 3.3. Consents and Approvals; No Violations................................................ 13
SECTION 3.4. Compliance with Laws................................................................. 13
SECTION 3.5. Capitalization....................................................................... 14
SECTION 3.6. Subsidiaries......................................................................... 14
SECTION 3.7. SEC Filings.......................................................................... 15
SECTION 3.8. Financial Statements................................................................. 16
SECTION 3.9. No Undisclosed Liabilities........................................................... 16
SECTION 3.10. Absence of Certain Changes........................................................... 16
SECTION 3.11. Title to Properties; Encumbrances.................................................... 17
SECTION 3.12. Litigation........................................................................... 18
SECTION 3.13. Taxes................................................................................ 18
SECTION 3.14. Employee Benefit Plans............................................................... 20
SECTION 3.15. Brokers.............................................................................. 22
SECTION 3.16. Environmental Matters................................................................ 22
SECTION 3.17. Proprietary Rights................................................................... 24
SECTION 3.18. Material Contracts and Leases........................................................ 25
SECTION 3.19. Insurance............................................................................ 26
SECTION 3.20. Labor Relations...................................................................... 26
SECTION 3.21. Voting Requirements.................................................................. 27
SECTION 3.22. Rights Agreement..................................................................... 27
SECTION 3.23. Customers Relations.................................................................. 27
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............................................... 28
SECTION 4.1. Corporate Existence and Power........................................................ 28
SECTION 4.2. Corporate Authorization.............................................................. 28
SECTION 4.3. Consents and Approvals............................................................... 28
SECTION 4.4. No Violation......................................................................... 29
SECTION 4.5. Financial Statements................................................................. 29
SECTION 4.6. Financing............................................................................ 29
SECTION 4.7. Offer Documents; Other Information................................................... 30
SECTION 4.8. Litigation........................................................................... 30
ARTICLE V--CONDUCT OF BUSINESS BY THE CORPORATION PENDING THE
CLOSING....................................................................................... 30
SECTION 5.1. Regular Course of Business........................................................... 30
SECTION 5.2. Charter Documents and Capital Changes................................................ 32
SECTION 5.3. Organization and Good Will........................................................... 33
SECTION 5.4. Insurance............................................................................ 33
SECTION 5.5. Compliance With Laws................................................................. 33
SECTION 5.6. SEC Reports.......................................................................... 33
SECTION 5.7. Proxy Statement...................................................................... 33
SECTION 5.8. Shareholder Approval................................................................. 33
SECTION 5.9. No Solicitation of Other Offers...................................................... 34
SECTION 5.10. Notification of Certain Matters...................................................... 36
SECTION 5.11. Rights Agreement..................................................................... 36
SECTION 5.12. Properties; Material Contracts....................................................... 37
SECTION 5.13. Dividends, Etc....................................................................... 37
SECTION 5.14. Full Access.......................................................................... 37
ARTICLE VI--COVENANTS OF PARTIES........................................................................... 38
SECTION 6.1. Confidentiality...................................................................... 38
SECTION 6.2. Cooperation.......................................................................... 39
SECTION 6.3. Filings; Consents; Removal of Objections............................................. 40
SECTION 6.4. Public Announcements................................................................. 40
SECTION 6.5. Employee Benefits.................................................................... 40
SECTION 6.6. Indemnification and Insurance........................................................ 41
SECTION 6.7. Resignation of Directors............................................................. 42
SECTION 6.8. Confidentiality Agreement............................................................ 42
SECTION 6.9. Certain Actions of Parent and Sub.................................................... 42
ARTICLE VII--CONDITIONS TO CONSUMMATION OF THE MERGER...................................................... 43
SECTION 7.1. Conditions Precedent to Obligations of Parent, Sub and the Corporation............... 43
ARTICLE VIII--TERMINATION AND ABANDONMENT.................................................................. 44
SECTION 8.1. Termination.......................................................................... 44
SECTION 8.2. Effect of Termination................................................................ 45
ARTICLE IX--MISCELLANEOUS.................................................................................. 46
SECTION 9.1. Fees and Expenses.................................................................... 46
SECTION 9.2. Notices.............................................................................. 47
SECTION 9.3. Termination of Representations and Warranties........................................ 48
SECTION 9.4. Amendments........................................................................... 48
SECTION 9.5. Waivers.............................................................................. 48
SECTION 9.6. Successors and Assigns............................................................... 48
SECTION 9.7. Governing Law and Forum.............................................................. 49
SECTION 9.8. Counterparts; Effectiveness.......................................................... 49
SECTION 9.9. Entire Agreement; Schedules and Exhibits............................................. 49
SECTION 9.10. Headings and Table of Contents....................................................... 49
ARTICLE X--DEFINITIONS..................................................................................... 50
ANNEX I to Share Purchase Agreement and Plan of Merger
Conditions to the Share Purchase......................................................................... A-I
</TABLE>
SHARE PURCHASE AGREEMENT AND PLAN OF MERGER
This Share Purchase Agreement and Plan of Merger (this "Agreement") dated as
of December 22, 1997 is made by and among Outsourcing Solutions, Inc., a
Delaware corporation ("Parent"), Sherman Acquisition Corporation, a Delaware
corporation and a direct wholly-owned subsidiary of Parent ("Sub"), and The
Union Corporation, a Delaware corporation (the "Corporation"). Capitalized terms
used herein and not otherwise defined in the Preamble or in Articles I through
IX of this Agreement shall have the respective meanings ascribed to such terms
in Article X hereto.
PREAMBLE
WHEREAS, the Boards of Directors of Parent, Sub and the Corporation have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire up to all of the issued and outstanding
Common Stock, par value $.50 per share, of the Corporation (the "Corporation
Stock") (all issued and outstanding shares of Corporation Stock being
hereinafter collectively referred to as the "Shares") upon the terms and subject
to the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Sub shall make a cash
tender offer (the "Offer") to acquire all of the issued and outstanding Shares
for $31.50 per share (such amount, or any greater amount per Share paid pursuant
to the Offer, being hereinafter referred to as the "Per Share Amount"), net to
the seller in cash, in accordance with the terms provided herein and in the
Offer; and
WHEREAS, to complete such acquisition, the respective Boards of Directors of
Parent, Sub and the Corporation have approved the merger of Sub with and into
the Corporation (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement; and h) 0*0*0*-Registered Trademark- -Registered
Trademark- Section(5) WHEREAS, the Directors of the Corporation have unanimously
determined that each of the Offer and the Merger are fair to, and in the best
interests of, the holders of Common Stock, approved the Offer and the Merger and
recommended the acceptance of the Offer and approval and adoption of this
Agreement by the shareholders of the Corporation; and
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties herein set forth, and the mode of carrying the same into effect,
the parties hereto hereby agree as follows:
ARTICLE I--THE TENDER OFFER
SECTION 1.1. THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with Article VIII hereof and so long as none of
the events set forth in Annex I hereto (the "Tender Offer Conditions") shall
have occurred and be continuing and shall not have been waived by Parent, Parent
shall cause Sub to commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder) the Offer for all issued and outstanding Shares as
promptly as reasonably practicable after the date hereof, but in no event later
than five (5) business days after the date of this Agreement. The Offer shall
remain open for a period of not less than twenty (20) business days. The
obligation of Sub to accept for payment Shares tendered pursuant to the Offer
shall be subject to the satisfaction of the Tender Offer Conditions. Parent and
Sub expressly reserve the right to waive any such condition, to increase the Per
Share Amount payable in the Offer, and to make any other change in the terms and
conditions of the Offer; provided, however, that, without the written consent of
the Corporation, no change may be made which (A) decreases the Per Share Amount
payable in the Offer, (B) reduces the number of Shares to be purchased in the
Offer, (C) imposes conditions to the Offer in addition to the Tender Offer
Conditions, (D) amends or changes the terms and conditions of the Offer in any
manner materially adverse to the holders of Shares (other than Parent and Sub
and its subsidiaries), (E) changes the consideration payable in the Offer to
anything other than all cash, (F) reduces the time period during which the Offer
shall remain open or (G) except as provided in the next sentence, extends the
time period during which the Offer shall remain open. Notwithstanding the
foregoing, Parent and Sub may, without the consent of the Corporation, (i)
extend the Offer beyond the scheduled expiration date and any subsequent
scheduled expiration date (but not beyond the date referred to in Section 8.1(c)
hereof), if at such date any of the Tender Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
and (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC (but not beyond the date referred to in
Section 8.1(c) hereof). The Per Share Amount shall be net to the seller in cash,
upon the terms and subject to the Tender Offer Conditions. Following the
satisfaction or waiver of the Tender Offer Conditions, Sub shall accept for
payment and pay for (hereinafter referred to as the "Share Purchase"), in
accordance with the terms of the Offer, all Shares validly tendered pursuant to
the Offer and not withdrawn, as soon as it is permitted to do so pursuant to the
Exchange Act or other applicable law or regulation, whichever is later.
(b) As soon as practicable on the date of the commencement of the Offer,
Parent and Sub shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with
all amendments and supplements thereto, the "Schedule 14D-1") with respect to
the Offer. The Schedule 14D-1 will contain an offer to purchase (the "Offer to
Purchase") and form of the related letter of transmittal and any summary
advertisement (which Schedule 14D-1, Offer to Purchase and other documents,
together with any supplements or amendments thereto, are referred to herein
collectively as the "Offer Documents"). The Corporation and its counsel shall be
given the opportunity to review and comment upon the Offer Documents prior to
their filing with the SEC. Parent, Sub and the Corporation agree promptly to
correct any information provided by any of them for use in the Offer Documents
that shall have become false or misleading in any material respect, and Parent
and Sub further agree to take all steps necessary to cause the Schedule 14D-1 as
so corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Parent and Sub each agree
to provide the Corporation and its counsel with any comments either of them, or
their counsel, may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments and shall provide the
Corporation and its counsel an opportunity to participate, including by way of
discussions with the SEC or its staff, in their response to such comments.
SECTION 1.2. CORPORATE ACTION,CFN. (a) The Corporation hereby approves of
and consents to the Offer and the Merger and represents that (i) its Board of
Directors, at a meeting duly called, has unanimously (A) determined that this
Agreement and the transactions contemplated hereby are fair to and in the best
interests of the holders of Shares, (B) approved and adopted this Agreement and
the transactions contemplated hereby and recommends that the stockholders of the
Corporation accept the Offer, and (C) taken all other applicable action
necessary to render, so long as this Agreement remains in effect, (x) Section
203 of the General Corporation Law of the State of Delaware (the "DGCL") and
other state takeover statutes; (y) Article FIFTH of the Corporation's
Certificate of Incorporation (except for the requirement that the Merger be
approved by the holders of not less than two-thirds of the outstanding Shares),
and (z) the Rights Agreement dated as of March 14, 1988, as amended (the "Rights
Agreement"), inapplicable to the Offer and the Merger; and (ii) CIBC Oppenheimer
Corp. has delivered to the Board of Directors of the Corporation its written
opinion that the consideration to be received by the holders of Shares pursuant
to the Offer and the Merger is fair to the holders of Shares from a financial
point of view and Corporation has delivered to Parent a copy of said opinion.
(b) The Corporation shall file with the SEC as soon as practicable on the
date of the commencement of the Offer a Solicitation/Recommendation Statement on
schedule 14D-9 (together with all amendments and supplements thereto, the
"Schedule 14D-9") containing, subject to the terms of this Agreement, the
recommendation of the Corporation's Board of Directors described in Section
1.2(a) and shall disseminate the Schedule 14D-9 as required by Rule 14d-9
promulgated under the Exchange Act. Parent and Sub and their counsel shall be
given the opportunity to review and comment upon the Schedule 14D-9 prior to its
filing with the SEC. The Corporation, Parent and Sub each agree promptly to
correct any information provided by any of them for use in the Schedule 14D-9
that shall have become false or misleading in any material respect, and the
Corporation further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. The Corporation agrees to provide Parent and its counsel with
any comments the Corporation or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments and shall provide Parent and its counsel an opportunity to participate,
including by way of discussions with the SEC or its staff, in the response of
the Corporation to such comments.
(c) The Corporation has furnished Parent with mailing labels and a list
containing the names and addresses of all record holders of Shares and will,
upon request, furnish Parent with all other available listings or computer files
containing names, addresses and security position listings of any record holders
or beneficial owners of Shares, each as of a recent date. The Corporation shall
furnish Parent with such additional information, including updated lists and
files of stockholders and security position listings, and such other related
assistance Parent or its agents may reasonably request to carry out the
transactions contemplated hereby. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Share Purchase, Parent shall
hold in confidence the information contained in any of such lists and files,
shall use such information only in connection with the Offer (and the Merger)
and, if this Agreement shall be terminated, shall deliver to the Corporation all
copies of such information then in its possession. The Corporation has been
advised that each of its directors and the executive officers intends to tender
pursuant to the Offer all shares of Common Stock owned of record and
beneficially by him or her.
SECTION 1.3. COMPOSITION OF THE BOARD OF DIRECTORS. Promptly upon the Share
Purchase, Sub shall be entitled to designate such number of directors on the
Board of Directors of the Corporation, rounded up to the next whole number, as
will give Sub, subject to compliance with Section 14(f) of the Exchange Act,
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock so accepted for payment and paid for or otherwise acquired or
owned by Sub or Parent and the denominator of which shall be the number of
shares of Common Stock then outstanding, and the Corporation and its Board of
Directors shall, at such time, take any and all such action needed to cause
Sub's designees to be appointed to the Corporation's Board of Directors
(including to cause directors to resign). Promptly upon the Share Purchase,
Corporation and its Board of Directors shall take such further action as may be
requested by Sub to cause Sub's designees to constitute at least a majority of
the Board of Directors of each direct or indirect Subsidiary of the Corporation
(other than Allied Bond & Collection Agency, Inc.). Subject to applicable law,
the Corporation shall take all action requested by Parent which is reasonably
necessary to effect any such election, including mailing to its shareholders an
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Corporation
agrees to make such mailing with the mailing of the Schedule 14D-9 so long as
Sub shall have provided to the Corporation on a timely basis all information
required to be included in such Information Statement with respect to Sub's
designees. In furtherance thereof, the Corporation will increase the size of the
Corporation's Board of Directors, or use its reasonable efforts to secure the
resignation of directors, or both, as is necessary to permit Sub's designees to
be elected to the Corporation's Board of Directors. Upon the Share Purchase (as
defined in Section 1.1 hereof) all directors of the Corporation, other than
Sub's designees and two directors of Corporation, and, unless otherwise agreed,
all officers of the Corporation shall resign.
SECTION 1.4. STOCK OPTIONS AND OTHER PLANS. (a) As soon as practicable
following the date hereof, the Board of Directors of the Corporation shall adopt
appropriate resolutions and cause the Corporation to take all actions necessary
to obtain the consent of each holder of an outstanding option to purchase Shares
("Options") to the effect that, upon the Share Purchase, each Option, whether or
not then vested or exercisable, shall no longer be exercisable for the purchase
of Shares but shall entitle each holder thereof, in cancellation and settlement
therefor, to a payment in cash (subject to any applicable withholding taxes, the
"Cash Payment"), equal to the product of (x) the total number of shares of
Common Stock subject to such Option as to which such Option could have been
exercised and (y) the excess of the Per Share Amount over the exercise price per
share of Common Stock subject to such Option, each such Cash Payment to be paid
to each holder (or, without duplication, the beneficial owner) of an outstanding
Option on the date of the Share Purchase; and
(b) All stock option plans of the Corporation ("Stock Plans") shall
terminate as of the Effective Time and the provisions in any other Employee
Benefit Plan providing for the issuance, transfer or grant of any capital stock
of the Corporation or any interest in respect of any capital stock of the
Corporation shall be deleted as of the Effective Time, and the Corporation shall
ensure that following the Effective Time no holder of an Option or any
participant in any Stock Plan shall have any right thereunder to acquire any
capital stock of the Corporation, Parent or the Surviving Corporation. The
Corporation will ensure that neither the Corporation nor any of its Subsidiaries
is or will be bound by any Options, other options, warrants, rights or
agreements which would entitle any Person, other than Parent or its affiliates,
to own any capital stock of the Surviving Corporation or any of its Subsidiaries
or to receive any payment in respect thereof. Notwithstanding the foregoing, the
holders of Options who did not receive the Cash Payment on the date of the Share
Purchase shall thereafter be entitled to receive the Cash Payment in
cancellation and settlement of such Options as provided in the preceding
paragraph (a).
ARTICLE II--THE MERGER AND RELATED MATTERS
SECTION 2.1. THE MERGER. (a) Subject to the terms and conditions of this
Agreement, at the time of the Closing (as defined in Section 2.11 hereof), a
certificate of merger (the "Certificate of Merger") shall be duly prepared,
executed and acknowledged by Sub and the Corporation in accordance with the DGCL
and shall be filed on the Closing Date (as defined in Section 2.11 hereof). The
Merger shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with the
provisions and requirements of the DGCL. The date and time when the Merger shall
become effective is hereinafter referred to as the "Effective Time".
(b) At the Effective Time, Sub shall be merged with and into the Corporation
and the separate corporate existence of Sub shall cease, and the Corporation
shall continue as the surviving corporation under the laws of the State of
Delaware under the name of "The Union Corporation" (the "Surviving
Corporation").
(c) From and after the Effective Time, the Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 2.2. CONVERSION OF STOCK. At the Effective Time:
(a) Each share of Common Stock then issued and outstanding other than (i)
any shares of Common Stock which are held by any Subsidiary of the Corporation
or in the treasury of the Corporation, or which are held, directly or
indirectly, by Parent or any direct or indirect subsidiary of Parent (including
Sub), all of which shall be cancelled and none of which shall receive any
payment with respect thereto and (ii) shares of Common Stock held by Dissenting
Shareholders (as defined in Section 2.3 hereof) shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into and
represent the right to receive an amount in cash, without interest, equal to the
Per Share Amount (the "Merger Consideration"); and
(b) Each share of common stock, par value $0.01 per share, of Sub then
issued and outstanding shall, by virtue of the Merger and without any action on
the part of the holder thereof, become one fully paid and nonassessable share of
common stock, $0.50 par value, of the Surviving Corporation.
SECTION 2.3. DISSENTING STOCK. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by DGCL, shares of Common Stock
that are issued and outstanding immediately prior to the Effective Time and are
held by holders of Common Stock who comply with all the provisions of Delaware
law concerning the right of holders of Common Stock to dissent from the Merger
and require appraisal of their shares of Common Stock ("Dissenting
Shareholders") shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due such Dissenting Shareholder pursuant to the laws of the
State of Delaware; PROVIDED, HOWEVER, that (i) if any Dissenting Shareholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, then such Dissenting
Shareholder or Shareholders, as the case may be, shall forfeit the right to
appraisal of such shares and such shares shall thereupon be deemed to have been
converted into the right to receive, as of the Effective Time, the Merger
Consideration, without interest. The Corporation shall give Parent and Sub (A)
prompt notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other related instruments received by the Corporation, and (B)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal. The Corporation will not voluntarily make any payment
with respect to any demands for appraisal and will not, except with the prior
written consent of Parent, settle or offer to settle any demand.
SECTION 2.4. SURRENDER OF CERTIFICATES. (a) Concurrently with or prior to
the Effective Time, Parent shall designate a bank or trust company located in
the United States to act as paying agent (the "Paying Agent") for purposes of
making the cash payments contemplated hereby. As soon as practicable after the
Effective Time, Parent shall cause the Paying Agent to mail and/or make
available to each holder of a certificate theretofore evidencing shares of
Common Stock (other than those which were held by any Subsidiary of the
Corporation or in the treasury of the Corporation or which are held directly or
indirectly by Parent or any direct or indirect subsidiary of Parent (including
Sub)) a notice and letter of transmittal advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Paying
Agent such certificate or certificates which immediately prior to the Effective
Time represented outstanding Common Stock (the "Certificates") in exchange for
the Merger Consideration deliverable in respect thereof pursuant to this Article
II. Upon the surrender for cancellation to the Paying Agent of such
Certificates, together with a letter of transmittal, duly executed and completed
in accordance with the instructions thereon, and any other items specified by
the letter of transmittal, the Paying Agent shall promptly pay to the Person
entitled thereto the Merger Consideration deliverable in respect thereto. Until
so surrendered, each Certificate shall be deemed, for all corporate purposes, to
evidence only the right to receive upon such surrender the Merger Consideration
deliverable in respect thereof to which such Person is entitled pursuant to this
Article II. No interest shall be paid or accrued in respect of such cash
payments.
(b) If the Merger Consideration (or any portion thereof) is to be delivered
to a Person other than the Person in whose name the Certificate surrendered in
exchange therefor are registered, it shall be a condition to the payment of the
Merger Consideration that the Certificates so surrendered shall be properly
endorsed or accompanied by appropriate stock powers and otherwise in proper form
for transfer, that such transfer otherwise be proper and that the Person
requesting such transfer pay to the Paying Agent any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of the
Paying Agent that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with this Article II,
provided that, the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, give the Surviving Corporation a
bond in such sum as it may direct or otherwise indemnify the Surviving
Corporation in a manner satisfactory to it against any claim that may be made
against the Surviving Corporation with respect to the Certificate claimed to
have been lost, stolen or destroyed.
SECTION 2.5. PAYMENT. Concurrently with or immediately prior to the
Effective Time, Parent or Sub shall deposit in trust with the Paying Agent cash
in United States dollars in an aggregate amount equal to the product of (i) the
number of shares of Common Stock outstanding immediately prior to the Effective
Time (other than shares of Common Stock which are held by any Subsidiary of the
Corporation or in the treasury of the Corporation or which are held directly or
indirectly by Parent or any direct or indirect subsidiary of Parent (including
Sub) or a Person known at the time of such deposit to be a Dissenting
Shareholder) and (ii) the Merger Consideration (such amount being hereinafter
referred to as the "Payment Fund"). The Payment Fund shall be invested by the
Paying Agent as directed by Parent only in direct obligations of the United
States, obligations for which the full faith and credit of the United States is
pledged to provide for the payment of principal and interest, commercial paper
rated of the highest quality by Moody's Investors Services, Inc. or Standard &
Poor's Ratings Group or certificates of deposit, bank repurchase agreements or
bankers' acceptances of a commercial bank having at least $100,000,000 in assets
(collectively, "Permitted Investments") or in money market funds which are
invested in Permitted Investments, and any net earnings with respect thereto
shall be paid to Parent as and when requested by Parent. The Paying Agent shall,
pursuant to irrevocable instructions, make the payments referred to in Section
2.2(a) hereof out of the Payment Fund. The Payment Fund shall not be used for
any other purpose except as otherwise agreed to by Parent. Promptly following
the date which is three months after the Effective Time, the Paying Agent shall
return to Parent all cash, certificates and other instruments in its possession
that constitute any portion of the Payment Fund (other than net earnings on the
Payment Fund which shall be paid to Parent), and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Merger
Consideration, without interest, but shall have no greater rights against the
Surviving Corporation or Parent than may be accorded to general creditors of the
Surviving Corporation or Parent under applicable law. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to a
holder of shares of Common Stock for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property, escheat and similar
laws.
SECTION 2.6. NO FURTHER RIGHTS OF TRANSFERS. At and after the Effective
Time, each holder of a Certificate shall cease to have any rights as a
shareholder of the Corporation, except for, in the case of a holder of a
Certificate (other than shares to be cancelled pursuant to Section 2.2(a) hereof
and other than shares held by Dissenting Shareholders), the right to surrender
his or her Certificate in exchange for payment of the Merger Consideration or,
in the case of a Dissenting Shareholder, to perfect his or her right to receive
payment for his or her shares pursuant to Delaware law if such holder has
validly perfected and not withdrawn his or her right to receive payment for his
or her shares, and no transfer of shares of Common Stock shall be made on the
stock transfer books of the Surviving Corporation. Certificates presented to the
Surviving Corporation after the Effective Time shall be cancelled and exchanged
for cash as provided in this Article II. At the close of business on the day of
the Effective Time the stock ledger of the Corporation with respect to Common
Stock shall be closed.
SECTION 2.7. CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
Certificate of Incorporation of the Corporation, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation and shall be amended such that it is substantially in the
form of the Amended and Restated Certificate of Incorporation attached hereto as
Exhibit 2.7.
SECTION 2.8. BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of Sub, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation.
SECTION 2.9. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
shareholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified. At the Effective
Time, the officers of the Corporation immediately prior to the Effective Time
shall, subject to the applicable provisions of the Certificate of Incorporation
and By-Laws of the Surviving Corporation, be the officers of the Surviving
Corporation until their respective successors shall be duly elected or appointed
and qualified.
SECTION 2.10. CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of White & Case, 1155 Avenue of the Americas, New York, New
York, as soon as practicable after the last of the conditions set forth in
Article VII hereof is fulfilled or waived (subject to applicable law) but in no
event later than the fifth business day thereafter, or at such other time and
place and on such other date as Parent and the Corporation shall mutually agree
(the "Closing Date").
SECTION 2.11. PROXY STATEMENT, SCHEDULE 14D-9 AND SCHEDULE 14D-1. The
definitive proxy statement and related materials, if required, to be furnished
to the holders of Common Stock in connection with the Merger pursuant to Section
5.7 hereof (the "Proxy Statement") will comply in all material respects with the
Exchange Act and the rules and regulations thereunder and any other applicable
laws. If at any time prior to the Effective Time any event occurs which should
be described in an amendment or supplement to the Proxy Statement, the
Corporation will file and disseminate, as required, an amendment or supplement
which complies in all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. None of the information
supplied by the Corporation for inclusion or incorporation by reference in (i)
the Offer Documents or (ii) the Proxy Statement, will, in the case of the Offer
Documents, at the respective times the Offer Documents are filed with the SEC,
or, in the case of the Proxy Statement, at the date such information is supplied
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made,
in light of the circumstance under which they are made, not misleading. None of
the information in the Schedule 14D-9, at the respective times the Schedule
14D-9 is filed with the SEC, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made by
Corporation with respect to any information with respect to Parent, Sub or their
officers, directors or affiliates provided to the Corporation by Parent or Sub
in writing for inclusion in the Schedule 14D-9. The Schedule 14D-9 will comply
in all material respects with the Exchange Act and the rules and regulations
thereunder and any other applicable laws. If at any time prior to the expiration
or termination of the Offer any event occurs which should be described in an
amendment or supplement to the Schedule 14D-9 or any amendment or supplement
thereto, the Corporation will file and disseminate, as required, an amendment or
supplement which complies in all material respects with the Exchange Act the
rules and regulations thereunder and any other applicable laws. Prior to its
filing with the SEC, the amendment or supplement shall be delivered to Parent
and Sub and their counsel.
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Parent and Sub that:
SECTION 3.1. CORPORATE EXISTENCE AND POWER. The Corporation is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power, authority and legal right to
conduct its business as it is now being conducted and to own the properties and
assets it now owns. Except as shown in Paragraph 3.1 of the Disclosure Letter
("DL") heretofore prepared by the Corporation and delivered to Parent, foreign
corporation and is in good standing in every jurisdiction, both domestic and
foreign, where the character of the property owned or leased by it or the nature
of its activities makes such qualification necessary, except where the continued
failure to be so qualified or licensed is not reasonably likely to have a
Material Adverse Effect on the Corporation. The Corporation has previously
delivered to Purchaser true and correct copies of the Corporation's Certificate
of Incorporation and By-Laws, as currently in effect.
SECTION 3.2. CORPORATE AUTHORIZATION. The Corporation has full corporate
power and authority to enter into this Agreement and, subject to obtaining the
necessary approval of the Merger by its stockholders, to carry out the
transactions contemplated hereby. The Board of Directors of the Corporation has
taken all actions required by applicable law and its Certificate of
Incorporation and By-Laws to authorize the execution and delivery by the
Corporation of this Agreement and, subject to obtaining the approval of the
Merger by the holders of not less than two-thirds of the outstanding shares, the
performance by the Corporation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Corporation
and no other corporate action is necessary in connection therewith (other than
the approval of the Merger by the holders of a two- thirds of the outstanding
shares of Common Stock entitled to vote), and this Agreement (assuming the due
authorization, execution and delivery hereof by Parent and Sub) is a legal,
valid and binding obligation of the Corporation enforceable against it in
accordance with its terms, except to the extent that enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in equity or at law).
SECTION 3.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming (i) the filings
required under the HSR Act are made and the waiting period thereunder has been
terminated or has expired, (ii) the requirements of the Exchange Act relating to
the Proxy Statement (if required) and the Offer are met, (iii) the filing of the
Certificate of Merger and other appropriate merger documents, if any, as
required by DGCL are made and (iv) approval of the Merger by holders two-thirds
of the outstanding shares of Common Stock entitled to vote, if required by the
DGCL, is received, the execution and delivery of this Agreement by the
Corporation and the consummation by the Corporation of the transactions
contemplated hereby will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of the Corporation or the comparable governing
documents of any of its Subsidiaries, in each case, as amended; (2) violate any
statue, ordinance, rule, regulation, order or decree of any court or of any
governmental or regulatory body, agency or authority applicable to the
Corporation or any of its Subsidiaries or by which any of their respective
properties or assets may be bound; (3) except as set forth in DL 3.3, require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority; or (4) except as
set forth in DL 3.3, result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, payment or acceleration)
under, or result in the creation of any mortgage, pledge, lien, security
interest, encumbrance or charge of any kind (each an "Encumbrance") upon any of
the properties or assets of the Corporation or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
other instrument or obligation to which the Corporation or any of its
Subsidiaries is a party, or by which it or any of their respective properties or
assets are bound or subject, except for in the case of clauses (3) and (4) above
for any such filing, permit, consent, approval, violation, breach or Encumbrance
which would not reasonably be expected to (a) have a Material Adverse Effect on
the Corporation and its Subsidiaries, taken as a whole, or (b) prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
SECTION 3.4. COMPLIANCE WITH LAWS. Subject to Section 3.16 and except as set
forth in DL 3.4, the Corporation and its Subsidiaries are in compliance with all
applicable laws, regulations, orders, judgements and decrees (including, but not
limited to, the Fair Debt Collection Practices Act and any state or local
counterpart or equivalent) except where the failure to so comply would not be
reasonably likely to (i) have a Material Adverse Effect on the Corporation and
its Subsidiaries taken as a whole or (ii) prevent or materially delay
consummation of the transactions contemplated by this Agreement.
SECTION 3.5. CAPITALIZATION. The authorized capital stock of the Corporation
consists of 15,000,000 shares of common stock, par value $.50 per share, and
500,000 shares of preferred stock, par value $.50 per share. As of December 22,
1997, there were issued and outstanding 5,802,641 shares of such common stock
(not including 2,944,837 shares held in the Corporation's treasury), all of
which are of one class, and no shares of such preferred stock. All issued and
outstanding shares of Corporation Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are not subject to, nor were
they issued in violation of, any preemptive rights. As of December 22, 1997,
728,548 shares of Corporation Stock were issuable upon exercise of Options to
purchase such stock, which Options were issued pursuant to the Stock Plans (as
defined in Section 1.4), which plans are listed in DL 3.5(i). Except as set
forth in this Section, in DL 3.5(i) or in the Rights Agreement, as of the date
hereof there are no, and at the Effective Time there will be no, (i) other
outstanding shares of, (ii) securities of the Corporation convertible into or
exchangeable for, (iii) options or other rights (including any pre-emptive
rights) to acquire from the Corporation, or (iv) other contracts,
understandings, arrangements or obligations (whether or not contingent)
providing for the issuance or sale by the Corporation, directly or indirectly,
of, any capital stock or other equity or debt security of the Corporation. As of
the date hereof, except as set forth in DL 3.5(i) or in connection with the
exercise of any Options, there are no, and at the Effective Time there will be
no, outstanding contractual obligations of the Corporation to repurchase, redeem
or otherwise acquire any outstanding shares of Corporation Stock or other
securities issued by the Corporation.
SECTION 3.6. SUBSIDIARIES. Attached hereto as DL 3.6 is a true and complete
list of each subsidiary of the Corporation (the "Subsidiaries"), and except as
set forth on DL 3.6, each of the Subsidiaries is duly incorporated and validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now conducted and to own the properties and assets it now owns. Except
as set forth in DL 3.6, each of the Subsidiaries is duly qualified or licensed
to do business as a foreign corporation and is in good standing in every
jurisdiction, both domestic and foreign, where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or licensed is not
reasonably likely to have a Material Adverse Effect on the Corporation and its
Subsidiaries, taken as a whole. All Subsidiaries are wholly owned, directly or
indirectly, by the Corporation. Except for the Subsidiaries or as set forth in
DL 3.6, the Corporation does not own, directly or indirectly, securities or
other ownership interests in any other entity and except as set forth in DL 3.6,
neither the Corporation nor any of its Subsidiaries is subject to any obligation
or requirement to provide funds for or to make any investment (in the form of a
loan, capital contribution or otherwise) to or in any entity other than a
Subsidiary. All of the shares of capital stock of the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable, are not
subject to, nor were they issued in violation of, any preemptive rights, and are
owned, directly or indirectly, by the Corporation free and clear of all
Encumbrances, options or claims whatsoever. No shares of capital stock of any of
the Subsidiaries are reserved for issuance and there are no outstanding or
authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, rights of redemption, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to the
capital stock of any Subsidiary, pursuant to which such Subsidiary is or may
become obligated to issue any shares of capital stock of such Subsidiary or any
securities convertible into, exchangeable for, or evidenced in the right to
subscribe for, any shares of such Subsidiary. Except as set forth in DL 3.6(ii),
there are no restrictions of any kind which prevent the payment of dividends by
any of the Subsidiaries.
SECTION 3.7. SEC FILINGS. (a) The Corporation has previously delivered to
Parent a true, correct and complete copy of the Corporation's Annual Reports on
Form 10-K for the years ended June 30, 1996 and June 30, 1997 (the "Corporation
10-Ks"), the Corporation's proxy statement relating to its annual meeting of
stockholders to be held on November 19, 1997, all other reports or registration
statements filed by the Corporation with the SEC since June 30, 1996, and all
amendments and supplements to the foregoing (the "Corporation Filings"). Each of
the Corporation Filings has been timely filed, subject to any allowable
extensions, and was prepared in all material respects in accordance with the
requirements of the Securities Act or a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Corporation Filings constitute all of the documents required to
be filed by the Corporation with the SEC since June 30, 1996.
(b) None of the information supplied to Parent by the Corporation for
inclusion in the Offer Documents will, at the respective times such Offer
Documents or any amendments or supplements thereto are filed with the SEC or are
first published, sent or given to stockholders, as the case may be, contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 3.8. FINANCIAL STATEMENTS. The financial statements (including the
notes thereto) (the "Corporation Financial Statements") of the Corporation and
its Subsidiaries included in the Corporation Filings fairly present, in all
material respects, the consolidated financial position of the Corporation and
its Subsidiaries as of the respective dates thereof and the consolidated results
of its operations, cash flows and stockholders' equity for the respective
periods then ended, all in conformity with generally accepted accounting
principles applied on a consistent basis ("GAAP"), except as indicated in the
notes thereto.
SECTION 3.9. NO UNDISCLOSED LIABILITIES. Except as set forth in DL 3.9 (the
"Corporation Disclosed Liabilities"), the Corporation has no liabilities, claims
or other obligations (absolute, accrued, or contingent) (herein referred to as
the "Corporation Liabilities") except (a) Corporation Liabilities which are
accrued or otherwise reflected on the Corporation Financial Statements or
disclosed in the notes thereto, (b) Corporation Liabilities incurred in the
ordinary course of business since June 30, 1997 (the "Balance Sheet Date"), (c)
Corporation Liabilities which are otherwise disclosed in the Corporation
Filings, (d) Corporation Liabilities otherwise permitted by this Agreement, and
(e) Corporation Liabilities which would not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Except as set forth in DL 3.10,
since the Balance Sheet Date, neither the Corporation nor any of the
Subsidiaries has:
(a) suffered any Material Adverse Effect;
(b) except for transactions contemplated by this Agreement, made any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock, except dividends from Subsidiaries to Corporation;
(c) made any change in accounting principles except for the adoption of such
accounting principles which have, pursuant to the rules of the Financial
Accounting Standards Board or the SEC, become effective for the Corporation's
fiscal year ending June 30, 1998;
(d) granted any general increase in the compensation of its directors,
officers or employees or any increase in compensation payable to or to be
payable to any such director, officer, or employee, except for increases in the
ordinary course of business and consistent with past practice or as previously
disclosed to Parent;
(e) made any capital expenditures (other than (i) capital expenditures in
the ordinary course of business and consistent with past practice, (ii) as
provided in Section 5.1(b)(iii), and (iii) as otherwise provided in any Material
Contracts listed in DL 3.18);
(f) incurred any material increase in net borrowings outstanding under the
Amended and Restated Credit Agreement by and between the Corporation and The
First National Bank of Boston (now, Bank of Boston Connecticut) dated as of
December 31, 1994, as amended by the Amendment dated October 23, 1996 (the
"Credit Agreement") or incurred any other indebtedness (except in each case in
the ordinary course of business);
(g) taken any action referred to in Sections 5.1, 5.2 and 5.13, except as
permitted thereby; or
(h) agreed, whether in writing or otherwise, to take any action described in
this Section, except as otherwise contemplated herein.
SECTION 3.11. TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth in DL
3.11:
(a) the Corporation and each of the Subsidiaries have good and marketable
title to their respective material properties and assets reflected on the
Corporation's balance sheet included in the Corporation's Form 10-K, for the
fiscal year ending June 30, 1997 (the "1997 10-K"), except for (i) assets
related to capitalized leases and (ii) properties and assets sold or disposed of
since the Balance Sheet Date in the ordinary course of business;
(b) none of the properties or assets of the Corporation or any of the
Subsidiaries is subject to any mortgage, pledge, lien, security interest,
encumbrance or charge of any kind (collectively referred to herein as "Liens")
except the following (herein called "Permitted Liens"): (i) Liens reflected on
the Corporation Financial Statements (including the notes thereto), (ii) public
or statutory Liens or liens of lessors, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the ordinary
course of business, (iii) Liens incurred or deposits made in connection with
workers' compensation, unemployment insurance and other types of social security
benefits, (iv) Liens which individually or in the aggregate do not materially
detract from the value, use or enjoyment of such properties or assets or
otherwise would have a Material Adverse Effect on the business operations of the
Corporation and the Subsidiaries, taken as a whole; and (v) Liens with respect
to taxes, assessments and charges not yet due or the validity of which are being
contested in good faith by appropriate actions.
SECTION 3.12. LITIGATION. Subject to Section 3.16 and except as set forth in
DL 3.12 or as disclosed in the Corporation Filings, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of the Corporation,
threatened against the Corporation or any of the Subsidiaries before any court
or arbitrator or any governmental body, agency or official which (i) are
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on the Corporation and the Subsidiaries, taken as a whole, (ii) question
or challenge the validity of this Agreement or the transactions contemplated
hereby, or (iii) would be reasonably likely to prevent or materially delay
consummation of the transactions contemplated hereby.
SECTION 3.13. TAXES. Except as set forth in DL 3.13 or where such failure to
duly file or pay would not be reasonably likely to have a Material Adverse
Effect on the Corporation and its Subsidiaries, taken as a whole:
(i) TAX RETURNS. The Corporation and each of its Subsidiaries has timely
filed or caused to be timely filed with the appropriate taxing authorities all
Federal and other returns, statements, forms and reports for Taxes (as
hereinafter defined) ("Returns") that are required to be filed by, or with
respect to, the Corporation and such Subsidiaries. The Returns reflect
accurately all liability for Taxes of the Corporation and such Subsidiaries for
the periods covered thereby. "Taxes" means all taxes, assessments, charges,
duties, fees, levies or other governmental charges, including, without
limitation, all Federal, state, local, foreign, and other income, franchise,
profits, capital gains, capital stock, transfer, sales, use, occupation,
property, excise, severance, windfall profits, stamp, license, payroll,
withholding and other taxes, assessments, charges, duties, fees, levies or other
governmental charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a Return), all estimated
taxes, deficiency assessments, additions to tax, penalties and interest and
shall include any liability for such amounts as a result either of being a
member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person or other entity;
(ii) PAYMENT OF TAXES. All Taxes and Tax liabilities of the Corporation and
its Subsidiaries have been timely paid or adequately disclosed and fully
provided for as a liability on the consolidated financial statements of the
Corporation and its Subsidiaries in accordance with GAAP; and
(iii) OTHER TAX MATTERS. (A) DL 3.13(iii)(A) sets forth (1) each taxable
year or other taxable period of the Corporation or any of its Subsidiaries for
which an audit or other examination of Taxes by the appropriate tax authorities
of any nation, state or locality is currently in progress (or, to the knowledge
of the Corporation, scheduled to be conducted) together with the names of the
respective tax authorities conducting (or scheduled to conduct) such audits or
examinations and a description of the subject matter of such audits or
examinations, (2) the most recent taxable year or other taxable period for which
an audit or other examination relating to Federal income taxes of the
Corporation and its Subsidiaries has been finally completed and the disposition
of such audit or examination, (3) the taxable years or other taxable periods of
the Corporation or any of its Subsidiaries which will not be subject to the
normally applicable statute of limitations by reason of the existence of
circumstances that would cause any such statute of limitations for applicable
Taxes to be extended, (4) the amount of any proposed adjustments (and the
principal reason therefor) relating to any Returns for Tax liability of the
Corporation or any of its Subsidiaries which have been proposed or assessed by
any taxing authority and (5) a list of all notices received by the Corporation
or any of its Subsidiaries from any taxing authority relating to any issue which
could affect the Tax liability of the Corporation or any of its Subsidiaries,
which issue has not been finally determined and which, if determined adversely
to the Corporation or any such subsidiaries, could result in a Tax liability.
(B) Except as shown in DL 3.13(iii)(B), neither the Corporation nor any of
its Subsidiaries has been included in any "consolidated," "unitary" or
"combined" Return (other than Returns which include only the Corporation and any
Subsidiaries of the Corporation) provided for under the law of the United
States, any foreign jurisdiction or any state or locality with respect to Taxes
for any taxable period for which the statute of limitations has not expired.
(C) All Taxes which the Corporation or any of its Subsidiaries is (or was)
required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper authorities to the extent due and
payable.
(D) Except as previously disclosed to Parent, the Corporation is not a party
to any agreement that would require it to make any payment that would constitute
an "excess parachute payment" for purposes of Sections 280G and 4999 of the
Internal Revenue Code of 1986, as amended (the "Code").
(E) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between the Corporation, any Subsidiary,
or any predecessor or affiliate thereof and any other party under which Parent,
Sub or the Corporation (or any of its Subsidiaries) could be liable for any
Taxes or other claims of any other party under such agreements or arrangements.
(F) No indebtedness of the Corporation or any of its Subsidiaries consists
of "corporate acquisition indebtedness" within the meaning of Section 279 of the
Code.
(G) Neither the Corporation nor any of its Subsidiaries will be required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by the Corporation or any
of its Subsidiaries after the date hereof and during the period ending at the
time of the Share Purchase, and the Internal Revenue Service has not initiated
or proposed any such adjustment or change in accounting method.
SECTION 3.14. EMPLOYEE BENEFIT PLANS. Set forth in DL 3.14 is an accurate
and complete list of each domestic and foreign employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations thereunder ("ERISA"), whether or not
subject to ERISA, and each stock option, stock appreciation right, restricted
stock, incentive, bonus, profit-sharing, savings, deferred compensation, health,
medical, life, disability, accident, supplemental unemployment or retirement,
employment, severance or salary or benefits continuation plan, program,
arrangement or agreement maintained by the Corporation or any of its
Subsidiaries or affiliates (including, for this purpose and for the purpose of
all of the representations in this Section 3.14, any predecessors to the
Corporation or to any such Subsidiaries or affiliates and all employers (whether
or not incorporated) that would be treated together with the Corporation and/or
any of its Subsidiaries as a single employer within the meaning of Section 414
of the Code, or to which the Corporation or any such Subsidiary or affiliate
contributes (or has any obligation to contribute), has any liability or is a
party (collectively, the "Employee Benefit Plans"). Except to the extent that
any breach of the following representations could not reasonably be expected to
have a Material Adverse Effect on the Corporation or as disclosed in DL 3.14,(i)
each Employee Benefit Plan (and each related trust, insurance contract or fund)
is in compliance with applicable law (including, without limitation, ERISA and
the Code) and has been administered and operated in all respects in accordance
with its terms;(ii) except as set forth in DL 3.14, each Employee Benefit Plan
which is intended to be "qualified" within the meaning of Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service, and no event has occurred and no condition exists which could
reasonably be expected to result in the revocation of any such
determination;(iii) no complete or partial termination of any Employee Benefit
Plan covered by Title IV of ERISA has occurred and no proceedings have been
instituted to terminate or appoint a trustee to administer any such Employee
Benefit Plan, and no such Employee Benefit Plan has been the subject of a
"reportable event" (as defined in Section 4043 of ERISA) for which the 30-day
notice requirement has not been waived by the Pension Benefit Guaranty
Corporation (the "PBGC"); (iv)neither the Corporation nor any of its
Subsidiaries has incurred any unsatisfied liability to the PBGC with respect to
any Employee Benefit Plan which is an "employee pension benefit plan" (within
the meaning of Section 3(2) of ERISA), including, without limitation, any
liability under Section 4069 of ERISA or any penalty imposed under Section 4071
of ERISA, or otherwise incurred any liability under Title IV of ERISA or Chapter
43 of the Code with respect to any such Employee Benefit Plan, and no event has
occurred and no condition or circumstance has existed that would give rise to
any such liability;(v) no Employee Benefit Plan subject to Section 412 of the
Code or Section 302 of ERISA has incurred any accumulated funding deficiency
within the meaning of such sections of the Code or ERISA or obtained or applied
for a waiver of any minimum funding standards or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304 of
ERISA;(vi) the actuarial present value of the accumulated plan benefits under
any Employee Benefit Plan that is an "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA), whether or not vested and determined in
accordance with PBGC actuarial methods, factors and assumptions applicable to
such a plan terminating on the Closing Date, does not exceed the fair value of
the assets allocable thereto;(vii) no Employee Benefit Plan is a "multi-employer
plan" (as defined in the Code or Section 4001(a)(3) of ERISA) or a "multiple
employer plan" (within the meaning of the Code or ERISA) and neither the
Corporation nor any Subsidiary contributes to or has contributed to, or had any
liability or obligation with respect to any multi-employer plan;(viii) full
payment has been timely made of all amounts which the Corporation or any of its
Subsidiaries is required under applicable law or under any Employee Benefit Plan
or related agreement to have paid as of the last day of the most recent fiscal
year, of such Employee Benefit Plan or related agreement ended prior to the date
hereof, and the Corporation and its Subsidiaries have made adequate provisions,
in accordance with GAAP, in their financial statements for all obligations and
liabilities under all Employee Benefit Plans that have accrued but have not been
paid because they are not yet due under the terms of any such Employee Benefit
Plan, related agreement, or applicable law;(ix) neither the Corporation nor any
of its Subsidiaries have any unfunded liabilities pursuant to any Employee
Benefit Plan which is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) that is not intended to be qualified under Section 401(a)
of the Code; (x) the applicable requirements of Part 6 of Subtitle B of Title I
of ERISA and Section 4980B of the Code have been met with respect to each
Employee Benefit Plan that is a "group health plan" (as such term is defined in
Section 607(1) of ERISA or Section 5000(b)(1) of the Code);(xi) no Employee
Benefit Plan provides for post-employment or retiree health, life insurance or
other welfare benefits which could result in a material liability of the
Corporation or any Subsidiary;(xii) neither the Corporation nor any Subsidiary,
nor any of their respective directors, officers or employees, or, to
Corporation's knowledge, any other "disqualified person" or "party in interest"
(as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transaction, act or omission to act in
connection with any Employee Benefit Plan that could reasonably be expected to
result in the imposition of a penalty or fine pursuant to Section 502 of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975 of
the Code;(xiii) no plan or agreement to which the Corporation or any Subsidiary
is a party or by which it may be bound will or may, by reason of the execution
of this Agreement and the consummation of the transactions contemplated hereby
(either alone or upon the occurrence of any additional or subsequent event),
result in any payment, "parachute payment" (as such term is defined in Section
280G of the Code), severance, bonus, retirement or job security or similar-type
benefit, or increase any benefits or accelerate the payment or vesting of any
benefits to any employee or former employee or director of the Corporation or
any Subsidiary, and no Employee Benefit Plan provides for the payment of
severance, termination, change in control or similar-type payments or benefits;
and (xiv) no liability, claim, action, audit, examination or litigation is
pending or, to the Corporation's knowledge, threatened with respect to any
Employee Benefit Plan (other than routine claims for benefits payable in the
ordinary course).
SECTION 3.15. BROKERS. There is no investment banker, broker, finder or
other intermediary other than CIBC Oppenheimer Corp. which or who has been
retained by, or is authorized to act for, the Corporation in connection with the
transactions contemplated by this Agreement or is otherwise entitled to payment
of any fee or commission.
SECTION 3.16. ENVIRONMENTAL MATTERS.
(a) PROVISION CONTROLS. Anything elsewhere in this Agreement to the contrary
notwithstanding, this Section 3.16 contains the entire agreement and
understanding of the parties relating to environmental representations and
warranties concerning the Corporation and the Subsidiaries.
(b) ENVIRONMENTAL DISCLOSURES. DL 3.16 sets forth all environmental matters
that are within the scope of the specific categories set forth below which,
individually or in the aggregate, could reasonably be expected to have a
Materially Adverse Effect on the Corporation and the Subsidiaries taken as a
whole:
(1) all permits, licenses and other authorizations possessed by the
Corporation and the Subsidiaries issued under Federal, state or local laws
relating to pollution or protection of worker or public health, safety or
the environment (collectively, the "Environmental Permits"), whether based
on statute, regulation, common law, equity or any other legal theory (the
"Environmental Laws") including, but not limited to, those relating to
emissions, discharges, releases or threatened releases of hazardous
substances, pollutants, contaminants, or hazardous or toxic material or
wastes into ambient air, surface water, groundwater or land ("Releases").
Each of such Releases and violations of an Environmental Law is referred to
herein as an "Environmental Incident";
(2) to the knowledge of the Corporation, all violations by the
Corporation or any Subsidiary of the terms and conditions of any
Environmental Permits or Environmental Laws or of any other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in Environmental Laws;
applicable orders, agreements, variances, injunctions, decrees, writs,
judgments, awards or arbitration awards relating thereto; and all past or
present events, conditions, circumstances, activities, practices, incidents,
actions or plans concerning the business or operations of the Corporation or
any of its Subsidiaries or any entity that was formerly a subsidiary or a
controlled affiliate of the Corporation which may give rise to any legal
liability of the Corporation or any of its Subsidiaries under any
Environmental Law or otherwise from any claim, action, suit, proceeding,
hearing or investigation in connection with any Environmental Incident;
(3) all orders (including, without limitations, decrees, writs,
judgments, awards or notice or demand letters) or agreements issued,
entered, promulgated or approved by any Person under or in connection with
Environmental Laws which bind, restrict, obligate, or otherwise apply to the
Corporation or any of the Subsidiaries or any of their respective properties
or assets, which remain in effect or which were issued or effective during
the five years prior to the date of this Agreement;
(4) all actions, claims, suits, proceedings or investigations under any
Environmental Laws either pending or, to the knowledge of the Corporation,
threatened against the Corporation or any of the Subsidiaries or any of
their respective properties or assets before any court or arbitrator or any
Governmental Authority;
(5) all agreements (including, but not limited to, consent orders and
agreements among potentially responsible parties) to which the Corporation
or any of the Subsidiaries is a party and which relate to benefits
(including, but not limited to, indemnification) or obligations of the
Corporation or any of the Subsidiaries in connection with Environmental Laws
or any Environmental Incident, and any effect that the transactions
contemplated by this Agreement will have on the benefits (including, without
limitation, indemnification) granted to the Corporation or any of the
Subsidiaries under any such agreements including any assignments or
approvals required in connection with such benefits;
(6) any Owned Real Property or Leased Real Property, whether or not set
forth in DL 3.11, that is subject to any applicable law that conditions,
restricts, prohibits, or requires any notification or disclosure in
connection with the transactions contemplated hereby for environmental
reasons ("Environmental Property Transfer or Disclosure Law"). To the extent
an Environmental Property Transfer or Disclosure Law is applicable to any
such Owned Real Property or Leased Real Property in connection with the
transactions contemplated hereby, as and when appropriate the Corporation
will take (or cooperate with Parent in taking), such action as is necessary
to fully comply with the requirements of such laws; and
(7) any proceeding or investigation concerning criminal violations of
any Environmental Law to which the Corporation and its Subsidiaries or any
entity that was formerly a subsidiary or controlled affiliate of the
Corporation, are, or have been, subject at any time during the past 10
years.
(c) CONDUCT OF BUSINESS BY THE CORPORATION PENDING THE EFFECTIVE TIME.
Anything elsewhere in this Agreement to the contrary notwithstanding, the
Corporation retains the right, with prior notice to Parent, to take only the
actions and make only the payouts set forth in DL 3.16A, if required, with
respect to environmental matters.
SECTION 3.17. PROPRIETARY RIGHTS. Except as set forth in DL 3.17, as of the
date hereof the Corporation has received no notice that it or any of its
Subsidiaries has infringed, and to the knowledge of the Corporation neither it
nor any of its Subsidiaries is now infringing, on any patent, trade name,
trademark, service mark, copyright, trade secret, technology, know-how or
process (collectively, the "Proprietary Rights") belonging to any other person,
which infringement, in the aggregate, would have a Material Adverse Effect on
the Corporation and its Subsidiaries, taken as a whole. Except as set forth in
DL 3.17, (i) the Corporation is not aware of any infringement by any third party
of any Proprietary Rights of the Corporation or any of its Subsidiaries, and
(ii) neither the Corporation nor any of its Subsidiaries is a party to any
material license, agreement or arrangement with respect to any Proprietary
Rights. DL 3.17 lists all the Proprietary Rights owned by the Corporation or any
of the Subsidiaries that are composed of registered patents, trade names,
trademarks, service marks or copyrights that are material to its business and
sets forth, if and as applicable, the registration number, country, application,
registration and expiration dates, and class with respect to such Proprietary
Rights.
SECTION 3.18. MATERIAL CONTRACTS AND LEASES. The list of agreements set
forth in DL 3.18 includes all the Material Contracts (as defined below) that the
Corporation or any of the Subsidiaries is party to, or is bound by. For purposes
of this Agreement, a "Material Contract" shall mean (i) any contract, lease or
other agreement (except for purchase orders entered into in the ordinary course
of business and contracts and agreements cancelable by the Corporation or any of
its Subsidiaries at will or on notice of 30 days or less) to which the
Corporation or any of its Subsidiaries is a party or by which the Corporation or
any of its Subsidiaries is bound, which by its terms calls for the payment by
either party to such contract or agreement of $250,000 or more in any fiscal
year or is material to the business, operations or financial condition of the
Corporation and its subsidiaries, taken as a whole, (ii) any material agreement,
contract or commitment not in the ordinary course of business, (iii) any
agreement, indenture or other instrument which contains restrictions with
respect to payment of dividends or any other distribution in respect of its
capital stock, (iv) any agreement, contract or commitment to be performed
relating to capital expenditures in excess of $100,000 in any calendar year, or
in the aggregate requiring expenditures in excess of $1,000,000, (v) any
material agreement, indenture or instrument relating to indebtedness for
borrowed money or the deferred purchase price of property (excluding trade
payables in the ordinary course of business, intercompany indebtedness,
intercompany transfers, and operating leases), (vi) any loan or advance to
(other than advances to employees in the ordinary course of business in amounts
of $25,000 or less to any individual and $100,000 in the aggregate to all
employees), or investment in (other than investments in Subsidiaries), any
Person, or any agreement, contract or commitment relating to the making of any
such loan, advance or investment or any agreement, contract or commitment
involving a sharing of profits (except for bonus or commission arrangements with
employees entered into in the ordinary course of business consistent with past
practice), (vii) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than in the ordinary course of
business and other than with respect to any indebtedness or obligation of the
Corporation or any Subsidiary), (viii) any management service, consulting or any
other similar type of contract (other than contingent fee agreements with
collection attorneys), involving payments of more than $150,000 annually, unless
terminable by the Corporation or Subsidiary on not more than 90 days notice,(ix)
any agreement, contract or commitment limiting the ability of the Corporation or
any of its Subsidiaries to engage in any line of business or to compete with any
Person, (x) any warranty, guaranty or other similar undertaking with respect to
a contractual performance extended by the Corporation or any of its Subsidiaries
other than in the ordinary course of business, or (xi) any agreement, contract
or commitment to employ any of its officers or employees, and (xii) any material
amendment, modification or supplement in respect of any of the foregoing.
Neither the Corporation nor any of its Subsidiaries is in default under any
Material Contract, except for such defaults which will not, individually or in
the aggregate, have a Material Adverse Effect on the Corporation and its
Subsidiaries, taken as a whole. Except as shown in DL 3.18, no approval or
consent of, or notice to, any person is needed in order that each such Material
Contract shall continue in full force and effect in accordance with its terms
without penalty, acceleration or rights of early termination by reason of the
consummation of the transactions contemplated by this Agreement.
SECTION 3.19. INSURANCE. DL 3.19 sets forth a list of all material policies
of insurance maintained on the date hereof by the Corporation and each of its
Subsidiaries with respect to their respective businesses, which policies are
currently in full force and effect. As of the date hereof, except as set forth
in DL 3.19, neither the Corporation nor any of its Subsidiaries has received
notice of cancellation or refusal to renew with respect to any insurance policy
set forth in DL 3.19.
SECTION 3.20. LABOR RELATIONS. Neither the Corporation nor any of its
Subsidiaries is currently party to any collective bargaining agreement with
respect to any of its employees. The Corporation has previously furnished or
made available to Parent a true, complete and correct copy of the handbooks and
administrative policies and practices relating to employees of the Corporation
and its Subsidiaries and any other material agreement regarding its relationship
with the Corporation's employees or those of its Subsidiaries. Except as set
forth in DL 3.20 and except for any violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect,
each of the Corporation and its Subsidiaries is in substantial compliance with
all federal, state or other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and has not
and is not engaged in any unfair labor practice. Except as disclosed in DL 3.20
or in the Corporation Filings, there exist no employment, consulting, severance,
indemnification agreements or deferred compensation agreements between the
Corporation and any director, officer or employee of the Corporation or any
agreement that would give any Person the right to receive any payment from the
Corporation as a result of the Offer or the Merger.
SECTION 3.21. VOTING REQUIREMENTS. After the Share Purchase, the affirmative
vote of the holders of two-thirds of the outstanding shares of Corporation
Common Stock entitled to be cast approving this Agreement is the only vote of
the holders of any class or series of the Corporation's capital stock necessary
to approve this Agreement and the transactions contemplated by this Agreement.
SECTION 3.22. RIGHTS AGREEMENT. The Corporation and the Board of Directors
of the Corporation have taken and will maintain in effect during the term of
this Agreement all necessary action to (i) render the Rights Agreement
inapplicable with respect to the Offer, the Merger and the other transactions
contemplated by this Agreement, and (ii) ensure that (x) neither Parent, nor
Sub, nor any of their Affiliates, or Associates (each as defined in the Rights
Agreement) is considered to be an Acquiring Person (as defined in the Rights
Agreement) and (y) the provisions of the Rights Agreement, including the
occurrence of a Distribution Date (as defined in the Rights Agreement), are not
and shall not be triggered by reason of the announcement or consummation of the
Offer, the Merger or the other transactions contemplated by this Agreement. The
Corporation has delivered to Parent a complete and correct copy of the Rights
Agreement as amended and supplemented to the date of this Agreement. The Board
of Directors of the Corporation, at a meeting duly called and held, has resolved
that the Rights shall be redeemed immediately prior to, and subject to, the
acceptance for payment and purchase of not less than two-thirds of the
outstanding Shares pursuant to the Offer in accordance with the terms of this
Agreement.
SECTION 3.23. CUSTOMERS RELATIONS. Except as disclosed on DL 3.23, none of
the top twenty customers of the Corporation (based on the Corporation's
consolidated revenues for the fiscal year ended June 30, 1997) has notified the
Corporation or any of its Subsidiaries that it intends to either (i) terminate
or modify in a manner materially adverse to the Corporation or any of its
Subsidiaries its contractual arrangements with the Corporation or any of its
Subsidiaries or (ii) substantially curtail the amount of business it currently
does with the Corporation or any of its Subsidiaries.
SECTION 3.24. OPINION OF FINANCIAL ADVISOR. The Corporation has received the
opinion of CIBC Oppenheimer Corp., to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by the
Corporation's shareholders is fair to the Corporation's shareholders form a
financial point of view, and a complete and correct signed copy of such opinion
has been, or promptly upon receipt thereof will be, delivered to Parent.
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub represents and warrants to the Corporation that:
SECTION 4.1. CORPORATE EXISTENCE AND POWER. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware, and each has all corporate power, authority and legal right to
conduct its business as it is now being conducted and to own the properties and
assets it now owns. Parent and Sub have delivered to Corporation true, compete
and correct copies of their respective certificates of incorporation and
by-laws.
SECTION 4.2. CORPORATE AUTHORIZATION. Each of Parent and Sub (a) has full
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, (b) has taken all action required by
applicable law and its Certificate of Incorporation and By-Laws, including the
authorization of this Agreement and the transactions contemplated hereby by
their respective Boards of Directors and (if required) stockholders, to
authorize the execution and delivery of this Agreement and the performance by
Parent and Sub of the transactions contemplated hereby, (c) has duly and validly
executed and delivered this Agreement and no other corporate action is necessary
in connection therewith. This Agreement (assuming the due authorization,
execution and delivery hereof by the Corporation) is a legal, valid and binding
obligation of each of Parent and Sub enforceable against each of them in
accordance with its terms, except to the extent that enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in equity or at law).
SECTION 4.3. CONSENTS AND APPROVALS. Except as contemplated by Section 4.6
hereof and except for the requirements of the federal and state securities laws
and the HSR Act, and assuming the filing of the Certificate of Merger and other
appropriate merger documents, if any, as required by the laws of the State of
Delaware, no consent, approval or authorization of, or declaration, filing or
registration with, any United States or foreign governmental or regulatory
authority or any other person or entity is required to be made or obtained by
Parent or any of its affiliates in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 4.4. NO VIOLATION. The execution, delivery and performance of this
Agreement by Parent and Sub and the consummation of the transactions
contemplated hereby (a) will not violate any provision of the respective
Certificates of Incorporation or By-Laws of Parent or Sub or any of their
affiliates, (b) except as set forth in the Disclosure Letter heretofore prepared
by Parent and delivered to the Corporation, will not violate, or be in conflict
with, or constitute a default under any material contract, lease, loan
agreement, license, permit or other agreement to which Parent or any of its
affiliates is a party, or by which Parent or any of its affiliates is bound or
to which it or any of them is subject and (c) will not violate any law,
judgment, decree, order, regulation or rule of any court or governmental
authority by which Parent or any of its affiliates is bound or any of their
respective properties is subject, except in any case where the violation or
default would not materially adversely affect Parent's or Sub's ability to
consummate the transactions contemplated by this Agreement (including, without
limitation, its ability to complete the Share Purchase pursuant to the Offer).
SECTION 4.5. FINANCIAL STATEMENTS. The audited financial statements
(including the notes thereto, the "Parent Audited Financial Statements") of
Parent for its most recently completed fiscal year, a copy of which has
previously been delivered to the Corporation, present fairly, in all material
respects, the consolidated financial position of Parent and its subsidiaries as
of the date thereof and their consolidated results of operations, cash flows and
stockholders' equity for the period then ended, all in conformity with GAAP. The
unaudited financial statements (including the notes thereto) of Parent for the
period ended June 30, 1997, a copy of which has been previously delivered to the
Corporation, were prepared in a manner consistent with the basis of presentation
used in the Parent Audited Financial Statements and in accordance with GAAP, and
fairly present, in all material respects, the consolidated financial position of
Parent and its subsidiaries as at and for the periods indicated, subject to
normal recurring year-end adjustments.
SECTION 4.6. FINANCING. Parent and Sub have obtained letters (copies of
which have been delivered to the Corporation) from responsible financial
institutions providing for, subject to certain conditions set forth therein,
commitments to provide all funds necessary, together with funds available to the
Parent and Sub, to consummate the transactions contemplated hereby.
SECTION 4.7. OFFER DOCUMENTS; OTHER INFORMATION. None of the information
contained in any of the Offer Documents (excluding information described therein
as being supplied by the Corporation with respect to itself) will, at the
respective times such Offer Documents or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to stockholders, as
the case may be, contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.8. LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of Parent or Sub, threatened against
Parent or Sub or any of their affiliates before any court or arbitrator or any
governmental body, agency or official which are reasonably likely, individually
or in the aggregate, to materially adversely affect Parent's or Sub's ability to
consummate the transactions contemplated hereby or which questions or challenges
the validity of this Agreement or the transactions contemplated hereby.
ARTICLE V--CONDUCT OF BUSINESS BY THE CORPORATION PENDING THE CLOSING
From the date hereof until immediately after the Closing (or, if sooner, the
termination of this Agreement), and except as otherwise consented to or approved
by Parent in writing, which consent or approval shall not be unreasonably
withheld or delayed:
SECTION 5.1. REGULAR COURSE OF BUSINESS. (a) The Corporation will, and will
cause its Subsidiaries to, conduct business substantially in the same manner as
heretofore conducted and neither the Corporation nor any of its Subsidiaries
will engage in any transaction or activity, enter into any agreement or make any
commitment (or materially amend any Material Contract existing on the date
hereof), except (i) as set forth on DL 5.1(a), (ii) in the ordinary course of
business and consistent with past practices or pursuant to an agreement to which
the Corporation or any of such Subsidiaries is a party on the date hereof (it
being understood that transactions in the call center outsourcing business shall
be deemed to be within the ordinary course of business of the Corporation and
any Subsidiary which is engaged in such business as of the date hereof), (iii)
as contemplated by this Agreement, or (iv) which would not be reasonably likely
to have a Material Adverse Effect. Except as otherwise permitted by this
Agreement, the Corporation will not, and will cause the Subsidiaries not to,
intentionally take any action that would cause, or intentionally omit to take
any reasonable action that in all likelihood would prevent, any of the
representations and warranties contained in Article III which are qualified as
to materiality to fail to be true and correct in any respect or any
representation or warranty not so qualified to fail to be true and correct in
all material respects, as if such representations and warranties were deemed to
be made at and as of the Closing (except to the extent any such representation
or warranty was expressly made only as of a different date).
(b) Without limiting the generality of subsection (a) of this Section, the
Corporation will not, and will not permit any Subsidiary to, except pursuant to
this Agreement or as otherwise permitted by DL 5.1(b): (i) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof, make any material investment in
any other entity which is not a wholly owned affiliate of the Corporation or
relinquish any material contract rights; (ii) acquire (including by lease) any
material assets or properties or dispose of, mortgage or encumber any of its
material assets or properties (except in each case in the ordinary course of
business and consistent with past practice or pursuant to an agreement to which
the Corporation or any Subsidiary is a party on the date hereof); (iii) make or
commit to make any capital expenditures in excess of $150,000, (iv) make any
change in accounting principles (except as may be required by generally accepted
accounting principles or SEC regulations, in which event, the Corporation will
fully disclose any such change and the reason(s) therefor); (v) sell or pledge
or agree to sell or pledge any stock owned by it in any of its Subsidiaries;
(vi) except to the extent required under existing employee and director benefit
plans, agreements or arrangements as in effect on the date of this Agreement,
increase the compensation or fringe benefits of any of its directors, officers
or employees, except for increases in salary, wages or commissions of employees
of the Corporation or its Subsidiaries who are not officers of the Corporation
in the ordinary course of business in accordance with past practice, or grant
any severance or termination pay not currently required to be paid under
existing severance plans or agreements or enter into any employment, consulting
or severance agreement or arrangement with any present or former director,
officer or other employee of the Corporation or any of its subsidiaries, or
establish, adopt, enter into or amend or terminate any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers or employees; (vii) except for transactions between the
Corporation and Subsidiaries or in the ordinary course of business, transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of, encumber or
subject to any lien, any material assets or incur or modify any indebtedness or
other liability (other than indebtedness incurred under the Amended and Restated
Credit Agreement dated December 31, 1994, between the Corporation and Bank of
Boston, Connecticut (the "Existing Credit Facility"); PROVIDED that there shall
not be any material increase in the amounts outstanding under the Existing
Credit Facility, other than in the ordinary course of business, or otherwise as
an accommodation, except for guarantees by Corporation of obligations of
Subsidiaries or guarantees by Subsidiaries of obligations of Subsidiaries,
become responsible for the obligations of any person or, other than in the
ordinary course of business consistent with past practice, make any loan or
other extension of credit except for intercompany transactions between
Corporation and Subsidiaries and between Subsidiaries; (viii) agree to the
settlement of any material claim or litigation (including, but not limited to,
any claim or litigation in respect of, related to or arising out of any
Environmental Law, Environmental Permit or Pollution Incident); (ix) make any
material tax election or settle or compromise any material tax liability; (x)
permit any insurance policy naming it as beneficiary or a loss payable payee to
be cancelled without notice to Parent, except for the cancellation of insurance
policies required to be maintained by third parties for the benefit of the
Corporation or any Subsidiary of which such cancellation neither the Corporation
nor any Subsidiary has notice; (xi) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Corporation or any of its Subsidiaries not
constituting an inactive Subsidiary (other than the Merger); or (xii) agree, in
writing or otherwise, to take any of the foregoing actions.
SECTION 5.2. CHARTER DOCUMENTS AND CAPITAL CHANGES. Except as expressly
authorized by this Agreement or required by Section 1.2, neither the Corporation
nor any of its Subsidiaries will (a) change or amend its Certificate of
Incorporation, By-Laws or the Certificate of Incorporation or By-Laws of any of
its Subsidiaries, (b) issue or sell any shares of its capital stock (other than
shares issuable upon exercise of currently outstanding options), nor issue
options (other than automatic issuances pursuant to the terms of a plan in
effect on the date hereof or pursuant to the terms of any existing employment
agreement), warrants to purchase, or rights to subscribe to, any shares of its
capital stock, or enter into any arrangement or contract with respect thereto,
or (c) make any other material changes in its capital structure, other than
dividends and other intercompany transfers, allocations and transactions in the
ordinary course of business between any wholly-owned Subsidiary and the
Corporation or any other wholly-owned Subsidiary.
SECTION 5.3. ORGANIZATION AND GOOD WILL. Except as set forth in DL 5.3, the
Corporation will use all reasonable efforts to preserve the business, business
organization and good will of the Corporation and each of its Subsidiaries, keep
in place their present executive officers and key employees, and preserve their
present relationships with persons having business dealings with them.
SECTION 5.4. INSURANCE. The Corporation will use all commercially reasonable
efforts to maintain, and cause each of its Subsidiaries to maintain, insurance
substantially at current levels on all property, real, personal and mixed, owned
or leased by them.
SECTION 5.5. COMPLIANCE WITH LAWS. The Corporation will use its best efforts
to duly comply, and cause each of its Subsidiaries to duly comply, in all
material respects with all laws applicable to them and their respective
properties, operations, business and employees, except where the failure to do
so is not reasonably likely to have a Material Adverse Effect on the
Corporation.
SECTION 5.6. SEC REPORTS. The Corporation will duly file all reports
required to be filed by it with the SEC pursuant to the Exchange Act and will
submit copies thereof to Parent simultaneously with the time of filing thereof.
SECTION 5.7. PROXY STATEMENT. If shareholder approval of the Merger is
required by law, as promptly as practicable following the Share Purchase, the
Corporation will prepare and file a preliminary Proxy Statement with the SEC and
will use its best efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement (including, without limitation, financial statements and
supporting schedules and certificates and reports of independent public
accountants). Promptly following the Share Purchase, if required by the DGCL in
order to consummate the Merger, the Corporation will cause the definitive Proxy
Statement to be mailed to the shareholders of the Corporation and, if necessary,
after the definitive Proxy Statement shall have been so mailed, promptly
circulate amended, supplemental or supplemented proxy material and, if required
in connection therewith, resolicit proxies.
SECTION 5.8. SHAREHOLDER APPROVAL. (a) Promptly following the Share
Purchase, if required by DGCL in order to consummate the Merger, the
Corporation, acting through its Board of Directors, shall, in accordance with
applicable law, duly call, convene and hold a special meeting of the holders of
Common Stock for the purpose of voting upon this Agreement and the Merger and
the Corporation agrees that this Agreement and the Merger shall be submitted at
such special meeting. The Corporation shall use its reasonable best efforts to
solicit from its shareholders proxies, and shall take all other action necessary
and advisable, to secure the vote of shareholders required by applicable law to
obtain the approval for this Agreement and the Merger. Subject to Section 5.9 of
this Agreement, the Corporation agrees that it will include in the Proxy
Statement the recommendation of its Board of Directors that holders of Common
Stock approve and adopt this Agreement and approve the Merger. Parent will cause
all shares of Common Stock owned by Parent and its subsidiaries to be voted in
favor of the Merger.
(b) Notwithstanding the foregoing, in the event that Sub shall acquire at
least 90% of the outstanding Corporation Common Stock, the Corporation agrees,
subject to Article VII, to take all necessary and appropriate action to cause
the Merger to become effective as soon as reasonably practicable after such
acquisition, without a meeting of the Corporation's shareholders, in accordance
with Section 253 of the DGCL.
SECTION 5.9. NO SOLICITATION OF OTHER OFFERS. (a) The Corporation and its
affiliates and each of their respective officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any other parties that may be ongoing with respect to any
Acquisition Proposal (as defined below). Neither the Corporation nor any of its
affiliates, shall, directly or indirectly, take (and the Corporation shall not
authorize or permit its or its affiliates, officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants or
other agents or affiliates, to so take) any action to (i) encourage, solicit or
initiate the making of any Acquisition Proposal, (ii) enter into any agreement
with respect to any Acquisition Proposal or (iii) participate in any way in
discussions or negotiations with, or furnish or disclose any information to, any
Person (other than Parent or Sub or their representatives) in connection with,
or take any other action to facilitate any inquiries or the making of any
proposal (including without limitation by taking any action (except as required
by Section 1.2) that would make the Rights Agreement, Section 203 of the DGCL or
the provisions of Article FIFTH of the Corporation's Certificate of
Incorporation inapplicable to an Acquisition Proposal) that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal, PROVIDED, HOWEVER,
that the Corporation, in response to an unsolicited Acquisition Proposal and in
compliance with its obligations under Section 5.9(b) hereof, may participate in
discussions or negotiations with or furnish information to any third party which
proposes a transaction which the Board of Directors of the Corporation
reasonably determines will result in a Superior Proposal if the Board of
Directors believes (and has been advised in writing by independent outside
counsel) that failing to take such action would constitute a breach of its
fiduciary duties under applicable law. In addition, neither the Board of
Directors of the Corporation nor any Committee thereof shall (x) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or Sub
the approval and recommendation of the Offer and this Agreement or (y) approve
or recommend, or propose to approve or recommend, any Acquisition Proposal,
provided that the Corporation may recommend to its shareholders an Acquisition
Proposal and in connection therewith withdraw or modify its approval or
recommendation of the Offer or the Merger if (i) the Board of Directors of the
Corporation has determined that the Acquisition Proposal is a Superior Proposal,
(ii) all the conditions to the Corporation's right to terminate this Agreement
in accordance with Section 8.1(e) have been satisfied (including the expiration
of the three day period described therein and the payment of all amounts
required pursuant to Section 9.1), (iii) simultaneously with such withdrawal,
modification or recommendation, this Agreement is terminated in accordance with
Section 8.1(e) and (iv) the Acquisition Proposal does not provide for any
breakup fee or other inducement to the acquiror other than reimbursement of out
of pocket expenses incurred in connection with such Acquisition Proposal. Any
actions permitted under, and taken in compliance with, this Section 5.9 shall
not be deemed a breach of any other covenant or agreement contained in this
Agreement.
"Acquisition Proposal" shall mean any inquiry, proposal or offer from any
Person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Corporation or any of its Subsidiaries or of
over 10% of any class of equity securities of the Corporation or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 10% or more of any class of equity
securities of the Corporation or any of its Subsidiaries, any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Corporation or any of its Subsidiaries, other than the transactions contemplated
by this Agreement, or any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Offer or the Merger or which would reasonably be expected to dilute
materially the benefits to Parent of the transactions contemplated hereby.
"Superior Proposal" shall mean a BONA FIDE proposal made by a third party to
acquire all of the outstanding shares of the Corporation pursuant to a tender
offer, a merger or a sale of all of the assets of the Corporation (x) on terms
which a majority of the members of the Board of Directors of the Corporation
determines in its good faith reasonable judgement (based on the advice of
independent outside financial and legal advisors) to be more favorable to the
Corporation and its shareholders than the transactions contemplated hereby, (y)
for which in the good faith reasonable judgement of the Board of Directors
adequate financing or other consideration is then available and (z) which does
not provide for any breakup fee or other inducement to the acquiror other than
reimbursement of documented out-of-pocket expenses incurred in connection with
the Superior Proposal.
(b) In addition to the obligations of the Corporation set forth in paragraph
(a), on the date of receipt thereof, the Corporation shall advise Parent of any
request for information or any Acquisition Proposal, or any inquiry or proposal
with respect to any Acquisition Proposal, and the material terms and conditions
of such request or takeover proposal.
(c) Immediately following the Share Purchase, the Corporation will request
each person who has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Corporation or any portion
thereof (the "Confidentiality Agreements") to return all confidential
information heretofore furnished to such person by or on behalf of the
Corporation.
SECTION 5.10. NOTIFICATION OF CERTAIN MATTERS. The Corporation shall give
prompt notice to Parent of: (a) any notice of, or other communication relating
to, a default or event that, with notice or lapse of time or both, would become
a default, received by the Corporation or any of its Subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any Material
Contract to which the Corporation or any of its Subsidiaries is a party or is
subject; and (b) any change or occurrence in the Corporation and its
Subsidiaries taken as a whole which has had a Material Adverse Effect on the
Corporation and its Subsidiaries, taken as a whole, or the occurrence of any
event which is reasonably likely to result in such a Material Adverse Effect.
Each of the Corporation and Parent shall give prompt notice to the other party
of any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
SECTION 5.11. RIGHTS AGREEMENT. The Corporation shall not redeem the Rights
or amend (other than to delay the Distribution Date (as defined therein) or to
render the Rights inapplicable to the Offer and the Merger) or terminate the
Rights Agreement prior to the Effective Time without the consent of the Parent
unless required to do so by a court of competent jurisdiction.
SECTION 5.12. PROPERTIES; MATERIAL CONTRACTS. The Corporation will use, and
will cause its Subsidiaries to use, all reasonable efforts to (a) maintain and
keep their respective properties in their current condition in all material
respects, except for ordinary wear and tear and damage due to casualty or other
extraordinary occurrence, and (b) perform in all material respects their
respective obligations under the Material Contracts.
SECTION 5.13. DIVIDENDS, ETC. Prior to the Closing, the Corporation will not
declare, pay or set aside for payment any dividend or distributions, including a
distribution of rights, in respect of its capital stock or redeem, purchase or
otherwise acquire any shares of its capital stock, except as contemplated by
this Agreement, in connection with the cancellation or exercise of stock
options, or any such dividends, distributions or payments made by or to any
Subsidiary.
SECTION 5.14. FULL ACCESS. The Corporation will, until the Closing afford to
Parent, its counsel, accountants and other authorized representatives, full and
complete access, upon reasonable notice and in a reasonable manner, to the
offices, properties, books and records of the Corporation and each of its
Subsidiaries in order that Parent may have full opportunity to make such
reasonable investigations as it shall desire as to the business and affairs of
the Corporation and its Subsidiaries. The Corporation will also cause its
officers, accountants and attorneys to furnish, upon reasonable notice and in a
reasonable manner, such additional financial and operating data and other
information as Parent shall from time to time reasonably request. Parent shall,
and shall cause its directors, officers, employees, partners, agents, counsel,
accountants and other authorized representatives and any proposed lender,
placement agent or underwriter to, keep confidential any and all information
(whether in writing or otherwise) obtained or developed pursuant to this
Agreement in accordance with the provisions of Section 6.1 hereof.
ARTICLE VI--COVENANTS OF PARTIES
The Corporation hereby covenants and agrees with Parent and Sub, and Parent
and Sub hereby covenant and agree with the Corporation, that:
SECTION 6.1. CONFIDENTIALITY. (a) Until the Closing Time, or, in the event
of the termination of this Agreement pursuant to Article VIII, for a period of
three years from the date of such termination, the Corporation, Parent and Sub
and their respective affiliates, consultants, advisors, officers, employees,
directors and agents ("Representatives") shall hold in strictest confidence and
not divulge, use or make available to any other person any information of the
other obtained from any investigation of the other in connection with the
transactions contemplated hereby (including all data, reports, interpretations,
electronic images, computer software, forecasts and records), or given to them
by the other or by others performing services for them or the other or in a
confidential relationship with the other (herein collectively referred to as
"Information"), except to the extent (i) such party is compelled to disclose
such Information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law (provided such disclosing party provides
the other parties hereto with prompt notice of such proposed disclosure so that
such other parties may seek a protective order or other appropriate remedy),
(ii) such Information becomes generally available to the public other than as a
result of a breach of this Section or is otherwise available from third parties
not under a duty to keep such Information confidential, (iii) such Information
was at the time of its disclosure to such person previously known to it, (iv)
such disclosure is permitted by Section 6.4 (relating to public announcements)
or otherwise pursuant to this Agreement, or (v) such Information is divulged to
such party's Representatives (provided that each such person agrees to be bound
by the provisions of this Section). Neither Parent, Sub nor the Corporation, nor
any of their respective Representatives, will misuse to the detriment of the
other, any Information obtained from the other. If the Share Purchase does not
occur, upon the request of the Corporation or Parent and Sub, the party to whom
such request is made shall as directed by the requesting party destroy or return
to the requesting party any and all copies of written Information covered by
this Section furnished to such non-requesting party or its representatives by,
or on behalf of, the requesting party or otherwise obtained, prepared or
developed by or on behalf of the non-requesting party, and such destruction
shall be certified in writing to the requesting party.
(b) For a period of three years from the date of the termination of this
Agreement, if the Share Purchase does not occur, Parent (and any affiliate
thereof) will not (i) solicit for hire or employ any person who on the date
hereof or on the date of such termination was an employee of the Corporation or
any of its Subsidiaries or (ii) cause any individual engaged as an independent
contractor by the Corporation or any of its Subsidiaries to breach or void such
individual's independent contractor agreement with the Corporation.
(c) Contemporaneous with the Share Purchase, Parent shall make or cause the
Corporation and each of its Subsidiaries to make, by certified or bank check or
other means acceptable to the payee thereof, all payments which are required to
be made on or after such time under any agreement in effect on the date hereof
between the Corporation or any of such Subsidiaries and (i) any officer or other
employee thereof as a result of a "change of control" (as defined in any such
agreement) having occurred or as a result of the termination of such officer's
or employee's employment, whether voluntary or otherwise, and (ii) all
non-employee directors of the Company with respect to deferred compensation,
including, without limitation the severance, bonus and other payments listed in
DL 6.1, which amounts have been reviewed and approved by Parent and Sub.
SECTION 6.2. COOPERATION. The Corporation and Parent will cooperate with
each other and each such party shall take all reasonable actions that may be
necessary or desirable to consummate the transactions contemplated pursuant to
this Agreement, including, but not limited to, furnishing to each other, or
reviewing, the information relating to each of them required by applicable
statutes, rules and regulations for the purpose of preparing the Offer
Documents, any federal and state securities law filings and any filings under
the HSR Act. Prior to the execution of this Agreement, Parent will provide the
Corporation with a copy in draft form of the Offer Documents and will make
available a final copy of the Offer Documents prior to filing with the SEC. Each
party covenants that all such information furnished to the other or reviewed by
it will be true and correct in all material respects to the knowledge of such
party. Parent and the Corporation will promptly notify the other party hereto of
any comments or requests for additional information from the SEC or state
securities law administrators or relating to any filing under the HSR Act
relating to the Offer, and will upon request supply the other parties hereto
with copies of all correspondence between them or their representatives and the
SEC or members of its staff or state securities law administrators with respect
to the transaction contemplated hereby or relating to any filing under the HSR
Act relating thereto.
SECTION 6.3. FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Each party hereto
agrees to exert all reasonable efforts to consummate the Offer and the Merger at
the earliest practicable time, including, without limitation, (i) preparing and
filing all requisite applications, documents and notifications (including filing
with the FTC and the DOJ the Notification and Report Forms under the HSR Act and
cooperating with each other with respect to the filing of any additional
information with respect thereto) in connection with the transaction
contemplated herein required by applicable law, (ii) responding as promptly as
practicable to all inquiries in connection therewith, (iii) removing or
satisfying, if reasonably practicable, any objections to the validity or
legality of the Share Purchase, and (iv) satisfying the conditions to the
consummation of the Share Purchase set forth herein.
SECTION 6.4. PUBLIC ANNOUNCEMENTS. Parent, Sub and the Corporation will
consult with each other before issuing any press release or making any public
statement with respect to the Offer or this Agreement and, except as may be
required by applicable law or the NYSE Rules, will not issue any such press
release or make any such public statement without the prior consent of the other
party hereto, which consent will not be unreasonably withheld or delayed.
SECTION 6.5. EMPLOYEE BENEFITS. (a) Until the first anniversary of the
Effective Time, Parent shall ensure that all employees and officers of the
Corporation and Subsidiaries receive compensation and benefits in the aggregate
substantially comparable to the compensation and benefits received by such
individuals immediately prior to the date hereof. Notwithstanding the foregoing,
following the Effective Time, the Parent may terminate the employment of any
employee (subject to the payment of severance benefits payable to the employee
in connection with such termination).
(b) Until the first anniversary of the Effective Time, Parent shall keep in
effect all severance policies that are applicable to employees and officers of
the Corporation and its Subsidiaries immediately prior to the date hereof.
(c) Following the Effective Time, (i) Parent shall ensure that no employee
welfare benefit plan adopted by the Corporation or the Subsidiaries shall have
any preexisting condition limitations and (ii) Parent shall honor all premiums
and deductibles paid by the employees, officers and directors of the Corporation
and Subsidiaries under all Employee Benefit Plans up to (and including) the
Effective Time.
(d) Following the Effective Time, for purposes of eligibility and vesting,
Parent shall honor all service credit accrued by the employees, officers and
directors of the Corporation and Subsidiaries under all Employee Benefit Plans
up to (and including) the Effective Time.
SECTION 6.6. INDEMNIFICATION AND INSURANCE. (a) From and after the Share
Purchase, Parent shall cause the Corporation to (i) maintain in effect in the
Certificate of Incorporation of the Corporation the provisions with respect to
the indemnification set forth in Article VII of the Certificate of Incorporation
of the Corporation as in effect at the Share Purchase, which provisions shall
not be amended, repealed or otherwise modified for a period of six (6) years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals (or their estates) who at the date of this Agreement
and/or as of the closing of the Share Purchase are or were directors, officers,
employees or agents of the Corporation or its Subsidiaries, unless such
modification is required by law and (ii) maintain in effect for a period of six
(6) years from the Share Purchase each Indemnification Agreement in effect (as
of such date) between the Corporation or any of its Subsidiaries and officers
and directors of the Corporation and its Subsidiaries, which Indemnification
Agreement shall not be amended or modified during such period in any manner that
would adversely affect the rights of the individual who is a party thereto.
(b) Prior to the Share Purchase, the Corporation shall purchase a six year
"tail" insurance policy with its current carrier substantially identical in all
respects to the Corporation's current directors' and officers' liability
insurance coverage (and providing coverage for an amount not less than
$30,000,000 and providing for two reinstatement options, exercisable at any time
during such six year tail period of $30,000,000) covering those persons who are
currently covered on the date of this Agreement by the Corporation's directors'
and officers' liability insurance policy (a copy of which has been heretofore
delivered to Parent) (the "Indemnified Parties").
(c) In the event the Corporation or Parent or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Corporation
or Parent, as the case may be, shall assume the obligations set forth in this
Section.
(d) Notwithstanding the foregoing, nothing herein shall be construed to
relieve Parent or the Corporation of their respective obligations to any
Indemnified Party pursuant to this Section, and each of the Indemnified Parties
shall be entitled to enforce such obligations (including the right to
indemnification) directly against the Parent or the Corporation without first
making any claim with respect thereto against any applicable successor or
assign.
(e) This Section 6.6 shall survive the consummation of the Share Purchase
and the Merger, if necessary, is intended to benefit the Corporation and the
Indemnified Parties, and shall be binding on all successors and assigns of the
Corporation and the Parent. Parent shall cause the Corporation to honor its
obligations pursuant to this Section 6.6 from and after the Share Purchase.
SECTION 6.7. RESIGNATION OF DIRECTORS. The Corporation shall cause each of
the persons who are members of the Board of Directors of the Corporation or of
the Board of Directors of the Subsidiaries (other than Allied Bond & Collection
Agency, Inc.) immediately prior to the Closing to deliver their resignations as
directors of the Corporation and such Subsidiaries, which resignations shall be
effective as of the Closing.
SECTION 6.8. CONFIDENTIALITY AGREEMENT. Purchaser and the Corporation hereby
agree that as of the date hereof the Confidentiality Agreement dated August 18,
1997 between Purchaser and the Corporation shall in all respects be terminated.
SECTION 6.9. CERTAIN ACTIONS OF PARENT AND SUB. Parent and Sub will not take
any action, or omit to take any reasonable action, which in all likelihood would
(i) have a Material Adverse Effect on the ability of Parent or Sub to consummate
the transactions contemplated hereby, or (ii) cause any of the representations
and warranties contained in Article IV which are qualified as to materiality to
fail to be true and correct in any respect or any such representation or
warranty which is not so qualified to fail to be true and correct in all
material respects, as if such representations and warranties were made at and as
of the Closing, except to the extent any such representation or warranty was
expressly made only as of a different date.
ARTICLE VII--CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT, SUB AND THE
CORPORATION. The respective obligations of Parent and Sub, on the one hand, and
the Corporation, on the other hand, to effect the Merger are subject to the
satisfaction or waiver (subject to applicable law) at or prior to the Effective
Time of each of the following conditions:
(a) APPROVAL OF CORPORATION'S SHAREHOLDERS. To the extent required by
applicable law, this Agreement and the Merger shall have been approved and
adopted by holders of the requisite number of outstanding shares of the
Common Stock of the Corporation entitled to vote in accordance with
applicable law (if required by applicable law) and the Corporation's
Certificate of Incorporation and By-Laws;
(b) HSR ACT. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated;
(c) INJUNCTION. No preliminary or permanent injunction or other order
shall have been issued by any court or by any governmental or regulatory
agency, body or authority which prohibits the consummation of the Merger and
the transactions contemplated by this Agreement and which is in effect at
the Effective Time, PROVIDED, HOWEVER, that, in the case of a decree,
injunction or other order, each of the parties shall have used reasonable
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any decree, injunction or other order that
may be entered; and
(d) STATUTES. No statute, rule, regulation, executive order, decree or
order of any kind shall have been enacted, entered, promulgated or enforced
by any court or governmental authority which prohibits the consummation of
the Merger or has the effect of making the purchase of the Common Stock
illegal.
ARTICLE VIII--TERMINATION AND ABANDONMENT
SECTION 8.1. TERMINATION. This Agreement may be terminated prior to the
Share Purchase and the Merger may be abandoned after the Share Purchase:
(a) by mutual written consent of the Corporation, on the one hand, and
of Parent and Sub, on the other hand;
(b) by either Parent, on the one hand, or the Corporation, on the other
hand, if any governmental or regulatory agency shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or
payment for shares of Common Stock pursuant to the Offer and such order,
decree or ruling or other action shall have become final and nonappealable;
(c) by Parent, on the one hand, or the Corporation, on the other hand,
if the Share Purchase shall not have occurred within 120 days after
commencement of the Offer, unless the Share Purchase shall not have occurred
because of a material breach of any representation, warranty, obligation,
covenant, agreement or condition set forth in this Agreement on the part of
the party seeking to terminate this Agreement;
(d) by the Parent, in the event of a breach by the Corporation of any
representation, warranty, covenant or agreement contained in this Agreement
which (A) would give rise to the failure of a condition set forth in
paragraph (d) or (f) of Annex I to this Agreement, and (B) cannot or has not
been cured prior to the earlier of (i) 15 days after the giving of written
notice of such breach to the Corporation and (ii) two business days prior to
the date on which the Offer expires;
(e) by either Parent, on the one hand, or the Corporation, on the other
hand, if the Board of Directors of the Corporation determines that an
Acquisition Proposal constitutes a Superior Proposal and the Board believes
(and has been advised by independent outside counsel) that a failure to
terminate this Agreement and enter into an agreement to effect the Superior
Proposal would constitute a breach of its fiduciary duties; PROVIDED,
HOWEVER, the Corporation may not terminate this Agreement pursuant to this
Section 8.1(e) unless and until three days have elapsed following delivery
to Parent of a written notice of such determination by the Board of
Directors and during such three day period the Corporation has fully
cooperated with the Parent, including, without limitation, informing the
Parent of the terms and conditions of such Superior Proposal with the intent
of enabling both parties to agree to a modification of the terms and
conditions of this Agreement so that the transactions contemplated hereby
may be effected; and PROVIDED FURTHER that at the end of such three day
period the Board of Directors of the Corporation determines that the
Acquisition Proposal constitutes a Superior Proposal and the Board continues
to believe (and has again been advised by independent outside counsel) that
a failure to terminate this Agreement and enter into an agreement to effect
the Superior Proposal would constitute a breach of its fiduciary duties;
PROVIDED FURTHER that this Agreement shall not terminate pursuant to this
Section 8.1(e) unless (i) prior to such termination Parent has received all
fees and expenses set forth in Section 9.1 by wire transfer in same day
funds and (ii) simultaneously with such termination the Corporation enters
into a definitive acquisition, merger or similar agreement to effect the
Superior Proposal which acquisition agreement (x) permits the Corporation to
terminate the acquisition agreement in the event the Board of Directors of
the Corporation determines to effect a transaction with Parent and (y) does
not provide for breakup fee or other inducement to the acquiror other than
reimbursement of documented out of pocket expenses incurred in connection
with such Superior Proposal;
(f) by the Corporation, in the event of a breach by the Parent or Sub
of any representation, warranty, covenant or agreement contained in this
Agreement which cannot or has not been cured within 15 days after the
giving of written notice of such breach to the Parent and Sub, except, in
any case where such failure is not reasonably likely to affect adversely
Parent's or Sub's ability to complete the Offer and/or Merger.
SECTION 8.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 8.1 hereof by Parent or Sub, on the one hand, or
the Corporation, on the other hand, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall become void and have no
effect, and there shall be no liability hereunder on the part of Parent, Sub or
the Corporation, except that Sections 6.1, 6.4, 9.1 and this Section 8.2 hereof
shall survive any termination of this Agreement. Nothing in this Section 8.2
shall relieve any party to this Agreement of liability for breach of this
Agreement.
ARTICLE IX--MISCELLANEOUS
SECTION 9.1. FEES AND EXPENSES. (a) Except as provided in paragraph (b)
below, all costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
(b) If this Agreement is terminated:
(i) by Parent because of an event set forth in clause (iv)(e) of Annex I
of this Agreement; or
(ii) by Parent or the Corporation in accordance with the terms of
Section 8.1(e) of this Agreement; or
(iii) by the Corporation pursuant to Section 8.1(c), if, prior to such
termination, the Corporation shall have directly or indirectly notified any
of its stockholders that a third party has made an Acquisition Proposal or a
third party shall have announced an Acquisition Proposal, and within twelve
months after such termination, the Corporation or any of its Subsidiaries
enters into an agreement with respect to any merger or any other business
combination, sale or other disposition of any material amount of assets,
sale of shares of capital stock which would give the acquirors not less than
10% of the issued Shares, a tender offer or exchange offer or similar
transaction involving the Corporation or one or more of its Subsidiaries
accounting for more than 10% of the Corporation's consolidated income in its
prior fiscal year (a "Third Party Acquisition"), or a Third Party
Acquisition occurs within twelve months after the Corporation's termination
of this Agreement pursuant to Section 8.1(c), involving any such party (or
any affiliate or associate thereof) (x) with whom the Corporation or any
Subsidiary (or their respective representatives) during the term of this
Agreement had any discussions with respect to a Third Party Acquisition, (y)
to whom the Corporation or any Subsidiary (or any of their respective
representatives) during the term of this Agreement furnished information
with respect to or with a view toward a Third Party Acquisition, or (z) who
during the term of this Agreement had submitted a proposal or expressed any
interest publicly or to the Corporation or any Subsidiary (or their
respective representatives) in a Third Party Acquisition, which Third Party
Acquisition contemplates a direct or indirect consideration for shares of
Common Stock in excess of the Merger Consideration, in the case of each of
clauses (x), (y) and (z) prior to such termination; then the Corporation
shall (except as required to be earlier paid in accordance with Section
8.1(e)) pay to Parent in same day funds Seven Million Seven Hundred Thousand
Dollars ($7,700,000.00), which shall be deemed to include reimbursement for
all out-of-pocket fees and expenses incurred by Parent or on its behalf in
connection with the transactions contemplated hereby.
SECTION 9.2. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing and shall be given by personal delivery,
reputable overnight courier service, certified mail (postage prepaid, return
receipt requested), facsimile (with a copy sent via prepaid first class mail) or
first class mail, as follows:
If to the Corporation, to:
The Union Corporation
211 King Street
Suite 100
Charleston, South Carolina 29401
Attention: William B. Hewitt, President
and Chief Executive Officer
Fax: (803) 958-3850
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Robert H. Haines, Esq.
Fax: (212) 223-1151
If to Parent and Sub, to:
c/o Outsourcing Solutions Inc.
390 South Woods Mill Road
Suite 150
Chesterfield, MO 63017
Attention: Timothy G. Beffa, President
and Chief Executive Officer
Fax: (314) 576-1867
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Fax: (212) 819-7817
or to such other address as such party may hereafter specify by notice to the
other party hereto delivered in accordance with this Section. Each such notice,
request or other communication shall be effective (a) if personally delivered,
when presented, (b) if by reputable overnight courier, the next business day
following the delivery thereof to such courier (or such later date as is
demonstrated by a BONA FIDE receipt therefor), (c) if given by certified mail
(postage prepaid, return receipt requested), three business days after deposit
in the mails, (d) if given by facsimile, when the appropriate answerback or
other confirmation of receipt is received, or (e) if given by any other means,
when received.
SECTION 9.3. TERMINATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein shall terminate at the Share
Purchase and neither the Corporation nor any officer, director, employee,
stockholder, fiduciary or agent of the Corporation shall be under any liability
or obligation whatsoever with respect to any such representation or warranty
after such time. This Section shall not limit any covenant or agreement of the
parties hereto which by its terms contemplates performance after the Share
Purchase.
SECTION 9.4. AMENDMENTS. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by the mutual written agreement of the
parties hereto at any time prior to the Effective Time with respect to any of
the terms contained herein; except that Sections 6.1(c), 6.5 and 6.6 above may
not be amended or supplemented to the detriment of any intended third party
beneficiary thereof without the express written consent of such beneficiary.
SECTION 9.5. WAIVERS. At any time prior to the Closing, Parent, on the one
hand, and the Corporation, on the other hand, may (a) extend the time for the
performance of any agreement of the other party hereto, (b) waive any inaccuracy
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto or (c) waive compliance with any
agreement of the other party or any condition contained herein (unless pursuant
hereto such condition may not be waived) to be satisfied by such other party.
Any agreement on the part of any party to any such extension, and any such
waiver, shall be effective only if set forth in a writing signed on behalf of
such party and delivered to the other party hereto.
SECTION 9.6. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED, that no party may assign or
otherwise transfer any of its rights or obligations under this Agreement without
the prior written consent of the other party hereto and any attempt to so assign
such right or obligation shall be void AB INITIO.
This Agreement shall be binding upon and is solely for the benefit of the
parties hereto and their respective permitted successors and assigns, and
nothing in this Agreement is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this Agreement,
except that (i) in the event that the Share Purchase shall be consummated, then
from and after the Share Purchase the provisions of Sections 6.1(c), 6.5 and 6.6
shall inure to the benefit of the employees, option holders and other persons
specified therein, who, as the intended beneficiaries of such Sections, shall
each be entitled to enforce his or her rights under such Sections and (ii) the
provisions of Section 6.6 shall inure to the benefit of the Indemnified Parties,
who, as the intended beneficiaries of such Section 6.6, shall each be entitled
to enforce his or her rights under such Section.
SECTION 9.7. GOVERNING LAW AND FORUM. This Agreement shall be construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely therein, except that, with respect to matters of
corporate law, Delaware law shall apply.
SECTION 9.8. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
force and effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by the other parties hereto.
SECTION 9.9. ENTIRE AGREEMENT; SCHEDULES AND EXHIBITS. This Agreement,
including the Schedules and Annex I hereto (which are hereby made a part of this
Agreement), contains all of the terms, conditions and representations and
warranties agreed upon by the parties relating to the subject matter of this
Agreement and supersedes all prior and contemporaneous agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
respecting such subject matter.
SECTION 9.10. HEADINGS AND TABLE OF CONTENTS. The headings in this Agreement
and the Table of Contents are included herein for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
ARTICLE X--DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings ascribed to such terms in this Article.
(a) "Balance Sheet Date" shall have the meaning ascribed to such term in
Section 3.9.
(b) "Cash Payment" shall have the meaning ascribed to such term in Section
1.4.
(c) "Certificate of Merger" shall have the meaning ascribed to such term in
Section 2.1.
(d) "Certificates" shall have the meaning ascribed to such term in Section
2.4.
(e) "Closing" shall have the meaning ascribed to such term in Section 2.10.
(f) "Closing Date" shall have the meaning ascribed to such term in Section
2.10.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
(h) "Corporation Filings" shall have the meaning ascribed to such term in
Section 3.7.
(i) "Corporation Financial Statements" shall have the meaning ascribed to
such term in Section 3.8.
(j) "Corporation Stock" shall have the meaning ascribed to such term in the
preamble to this Agreement.
(k) "Corporation 10-Ks" shall have the meaning ascribed to such term in
Section 3.7.
(l) "Credit Agreement" shall have the meaning ascribed to such term in
Section 3.10.
(m) "DGCL" shall have the meaning ascribed to such term in Section 1.2.
(n) "DL" is the Disclosure Letter.
(o) "DOJ" shall mean the United States Department of Justice.
(p) "Dissenting Shareholders" shall have the meaning ascribed to such term
in Section 2.3.
(q) "Effective Time" shall have the meaning ascribed to such term in Section
2.1.
(r) "ERISA" shall have the meaning ascribed to such term in Section 3.14.
(s) "Exchange Act" shall have the meaning ascribed to such term in Section
1.1.
(t) "FTC" shall mean the Federal Trade Commission.
(u) "GAAP" shall have the meaning ascribed to such term in Section 3.8.
(v) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
(w) "Material Adverse Effect" shall mean any change in or effect on the
applicable corporation that either is, or in all reasonable likelihood will be,
materially adverse to the business, operations, financial condition, results of
operations, assets, liabilities or reserves of such corporation and its
subsidiaries, taken as a whole.
(x) "Material Contracts" shall have the meaning ascribed to such term in
Section 3.18.
(y) "Merger" shall have the meaning ascribed to such term in the preamble of
this Agreement.
(z) "Merger Consideration" shall have the meaning ascribed to such term in
Section 2.2.
(aa) "NYSE Rules" shall mean the rules and regulations promulgated by the
New York Stock Exchange, Inc.
(bb) "Offer" shall have the meaning ascribed to such term in the preamble of
this Agreement.
(cc) "Offer Documents" shall have the meaning ascribed to such term in
Section 1.1(b).
(dd) "Options" shall have the meaning ascribed to such term in Section 1.4.
(ee) "Parent Audited Financial Statements" shall have the meaning ascribed
to such term in Section 4.5.
(ff) "Paying Agent" shall have the meaning ascribed to such term in Section
2.4.
(gg) "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
(hh) "Per Share Amount" shall have the meaning ascribed to such term in the
preamble to this Agreement.
(ii) "Proxy Statement" shall have the meaning ascribed to such term in
Section 2.11.
(jj) "Rights Agreement" shall have the meaning ascribed to such term in
Section 1.2.
(kk) "Schedule 14D-1" shall have the meaning ascribed to such term in
Section 1.1(b).
(ll) "Schedule 14D-9" shall have the meaning ascribed to such term in
Section 1.2(b).
(mm) "SEC" shall mean the United States Securities and Exchange Commission.
(nn) "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(oo) "Share Purchase" shall have the meaning ascribed to such term in
Section 1.1.
(pp) "Shares" shall have the meaning ascribed to such term in the preamble
to this Agreement.
(qq) "Subsidiaries" shall have the meaning ascribed to such term in Section
3.6.
(rr) "Surviving Corporation" shall have the meaning ascribed to such term in
Section 2.1(b).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
ATTEST: THE UNION CORPORATION
By: /s/ MELVIN S. COOPER
/s/ NICHOLAS P. GILL ----------------------------------------
- ------------------------------ Name: Melvin S. Cooper
Name: Nicholas P. Gill Title: Chairman of the Board
ATTEST:
OUTSOURCING SOLUTIONS INC.
By: /s/ TYLER T. ZACHEM
/s/ S. WARD ATTERBURY ----------------------------------------
- ------------------------------ Name: Tyler T. Zachem
Name: S. Ward Atterbury Title: Vice President
ATTEST:
SHERMAN ACQUISITION CORPORATION
By: /s/ TYLER T. ZACHEM
/s/ S. WARD ATTERBURY ----------------------------------------
- ------------------------------ Name: Tyler T. Zachem
Name: S. Ward Atterbury Title: Vice President and Treasurer
<PAGE>
ANNEX I
TO SHARE PURCHASE AGREEMENT AND PLAN OF MERGER
CONDITIONS TO THE SHARE PURCHASE
The capitalized terms used in this Annex I shall have the meanings set forth
in the Agreement to which it is annexed.
Notwithstanding any other provision of the Offer or the Agreement, Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1c under the Exchange Act, pay for
any shares of Common Stock tendered pursuant to the Offer and may terminate the
Offer or amend the Offer as and to the extent provided in Section 1.1 of the
Agreement and may postpone the acceptance of, and payment for, shares of Common
Stock, if (i) there shall not have been validly tendered and not withdrawn prior
to the expiration of the Offer a number of shares of Common Stock which
represent two-thirds of the total voting power of all shares of capital stock of
the Corporation outstanding on a fully-diluted basis, (ii) any applicable
waiting period under the HSR Act shall not have expired or been terminated,
(iii) Parent shall not have received financing necessary for it and Sub to
consummate the Offer and the other transactions contemplated by the Agreement in
accordance with the terms of the bank commitment letter dated December 22, 1997,
to Parent from The Chase Manhattan Bank, Chase Securities Inc. and Goldman Sachs
Credit Partners L.P. or (iv) if, at any time on or after the date of the
Agreement and at or before the Share Purchase any of the following shall occur:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, or by
any other Person, domestic or foreign, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or seeking to, or
which could reasonably be expected to make illegal, impede, delay or
otherwise directly or indirectly materially restrain, prohibit or make more
costly the Offer or the Merger or seeking to obtain material damages, (ii)
seeking to prohibit or materially limit the ownership or operation by Parent
or Sub of all or any material portion of the business or assets of the
Corporation or any of its Subsidiaries taken as a whole or to compel Parent
or Sub to dispose of or hold separately all or any material portion of the
business or assets of Parent or Sub or the Corporation or any of its
Subsidiaries taken as a whole or seeking to impose any material limitation
by reason of the transactions contemplated by the Agreement on the ability
of Parent or Sub to conduct its business or own such assets, (iii) seeking
to impose limitations on the ability of Parent or Sub effectively to
exercise full rights of ownership of the shares of Common Stock, including,
without limitation, the right to vote any shares of Common Stock acquired or
owned by Sub or Parent on all matters properly presented to the
Corporation's shareholders, (iv) seeking to require divestiture by Parent or
Sub of any shares of Common Stock, (v) otherwise directly or indirectly
relating to the Offer or the Merger and which, could reasonably be expected
to materially adversely affect the Corporation or any of its Subsidiaries or
Sub or Parent, or (vi) otherwise having a Material Adverse Effect on the
Corporation and its Subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
Parent, Sub, the Corporation or any Subsidiary of the Corporation or (ii)
the Offer or the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or to the Merger, which could reasonably be
expected to directly or indirectly, result in any of the consequences
referred to in clauses (i) through (vi) of paragraph (a) above;
(c) any change (other than as a result of general economic conditions)
shall have occurred, or Parent shall have become aware of any fact, that is
reasonably likely to have a Material Adverse Effect on the Corporation and
its Subsidiaries taken as a whole;
(d) any of the representations or warranties made by the Corporation in
the Agreement that are qualified as to materiality shall be untrue or
incorrect in any respect or any of such representations and warranties that
are not so qualified shall be untrue or incorrect in any material respect as
of the date of this Agreement or immediately prior to the Share Purchase;
(e) the Corporation's Board of Directors shall have withdrawn, modified
or amended in any respect adverse to Parent or Sub its recommendation of the
Offer or the Merger, or shall have resolved to do so;
(f) the Corporation shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or material covenant of the Corporation to be performed
or complied with by it under this Agreement; or
(g) the Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Sub, makes it inadvisable to proceed with
such acceptance for payment or payment.
The foregoing conditions (including those set forth in clauses (i)-(iv)
above) are for the sole benefit of the Parent and Sub and may be asserted by any
of them, or may be waived by the Parent or Sub, in whole or in part at any time
and from time to time in its sole discretion. The failure by the Parent or Sub
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
EMPLOYMENT AGREEMENT
This Agreement is made as of the 16th day of October, 1997 between
Outsourcing Solutions Inc., a Delaware corporation, with offices at 390 South
Woods Mill Road, Suite 150, Chesterfield, Missouri 63017 (the "Company"), and
Daniel J. Dolan, an individual residing in the State of Missouri (the
"Employee").
RECITALS
WHEREAS, the Company desires to secure the services and employment of
the Employee on behalf of the Company, and the Employee desires to enter into
employment with the Company, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Chief
Financial Officer of the Company, and the Employee accepts such employment for
the term of the employment specified in Section 3 below. During the Employment
Term (as defined below), the Employee shall serve as the Chief Financial Officer
of the Company, performing such duties as shall be reasonably required of such
an employee of the Company, and shall have such other powers and perform such
other additional executive duties as may from time to time be assigned to him by
the Board of Directors of the Company. The Employee's primary place of
employment shall be St. Louis, Missouri.
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Employment Term. The employment term shall begin on the date of
this Agreement and continue until December 31, 1998, unless earlier terminated
pursuant to Section 7 below (the "Employment Term"); provided, that on December
31, 1998 and on each anniversary thereafter, the Employment Term shall be
automatically extended for an additional twelve month period unless 30 days
prior to such anniversary date either the Company or the Employee shall give
written notice of termination of the Agreement, in which case the Agreement will
terminate at the end of the then existing Employment Term..
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal semimonthly installments, subject to
withholding and other applicable taxes, at an annual rate of Two Hundred Sixty
Thousand Dollars ($260,000.00).
(b) Bonus. For the period commencing on the date of this Agreement and
ending on December 31, 1997, the Company shall pay the Employee a guaranteed
bonus, subject to withholding and other applicable taxes, of $130,000, payable
on or before January 15, 1998. Commencing on January 1, 1998, the Employee shall
be eligible for an annual bonus of up to 67% of his base salary and, with
respect to the 12 months ended December 31, 1998, the Company shall pay the
Employee a guaranteed bonus, subject to withholding and other applicable taxes,
of $70,000, payable on or before March 15, 1999. The non-guaranteed portion of
such annual bonus shall be based on the satisfaction of performance targets
established by the Board of Directors on or before December 31 of each year for
the next succeeding year.
(c) Stock Options. The Company shall grant to the Employee options to
purchase 75,000 shares of the Company's common stock at an exercise price of
$25.00 per share pursuant to the Company's 1995 Stock Option and Stock Award
Plan (the "Plan"). Such options shall vest upon the satisfaction of performance
and liquidity targets as set forth in the Plan and any award agreement pursuant
to which such options are granted.
(d) Medical and Dental Health, Life and Disability Insurance Benefits.
During the Employment Term, the Employee shall be entitled to medical and dental
health, life insurance and disability insurance benefits in accordance with the
Company's established practices with respect to its key employees.
(e) Vacation; Sick Leave. During the Employment Term, the Employee
shall be entitled to vacation and sick leave in accordance with the Company's
established practices with respect to its key employees.
(f) Car Allowance. During the Employment Term, the Employee shall be
entitled to a $500 per month automobile allowance, payable on the 15th of each
month. In addition, parking at the Company's office shall be provided and the
Company will pay any parking fees charged by any landlord at the Company's
offices.
(g) Club Dues. During the Employment Term, the Company shall pay the
monthly dues and assessment for the Fox Run Golf Club and the St. Louis Club;
provided, however, the Company may terminate payment for the St. Louis Club at
any time upon 60 days notice. In addition, the Company shall pay the $7,500
corporate transfer fee with regard to the Fox Run Golf Club.
5. Expenses. The Employee shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with policies established by the Board from time
to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent required, after prompt notice to the Company of any such order), directly
or indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company or with respect to confidential or secret
processes, services, techniques, customers or plans with respect to the Company
and (b) the Employee will not use, directly or indirectly, any confidential
information for the benefit of anyone other than the Company; provided, however,
that the Employee has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Employee. All new processes, techniques, know-how, inventions, plans, products,
patents and devices developed, made or invented by the Employee, alone or with
others, while an employee of the Company, shall be and become the sole property
of the Company, unless released in writing by the Company, and the Employee
hereby assigns any and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
take any action to disparage or criticize to any third parties any of the
services of the Company or to commit any other action that injures or hinders
the business relationships of the Company.
During the term of this Agreement and thereafter, Employee shall not
employ, solicit for employment or otherwise contract for the services of any
employee of the Company or any of its Affiliates (as defined below) at the time
of this Agreement or who shall subsequently become an employee of the Company or
any of its Affiliates.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder may be
terminated at any time by the Company with or without "cause". For purposes of
this Agreement, "cause" shall mean: (i) embezzlement, theft or other
misappropriation of any property of the Company or any subsidiary, (ii) gross or
willful misconduct resulting in substantial loss to the Company or any
subsidiary or substantial damage to the reputation of the Company or any
subsidiary, (iii) any act involving moral turpitude which results in a
conviction for a felony involving moral turpitude, fraud or misrepresentation,
(iv) gross neglect of his assigned duties to the Company or any subsidiary, (v)
gross breach of his fiduciary obligations to the Company or any subsidiary, or
(vi) any chemical dependence which materially affects the performance of his
duties and responsibilities to the Company or any subsidiary; provided that in
the case of the misconduct set forth in clauses (iv) and (vi) above, such
misconduct shall continue for a period of 30 days following written notice
thereof by the Company to the Employee.
8. Severance. If (a) the Employee's employment is terminated by the
Company without "cause" or (b) the Company does not agree to extend the
Employment Term upon the expiration thereof, the Employee shall be entitled to
(i) receive an amount equal to his total cash compensation (base salary plus
bonus) for the year preceding the date of the Employee's termination or the date
on which the Employment Term expires, as the case may be, such amount to be
payable, at the Company's option, in a lump sum on the date of termination or
the date on which the Employment Term expires, as the case may be, or ratably
over the one year period following the date of termination or expiration (the
"Severance Period") and (ii) continue to receive the medical and dental health
benefits referred to in Section 4(d) during the Severance Period; provided,
however, if either such event occurs prior to the extension of the initial
Employment Term, Employee shall be entitled to (i) $260,000, payable in a lump
sum on the date of termination, (ii) the guaranteed bonus payments for 1997 and
1998 referred to in Section 4(b) to the extent not previously paid to Employee,
payable in a lump sum on the date of termination, and (iii) continue to receive
the medical and dental health benefits referred to in Section 4(d) during the
Severance Period. If the Employee's employment is terminated by the Company "for
cause", the Employee shall not be entitled to severance compensation. The
Employee covenants and agrees that he will not, during the one year period
following the termination of the Employee's employment by the Company, within
any jurisdiction or marketing area in which the Company or any of its Affiliates
(as defined below) is doing business or is qualified to do business, directly or
indirectly own, manage, operate, control, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner
with, any business of the type and character engaged in and competitive with
that conducted by the Company or any of its Affiliates at the time of such
termination; provided, however, that ownership of securities of 2% or less of
any class of securities of a public company shall not be considered to be
competition with the Company or any of its Affiliates. For the purposes of this
Section 8, the term "Affiliate" shall mean, with respect to the Company, any
person or entity which, directly or indirectly, owns or is owned by, or is under
common ownership with, the Company. The term "own" (including, with correlative
meanings, "owned by" and "under common ownership with") shall mean the ownership
of 50% or more of the voting securities (or their equivalent) of a particular
entity.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
Daniel J. Dolan
If to the Company:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 150
Chesterfield, Missouri 63017
Attn: President
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Missouri applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of Missouri or
in the United States District Court for the Eastern District of Missouri, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Sections 6 and 7 of this
Agreement shall survive and shall continue to be binding upon Employee
notwithstanding the termination of this Agreement for any reason whatsoever. The
covenants set forth in Sections 6 and 8 of this Agreement shall be deemed and
construed as separate agreements independent of any other provision of this
Agreement. The existence of any claim or cause of action by Employee against
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Company of any or all covenants. It is expressly
agreed that the remedy at law for the breach or any such covenant is inadequate
and that injunctive relief shall be available to prevent the breach or any
threatened breach thereof.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
OUTSOURCING SOLUTIONS INC.
By /s/ Timothy G. Beffa
--------------------------------------
Timothy G. Beffa, President and
Chief Executive Officer
EMPLOYEE
/s/ Daniel J. Dolan
-----------------------------------------
Daniel J. Dolan
FIRST AMENDMENT TO OUTSOURCING SOLUTIONS INC.
1995 STOCK OPTION AND STOCK AWARD PLAN
This First Amendment (this "Amendment") to the Outsourcing Solutions Inc.
1995 Stock Option and Stock Award Plan (the "Plan"), is made as of the 18th day
of December, 1997. Terms which are defined in the Plan shall have the same
meanings when used herein unless otherwise defined
RECITALS
WHEREAS, the Company has established the Plan to for the purposes set forth
therein;
WHEREAS, the Company desires to amend the Plan to allow non-employee
directors to participate in the Plan upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, IT IS AGREED:
1. Section 4 of the Plan shall be amended by deleting that section in
its entirety and inserting in lieu thereof the following:
"4. Eligibility. Key salaried employees, including officers, and
consultants of the Company and its subsidiaries are eligible to be granted
options and awarded restricted stock under the Plan and to have their
bonuses payable in stock. In addition, directors (whether or not also
employees) of the Company shall also be eligible to be granted options and
awarded restricted stock under the Plan. The employees, consultants and
directors who shall receive awards or options under the Plan shall be
selected from time to time by the Committee, in its sole discretion, from
among those eligible, which may be based upon information furnished to the
Committee by the Company's management, and the Committee shall determine,
in its sole discretion, the number of shares to be covered by the award or
awards and by the option or options granted to each such person selected.
Such key salaried employees, consultants and directors who are selected to
participate in the Plan shall be referred to collectively herein as
"Participants."
2. As used in the Plan and any documents referring thereto, the term
"Plan" on and subsequent to the date hereof shall mean the Plan as amended
hereby.
3. This Amendment shall be limited precisely as written and shall not
be deemed to (i) be a consent to any waiver or modification of any other terms
and conditions of the Plan or (ii) prejudice any right or rights which the
Company may now have or may have in the future under or in connection with the
Plan. Except as expressly amended hereby, the terms and provisions of the Plan
shall remain in full force and effect.
4. This Amendment shall be governed by, and construed in accordance
with, the law of the State of Delaware.
SINGLE TENANT BUILDING LEASE
BETWEEN
JUSTUS REALTY LIMITED PARTNERSHIP,
A COLORADO PARTNERSHIP (LANDLORD)
AND
ACCELERATED BUREAU OF COLLECTIONS, INC.,
A COLORADO CORPORATION (TENANT)
DATE: JUNE 1, 1997
<PAGE>
TABLE OF CONTENTS
1. AGREEMENT ...............................................................1
2. PREMISES ................................................................1
3. TERM ....................................................................1
(a) Initial Term .......................................................1
(b) Option to Extend ...................................................1
4. RENT ....................................................................1
(a) Base Rent ..........................................................1
(b) Square Footage .....................................................2
(c) Adjustment to Base Rent ............................................2
5. TAXES ...................................................................2
(a) Obligation for Payment .............................................2
(b) Taxes Payable in Installments ......................................3
(c) Taxes for Period Other Than Term ...................................3
(d) Other Impositions ..................................................3
(e) Right to Contest Taxes .............................................3
(f) Estimated Payments .................................................4
(g) Final Settlement ...................................................4
6. UTILITIES ...............................................................4
7. INSURANCE ...............................................................5
(a) "All-Risk" Coverage ................................................5
(b) General Liability ..................................................5
(c) Other Matters ......................................................5
(d) Additional Insureds ................................................6
(e) Waiver .............................................................6
8. USE .....................................................................6
9. COMPLIANCE WITH LAWS (GENERALLY .........................................6
(a) Tenant's Obligations ...............................................6
(b) Tenant's Obligations with Respect to
Environmental Laws .................................................7
(c) Right to Contest Laws ..............................................9
10. ASSIGNMENTS AND SUBLEASES .............................................10
11. SIGNS .................................................................10
12. REPAIRS AND MAINTENANCE ..............................................10
13. ALTERATIONS ...........................................................10
14. END OF TERM ...........................................................11
15. DAMAGE AND DESTRUCTION ................................................11
(a) General ...........................................................11
(b) Landlord's Inspection .............................................12
(c) Landlord's Costs ..................................................13
(d) No Rent Abatement .................................................13
(e) Damage During Last Three Years ....................................13
16. CONDEMNATION ..........................................................13
(a) Total Taking ......................................................13
(b) Partial Taking ....................................................13
(c) Tenant's Award ....................................................14
(d) Allocation of an Award for a Total Taking .........................14
17. SUBORDINATION; ENCUMBRANCES ...........................................15
(a) General ...........................................................15
(b) Attornment ........................................................15
(c) Encumbrances ......................................................15
18. LANDLORD'S ACCESS .....................................................16
19. INDEMNIFICATION, WAIVER AND RELEASE ...................................16
(a) Indemnification ...................................................16
(b) Waiver and Release ................................................17
20. COVENANT OF QUIET ENJOYMENT ...........................................17
21. LIMITATION ON TENANT'S RECOURSE .......................................17
22. DEFAULT ...............................................................18
(a) Cure ..............................................................18
(b) Events of Default .................................................18
(c) Remedies ..........................................................19
23. ARBITRATION ...........................................................21
24. MISCELLANEOUS .........................................................22
(a) Recordation .......................................................22
(b) Holding Over ......................................................22
(c) Estoppel Certificates .............................................22
(d) No Waiver .........................................................23
(e) Authority .........................................................23
(f) Notices ...........................................................23
(g) Attorneys' Fees ...................................................24
(h) Waiver of Jury Trial ..............................................24
(i) Restrictions ......................................................24
(j) Binding Effect ....................................................24
<PAGE>
SINGLE TENANT BUILDING LEASE
THIS SINGLE TENANT BUILDING LEASE is made as of June 1, 1997, by JUSTUS
REALTY LIMITED PARTNERSHIP, a Colorado partnership ("landlord"), and ACCELERATED
BUREAU OF COLLECTIONS, INC., a Colorado corporation ("tenant").
1. AGREEMENT
Landlord leases the premises (as that term is defined in paragraph 2) to
tenant, and tenant leases the premises from landlord, according to this lease.
2. PREMISES
The premises are the land and building commonly known as 5295 DTC Parkway,
City of Englewood, County of Arapahoe, State of Colorado, and more particularly
described as:
See Exhibit A attached hereto.
The premises include the heating, ventilating, and air conditioning systems and
the mechanical, electrical, and plumbing systems serving the premises, and the
use of 60 parking spaces located in front of and behind the building.
3. TERM
(a) Initial Term. The term of this lease will be five years, beginning on
June 1, 1997, and expiring on May 31, 2002.
(b) Option to Extend. Tenant may extend the term until the fifth
anniversary of the expiration date by written notice of its election to do so
given to landlord at least one year prior to the expiration date. The terms and
conditions of the lease applicable at the expiration date will govern the
extended term; except that, tenant will have no further right to extend the term
and the base rent during the extended term will be an amount to be agreed upon
in writing by landlord and tenant in writing prior to the expiration date.
Tenant will not have any rights under this paragraph 3(b) if (1) an event of
default exists on the expiration date or on the date on which the tenant gives
its notice, or (2) tenant exercises its rights less than one year before the
expiration date.
4. RENT
(a) Base Rent. Tenant will pay landlord $20.00 annually per square foot of
space in the rented premises (the "base rent") in equal consecutive monthly
installments on or before the first day of each month during the term of this
lease. The base rent will be paid in advance at the address specified for
landlord in paragraph 25(f) or such other place as landlord designates, without
prior demand and without any abatement, deduction or setoff. If the commencement
date occurs on a day other than the first day of a calendar month, or if the
expiration date occurs on a day other than the last day of a calendar month,
then the base rent for the fractional month will be prorated on a daily basis.
(b) Square Footage. Tenant and landlord agree that for the purposes of this
lease, the premises contain 16,728 square feet.
(c) Adjustment to Base Rent. On June 1 of each year during the term hereof,
the base rent for the following year shall be adjusted to reflect increases or
decreases in the Consumer Price Index during the period from June 1 through May
31 immediately preceding the adjustment month each year, as follows: the base
rent for the final month of the preceding year shall be multiplied by a number
which is reached by dividing the Consumer Price Index for Denver/Boulder,
Colorado -- All Items, as published by the Bureau of Labor Statistics, U.S.
Department of Labor (the "CPI") figure for said final month by the CPI figure
for the initial month of this lease term, which is expressed formulaically as:
base rent x last month's CPI/initial month's CPI. If the official monthly CPI is
not available for use as a cost-of-living index for the months provided to be
used as a basis for such formula, it is agreed that the CPI as issued and
published for the earliest preceding months should be used in determining such
formula. If, at any time during the term hereof, the U.S. Bureau of Labor
Statistics shall discontinue the issuance of the Bureau of Labor Statistics
Consumer Price Index, the parties shall use any other standard, nationally
recognized cost-of-living index then issued and available, which is published by
the U.S. government.
5. TAXES
(a) Obligation for Payment. Tenant will pay all taxes (collectively the
"tax"), including without limitation real estate and personal property taxes and
assessments assessed, levied, confirmed, or imposed during the term of this
lease, whether or not now customary or within the contemplation of landlord and
tenant:
(1) upon, measured by, or reasonably attributable to the cost or value
of tenant's equipment, furniture, fixtures, and other personal property located
in the premises, or by the cost or value of any leasehold improvements made in
or to the premises by or for tenant, regardless of whether title to the
improvements is in tenant or landlord;
(2) upon or measured by the base rent, including without limitation
any gross receipts tax or excise tax levied by the federal government or any
other governmental body with respect to the receipt of base rent;
(3) upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use, or occupancy by tenant of the
premises or any portion of the premises;
(4) upon this transaction or any document to which tenant is a party
creating or transferring an interest or an estate in the premises;
(5) upon the premises and all personal property, furniture, fixtures,
and equipment, and all replacements, improvements, or additions to them, whether
owned by landlord or tenant; and
(6) based in whole or in part on a base rent, whether made in addition
to or in substitution for any other tax.
(b) Taxes Payable in Installments. Unless landlord has exercised its rights
under paragraph 5(f) and if, by law, any tax may at the option of the taxpayer
be paid in installments (whether or not interest accrues on the unpaid balance
of the tax), tenant may exercise the option to pay the tax (and any accrued
interest on the unpaid balance of the tax) in installments; in that event,
tenant will pay the installments that become due during the term of this lease
as they become due and before any fine, penalty, further interest, or cost may
be added to them.
(c) Taxes for Period Other Than Term. Any tax, including taxes that have
been converted into installment payments, relating to a fiscal period of the
taxing authority, a part of which period is included within the term and a part
of which is included in a period of time prior to the commencement or after the
end of the term, whether or not such tax or installments are assessed, levied,
confirmed, imposed upon or in respect of, or become a lien upon the premises, or
become payable, during the term, will be adjusted between landlord and tenant as
of the commencement or end of the term, so that tenant will pay that portion of
the tax or installment which the part of the fiscal period included in the term
bears to the fiscal period, and landlord will pay the remainder.
(d) Other Impositions. Tenant will not be obligated to pay local, state, or
federal net income taxes assessed against landlord; local, state, or federal
capital levy of landlord; or sales, excise, franchise, gift, estate, succession,
inheritance, or transfer taxes of landlord.
(e) Right to Contest Taxes. Tenant will have the right to contest the
amount or validity, in whole or in part, of any tax by appropriate proceedings
diligently conducted in good faith, only after paying the tax or posting such
security as landlord may reasonably require in order to protect the premises
against loss or forfeiture. Upon the termination of those proceedings, tenant
will pay the amount of the tax or part of the tax as finally determined, the
payment of which may have been deferred during the prosecution of the
proceedings, together with any costs, fees, interest, penalties, or other
related liabilities. Landlord will not be required to join in any contest or
proceedings unless the provisions of any law or regulations then in effect
require that the proceedings be brought by or in the name of landlord. In that
event, landlord will join in the proceedings or permit them to be brought in its
name; however, landlord will not be subjected to any liability for the payment
of any costs or expenses in connection with any contest or proceedings, and
tenant will indemnify landlord against and save landlord harmless from any of
those costs and expenses.
(f) Estimated Payments. If any lender requires landlord to do so, then, in
each December during the term or as soon after December as practicable, landlord
will give tenant written notice of its estimate of amounts payable under
paragraph 5 for the ensuing calendar year. On or before the first day of each
month during the ensuing calendar year, tenant will pay to landlord one-twelfth
(1/12th) of the estimated amounts; however, if notice is not given in December,
tenant will continue to pay on the basis of the prior year's estimate until the
month after notice is given. If at any time or times it appears to landlord that
the amounts payable under paragraph 5 for the current calendar year will vary
from its estimate by more than ten percent (10%), landlord will, by written
notice to tenant, revise its estimate for the year, and subsequent payments by
tenant for such year will be based upon the revised estimate.
(g) Final Settlement. Within ninety (90) days after the close of each
calendar year or as soon after the ninety-day period as practicable, landlord
will deliver to tenant a statement of amounts payable under paragraph 5 for the
calendar year, prepared by certified public accountants designated by landlord
or prepared by landlord and certified by one of its officers. The certified
statement will be final and binding upon landlord and tenant. If the statement
shows an amount owing by tenant that is less than the estimated payments
previously made by tenant for the calendar year, the statement will be
accompanied by a refund of the excess by landlord to tenant. If the statement
shows an amount owing by tenant that is more than the estimated payments
previously made by tenant for the calendar year, tenant will pay the deficiency
to landlord within thirty (30) days after the delivery of the statement.
6. UTILITIES
Tenant will pay the appropriate suppliers for all water, gas, electricity,
light, heat, telephone, power, and other utilities and communications services
used by tenant on the premises during the term, whether or not the services are
billed directly to tenant. Tenant will also procure, or cause to be procured,
without cost to landlord, any and all necessary permits, licenses, or other
authorizations required for the lawful and proper installation and maintenance
upon the premises of wires, pipes, conduits, tubes, and other equipment and
appliances for use in supplying any of the services to and upon the premises.
Landlord, upon request of tenant, and at the sole expense and liability of
tenant, will join with tenant in any application required for obtaining or
continuing any of the services.
7. INSURANCE
(a) "All-Risk" Coverage. Tenant will, at its sole expense, obtain and keep
in force, during the term of this lease, "all-risk" coverage insurance
(including earthquake and flood insurance) naming landlord and tenant as their
interests may appear and other parties that landlord or tenant may designate as
additional insureds in the customary form in the City of Englewood for buildings
and improvements of similar character, on all buildings and improvements now or
after this date located on the premises. The amount of the insurance will be
designated by landlord no more frequently than once every twelve (12) months,
will be set forth on an "agreed amount endorsement" to the policy of insurance,
will not be less than the agreed replacement value of the buildings and
improvements, and will be subject to arbitration pursuant to paragraph 2.4 if
landlord and tenant do not agree with regard to such value. Landlord and tenant
have already agreed by separate document as to the replacement value of the
existing building on the premises which shall apply from June 1, 1997 until May
31, 1998.
(b) General Liability. Tenant will, at its sole expense, obtain and keep in
force during the term of this lease commercial general liability insurance with
a combined single limit of not less than one million dollars ($1,000,000) for
injury to or death of any one person, and three million dollars ($3,000,000) for
injury to or death of any number of persons in one occurrence and in the
aggregate, and for damage to property, insuring against any and all liability of
landlord and tenant, including without limitation coverage for contractual
liability, broad form property damage, host liquor liability, and non-owned
automobile liability, with respect to the premises or arising out of the
maintenance, use, or occupancy of the premises. The insurance will insure the
performance by tenant of the indemnity agreement as to liability for injury to
or death of persons and damage to property set forth in paragraph 19. The
insurance will be noncontributing with any insurance that may be carried by
landlord and will contain a provision that landlord, although named as an
insured, will nevertheless be entitled to recover under the policy for any loss,
injury, or damage to landlord, its agents, and employees, or the property of
such persons. The limits and coverage of all the insurance will be adjusted by
agreement of landlord and tenant during every third lease year during the term
of this lease in conformity with the then prevailing custom of insuring
liability in the City of Englewood, and any disagreement regarding the
adjustment will be submitted to arbitration in the manner provided in paragraph
24.
(c) Other Matters. All insurance required in this paragraph and all
renewals of it will be issued by companies authorized to transact business in
the State of Colorado, and rated at least A+ Class X by Best's Insurance Reports
(property liability) or approved by landlord. All insurance policies will be
subject to approval by landlord and any lender as to form and substance; will
expressly provide that the policies will not be canceled or altered without
thirty (30) days' prior written notice to landlord and any lender, in the case
of "all-risk" coverage insurance, and to landlord, in the case of general
liability insurance; and will, to the extent obtainable, provide that no act or
omission of tenant which would otherwise result in forfeiture or reduction of
the insurance will affect or limit the obligation of the insurance company to
pay the amount of any loss sustained. Tenant may satisfy its obligation under
this paragraph by appropriate endorsements of its blanket insurance policies.
(d) Additional Insureds. All policies of liability insurance that tenant is
obligated to maintain according to this lease (other than any policy of
workmen's compensation insurance) will name landlord and such other persons or
firms as landlord specifies from time to time as additional insureds. Original
or copies of original policies (together with copies of the endorsements naming
landlord, and any others specified by landlord, as additional insureds) and
evidence of the payment of all premiums of such policies will be delivered to
landlord prior to tenant's occupancy of the premises and from time to time at
least thirty (30) days prior to the expiration of the term of each policy. All
public liability, property damage liability, and casualty policies maintained by
tenant will be written as primary policies, not contributing with and not in
excess of coverage that landlord may carry. No insurance required to be
maintained by tenant by this paragraph will be subject to any deductible without
landlord's prior written consent.
(e) Waiver. Landlord and tenant waive all rights to recover against each
other or against any other tenant or occupant of the building, or against the
officers, directors, shareholders, partners, joint venturers, employees, agents,
customers, invitees, or business visitors of each of theirs or of any other
tenant or occupant of the building, for any loss or damage arising from any
cause covered by any insurance required to be carried by each of them pursuant
to this paragraph 7 or any other insurance actually carried by each of them.
Landlord and tenant will cause their respective insurers to issue appropriate
waiver of subrogation rights endorsements to all policies of insurance carried
in connection with the building or the premises or the contents of either of
them. Tenant will cause all other occupants of the premises claiming by, under,
or through tenant to execute and deliver to landlord a waiver of claims similar
to the waiver in this paragraph and to obtain such waiver of subrogation rights
endorsements.
8. USE
The premises will be used only for offices.
9. COMPLIANCE WITH LAWS (GENERALLY)
(a) Tenant's Obligations. Tenant will not use or occupy, or permit any
portion of the premises to be used or occupied:
(1) in violation of any law, ordinance, order, rule, regulation,
certificate of occupancy, or other governmental requirement;
(2) for any disreputable business or purpose; or
(3) in any manner or for any business or purpose that creates risks of
fire or other hazards, or that would in any way violate, suspend, void, or
increase the rate of fire or liability or any other insurance of any kind at any
time carried by landlord upon all or any part of the building in which the
premises are located or its contents.
Tenant will comply with all laws, ordinances, orders, rules, regulations, and
other governmental requirements relating to the use, condition, or occupancy of
the premises, and all rules, orders, regulations, and requirements of the board
of fire underwriters or insurance service office, or any other similar body,
having jurisdiction over the building in which the premises are located.
(b) Tenant's Obligations with Respect to Environmental Laws.
(1) Tenant and the premises will remain in compliance with all
applicable laws, ordinances, and regulations (including consent decrees and
administrative orders) relating to public health and safety and protection of
the environment, including those statutes, laws, regulations, and ordinances
identified in subparagraph (7), all as amended and modified from time to time
(collectively, "environmental laws"). All governmental permits relating to the
use or operation of the premises required by applicable environmental laws are
and will remain in effect, and tenant will comply with them.
(2) Tenant will not permit to occur any release, generation,
manufacture, storage, treatment, transportation, or disposal of "hazardous
material," as that term is defined in subparagraph (7), on, in, under, or from
the premises. Tenant will promptly notify landlord, in writing, if tenant has or
acquires notice or knowledge that any hazardous material has been or is
threatened to be released, discharged, disposed of, transported, or stored on,
in, under, or from the premises; and if any hazardous material is found on the
premises, tenant, at its own cost and expense, will immediately take such action
as is necessary to detain the spread of and remove the hazardous material to the
complete satisfaction of landlord and the appropriate governmental authorities.
(3) Tenant will immediately notify landlord and provide copies upon
receipt of all written complaints, claims, citations, demands, inquiries,
reports, or notices relating to the condition of the premises or compliance with
environmental laws. Tenant will promptly cure and have dismissed with prejudice
any of those actions and proceedings to the satisfaction of landlord. Tenant
will keep the premises free of any lien imposed pursuant to any environmental
laws.
(4) Landlord will have the right at all reasonable times and from time
to time to conduct environmental audits of the premises, and tenant will
cooperate in the conduct of those audits. The audits will be conducted by a
consultant of landlord's choosing, and if any hazardous material is detected or
if a violation of any of the warranties, representations, or covenants contained
in this paragraph is discovered, the fees and expenses of such consultant will
be borne by tenant and will be paid as additional rent under this lease on
demand by landlord.
(5) If tenant fails to comply with any of the foregoing warranties,
representations, and covenants, landlord may cause the removal (or other cleanup
acceptable to landlord) of any hazardous material from the premises. The costs
of hazardous material removal and any other cleanup (including transportation
and storage costs) will be additional rent under this lease, whether or not a
court has ordered the cleanup, and those costs will become due and payable on
demand by landlord. Tenant will give landlord, its agents, and employees access
to the premises to remove or otherwise clean up any hazardous material.
Landlord, however, has no affirmative obligation to remove or otherwise clean up
any hazardous material, and this lease will not be construed as creating any
such obligation.
(6) Tenant agrees to indemnify, defend (with counsel reasonably
acceptable to landlord and at tenant's sole cost), and hold landlord and
landlord's affiliates, shareholders, directors, officers, employees, and agents
free and harmless from and against all losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, costs, judgments, suits,
proceedings, damages (including consequential damages), disbursements, or
expenses of any kind (including attorneys' and experts' fees and expenses and
fees and expenses incurred in investigating, defending, or prosecuting any
litigation, claim, or proceeding) that may at any time be imposed upon, incurred
by, or asserted or awarded against landlord or any of them in connection with or
arising from or out of:
(A) any hazardous material on, in, under, or affecting all or any
portion of the premises;
(B) any misrepresentation, inaccuracy, or breach of any warranty,
covenant, or agreement contained or referred to in this paragraph;
(C) any violation or claim of violation by tenant of any environmental
law; or
(D) the imposition of any lien for the recovery of any costs for
environmental cleanup or other response costs relating to the release or
threatened release of hazardous material.
This indemnification is the personal obligation of tenant and will survive
termination of this lease. Tenant, its successors, and assigns waive, release,
and agree not to make any claim or bring any cost recovery action against
landlord under CERCLA, as that term is defined in subparagraph (7), or any state
equivalent or any similar law now existing or enacted after this date. To the
extent that landlord is strictly liable under any such law, regulation,
ordinance, or requirement, tenant's obligation to landlord under this indemnity
will also be without regard to fault on the part of tenant with respect to the
violation or condition that results in liability to landlord.
(7) For purposes of this lease, "hazardous material" means:
(A) "hazardous substances" or "toxic substances" as those terms are
defined by the Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), 42 U.S.C. ss. 9601, et seq., or the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1802, both as amended to this date and as
amended after this date;
(B) "hazardous wastes," as that term is defined by the Resource
Conservation and Recovery Act (RCRA), 42 U.S.C.ss. 6902, et seq., as amended to
this date and as amended after this date;
(C) any pollutant, contaminant, or hazardous, dangerous, or toxic
chemical, material, or substance within the meaning of any other applicable
federal, state, or local law, regulation, ordinance, or requirement (including
consent decrees and administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous, toxic, or dangerous waste
substance or material, all as amended to this date or as amended after this
date;
(D) crude oil or any fraction of it that is liquid at standard
conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds
per square inch absolute);
(E) any radioactive material, including any source, special nuclear,
or byproduct material as defined at 42 U.S.C.ss. 2011, et seq., as amended to
this date or as amended after this date;
(F) asbestos in any form or condition; and
(G) polychlorinated biphenyls (PCB's) or substances or compounds
containing PCB'S.
(c) Right to Contest Laws. Tenant will have the right to contest by
appropriate proceedings diligently conducted in good faith in the name of
tenant, or, with the prior consent of the landlord, in the name of landlord, or
both, without cost or expense to landlord, the validity or application of any
law, ordinance, order, rule, regulation, or legal requirement of any nature. If
compliance with any law, ordinance, order, rule, regulation, or requirement may
legally be delayed pending the prosecution of any proceeding, without incurring
any lien, charge, or liability of any kind against the premises, or tenant's
interest in the premises, and without subjecting tenant or landlord to any
liability, civil or criminal, for failure so to comply, tenant may delay
compliance until the final determination of the proceeding. Even if a lien,
charge, or liability may be incurred by reason of delay, tenant may contest and
delay, so long as (1) the contest or delay does not subject landlord to criminal
liability and (2) tenant furnishes to landlord security, reasonably satisfactory
to landlord, against any loss or injury by reason of any contest or delay.
Landlord will not be required to join any proceedings referred to in this
paragraph unless the provision of any applicable law, rule, or regulation at the
time in effect requires that the proceedings be brought by or in the name of
landlord, or both. In that event landlord will join the proceedings or permit
them to be brought in its name if tenant pays all related expenses.
10. ASSIGNMENTS AND SUBLEASES
Tenant may assign or sublease all or part of the premises with landlord's
prior written consent, which landlord agrees will not be unreasonably withheld
or delayed.
11. SIGNS
Tenant may install signs on the premises in accordance with federal, state,
and local statutes, laws, ordinances, and codes.
12. REPAIRS AND MAINTENANCE
Tenant accepts the premises as is. Tenant will, at its sole cost and
expense, maintain the premises and make repairs, restorations, and replacements
to the premises, including without limitation the heating, ventilating, air
conditioning, mechanical, electrical, elevator, and plumbing systems, structural
roof, walls, and foundations, and the fixtures and appurtenances to the premises
as and when needed to preserve them in good working order and condition and
regardless of whether the repairs, restorations, and replacements are ordinary
or extraordinary, foreseeable or unforeseeable, capital or noncapital, or the
fault or not the fault of tenant, its agents, employees, invitees, visitors, or
contractors. All repairs, restorations, and replacements will be in quality and
class equal to the original work or installations. If tenant fails to make
repairs, restorations, or replacements, landlord may make them at the expense of
tenant and the expense will be collectible as additional rent to be paid by
tenant within fifteen (15) days after delivery of a statement for the expense.
13. ALTERATIONS
Tenant will not make any alterations, additions, or improvements to the
premises without landlord's prior written consent; however, landlord's prior
written consent will not be necessary for any alteration, addition, or
improvement which:
(a) costs less than two thousand dollars ($2,000) including labor and
materials;
(b) does not change the general character of the premises, or reduce the
fair market value of the premises below its fair market value prior to the
alteration, addition, or improvement;
(c) is made with due diligence, in a good and workmanlike manner, and in
compliance with the laws, ordinances, orders, rules, regulations, certificates
of occupancy, or other governmental requirements described in paragraph 9;
(d) is promptly and fully paid for by tenant; and
(e) is made under the supervision of an architect or engineer reasonably
satisfactory to landlord and in accordance with plans and specifications and
cost estimates approved by landlord.
Landlord may designate a supervising architect to assure compliance with the
provisions of this paragraph, and if it does, tenant will pay the supervising
architect's charges. Subject to tenant's rights in paragraph 14, all
alterations, additions, fixtures, and improvements, whether temporary or
permanent in character, made in or upon the premises by tenant, will immediately
become landlord's property and at the end of the term of this lease will remain
on the premises without compensation to tenant. By notice given to tenant no
less than ninety (90) days prior to the end of this lease, landlord may require
that any alterations, additions, fixtures, and improvements made in or upon the
premises be removed by tenant. In that event, tenant will remove the
alterations, additions, fixtures, and improvements at tenant's sole cost and
will restore the premises to the condition in which they were before the
alterations, additions, improvements, and additions were made, reasonable wear
and tear excepted.
14. END OF TERM
At the end of this lease, tenant will surrender the premises in good order
and condition, ordinary wear and tear excepted. Tenant will not remove any trade
fixtures or equipment without landlord's prior written consent. Whether or not
tenant is then in default, tenant will remove alterations, additions,
improvements, trade fixtures, equipment, and furniture that landlord has
requested be removed in accordance with paragraph 13. Tenant will fully repair
any damage occasioned by the removal of any trade fixtures, equipment,
furniture, alterations, additions, and improvements. All trade fixtures,
equipment, furniture, alterations, additions, and improvements not so removed
will conclusively be deemed to have been abandoned by tenant and may be
appropriated, sold, stored, destroyed, or otherwise disposed of by landlord
without notice to tenant or to any other person and without obligation to
account for them. Tenant will pay landlord all expenses incurred in connection
with landlord's disposition of such property, including without limitation the
cost of repairing any damage to the building or premises caused by removal of
the property. Tenant's obligation to observe and perform this covenant will
survive the end of this lease.
15. DAMAGE AND DESTRUCTION
(a) General. if the premises are damaged or destroyed by reason of fire or
any other cause, tenant will immediately notify landlord and will promptly
repair or rebuild the building at tenant's expense, so as to make the building
at least equal in value to the building existing immediately prior to the
occurrence and as nearly similar to it in character as is practicable and
reasonable. Landlord will apply and make available to pay to tenant the net
proceeds of any fire or other casualty insurance paid to landlord, after
deduction of any costs of collection, including attorneys' fees, for repairing
or rebuilding as the same progresses. Payments will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by landlord. Landlord will contribute, out of the insurance proceeds, towards
each payment to be made by or on behalf of tenant for the repairing or
rebuilding of the building, under a schedule of payments to be made by tenant
and not unreasonably objected to by landlord, an amount in the proportion to the
payment by tenant as the total net amount received by landlord from insurers
bears to the total estimated cost of the rebuilding or repairing. Landlord,
however, may withhold from each amount so to be paid by landlord fifteen percent
(15%) of the amount until the work of repairing or rebuilding is completed and
proof has been furnished to landlord that no lien or liability has attached or
will attach to the premises or to landlord in connection with the repairing or
rebuilding. Upon the completion of rebuilding and the furnishing of that proof,
the balance of the net proceeds of the insurance will be paid to tenant. If the
proceeds of insurance are paid to the holder of any mortgage on landlord's
interest in the premises, landlord will make available net proceeds of the
insurance in accordance with the provisions of this paragraph. Before beginning
repairs or rebuilding, or letting any contracts in connection with repairs or
rebuilding, tenant will submit for landlord's approval, which approval landlord
will not unreasonably withhold or delay, complete and detailed plans and
specifications for the repairs or rebuilding. Promptly after receiving
landlord's approval of those plans and specifications, tenant will begin the
repairs or rebuilding and will prosecute the repairs or rebuilding to completion
with diligence, subject, however, to strikes, lockouts, acts of God, embargoes,
governmental restrictions, and other causes beyond tenant's reasonable control.
Tenant will obtain and deliver to landlord a temporary or final certificate of
occupancy before the premises are reoccupied for any purpose. The repairs or
rebuilding will be completed free and clear of mechanics' or other liens, and in
accordance with the building codes and all applicable laws, ordinances,
regulations, or orders of any state, municipal, or other public authority
affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body, and of any
liability insurance company insuring landlord against liability for accidents
related to the premises. Any remaining proceeds of insurance after the
restoration will be tenant's property.
(b) Landlord's Inspection. During the progress of repairs or rebuilding,
landlord and its architects and engineers may from time to time inspect the
building and will be furnished, if required by them, with copies of all plans,
shop drawings, and specifications relating to the repairs or rebuilding. Tenant
will keep all plans, shop drawings, and specifications at the building, and
landlord and its architects and engineers may examine them at all reasonable
times. If, during repairs or rebuilding, landlord and its architects and
engineers determine that the repairs or rebuilding are not being done in
accordance with the approved plans and specifications, landlord will give prompt
notice in writing to tenant, specifying in detail the particular deficiency,
omission, or other respect in which landlord claims the repairs or rebuilding do
not accord with the approved plans and specifications. Upon the receipt of that
notice, tenant will cause corrections to be made to any deficiencies, omissions,
or such other respect. Tenant's obligations to supply insurance according to
paragraph 7 will be applicable to any repairs or building under this paragraph.
(c) Landlord's Costs. The charges of any architect or engineer of landlord
employed to pass upon any plans and specifications and to supervise and approve
any construction, or for any services rendered by the architect or engineer to
landlord as contemplated by any of the provisions of this lease, will be paid by
tenant as a cost of the repair or rebuilding. The fees of such architect or
engineer will be those customarily paid for comparable services.
(d) No Rent Abatement. Base rent and additional rent will not abate pending
the repairs or rebuilding except to the extent to which landlord receives a net
sum as proceeds of any rent insurance.
(e) Damage During Last Three Years. If at any time during the last three
years of the term (as extended according to paragraph 3) the building is so
damaged by fire or otherwise that the cost of restoration exceeds fifty percent
(50%) of the replacement value of the building (exclusive of foundations)
immediately prior to the damage, either landlord or tenant may, within thirty
(30) days after such damage, give notice of its election to terminate this lease
and, subject to the further provisions of this paragraph, this lease will cease
on the tenth (10th) day after the delivery of that notice. Base rent will be
apportioned and paid to the time of termination. If this lease is so terminated,
tenant will have no obligation to repair or rebuild, and the entire insurance
proceeds will belong to landlord.
16. CONDEMNATION
(a) Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right (in
either case a "taking"), all of the premises are taken, or if so much of the
premises are taken that the premises (even if the restorations described in
paragraph 16(b) were to be made) cannot be used by tenant for the purposes for
which they were used immediately before the taking, this lease will end on the
earlier of the vesting of title to the premises in the condemning authority or
the taking of possession of the premises by the condemning authority (in either
case the "ending date"). If this lease ends according to this paragraph 16(a),
prepaid rent will be appropriately prorated to the ending date. The award in a
taking subject to this paragraph 16(a) will be allocated according to paragraph
16(d).
(b) Partial Taking. If, after a taking, so much of the premises remains
that the premises can be used for substantially the same purposes for which they
were used immediately before the taking:
(1) this lease will end on the ending date as to the part of the
premises which is taken;
(2) prepaid rent will be appropriately allocated to the part of the
premises which is taken and prorated to the ending date;
(3) beginning on the day after the ending date, rent for so much of
the premises as remains will be reduced in the proportion of the floor area of
the building remaining after the taking to the floor area of the building before
the taking;
(4) at its cost, tenant will restore so much of the premises as
remains to a sound architectural unit substantially suitable for the purposes
for which it was used immediately before the taking, using good workmanship and
new first class materials, all according to paragraph 13;
(5) upon the completion of restoration according to clause (6),
landlord will pay tenant the lesser of the net award made to landlord on account
of the taking (after deducting from the total award attorneys', appraisers', and
other costs incurred in connection with obtaining the award, and amounts paid to
the holders of mortgages affecting the premises), or tenant's actual
out-of-pocket cost of restoring the premises; and
(6) landlord will keep the balance of the net award.
(c) Tenant's Award. In connection with any taking subject to paragraph
16(a) or 16(b), tenant may prosecute its own claim by separate proceedings
against the condemning authority for damages legally due to it (such as the loss
of fixtures which tenant was entitled to remove and moving expenses) only so
long as tenant's award does not diminish or otherwise adversely affect
landlord's award.
(d) Allocation of an Award for a Total Taking. If this lease ends according
to paragraph 16(a), the condemnation award will be paid in the order in this
paragraph 16(d) to the extent it is sufficient:
(1) First, landlord will be reimbursed for its attorneys' fees,
appraisal fees, and other costs incurred in prosecuting the claim for the award.
(2) Second, any lender whose loan is secured by the premises will be
paid the principal balance of its loan, plus accrued and unpaid interest, and
any other charges due on payment.
(3) Third, landlord will be paid the value at the time of the award of
lost rent and the reversion to the extent they exceed the amount paid to
landlord's lender.
(4) Fourth, tenant will be paid its adjusted book value as of the date
of the taking of its improvements (excluding trade fixtures) made to the
premises. In computing its adjusted book value, improvements will be
conclusively presumed to have been depreciated or amortized for federal income
tax purposes over their useful lives with a reasonable salvage value.
(5) Fifth, the balance will be divided equally between landlord and
tenant.
17. SUBORDINATION; ENCUMBRANCES
(a) General. This lease and tenant's rights under this lease are subject
and subordinate to any ground lease or underlying lease, first mortgage, first
deed of trust, or other first lien encumbrance or indenture, together with any
renewals, extensions, modifications, consolidations, and replacements of them,
which now or at any subsequent time affect the premises, any interest of
landlord in the premises, or landlord's interest in this lease and the estate
created by this lease (except to the extent that any such instrument expressly
provides that this lease is superior to it). This provision will be
self-operative and no further instrument of subordination will be required in
order to effect it. Nevertheless, tenant will execute, acknowledge and deliver
to landlord, at any time and from time to time, upon demand by landlord, any
documents as may be requested by landlord, any ground landlord or underlying
lessor, or any mortgagee, or any holder of a deed of trust or other instrument
described in this paragraph, to confirm or effect the subordination. If tenant
fails or refuses to execute, acknowledge, and deliver any such document within
twenty (20) days after written demand, landlord, its successors, and assigns
will be entitled to execute, acknowledge, and deliver the document on behalf of
tenant as tenant's as attorney-in-fact. Tenant constitutes and irrevocably
appoints landlord, its successors, and assigns, as tenant's attorney-in-fact to
execute, acknowledge, and deliver on behalf of tenant any documents described in
this paragraph.
(b) Attornment. If any holder of any mortgage, indenture, deed of trust, or
other similar instrument described in subparagraph (a) succeeds to landlord's
interest in the premises, tenant will pay to it all rents subsequently payable
under this lease. Tenant will, upon request of anyone so succeeding to the
interest of landlord, automatically become the tenant of, and attorn to, the
successor in interest without change in this lease. The successor in interest
will not be bound by (1) any payment of rent for more than one month in advance,
(2) any amendment or modification of this lease made without its written
consent, (3) any claim against landlord arising prior to the date on which the
successor succeeded to landlord's interest, or (4) any claim or offset of rent
against the landlord. Upon request by the successor in interest and without cost
to landlord or the successor in interest, tenant will execute, acknowledge, and
deliver an instrument or instruments confirming the attornment. The instrument
of attornment will also provide that the successor in interest will not disturb
tenant in its use of the premises in accordance with this lease. If tenant fails
or refuses to execute, acknowledge, and deliver the instrument within twenty
(20) days after written demand, the successor in interest will be entitled to
execute, acknowledge, and deliver the document on behalf of tenant as tenant's
as attorney-in-fact. Tenant constitutes and irrevocably appoints the successor
in interest as tenant's attorney-in-fact to execute, acknowledge, and deliver on
behalf of tenant any document described in this paragraph.
(c) Encumbrances. Tenant may not mortgage, pledge, or otherwise encumber
this lease or the premises.
18. LANDLORD'S ACCESS
Landlord, its agents, employees, and contractors may enter the premises at
any time in response to an emergency, and at reasonable hours to (a) inspect the
premises, (b) exhibit the premises to prospective purchasers, lenders, or
tenants, (c) determine whether tenant is complying with its obligations in this
lease, (d) supply any other service which this lease requires landlord to
provide, (e) post notices of nonresponsibility or similar notices, or (f) make
repairs which this lease requires landlord to make; however, all work will be
done as promptly as reasonably possible and so as to cause as little
interference to tenant as reasonably possible. Tenant waives any claim on
account of any injury or inconvenience to tenant's business, interference with
tenant's business, loss of occupancy or quiet enjoyment of the premises, or any
other loss occasioned by the entry. Landlord will at all times have a key with
which to unlock all of the doors in the premises (excluding tenant's vaults,
safes, and similar areas designed in writing by tenant in advance). Landlord
will have the right to use any means landlord may deem proper to open doors in
the premises and to the premises in an emergency in order to enter the premises.
No entry to the premises by landlord by any means will be a forcible or unlawful
entry into the premises or a detainer of the premises or an eviction, actual or
constructive, of tenant from the premises, or any part of the premises, nor will
any entry entitle tenant to damages or an abatement of rent or other charges
which this lease requires tenant to pay.
19. INDEMNIFICATION, WAIVER AND RELEASE
(a) Indemnification. Tenant will indemnify landlord, its agents, and
employees against, and hold landlord, its agents, and employees harmless from,
any and all demands, claims, causes of action, fines, penalties, damages
(including consequential damages), losses, liabilities, judgments, and expenses
(including without limitation attorneys' fees and court costs) incurred in
connection with or arising from:
(1) the use or occupancy of the premises by tenant or any person
claiming under tenant;
(2) any activity, work, or thing done or permitted or suffered by
tenant in or about the premises;
(3) any acts, omissions, or negligence of tenant, any person claiming
under tenant, or the employees, agents, contractors, invitees, or visitors of
tenant or any person;
(4) any breach, violation, or nonperformance by tenant, any person
claiming under tenant, or the employees, agents, contractors, invitees, or
visitors of tenant, or any person of any term, covenant, or provision of this
lease or any law, ordinance, or governmental requirement of any kind; or
(5) except for loss of use of all or any portion of the premises or
tenant's property located within the premises that is proximately caused by or
results proximately from the negligence of landlord, any injury or damage to the
person, property, or business of tenant or its employees, agents, contractors,
invitees, visitors, or any other person entering upon the premises under the
express or implied invitation of tenant.
If any action or proceeding is brought against landlord, its employees, or
agents by reason of any claim, tenant, upon notice from landlord, will defend
the claim at tenant's expense with counsel reasonably satisfactory to landlord.
(b) Waiver and Release. Tenant waives and releases all claims against
landlord, its employees, and agents with respect to all matters for which
landlord has disclaimed liability pursuant to the provisions of this lease. In
addition, tenant agrees that landlord, its agents, and employees will not be
liable for any loss, injury, death, or damage (including consequential damages)
to persons, property, or tenant's business occasioned by theft; act of God;
public enemy; injunction; riot; strike; insurrection; war; court order;
requisition; order of governmental body or authority; fire; explosion; falling
objects; steam, water, rain or snow; leak or flow of water (including water from
the elevator system), rain or snow from the premises or into the premises or
from the roof, street, subsurface, or from any other place, or by dampness, or
from the breakage, leakage, obstruction, or other defects of the pipes,
sprinklers, wires, appliances, plumbing, air conditioning, or lighting fixtures
of the building; or from construction, repair, or alteration of the premises or
from any acts or omissions of any visitor of the premises; or from any cause
beyond landlord's control.
20. COVENANT OF QUIET ENJOYMENT
So long as tenant pays the rent and performs all of its obligations in this
lease, tenant's possession of the premises will not be disturbed by landlord, or
anyone claiming by, through or under landlord, or by the holders of the
mortgages described in paragraph 17.
21. LIMITATION ON TENANT'S RECOURSE
Tenant's sole recourse against landlord, and any successor to the interest
of landlord in the premises, is to the interest of landlord, and any successor,
in the premises. Tenant will not have any right to satisfy any judgment which it
may have against landlord, or any successor, from any other assets of landlord,
or any successor.
In this paragraph the terms "landlord" and "successor" include the
shareholders, venturers, and partners of landlord and successor and the
officers, directors, and employees of landlord and successor. The provisions of
this paragraph are not intended to limit tenant's right to seek injunctive
relief or specific performance, or tenant's right to claim the proceeds of
insurance (if any) specifically maintained by landlord for tenant's benefit.
22. DEFAULT
(a) Cure. If tenant fails to pay when due amounts payable under this lease
or to perform any of its other obligations under this lease within the time
permitted for its performance, then landlord, after ten (10) days' written
notice to tenant (or, in case of any emergency, upon notice or without notice as
may be reasonable under the circumstances) and without waiving any of its rights
under this lease, may (but will not be required to) pay the amount or perform
the obligation.
All amounts so paid by landlord and all costs and expenses incurred by
landlord in connection with the performance of any obligations (together with
interest at the prime rate from the date of landlord's payment of the amount or
incurring of each cost or expense until the date of full repayment by tenant)
will be payable by tenant to landlord on demand. In the proof of any damages
that landlord may claim against tenant arising out of tenant's failure to
maintain insurance, landlord will not be limited to the amount of the unpaid
insurance premium but will also be entitled to recover as damages for the breach
the amount of any uninsured loss (to the extent of any deficiency in the
insurance required by the provisions of this lease), damages, costs and expenses
of suit, including attorneys' fees, arising out of damage to, or destruction of,
the premises occurring during any period for which tenant has failed to provide
the insurance.
(b) Events of Default. The following occurrences are "events of default":
(1) Tenant defaults in the due and punctual payment of rent, and the
default continues for five (5) days after notice from landlord; however, tenant
will not be entitled to more than one (1) notice for default in payment of rent
during any twelve-month period, and if, within twelve (12) months after any
notice, any rent is not paid when due, an event of default will have occurred
without further notice;
(2) Tenant vacates or abandons the premises;
(3) This lease or the premises or any part of the premises is taken
upon execution or by other process of law directed against tenant, or is taken
upon or subjected to any attachments by any creditor of tenant or claimant
against tenant, and the attachment is not discharged within fifteen (15) days
after its levy;
(4) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or is dissolved, or makes an assignment
for the benefit of creditors;
(5) Involuntary proceedings under any bankruptcy laws or insolvency
act or for the dissolution of tenant are instituted against tenant, or a
receiver or trustee is appointed for all or substantially all of tenant's
property, and the proceeding is not dismissed or the receivership or trusteeship
is not vacated within sixty (60) days after institution or appointment;
(6) Tenant fails to take possession of the premises on the
commencement date of the term; or
(7) Tenant breaches any of the other agreements, terms, covenants, or
conditions that this lease requires tenant to perform, and the breach continues
for a period of thirty (30) days after notice by landlord to tenant.
(c) Remedies. If any one or more events of default set forth in paragraph
23(b) occurs, then landlord may, at its election, either:
(1) give tenant written notice of its intention to terminate this
lease on the date of the notice or on any later date specified in the notice,
and, on the date specified in the notice, tenant's right to possession of the
premises will cease and the lease will be terminated, except as to tenant's
liability set forth in this paragraph 23(c)(1), as if the date fixed in the
notice were the end of the term of this lease. If this lease is terminated
pursuant to the provisions of this subparagraph (1), tenant will remain liable
to landlord for damages in an amount equal to the rent and other sums that would
have been owing by tenant under this lease for the balance of the term if this
lease had not been terminated, less the net proceeds, if any, of any reletting
of the premises by landlord subsequent to the termination, after deducting all
landlord's expenses in connection with reletting, including without limitation
the expenses set forth in paragraph 23(c)(2). Landlord will be entitled to
collect damages from tenant monthly on the days on which the rent and other
amounts would have been payable under this lease if this lease had not been
terminated, and landlord will be entitled to receive damages from tenant on each
day. Alternatively, at the option of landlord, if this lease is terminated,
landlord will be entitled to recover from tenant:
(A) the worth at the time of award of the unpaid rent which had been
earned at the time of termination;
(B) the worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of rent loss that tenant proves could reasonably have been
avoided;
(C) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term of this lease after the time of award exceeds
the amount of rent loss that tenant proves could reasonably be avoided; and
(D) any other amount necessary to compensate landlord for all the
detriment proximately caused by tenant's failure to perform its obligations
under this lease or which in the ordinary course of things would be likely to
result from the failure.
The "worth at the time of award" of the amount referred to in clauses (A) and
(B) is computed by allowing interest at the highest rate permitted by law. The
"worth at the time of award" of the amount referred to in clause (C) is computed
by discounting the amount at the discount rate of the Federal Reserve Bank of
[name] at the time of award.
or
(2) without demand or notice, re-enter and take possession of the
premises or any part of the premises; repossess the premises as of the
landlord's former estate; expel the tenant from the premises and those claiming
through or under tenant; and remove the effects of both or either, without being
deemed guilty of any manner of trespass and without prejudice to any remedies
for arrears of rent or preceding breach of covenants or conditions. If landlord
elects to re-enter as provided in this paragraph 23(c)(2), or if landlord takes
possession of the premises pursuant to legal proceedings or pursuant to any
notice provided by law, landlord may, from time to time, without terminating
this lease, relet the premises or any part of the premises, either alone or in
conjunction with other portions of the building of which the premises are a
part, in landlord's or tenant's name but for the account of tenant, for the term
or terms (which may be greater or less than the period which would otherwise
have constituted the balance of the term of this lease) and on such terms and
conditions (which may include concessions of free rent, and the alteration and
repair of the premises) as landlord, in its uncontrolled discretion, may
determine. Landlord may collect and receive the rents for the premises. Landlord
will not be responsible or liable for any failure to relet the premises, or any
part of the premises, or for any failure to collect any rent due upon the
reletting. No re-entry or taking possession of the premises by landlord will be
construed as an election on landlord's part to terminate this lease unless a
written notice of the intention is given to tenant. No notice from landlord
under this lease or under a forcible entry and detainer statute or similar law
will constitute an election by landlord to terminate this lease unless the
notice specifically says so. Landlord reserves the right following any reentry
or reletting, or both, to exercise its right to terminate this lease by giving
tenant written notice, and in that event the lease will terminate as specified
in the notice. If landlord elects to take possession of the premises according
to this paragraph 23(c)(2) without terminating the lease, tenant will pay
landlord the rent and other sums which would be payable under this lease if the
repossession had not occurred, less the net proceeds, if any, of any reletting
of the premises after deducting all of landlord's expenses incurred in
connection with the reletting, including without limitation all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, expenses of
employees, alteration, remodeling and repair costs, and expenses of preparation
for the reletting. If, in connection with any reletting, the new lease term
extends beyond the existing term, or the premises covered by the reletting
include areas that are not part of the premises, a fair apportionment of the
rent received from the reletting and the expenses incurred in connection with
the reletting will be made in determining the net proceeds received from
reletting. In addition, in determining the net proceeds from reletting, any rent
concessions will be apportioned over the term of the new lease. Tenant will pay
the amounts to landlord monthly on the days on which the rent and all other
amounts owing under this lease would have been payable if possession had not
been retaken, and landlord will be entitled to receive the rent and other
amounts from tenant on each day.
23. ARBITRATION
These procedures will govern any arbitration according to this lease:
(a) Arbitration will be commenced by a written demand made by landlord or
tenant upon the other. The written demand will contain a statement of the
question to be arbitrated and the name and address of the arbitrator appointed
by the demandant. Within ten (10) days after its receipt of the written demand,
the other will give the demandant written notice of the name and address of its
arbitrator. Within ten (10) days after the date of the appointment of the second
arbitrator, the two arbitrators will meet. If the two arbitrators are unable to
resolve the question in dispute within ten (10) days after their first meeting,
they will select a third arbitrator. The third arbitrator will be designated as
chairman and will immediately give landlord and tenant written notice of its
appointment. The three arbitrators will meet within ten (10) days after the
appointment of the third arbitrator. If they are unable to resolve the question
in dispute within ten (10) days after their first meeting, the third arbitrator
will select a time, date, and place for a hearing and will give landlord and
tenant thirty (30) days' prior written notice of it. The date for the hearing
will not be more than sixty (60) days after the date of appointment of the third
arbitrator. The first two arbitrators may be partial. The third arbitrator must
be neutral.
(b) At the hearing, landlord and tenant will each be allowed to present
testimony and tangible evidence and to cross-examine each other's witnesses. The
arbitrators may make additional rules for the conduct of the hearing or the
preparation for it. The arbitrators will render their written decision to
landlord and tenant not more than thirty (30) days after the last day of the
hearing.
(c) If the one of whom arbitration is demanded fails to appoint its
arbitrator within the time specified, or if the two arbitrators appointed are
unable to agree on an appointment of the third arbitrator within the time
specified, either landlord or tenant may petition a justice of the Court of the
State of Colorado to appoint a third arbitrator. The petitioner will give the
other five (5) days' written notice before filing its petition.
(d) The arbitration will be governed by the Arbitration Law of the State of
Colorado, and, when not in conflict with that law, by the general procedures in
the Commercial Arbitration Rules of the American Arbitration Association.
(e) The arbitrators will not have power to add to, modify, detract from, or
alter in any way the provisions of this lease or any amendments or supplements
to this lease. The written decision of at least two arbitrators will be
conclusive and binding upon landlord and tenant. No arbitrator is authorized to
make an award of punitive or exemplary damages.
(f) Landlord and tenant will each pay for the services of its appointees,
attorneys, and witnesses, plus one-half (1/2) of all other proper costs relating
to the arbitration.
(g) The decision of the arbitrators will be final and non-appealable, and
may be enforced according to the laws of the State of Colorado.
24. MISCELLANEOUS
(a) Recordation. Tenant's recordation of this lease or any memorandum or
short form of it will be void and a default under this lease.
(b) Holding Over. If tenant remains in possession of the premises after the
end of this lease, tenant will occupy the premises as a tenant from month to
month, subject to all conditions, provisions, and obligations of this lease in
effect on the last day of the term.
(c) Estoppel Certificates. Within no more than fifteen (15) days after
written request by landlord, tenant will execute, acknowledge, and deliver to
landlord a certificate stating:
(1) that this lease is unmodified and in full force and effect, or, if
the lease is modified, the way in which it is modified accompanied by a copy of
the modification agreement;
(2) the date to which rental and other sums payable under this lease
have been paid;
(3) that no notice has been received by tenant of any default which
has not been cured, or, if the default has not been cured, what tenant intends
to do in order to effect the cure, and when it will do so;
(4) that tenant has accepted and occupied the premises;
(5) that tenant has no claim or offset against landlord, or, if it
does, stating the date of the assignment and assignee (if known to tenant); and
(6) other matters as may be reasonably requested by landlord.
Any certificate may be relied upon by any prospective purchaser of the premises
and any prospective mortgagee or beneficiary under any deed of trust or mortgage
encumbering the premises. If landlord submits a completed certificate to tenant,
and if tenant fails to object to its contents within ten (10) days after its
receipt of the completed certificate, the matters stated in the certificate will
conclusively be deemed to be correct. Furthermore, tenant irrevocably appoints
landlord as tenant's attorney-in-fact to execute and deliver on tenant's behalf
any completed certificate to which tenant does not object within ten (10) days
after its receipt.
(d) No Waiver. No waiver of any condition or agreement in this lease by
either landlord or tenant will imply or constitute a further waiver by such
party of the same or any other condition or agreement. No act or thing done by
landlord or landlord's agents during the term of this lease will be deemed an
acceptance of a surrender of the premises, and no agreement to accept the
surrender will be valid unless in writing signed by landlord. The delivery of
tenant's keys to any employee or agent of landlord will not constitute a
termination of this lease unless landlord has entered into a written agreement
to that effect. No payment by tenant, or receipt from landlord, of a lesser
amount than the rent or other charges stipulated in this lease will be deemed to
be anything other than a payment on account of the earliest stipulated rent. No
endorsement or statement on any check or any letter accompanying any check or
payment as rent will be deemed an accord and satisfaction. Landlord will accept
the check for payment without prejudice to landlord's right to recover the
balance of the rent or to pursue any other remedy available to landlord. If this
lease is assigned, or if the premises or any part of the premises are sublet or
occupied by anyone other than tenant, landlord may collect rent from the
assignee, subtenant, or occupant and apply the net amount collected to the rent
reserved in this lease. No collection will be deemed a waiver of the covenant in
this lease against assignment and subletting; the acceptance of the assignee,
subtenant, or occupant as tenant; or a release of tenant from the complete
performance by tenant of its covenants in this lease.
(e) Authority. If tenant signs this lease as a corporation, each of the
persons executing this lease on behalf of tenant warrants to landlord that
tenant is a duly authorized and existing corporation, that tenant is qualified
to do business in the state in which the premises are located, that tenant has
full right and authority, to enter into this lease, and that each and every
person signing on behalf of tenant is authorized to do so. Upon landlord's
request, tenant will provide evidence satisfactory to landlord confirming these
representations.
(f) Notices. Any notice, request, demand, consent, approval, or other
communication required or permitted under this lease will be written and will be
deemed to have been given (1) when personally delivered, (2) when served
pursuant to the Federal Rules of Civil Procedure, or (3) on the third day after
it is deposited in any depository regularly maintained by the United States
postal service, postage prepaid, certified or registered mail, return receipt
requested, addressed to:
Landlord: Justus Realty Limited Partnership
13111 East Briarwood Avenue
Englewood, CO 80112
Tenant: Accelerated Bureau of Collections, Inc.
5295 DTC Parkway
Englewood, CO 80111
Either landlord or tenant may change its address or addressee for purposes of
this paragraph by giving ten (10) days' prior notice according to this
paragraph. Any notice from landlord to tenant will be deemed to have been given
if delivered to the premises, addressed to tenant, whether or not tenant has
vacated or abandoned the premises.
(g) Attorneys' Fees. If landlord and tenant litigate any provision of this
lease or the subject matter of this lease, the unsuccessful litigant will pay to
the successful litigant all costs and expenses, including reasonable attorneys'
fees and court costs, incurred by the successful litigation at trial and on any
appeal. If, without fault, either landlord or tenant is made a party to any
litigation instituted by or against the other, the other will indemnify the
faultless one against all loss, liability, and expense, including reasonable
attorneys' fees and court costs, incurred by it in connection with the
litigation.
(h) Waiver of Jury Trial. Landlord and tenant waive trial by jury in any
action, proceeding, or counterclaim brought by either of them against the other
on all matters arising out of this lease or the use and occupancy of the
premises (except claims for personal injury or property damage). If landlord
commences any summary proceeding for nonpayment of rent, tenant will not
interpose (and waives the right to interpose) any counterclaim in any
proceeding.
(i) Restrictions. Tenant shall be subject to any restrictive covenants
running with the premises and to any covenants contained in the Master
Development Plan for the Denver Technological Center.
(j) Binding Effect. This lease will inure to the benefit of, and will be
binding upon, landlord's successors and assigns. This lease will inure to the
benefit of, and will be binding upon, the tenant's successors and assigns so
long as the succession or assignment is permitted by paragraph 10.
<PAGE>
Landlord and tenant have executed this lease as of the first date in this
lease.
LANDLORD:
JUSTUS REALTY LIMITED PARTNERSHIP
By: Justus Real Property Management, Inc.,
its sole general partner
ATTEST:
By:_______________________________________________
____________________________, President
TENANT:
ACCELERATED BUREAU OF COLLECTIONS, INC.
ATTEST:
By:_______________________________________________
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
The foregoing instrument was acknowledged before me on May 30, 1997, by
__________________, as ________________ of _________________________, a
______________________.
Witness my hand and official seal.
---------------------------------------
Notary Public
My commission expires:________________________________
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
The foregoing instrument was acknowledged before me on May 30, 1997, by
__________________, as ________________ of _________________________, a
______________________.
Witness my hand and official seal.
---------------------------------------
Notary Public
My commission expires:________________________________
<PAGE>
EXHIBIT A
TO LEASE
LEGAL DESCRIPTION OF PREMISES
[INSERT DESCRIPTION]
EARN-OUT AGREEMENT
THIS EARN-OUT AGREEMENT ("Agreement") made as of October 8, 1997 by
and among NSA Acquisition Corporation, a New York corporation ("Buyer"),
Outsourcing Solutions Inc., a Delaware corporation ("OSI"), North Shore Agency,
Inc., a New York corporation ("North Shore"), Automated Mailing Services, Inc.,
a New York corporation ("AMS"), Mailguard Security Systems, Inc., a New York
Corporation ("Mailguard"), and DMM Consultants, a sole proprietorship of David
Klein ("DMM Consultants;" collectively, the "Sellers").
RECITALS
A. Pursuant to an asset purchase agreement among OSI, Buyer, Sellers
and certain other parties, dated October 8, 1997 (the "Purchase Agreement"),
Buyer acquired the assets of Sellers, effective this date.
B. Pursuant to Section 2.3 of the Purchase Agreement, payments under
this Earn-out Agreement shall be additional purchase price consideration for the
Assets (as defined in the Purchase Agreement) of Sellers.
C. All capitalized terms used herein which are defined in the Purchase
Agreement shall have the meanings herein as are ascribed to such terms in the
Purchase Agreement unless otherwise expressly provided for herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Definitions and Related Matters.
(a) "1997 Baseline EBITDA" shall mean $4,011,000.
(b) "Baseline EBITDA" shall mean $3,761,000.
(c) "Buyer Benefit Package" shall mean the employee benefits package
contemplated by Buyer to be offered to certain employees of Buyer on or after
January 1, 1998 in lieu of or in addition to certain employee benefits available
to such employees during their term of employment with Sellers; such additional
benefits may include the establishment of a bonus plan for certain employees, an
alternative medical coverage plan, a dental plan, an accidental death and
disability insurance program, a long term disability insurance program, a life
insurance program, an alternative 401(k) program, an employee assistance program
and a vision plan. The Buyer Benefit Package may also include the employment of
a human resources executive.
(d) "Earnings" shall mean earnings of Buyer for purposes of calculating the
Earn-out Payments. Earnings shall be determined for purposes of this Agreement
with the following considerations: (i) actual moving (non-capitalized) expenses
related to the relocation of Seller's operations during 1997 and/or 1998 shall
not be included as expenses for purposes of calculating Earnings up to a maximum
possible aggregate exclusion of $450,000 and (ii) no overhead expenses from OSI
shall be charged against the earnings of Buyer other than expenses related to
matters for which Buyer receives direct benefits. In addition, notwithstanding
the first sentence of this subsection 1(d), Earnings for the First Payment
Period (as defined below) shall be Earnings of North Shore, AMS, Mailguard and
North Shore Canada (collectively, the "North Shore Affiliated Group") for the
period from January 1, 1997 to the Closing Date (the "NSA Period") and Earnings
of Buyer for the period from the Closing Date through December 31, 1997; and
provided further that the Earnings of the North Shore Affiliated Group for the
NSA Period shall be adjusted as follows: (i) salary expense for Jerome Goodman
shall be reduced to an amount equal to the amount of such expense as if it were
incurred at the same rate as the salary expense to be incurred by Buyer with
respect to Jerome Goodman following the date hereof; (ii) fees paid to DMM
Consultants shall be reduced to $379,851; (iii) salary expense for Joan Goodman
shall be reduced to zero; (iv) automobile expenses shall be reduced by the
amount incurred for the Toyota "Four Runner" automobile; (v) salary expense for
maintenance personnel shall be reduced by $20,000; (vi) certain travel and
entertainment and other miscellaneous expenses incurred by members of the
Goodman family shall be reduced by an amount not to exceed $10,000; and (vii)
appropriate FICA and Medicare expenses shall be reduced as appropriate in
connection with the reductions referred to in clauses (i), (iii) and (v) of this
sentence.
(e) "Earn-out Payments" shall mean the payments made to Sellers pursuant to
Sections 2(a), 2(b) and 2(c).
(f) "EBITDA" shall mean Earnings before interest expense, taxes,
depreciation and amortization, each item determined in accordance with GAAP.
2. Payments.
(a) For the 12 month period ending December 31, 1997 (the "First Payment
Period"), Buyer will pay Sellers in cash an amount equal to 50% of the amount by
which EBITDA for the First Payment Period exceeds 1997 Baseline EBITDA.
(b) For each of the 12 month periods ending December 31, 1998 (the "Second
Payment Period") December 31, 1999 (the "Third Payment Period"), and December
31, 2000 (the "Fourth Payment Period"), Buyer will pay Sellers in cash an amount
equal to 50% of the amount by which EBITDA for the relevant Payment Period
exceeds Baseline EBITDA.
(c) In addition to the payments contemplated by Sections 2(a) and 2(b),
Buyer will pay Sellers an amount in cash depending on the EBITDA for the First
Payment Period as set forth in the following table:
EBITDA for First Payment Period Payment to Sellers
- ------------------------------- ------------------
Equals or exceeds 1997 EBITDA Baseline $1,500,000
$3,961,000 to $4,010,999 $1,250,000
$3,911,000 to $3,960,999 $1,000,000
$3,861,000 to $3,910,999 $750,000
$3,811,000 to $3,860,999 $500,000
$3,761,000 to $3,810,999 $250,000
$3,760,999 or below -0-
(d) With respect to the payment for each Payment Period, Buyer will pay
(and OSI will cause Buyer to pay) to Sellers a preliminary payment of the
aggregate Earn-out Payment due pursuant to Sections 2(a) and (b) for the
applicable Payment Period on the date Buyer submits its preliminary
determination to the Sellers pursuant to Section 3(a) ("Preliminary Payment
Date"). In addition, with respect to the First Payment Period, Buyer will pay
(and OSI will cause Buyer to pay) to Sellers a preliminary payment of the
Earn-out Payment due pursuant to Section 2(c) on the Preliminary Payment Date to
the extent OSI determines such payment is due to Sellers. Buyer shall pay any
additional payments required pursuant to Section 3(b) promptly following the
final and binding determination, pursuant to this Agreement, of the Earn-Out
Payments for the applicable Payment Period. To the extent the amount of the
Earn-Out Payment is less than the aggregate of preliminary payments previously
paid for the applicable Payment Period, Sellers shall refund the amount in
excess to Buyer promptly following the final and binding determination, pursuant
to this Agreement, of the applicable Earn-Out Payment.
(e) Payment of the Earn-Out Payments shall be distributed among Sellers in
accordance with Schedule 2.5 of the Purchase Agreement.
3. Determination of Earn-out Payments; Arbitration.
(a) The determination of the amount of the Earn-out Payments for any
Payment Period shall be determined by OSI promptly after the completion of the
applicable Payment Period. The determinations of the amount of the Earn-out
Payments shall be submitted to the Seller Group Representative within 75 days
after end of the applicable Payment Period; provided, however, the determination
of the amount of any Earn-out Payment for the First Payment Period shall be
submitted to the Seller Group Representative within 90 days after end of the
First Payment Period. After such submission and upon request of the Seller Group
Representative, OSI will provide the Seller Group Representative with reasonable
access to its records relating to the determination of the amount of Earn-Out
Payments. If the Seller Group Representative does not object to the
determination by OSI of the applicable Earn-out Payment by written notice of
objection (the "Notice of Objection") delivered to OSI within 20 business days
after receipt by Sellers of such determination, the proposed Earn-out Payment
shall be deemed final and binding.
(b) If the Seller Group Representative delivers a Notice of Objection to
the determination of the Earn-out Payments within the appropriate time period,
such Notice of Objection to describe in reasonable detail each of Sellers'
proposed adjustments to the proposed determination of the Earn-out Payment, the
Seller Group Representative and OSI shall negotiate in good faith to resolve any
differences. If after 15 business days following such notice (the "Negotiation
Period") any of such objections have not been resolved (the "Disputed Matters"),
then such Disputed Matters shall be submitted to arbitration in Chicago,
Illinois. The arbitrator (the "Arbitrator") shall be Price Waterhouse LLP. Any
reference herein to the Arbitrator shall be deemed to include any member or
employee thereof (who is a certified public accountant) that such firm shall
designate as the Arbitrator on its behalf. The Arbitrator shall consider only
the Disputed Matters, and the arbitration shall be conducted in accordance with
the Commercial Rules of the American Arbitration Association then in effect. The
Arbitrator shall act promptly to resolve all Disputed Matters and its decision
with respect to all Disputed Matters shall be final and binding upon the parties
hereto and shall not be appealable to any court. The Arbitrator shall render an
opinion in writing setting forth the basis of its decision on the Disputed
Matters. Each party shall pay all costs and expenses incurred by such party
incident to the arbitration, provided the costs and expenses of the Arbitrator
shall be shared equally by Sellers and OSI. Any portion of the Earn-out Payment
that is affected by the Disputed Matter shall not be distributed until the
resolution of the Disputed Matter, and upon such resolution any increase in the
Earn-out Payment shall be distributed to Sellers.
4. Outsourcing Mail Volume. OSI shall use commercially reasonable
efforts to increase the EBITDA of Buyer by outsourcing mail processing volume
generated from OSI subsidiaries, taking into account reasonable economic and
logistical factors. Pricing for such outsourced mail volume shall be negotiated
between Sellers and OSI based on reasonably competitive alternatives available
to OSI. If the parties are unable to agree on pricing, performance or other
relevant terms, OSI shall be under no obligation to outsource mail volume to
Buyer pursuant to this section.
5. Management of Buyer.
(a) The operational aspects of the business of Buyer shall be conducted in
all material respects, taken as a whole, as Seller conducted the operational
aspects of the Business prior to the Closing Date; provided, however, that Buyer
(i) may implement the Buyer Benefit Package and (ii) may alter the operational
aspects of the business of Buyer if, in the reasonable view of the board of
directors of Buyer, operational aspects require revision in order to operate
such business in compliance with law. Notwithstanding clause (i) of the
preceding sentence, if the marginal expenses of the Buyer Benefit Package (i.e.,
expenses in excess of such category of expenses that would have been incurred by
the Business without implementation of the Buyer Benefit Package) exceed
$500,000 in any calendar year, Sellers shall have the right consider such
expenses a "Disputed Management Matter" (as defined in the next section) if such
expenses are unreasonable in light of the revenues being generated by the
Business in the applicable year.
(b) In the event Buyer takes actions contrary to provisions of Section
5(a), the Seller Group Representative shall promptly notify OSI in writing. Such
notice shall describe in reasonable detail the basis for the Seller Group
Representative's belief that the Buyer has taken action contrary to Section 5(a)
("Disputed Management Matters"). After delivery of such notice, the Seller Group
Person and OSI shall negotiate in good faith (i) to revise the Earn-Out
Agreement to appropriately reflect the then current operations of Buyer or (ii)
to agree that no such revisions are necessary or appropriate. Revisions to the
Earn-Out Agreement may include reducing Baseline EBITDA or adjusting the method
of determining EBITDA for any or all payment periods. If, after 15 business days
following such notice (the "Management Negotiation Period"), any of the Disputed
Management Matters have not been resolved, then the Disputed Management Matters
shall be submitted to arbitration in Chicago, Illinois. The arbitrator (the
"Arbiter") shall be a partner, member or employee within the consulting group of
Price Waterhouse LLP. The Arbiter shall consider only the Disputed Management
Matters, and the arbitration shall be conducted in accordance with the
commercial rules of the American Arbitration Association then in effect. In
making its determination, the Arbiter shall take into consideration, among other
factors, the effects of the amount and timing of any expenditures proposed by
Buyer on the Earn-out Payments. The Arbiter shall act promptly to resolve all
Disputed Management Matters (i) by revising the Earn-Out Agreement to
appropriately adjust for the Disputed Management Matters or (ii) by determining
that no revisions to the Earn-Out Agreement are necessary or appropriate. The
Arbiter's decision with respect to all Disputed Management Matters and the need
for any revisions to the Earn-Out Agreement shall be final and binding upon the
parties hereto and shall not be appealable to any court. Each party shall pay
all costs and expenses incurred by such party incident to the arbitration,
provided that the costs and expenses of the Arbiter shall be shared equally by
the Sellers and OSI. The provisions of this Section 5(b) shall be the sole
remedy of Seller in connection with any action taken by OSI or Buyer contrary to
Section 5(a).
6. General.
(a) Captions. The captions herein have been inserted solely for convenience
of reference and in no way define, limit or describe the scope or substance of
any provision of this Agreement.
(b) Amendments and Status as Parties. This Agreement may be amended only by
a writing signed by OSI, Buyer and Sellers
(c) Waivers. Neither this Agreement nor any term or condition hereof or
right hereunder may be waived or shall be deemed to have been waived or modified
in whole or in part by any party or by the forbearance of any party to exercise
any of its rights hereunder, except by written instrument executed by or on
behalf of that party.
(d) Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and may not be assigned by Sellers without the
consent of OSI, except that each Seller may assign its rights to the Earn-out
Payments to its shareholders.
(e) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
(f) Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto relating to the subject matter hereof, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement that are not set forth herein.
(g) Governing Law. The execution, interpretation and performance of this
Agreement shall be governed by the internal laws of the state of New York
without giving effect to principles of conflicts of law.
(h) Merger, Consolidation, Etc. In the event Buyer merges or consolidates
with another entity, or all or substantially all of Buyer's assets are acquired
by another corporation, prior to the payment of Earn-out Payments for the Fourth
Payment Period, OSI and Buyer shall cause the surviving or acquiring entity to
assume the obligations of Buyer under this Agreement and to account for payments
under this Agreement consistent with the practices of Buyer prior to such
acquisition, merger or consolidation.
(i) Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered (i) personally, (ii) by registered or certified
mail, postage prepaid, (iii) by facsimile transmission or (iv) by overnight
delivery service and addressed as set forth below:
If to Buyer or OSI:
Outsourcing Solutions Inc.
390 South Woods Mill Road
St. Louis, MO 63017
Attention: Timothy G. Beffa
Fax: 314-576-1867
If to the Seller Group Representative or Sellers:
Jerome Goodman
North Shore Agency, Inc.
117 Cuttermill Road
Great Neck, NY 11021
Fax: (516)466-9391
copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, NY 10022
Attention: Eric B. Woldenberg
Fax: (212) 326-0806
Any such notice shall be effective upon receipt. Any party may change the
address to which notices are to be addressed by giving the other parties notice
in the manner herein set forth.
THIS AGREEMENT CONTAINS ARBITRATION PROVISIONS WHICH MAY BE ENFORCED BY THE
PARTIES HERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
NSA ACQUISITION CORPORATION
By: /s/ Peter D. Waldstein
-------------------------------
Peter D. Waldstein
Vice President
OUTSOURCING SOLUTIONS INC.
By: /s/ Timothy G. Beffa
------------------------------
Timothy G. Beffa
President and Chief Executive
Officer
North Shore Agency, Inc.
By: /s/ Jerome Goodman
-------------------------------
Jerome Goodman
President
Automated Mailing Services, Inc..
By: /s/ Jerome Goodman
-------------------------------
Jerome Goodman
President
Mailguard Security Systems, Inc.
By: /s/ Jerome Goodman
-------------------------------
Jerome Goodman
President
/s/ David Klein
- ----------------------------------
David Klein, as sole proprietor
of DMM Consultants
OUTSOURCING SOLUTIONS INC.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of January
26, 1998 and entered into by and among OUTSOURCING SOLUTIONS INC., a Delaware
corporation ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HEREOF (each individually referred to herein as a "LENDER" and
collectively as "LENDERS"), GOLDMAN SACHS CREDIT PARTNERS L.P. and THE CHASE
MANHATTAN BANK, as co-administrative agents (each, in such capacity, a
"CO-ADMINISTRATIVE AGENT" and, collectively, "CO-ADMINISTRATIVE AGENTS"),
GOLDMAN SACHS CREDIT PARTNERS L.P. and CHASE SECURITIES INC., as arranging
agents (each, in such capacity, an "ARRANGING AGENT" and collectively,
"ARRANGING AGENTS"), and SUNTRUST BANK, ATLANTA, as collateral agent (in such
capacity, "COLLATERAL AGENT").
R E C I T A L S
- - - - - - - -
WHEREAS, Company and certain financial institutions (the "Existing
Lenders") are parties to that certain Amended and Restated Credit Agreement
dated as of October 8, 1997 (as heretofore amended, supplemented or otherwise
modified, the "EXISTING CREDIT AGREEMENT"), pursuant to which the Existing
Lenders (capitalized terms used in these Recitals without definition shall have
the respective meanings assigned in subsection 1.1 hereof) have extended and
agreed to extend certain credit facilities to Company, the proceeds of which
were or will be used (i) together with the proceeds of the Subordinated Notes
and certain other funds, to fund the Payco Acquisition, the Accelerated
Acquisition and the NSA Acquisition and refinance certain indebtedness of
Company, Payco, Accelerated and NSA and pay certain transaction fees and
expenses relating thereto, and (ii) to provide working capital and financing for
certain acquisitions by Company and its Subsidiaries;
WHEREAS, the domestic Subsidiaries of Company have guaranteed all of the
obligations of Company with respect to the credit facilities provided by Lenders
under the Existing Credit Agreement;
WHEREAS, Company has secured all of the Obligations under the Existing
Credit Agreement, and each such Subsidiary of Company has secured its respective
obligations under the Subsidiary Guaranty, by granting to Collateral Agent, for
the benefit of Agents and Lenders, (i) a first priority Lien on substantially
all of their respective real and personal property and (ii) a first priority
pledge of all of the capital stock of their respective domestic Subsidiaries
(65% of the capital stock of their respective foreign subsidiaries);
WHEREAS, Company has entered into (i) the Accelerated Acquisition Agreement
with Accelerated Bureau of Collections, Inc., a Colorado corporation
("Accelerated"), pursuant to which, among other things, Company has acquired all
or substantially all of the assets (the "ACCELERATED ACQUIRED ASSETS") of
Accelerated, and (ii) the NSA Acquisition Agreement with North Shore Agency,
Inc., a New York corporation ("NSA"), and certain other Persons, pursuant to
which, among other things, Company has acquired all or substantially all of the
assets (the "NSA ACQUIRED ASSETS") of NSA;
WHEREAS, Company, Sherman Acquisition Corporation ("Merger Sub") and The
Union Corporation, a Delaware corporation ("Union") have entered into the Union
Acquisition Agreement pursuant to which (i) Merger Sub will tender for all of
the issued and outstanding capital stock of Union pursuant to the Tender Offer;
(ii) after consummation of the Tender Offer, Merger Sub will merge (the "UNION
MERGER") with and into Union, with Union being the surviving corporation and
thereby becoming a wholly-owned Subsidiary of Company; and (iii) pursuant to the
Union Merger any Union Common Stock not tendered in the Tender Offer will be
canceled in exchange for certain cash consideration;
WHEREAS, Company desires that Existing Lenders and New Lenders agree to
amend and restate the Existing Credit Agreement in its entirety (i) to extend
additional credit facilities to Company in an aggregate principal amount of
$225,000,000 through the addition of a Tranche C Term Loan facility, the
proceeds of which will be used (a) to finance the purchase of the capital stock
of Union pursuant to the Tender Offer and the payment of cash consideration to
certain shareholders of Union upon consummation of the Union Merger, (b) to pay
Transaction Costs, and (c) to repay outstanding Revolving Loans, and (ii) to
make certain other changes as more fully set forth herein, which amendment and
restatement shall become effective upon satisfaction of the conditions precedent
set forth herein;
WHEREAS, it is the intent of the parties hereto that this Agreement not
constitute a novation of the obligations and liabilities of the parties under
the Existing Credit Agreement or be deemed to evidence or constitute repayment
of all or any portion of such obligations and liabilities and that this
Agreement amend and restate in its entirety the Existing Credit Agreement and
re-evidence the Obligations of Company outstanding thereunder; and
WHEREAS, it is the intent of Loan Parties to confirm that all Obligations
of Loan Parties under the other Loan Documents shall continue in full force and
effect and that, from and after the Effective Date, all references to the
"CREDIT AGREEMENT" contained therein shall be deemed to refer to this Agreement:
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders, Co-Administrative
Agents, Arranging Agents and Collateral Agent agree that on the Effective Date
the Existing Credit Agreement shall be amended and restated in its entirety as
follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"Accelerated" has the meaning assigned to that term in the Recitals to this
Agreement.
"Accelerated Acquired Assets" means the assets acquired pursuant to the
Accelerated Acquisition.
"Accelerated Acquisition" means the transactions contemplated by the
Accelerated Acquisition Agreement.
"Accelerated Acquisition Agreement" means the Asset Purchase Agreement by
and between Company and Accelerated, in the form delivered to Arranging Agents
on or prior to the Funding Date for the Accelerated Acquisition Loans and as
such agreement may be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under subsection 7.12A.
"Accelerated Acquisition Loans" means Additional Tranche B Term Loans in an
aggregate principal amount of $33,000,000 made to Company on November 10, 1997.
"Acquisition Loans" means the Accelerated Acquisition Loans and the NSA
Acquisition Loans, collectively.
"Acquisition Sub" means Boxer Acquisition Corp., a Delaware corporation.
"Additional Tranche B Term Loans" means the Loans made by Lenders to
Company pursuant to subsection 2.1A(ii) of the Existing Credit Agreement.
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date,
the rate per annum obtained by dividing (i) the London Interbank offered rate
for deposits in U.S. Dollars for maturities comparable to the Interest Period
for which such Adjusted Eurodollar Rate will apply as of approximately 11:00
A.M. (London time) on such Interest Rate Determination Date as set forth on
Telerate Page 3750 by (ii) a percentage equal to 100% minus the stated maximum
rate of all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable on such Interest
Rate Determination Date to any member bank of the Federal Reserve System in
respect of "Eurocurrency liabilities" as defined in Regulation D (or any
successor category of liabilities under Regulation D).
"Affected Lender" has the meaning assigned to that term in subsection 2.6C.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise; provided, however, that "Affiliate" as applied to
Company or its Subsidiaries shall not include Chase, CSI, GSCP, Goldman, Sachs &
Co. or CS First Boston Corporation and their respective Affiliates, except that
Goldman, Sachs & Co. and GSCP shall be considered Affiliates of Company and its
Subsidiaries for purposes of subsection 7.9 hereof to the extent such Persons
are acting as agents or brokers for Company or any of its Subsidiaries in
connection with any sales of receivables portfolios.
"Agent" means, individually, each of Collateral Agent, Co-Administrative
Agents and Arranging Agents, and "AGENTS" means Collateral Agent,
Co-Administrative Agents and Arranging Agents, collectively.
"Agreement" means this Second Amended and Restated Credit Agreement dated
as of January 26, 1998, as it may be amended, restated, supplemented or
otherwise modified from time to time.
"Applicable Base Rate Margin" means, with respect to the applicable Loan
set forth below, the corresponding per annum rate set forth below:
=========================================== ==================================
LOAN APPLICABLE
BASE RATE MARGIN
=========================================== ==================================
Tranche A Term Loans 1.50%
=========================================== ==================================
Tranche B Term Loans 2.00%
=========================================== ==================================
Tranche C Term Loans 2.00%
=========================================== ==================================
Revolving Loans 1.50%
=========================================== ==================================
; provided that the Applicable Base Rate Margin set forth above with respect to
Tranche A Term Loans and Revolving Loans shall be reduced by the Pricing
Reduction, if any.
"Applicable Eurodollar Rate Margin" means, with respect to the applicable
Loan set forth below, the corresponding per annum rate set forth below:
=========================================== ===================================
LOAN APPLICABLE EURODOLLAR
RATE MARGIN
=========================================== ===================================
Tranche A Term Loans 2.50%
=========================================== ===================================
Tranche B Term Loans 3.00%
=========================================== ===================================
Tranche C Term Loans 3.00%
=========================================== ===================================
Revolving Loans 2.50%
=========================================== ===================================
; provided that the Applicable Eurodollar Rate Margin set forth above with
respect to Tranche A Term Loans and Revolving Loans shall be reduced by the
Pricing Reduction, if any.
"Arranging Agent" and "Arranging Agents" have the respective meanings
assigned to such terms in the introduction to this Agreement; provided that
after the Effective Date, Arranging Agents shall only mean and include GSCP.
"Articles of Merger" means the Articles of Merger dated as of November 6,
1996 by and between Acquisition Sub and Payco to be filed with the Secretary of
State of Wisconsin, as in effect on the Closing Date and as such articles may
heretofore have been or hereafter may be amended, restated, supplemented or
otherwise modified from time to time thereafter to the extent permitted under
subsection 7.12A.
"Asset Sale" means the sale (including in any sale-leaseback transaction)
by Company or any of its Subsidiaries to any Person (other than Company or any
of its Wholly Owned Subsidiaries) of (i) any of the stock of any of Company's
Subsidiaries (other than the sale of stock of Union during such times as such
shares constitute Margin Stock), (ii) all or substantially all of the assets of
any division or line of business of Company or any of its Subsidiaries, or (iii)
any other assets other than sales of assets in the ordinary course of business
and sales of obsolete equipment, excluding any such other assets to the extent
that the aggregate value of such assets sold in any single transaction or
transactions is equal to $250,000 or less in any one Fiscal Year; provided that
in no event shall a sale of all or any portion of a receivables portfolio be
deemed a sale of assets in the ordinary course of business.
"Assignment Agreement" means an assignment agreement in substantially the
form of Exhibit XIII annexed hereto or in such other form as may be approved by
Co-Administrative Agents.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the
rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"Business Day" means (i) for all purposes other than as covered by clause
(ii) below, any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or is a day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, fundings, issuances and payments in connection with the Adjusted
Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day
described in clause (i) above and that is also (a) a day for trading by and
between banks in Dollar deposits in the London interbank market and (b) a day on
which banking institutions are open for business in London.
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means (i) marketable securities issued or directly and
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Rating Service ("S&P") or Moody's Investors
Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates
of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's, issued by any Lender or any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia having unimpaired capital and surplus
of not less than $250,000,000 (each Lender and each such commercial bank being
herein called a "CASH EQUIVALENT BANK"); and (v) Eurodollar time deposits having
a maturity of less than one year purchased directly from any Cash Equivalent
Bank (provided such deposit is with such Cash Equivalent Bank or any other Cash
Equivalent Bank).
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received by Company or any of its Subsidiaries from such Asset Sale.
"Certificate re Non-Bank Status" means a certificate substantially in the
form of Exhibit XV annexed hereto delivered by a Lender to Chase
Co-Administrative Agent pursuant to subsection 2.7B(iii).
"Chase" means The Chase Manhattan Bank and its successors, including,
without limitation, its successors by merger.
"Chase Co-Administrative Agent" means Chase, in its capacity as a
Co-Administrative Agent, and any successor to Chase in such capacity appointed
pursuant to subsection 9.5A.
"Closing Date" means November 6, 1996.
"Co-Administrative Agent" and "Co-Administrative Agents" have the
respective meanings assigned to such terms in the introduction to this Agreement
and also mean and include any successor Co-Administrative Agent appointed
pursuant to subsection 9.5A.
"Collateral" means all of the properties and assets (including capital
stock) in which Liens are purported to be granted by the Collateral Documents.
"Collateral Account" has the meaning assigned to that term in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
executed and delivered by Company and Chase Co-Administrative Agent on the
Closing Date, substantially in the form of Exhibit XVI annexed hereto, pursuant
to which Company may pledge cash to Chase Co-Administrative Agent to secure the
obligations of Company to reimburse Issuing Lenders for payments made under one
or more Letters of Credit as such Collateral Account Agreement may heretofore
have been or hereafter may be amended, restated, supplemented or otherwise
modified from time to time.
"Collateral Agent" means SunTrust, in its capacity as Collateral Agent, and
any successor to SunTrust, in such capacity appointed pursuant to subsection
9.5A.
"Collateral Documents" means the Pledge Agreement, the Security Agreement,
the Limited Partnership Security Agreement, the Trademark Security Agreement,
the Collateral Account Agreement, the Mortgages, the Deeds of Trust, and any
other documents, instruments or agreements delivered by any Loan Party pursuant
to this Agreement or any of the other Loan Documents in order to grant or
perfect liens on any assets of such Loan Party as security for the Obligations.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
any of its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"Commitments" means (i) with respect to the period prior to the Effective
Date, the commitments of Lenders to make Loans as set forth in subsection 2.1A
of the Existing Credit Agreement, and (ii) thereafter, the commitments of
Lenders to make Loans as set forth in subsection 2.1A of this Agreement.
"Company Common Stock" means, collectively, Company's (i) Voting Common
Stock, par value $0.01 per share, (ii) Class A Non-Voting Common Stock, par
value $0.01 per share, (iii) Class B Non-Voting Common Stock, par value $0.01
per share, and (iv) Class C Non-Voting Common Stock, par value $0.01 per share.
"Company Preferred Stock" means Company's 8.0% Non-Voting Cumulative
Redeemable Exchangeable Preferred Stock outstanding as of the Closing Date in
the approximate amount of $10,800,000, together with any shares of such
preferred stock issued after the Closing Date as dividends thereon permitted
under subsection 7.5 of the Existing Credit Agreement or under subsection 7.5 of
this Agreement.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit X annexed hereto delivered to Chase Co-Administrative Agent by Company
pursuant to subsection 6.1(iv).
"Condemnation Proceeds" has the meaning assigned to that term in subsection
2.4B(iii)(d).
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in "purchases of property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Company and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
(except inventory, other than any receivables portfolios, in the ordinary course
of business) or fixed assets of any Person, or stock or other evidence of
beneficial ownership of any Person that, as a result of the acquisition of such
stock or other evidence, becomes a Subsidiary of Company.
"Consolidated Current Assets" means, as at any date of determination, the
total assets of Company and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP, excluding Cash
and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of determination,
the total liabilities of Company and its Subsidiaries on a consolidated basis
which may properly be classified as current liabilities in conformity with GAAP.
"Consolidated EBITDA" means, for any period, (i) the sum of the amounts for
such period of (a) Consolidated Net Income, (b) Consolidated Interest Expense,
(c) provisions for taxes based on income, (d) total depreciation expense, (e)
total amortization expense, (f) other non-cash items reducing Consolidated Net
Income, (g) to the extent deducted in determining Consolidated Net Income,
charges incurred during 1998 not in excess of $1,500,000 with respect to the
costs of implementing a new computer system at Payco and duplicative costs of
operating the old system concurrently, (h) to the extent deducted in determining
Consolidated Net Income, any non-recurring charges incurred after the Closing
Date in connection with the resolution of litigation of Company and its
Subsidiaries disclosed in that certain Offering Circular dated October 31, 1996
prepared in connection with the offering of the Subordinated Notes, and (i) to
the extent deducted in determining Consolidated Net Income for such period, any
non-recurring charges not to exceed $20 million in the aggregate incurred by
Union and/or its Subsidiaries during the period from January 1, 1998 through the
Union Merger Date to the extent such charges were incurred as a result of the
Union Acquisition (including approximately $14.5 million of "change of control"
payments to be paid by Union to employees and directors of Union in connection
with the Union Acquisition and approximately $5.5 million of fees and expenses)
less (ii) the sum of the amounts for such period of (a) other non-cash items
increasing Consolidated Net Income and (b) to the extent not otherwise deducted
in determining Consolidated Net Income, payments made during such period with
respect to Earn Out Agreements permitted hereunder and Management Fees, all of
the foregoing as determined on a consolidated basis for Company and its
Subsidiaries in conformity with GAAP.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital
Adjustment minus (ii) the sum, without duplication, of the amounts for such
period of (a) voluntary and scheduled cash repayments of Consolidated Total Debt
(excluding repayments of Revolving Loans except to the extent the Revolving Loan
Commitments are permanently reduced in connection with such repayments), (b)
Consolidated Capital Expenditures (net of any proceeds of any related financings
with respect to such expenditures), (c) Consolidated Interest Expense, (d) the
provision for current taxes based on income of Company and its Subsidiaries and
payable in cash with respect to such period, and (e) to the extent not otherwise
deducted in calculating Consolidated Excess Cash Flow, cash payments made during
such period with respect to non-recurring charges described in subdivisions (g),
(h) and (i) of the definition of Consolidated EBITDA.
"Consolidated Fixed Charges" means, for any period, an amount equal to the
sum of the amounts for such period of (i) scheduled cash repayments of principal
of all Indebtedness, as reduced by prepayments previously made, (ii)
Consolidated Interest Expense, (iii) Consolidated Maintenance Capital
Expenditures and (iv) the portion of taxes based on income actually paid in
cash.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP) payable in cash of Company and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of Company and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements, but
excluding, however, any amounts referred to in subsection 2.3 of this Agreement
or subsection 2.3 of the Existing Credit Agreement payable to Agents and Lenders
on or before the Effective Date or the Closing Date, respectively.
"Consolidated Maintenance Capital Expenditures" means, for any period, all
Consolidated Capital Expenditures for such period other than Consolidated
Capital Expenditures expended to make Permitted Acquisitions or Permitted
Portfolio Acquisitions.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Company and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income of
any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales, and (v) (to the extent not included in clauses (i) through (iv)
above) any net extraordinary gains or net non-cash extraordinary losses.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all outstanding Indebtedness of Company
and its Subsidiaries on a consolidated basis as determined in conformity with
GAAP.
"Consolidated Working Capital" means, as at any date of determination, the
excess of Consolidated Current Assets over Consolidated Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements. Contingent Obligations shall include, without
limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (x) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(x) or (y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Continuing Director" shall mean, as of any date of determination, any
member of the Board of Directors of Company who (i) was a member of such Board
of Directors on the Closing Date or (ii) was nominated for election or elected
to such Board of Directors with the affirmative vote of the MDC Entities.
"Contractual Obligation" means, as applied to any Person, any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Corporate Loan Party" means any Loan Party which is a corporation.
"CSI" means Chase Securities Inc. and its successors and assigns,
including, without limitation, its successors by merger.
"Custodian" means ChaseMellon Shareholder Services, L.C.C.
"Debt Collection Laws" means the Fair Debt Collection Practices Act and any
similar state laws relating to the collection of consumer debt.
"Deed of Trust" means any deed of trust granted by Company or any of its
Subsidiaries in any interest in real property to secure the Obligations, as such
deed of trust may be amended, restated, supplemented or otherwise modified from
time to time.
"Defaulting Lender" means any Lender with respect to which a Lender Default
is in effect.
"Delayed-Draw Term Loans" means a portion of the Tranche C Term Loans, in
an aggregate amount equal to the product of (x) $31.50 and (y) those shares of
Union Common Stock not purchased pursuant to the Tender Offer, that may be
borrowed by Company on the Union Merger Date.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"Earn Out Agreement" shall mean (i) the agreements set forth in Schedule
7.4(iv)(a) hereto and (ii) any other agreement entered into after the Closing
Date by Company to pay the seller or sellers of any Person or assets acquired in
accordance with the provisions of subsection 7.7(v) at any time following the
consummation of such acquisition by reference to the financial performance of
Company or the Person or assets acquired.
"Effective Date" means the date on or before February 15, 1998 on which the
conditions precedent set forth in subsections 4.2 and 4.4 shall be satisfied or
waived in accordance with the terms hereof.
"Eligible Assignee" means (i) (a) a commercial bank organized under the
laws of the United States or any state thereof; (b) a commercial bank organized
under the laws of any other country or a political subdivision thereof; provided
that (x) such bank is acting through a branch or agency located in the United
States or (y) such bank is organized under the laws of a country that is a
member of the Organization for Economic Cooperation and Development or a
political subdivision of such country; (c) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities Act)
which extends credit or buys loans as one of its businesses including, but not
limited to, insurance companies, mutual funds and lease financing companies; and
(d) any other financial institution or fund (whether a corporation, partnership,
trust or other entity) that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and has
combined capital and surplus or net assets of at least $100,000,000, in each
case (under clauses (a) through (d) above) that is reasonably acceptable to
Co-Administrative Agents; and (ii) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Company shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is subject to ERISA and which is maintained or
contributed to by Company or any of its ERISA Affiliates.
"Environmental Claim" means any written accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company, any of
its Subsidiaries, any of their respective Affiliates that are directly or
indirectly controlled by Company, or any Facility.
"Environmental Laws" means all laws, statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of Hazardous
Materials, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials, or (iii) occupational safety and health, public health and
safety, industrial hygiene or protection of wetlands, in any manner applicable
to Company or any of its Subsidiaries or any of their respective properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act ( 33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
ss.136 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss.
11001 et seq.), each as amended or supplemented, and any analogous future or
present local, state and federal statutes and regulations promulgated pursuant
thereto, each as in effect as of the date of determination.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Company after the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
solely for purposes of obligations under Section 412 of the Internal Revenue
Code or under the applicable sections set forth in Section 414(t)(2) of the
Internal Revenue Code, any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member.
"ERISA Event" means (i) a "reportable event" within the meaning of Section
4043(c) of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Company or any of its ERISA Affiliates from any Pension Plan with
two or more contributing sponsors or the termination of any such Pension Plan
resulting, in either case, in liability pursuant to Section 4063 or 4064 of
ERISA, respectively; (v) the institution by the PBGC of proceedings to terminate
any Pension Plan pursuant to Section 4042 of ERISA; (vi) the imposition of
liability on Company or any of its ERISA Affiliates pursuant to Section 4062(e)
or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA;
(vii) the withdrawal by Company or any of its ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan resulting in withdrawal liability pursuant to Section
4201 of ERISA, or the receipt by Company or any of its ERISA Affiliates of
written notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4042 of ERISA or under Section 4041A
of ERISA if such termination would result in liability to Company or any of its
ERISA Affiliates; (viii) the imposition on Company or any of its ERISA
Affiliates of fines, penalties or taxes under Chapter 43 of the Internal Revenue
Code or under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in respect of
any Employee Benefit Plan; (ix) the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue
Code, or the failure of any trust forming part of any Pension Plan to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue Code;
or (x) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.
"Eurodollar Rate Loans" means Loans bearing interest at rates determined by
reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Credit Agreement" has the meaning assigned to that term in the
Recitals to this Agreement.
"Existing Lenders" has the meaning assigned to that term in the Recitals to
this Agreement.
"Existing Letters of Credit" has the meaning assigned to that term in
subsection 3.1.
"Existing Loan" or "Existing Loans" means, as the context requires, one or
more of the Existing Tranche A Term Loans, Existing Tranche B Term Loans or
Existing Revolving Loans or any combination thereof.
"Existing Revolving Loans" means, with respect to any Existing Lender, the
Revolving Loans under, as defined in, the Existing Credit Agreement held by such
Existing Lender, in the principal amount of such Loans outstanding immediately
prior to the Effective Date.
"Existing Seller Note" means that certain 9% Non-Negotiable Subordinated
Note issued by Outsourcing Solutions Incorporated to Alan Miller in the
principal amount of $5,000,000, due July 10, 2001, as in effect on the Closing
Date and as such note may heretofore have been or hereafter may be amended,
restated, supplemented or otherwise modified from time to time thereafter to the
extent permitted under subsection 7.12B.
"Existing Tranche A Term Loan" means, with respect to any Existing Lender,
the Tranche A Term Loan under, as defined in, the Existing Credit Agreement held
by such Existing Lender, in the principal amount of such Loan outstanding
immediately prior to the Effective Date, and "EXISTING TRANCHE A TERM LOANS"
means such Loans of all Existing Lenders, collectively.
"Existing Tranche B Term Loan" means, with respect to any Existing Lender,
the Tranche B Term Loan under, as defined in, the Existing Credit Agreement held
by such Existing Lender, in the principal amount of such Loan outstanding
immediately prior to the Effective Date, and "EXISTING TRANCHE B TERM LOANS"
means such Loans of all Existing Lenders, collectively.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by Company or any of its
Subsidiaries (but only as to portions of buildings actually leased or used) or
any of their respective predecessors or any of their respective Affiliates that
are directly or indirectly controlled by Company.
"Fair Debt Collection Practices Act" means the Federal Fair Debt Collection
Practices Act, as amended from time to time, and any successor statute.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Chase Co-Administrative Agent from three Federal funds
brokers of recognized standing selected by Chase Co-Administrative Agent.
"First Amendment Date" means October 8, 1997.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries ending
on December 31 of each calendar year.
"Forward Flow Contract" shall mean (i) the agreement set forth in Schedule
7.4(iv)(b) hereto and (ii) any other agreement entered into after the Closing
Date by Company or any of its Subsidiaries to purchase receivables portfolios
from time to time meeting the criteria enumerated therein.
"Funding and Payment Office" means the office of Chase Co-Administrative
Agent and Swing Line Lender located at 270 Park Avenue, New York, New York 10017
or such offices of Chase Co-Administrative Agent or any successor Chase
Co-Administrative Agent specified by Chase Co-Administrative Agent or such
successor Chase Co-Administrative Agent in a written notice to Loan Parties and
Lenders).
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, in each case as the same are applicable to the circumstances as of
the date of determination and specifically, terms used herein applicable to
Company and its Subsidiaries defined by reference to GAAP shall give effect to
the subtraction of minority interests.
"Governmental Acts" has the meaning assigned to that term in subsection
3.5.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"GSCP" means Goldman Sachs Credit Partners L.P., a Bermuda limited
partnership.
"Guaranty" means the Subsidiary Guaranty and any other guaranty of the
Obligations.
"Guarantors" means the Subsidiary Guarantors.
"Hazardous Materials" means (i) any chemical, material or substance defined
as or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous waste", "restricted hazardous
waste", "infectious waste", "toxic substances" or any other formulations
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar import under any applicable Environmental Laws; (ii) any oil, petroleum,
petroleum fraction or petroleum derived substance; (iii) any drilling fluids,
produced waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority.
"Immaterial Subsidiaries" means, with respect to any Person, any Subsidiary
or Subsidiaries of such Person the assets of which constitute, individually or
in the aggregate, less than 5% of the total assets of such Person and its
Subsidiaries.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money (other than accounts
payable incurred in the ordinary course of business and accrued expenses
incurred in the ordinary course of business), (iv) any obligation owed for all
or any part of the deferred purchase price of property or services (excluding
any such obligations incurred under ERISA or under Earn Out Agreements), which
purchase price is (a) due more than six months from the date of incurrence of
the obligation in respect thereof or (b) evidenced by a note or similar written
instrument, and (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements, Currency
Agreements and Earn Out Agreements constitute Contingent Obligations and not
Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Insurance Proceeds" has the meaning assigned to that term in subsection
2.4B(iii)(d).
"Interest Coverage Ratio" means, as of any date of determination, the ratio
of Consolidated EBITDA to Consolidated Interest Expense, in each case calculated
for the 12 consecutive months ending on the last day of the month preceding such
date of determination.
"Interest Payment Date" means (i) with respect to any Base Rate Loan, each
January 15, April 15, July 15 and October 15 of each year, commencing on January
15, 1997 and (ii) with respect to any Eurodollar Rate Loan, the last day of each
Interest Period applicable to such Loan; provided that in the case of each
Interest Period of longer than three months, "Interest Payment Date" shall also
include the date that is three months after the commencement of such Interest
Period.
"Interest Period" has the meaning assigned to that term in subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to hedge Company or any of its Subsidiaries against
fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating the
Adjusted Eurodollar Rate, for purposes of determining the interest rate in
respect of an Interest Period. The Interest Rate Determination Date in respect
of calculating the Adjusted Eurodollar Rate shall be the second Business Day
prior to the first day of the related Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Company or any of its Subsidiaries of, or of a beneficial interest in, stock
or other Securities of any other Person (other than a Person that, prior to such
purchase or acquisition, was a Wholly Owned Subsidiary of Company), or (ii) any
direct or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Company or any of
its Subsidiaries to any other Person other than a Wholly Owned Subsidiary of
Company, including all indebtedness and accounts receivable acquired from that
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business; provided, however, that the
term "Investment" shall not include (a) current trade and customer accounts
receivable for goods furnished or services rendered in the ordinary course of
business and payable in accordance with customary trade terms, (b) advances and
prepayments to suppliers for goods and services in the ordinary course of
business, (c) stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due or owing to Company or
any of its Subsidiaries or as security for any such Indebtedness or claims, (d)
Cash held in Deposit Accounts with banks and trust companies (other than
Lenders) not exceeding $2,000,000 in aggregate amount, (e) Cash held in Deposit
Accounts with banks and trust companies (other than Lenders) in which amounts
received from credit card issuers are concentrated and held to be swept to
Company's operating accounts with a Lender on a daily basis, (f) Cash held in
any Deposit Account with a Lender and (g) shares in a mutual fund that invests
solely in Cash Equivalents. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Issuing Lender" means, with respect to any Letter of Credit, the Lender
which agrees or is otherwise obligated to issue such Letter of Credit,
determined as provided in subsection 3.1B(ii).
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lender" and "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of this Agreement, together with their successors and
permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires provided that
the term "Lenders", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment. To the extent the context so requires, the
terms "LENDER" and "LENDERS" shall include "Lenders" under, and as defined in,
the Existing Credit Agreement.
"Lender Default" shall mean (i) the refusal (which has not been retracted)
of a Lender to make available its portion of any Loans (including any Revolving
Loans made to pay Refunded Swing Line Loans or to reimburse drawings under
Letters of Credit) in accordance with subsection 2.1A(iii) or its portion of any
unreimbursed drawing or payment under a Letter of Credit in accordance with
subsection 3.3C or (ii) a Lender having notified Company and/or Chase
Co-Administrative Agent in writing that it does not intend to comply with its
obligations under subsection 2.1 or subsections 3.1C, 3.3B or 3.3C, in any such
case as a result of any takeover of such Lender by any regulatory authority or
agency.
"Lending Office" means, as to any Lender, the office or offices of such
Lender specified as its "Lending Office" on Schedule 2.1, or such other office
or offices as such Lender may from time to time notify Company and Chase
Co-Administrative Agent.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of Company pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the sum of
(i) the maximum aggregate amount which is or at any time thereafter may become
available for drawing under all Letters of Credit then outstanding plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by Issuing
Lenders and not theretofore reimbursed by Company (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B).
"Leverage Ratio" means, as of any date of determination, the ratio of
Consolidated Total Debt, as of the date of determination, to Consolidated
EBITDA, for the 12 consecutive months ending on the last day of such month, in
each case, calculated for Company and its Subsidiaries on a consolidated basis
in accordance with GAAP and in accordance with the provisions of subsection
7.6E.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
fixed or floating charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Limited Partnership Security Agreement" means the Limited Partnership
Security Agreement entered into by and among Company, certain Subsidiary
Guarantors and Collateral Agent dated as of the Closing Date, substantially in
the form of Exhibit IX-B annexed hereto, as such Limited Partnership Security
Agreement may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time.
"Loan" or "Loans" means, as the context requires, one or more of the
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans, Revolving
Loans and Swing Line Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of Credit
(and any applications for, or reimbursement agreements or other documents or
certificates executed by Company in favor of an, Issuing Lender relating to, the
Letters of Credit), the Guaranty, the Collateral Documents, and the Second
Acknowledgement and Consent.
"Loan Parties" means Company and each Subsidiary Guarantor.
"Management Fees" means the fees payable by Company pursuant to the MDC
Advisory Services Agreement and the HBR Services Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company and its Subsidiaries, taken as a whole, (ii) the material
impairment of the ability of any Loan Party to perform the Obligations and (iii)
a material adverse effect upon the legality, validity, binding effect or
enforceability against a Loan Party of a Loan Document to which it is a party;
provided that Company's consummation of the Payco Acquisition in accordance with
the terms of the Payco Acquisition Agreement or the Union Acquisition in
accordance with the terms of the Union Acquisition Agreement shall not be deemed
to have a Material Adverse Effect for purposes of subsection 5.4.
"MDC Advisory Services Agreement" means that certain Advisory Services
Agreement dated as of September 21, 1995, by and between Company and MDC
Management Company III, L.P., as in effect on the Closing Date and as such
agreement may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time thereafter to the extent
permitted under subsection 7.12A.
"MDC Entities" means McCown De Leeuw & Co. III, L.P., a California limited
partnership, McCown De Leeuw & Co. III (Europe), L.P., a Bermuda limited
partnership, McCown De Leeuw & Co. III (Asia), L.P., a Bermuda limited
partnership and Gamma Fund LLC, a California limited liability company.
"Merger Sub" has the meaning assigned to that term in the Recitals to this
Agreement.
"Minimum Union Shares" means 66-2/3% of the outstanding shares of Union
Common Stock, on a fully-diluted basis.
"Mortgage" means any mortgage or legal charge granted by Company or any of
its Subsidiaries in any interest in real property to secure the Obligations, as
such mortgage may be amended, restated, supplemented or otherwise modified from
time to time.
"Multiemployer Plan" means a "multiemployer plan", as defined in Section
4001(a)(3) of ERISA which is subject to Title IV of ERISA, to which Company or
any of its ERISA Affiliates is contributing or to which Company or any of its
ERISA Affiliates has an obligation to contribute.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds of
such Asset Sale net of bona fide direct costs of sale including, without
limitation, (i) income taxes reasonably estimated to be actually payable as a
result of such Asset Sale within one year of the date of receipt of such Cash
Proceeds, (ii) transfer, sales, use and other taxes payable in connection with
such Asset Sale, (iii) payment of the outstanding principal amount of, premium
or penalty, if any, and interest on any Indebtedness (other than the Loans) that
is secured by a Lien on the stock or assets in question and that is required to
be repaid under the terms thereof as a result of such Asset Sale, and (iv)
broker's commissions and reasonable fees and expenses of counsel and all other
professionals in connection with such Asset Sale.
"New Lender" means any Lender which is a party to this Agreement as of the
Effective Date and which is not an Existing Lender.
"Non-Defaulting Lender" means and includes each Lender other than a
Defaulting Lender.
"Notes" means one or more of the Term Notes, Revolving Notes or Swing Line
Note or any combination thereof.
"Notice of Borrowing" means (i) with respect to an Existing Loan, the
Notice of Borrowing under the Existing Credit Agreement delivered by Company
with respect to such Existing Loan and (ii) with respect to Loans to be made
under subsection 2.1A(ii), 2.1A(iii) or 2.1A(iv), a notice substantially in the
form of Exhibit I annexed hereto delivered by Company to Chase Co-Administrative
Agent pursuant to subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in the
form of Exhibit II annexed hereto delivered by Company to Chase
Co-Administrative Agent pursuant to subsection 2.2D with respect to a proposed
conversion or continuation of the applicable basis for determining the interest
rate with respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice in the form of
Exhibit III annexed hereto delivered by Company to Chase Co-Administrative Agent
pursuant to subsection 3.1B(i) with respect to the proposed issuance of a Letter
of Credit.
"NSA" has the meaning assigned to that term in the Recitals to this
Agreement.
"NSA Acquired Assets" has the meaning assigned to that term in the Recitals
to this Agreement.
"NSA Acquisition" means the transactions contemplated by the NSA
Acquisition Agreement.
"NSA Acquisition Agreement" means the Asset Purchase Agreement by and among
Company, NSA, NSA Acquisition Company, certain Subsidiaries of NSA, certain
stockholders of NSA and other parties indicated on the signature pages thereof,
in the form delivered to Arranging Agents on or prior to November 10, 1997 and
as such agreement may be amended, restated, supplemented or otherwise modified
from time to time to the extent permitted under subsection 7.12A.
"NSA Acquisition Loans" means the Additional Tranche B Term Loans in an
aggregate principal amount of $22,000,000 made to Company on October 8, 1997.
"Obligations" means all obligations of every nature of each Loan Party from
time to time owed to Agents, Lenders or any of them under the Loan Documents,
whether for principal, interest, reimbursement of amounts drawn under Letters of
Credit or payments for early termination of Interest Rate Agreements, fees,
expenses, indemnification or otherwise.
"Officer's Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer), its president, its chief financial officer or a vice president;
provided that every Officer's Certificate with respect to the compliance with a
condition precedent to the making of any Loans hereunder shall include (i) a
statement that the officer making or giving such Officer's Certificate has read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the signer
he or she has made or has caused to be made such examination or investigation as
is necessary to enable him or her to express an informed opinion as to whether
or not such condition has been complied with, and (iii) a statement as to
whether, in the opinion of the signer, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Original Credit Agreement" means that certain Credit Agreement dated as of
November 6, 1996 by and among Company, the financial institutions party thereto
from time to time, Goldman Sachs Credit Partners L.P. and The Chase Manhattan
Bank as Co-Administrative Agents, Goldman Sachs Credit Partners L.P. and Chase
Securities Inc., as Arranging Agents and SunTrust Bank, Atlanta as collateral
agent.
"Partnership Loan Party" means any Loan Party which is a limited
partnership.
"Payco" means Payco American Corporation, a Wisconsin corporation.
"Payco Acquisition" means the transactions contemplated by the Payco
Acquisition Agreement.
"Payco Acquisition Agreement" means that certain Agreement and Plan of
Merger dated as of August 13, 1996, by and among Company, Acquisition Sub and
Payco, as in effect on the Closing Date and as such agreement may heretofore
have been or hereafter may be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under subsection 7.12A.
"Payco Merger" means the merger of Acquisition Sub with and into Payco in
accordance with the terms of the Payco Acquisition Agreement, the Articles of
Merger and the Certificate of Merger, with Payco being the surviving corporation
in such merger.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Section 4002 of ERISA (or any successor thereto).
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to Title IV of ERISA.
"Permitted Acquisition" means an acquisition of assets or a business (other
than Permitted Portfolio Acquisitions) effected prior to the Effective Date or
in accordance with the provisions of subsection 7.7(v) or 7.7(vi).
"Permitted Encumbrances" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by law
(other than any such Lien imposed pursuant to Section 401(a)(29) or 412(n)
of the Internal Revenue Code or by ERISA) incurred in the ordinary course
of business for sums not yet delinquent or being contested in good faith,
if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries;
(vii) any (a) interest or title of a lessor or sublessor under any
Capital Lease permitted by subsection 7.1(iii) or any operating lease not
prohibited by this Agreement, (b) restriction or encumbrance that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(viii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) deposits in the ordinary course of business to secure liabilities
to insurance carriers, lessors, utilities and other service providers; and
(xi) bankers liens and rights of setoff with respect to customary
depository arrangements entered into in the ordinary course of business.
"Permitted Joint Venture" means an entity engaged in substantially the same
line of business as Company and its Subsidiaries on the date hereof in which (i)
except with respect to an entity the only other equity holder of which is
Goldman, Sachs & Co. or one or more of its designated affiliates, at least 51%
of the outstanding equity interests are owned by Company or a Wholly Owned
Subsidiary of Company, (ii) any equity interests (other than Regulatory Shares)
not owned by Company or a Wholly Owned Subsidiary of Company are beneficially
owned by non-Affiliates of Company and (iii) Company or a Wholly Owned
Subsidiary, as a general partner or otherwise, controls the management,
operations and policies.
"Permitted Portfolio Acquisition" means an acquisition of a receivables
portfolio effected in accordance with the provisions of subsection 7.7(v).
"Permitted Seller Note" means a promissory note substantially in the form
of Exhibit XIV annexed hereto representing any Indebtedness of Company incurred
in connection with any Permitted Acquisition payable to the seller in connection
therewith, as such note may be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under subsection 7.12B;
provided that no Permitted Seller Note shall (i) be guaranteed by any Subsidiary
of Company or secured by any property of Company or any of its Subsidiaries,
(ii) bear cash interest at a rate in excess of 12% per annum; or (iii) provide
for any prepayment or repayment of all or any portion of the principal thereof
prior to the date of the final scheduled installment of principal of any of the
Loans; provided that, up to $10,000,000 aggregate principal amount of Permitted
Seller Notes may provide for prepayment or repayment prior to the final
scheduled installment of principal of the Loans but in no event earlier than the
fifth anniversary of the Effective Date.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Pledge Agreement" means that certain Pledge Agreement by and among
Company, the Subsidiary Guarantors and Collateral Agent dated as of the Closing
Date and substantially in the form of Exhibit VIII annexed hereto, as such
Pledge Agreement may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time.
"Portfolio Purchase Business" means assets or operations generating
revenues from collections on acquired or purchased portfolios of loans,
accounts, chattel paper, general intangibles or instruments.
"Potential Event of Default" means a condition or event that, after notice
or after any applicable grace period has lapsed, or both, would constitute an
Event of Default.
"Pricing Reduction" means, at any time after June 30, 1998, a pricing
reduction determined by reference to the correlative Leverage Ratio set forth
below:
============================================== =============================
LEVERAGE RATIO PRICING REDUCTION
============================================== =============================
Greater than or equal to 2.25:1.0, .25%
but less than 2.75:1.0
============================================== =============================
Less than 2.25:1.0 .50%
============================================== =============================
The Pricing Reduction shall be determined by reference to the Leverage Ratio set
forth in the most recent financial statements delivered by Company pursuant to
clause (ii) or (iii) of subsection 6.1 (accompanied by a Compliance Certificate
delivered by Company pursuant to clause (iv) of subsection 6.1). The Pricing
Reduction shall be effective on the day following delivery of the relevant
Compliance Certificate to Chase Co-Administrative Agent and shall remain in
effect through the next scheduled date for delivery of a Compliance Certificate.
It is understood that the Pricing Reductions set forth in the table above are
not cumulative. Notwithstanding anything herein to the contrary, at any time an
Event of Default shall have occurred and be continuing the Pricing Reduction
shall be zero.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by Chase as its prime commercial lending rate in effect at its
principal office in New York City. The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. Chase or any other Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.
"Projections" has the meaning assigned thereto in subsection 5.3B.
"Pro Rata Share" means (i) with respect to all payments, computations and
other matters relating to the Tranche A Term Loan Commitment or the Tranche A
Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche A
Term Loan Exposure of that Lender by (y) the aggregate Tranche A Term Loan
Exposure of all Lenders; (ii) with respect to all payments, computations and
other matters relating to the Tranche B Term Loan Commitment or the Tranche B
Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche B
Term Loan Exposure of that Lender by (y) the aggregate Tranche B Term Loan
Exposure of all Lenders; (iii) with respect to all payments, computations and
other matters relating to the Tranche C Term Loan Commitment or the Tranche C
Term Loans of any Lender, the percentage obtained by dividing (x) the Tranche C
Term Loan Exposure of that Lender by (y) the aggregate Tranche C Term Loan
Exposure of all Lenders; (iv) with respect to all payments, computations and
other matters relating to the Revolving Loan Commitment or the Revolving Loans
of any Lender or any Letters of Credit issued by any Lender or any
participations purchased by any Lender therein or in any Swing Line Loans, the
percentage obtained by dividing (x) the Revolving Loan Exposure of that Lender
by (y) the aggregate Revolving Loan Exposure of all Lenders; and (v) for all
other purposes with respect to each Lender, the percentage obtained by dividing
(x) the sum of the Tranche A Term Loan Exposure of that Lender plus the Tranche
B Term Loan Exposure of that Lender plus the Tranche C Term Loan Exposure of
that Lender plus the Revolving Loan Exposure of that Lender by (y) the sum of
the aggregate Tranche A Term Loan Exposure of all Lenders plus the aggregate
Tranche B Term Loan Exposure of all Lenders plus the aggregate Tranche C Term
Loan Exposure of all Lenders plus the aggregate Revolving Loan Exposure of all
Lenders; in any such case as the applicable percentage may be adjusted by
assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of
each Lender for purposes of each of clauses (i), (ii), (iii), (iv) and (v) of
the preceding sentence is set forth opposite the name of that Lender in Schedule
2.1 annexed hereto.
"Qualified Loan Portfolio" means a portfolio of loans, accounts, chattel
paper, general intangibles or instruments acquired or purchased by Company or
one of its Subsidiaries from any Person, where (i) the portfolio is free and
clear of all Liens, except Liens in favor of Collateral Agent for the benefit of
Agents and Lenders under this Agreement; (ii) no participation or other interest
in the portfolio or the collections from the portfolio exists in favor of any
other Person other than a participation or other interest which does not exceed
50% of the portfolio or collections from the portfolio and which is on terms
approved in advance by Co-Administrative Agents and Requisite Lenders; and (iii)
the portfolio consists of loans, accounts, chattel paper, general intangibles or
instruments similar in type, characteristics and quality to those owned or
previously owned by Company and its Subsidiaries. Notwithstanding the foregoing,
a Qualified Loan Portfolio may be subject to participations, interests and/or
Liens granted to Goldman, Sachs & Co. or its designated affiliate or affiliates
pursuant to arrangements in effect as of the Effective Date or substantially
similar thereto.
"Refunded Swing Line Loans" has the meaning assigned to that term in
subsection 2.1A(iv).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Regulatory Shares" means, with respect to any Person, shares of such
Person required to be issued as qualifying shares to directors or persons
similarly situated or shares issued to Persons other than Company or a Wholly
Owned Subsidiary of Company in response to regulatory requirements of foreign
jurisdictions pursuant to a resolution of the Board of Directors of such Person,
so long as such shares do not exceed one percent of the total outstanding shares
of equity such Person and any owners of such shares irrevocably covenant with
Company to remit to Company or waive any dividends or distributions paid or
payable in respect of such shares.
"Reimbursement Date" has the meaning assigned to that term in subsection
3.3B.
"Related Agreements" means the Subordinated Notes, the Subordinated Note
Indenture, the other Subordinated Note Documents, the Payco Acquisition
Agreement, the Articles of Merger, the Certificate of Merger, the NSA
Acquisition Agreement, the Accelerated Acquisition Agreement and the Union
Acquisition Documents.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Requisite Lenders" means Non-Defaulting Lenders having or holding not less
than 51% of the sum of the aggregate Tranche A Term Loan Exposure of all
Non-Defaulting Lenders plus the aggregate Tranche B Term Loan Exposure of all
Non-Defaulting Lenders plus the aggregate Tranche C Term Loan Exposure of all
Non-Defaulting Lenders plus the aggregate Revolving Loan Exposure of all
Non-Defaulting Lenders.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Company
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Company now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Company now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Subordinated Indebtedness.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(iii) and "REVOLVING LOAN
COMMITMENTS" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means October 15, 2001.
"Revolving Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the termination of the Revolving Loan Commitments,
that Lender's Revolving Loan Commitment and (ii) after the termination of the
Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal
amount of the Revolving Loans of that Lender plus (b) in the event that Lender
is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all
Letters of Credit issued by that Lender (net of any participations purchased by
other Lenders in such Letters of Credit) plus (c) the aggregate amount of all
participations purchased by that Lender in any outstanding Letters of Credit or
any unreimbursed drawings under any Letters of Credit plus (d) the aggregate
amount of all participations purchased by that Lender in any outstanding Swing
Line Loans plus (e) in the case of Swing Line Lender, the sum of the aggregate
outstanding principal amount of all Swing Line Loans (in each case net of any
participations therein purchased by other Lenders).
"Revolving Loans" means (i) the Loans made by Lenders to Company pursuant
to subsection 2.1A(iii) of the Original Credit Agreement and pursuant to
subsection 2.1A(iii) of the Existing Credit Agreement and outstanding after the
Effective Date and (ii) any Loans made by Lenders to Company pursuant to
subsection 2.1A(iii) of this Agreement.
"Revolving Notes" means (i) the promissory notes of Company issued pursuant
to the Original Credit Agreement and the Existing Credit Agreement and (ii) any
promissory notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Revolving Loan Commitment and
Revolving Loans of any Lender, in each case substantially in the form of Exhibit
V annexed hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"Second Acknowledgment and Consent" means that certain Acknowledgement and
Consent executed by Company and the Subsidiary Guarantors dated as of the
Effective Date and substantially in the form of Exhibit XII annexed hereto, as
such Acknowledgement and Consent may be amended, restated, supplemented or
otherwise modified from time to time.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Security Agreement" means the Security Agreement entered into by and among
Company, the Subsidiary Guarantors and Collateral Agent dated as of the Closing
Date and substantially in the form of Exhibit IX annexed hereto, as such
Security Agreement may heretofore have been or hereafter may be amended,
restated, supplemented or otherwise modified from time to time.
"Solvent" means, with respect to any Person, that as of the date of
determination both (i) (a) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (c) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (ii) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) workers' compensation
liabilities of Company or any of its Subsidiaries, (ii) the obligations of third
party insurers of Company or any of its Subsidiaries arising by virtue of the
laws of any jurisdiction requiring third party insurers, (iii) performance,
payment, deposit or surety obligations of Company or any of its Subsidiaries, in
any case if required by law or governmental rule or regulation or in accordance
with custom and practice in the industry, and (iv) such other obligations of
Company and its Subsidiaries as may be reasonably acceptable to
Co-Administrative Agents; provided that Standby Letters of Credit may not be
issued for the purpose of supporting (a) trade payables or (b) Indebtedness
constituting "antecedent debt" (as that term is used in Section 547 of the
Bankruptcy Code).
"Stockholders Agreement" means that certain Amended and Restated
Stockholders Agreement dated as of February 16, 1996, by and among Company and
various stockholders of Company, as in effect on the Closing Date and as such
agreement may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time thereafter to the extent
permitted under subsection 7.12A.
"Subordinated Indebtedness" means (i) the Indebtedness of Company evidenced
by the Subordinated Notes, (ii) the Indebtedness of Company evidenced by the
Existing Seller Note and any Permitted Seller Notes and (iii) any other
Indebtedness of Company or any of its Subsidiaries subordinated in right of
payment to the Obligations pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination provisions
and other material terms in form and substance satisfactory to Co-Administrative
Agents and Requisite Lenders.
"Subordinated Note Documents" means the Subordinated Notes, the
Subordinated Note Indenture, the Subordinated Note Guaranty and each other
document executed in connection with the Subordinated Notes, as each such
document may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted by
subsection 7.12B.
"Subordinated Note Guaranty" means the guaranty of the Subordinated Notes
executed by certain Subsidiaries of Company and contained in the Subordinated
Note Indenture, as such guaranty may heretofore have been or hereafter may be
amended, restated, supplemented or otherwise modified from time to time
(including by any supplemental indenture thereto executed by any Subsidiary of
Company after the Closing Date) to the extent permitted under subsection 7.12B.
"Subordinated Note Indenture" means the indenture pursuant to which the
Subordinated Notes are issued, as in effect on the Closing Date and as such
indenture may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12B.
"Subordinated Notes" means the $100,000,000 in aggregate principal amount
of 11% Senior Subordinated Notes due 2006 of Company issued pursuant to the
Subordinated Note Indenture.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof provided that, prior
to the Union Merger Date, neither Union nor any of its Subsidiaries shall be
deemed a Subsidiary of Company for purposes of Sections 5.16, 7.1, 7.2 or 7.3.
"Subsidiary Guarantor" means any Wholly Owned Subsidiary of Company that is
a party to the Subsidiary Guaranty on the Effective Date or at any time
thereafter pursuant to subsection 6.9.
"Subsidiary Guaranty" means the Subsidiary Guaranty, substantially in the
form of Exhibit VII annexed hereto, dated as of the Closing Date and delivered
by the existing Subsidiary Guarantors on the Effective Date and any additional
Subsidiary Guarantor from time to time thereafter pursuant to subsection 6.9, as
such Subsidiary Guaranty may heretofore have been or hereafter may be amended,
restated, supplemented or otherwise modified from time to time.
"SunTrust" means SunTrust Bank, Atlanta and its successors and assigns,
including, without limitation, its successors by merger.
"Swing Line Lender" means Chase, or any Person serving as a successor Chase
Co-Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line Lender to
make Swing Line Loans to Company pursuant to subsection 2.1A(iv).
"Swing Line Loans" means the Loans made by Swing Line Lender pursuant to
subsection 2.1A(iv).
"Swing Line Note" means (i) the promissory note of Company issued pursuant
to the Existing Credit Agreement and the Original Credit Agreement and (ii) any
promissory note issued by Company to any successor Chase Co-Administrative Agent
and Swing Line Lender pursuant to the last sentence of subsection 9.5B, in each
case substantially in the form of Exhibit VI annexed hereto, as it may be
amended, restated, supplemented or otherwise modified from time to time.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "TAX ON THE OVERALL NET INCOME" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of a Lender, its relevant Lending
Office) is located or in which that Person is deemed to be doing business on all
or part of the net income, profits or gains of that Person (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise).
"Tendered Union Shares" means all shares of Union Common Stock tendered to
and purchased by Merger Sub pursuant to the Tender Offer.
"Tender Offer" means the offer to purchase for cash all of the outstanding
shares of Union Common Stock by Merger Sub pursuant to the Tender Offer
Materials.
"Tender Offer Materials" means the Tender Offer Statement on Schedule 14D-1
filed by Merger Sub on December 24, 1997 with the Securities and Exchange
Commission pursuant to Section 14(d)(1) of the Exchange Act, together with all
exhibits, supplements and amendments thereto and any other amendments prior to
the date hereof that relate only to any extension of time during which the offer
to purchase remains outstanding or to the results of the Tender Offer and other
amendments that are approved by Arranging Agents.
"Term Loans" means, collectively, the Tranche A Term Loans, the Tranche B
Term Loans and the Tranche C Term Loans.
"Term Notes" means, collectively, the Tranche A Term Notes, the Tranche B
Term Notes and the Tranche C Term Notes.
"Total Utilization of Revolving Loan Commitments" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of repaying any
Refunded Swing Line Loans or reimbursing the applicable Issuing Lender for any
amount drawn under any Letter of Credit but not yet so applied) plus (ii) the
aggregate principal amount of all outstanding Swing Line Loans plus (iii) the
Letter of Credit Usage.
"Trademark Security Agreement" means the Trademark Security Agreement
entered into by and among Company, the Subsidiary Guarantors and Collateral
Agent dated as of the Closing Date, substantially in the form of Exhibit IX-C
annexed hereto, as such Trademark Security Agreement may heretofore have been or
hereafter may be amended, restated, supplemented or otherwise modified from time
to time.
"Tranche A Term Loan Commitment" means the commitment of a Lender to make a
Tranche A Term Loan to Company on the Closing Date pursuant to subsection
2.1A(i) of the Original Credit Agreement and the Existing Credit Agreement, and
"TRANCHE A TERM LOAN COMMITMENTS" means such commitments of all Lenders in the
aggregate.
"Tranche A Term Loan Exposure" means, with respect to any Lender as of any
date of determination, the outstanding principal amount of the Tranche A Term
Loan of that Lender.
"Tranche A Term Loans" means the Existing Tranche A Term Loans.
"Tranche A Term Notes" means (i) the promissory notes of Company issued
pursuant to the Original Credit Agreement and the Existing Credit Agreement and
(ii) any promissory notes issued by Company pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Tranche A Term Loans
of any Lenders, in each case substantially in the form of Exhibit IV-A annexed
hereto, as they may be amended, restated, supplemented or otherwise modified
from time to time.
"Tranche B Term Loan Commitment" means the commitment of a Lender to make a
Tranche B Term Loan to Company on the Closing Date pursuant to subsection
2.1A(ii) of the Original Credit Agreement and the commitment of a Lender to make
Additional Tranche B Term Loans to Company pursuant to subsection 2.1A(ii) of
the Existing Credit Agreement, and "TRANCHE B TERM LOAN COMMITMENTS" means such
commitments of all Lenders in the aggregate.
"Tranche B Term Loan Exposure" means, with respect to any Lender as of any
date of determination the outstanding principal amount of the Tranche B Term
Loan of that Lender.
"Tranche B Term Loans" means the Existing Tranche B Term Loans.
"Tranche B Term Note Allonge" means the Allonges issued pursuant to
subsection 2.1E of the Existing Credit Agreement on the First Amendment Date
with respect to the Tranche B Term Notes, as they may be amended, restated,
supplemented or otherwise modified from time to time.
"Tranche B Term Notes" means (i) the promissory notes of Company issued
pursuant to the Original Credit Agreement, in each case as amended on the First
Amendment Date by the Tranche B Term Note Allonges, (ii) the promissory notes of
Company issued pursuant to subsection 2.1E(ii) of the Existing Credit Agreement
on the First Amendment Date, and (iii) any promissory notes issued by Company
pursuant to the last sentence of subsection 10.1B(i) in connection with
assignments of the Tranche B Term Loans of any Lenders, in each case
substantially in the form of Exhibit IV-B annexed hereto, as they may be
amended, restated, supplemented or otherwise modified from time to time.
"Tranche C Term Loan Commitment" means the commitment of a Lender to make a
Tranche C Term Loan to Company pursuant to subsection 2.1A(ii), and "Tranche C
Term Loan Commitments" means such commitments of all Lenders in the aggregate.
"Tranche C Term Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the funding of the Tranche C Term Loans, that
Lender's Tranche C Term Loan Commitment, (ii) after the initial funding of the
Tranche C Term Loans but before the date (the "TRANCHE C TERM LOAN COMMITMENT
TERMINATION DATE") that is 120 days after the Effective Date or (if earlier) the
date on which the Delayed-Draw Term Loans are made, the outstanding principal
amount of the Tranche C Term Loans of that Lender plus the unfunded portion of
the Tranche C Term Loan Commitment, and (iii) after the Tranche C Term Loan
Commitment Termination Date, the outstanding principal amount of the Tranche C
Term Loans of that Lender.
"Tranche C Term Loans" means the Loans made by Lenders to Company pursuant
to subsection 2.1A(ii).
"Tranche C Term Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E on the Effective Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Tranche C Term Loan Commitments or Tranche C
Term Loans of any Lenders, in each case substantially in the form of Exhibit
IV-C annexed hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"Transaction Costs" means the fees, costs and expenses payable by Company
and its Subsidiaries and in connection with the transactions contemplated hereby
to occur on the Effective Date and the Funding Date for the Delayed-Draw Term
Loan.
"Unfunded Current Liability" means, with respect to any Pension Plan, the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under such Pension Plan as of the close of its most recent plan year
exceeds the fair market value of the assets allocable thereto, each determined
in accordance with Statement of Financial Accounting Standards No. 35, based
upon the actuarial assumptions used by such Pension Plan's actuary in the most
recent annual valuation of such Pension Plan.
"Union" has the meaning assigned to that term in the recitals to this
Agreement.
"Union Acquisition" means the transactions contemplated by the Union
Acquisition Agreement.
"Union Acquisition Agreement" that certain Share Purchase Agreement and
Plan of Merger dated as of December 22, 1997 by and among Company, Merger Sub
and Union.
"Union Acquisition Documents" means the Union Acquisition Agreement, the
Tender Offer Materials and the Union Certificate of Merger.
"Union Certificate of Merger" means the Certificate of Merger by and
between Merger Sub and Union to be filed with the Secretary of State of Delaware
as contemplated by the Union Acquisition Agreement, as such certificate may be
amended, restated, supplemented or otherwise modified from time to time
thereafter to the extent permitted under subsection 7.12A.
"Union Common Stock" means the common stock of Union, par value $.50 per
share, issued and outstanding prior to the Union Merger.
"Union Letters of Credit" has the meaning assigned to that term in
subsection 3.1A.
"Union Merger" means the merger of Merger Sub with and into Union in
accordance with the terms of the Union Acquisition Agreement and the Union
Certificate of Merger, with Union being the surviving corporation.
"Union Merger Date" means the date that the Union Merger becomes effective
in accordance with the terms of the Union Acquisition Agreement.
"Wholly Owned Subsidiary" means, with respect to any Person, a Subsidiary
of such Person all of the outstanding capital stock or other ownership interests
of which (other than Regulatory Shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiii)
of subsection 6.1 shall be prepared in accordance with GAAP (except, with
respect to interim financial statements, normal year-end audit adjustments and
the absence of explanatory footnotes) as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 6.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3A.
1.3 OTHER DEFINITIONAL PROVISIONS.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. The words "includes", "including" and similar terms used in any Loan
Document shall be construed as if followed by the words "without limitation".
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; LOANS.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Loan Parties set forth
herein and in the other Loan Documents, each Lender hereby severally agrees to
make (or maintain, as the case may be) the Loans described in subsections
2.1A(i), 2.1A(ii) and 2.1A(iii) and Swing Line Lender hereby agrees to make the
Swing Line Loans as described in subsection 2.1A(iv).
(i) Existing Loans. Company acknowledges and confirms that each
Existing Lender holds Existing Loans in the respective principal amounts
outstanding as of the Effective Date set forth opposite its name on
Schedule 2.1 annexed hereto. Company hereby represents, warrants, agrees,
covenants and (1) reaffirms that it has no (and it permanently and
irrevocably waives and releases Agents and Lenders from any, to the extent
arising on or prior to the Effective Date) defense, set off, claim or
counterclaim against any Agent or Lender in regard to its Obligations in
respect of such Existing Loans and (2) reaffirms its obligation to pay such
Loans in accordance with the terms and conditions of this Agreement and the
other Loan Documents. Based on the foregoing, (A) Company and each Lender
agree that (x) the Existing Tranche A Term Loans, (y) the Existing Tranche
B Term Loans and (z) the Existing Revolving Loans, and any amounts owed
(whether or not presently due and payable, and including all interest
accrued to the Effective Date (which shall be payable on the next Interest
Payment Date with respect to the Loans to which such interest relates)) by
Company to Lenders thereunder or in respect thereof, shall, as of the
Effective Date, be converted to, maintained as, and owed by Company under
or in respect of Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans, respectively, hereunder. Amounts repaid or prepaid in respect of
Tranche A Term Loans and Tranche B Term Loans may not be reborrowed.
Amounts repaid or prepaid in respect of the foregoing Revolving Loans may
be repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
(ii) Tranche C Term Loans. Each Lender severally agrees (a) to lend to
Company on the Effective Date (in the case of Tranche C Term Loans other
than Delayed-Draw Term Loans) and (b) to lend to Company within 120 days
after the Effective Date (in the case of Delayed-Draw Term Loans) an
aggregate amount not exceeding its Pro Rata Share of the aggregate amount
of the Tranche C Term Loan Commitments to be used for the purposes
identified in subsection 2.5B. The amount of each Lender's Tranche C Term
Loan Commitment is set forth opposite its name on Schedule 2.1 annexed
hereto and the aggregate amount of the Tranche C Term Loan Commitments is
$225,000,000; provided that the Tranche C Term Loan Commitments of Lenders
shall be adjusted to give effect to any assignments of the Tranche C Term
Loan Commitments pursuant to subsection 10.1B. Each Lender's Tranche C Term
Loan Commitment shall expire immediately and without further action on
February 15, 1998 if the initial Tranche C Term Loans are not made on or
before that date, and each Lender's Tranche C Term Loan Commitment in
respect of the Delayed-Draw Term Loans shall expire immediately and without
further action on the date that is 120 days after the Effective Date in the
event that the Delayed-Draw Term Loans are not made on or before that date.
Company may make only two borrowings under the Tranche C Term Loan
Commitments. Amounts borrowed under this subsection 2.1A(ii) and
subsequently repaid or prepaid may not be reborrowed.
(iii) Revolving Loans. Each Lender severally agrees, subject to the
limitations set forth below with respect to the maximum amount of Revolving
Loans permitted to be outstanding from time to time, to lend to Company
from time to time during the period from the Effective Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount which, when aggregated with any outstanding Existing Loans of the
Lender that are Revolving Loans, shall not exceed its Pro Rata Share of the
aggregate amount of the Revolving Loan Commitments, to be used for the
purposes identified in subsection 2.5C. The original amount of each
Lender's Revolving Loan Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate original amount of the
Revolving Loan Commitments is $58,000,000; provided that the Revolving Loan
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Revolving Loan Commitments pursuant to subsection 10.1B; provided
further that the amount of the Revolving Loan Commitments shall be reduced
from time to time by the amount of any reductions thereto made pursuant to
subsection 2.4B. Each Lender's Revolving Loan Commitment shall expire on
the Revolving Loan Commitment Termination Date and all Revolving Loans and
all other amounts owed hereunder with respect to the Revolving Loans and
the Revolving Loan Commitments shall be paid in full no later than that
date. Amounts borrowed under this subsection 2.1A(iii) as Revolving Loans
may be repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
Notwithstanding anything contained herein to the contrary, in no event
shall the Total Utilization of Revolving Loan Commitments at any time
exceed the Revolving Loan Commitments then in effect.
(iv) Swing Line Loans. Swing Line Lender hereby agrees, subject to the
limitations set forth below with respect to the maximum aggregate amount of
all Swing Line Loans outstanding from time to time, to make a portion of
the Revolving Loan Commitments available to Company from time to time
during the period from the Effective Date to but excluding the Revolving
Loan Commitment Termination Date by making Base Rate Loans as Swing Line
Loans to Company in an aggregate amount not to exceed the amount of the
Swing Line Loan Commitment, to be used for the purposes identified in
subsection 2.5B, notwithstanding the fact that such Swing Line Loans, when
aggregated with the sum of Swing Line Lender's outstanding Revolving Loans
and Swing Line Lender's Pro Rata Share of the Letter of Credit Usage then
in effect, may exceed Swing Line Lender's Revolving Loan Commitment. The
original amount of the Swing Line Loan Commitment is $5,000,000; provided
that the amounts of the Swing Line Loan Commitment are subject to reduction
as provided in clause (b) of the next paragraph. The Swing Line Loan
Commitment shall expire on the Revolving Loan Commitment Termination Date
and all Swing Line Loans and all other amounts owed hereunder with respect
to the Swing Line Loans shall be paid in full no later than that date.
Amounts borrowed under this subsection 2.1A(iv) may be repaid and
reborrowed to but excluding the Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, the Swing Line
Loans, and the Swing Line Loan Commitment shall be subject to the following
limitations in the amounts indicated:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect;
(b) any reduction of the Revolving Loan Commitments made pursuant
to subsection 2.4B which reduces the aggregate Revolving Loan
Commitments to an amount less than the then current sum of the Swing
Line Loan Commitment shall result in an automatic corresponding pro
rata reduction of the Swing Line Loan Commitment such that the sum
thereof equals the amount of the Revolving Loan Commitments, as so
reduced, without any further action on the part of Company, Chase
Co-Administrative Agent or Swing Line Lender.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Chase
Co-Administrative Agent (with a copy to Company), no later than 12:00 Noon
(New York time) at least one Business Day in advance of the proposed
Funding Date, a notice (which shall be deemed to be a Notice of Borrowing
given by Company) requesting Lenders to make Revolving Loans that are Base
Rate Loans to Company on such Funding Date in an amount equal to the amount
of such Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on
the date such notice is given which Swing Line Lender requests Lenders to
prepay. Anything contained in this Agreement to the contrary
notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders
other than Swing Line Lender shall be immediately delivered by
Co-Administrative Agents to Swing Line Lender (and not to Company) and
applied to repay a corresponding portion of the Refunded Swing Line Loans
and (ii) on the day such Revolving Loans are made, Swing Line Lender's Pro
Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with
the proceeds of a Revolving Loan made by Swing Line Lender to Company, and
such portion of the Swing Line Loans deemed to be so paid shall no longer
be outstanding as Swing Line Loans and shall no longer be due under the
Swing Line Note of Swing Line Lender but shall instead constitute part of
Swing Line Lender's outstanding Revolving Loans to Company and shall be due
under the Revolving Note issued by Company to Swing Line Lender. Company
hereby authorizes each of Chase Co-Administrative Agent and Swing Line
Lender to charge Company's accounts with Chase Co-Administrative Agent and
Swing Line Lender (up to the amount available in each such account) in
order to immediately pay Swing Line Lender the amount of the Refunded Swing
Line Loans to the extent the proceeds of such Revolving Loans made by
Lenders, including the Revolving Loan deemed to be made by Swing Line
Lender, are not sufficient to repay in full the Refunded Swing Line Loans.
If any portion of any such amount paid (or deemed to be paid) to Swing Line
Lender should be recovered by or on behalf of Company from Swing Line
Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared
among all Lenders in the manner contemplated by subsection 10.5.
If for any reason Revolving Loans are not made pursuant to this
subsection 2.1A(iv) in an amount sufficient to repay any amounts owed to
Swing Line Lender in respect of any outstanding Swing Line Loans on or
before the third Business Day after demand for payment thereof by Swing
Line Lender, each Lender shall be deemed to, and hereby agrees to, have
purchased a participation in such outstanding Swing Line Loans, and in an
amount equal to its Pro Rata Share of the applicable unpaid amount together
with accrued interest thereon. Upon one Business Day's notice from Swing
Line Lender, each Lender shall deliver to Swing Line Lender an amount in
equal to its respective participation in the applicable unpaid amount in
same day funds at the Funding and Payment Office. In order to evidence such
participation each Lender agrees to enter into a participation agreement at
the request of Swing Line Lender in form and substance satisfactory to
Swing Line Lender. In the event any Lender fails to make available to Swing
Line Lender the amount of such Lender's participation as provided in this
paragraph, Swing Line Lender shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the rate
customarily used by Swing Line Lender for the correction of errors among
banks for three Business Days and thereafter at the Base Rate, as
applicable.
Notwithstanding anything contained herein to the contrary, (i) each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation, (a) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against Swing Line
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event of
Default; (c) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing; provided
that no Lender shall have any such obligation unless (x) Swing Line Lender
believed in good faith that all conditions under Section 4 to the making of
the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans,
were satisfied at the time such Refunded Swing Line Loans or unpaid Swing
Line Loans were made, or (y) such Lender had actual knowledge, by receipt
of any notices required to be delivered to Lenders pursuant to subsection
6.1(ix) or otherwise, that any such condition under Section 4 had not been
satisfied and such Lender failed to notify Swing Line Lender and Chase
Co-Administrative Agent in writing that it had no obligation to make
Revolving Loans until such condition was satisfied (any such notice to be
effective as of the date of receipt thereof by Swing Line Lender and Chase
Co-Administrative Agent), or (z) the satisfaction of any such condition
under Section 4 not satisfied had been waived by Requisite Lenders prior to
or at the time such Refunded Swing Line Loans or other unpaid Swing Line
Loans were made; and (ii) Swing Line Lender shall not be obligated to make
any Swing Line Loans if it has elected not to do so after the occurrence
and during the continuation of a Potential Event of Default or Event of
Default.
B. BORROWING MECHANICS. Term Loans or Revolving Loans (including any such
Loans made as Eurodollar Rate Loans with a particular Interest Period) made on
any Funding Date (other than Revolving Loans made pursuant to a request by Swing
Line Lender pursuant to subsection 2.1A(iv) for the purpose of repaying any
Refunded Swing Line Loans or Revolving Loans made pursuant to subsection 3.3B
for the purpose of reimbursing any Issuing Lender for the amount of a drawing or
payment under a Letter of Credit issued by it) shall be in an aggregate minimum
amount of $1,000,000 and integral multiples of $100,000 in excess of that
amount. Swing Line Loans made on any Funding Date shall be in an aggregate
minimum amount of $250,000 and integral multiples of $100,000 in excess of that
amount. Whenever Company desires that Lenders make Term Loans or Revolving Loans
it shall deliver to Chase Co-Administrative Agent on behalf of Company a Notice
of Borrowing no later than 12:00 Noon (New York time), at least three Business
Days in advance of the proposed Funding Date in the case of a Eurodollar Rate
Loan, or at least one Business Day in advance of the proposed Funding Date in
the case of a Base Rate Loan; provided, however, that Company may deliver to
Chase Co-Administrative Agent a Notice of Borrowing no later than 11:00 AM (New
York time) on the proposed Funding Date of any Tranche C Term Loans (other than
Delayed-Draw Term Loans) to be borrowed at the Base Rate. Whenever Company
desires that Swing Line Lender make a Swing Line Loan, it shall deliver to Chase
Co-Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York
time) on the proposed Funding Date. The Notice of Borrowing shall specify (i)
the proposed Funding Date (which shall be a Business Day), (ii) the amount and
type of Loans requested, (iii) in the case of Swing Line Loans, that such Loans
shall be Base Rate Loans, (iv) in the case of any Loans other than Swing Line
Loans, whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and
(v) in the case of any Loans requested to be made as Eurodollar Rate Loans, the
initial Interest Period requested therefor. Term Loans and Revolving Loans may
be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in
the manner provided in subsection 2.2D. In lieu of delivering the
above-described Notice of Borrowing, Company may give Chase Co-Administrative
Agent telephonic notice by the required time of any proposed borrowing under
this subsection 2.1B; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Borrowing to Chase Co-Administrative Agent on
or before the applicable Funding Date.
Neither Chase Co-Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above that
Chase Co-Administrative Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to borrow on behalf of
Company or for otherwise acting in good faith under this subsection 2.1B, and
upon funding of Loans by Lenders in accordance with this Agreement pursuant to
any such telephonic notice Company shall have effected Loans hereunder.
Company shall notify Chase Co-Administrative Agent prior to the funding of
any Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing are no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds of
any Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. DISBURSEMENT OF FUNDS. All Term Loans and all Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Co-Administrative
Agents of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic
notice in lieu thereof), Chase Co-Administrative Agent shall notify each Lender
or Swing Line Lender, as the case may be, of the proposed borrowing and of the
amount of such Lender's Pro Rata Share of the applicable Loans.
Each Lender shall make the amount of its Loan available to Chase
Co-Administrative Agent not later than 12:00 Noon (New York time) on the
applicable Funding Date, and Swing Line Lender shall make the amount of its
Swing Line Loan available to Chase Co-Administrative Agent not later than 12:00
Noon (New York time) on the applicable Funding Date, in each case in same day
funds, at the Funding and Payment Office. Except as provided in subsection
2.1A(iv) or subsection 3.3B with respect to Revolving Loans used to repay
Refunded Swing Line Loans or to reimburse any Issuing Lender for the amount of
an honored drawing or payment under a Letter of Credit issued by it, upon
satisfaction or waiver of the conditions precedent specified in subsections 4.2
(in the case of Loans made on the Effective Date), 4.3 (in the case of the
Delayed-Draw Term Loans) and 4.4 (in the case of all Loans), Chase
Co-Administrative Agent shall make the proceeds of such Loans available to
Company on the applicable Funding Date by causing an amount of same day funds
equal to the proceeds of all such Loans received by Chase Co-Administrative
Agent from Lenders or Swing Line Lender, as the case may be, to be credited to
the account of Company at the Funding and Payment Office.
Unless Chase Co-Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to Chase Co-Administrative Agent the amount of such Lender's Loan
requested on such Funding Date, Chase Co-Administrative Agent may assume that
such Lender has made such amount available to Chase Co-Administrative Agent on
such Funding Date and Chase Co-Administrative Agent may, in its sole discretion,
but shall not be obligated to, make available to Company a corresponding amount
on such Funding Date. If such corresponding amount is not in fact made available
to Chase Co-Administrative Agent by such Lender, Chase Co-Administrative Agent
shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from such Funding Date until
the date such amount is paid to Chase Co-Administrative Agent, at the customary
rate set by Chase Co-Administrative Agent for the correction of errors among
banks for three Business Days and thereafter at the Base Rate. If such Lender
does not pay such corresponding amount forthwith upon Chase Co-Administrative
Agent's demand therefor, Chase Co-Administrative Agent shall promptly notify
Company and Company shall immediately pay such corresponding amount in the to
Chase Co-Administrative Agent together with interest thereon, for each day from
such Funding Date until the date such amount is paid to Chase Co-Administrative
Agent, at the rate applicable to such Loan. Nothing in this subsection 2.1C
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitments hereunder or to prejudice any rights that Company may have against
any Lender as a result of any default by such Lender hereunder.
D. THE REGISTER.
(i) Chase Co-Administrative Agent shall maintain, at the address
referred to in subsection 10.8, a register for the recordation of the names
and addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "REGISTER"). The Register shall be available for
inspection by Company or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(ii) Chase Co-Administrative Agent shall record in the Register the
Commitments and the outstanding Loans from time to time of each Lender and
each repayment or prepayment in respect of the principal amount of the
outstanding Loans of each Lender. Any such recordation shall be conclusive
and binding on Company and each Lender, absent manifest error; provided
that failure to make any such recordation, or any error in such
recordation, shall not affect Company's Obligations in respect of the
applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of each Loan
made by it and each payment in respect thereof. Any such recordation shall
be prima facie evidence of the amount of such Loans; provided that failure
to make any such recordation, or any error in such recordation, shall not
affect Company's Obligations in respect of the applicable Loans; and
provided, further that in the event of any inconsistency between the
Register and any Lender's records, the recordations in the Register shall
govern.
(iv) Company, Agents and Lenders shall deem and treat the Persons
listed as Lenders in the Register as the holders and owners of the
corresponding Commitments and Loans listed therein for all purposes hereof,
and no assignment or transfer of any Commitment or Loan shall be effective,
in each case unless an until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by Chase
Co-Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(v) Company hereby designates Chase, and any financial institution
serving as a successor Chase Co-Administrative Agent, to serve as Company's
agent solely for purposes of maintaining the Register as provided in this
subsection 2.1D, and Company hereby agrees that, to the extent Chase serves
in such capacity, Chase and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes under subsection
10.3.
E. TRANCHE C TERM NOTES. Company shall execute and deliver on the Effective
Date to each Lender providing a Tranche C Term Loan Commitment (or to
Co-Administrative Agents for that Lender) a Tranche C Term Note, substantially
in the form of Exhibit IV-C annexed hereto, to evidence that Lender's Tranche C
Term Loans in the principal amount of that Lender's Tranche C Term Loans and
with other appropriate insertions. The Notes and the Obligations evidenced
thereby shall be governed by, subject to and benefit from all of the terms and
conditions of this Agreement and the other Loan Documents and shall be
guaranteed and/or secured by the Collateral as provided in the Loan Documents.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and 2.7,
each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate, as the case may be. Subject to the provisions of
subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal
amount thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate. The applicable
basis for determining the rate of interest with respect to any Loan shall be
selected by Company initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.1B. The basis for determining the
interest rate with respect to any Term Loan or any Revolving Loan may be changed
from time to time pursuant to subsection 2.2D. If on any day any Term Loan or
Revolving Loan is outstanding with respect to which notice has not been
delivered to Co-Administrative Agents in accordance with the terms of this
Agreement specifying the applicable basis for determining the rate of interest,
then for that day that Loan shall bear interest determined by reference to the
Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Term Loans and
the Revolving Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus
the Applicable Base Rate Margin; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans
shall bear interest through maturity at the sum of the Base Rate plus the
Applicable Base Rate Margin less 0.50% per annum.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan, Company
may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, three or six month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods applicable
to a Eurodollar Rate Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence on
the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any portion of the Tranche A
Term Loans shall extend beyond October 15, 2001, no Interest Period with
respect to any portion of the Tranche B Term Loans shall extend beyond
October 15, 2003 and no Interest Period with respect to any portion of the
Tranche C Term Loans shall extend beyond October 15, 2004 and no Interest
Period with respect to any portion of the Revolving Loans shall extend
beyond the Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Tranche A
Term Loans, Tranche B Term Loans or Tranche C Term Loans shall extend
beyond a date on which Company is required to make a scheduled payment of
principal of the Tranche A Term Loans, Tranche B Term Loans or Tranche C
Term Loans, as the case may be, unless the sum of (a) the aggregate
principal amount of Tranche A Term Loans, Tranche B Term Loans or Tranche C
Term Loans, as the case may be, that are Base Rate Loans plus (b) the
aggregate principal amount of Tranche A Term Loans, Tranche B Term Loans or
Tranche C Term Loans, as the case may be, that are Eurodollar Rate Loans
with Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Tranche A Term Loans, Tranche B
Term Loans or Tranche C Term Loans, as the case may be, on such date;
(vii) no Interest Period with respect to any portion of the Revolving
Loans shall extend beyond the date on which a permanent reduction of the
Revolving Loan Commitments is scheduled to occur unless the sum of (a) the
aggregate principal amount of Revolving Loans that are Base Rate Loans plus
(b) the aggregate principal amount of Revolving Loans that are Eurodollar
Rate Loans with Interest Periods expiring on or before such date plus (c)
the excess of the Revolving Loan Commitments then in effect over the
aggregate principal amount of Revolving Loans then outstanding equals or
exceeds the permanent reduction of the Revolving Loan Commitments that is
scheduled to occur on such date;
(viii) Company may not select an initial Interest Period of longer
than one month with respect to Tranche C Term Loans made on the Effective
Date.
(ix) there shall be no more than ten (10) Interest Periods outstanding
at any time; and
(x) in the event Company fails to specify an Interest Period for any
Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event that any Swing Line Loans, any Revolving
Loans or any Term Loans that are Base Rate Loans are prepaid pursuant to
subsection 2.4B(i), interest accrued on such Swing Line Loans, Revolving Loans
or Term Loans through the date of such prepayment shall be payable on the next
succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier,
at final maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection 2.6,
Company shall have the option (i) to convert at any time all or any part of its
outstanding Term Loans or Revolving Loans equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $1,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to Chase
Co-Administrative Agent no later than 12:00 Noon (New York time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan), and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has
occurred and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Chase Co-Administrative Agent
telephonic notice by the required time of any proposed conversion/continuation
under this subsection 2.2D; provided that such notice shall be promptly
confirmed in writing by delivery of a Notice of Conversion/Continuation to Chase
Co-Administrative Agent on or before the proposed conversion/continuation date.
Neither Chase Co-Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above that
Chase Co-Administrative Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to act on behalf of Company
or for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant to any
such telephonic notice Company shall have effected a conversion or continuation,
as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. POST-DEFAULT INTEREST. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code, or other applicable bankruptcy or insolvency laws)
payable upon demand at a rate that is 2% per annum in excess of the interest
rate otherwise payable under this Agreement with respect to the applicable Loans
(or, in the case of any such fees and other amounts, at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Revolving Loans bearing interest at a rate determined by reference to the Base
Rate); provided that, in the case of Eurodollar Rate Loans, upon the expiration
of the Interest Period in effect at the time any such increase in interest rate
is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate equal to 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans that are Tranche A Term Loans, Tranche B Term Loans, Tranche C
Term Loans, or Revolving Loans, as applicable. Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of any
Agent or Lender.
F. COMPUTATION OF INTEREST. Interest on Loans shall be computed (i) in the
case of Base Rate Loans based on the Prime Rate, on the basis of a 365-day or
366-day year, as the case may be, and (ii) in the case of all other Base Rate
Loans and Eurodollar Rate Loans, on the basis of a 360-day year, in each case
for the actual number of days elapsed in the period during which it accrues. In
computing interest on any Loan, the date of the making of such Loan or the first
day of an Interest Period applicable to such Loan or, with respect to a Base
Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of
such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on that Loan.
2.3 FEES.
A. COMMITMENT FEES. Company agrees to pay to Chase Co-Administrative Agent,
for distribution to each Lender in proportion to that Lender's Pro Rata Share
with respect to the Revolving Loan Commitments for the period from and including
the Closing Date to and excluding the Revolving Loan Commitment Termination Date
commitment fees equal to (i) the average of the daily excess of the Revolving
Loan Commitments over the sum of (x) the aggregate principal amount of Revolving
Loans outstanding (but not any Swing Line Loans outstanding) plus (y) the Letter
of Credit Usage, multiplied by (ii) 1/2 of 1% per annum. Company also agrees to
pay to Chase Co-Administrative Agent, for distribution to each Lender in
proportion to that Lender's Pro Rata Share with respect to the Tranche C Term
Loan Commitments for the period from and including the Effective Date to and
excluding the earlier of the Funding Date of the Delayed-Draw Term Loans and the
date which is 120 days after the Effective Date, commitment fees equal to (i)
the average daily unfunded portion of the Tranche C Term Loan Commitments,
multiplied by (ii) 1/2 of 1% per annum. All such commitment fees shall be
calculated on the basis of a 360-day year and the actual number of days elapsed
and shall be payable quarterly in arrears on January 15, April 15, July 15 and
October 15 of each year, commencing on January 15, 1997.
B. ANNUAL COLLATERAL AGENT'S FEE. Company agrees to pay to Collateral Agent
an annual Collateral Agent's fee in such amounts as may be agreed between them
from time to time.
C. OTHER FEES. Company agrees to pay to Agents such other fees in the
amounts and at the times separately agreed upon between Company and the
applicable Agents.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED PAYMENTS OF TERM LOANS.
(i) Scheduled Payments of Tranche A Term Loans. Company shall make
principal payments on the Tranche A Term Loans in installments on the dates
and in the amounts set forth below:
=========================================== ===================================
SCHEDULED REPAYMENT
DATE OF TRANCHE A
TERM LOANS
=========================================== ===================================
=========================================== ===================================
April 15, 1998 $3,312,500
July 15, 1998 $3,312,500
October 15, 1998 $3,312,500
=========================================== ===================================
January 15, 1999 $3,312,500
April 15, 1999 $3,312,500
July 15, 1999 $3,312,500
October 15, 1999 $3,312,500
=========================================== ===================================
January 15, 2000 $4,250,000
April 15, 2000 $4,250,000
July 15, 2000 $4,250,000
October 15, 2000 $4,250,000
=========================================== ===================================
January 15, 2001 $4,750,000
April 15, 2001 $4,750,000
July 15, 2001 $4,750,000
October 15, 2001 $4,750,000
=========================================== ===================================
; provided that the scheduled installments of principal of the Tranche A
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche A Term Loans in
accordance with subsection 2.4C; and provided further, that the Tranche A
Term Loans and all other amounts owed hereunder with respect to the Tranche
A Term Loans shall be paid in full no later than October 15, 2001, and the
final installment payable by Company in respect of the Tranche A Term Loans
on such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by Company under
this Agreement with respect to the Tranche A Term Loans.
(ii) Scheduled Payments of Tranche B Term Loans. Company shall make
principal payments on the Tranche B Term Loans in installments on the dates
and in the amounts set forth below:
=========================================== ===================================
DATE SCHEDULED REPAYMENT
OF TRANCHE B
TERM LOANS
=========================================== ===================================
=========================================== ===================================
April 15, 1998 $ 446,149
July 15, 1998 $ 446,149
October 15, 1998 $ 446,149
=========================================== ===================================
January 15, 1999 $ 446,149
April 15, 1999 $ 446,149
July 15, 1999 $ 446,149
October 15, 1999 $ 446,149
=========================================== ===================================
January 15, 2000 $ 446,149
April 15, 2000 $ 446,149
July 15, 2000 $ 446,149
October 15, 2000 $ 446,149
=========================================== ===================================
January 15, 2001 $ 446,149
April 15, 2001 $ 446,149
July 15, 2001 $ 446,149
October 15, 2001 $ 446,149
=========================================== ===================================
January 15, 2002 $12,492,171
April 15, 2002 $12,492,171
July 15, 2002 $12,492,171
October 15, 2002 $12,492,171
=========================================== ===================================
January 15, 2003 $16,953,660
April 15, 2003 $16,953,660
July 15, 2003 $16,953,660
October 15, 2003 $16,953,655
=========================================== ===================================
; provided that the scheduled installments of principal of the Tranche B
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Term Loans in
accordance with subsection 2.4C; and provided, further that the Tranche B
Term Loans and all other amounts owed hereunder with respect to the Tranche
B Term Loans shall be paid in full no later than October 15, 2003, and the
final installment payable by Company in respect of the Tranche B Term Loans
on such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by Company under
this Agreement with respect to the Tranche B Term Loans.
(iii) Scheduled Payments of Tranche C Term Loans. Company shall make
principal payments on the Tranche C Term Loans in installments on the dates
and in the amounts set forth below (it being understood and agreed that (a)
the amounts set forth below reflect the borrowing of the full amount of
Tranche C Term Loans on or prior to April 15, 1998; (b) in the event the
Delayed-Draw Term Loans have not been funded on or prior to April 15, 1998,
the amounts of the scheduled installments of principal (including the
installment due April 15, 1998) set forth below shall be reduced ratably in
an aggregate amount equal to the amount of unfunded Tranche C Term Loan
Commitments as of April 15, 1998; and (c) in the event that the Funding
Date of the Delayed-Draw Term Loans occurs after April 15, 1998, the
amounts of the scheduled installments of principal set forth below (as
adjusted in accordance with clause (b) above) for the period after April
15, 1998 shall be, as of such Funding Date, increased ratably in an
aggregate amount equal to the amount of such borrowing of Delayed-Draw Term
Loans):
============================ ===============================
DATE SCHEDULED
REPAYMENT OF
TRANCHE C TERM
LOANS
============================ ===============================
April 15, 1998 $ 250,000
July 15, 1998 $ 250,000
October 15, 1998 $ 250,000
============================ ===============================
January 15, 1999 $ 250,000
April 15, 1999 $ 250,000
July 15, 1999 $ 250,000
October 15, 1999 $ 250,000
---------------------------- ===============================
January 15, 2000 $ 250,000
April 15, 2000 $ 250,000
July 15, 2000 $ 250,000
October 15, 2000 $ 250,000
---------------------------- ===============================
January 15, 2001 $ 250,000
April 15, 2001 $ 250,000
July 15, 2001 $ 250,000
October 15, 2001 $ 250,000
---------------------------- ===============================
January 15, 2002 $ 250,000
April 15, 2002 $ 250,000
July 15, 2002 $ 250,000
October 15, 2002 $ 250,000
============================ ===============================
January 15, 2003 $ 250,000
April 15, 2003 $ 250,000
July 15, 2003 $ 250,000
October 15, 2003 $ 250,000
============================ ===============================
January 15, 2004 $ 54,750,000
April 15, 2004 $ 54,750,000
July 15, 2004 $ 54,750,000
October 15, 2004 $ 55,000,000
============================ ===============================
; provided that the scheduled installments of principal of the Tranche C
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche C Term Loans in
accordance with subsection 2.4C; and provided further, that the Tranche C
Term Loans and all other amounts owed hereunder with respect to the Tranche
C Term Loans shall be paid in full no later than October 15, 2004, and the
final installment payable by Company in respect of the Tranche C Term Loans
on such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by Company under
this Agreement with respect to the Tranche C Term Loans.
B. PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS.
(i) Voluntary Prepayments. Company may, upon written or telephonic
notice to Chase Co-Administrative Agent on or prior to 12:00 Noon (New York
time) on the date of prepayment, which notice, if telephonic, shall be
promptly confirmed in writing, at any time and from time to time prepay,
without premium or penalty, any Swing Line Loan on any Business Day in
whole or in part in an aggregate minimum amount of $250,000 and integral
multiples of $50,000 in excess of that amount. In addition, so long as no
Swing Line Loans are then outstanding, Company may, upon not less than one
Business Day's prior written or telephonic notice, in the case of Base Rate
Loans, and three Business Days' prior written or telephonic notice, in the
case of Eurodollar Rate Loans, in each case confirmed in writing to Chase
Co-Administrative Agent (which notice Chase Co-Administrative Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any
time and from time to time prepay, without premium or penalty, the Loans
other than Swing Line Loans on any Business Day in whole or in part in an
aggregate minimum amount of $1,000,000 and integral multiples of $250,000
in excess of that amount; provided, however, that in the event Company
shall prepay a Eurodollar Rate Loan other than on the expiration of the
Interest Period applicable thereto, Company shall, at the time of such
prepayment, also pay the amount payable under Section 2.6D hereof. Notice
of prepayment having been given as aforesaid, the Loans shall become due
and payable on the prepayment date specified in such notice and in the
aggregate principal amount specified therein. Any voluntary prepayments
pursuant to this subsection 2.4B(i) shall be applied as specified in
subsection 2.4C.
(ii) Voluntary Reductions of Revolving Loan Commitments. Company may,
upon not less than three Business Days' prior written or telephonic notice
confirmed in writing to Chase Co-Administrative Agent (which notice Chase
Co-Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time terminate in
whole or permanently reduce in part, without premium or penalty, (y) the
Revolving Loan Commitments in an amount up to the amount by which the
Revolving Loan Commitments exceed the Total Utilization of Revolving Loan
Commitments at the time of such proposed termination or reduction; provided
that any such partial reduction of the Revolving Loan Commitments shall be
in an aggregate minimum amount of $1,000,000 and integral multiples of
$250,000 in excess of that amount. Company's notice to Chase
Co-Administrative Agent shall designate the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial
reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in such notice and
shall reduce the Revolving Loan Commitment, as applicable, of each Lender
proportionately to its Pro Rata Share. Any such voluntary reduction of the
Revolving Loan Commitments shall be applied as specified in subsection
2.4C.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving Loan
Commitments.
The Loans shall be prepaid and the Revolving Loan Commitments shall be
reduced in the manner provided in subsection 2.4C upon the occurrence of the
following circumstances:
(a) Prepayments and Reductions from Asset Sales. No later than
the first Business Day following the date of receipt by Company or any
of its Subsidiaries of the Cash Proceeds of any Asset Sale (other than
any portion of such proceeds that is reinvested (or scheduled for
reinvestment) in a Qualified Loan Portfolio and/or assets of the
general type used in the business of Company and its Subsidiaries
within 270 days from the date of receipt of such proceeds), Company
shall prepay the Loans (and/or the Revolving Loan Commitments shall be
reduced) in the amount of such proceeds not so reinvested (or
scheduled for such reinvestment); provided, that if the Net Cash
Proceeds of all such Asset Sales exceed $20,000,000 during Fiscal Year
1998 or $15,000,000 in any Fiscal Year thereafter, then in each case
the amount of such excess Net Cash Proceeds may not be reinvested (or
scheduled for reinvestment); provided further, that if the Net Cash
Proceeds of Asset Sales of businesses in any Fiscal Year exceed 10% of
Consolidated EBITDA for the preceding Fiscal Year, then the amount of
such excess Net Cash Proceeds may not be reinvested (or scheduled for
reinvestment); and provided further, that Company may not reinvest (or
schedule for reinvestment) Net Cash Proceeds upon the occurrence and
during the continuation of an Event of Default. Company shall, no
later than 365 days after receipt of any such Net Cash Proceeds that
have not theretofore been applied to the Obligations, make an
additional prepayment of the Loans (and/or the Revolving Loan
Commitments shall be reduced) in the full amount of all such proceeds
that have not therefore been so reinvested. Concurrently with any
prepayment of the Loans and/or reduction of the Commitments pursuant
to this subsection 2.4B(iii)(a), Company shall deliver to Chase
Co-Administrative Agent an Officer's Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale from
the gross sales price thereof. In the event that Company shall, at any
time after receipt of Cash Proceeds of any Asset Sale requiring a
prepayment or a reduction of the Revolving Loan Commitments pursuant
to this subsection 2.4B(iii)(a), determine that the prepayments and/or
reductions of the Revolving Loan Commitments previously made in
respect of such Asset Sale were in an aggregate amount less than that
required by the terms of this subsection 2.4B(iii)(a), Company shall
promptly cause to be made an additional prepayment of the Loans
(and/or reduction in the Revolving Loan Commitments) in an amount
equal to the amount of any such deficit, and Company shall
concurrently therewith deliver to Co-Administrative Agents an
Officer's Certificate demonstrating the derivation of the additional
Net Cash Proceeds resulting in such deficit.
(b) Prepayments and Reductions Due to Issuance of Debt. On or
prior to the first Business Day after receipt by Company or any of its
Subsidiaries of any proceeds of any Indebtedness (other than the Loans
and any other Indebtedness permitted by this Agreement), Company shall
prepay the Loans (and/or the Revolving Loan Commitments shall be
reduced) in an amount equal to the amount of such proceeds; provided
that payment or acceptance of the amounts provided for in this
subsection 2.4B(iii)(b) shall not constitute a waiver of any Event of
Default resulting from the incurrence of such Indebtedness or
otherwise prejudice any rights or remedies of Agents or Lenders.
(c) Prepayments and Reductions Due to Issuance of Equity
Securities. On or prior to the first Business Day after receipt by
Company or any of its Subsidiaries of any Equity Proceeds, Company
shall prepay the Loans (and/or the Revolving Loan Commitments shall be
reduced) in an amount equal to such Equity Proceeds; provided that
such Equity Proceeds shall not be applied to prepay Loans pursuant to
this subsection if (1) such Equity Proceeds were not derived from a
public offering of Securities and (2) such Equity Proceeds (y) are,
upon receipt, designated for reinvestment in the businesses of Company
and its Subsidiaries and (z) are within 30 days of receipt thereof by
Company or any of its Subsidiaries, reinvested in the businesses of
Company and its Subsidiaries.
(d) Prepayments and Reductions from Insurance and Condemnation
Proceeds. No later than the second Business Day following the date of
receipt by Company or any of its Subsidiaries of any cash payments
under any of the casualty insurance policies covering damage to or
loss of property maintained pursuant to subsection 6.4 resulting from
damage to or loss of all or any portion of the Collateral or any other
tangible asset (net of actual and documented reasonable costs incurred
by Company or any of its Subsidiaries in connection with adjustment
and settlement thereof, "INSURANCE PROCEEDS") or any proceeds
resulting from the taking of assets by the power of eminent domain,
condemnation or otherwise (net of actual and documented reasonable
costs incurred by Company or any of its Subsidiaries in connection
with adjustment and settlement thereof, "CONDEMNATION PROCEEDS")
(other than any portion of any such proceeds that is reinvested (or
scheduled for reinvestment) in assets of the general type used in the
business of Company and its Subsidiaries within 270 days from the date
of receipt of such proceeds), Company shall prepay the Loans (and/or
the Revolving Loan Commitments shall be reduced) in the amount of such
proceeds not so reinvested (or scheduled for such reinvestment).
Company shall, no later than 270 days after receipt of any such
Insurance Proceeds or Condemnation Proceeds that have not theretofore
been applied to the Obligations, make an additional prepayment of the
Loans (and/or the Revolving Loan Commitments shall be reduced) in the
full amount of all such proceeds that have not therefore been
reinvested in such assets.
(e) Prepayments and Reductions from Consolidated Excess Cash
Flow. In the event that there shall be Consolidated Excess Cash Flow
for any Fiscal Year (commencing with the Fiscal Year ending December
31, 1998), Company shall, no later than 100 days after the end of such
Fiscal Year, prepay the Loans (and/or the Revolving Loan Commitments
shall be reduced) in an aggregate amount equal to 50% of such
Consolidated Excess Cash Flow for such Fiscal Year; provided that, in
the event that, as of the last day of any such Fiscal Year, the
Leverage Ratio is less than 3.0:1.00, then for such Fiscal Year the
amount required to be prepaid pursuant to this subsection 2.4B(iii)(e)
shall be reduced to 25% of Consolidated Excess Cash Flow for such
Fiscal Year.
(f) Prepayments Due to Reductions or Restrictions of Revolving
Loan Commitments. Company shall prepay the Swing Line Loans and/or the
Revolving Loans from time to time to the extent necessary so that (y)
the Total Utilization of Revolving Loan Commitments shall not at any
time exceed the Revolving Loan Commitments then in effect, and (z) the
aggregate principal amount of all outstanding Swing Line Loans shall
not at any time exceed the Swing Line Loan Commitment then in effect.
All Swing Line Loans shall be prepaid in full prior to the prepayment
of any Revolving Loans pursuant to this subsection 2.4B(iii)(f).
C. APPLICATION OF PREPAYMENTS AND REDUCTIONS OF REVOLVING LOAN
COMMITMENTS.
(i) Application of Voluntary Prepayments by Type of Loans. Any
voluntary prepayments pursuant to subsection 2.4B(i) shall be applied:
first to repay outstanding Swing Line Loans to the full extent thereof,
second to repay outstanding Revolving Loans to the full extent thereof, and
third, to repay outstanding Term Loans to the full extent thereof.
(ii) Application of Mandatory Prepayments by Type of Loans. Any amount
(the "APPLIED AMOUNT") required to be applied as a mandatory prepayment of
the Loans and/or a reduction of the Revolving Loan Commitments pursuant to
subsections 2.4B(iii)(a)-(e) shall be applied first to prepay the Term
Loans to the full extent thereof, second, to the extent of any remaining
portion of the Applied Amount, to prepay the Swing Line Loans to the full
extent thereof and to permanently reduce the Revolving Loan Commitments by
the amount of such prepayment, third, to the extent of any remaining
portion of the Applied Amount, to prepay the Revolving Loans to the full
extent thereof and to further permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, and fourth, to the extent of
any remaining portion of the Applied Amount, to further permanently reduce
the Revolving Loan Commitments to the full extent thereof.
(iii) Application of Prepayments of Term Loans to Tranche A Term
Loans, Tranche B Term Loans and Tranche C Term Loans and the Scheduled
Installments of Principal Thereof. Any prepayments of the Term Loans
pursuant to subsection 2.4B(i) or 2.4B(iii) shall be applied to prepay the
Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans
on a pro rata basis in accordance with the respective outstanding principal
amounts thereof. Any mandatory prepayments applied to the Tranche A Term
Loans, the Tranche B Term Loans or the Tranche C Term Loans pursuant to
this subsection shall be applied on a pro rata basis (in accordance with
the respective outstanding principal amounts thereof) to each scheduled
installment of principal of the Tranche A Term Loans, the Tranche B Term
Loans or the Tranche C Term Loans, as the case may be, set forth in
subsection 2.4A(i), 2.4A(ii) or 2.4A(iii), respectively, that is unpaid at
the time of such prepayment.
(iv) Application of Prepayments to Base Rate Loans and Eurodollar Rate
Loans. Considering Tranche A Term Loans, Tranche B Term Loans, Tranche C
Term Loans and Revolving Loans being prepaid separately, any prepayment
thereof shall be applied first to Base Rate Loans to the full extent
thereof before application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments required to be made by
Company pursuant to subsection 2.6D.
D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER
SUBSIDIARY GUARANTY.
(i) Application of Proceeds of Collateral. Except as provided in
subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale
Proceeds, all proceeds received by Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral under any Collateral Document may, in the discretion of
Collateral Agent, be held by Collateral Agent as Collateral for, and/or
(then or at any time thereafter) applied in full or in part by Collateral
Agent against, the applicable Secured Obligations (as defined in such
Collateral Document) in the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including without limitation
reasonable compensation to Collateral Agent and its agents and
counsel, and all other reasonable expenses, liabilities and advances
made or incurred by Collateral Agent in connection therewith, and all
amounts for which Collateral Agent is entitled to indemnification
under such Collateral Document and all advances made by Collateral
Agent thereunder for the account of the applicable Loan Party, and to
the payment of all reasonable costs and expenses paid or incurred by
Collateral Agent in connection with the exercise of any right or
remedy under such Collateral Document, all in accordance with the
terms of this Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to the
payment of all other such Secured Obligations for the ratable benefit
of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Subsidiary Guaranty. All payments
received by Collateral Agent under the Subsidiary Guaranty shall be applied
promptly from time to time by Collateral Agent in the following order of
priority:
(a) To the payment of the reasonable costs and expenses of any
collection or other realization under the Subsidiary Guaranty,
including without limitation reasonable compensation to Collateral
Agent and its agents and counsel, and all expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith,
all in accordance with the terms of this Agreement and the Subsidiary
Guaranty;
(b) thereafter, to the extent of any excess such payments, to the
payment of all other Guaranteed Obligations (as defined in the
Subsidiary Guaranty) for the ratable benefit of the holders thereof;
and
(c) thereafter, to the extent of any excess such payments, to the
payment to the applicable Subsidiary Guarantor or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
E. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of principal,
interest, fees and other Obligations hereunder and under the Notes shall be
made in same day funds and without defense, setoff or counterclaim, free of
any restriction or condition, and delivered to Chase Co-Administrative
Agent not later than 12:00 Noon (New York time) on the date due at the
Funding and Payment Office for the account of Lenders; funds received by
Chase Co-Administrative Agent after that time on such due date shall be
deemed to have been paid by Company on the next succeeding Business Day.
Company hereby authorizes Chase Co-Administrative Agent to charge its
accounts with such Chase Co-Administrative Agent in order to cause timely
payment to be made to Chase Co-Administrative Agent of all principal,
interest, fees and expenses due hereunder (subject to sufficient funds
being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except as
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and in any
event any payments made in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to Lenders' respective Pro
Rata Shares. Chase Co-Administrative Agent shall promptly distribute to
each Lender, at its applicable Lending Office specified on Schedule 2.1 or
at such other address as such Lender may request, its Pro Rata Share of all
such payments received by Chase Co-Administrative Agent and the commitment
fees of such Lender when received by Chase Co-Administrative Agent pursuant
to subsection 2.3. Notwithstanding the foregoing provisions of this
subsection 2.4E(iii) if, pursuant to the provisions of subsection 2.6C, any
Notice of Conversion/Continuation is withdrawn as to any Affected Lender or
if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share
of any Eurodollar Rate Loans, Chase Co-Administrative Agent shall give
effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
obligations of Company hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
2.5 USE OF PROCEEDS.
A. TRANCHE A TERM LOANS AND TRANCHE B TERM LOANS. The proceeds of the
Tranche A Term Loans and the Tranche B Term Loans were applied in accordance
with the provisions of the Original Credit Agreement and the Existing Credit
Agreement.
B. TRANCHE C TERM LOANS. The proceeds of the Tranche C Term Loans shall be
applied by Company (a) on the date of the initial funding of the Tranche C Term
Loans (x) to repay Existing Revolving Loans and (y) to make capital
contributions and/or loans to Merger Sub, which will utilize the proceeds
thereof to pay for Tendered Union Shares and to pay costs and expenses arising
from the Tender Offer and related transactions and (b) in the case of
Delayed-Draw Term Loans, to make cash payments to the holders of Union Common
Stock pursuant to the Union Merger Agreement.
C. REVOLVING LOANS; SWING LINE LOANS. Revolving Loans and Swing Line Loans
in an aggregate amount not to exceed $10,000,000 at any time outstanding may be
used to finance the general corporate purposes of Company and its Subsidiaries.
Revolving Loans and Swing Line Loans in an additional amount not to exceed
$48,000,000 at any time outstanding may be used to finance expenditures which
are included in the definition of Consolidated Capital Expenditures; provided
that Revolving Loans and Swing Line Loans in an aggregate amount not to exceed
$58,000,000 at any time outstanding may be used to finance such acquisitions if
at all times such additional amount of Revolving Loans is outstanding the sum of
(i) unrestricted Cash and Cash Equivalents on the balance sheet of Company plus
(ii) the excess of the Revolving Loan Commitments over the Total Utilization of
Revolving Loan Commitments equals or exceeds $10,000,000.
D. COMPLIANCE WITH LAWS. Company hereby undertakes that no portion of the
proceeds of any Loans or other extensions of credit under this Agreement shall
be used by any Loan Party in any manner which would be illegal under, or which
would cause the invalidity or unenforceability (in each case in whole or in
part) of any Loan Document under, any applicable law.
E. MARGIN REGULATIONS. Without limiting the generality of subsection 2.5,
no portion of the proceeds of any borrowing under this Agreement shall be used
by Company or any of its Subsidiaries in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 11:00 A.M. (New York time) on each Interest Rate Determination Date,
Chase Co-Administrative Agent shall determine (which determination shall,
absent manifest error, be final, conclusive and binding upon all parties)
the interest rate that shall apply to the Eurodollar Rate Loans for which
an interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to Company and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Chase Co-Administrative Agent shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties
hereto), on any Interest Rate Determination Date with respect to any
Eurodollar Rate Loans, that by reason of circumstances arising after the
date of this Agreement affecting the London interbank market, adequate and
fair means do not exist for ascertaining the interest rate applicable to
such Loans on the basis provided for in the definition of Adjusted
Eurodollar Rate Chase Co-Administrative Agent shall on such date give
notice (by telecopy or by telephone confirmed in writing) to Company and
each Lender of such determination, whereupon (i) no Loans may be made as,
or converted to, Eurodollar Rate Loans, until such time as Chase
Co-Administrative Agent notifies Company and Lenders that the circumstances
giving rise to such notice no longer exist (such notification not to be
unreasonably withheld or delayed) and (ii) any Notice of Borrowing or
Notice of Conversion/Continuation given by Company with respect to the
Loans in respect of which such determination was made shall be deemed to be
rescinded by Company.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the
event that on any date any Lender shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties
hereto but shall be made only after consultation with Company and Chase
Co-Administrative Agent) that the making, maintaining or continuation of
its Eurodollar Rate Loans (i) has become unlawful as a result of compliance
by such Lender in good faith with any law, treaty, governmental rule,
regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of
law even though the failure to comply therewith would not be unlawful) or
(ii) has become impracticable, or would cause such Lender material
hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank
market, then, and in any such event, such Lender shall be an "AFFECTED
LENDER" and it shall on that day give notice (by telecopy or by telephone
confirmed in writing) to Company and Chase Co-Administrative Agent of such
determination (which notice Chase Co-Administrative Agent shall promptly
transmit to each other Lender). Thereafter (a) the obligation of the
Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate
Loans, shall be suspended until such notice shall be withdrawn by the
Affected Lender, (b) to the extent such determination by the Affected
Lender relates to a Eurodollar Rate Loan then being requested by Company
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation,
the Affected Lender shall make such Loan as (or convert such Loan to, as
the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to
maintain its outstanding Eurodollar Rate Loans, as the case may be (the
"AFFECTED LOANS"), shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the
Affected Loans or when required by law, and (d) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being
requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or
Notice of Conversion/Continuation as to all Lenders by giving notice (by
telecopy or by telephone confirmed in writing) to Chase Co-Administrative
Agent of such rescission on the date on which the Affected Lender gives
notice of its determination as described above (which notice of rescission
Chase Co-Administrative Agent shall promptly transmit to each other
Lender). Except as provided in the immediately preceding sentence, nothing
in this subsection 2.6C shall affect the obligation of any Lender other
than an Affected Lender to make or maintain Loans as, or to convert Loans
to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts), for
all reasonable losses, expenses and liabilities (including, without
limitation, any interest paid by that Lender to lenders of funds borrowed
by it to make or carry its Eurodollar Rate Loans and any loss, expense or
liability sustained by that Lender in connection with the liquidation or
re-employment of such funds) which that Lender may sustain: (i) if for any
reason (other than a default by that Lender) a borrowing of any Eurodollar
Rate Loan does not occur on a date specified therefor in a Notice of
Borrowing or a telephonic request for borrowing, or a conversion to or
continuation of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including without
limitation any prepayment pursuant to subsection 2.4B(i)) or conversion of
any of its Eurodollar Rate Loans occurs on a date that is not the last day
of an Interest Period applicable to that Loan, (iii) if any prepayment of
any of its Eurodollar Rate Loans is not made on any date specified in a
notice of prepayment given by Company, or (iv) as a consequence of any
other default by Company in the repayment of its Eurodollar Rate Loans when
required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its
branch offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this subsection 2.6
and under subsection 2.7A shall be made as though that Lender had actually
funded each of its relevant Eurodollar Rate Loans through the purchase of a
Eurodollar deposit bearing interest at the rate obtained pursuant to clause
(i) of the definition of Adjusted Eurodollar Rate in an amount equal to the
amount of such Eurodollar Rate Loan and having a maturity comparable to the
relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Lender to a domestic office of that
Lender in the United States of America; provided, however, that each Lender
may fund each of its Eurodollar Rate Loans in any manner it sees fit and
the foregoing assumptions shall be utilized only for the purposes of
calculating amounts payable under this subsection 2.6 and under subsection
2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of
Default, (i) Company may not elect to have a Loan be made or maintained as,
or converted to, a Eurodollar Rate Loan after the expiration of any
Interest Period then in effect for that Loan and (ii) subject to the
provisions of subsection 2.6D, any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to a requested
borrowing or conversion/continuation that has not yet occurred shall be
deemed to be rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions of
subsection 2.7B (which shall be controlling with respect to the matters covered
thereby), in the event that any law, treaty or governmental rule, regulation or
order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the Closing
Date, or compliance by such Lender with any guideline, request or directive
issued or made after the Closing Date by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) results in a change in the basis of taxation of such Lender (or
its applicable lending office) (other than a change with respect to any Tax
on the overall net income of such Lender) with respect to this Agreement or
any of its obligations hereunder or any payments to such Lender (or its
applicable lending office) of principal, interest, fees or any other amount
payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including,
without limitation, any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other than
any such reserve or other requirements with respect to Eurodollar Rate
Loans that are reflected in the definition of Adjusted Eurodollar Rate; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder, or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, Lender shall
promptly notify Company and Chase Co-Administrative Agent thereof and Company
shall promptly pay to such Lender, upon receipt of the statement referred to in
the next sentence, such additional amount or amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Lender shall reasonably determine) as may be necessary to compensate
such Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Company (with a copy to Chase
Co-Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
subsection 2.7A, which statement shall be prima facie evidence of such
additional amounts.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company under
this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed by
or within the United States of America or any political subdivision in or
of the United States of America or any other jurisdiction from which a
payment is made by or on behalf of Company.
(ii) Withholding of Taxes. If Company or any other Person is required
by law to make any deduction or withholding on account of any such Tax from
any sum paid or payable by Company to Chase Co-Administrative Agent or any
Lender under any of the Loan Documents:
(a) Company shall notify Chase Co-Administrative Agent of any
such requirement or any change in any such requirement as soon as
Company becomes aware of it;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on Chase Co-Administrative Agent or such Lender, as the
case may be) on behalf of and in the name of Chase Co-Administrative
Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Chase Co-Administrative Agent or
such Lender, as the case may be, receives on the due date a net sum
equal to what it would have received had no such deduction,
withholding or payment been required or made; and
(d) within 30 days after paying any sum from which it is required
by law to make any deduction or withholding, and within 30 days after
the due date of payment of any Tax which it is required by clause (b)
above to pay, Company shall deliver to Chase Co-Administrative Agent
evidence of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after the
Closing Date (in the case of each Existing Lender), after the Effective Date (in
the case of each New Lender) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each other Lender)
in any such requirement for a deduction, withholding or payment as is mentioned
therein shall result in an increase in the rate of such deduction, withholding
or payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to such
Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-U.S. Lender") shall deliver to Chase
Co-Administrative Agent for transmission to Company, on or prior to
the Closing Date (in the case of each Existing Lender), on or prior to
the Effective Date (in the case of each New Lender) or on or prior to
the date of the Assignment Agreement pursuant to which it becomes a
Lender (in the case of each other Lender), and at such other times as
may be necessary in the determination of Company or Chase
Co-Administrative Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue Service Form
1001 or 4224 (or any successor forms), accurately completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to any payments to such Lender of principal,
interest, fees or other amounts payable under any of the Loan
Documents or (2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 (or any
successor forms) pursuant to clause (1) above, a Certificate re
Non-Bank Status together with two original copies of Internal Revenue
Service Form W-8 (or any successor form), properly completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to any payments to such Lender of interest payable
under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, such Lender
shall (1) deliver to Chase Co-Administrative Agent for transmission to
Company two new original copies of Internal Revenue Service Form 1001
or 4224 (or any successor forms), or a Certificate re Non-Bank Status
and two original copies of Internal Revenue Service Form W-8 (or any
successor form), as the case may be, accurately completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required in order to confirm or establish that
such Lender is not subject to deduction or withholding of United
States federal income tax with respect to payments to such Lender
under the Loan Documents or (2) immediately notify Chase
Co-Administrative Agent and Company of its inability to deliver any
such forms, certificates or other evidence.
(c) Company shall not be required to pay any additional amount to
any Non-U.S. Lender under clause (c) of subsection 2.7B(ii) in respect
of deductions or withholdings of United States federal income taxes if
such Lender shall have failed to satisfy the requirements of
subsection 2.7B(iii)(a) or 2.7B(iii)(b); provided that if such Lender
shall have satisfied such requirements on the Closing Date (in the
case of each Existing Lender), on the Effective Date (in the case of
each New Lender) or on the date of the Assignment Agreement pursuant
to which it became a Lender (in the case of each other Lender),
nothing in this subsection 2.7B(iii)(c) shall relieve Company of its
obligation to pay any additional amounts pursuant to clause (c) of
subsection 2.7B(ii) in the event that, as a result of any change after
the Closing Date in any applicable law, treaty or governmental rule,
regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other evidence at
a subsequent date establishing the fact that such Lender is not
subject to withholding as described in subsection 2.7B(iii)(a) or
2.7B(iii)(b).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the Closing Date of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by the National Association of Insurance Commissioners, any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its applicable lending
office) with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of the National Association of
Insurance Commissioners, any such governmental authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the capital of such Lender or any corporation controlling such Lender as a
consequence of, or with reference to, such Lender's Loans or Commitments or
Letters of Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that which such
Lender reasonably determines such Lender or such controlling corporation could
have achieved but for such adoption, effectiveness, phase-in, applicability,
change or compliance (taking into consideration the policies of such Lender or
such controlling corporation with regard to capital adequacy), then from time to
time, within fifteen Business Days after receipt by Company from such Lender of
the statement referred to in the next sentence, Company shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Company (with a copy to Chase Co-Administrative Agent) a
written statement, setting forth in reasonable detail the basis of the
calculation of such additional amounts, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
D. SUBSTITUTE LENDERS. In the event Company is required under the
provisions of this subsection 2.7 to make payments in a material amount to any
Lender or in the event any Lender fails to lend to Company in accordance with
this Agreement, Company may, so long as no Event of Default or Potential Event
of Default shall have occurred and be continuing, elect to terminate such Lender
as a party to this Agreement; provided that, concurrently with such termination,
(i) Company shall pay that Lender all principal, interest and fees and other
amounts (including without limitation amounts, if any, owed under this
subsection 2.7) due to be paid to such Lender with respect to all periods
through such date of termination, (ii) another financial institution
satisfactory to Company and Co-Administrative Agents (or, in the case of a
Co-Administrative Agent that is also the Lender to be terminated, its successor
Co-Administrative Agent) shall agree, as of such date, to become a Lender for
all purposes under this Agreement (whether by assignment or amendment) and to
assume all obligations of the Lender to be terminated as of such date, and (iii)
all documents and supporting materials necessary, in the judgment of
Co-Administrative Agents (or, in the case of a Co-Administrative Agent that is
also the Lender to be terminated, its successor Co-Administrative Agent) to
evidence the substitution of such Lender shall have been received and approved
by Co-Administrative Agents as of such date.
2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE.
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Company agrees to
pay all incremental expenses incurred by such Lender or Issuing Lender as a
result of utilizing such other lending or letter of credit office. A certificate
as to the amount of any such expenses payable by Company pursuant to this
subsection 2.8 (setting forth in reasonable detail the basis for requesting such
amount) submitted by such Lender or Issuing Lender to Company (with a copy to
Chase Co-Administrative Agent) shall be conclusive absent manifest error.
SECTION 3.
LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
THEREIN.
A. LETTERS OF CREDIT. Company acknowledges and confirms that Schedule 3.1
annexed hereto sets forth each letter of credit issued under the Existing Credit
Agreement (collectively, the "EXISTING LETTERS OF CREDIT") and outstanding as of
the Effective Date. Company hereby represents, warrants, agrees, covenants and
(a) reaffirms that it has no (and it permanently and irrevocably waives and
releases Agents and Lenders from any, to the extent arising on or prior to the
Effective Date) defense, set off, claim or counterclaim against any Agent or
Lender in regard to its Obligations in respect of such Existing Letters of
Credit and (b) reaffirms its obligation to reimburse the applicable Issuing
Lenders for honored drawings under such Existing Letters of Credit in accordance
with the terms and conditions of this Agreement and the other Loan Documents
applicable to Letters of Credit issued hereunder. Based on the foregoing, each
Lender agrees that (1) each Existing Letter of Credit which is a Standby Letter
of Credit shall, as of the Effective Date, be deemed for all purposes of this
Agreement to be a Standby Letter of Credit issued hereunder, and (2) each
Existing Letter of Credit which is a Commercial Letter of Credit shall, as of
the Effective Date, be deemed for all purposes of this Agreement to be a
Commercial Letter of Credit issued hereunder. Company also acknowledges that set
forth on Schedule 3.1 are certain letters of credit (the "UNION LETTERS OF
CREDIT") issued by BankBoston, N.A. for the account of Union and/or its
Subsidiaries which are outstanding as of the Effective Date. Company hereby
requests, and the Lenders hereby agree that, from and after the Union Merger
Date such letters of credit shall be deemed to be Letters of Credit issued and
outstanding under this Agreement from and after the Union Effective Date;
provided that, the Company hereby releases Agents and Lenders, to the extent
arising prior to the Union Merger Date, from any defense, setoff, claim or
counterclaim against Agent or Lender in regard to its Obligations in respect of
such Letters of Credit. In addition to the foregoing and in addition to Company
requesting that Lenders make Revolving Loans pursuant to subsection 2.1A(iii),
and that Swing Line Lender make Swing Line Loans pursuant to subsection
2.1A(iv), Company may request, in accordance with the provisions of this
subsection 3.1, from time to time during the period from the Effective Date to
but excluding the Revolving Loan Commitment Termination Date, that one or more
Lenders issue Letters of Credit for the account of Company for the purposes
specified in the definitions of Commercial Letters of Credit and Standby Letters
of Credit. Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Company herein set forth, any one or
more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be
obligated to, issue such Letters of Credit in accordance with the provisions of
this subsection 3.1; provided that Company shall not request that any Lender
issue (and no Lender shall issue):
(i) any Letter of Credit if, after giving effect to such issuance, the
Total Utilization of Revolving Loan Commitments would exceed the Revolving
Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed $15,000,000;
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) the Revolving Loan Commitment Termination Date and
(b) the date which is one year from the date of issuance of such Standby
Letter of Credit; provided that the immediately preceding clause (b) shall
not prevent any Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive periods
not to exceed one year each unless such Issuing Lender elects not to extend
for any such additional period; provided further that, unless Requisite
Lenders otherwise consent, such Issuing Lender shall give notice that it
will not extend such Standby Letter of Credit if it has knowledge that an
Event of Default has occurred and is continuing on the last day on which
such Issuing Lender may give notice to the beneficiary that it will not
extend such Standby Letter of Credit;
(iv) any Commercial Letter of Credit (a) having an expiration date
later than the earlier of (X) 30 days prior to the Revolving Loan
Commitment Termination Date and (Y) the date which is 180 days from the
date of issuance of such Commercial Letter of Credit or (b) that is
otherwise unacceptable to the applicable Issuing Lender in its reasonable
discretion;
(v) any Letter of Credit denominated in a currency other than Dollars;
or
(vi) any Letter of Credit during any period when a Lender Default
exists, unless each Issuing Lender has entered into arrangements
satisfactory to it and Company to eliminate such Issuing Lender's risk with
respect to the Defaulting Lender, including by cash collateralizing such
Defaulting Lender's Pro Rata Share of the Letter of Credit Usage (after
giving effect to the issuance of the proposed Letter of Credit).
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance of a
Letter of Credit, it shall deliver to Chase Co-Administrative Agent, at the
Funding and Payment Office, a Notice of Issuance of Letter of Credit no
later than 12:00 Noon (New York time) at least five Business Days, or such
shorter period as may be agreed to by the Issuing Lender in any particular
instance, in advance of the proposed date of issuance. The Notice of
Issuance of Letter of Credit shall specify (a) the proposed date of
issuance (which shall be a Business Day), (b) the face amount of or maximum
aggregate liability under, as applicable, the Letter of Credit, (c) the
expiration date of the Letter of Credit, (d) the name and address of the
beneficiary, and (e) the verbatim text of the proposed Letter of Credit or
the proposed terms and conditions thereof, including a precise description
of any documents and the verbatim text of any certificates to be presented
by the beneficiary which, if presented by the beneficiary prior to the
expiration date of the Letter of Credit, would require the Issuing Lender
to make payment under the Letter of Credit; provided that the Issuing
Lender, in its reasonable discretion, may require changes in the text of
the proposed Letter of Credit or any such documents or certificates;
provided further that no Letter of Credit shall require payment against a
conforming draft or other request for payment to be made thereunder on the
same business day (under the laws of the jurisdiction in which the office
of the Issuing Lender to which such draft or other request for payment is
required to be presented is located) that such draft or other request for
payment is presented if such presentation is made after 10:00 A.M. (in the
time zone of such office of the Issuing Lender) on such business day.
Company shall notify the applicable Issuing Lender (and Chase
Co-Administrative Agent, if Chase Co-Administrative Agent is not such
Issuing Lender) prior to the issuance of any Letter of Credit in the event
that any of the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of Credit, and
upon the issuance of any Letter of Credit, Company shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to which
Company is required to certify in the applicable Notice of Issuance of
Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by Chase
Co-Administrative Agent of a Notice of Issuance of Letter of Credit
pursuant to subsection 3.1B(i) requesting the issuance of a Letter of
Credit, in the event Chase Co-Administrative Agent elects to issue such
Letter of Credit, Chase Co-Administrative Agent shall promptly so notify
Company, and such Chase Co-Administrative Agent shall be the Issuing Lender
with respect thereto. In the event that Chase Co-Administrative Agent, in
its sole discretion, elects not to issue such Letter of Credit, Chase
Co-Administrative Agent shall promptly so notify the Company, whereupon
Company may request any other Lender to issue such Letter of Credit by
delivering to such Lender a copy of the applicable Notice of Issuance of
Letter of Credit. Any Lender so requested to issue such Letter of Credit
shall promptly notify Company and Chase Co-Administrative Agent whether or
not, in its sole discretion, it has elected to issue such Letter of Credit,
and any such Lender which so elects to issue such Letter of Credit shall be
the Issuing Lender with respect thereto. In the event that all other
Lenders shall have declined to issue such Letter of Credit, notwithstanding
the prior election of Chase Co-Administrative Agent not to issue such
Letter of Credit, Chase Co-Administrative Agent shall be obligated to issue
such Letter of Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the sum of the Letter of Credit Usage with
respect to such Letter of Credit and with respect to all other Letters of
Credit issued by Chase Co-Administrative Agent, when aggregated with Chase
Co-Administrative Agent's outstanding Revolving Loans and Swing Line Loans,
may exceed Chase Co-Administrative Agent's Revolving Loan Commitment then
in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
accordance with subsection 10.6) of the conditions set forth in subsection
4.5, the Issuing Lender shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard operating procedures (any
such issuance by Chase Co-Administrative Agent being effected through the
Funding and Payment Office), and upon its issuance of such Letter of Credit
the Issuing Lender shall promptly notify Chase Co-Administrative Agent and
each Lender of such issuance, which notice shall be accompanied by a copy
of such Letter of Credit.
(iv) Reports to Lenders. Within 30 days after the end of each calendar
quarter ending after the Closing Date, so long as any Letter of Credit
shall have been outstanding during such calendar quarter, each Issuing
Lender shall deliver to Chase Co-Administrative Agent and Chase
Co-Administrative Agent shall deliver to each Lender a report setting forth
for such calendar quarter the daily maximum amount available to be drawn
under the Letters of Credit that were outstanding during such calendar
quarter.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately
upon the issuance of each Letter of Credit, each Lender having a Revolving Loan
Commitment shall be deemed to, and hereby agrees to, have irrevocably purchased
from the Issuing Lender a participation in such Letter of Credit and any
drawings honored or payments made thereunder in an amount equal to such Lender's
Pro Rata Share (with respect to the Revolving Loan Commitments) of the maximum
amount which is or at any time may become available to be drawn or required to
be paid thereunder.
3.2 LETTER OF CREDIT FEES.
Company agrees to pay the following amounts to each Issuing Lender with
respect to Letters of Credit issued by it for the account of Company:
(i) with respect to each Letter of Credit, (a) a fronting fee equal to
1/4 of 1% per annum of the daily maximum amount available to be drawn under
such Letter of Credit and (b) a Letter of Credit fee equal to the product
of (x) the Applicable Eurodollar Rate Margin with respect to Revolving
Loans and (y) the daily maximum amount available to be drawn under such
Letter of Credit, in each case payable in arrears on and to each January
15, April 15, July 15 and October 15 of each year, and computed on the
basis of a 360-day year for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each drawing made thereunder (without duplication of
the fees payable under clause (i) above), documentary and processing
charges in accordance with such Issuing Lender's standard schedule for such
charges in effect at the time of such issuance, amendment, transfer or
drawing, as the case may be.
Promptly upon receipt by such Issuing Lender of any amount described in clause
(i)(b) of this subsection 3.2, such Issuing Lender shall distribute to each
other Lender its Pro Rata Share of such amount.
3.3 DRAWINGS AND PAYMENTS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS
OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO REQUESTS FOR DRAWINGS
AND PAYMENTS. In determining whether to honor any drawing or request for payment
under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall
be responsible only to determine that the documents and certificates required to
be delivered under such Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit.
B. REIMBURSEMENT BY COMPANY OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In the
event an Issuing Lender has determined to honor a drawing or request for payment
under a Letter of Credit issued by it, such Issuing Lender shall immediately
notify Company and Chase Co-Administrative Agent, and Company shall reimburse
such Issuing Lender on or before the Business Day immediately following the date
on which such drawing is honored or such payment is made (the applicable
"REIMBURSEMENT DATE"), in an amount in same day funds equal to the amount of
such drawing; provided that, anything contained in this Agreement to the
contrary notwithstanding, (i) unless Company shall have notified Chase
Co-Administrative Agent and such Issuing Lender prior to 12:00 Noon (New York
time) on the date of such drawing or request for payment that Company intends to
reimburse such Issuing Lender for the amount of such honored drawing or payment
with funds other than the proceeds of Revolving Loans, Company shall be deemed
to have given a timely Notice of Borrowing to Chase Co-Administrative Agent
requesting Lenders to make Revolving Loans which are Base Rate Loans, on the
applicable Reimbursement Date in an amount equal to the amount of such honored
drawing or payment and (ii) subject to satisfaction or waiver of the conditions
specified in subsection 4.4B, Lenders shall, on the applicable Reimbursement
Date, make Revolving Loans and in the amount of such honored drawing or payment,
the proceeds of which shall be applied directly by Chase Co-Administrative Agent
to reimburse such Issuing Lender for the amount of such honored drawing or
payment; provided further that if for any reason proceeds of Revolving Loans are
not received by such Issuing Lender on the applicable Reimbursement Date in an
amount equal to the amount of such honored drawing or payment, Company shall
reimburse such Issuing Lender, on demand, in an amount in Dollars and in same
day funds equal to the excess of the amount of such honored drawing or payment
over the aggregate amount of such Revolving Loans, if any, which are so
received. Nothing in this subsection 3.3B shall be deemed to relieve any Lender
from its obligation to make Revolving Loans on the terms and conditions set
forth in this Agreement, and Company shall retain any and all rights it may have
against any Lender resulting from the failure of such Lender to make such
Revolving Loans under this subsection 3.3B.
C. PAYMENT BY LENDERS OF UNREIMBURSED PAYMENTS UNDER LETTERS OF CREDIT.
(i) Payment by Lenders. In the event that Company shall fail for any
reason to reimburse any Issuing Lender as provided in subsection 3.3B in an
amount equal to the amount of any honored drawing or payment made by such
Issuing Lender under a Letter of Credit issued by it, such Issuing Lender
shall promptly notify each other Lender of the unreimbursed amount of such
honored drawing or payment and of such other Lender's respective
participation therein based on such Lender's Pro Rata Share of the
Revolving Loan Commitments. Each Lender shall make available to such
Issuing Lender an amount equal to its respective participation, in same day
funds, at the office of such Issuing Lender specified in such notice, not
later than 12:00 Noon (New York time) on the first business day (under the
laws of the jurisdiction in which such office of such Issuing Lender is
located) after the date notified by such Issuing Lender. In the event that
any Lender fails to make available to such Issuing Lender on such business
day the amount of such Lender's participation in such Letter of Credit as
provided in this subsection 3.3C, such Issuing Lender shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by such Issuing Lender for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice
the right of any Lender to recover from any Issuing Lender any amounts made
available by such Lender to such Issuing Lender pursuant to this subsection
3.3C in the event that it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of Credit
by such Issuing Lender in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of such
Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From Company.
In the event any Issuing Lender shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of any honored
drawing or payment made by such Issuing Lender under a Letter of Credit
issued by it, such Issuing Lender shall distribute to each other Lender
which has paid all amounts payable by it under subsection 3.3C(i) with
respect to such honored drawing or payment such other Lender's Pro Rata
Share of all payments subsequently received by such Issuing Lender from
Company in reimbursement of such honored drawing or payment when such
payments are received. Any such distribution shall be made to a Lender at
its primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request.
D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to pay to each
Issuing Lender, with respect to drawings honored or payments made under any
Letters of Credit issued by it, interest on the amount paid by such Issuing
Lender in respect of each such drawing or payment from the date such
drawing is honored or payment is made to but excluding the date such amount
is reimbursed by Company (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to
(a) for the period from the date such drawing is honored or payment is made
to but excluding the applicable Reimbursement Date, the Base Rate plus the
Applicable Base Rate Margin with respect to Revolving Loans, and (b)
thereafter, a rate which is 2% per annum in excess of the rate of interest
described in the foregoing clause (a). Interest payable pursuant to this
subsection 3.3D(i) shall be computed on the basis of a 360-day year for the
actual number of days elapsed in the period during which it accrues and
shall be payable on demand or, if no demand is made, on the date on which
the related drawing or payment under a Letter of Credit is reimbursed in
full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
upon receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i), (a) such Issuing Lender shall distribute to each other
Lender, out of the interest received by such Issuing Lender in respect of
the period from the date of the applicable honored drawing or payment under
a Letter of Credit issued by such Issuing Lender to but excluding the date
on which such Issuing Lender is reimbursed for the amount of such drawing
or payment (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B), the amount that such other
Lender would have been entitled to receive in respect of the Letter of
Credit fee that would have been payable in respect of such Letter of Credit
for such period pursuant to subsection 3.2 if no drawing had been honored
or payment had been made under such Letter of Credit, and (b) in the event
such Issuing Lender shall have been reimbursed by other Lenders pursuant to
subsection 3.3C(i) for all or any portion of such drawing or payment, such
Issuing Lender shall distribute to each other Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such drawing
or payment such other Lender's Pro Rata Share of any interest received by
such Issuing Lender in respect of that portion of such drawing or payment
so reimbursed by other Lenders for the period from the date on which such
Issuing Lender was so reimbursed by other Lenders to and including the date
on which such portion of such drawing or payment is reimbursed by Company.
Any such distribution shall be made to a Lender at its Lending Office set
forth on Schedule 2.1 or at such other address as such Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
The obligation of Company to reimburse each Issuing Lender for drawings
honored or payments made under the Letters of Credit issued by it and to repay
any Revolving Loans made by Lenders pursuant to subsection 3.3B and the
obligations of Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right which
Company or any Lender may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Company whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or one of
its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
(iii) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not substantially comply with the terms of such Letter
of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing or other request for payment under any such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority (all such acts or
omissions herein called "GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDERS' DUTIES. As between Company and any Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing or
payment under such Letter of Credit; or (viii) any consequences arising from
causes beyond the control of such Issuing Lender, including, without limitation,
any Governmental Acts, and none of the above shall affect or impair, or prevent
the vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Company shall retain any and all rights it may have against any Issuing Lender
for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
In the event that any law, treaty or governmental rule, regulation or
order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the Closing
Date, or compliance by any Issuing Lender or Lender with any guideline, request
or directive issued or made after the Closing Date by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law):
(i) results in any change in the basis of taxation of such Issuing
Lender or Lender (or its applicable lending or letter of credit office)
(other than a change with respect to any Tax on the overall net income of
such Issuing Lender or Lender) with respect to the issuing or maintaining
of any Letters of Credit or the purchasing or maintaining of any
participations therein or any other obligations under this Section 3,
whether directly or by such being imposed on or suffered by any particular
Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including,
without limitation, any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing
Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition on or affecting such Issuing Lender
or Lender (or its applicable lending or letter of credit office) regarding
this Section 3 or any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (reasonably determined by such Issuing Lender or
Lender) as may be necessary to compensate such Issuing Lender or Lender for any
such increased cost or reduction in amounts received or receivable hereunder.
Such Issuing Lender or Lender shall deliver to Company a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Issuing Lender or Lender under this subsection 3.6, which
statement shall be prima facie evidence of such additional amounts.
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
4.1 CONDITIONS TO EXISTING LOANS AND LETTERS OF CREDIT.
The conditions to the making of the Existing Loans and the issuance of the
Existing Letters of Credit have been satisfied.
4.2 CONDITIONS TO TRANCHE C TERM LOANS.
The obligations of Lenders to make the initial Tranche C Term Loans are, in
addition to the conditions precedent specified in subsection 4.4, subject to
prior or concurrent satisfaction of the following conditions:
A. COMPANY DOCUMENTS. On or before the Effective Date, Company shall
deliver or cause to be delivered to Lenders (or to Chase Co-Administrative Agent
for Lenders with sufficient originally executed copies, where appropriate, for
each Lender and its counsel) the following, each, unless otherwise noted, dated
the Effective Date:
(i) Certified copies of its Certificate of Incorporation, together
with a good standing certificate from the Secretary of State of the State
of Delaware and each other state in which it is qualified as a foreign
corporation to do business, each dated a recent date prior to the Effective
Date;
(ii) Copies of its Bylaws, certified as of the Effective Date by its
corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and authorizing
the execution, delivery and performance of this Agreement, other Loan
Documents and the Union Acquisition Documents to which it is a party and
approving and authorizing the consummation of the Tender Offer and the
Union Merger in the manner contemplated by the Union Acquisition Documents,
certified as of the Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
(iv) Signature and incumbency certificates of its officers executing
this Agreement and the other Loan Documents;
(v) Executed originals of this Agreement and (to the extent not
previously executed and delivered to Lenders) the other Loan Documents to
which it is a party; and
(vi) Such other documents as Agents may reasonably request.
B. SUBSIDIARY DOCUMENTS. On or before the Effective Date, Company shall
deliver or cause to be delivered to Lenders (or to Chase Co-Administrative Agent
for Lenders with sufficient originally executed copies, where appropriate, for
each Lender and its counsel) the following for such Subsidiary (other than Union
and its Subsidiaries) as specified, each, unless otherwise noted, dated the
Effective Date:
(i) Certified copies of the Certificate of Incorporation (or
equivalent organizational document) of each domestic corporate Wholly Owned
Subsidiary of Company (or, in lieu thereof, a certificate of the corporate
secretary of such Subsidiary certifying as of the Effective Date that its
Certificate of Incorporation previously delivered to Existing Lenders is in
full force and effect without modification or amendment), together with a
good standing certificate from the secretary of state of its jurisdiction
of incorporation and each other state in which it is qualified as a foreign
corporation to do business (except any such other state or states in which
failure to be so qualified could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect) (or, in lieu
thereof, a certificate of the secretary of such Subsidiary certifying as of
the Effective Date that such Subsidiary is in good standing in all such
jurisdictions), each dated a recent date prior to the Effective Date;
(ii) Copies of the Bylaws of each such domestic corporate Wholly Owned
Subsidiary of Company, certified as of the Effective Date by its corporate
secretary, or an assistant secretary (or, in lieu thereof, a certificate of
such secretary certifying as of the Effective Date that the Bylaws of such
Subsidiary previously delivered to Existing Lenders are in full force and
effect without modification or amendment);
(iii) Resolutions of the Board of Directors of each such domestic
corporate Wholly Owned Subsidiary of Company approving and authorizing the
execution, delivery and performance of the Subsidiary Guaranty, the
Security Agreement, the Pledge Agreement, the Trademark Security Agreement,
the Limited Partnership Security Agreement (as applicable) and the other
Loan Documents to which such Subsidiary is party and, in the case of Merger
Sub, approving and authorizing the consummation of the Tender Offer and the
Union Merger in the manner contemplated by the Union Acquisition Documents,
certified as of the Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
(iv) Conformed copies of the partnership agreement of each domestic
Subsidiary of Company that is a partnership, certified by each general
partner of such partnership Subsidiary as of the Effective Date as being in
full force and effect without modification or amendment (or, in lieu
thereof, a certificate of such general partner certifying as of the
Effective Date that the partnership agreement of such partnership
Subsidiary delivered on the Closing Date pursuant to subsection 4.2 of the
Existing Credit Agreement is in full force and effect without modification
or amendment);
(v) Certificates of limited partnership or statements of partnership,
as applicable, of each such Subsidiary of Company that is a partnership,
certified by the Secretary of State (or similar official) of its
jurisdiction of formation (or, in lieu thereof, a certificate of the
general partner of such partnership Subsidiary certifying as of the
Effective Date that the certificate of limited partnership or statement of
partnership of such Subsidiary delivered on the Closing Date pursuant to
subsection 4.2 of the Existing Credit Agreement is in full force and effect
without modification or amendment), and a certificate of existence or good
standing, as the case may be, from the Secretary of State (or similar
official) of such jurisdiction, together with a certificate or other
evidence of good standing from the secretary of state of each other state
in which it is authorized as a foreign limited partnership to do business
(except any such other state or states in which failure to be so qualified
could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect), each dated as of a recent date prior to the
Effective Date;
(vi) All documents executed by the appropriate partners of each
Subsidiary of Company that is a partnership approving or authorizing the
execution, delivery and performance of the Subsidiary Guaranty, the
Security Agreement, the Pledge Agreement, the Trademark Security Agreement,
the Limited Partnership Security Agreement (as applicable) and the other
Loan Documents to which such Subsidiary is a party, each certified as of
the Effective Date by the general partner of such partnership Subsidiary or
other Loan Party;
(vii) Signature and incumbency certificates of its officers, partners
or other Persons executing the Subsidiary Guaranty, the Security Agreement,
the Pledge Agreement, the Trademark Security Agreement, the Limited
Partnership Security Agreement (as applicable) and the other Loan Documents
to which such Subsidiary is party;
(viii) Executed originals (to the extent not previously executed and
delivered to Lenders) of the Subsidiary Guaranty, the Security Agreement,
the Pledge Agreement and the other Loan Documents to which any corporate or
partnership Subsidiary of Company is a party; and
(ix) Such other documents as Agents may reasonably request.
C. UNION DOCUMENTS. On or before the Effective Date, Company shall, or
shall cause Union to, deliver to Lenders (or to Chase Co-Administrative Agent
for Lenders with sufficient originally executed copies, where appropriate, for
each Lender and its counsel) the following with respect to Union, each dated the
Effective Date:
(i) Certified copies of the Certificate of Incorporation of Union,
together with a good standing certificate from the Secretary of State of
Delaware and each other state in which Union is qualified as a foreign
corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority
of each of such jurisdictions, each dated a recent date prior to the
Effective Date;
(ii) Copies of the Bylaws of Union, certified as of the Effective Date
by its corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of Union approving and
authorizing the execution, delivery and performance of the Union
Acquisition Agreement, and approving and authorizing the consummation of
the Union Merger in the manner contemplated by the Union Acquisition
Documents, certified as of the Effective Date by the secretary or an
assistant secretary of Union as being in full force and effect without
modification or amendment; and
(iv) Signature and incumbency certificates of the officers of Union
executing the Union Acquisition Agreement.
D. TENDERED UNION SHARES. There shall have been validly tendered to Merger
Sub pursuant to the Tender Offer and not withdrawn shares of Union Common Stock
which constitute the Minimum Union Shares at the price per share specified to be
paid pursuant to the Tender Offer Materials; the shares of Union Common Stock to
be purchased shall be free and clear of all Liens and restrictions to purchase
imposed by applicable law or otherwise and such shares of Union Common Stock
shall be available for purchase in accordance with the terms and conditions set
forth in the Tender Offer Materials. Company shall have delivered to
Co-Administrative Agents (a) a certificate of Custodian certifying as to the
number of tendered shares of Union Common Stock, and (b) an Officers'
Certificate of Company certifying that the tendered shares of Union Common Stock
to be purchased with the proceeds of the initial Tranche C Term Loans represent,
in the aggregate, not less than the Minimum Union Shares.
E. UNION ACQUISITION DOCUMENTS.
(i) Union Acquisition Documents. Agents shall have received a fully
executed or conformed copy of each Union Acquisition Document (other than
the Union Certificate of Merger) and any other documents executed in
connection therewith, and the Union Acquisition Agreement and the other
Union Acquisition Documents shall be reasonably satisfactory in form and
substance to Arranging Agents and Requisite Lenders. The Union Acquisition
Documents (other than the Union Certificate of Merger) shall each be in
full force and effect and no provision thereof shall have been modified or
waived in any respect determined by Arranging Agents to be material, in
each case without the consent of Arranging Agents and Requisite Lenders,
such consent not to be unreasonably withheld.
(ii) No Material Litigation. There shall be no material litigation
pending which challenges the Tender Offer or the Union Merger in any
respect which is, in the reasonable judgment of Arranging Agents or
Co-Administrative Agents, material.
F. NO MATERIAL ADVERSE EFFECT. Since December 31, 1996, there shall not
have been an adverse change, or any development involving a prospective adverse
change, in or affecting the general affairs, management, financial position,
shareholders' equity or results of operation of Company and its Subsidiaries
which is, in the reasonable judgment of Arranging Agents, Co-Administrative
Agents or Requisite Lenders, material. Since June 30, 1997, there shall not have
been an adverse change, or any development involving a prospective adverse
change, in or affecting the general affairs, management, financial position,
shareholders' equity or results of operation of Union and its Subsidiaries which
is, in the reasonable judgment of Arranging Agents, Co-Administrative Agents or
Requisite Lenders, material.
G. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC. Company shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Tender Offer and the Union Merger,
the other transactions contemplated by the Loan Documents and the Related
Agreements, and the continued operation of the business conducted by Union and
its Subsidiaries in substantially the same manner as conducted prior to the
consummation of the Tender Offer, and each of the foregoing shall be in full
force and effect and in form and substance satisfactory to Arranging Agents
(except as disclosed to and approved by Arranging Agents). All applicable
waiting periods shall have expired without any action being taken or threatened
by any competent authority which would restrain, prevent or otherwise impose
adverse conditions on the Tender Offer or the Union Merger or the financing
thereof. No action, request for stay, petition for review or rehearing,
reconsideration, or appeal with respect to any of the foregoing shall be
pending, and the time for any applicable agency to take action to set aside its
consent on its own motion shall have expired.
H. OPINIONS OF LOAN PARTIES' COUNSEL. Lenders and their respective counsel
shall have received originally executed copies of one or more favorable written
opinions of White & Case, counsel for the Loan Parties, in form and substance
reasonably satisfactory to Arranging Agents and their counsel, dated as of the
Effective Date and setting forth substantially the matters in the opinions
designated in Exhibit XI annexed hereto and as to such other matters as
Arranging Agents acting on behalf of Lenders may reasonably request. Company
hereby requests that such counsel deliver such opinions on the Effective Date to
Agents and Lenders.
I. FEES. Company shall have paid to Agents, for distribution (as
appropriate hereunder or under the terms of the Existing Credit Agreement, as
the case may be) to Agents and Lenders, the fees payable on the Effective Date
referred to in subsection 2.3C.
J. ENVIRONMENTAL REPORTS. Lenders shall have received reports and/or other
information reasonably satisfactory to Arranging Agents regarding environmental
matters with respect to Union and its Subsidiaries.
K. CORPORATE STRUCTURE; MANAGEMENT.
(i) Corporate Structure. The corporate organizational structure,
capital structure and ownership of Company and its Subsidiaries, after
giving effect to the Tender Offer and the Union Merger, shall be as set
forth on Schedule 4.2J annexed hereto.
(ii) Management. The management structure of Company, after giving
effect to the Tender Offer and the Union Merger, shall be as set forth on
Schedule 4.2J annexed hereto.
L. BUSINESS PLAN. Arranging Agents shall have received a business plan in
form, scope and substance reasonably satisfactory to Arranging Agents submitted
by management of Company and its Subsidiaries with respect to the incorporation
of Union and its Subsidiaries into Company's existing business.
M. REPAYMENT OF SWING LINE LOANS. On the Effective Date, immediately before
and after giving effect to any borrowings hereunder on such date, no Swing Line
Loans shall be outstanding. N. No Event of Default. Company shall have delivered
to Chase Co-Administrative Agent an Officer's Certificate, in form and substance
satisfactory to Chase Co-Administrative Agent, to the effect that immediately
prior to the Effective Date, no event has occurred and is continuing that would
constitute an Event of Default or Potential Event of Default under the Existing
Credit Agreement.
O. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Arranging
Agents, acting on behalf of Requisite Lenders, and their counsel shall be
satisfactory in form and substance to Arranging Agents and such counsel, and
Arranging Agents and such counsel shall have received all such counterpart
originals or certified copies of such documents as Arranging Agents may
reasonably request.
P. FINANCIAL STATEMENTS; PRO FORMA BALANCE SHEET. On or before the
Effective Date, Lenders shall have received from Company and be satisfied with
(i) audited financial statements of Union and its Subsidiaries for the period
ending June 30, 1997, consisting of consolidated and consolidating balance
sheets and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows for such period, (ii) unaudited financial
statements of Union and its Subsidiaries for the period from June 30, 1997
through November 30, 1997, consisting of a consolidated balance sheet (prepared
on a divisional basis) and the related consolidated statements of income,
stockholders' equity and cash flows for the period ending on each such date, all
in reasonable detail and certified by the chief financial officer of Union that
they fairly present, in all material respects, the financial condition of Union
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments, (iii) audited financial
statements of the Company and its Subsidiaries for the period ending December
31, 1996, consisting of consolidated and consolidating balance sheets and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows for such period, (iv) unaudited financial statements of
Company and its Subsidiaries for the period from January 1, 1997 through
December 31, 1997, consisting of a consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows for the
period ending on each such date, all in reasonable detail and certified by the
chief financial officer of the Company that they fairly present, in all material
respects, the financial condition of the Company and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-end
adjustments, (v) pro forma combined balance sheets of Company and its
Subsidiaries as at November 30, 1997, prepared in accordance with GAAP and
reflecting the consummation of the Merger, the related financings and the other
transactions contemplated by the Loan Documents and the Related Agreements,
which pro forma financial statements shall be in form and substance satisfactory
to Lenders, and (vi) the Projections.
Q. SOLVENCY ASSURANCES. On the Effective Date, Arranging Agents,
Co-Administrative Agents and Lenders shall have received (i) a letter from
Murray Devine & Co. dated the Effective Date and addressed to Arranging Agents,
Co-Administrative Agents and Lenders, in form and substance satisfactory to
Arranging Agents and Lenders and with appropriate attachments and (ii) a
certificate from the chief financial officer of Company, in form, scope and
substance satisfactory to Arranging Agents, with appropriate attachments, in
each case demonstrating that, after giving effect to the consummation of the
Union Acquisition and the making of the Tranche C Term Loans and the
Delayed-Draw Term Loans, Company and its Subsidiaries will be Solvent.
R. REPAYMENT OF REVOLVING LOANS. On the Effective Date, Arranging Agents
shall have received evidence reasonably satisfactory to them that after giving
effect to the payment of consideration for the Tendered Union Shares, and the
payment of Transaction Costs, the remaining proceeds of the Tranche C Term Loans
(other than the amount of the Delayed-Draw Term Loans) shall be applied on the
Effective Date to repay Revolving Loans.
S. PERFECTION OF SECURITY INTERESTS IN PERSONAL PROPERTY AND MIXED
COLLATERAL. Company shall have taken or caused to be taken such actions in such
a manner so that Collateral Agent has, for the benefit of Agents and Lenders, a
valid and perfected first priority security interest in the entire personal
property and mixed Collateral (subject to Liens permitted by this Agreement);
provided, however, that prior to the Union Merger, (i) Merger Sub shall only be
required to provide a first priority security interest in any Union Common Stock
acquired through the Tender Offer to the extent requested by Co-Administrative
Agents and to the extent such Union Common Stock can be pledged in compliance
with applicable law and (ii) Company shall not be required to provide a first
priority security interest in the assets of Union or any of its Subsidiaries.
Such actions shall include, without limitation: (i) the delivery pursuant to the
applicable Collateral Documents of (a) certificates (which certificates shall be
properly endorsed in blank for transfer or accompanied by irrevocable undated
stock powers duly endorsed in blank, all in form and substance satisfactory to
Chase Co-Administrative Agent) representing all of the shares of capital stock
required to be pledged pursuant to the Collateral Documents, and (b) all
promissory notes or other instruments (duly endorsed, where appropriate, in a
manner reasonably satisfactory to Chase Co-Administrative Agent) evidencing any
Collateral; (ii) delivery to Agents of (a) the results of a recent search, by a
Person satisfactory to Agents, of all effective UCC financing statements and
fixture filings and all judgment and tax lien filings which may have been made
with respect to any personal or mixed property of Union and its Subsidiaries,
together with copies of all such filings disclosed by such search; (iii) the
delivery to Chase Co-Administrative Agent of UCC financing statements executed
by the applicable Loan Parties as to all such Collateral granted by such Loan
Parties for all jurisdictions as may be necessary or desirable to perfect
Collateral Agent's security interest in such Collateral; and (iv) the delivery
to Chase Co-Administrative Agent of evidence reasonably satisfactory to Chase
Co-Administrative Agent that all other filings (including, without limitation,
UCC termination statements and filings with the United States Patent and
Trademark Office of trademark assignments for all trademarks used by Company and
its Subsidiaries registered in the United States), recordings and other actions
that either Chase Co-Administrative Agent or Collateral Agent deems necessary or
advisable to establish, preserve and perfect the first priority Liens (subject
to Liens consented to in writing by Co-Administrative Agents and Requisite
Lenders or permitted by subsection 7.2 with respect to such Collateral) granted
to Collateral Agent in personal and mixed property shall have been made.
T. TRANSACTION COSTS. Company shall have delivered to Co-Administrative
Agents a schedule, in a form satisfactory to Co-Administrative Agents, setting
forth Company's reasonable best estimate of the Transaction Costs (other than
amounts payable to Agents and Lenders) relating to the Union Acquisition.
U. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company shall
have delivered to Chase Co-Administrative Agent an Officer's Certificate, in
form and substance satisfactory to Chase Co-Administrative Agent, to the effect
that the representations and warranties in Section 5 hereof are true and correct
in all material respects on and as of the Effective Date to the same extent as
though made on and as of such date and that Company shall have performed in all
material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by them on or before such
date, except as otherwise disclosed to and agreed to in writing by Chase
Co-Administrative Agent.
Each Lender, by delivering its signature page to this Agreement and, in the
case of Lenders having Tranche C Term Loan Exposure, funding its initial Tranche
C Term Loans on the Effective Date, shall be deemed to have acknowledged receipt
of, and consented to and approved (as long as substantially in the form
delivered to Lenders including any changed pages thereto delivered to Lenders),
each Loan Document and each other document required to be approved by Requisite
Lenders or Lenders, as applicable.
4.3 CONDITIONS TO DELAYED-DRAW TERM LOANS.
The obligations of Lenders to make the Delayed-Draw Term Loans are, in
addition to the conditions precedent specified in subsection 4.4, subject to
satisfaction of the following conditions:
A. CONSUMMATION OF UNION MERGER.
(i) The Union Merger shall have been consummated pursuant to the Union
Acquisition Agreement and no provision of such thereof shall have been
amended, supplemented, waived or otherwise modified in any material respect
without the prior consent of the Agents.
(ii) All of the issued and outstanding Union Common Stock shall be
owned by the Company.
(iii) After giving effect to the consummation of the Union Merger and
the payment of any portion of the aggregate consideration for the Union
Common Stock (and any related transaction fees and expenses) that becomes
due and payable thereupon, the aggregate amount of the consideration paid
for the Union Common Stock (and all such transaction fees and expenses)
shall not exceed $207,500,000.
(iv) Concurrently with the consummation of the Union Merger, all
existing Indebtedness of Union and its Subsidiaries in respect of borrowed
money (other than obligations with respect to industrial development bonds)
shall be repaid in full, except for the Union Letters of Credit.
(v) The execution by Union and each of its Subsidiaries and the
delivery thereof to Chase Co-Administrative Agent and Collateral Agent of
counterparts to the Subsidiary Guaranty.
(vi) Arranging Agents shall have received an Officer's Certificate of
Company to the effect set forth in clauses (i)-(v) above.
B. PERFECTION OF SECURITY INTERESTS IN UNION PERSONAL PROPERTY AND MIXED
COLLATERAL. Company shall have taken or caused to be taken such actions in such
a manner so that Collateral Agent has, for the benefit of Agents and Lenders, a
valid and perfected first priority security interest in all of the outstanding
capital stock of Union and in the entire personal property and mixed Collateral
(subject to Liens permitted by this Agreement) of Union and its Subsidiaries.
Such actions shall include, without limitation: (i) the execution by Union and
each of its Subsidiaries and the delivery thereof to Chase Co-Administrative
Agent and Collateral Agent of counterparts to the Pledge Agreement, Security
Agreement, Limited Partnership Security Agreement and the Patent and Trademark
Security Agreement; (ii) the delivery pursuant to the applicable Collateral
Documents of (a) certificates (which certificates shall be properly endorsed in
blank for transfer or accompanied by irrevocable undated stock powers duly
endorsed in blank, all in form and substance satisfactory to Chase
Co-Administrative Agent) representing all of the shares of capital stock
required to be pledged pursuant to the Collateral Documents, and (b) all
promissory notes or other instruments (duly endorsed, where appropriate, in a
manner reasonably satisfactory to Chase Co-Administrative Agent) evidencing any
Collateral of Union and its Subsidiaries; (iii) delivery to Agents of (a) the
results of a recent search, by a Person satisfactory to Agents, of all effective
UCC financing statements and fixture filings and all judgment and tax lien
filings which may have been made with respect to any personal or mixed property
of any Loan Party, together with copies of all such filings disclosed by such
search; (iv) the delivery to Chase Co-Administrative Agent of UCC financing
statements executed by the applicable Loan Parties as to all such Collateral
granted by such Loan Parties for all jurisdictions as may be necessary or
desirable to perfect Collateral Agent's security interest in such Collateral;
and (v) the delivery to Chase Co-Administrative Agent of evidence reasonably
satisfactory to Chase Co-Administrative Agent that all other filings (including,
without limitation, UCC termination statements and filings with the United
States Patent and Trademark Office of trademark assignments for all trademarks
used by Company and its Subsidiaries registered in the United States),
recordings and other actions that either Chase Co-Administrative Agent or
Collateral Agent deems necessary or advisable to establish, preserve and perfect
the first priority Liens (subject to Liens consented to in writing by
Co-Administrative Agents and Requisite Lenders or permitted by subsection 7.2
with respect to such Collateral) granted to Collateral Agent in personal and
mixed property shall have been made.
4.4 CONDITIONS TO ALL LOANS.
The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Chase Co-Administrative Agent shall have received on or before that
Funding Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, signed by the chief executive officer,
the chief financial officer or the controller of Company or by any executive
officer of Company designated by any of the above-described officers on behalf
of Company in a writing delivered to Chase Co-Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and as of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects on
and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default;
(iii) Each Loan Party shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement and the
other Loan Documents provide shall be performed or satisfied by it on or
before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it, on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not
violate any law including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing and that is required to be so disclosed pursuant to
subsection 5.6 or 6.1(x) prior to the making of the last preceding Loans
(or, in the case of the initial Tranche C Term Loans, prior to the
execution of this Agreement), and there shall have occurred no development
not so disclosed in any such action, suit, proceeding, governmental
investigation or arbitration so disclosed that, in either event, in the
opinion of Chase Co-Administrative Agent or of Requisite Lenders, would be
expected to have a Material Adverse Effect; and no injunction or other
restraining order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated by this Agreement or
the making of Loans hereunder.
4.5 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit, Chase
Co-Administrative Agent shall have received, in accordance with the provisions
of subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, signed by the chief executive officer, the chief financial officer or
the controller of Company or by any executive officer of Company designated by
any of the above-described officers on behalf of Company in a writing delivered
to Chase Co-Administrative Agent, together with all other information specified
in subsection 3.1B(i) and such other documents or information as the applicable
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.4B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make (or
maintain, as the case may be) the Loans, to induce Issuing Lender to issue (or
maintain, as the case may be) Letters of Credit and to induce other Lenders to
purchase participations therein, Company represents and warrants to each Lender,
on the date of this Agreement, on the Effective Date, on each Funding Date, and
on the date of issuance of each Letter of Credit, that the following statements
are true and correct:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Corporate Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation. Each Partnership Loan Party is a duly organized and validly
existing limited partnership under the laws of its jurisdiction of formation and
is in good standing in such jurisdiction. Each Loan Party has all requisite
corporate or partnership (as applicable) power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and to carry out the transactions
contemplated thereby. Company has all requisite corporate power and authority to
issue and pay the Notes.
B. QUALIFICATION AND GOOD STANDING. Each Corporate Loan Party is qualified
to do business and in good standing, and each Partnership Loan Party is
authorized as a foreign limited partnership to do business, in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, except in jurisdictions where the failure to be so
qualified, authorized or in good standing has not had and will not have a
Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.11.
D. COMPANY AND SUBSIDIARIES. All of the Subsidiaries of Company as of the
Effective Date after giving effect to the Union Acquisition are identified in
Schedule 5.1 annexed hereto. The capital stock of each of the domestic
Subsidiaries of Company identified in Schedule 5.1 annexed hereto which are
corporations is duly authorized, validly issued, fully paid and nonassessable
and, other than the capital stock of Union prior to the Merger, none of such
capital stock constitutes Margin Stock. The limited and general partnership
interests of each of the subsidiaries of Company identified in Schedule 5.1
annexed hereto which are limited partnerships are duly and validly issued.
Company and each of the domestic Subsidiaries of Company identified in Schedule
5.1 annexed hereto are duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation or formation
set forth therein, have full corporate or partnership (as applicable) power and
authority to own their assets and properties and to operate their business as
presently owned and conducted and as proposed to be conducted, and are qualified
to do business and in good standing in every jurisdiction where their assets are
located and wherever necessary to carry out their business and operations, in
each case except where failure to be so qualified or in good standing or a lack
of such corporate power and authority has not had and will not have a Material
Adverse Effect. Schedule 5.1 annexed hereto correctly sets forth the ownership
interest of Company in each of its Subsidiaries identified therein.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of
the Loan Documents and the Related Agreements and the issuance, delivery and
payment of the Notes have been duly authorized by all necessary corporate and/or
partnership (as applicable) action on the part of each of the Loan Parties
thereto.
B. NO CONFLICT. After giving effect to the consummation of the transactions
contemplated hereby to occur on the Effective Date, the execution, delivery and
performance by each of the Loan Parties of the Loan Document and the Related
Agreements to which they are parties, the issuance, delivery and payment of the
Notes and the consummation of the transactions contemplated by the Loan
Documents do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws (or other
analogous organizational document) of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Chase Co-Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or partners or any
approval or consent of any Person under any Contractual Obligation of Company or
any of its Subsidiaries, except for such approvals or consents which will be
obtained on or before the Effective Date.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by the
Loan Parties of the Loan Documents and Related Agreements to which they are
party, the issuance, delivery and payment of the Notes and the consummation of
the transactions contemplated by the Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except for such registrations, consents, approvals, notices or other
actions which will be made, obtained or taken on or before the Effective Date.
D. BINDING OBLIGATION. Each of the Loan Documents and the Related
Agreements has been duly executed and delivered by each of the Loan Parties
party thereto and is the legally valid and binding obligation of each such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. VALID ISSUANCE OF SUBORDINATED NOTES. The Subordinated Notes are the
legally valid and binding obligations of Company, enforceable against Company in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability. The subordination provisions of the Subordinated Notes will be
enforceable against the holders thereof and the Loans and all other monetary
Obligations hereunder are and will be within the definition of "Senior Debt"
included in such provisions. The Subordinated Notes, when issued and sold, will
either (a) have been registered or qualified under applicable federal and state
securities laws or (b) be exempt therefrom.
5.3 FINANCIAL CONDITION; PROJECTIONS.
A. FINANCIAL STATEMENTS. Company has heretofore delivered to Lenders, at
Lenders' request, the following financial statements and information: (i) the
audited consolidated balance sheets of Company and its Subsidiaries (or, with
respect to years prior to 1995, Account Portfolios, L.P. (as predecessor of
Company) and its Subsidiaries) as at December 31 of 1994, 1995 and 1996, and the
related audited consolidated statements of operations, stockholders' equity and
cash flows of Company and its Subsidiaries for the periods then ended, together
with the report on such consolidated financial statements of Deloitte & Touche
LLP setting forth in each case in comparative form the corresponding figures for
the previous Fiscal Year (other than the Fiscal Year ending December 31, 1992),
(ii) the unaudited consolidated balance sheet of Company and its Subsidiaries as
at September 30, 1997 and the related unaudited consolidated statements of
income, stockholders' equity and cash flows of Company and its Subsidiaries for
the nine months then ended, together with the corresponding figures for the
corresponding periods of the previous Fiscal Year, (iii) the audited
consolidated balance sheet of Payco and its subsidiaries as at December 31 of
1993, 1994 and 1995, and the audited consolidated statement of operations,
stockholders' equity, and cash flows of Payco and its Subsidiaries for the
fiscal year then ended, together with the report on such consolidated financial
statements of Arthur Andersen & Co. setting forth in comparative form the
corresponding figures for the previous fiscal year (other than the fiscal year
ending December 31, 1992), (iv) the unaudited consolidated balance sheet of
Payco and its Subsidiaries as at June 30, 1996 and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows of
Payco and its Subsidiaries for the six months then ended, together with the
corresponding figures for the corresponding period of the previous fiscal year
(other than the fiscal year ending December 31, 1992), (v) the consolidated
balance sheet of Accelerated and its Subsidiaries as at July 31, 1997 and the
related consolidated statements of income, stockholders' equity and cash flows
of Accelerated and its Subsidiaries for the seven months then ended, together
with the corresponding figures for the corresponding period ending on July 31 of
the previous year, (vi) the audited consolidated balance sheet of NSA and its
Subsidiaries as at December 31, 1996, and the related audited consolidated
statements of income, stockholders' equity and cash flows of NSA and its
Subsidiaries for the period then ended, together with the report on such
consolidated financial statements of Weisberg, Polansky, Kulberg, Einhorn &
Mole, LLP setting forth in comparative form the corresponding figures for the
previous fiscal year of NSA, (vii) the consolidated balance sheet of NSA and its
Subsidiaries as at December 31, 1995, and the related audited consolidated
statements of income, stockholders' equity and cash flows of NSA and its
Subsidiaries for the fiscal year of NSA then ended, (viii) the consolidated
balance sheet of NSA and its Subsidiaries as at July 31, 1997 and the related
consolidated statements of income, stockholders' equity and cash flows of NSA
and its Subsidiaries for the seven months then ended, together with the
corresponding figures for the corresponding period of the previous fiscal year,
and (ix) the financial statements required to be delivered pursuant to
subsection 4.2P. All such statements were prepared in conformity with GAAP and
fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as at
the respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and normal year-end adjustments and the absence of
footnote disclosure required in accordance with GAAP. Neither Company, Payco,
Accelerated nor NSA has (and did not immediately following the funding of the
initial Loans under the Existing Credit Agreement, have), and Union does not
(and will not immediately following the funding of the Tranche C Term Loans)
have, any Contingent Obligation, contingent liability or liability for taxes,
long-term lease or unusual forward or long-term commitment that is not reflected
in the most recent financial statements delivered pursuant to subsection 6.1 of
the Existing Credit Agreement, or subsection 4.2P(ii) of this Agreement in the
case of Union, the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Company and its Subsidiaries taken as a whole.
Notwithstanding the foregoing, Company shall not be deemed to make any
representation hereunder with respect to the financial statements described in
clause (ix) of this subsection prior to consummation of the Union Acquisition.
B. PROJECTIONS. On and as of the Effective Date, the financial projections
of Company and its Subsidiaries for the period from December 31, 1996 through
December 31, 2004 (giving effect to the Union Acquisition) previously delivered
to Lenders (the "PROJECTIONS") are based on good faith estimates and assumptions
made by the management of Company, it being recognized, however, that
projections as to future events are not to be viewed as facts and that the
actual results during the period or periods covered by the Projections may
differ from the projected results and that the differences may be material.
Notwithstanding the foregoing, as of the Effective Date, management of Company
believed that the Projections were reasonable and attainable.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
Since December 31, 1996, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since the Closing Date, neither Company nor any of its Subsidiaries has directly
or indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so except as permitted by
subsection 7.5.
5.5 TITLE TO PROPERTIES; LIENS.
After giving effect to the transactions contemplated by this Agreement to
occur on the Effective Date, Company and its Subsidiaries have good, sufficient
and legal title to all of their respective properties and assets reflected in
the financial statements referred to in the financial statements referred to in
subsection 5.3 or in the most recent financial statements delivered pursuant to
subsection 6.1 of the Existing Credit Agreement, except for assets disposed of
since the date of such financial statements in the ordinary course of business
or as otherwise permitted under subsection 7.7. Except as permitted by this
Agreement, all such properties and assets are free and clear of Liens.
5.6 LITIGATION; ADVERSE FACTS.
There is no action, suit, proceeding, arbitration or governmental
investigation (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that, either individually or in
the aggregate together with all other such actions, proceedings and
investigations, has had, or could reasonably be expected to result in, a
Material Adverse Effect, it being understood, solely for purposes of this
sentence, that any money judgments or settlements the occurrence of which do not
give rise to an Event of Default under subsection 8.8 shall not be deemed to
have a Material Adverse Effect. Neither Company nor any of its Subsidiaries is
or has been (i) in violation of any applicable law (including any Debt
Collection Laws) that has had, or could reasonably be expected to result in, a
Material Adverse Effect, it being understood for purposes of this clause (i)
that any such violation which results in money judgments or settlements the
occurrence of which do not give rise to an Event of Default under subsection 8.8
shall not be deemed to have a Material Adverse Effect, or (ii) subject to or in
default with respect to any final judgment, writ, injunction, decree, rule or
regulation of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that has had, or could reasonably be expected to result in, a Material
Adverse Effect.
5.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all material tax returns
and reports of Company and its Subsidiaries required to be filed by any of them
have been timely filed, and all material taxes, assessments, fees and other
governmental charges upon Company and its Subsidiaries and upon their respective
properties, assets, income, businesses and franchises which are due and payable
have been paid when due and payable. Company does not know of any proposed tax
assessment against Company or any of its Subsidiaries other than those which are
being actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings and for which reserves or other appropriate provisions,
if any, as may be required in conformity with GAAP shall have been made or
provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreement or instrument or any charter or other
internal restriction which has had, or could reasonably be expected (based upon
assumptions that are reasonable at the time made) to result in, individually or
in the aggregate, a Material Adverse Effect.
5.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 SECURITIES ACTIVITIES.
Neither Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
5.11 EMPLOYEE BENEFIT PLANS.
A. Company and each of its ERISA Affiliates are in substantial compliance
with all applicable provisions and requirements of ERISA with respect to each
Employee Benefit Plan, and have substantially performed all their obligations
under each Employee Benefit Plan, except to the extent that any non-compliance
with ERISA or any such failure to perform would not result in material liability
of Company or any of its ERISA Affiliates.
B. No ERISA Event has occurred which has resulted or is reasonably likely
to result in any material liability to the PBGC or to any other Person.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code and/or Section 601 of ERISA, neither Company nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Company or any of its Subsidiaries, except to the extent that the
provision of such benefits would not have a Material Adverse Effect.
D. No Pension Plan has an Unfunded Current Liability in an amount that
would have a Material Adverse Effect.
5.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the loan transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
5.13 ENVIRONMENTAL PROTECTION.
Except as set forth on Schedule 5.13 annexed hereto or as will not result
in a Material Adverse Effect:
(i) the operations of Company and each of its Subsidiaries (including,
without limitation, all operations and conditions at or in the Facilities)
comply in all material respects with all Environmental Laws;
(ii) Company and each of its Subsidiaries have obtained all material
Governmental Authorizations under Environmental Laws necessary to their
respective operations, and all such Governmental Authorizations are in good
standing, and Company and each of its Subsidiaries are in compliance with
all material terms and conditions of such Governmental Authorizations;
(iii) neither Company nor any of its Subsidiaries has received (a) any
notice or claim to the effect that it is or may be liable to any Person as
a result of or in connection with any Hazardous Materials or (b) any letter
or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss.
9604) or comparable state laws, and, to the best knowledge of Company, none
of the operations of Company or any of its Subsidiaries is the subject of
any federal or state investigation relating to or in connection with any
Hazardous Materials at any Facility or at any other location;
(iv) none of the operations of Company or any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging the violation
of or liability under any Environmental Laws;
(v) to the knowledge of Company, neither Company nor any of its
Subsidiaries nor any of their respective Facilities or operations are
subject to any outstanding written order or agreement with any governmental
authority or private party relating to (a) any Environmental Laws or (b)
any Environmental Claims;
(vi) neither Company nor any of its Subsidiaries has any material
contingent liability in connection with any Release of any Hazardous
Materials by Company or any of its Subsidiaries;
(vii) neither Company nor any of its Subsidiaries nor, to the
knowledge of Company, any predecessor of Company or any of its Subsidiaries
has filed any notice under any Environmental Law indicating past or present
treatment or Release of Hazardous Materials at any Facility, and none of
Company's or any of its Subsidiaries' operations involves the generation,
transportation, treatment, storage or disposal of hazardous waste, as
defined under 40 C.F.R. Parts 260-270 or any state equivalent;
(viii) to the knowledge of Company, no Hazardous Materials exist on or
under any Facility in a manner that has a reasonable possibility of giving
rise to an Environmental Claim, and neither Company nor any of its
Subsidiaries has filed any notice or report of a Release of any Hazardous
Materials that has a reasonable possibility of giving rise to an
Environmental Claim;
(ix) neither Company nor any of its Subsidiaries nor, to the knowledge
of Company, any of their respective predecessors has disposed of any
Hazardous Materials in a manner that has a reasonable possibility of giving
rise to an Environmental Claim;
(x) to the knowledge of Company, no underground storage tanks or
surface impoundments are on or at any Facility; and
(xi) to the knowledge of Company, no Lien in favor of any Person
relating to or in connection with any Environmental Claim has been filed or
has been attached to any Facility.
5.14 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened involving
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
5.15 SOLVENCY.
Each Loan Party is, and Company and its Subsidiaries, taken as a whole,
are, and, upon the incurrence of any Obligations by any Loan Party on any date
on which this representation is made, will be, Solvent.
5.16 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and delivery
of the Collateral Documents by Loan Parties, together with (i) the actions taken
on or prior to the date hereof pursuant to subsection 4.2J of the Original
Credit Agreement, subsections 4.3H, 4.4H and 6.9 of the Existing Credit
Agreement and subsections 4.2S, 4.3B and 6.9 of this Agreement, and (ii) the
delivery to Collateral Agent of any Pledged Collateral not delivered to
Collateral Agent at the time of execution and delivery of the applicable
Collateral Document (all of which Pledged Collateral has been so delivered) are
effective to create in favor of Collateral Agent for the benefit of Agents and
Lenders, as security for the respective Secured Obligations (as defined in the
applicable Collateral Document in respect of any Collateral), a valid and
perfected first priority Lien on all of the Collateral, and all filings and
other actions necessary or desirable to perfect and maintain the perfection and
first priority status of such Liens have been duly made or taken and remain in
full force and effect, other than the filing of any UCC financing statements
delivered to Collateral Agent for filing (but not yet filed) and the periodic
filing of UCC continuation statements in respect of UCC financing statements
filed by or on behalf of Collateral Agent.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for either (i) the pledge or grant by any Loan Party of the
Liens purported to be created in favor of Chase Co-Administrative Agent pursuant
to any of the Collateral Documents or (ii) the exercise by Chase
Co-Administrative Agent of any rights or remedies in respect of any Collateral
(whether specifically granted or created pursuant to any of the Collateral
Documents or created or provided for by applicable law), except for filings or
recordings contemplated by subsection 5.16A and except as may be required, in
connection with the disposition of any Pledged Collateral, by laws generally
affecting the offering and sale of securities.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in
favor of Chase Co-Administrative Agent as contemplated by subsection 5.16A, (i)
no effective UCC financing statement, fixture filing or other instrument similar
in effect covering all or any part of the Collateral is on file in any filing or
recording office and (ii) no effective filing covering all or any part of the
intellectual property Collateral is on file in the United States Patent and
Trademark Office.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to the
Collateral Documents does not violate Regulation G, Regulation T, Regulation U
or Regulation X of the Board of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to any Agent
by or on behalf of any Loan Party with respect to any of the Collateral (in each
case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects.
5.17 RELATED AGREEMENTS.
A. DELIVERY OF RELATED AGREEMENTS. Company has delivered to Agents complete
and correct copies of each Related Agreement and of all exhibits and schedules
thereto.
B. PAYCO'S WARRANTIES. Except to the extent otherwise set forth herein or
in the schedules hereto, each of the representations and warranties given by
Payco to Company in the Payco Acquisition Agreement was true and correct in all
material respects as of the Closing Date (or as of any earlier date to which
such representation and warranty specifically relates), subject to the
qualifications set forth in the schedules to the Payco Acquisition Agreement.
C. ACCELERATED'S WARRANTIES AND NSA'S WARRANTIES. Except to the extent
otherwise set forth herein or in the schedules hereto, each of the
representations and warranties given by Accelerated to Company in the
Accelerated Acquisition Agreement and by NSA to Company in the NSA Acquisition
Agreement was true and correct in all material respects as of the First
Amendment Date (or as of any earlier date to which such representation and
warranty specifically relates) in the case of the NSA Acquisition Agreement and
as of November 10, 1997 (or as of any earlier date to which such representation
and warranty specifically relates), in the case of the Accelerated Acquisition
Agreement, in each case subject to the qualifications set forth in the schedules
to the Accelerated Acquisition Agreement or the NSA Acquisition Agreement, as
applicable.
D. UNION'S WARRANTIES. Except to the extent otherwise set forth herein or
in the schedules hereto, each of the representations and warranties given by
Union to Company in the Union Acquisition Agreement and the other Union
Acquisition Documents is true and correct in all material respects as of the
date hereof (or as of any earlier date to which such representation and warranty
specifically relates) and will be true and correct in all material respects as
of the Effective Date (or as of such earlier date, as the case may be), in each
case subject to the qualifications set forth in the schedules to the Union
Acquisition Agreement or the other Union Acquisition Documents, as applicable.
Notwithstanding the foregoing, Company shall not be deemed to make any
representation hereunder with respect to representations and warranties of Union
described in this subsection prior to consummation of the Union Acquisition.
E. WARRANTIES OF COMPANY. Subject to the qualifications and the schedules
set forth therein, (i) each of the representations and warranties given by
Company to Payco in the Payco Acquisition Agreement was true and correct in all
material respects as of the Closing Date, (ii) each of the representations and
warranties given by Company to Accelerated and its Subsidiaries in the
Accelerated Acquisition Agreement was true and correct in all material respects
as of the November 10, 1997, (iii) each of the representations and warranties
given by Company to NSA and its Subsidiaries in the NSA Acquisition Agreement
was true and correct in all material respects as of the First Amendment Date and
(iv) each of the representations and warranties given by Merger Sub to Union in
the Union Acquisition Agreement is true and correct in all material respects as
of the date hereof (or its later date of execution) and will be true and correct
in all material respects as of the Effective Date. Notwithstanding the
foregoing, Company shall not be deemed to make any representation hereunder with
respect to representations and warranties described in clause (iv) of this
subsection prior to consummation of the Union Acquisition.
F. SURVIVAL. Notwithstanding anything in the Payco Acquisition Agreement,
the Accelerated Acquisition Agreement, the NSA Acquisition Agreement or the
Union Acquisition Agreement to the contrary, (i) the representations and
warranties of Company set forth in subsections 5.17B and 5.17E(i) shall, for
purposes of this Agreement, survive the Closing Date for the benefit of Agents
and Lenders, (ii) the representations and warranties of Company set forth in
subsections 5.17C, 5.17E(ii) and 5.17E(iii) shall, solely for purposes of this
Agreement, survive the First Amendment Date for the benefit of Agents and
Lenders and (iii) the representations and warranties of Company set forth in
subsections 5.17D and 5.17(E)(iv) shall, solely for purposes of this Agreement,
survive the Effective Date for the benefit of Agents and Lenders.
5.18 DISCLOSURE.
A. LOAN DOCUMENTS. The representations of Company and its Subsidiaries
contained in the Loan Documents, Related Documents and in any other document,
certificate or written statement furnished to Lenders by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement, when taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact (known to Company
or the applicable Subsidiary, in the case of any document not furnished by
Company or such Subsidiary) necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances in which the same
were made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Company to be reasonable at the time made, it being recognized by Lenders that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There is no fact known (or which should upon
the reasonable exercise of diligence be known) to Company (other than matters of
a general economic nature) that has had, or could reasonably be expected to
result in, a Material Adverse Effect and that has not been disclosed herein or
in such other documents, certificates and statements furnished to Lenders for
use in connection with the transactions contemplated hereby.
B. TENDER OFFER MATERIALS. The Tender Offer Materials do not contain any
untrue statement of a material fact or omit to state a material fact (known to
Company or any of its Subsidiaries, in the case of any document not furnished by
it) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made.
5.19 SUBORDINATION OF SELLER NOTES.
The subordination provisions of the Existing Seller Note and any Permitted
Seller Notes are enforceable against the holders thereof, and the Loans and
other monetary Obligations hereunder are and will be within the definition of
"Senior Indebtedness" included in such provisions.
5.20 MARGIN LENDING MATTERS.
At the time of the making of the Delayed-Draw Term Loans and after giving
effect to the Union Merger, not more than 25% of the value of the assets of the
Company, or of the Company and its Subsidiaries on a consolidated basis, shall
constitute Margin Stock. Neither the making of any Loan hereunder, nor the use
of the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock in violation of Regulation G, T, U or X or to extend credit for the
purpose of purchasing or carrying any Margin Stock in violation of Regulation G,
T, U or X.
SECTION 6.
AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Chase Co-Administrative Agent (and Chase
Co-Administrative Agent will, after receipt thereof, deliver to each Lender):
(i) Monthly Financials: as soon as available and in any event within
(y) 45 days after each of the first two calendar months ending after the
Effective Date, and (z) thereafter within 30 days after the last day of
each calendar month other than the last month of a Fiscal Quarter, (a) the
consolidated balance sheets of Company and its Subsidiaries as at the end
of each fiscal month ending after the Effective Date and the related
consolidated statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month, setting
forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the current
Fiscal Year delivered pursuant to subsection 6.1(xiii), all in reasonable
detail and certified by the chief financial officer of Company that they
fairly present, in all material respects, the financial condition of
Company and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments; and (b) a
narrative report describing the operations of Company and its Subsidiaries
in the form prepared for presentation to senior management for such month
and for the period from the beginning of the then current Fiscal Year to
the end of such month;
(ii) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each Fiscal Quarter, (a) the consolidated
balance sheets of Company and its Subsidiaries as at the end of such Fiscal
Quarter and the related consolidated statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding periods of
the previous fiscal year and the corresponding figures from the
consolidated plan and financial forecast for the current Fiscal Year
delivered pursuant to subsection 6.1(xiii), all in reasonable detail and
certified by the chief financial officer of Company that they fairly
present, in all material respects, the financial condition of Company and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Company and its Subsidiaries
in the form prepared for presentation to senior management for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter;
(iii) Year-End Financials: as soon as available and in any event
within 90 days after the end of each Fiscal Year, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Company and
its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6.1(xiii) for the Fiscal Year covered by
such financial statements, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its Subsidiaries
as at the dates indicated and the results of their operations and their
cash flows for the periods indicated, (b) a narrative report describing the
operations of Company and its Subsidiaries in the form prepared for
presentation to senior management for such Fiscal Year, and (c) in the case
of such consolidated financial statements, a report thereon of independent
certified public accountants of recognized national standing selected by
Company and reasonably satisfactory to Chase Co-Administrative Agent, which
report shall be unqualified as to the ability of Company and its
Subsidiaries to continue as a going concern and as to scope of audit, and
shall state that such consolidated financial statements fairly present, in
all material respects, the consolidated financial position of Company and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the examination
by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards;
(iv) Officer's and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above, (a) an Officer's Certificate of
Company stating that the signer has reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signer does not have
knowledge of the existence as at the date of such Officer's Certificate, of
any condition or event that constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Company has taken, is taking and proposes to take with respect thereto; and
(b) a Compliance Certificate demonstrating in reasonable detail compliance
during and at the end of the applicable accounting periods with the
restrictions contained in Section 7;
(v) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries delivered
pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1
will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions had
no such change in accounting principles and policies been made, then (a)
together with the first delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, consolidated financial statements of Company and its
Subsidiaries for (y) the current Fiscal Year to the effective date of such
change and (z) the two full Fiscal Years immediately preceding the Fiscal
Year in which such change is made, in each case prepared on a pro forma
basis as if such change had been in effect during such periods, and (b)
together with each delivery of financial statements pursuant to subdivision
(i), (ii), (iii) or (xiii) of this subsection 6.1 following such change, a
written statement of the chief accounting officer or chief financial
officer of Company setting forth the differences which would have resulted
if such financial statements had been prepared without giving effect to
such change;
(vi) Accountants' Certification: together with each delivery of
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a reading of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, and (b) stating whether, in connection with their audit
examination, any condition or event, insofar as such condition or event
relates to the covenants set forth in subsection 7.6 or to accounting
matters, that constitutes an Event of Default or Potential Event of Default
has come to their attention and, if such a condition or event has come to
their attention, specifying the nature and period of existence thereof;
provided that such accountants shall not be liable by reason of any failure
to obtain knowledge of any such Event of Default or Potential Event of
Default that would not be disclosed in the course of their audit
examination;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its respective Subsidiaries made by such
accountants, including, without limitation, any comment letter submitted by
such accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses, if
any, filed by Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any governmental
or private regulatory authority, and (c) all press releases and other
statements made available generally by Company or any of its Subsidiaries
to the public concerning material developments in the business of Company
or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of Company
obtaining knowledge (a) of any condition or event that constitutes an Event
of Default or Potential Event of Default, or becoming aware that any Lender
has given any notice (other than to Chase Co-Administrative Agent) or taken
any other action with respect to a claimed Event of Default or Potential
Event of Default, (b) that any Person has given any notice to Company or
any of its Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in subsection 8.2,
(c) of any condition or event that would be required to be disclosed in a
current report filed by Company with the Securities and Exchange Commission
on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if Company were required to file such reports under the Exchange
Act, or (d) of the occurrence of any event or change that has caused or
evidences, either in any case or in the aggregate, a Material Adverse
Effect, an Officer's Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice
given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, default, event or condition,
and what action Company has taken, is taking and proposes to take with
respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any officer of
Company obtaining knowledge of the institution of, or non-frivolous threat
of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against or affecting
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries (collectively, "Proceedings") not previously disclosed in
writing by Company to Lenders or Chase Co-Administrative Agent any material
development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within 45 days after the end of each Fiscal
Quarter, a schedule of all Proceedings involving an alleged liability of,
or claims against or affecting, Company or any of its Subsidiaries equal to
or greater than $2,000,000 which Company believes will likely result in
damages to Company of such amount, and promptly after request by either
Co-Administrative Agent such other information as may be reasonably
requested by such Co-Administrative Agent to enable such Co-Administrative
Agent and its counsel to evaluate any of such Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the occurrence of
any ERISA Event, a written notice specifying the nature thereof, what
action Company or any of its ERISA Affiliates has taken, is taking or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of Labor or the
PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) all
written notices received by Company or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (b) such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as either Co-Chase Co-Administrative Agent shall reasonably
request;
(xiii) Financial Plans: as soon as practicable and in any event no
later than the beginning of each Fiscal Year, a monthly consolidated and
consolidating plan and financial forecast for the next succeeding Fiscal
Year, including, without limitation, (a) forecasted consolidated and
consolidating balance sheets and forecasted consolidated and consolidating
statements of income and cash flows of Company and its Subsidiaries for
such Fiscal Year, together with a pro forma Compliance Certificate for such
Fiscal Year and an explanation of the assumptions on which such forecasts
are based, and (b) such other information and projections as either
Co-Administrative Agent may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Co-Administrative Agents outlining all material insurance coverage
maintained as of the date of such report by Company and its Subsidiaries
and all material insurance coverage planned to be maintained by Company and
its Subsidiaries in the immediately succeeding Fiscal Year;
(xv) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any Facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect;
(xvi) Board of Directors: with reasonable promptness, written notice
of any change in the Board of Directors of Company;
(xvii) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company and
(b) all of the data required to be set forth in Schedule 5.1 annexed hereto
with respect to all Subsidiaries of Company (it being understood that such
written notice shall be deemed to supplement Schedule 5.1 annexed hereto
for all purposes of this Agreement); and
(xviii) Existing Agreement Financial Covenants: on or before March 31,
1998, an Officer's Certificate to Lenders evidencing compliance with the
requirements of subsection 7.6 of the Existing Credit Agreement as of
December 31, 1997; provided that for purposes of demonstrating such
compliance an amount, not in excess of $7.2 million, representing
unrealized cost savings with respect to which action has been initiated
during 1997, shall be added to Consolidated EBITDA.
(xix) Other Information: with reasonable promptness, such other
information and data with respect to Company or any of its Subsidiaries as
from time to time may be reasonably requested by either Co-Administrative
Agent.
For purposes of subsections 4.2P(iii), 4.2P(iv) and 4.2P(v) and this
subsection 6.1, "consolidating" balance sheets and "consolidating" statements of
income, stockholders equity and cash flows refer to financial statements
consolidating the financial position, results of operations and cash flows of
the major operating groups of Company's Subsidiaries, which operating groups as
of the Effective Date consist of (1) A.M. Miller & Associates, Inc. and its
Subsidiaries, (2) Account Portfolios, Inc. and its Subsidiaries, (3) Continental
Credit Services, Inc., Alaska Financial Services, Inc., Southwest Credit
Services, Inc. and their respective Subsidiaries, (4) Payco and its
Subsidiaries, (5) NSA and its Subsidiaries, (6) Accelerated and its Subsidiaries
and (7) Union and its Subsidiaries.
6.2 CORPORATE EXISTENCE, ETC.
Except as permitted under subsection 7.7, Company will, and will cause each
of its Subsidiaries to, at all times preserve and keep in full force and effect
its corporate existence and all rights and franchises material to the business
of Company and its Subsidiaries (on a consolidated basis). Without limiting the
foregoing, Company shall, and shall cause each of its Subsidiaries to, file and
diligently process to completion applications for all material permits, licenses
and other governmental approvals necessary for the operation of its debt
collection business.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries to, pay all
material taxes and all assessments and other governmental charges imposed upon
it or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; provided that no such
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings timely instituted and diligently conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to, file or
consent to the filing of any consolidated income tax return with any Person
(other than Company and its Subsidiaries).
6.4 MAINTENANCE OF PROPERTIES; INSURANCE.
Company will, and will cause each of its Subsidiaries to, maintain or cause
to be maintained in good repair, working order and condition, ordinary wear and
tear excepted, all material properties used or useful in the business of Company
and its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Company will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses. Each such policy of casualty insurance covering
damage to or loss of property shall name Chase Co-Administrative Agent for the
benefit of Agent and Lenders as the loss payee thereunder for all losses,
subject to application of proceeds as required by subsection 2.4B(iii)(d), and
shall provide for at least 30 days' prior written notice to Chase
Co-Administrative Agent of any modification or cancellation of such policy.
6.5 INSPECTION; LENDER MEETING.
Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Agent or Lender to visit and
inspect any of the properties of Company or any of its Subsidiaries, including
its and their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants, all upon
reasonable advance notice and at such reasonable times during normal business
hours and as often as may be reasonably requested. Without in any way limiting
the foregoing, Company will, upon the request of Chase Co-Administrative Agent,
participate in a meeting of Agents and Lenders once during each Fiscal Year to
be held at Company's corporate offices (or such other location as may be agreed
to by Company and Chase Co-Administrative Agent) at such time as may be agreed
to by Company and Chase Co-Administrative Agent.
6.6 COMPLIANCE WITH LAWS, ETC.
Company shall, and shall cause each of its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including all Debt Collection Laws), noncompliance with
which could reasonably be expected to cause a Material Adverse Effect.
6.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.
A. Company shall, and shall cause each of its Subsidiaries to, exercise all
due diligence in order to comply and cause (i) all tenants under any leases or
occupancy agreements affecting any portion of the Facilities and (ii) all other
Persons on or occupying such property, to comply in all material respects with
all Environmental Laws.
B. Company agrees that Chase Co-Administrative Agent may, from time to time
and in its reasonable discretion, retain, at Company's expense, an independent
professional consultant to review any report relating to Hazardous Materials
prepared by or for Company and to conduct its own investigation of any Facility
currently owned, leased, operated or used by Company or any of its Subsidiaries,
and Company agrees to use all reasonable efforts to obtain permission for Chase
Co-Administrative Agent's professional consultant to conduct its own
investigation of any such Facility previously owned, leased, operated or used by
Company or any of its Subsidiaries. Company shall use its reasonable efforts to
obtain for Chase Co-Administrative Agent and its agents, employees, consultants
and contractors the right, upon reasonable notice to Company, to enter into or
on to the Facilities currently owned, leased, operated or used by Company or any
of its Subsidiaries to perform such tests on such property as are reasonably
necessary to conduct such a review and/or investigation. Any such investigation
of any Facility shall be conducted, unless otherwise agreed to by Company and
Chase Co-Administrative Agent, during normal business hours and, to the extent
reasonably practicable, shall be conducted so as not to interfere with the
ongoing operations at any such Facility or to cause any damage or loss to any
property at such Facility. Company and Chase Co-Administrative Agent hereby
acknowledge and agree that any report of any investigation conducted at the
request of Chase Co-Administrative Agent pursuant to this subsection 6.7B will
be obtained and shall be used by Chase Co-Administrative Agent and Lenders for
the purposes of Lenders' internal credit decisions, to monitor and police the
Loans and to protect Lenders' security interests, if any, created by the Loan
Documents. Chase Co-Administrative Agent agrees to deliver a copy of any such
report to Company with the understanding that Company acknowledges and agrees
that (i) it will indemnify and hold harmless each Agent and Lender from any
costs, losses or liabilities relating to any Loan Party's use of or reliance on
such report, (ii) no Agent nor any Lender makes any representation or warranty
with respect to such report, and (iii) by delivering such report to Company, no
Agent nor any Lender is requiring or recommending the implementation of any
suggestions or recommendations contained in such report.
C. Company shall promptly advise Chase Co-Administrative Agent in writing
and in reasonable detail of (i) any Release of any Hazardous Materials required
to be reported to any federal, state, local or foreign governmental or
regulatory agency under any applicable Environmental Laws, (ii) any and all
written communications with respect to any Environmental Claims that have a
reasonable possibility of giving rise to a Material Adverse Effect or with
respect to any Release of Hazardous Materials required to be reported to any
federal, state or local governmental or regulatory agency, (iii) any remedial
action taken by Company or any other Person in response to (x) any Hazardous
Materials on, under or about any Facility, the existence of which has a
reasonable possibility of resulting in an Environmental Claim having a Material
Adverse Effect, or (y) any Environmental Claim that could have a Material
Adverse Effect, (iv) Company's discovery of any occurrence or condition on any
real property adjoining or in the vicinity of any Facility that could cause such
Facility or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws, and (v)
any request for information from any governmental agency that suggests such
agency is investigating whether Company or any of its Subsidiaries may be
potentially responsible for a Release of Hazardous Materials.
D. Company shall promptly notify Chase Co-Administrative Agent of (i) any
proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Company or any of its
Subsidiaries and (ii) any proposed action to be taken by Company or any of its
Subsidiaries to commence manufacturing, industrial or other similar operations
that could reasonably be expected to subject Company or any of its Subsidiaries
to additional laws, rules or regulations, including, without limitation, laws,
rules and regulations requiring additional environmental permits or licenses.
E. Company shall, at its own expense, provide copies of such documents or
information as either Co-Administrative Agent may reasonably request in relation
to any matters disclosed pursuant to this subsection 6.7.
6.8 COMPANY'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
Company shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on or under any Facility in order to comply with all applicable
Environmental Laws and Governmental Authorizations unless the failure to so
comply could not reasonably be expected to have a Material Adverse Effect. In
the event Company or any of its Subsidiaries takes any remedial action with
respect to any Hazardous Materials on or under any Facility, Company or such
Subsidiary shall conduct and complete such remedial action in material
compliance with all applicable Environmental Laws, and in accordance with the
policies, orders and directives of all federal, state and local governmental
authorities except when, and only to the extent that, Company's or such
Subsidiary's liability for such presence, storage, use, disposal, transportation
or Release of any Hazardous Materials is being contested in good faith by
Company or such Subsidiary.
6.9 EXECUTION OF SUBSIDIARY GUARANTY AND SUBSIDIARY SECURITY AGREEMENTS BY
SUBSIDIARIES AND FUTURE SUBSIDIARIES.
In the event that any Person becomes a wholly-owned domestic Subsidiary
after the date hereof, Company will promptly notify Chase Co-Administrative
Agent of that fact and cause such Subsidiary to execute and deliver to Chase
Co-Administrative Agent and Collateral Agent a counterpart of the Subsidiary
Guaranty and the Pledge Agreement, the Security Agreement, the Limited
Partnership Security Agreement and the Trademark Security Agreement
(collectively, the "SUBSIDIARY SECURITY AGREEMENTS"), and to take all such
further actions and execute all such further documents and instruments as may be
required to grant and perfect in favor of Collateral Agent, for the benefit of
Lenders, a first-priority security interest in all of the personal property
assets of such Subsidiary described in the Subsidiary Security Agreements.
Company shall deliver to Chase Co-Administrative Agent and Collateral Agent,
together with such Loan Documents, (i) certified copies of such Subsidiary's
Articles or Certificate of Incorporation (or comparable constituent documents),
together, if applicable, with a good standing certificate from the Secretary of
State of the jurisdiction of its incorporation, each to be dated a recent date
prior to their delivery to Chase Co-Administrative Agent, (ii) a copy, if
applicable, of such Subsidiary's Bylaws, certified by its corporate secretary or
an assistant corporate secretary as of a recent date prior to their delivery to
Chase Co-Administrative Agent and Collateral Agent, (iii) a certificate executed
by the secretary or an assistant secretary of such Subsidiary as to (a) the
incumbency and signatures of the officers of such Subsidiary executing the
Subsidiary Guaranty and to which such Subsidiary is a party and (b) the fact
that the attached resolutions of the Board of Directors of such Subsidiary
authorizing the execution, delivery and performance of the Subsidiary Guaranty
and the Subsidiary Security Agreements to which such Subsidiary is a party are
in full force and effect and have not been modified or rescinded, and (iv) a
favorable opinion of counsel to such Subsidiary, in form and substance
satisfactory to Chase Co-Administrative Agent and its counsel, as to (a) the due
organization and good standing of such Subsidiary, (b) the due authorization,
execution and delivery by such Subsidiary of the Subsidiary Guaranty and the
Subsidiary Security Agreements to which such Subsidiary is a party, (c) the
enforceability of the Subsidiary Guaranty and the Subsidiary Security Agreements
to which such Subsidiary is a party against such Subsidiary, and (d) such other
matters as Chase Co-Administrative Agent and Collateral Agent may reasonably
request, all of the foregoing to be reasonably satisfactory in form and
substance to Chase Co-Administrative Agent and its counsel and Collateral Agent.
6.10 INTEREST RATE PROTECTION.
Within 180 days after the Effective Date, Company shall enter into one or
more Interest Rate Agreements with respect to the Loans, in an aggregate
notional principal amount of not less than $100,000,000, which Interest Rate
Agreements shall have the effect of establishing a maximum interest rate of not
more than 10% per annum with respect to such notional principal amount, each
such Interest Rate Agreement to be in form and substance satisfactory to
Co-Administrative Agents and with a term of not less than three years from the
Effective Date.
6.11 CONDUCT OF BUSINESS OF MERGER SUB.
Until consummation of the Union Merger, Merger Sub will engage in only
those activities that are necessary or advisable to effect the Tender Offer upon
the terms set forth in the Tender Offer Materials, to effect the Union Merger
and to effect the transactions contemplated by this Agreement.
6.12 CONDUCT OF BUSINESS OF UNION.
Until consummation of the Union Merger, Company and Merger Sub will cause
Union and its Subsidiaries to conduct their respective businesses in a manner
consistent with their past practices, and to comply with the terms of the Union
Acquisition Agreement.
6.13 UNION MERGER.
Company shall comply with, and cause Union to comply with, all covenants
set forth in the Union Acquisition Agreement that are applicable prior to the
consummation of the Union Merger. Company shall cause the Union Merger to be
consummated in accordance with the terms and conditions of the Union Acquisition
Agreement and the Tender Offer Materials and shall cause each of the conditions
set forth in subsection 4.3 to be fulfilled as soon as practicable and, in any
event, no later than 120 calendar days after the Effective Date. In the event
that the Tendered Union Shares to be purchased concurrently with receipt of the
proceeds of the initial Tranche C Term Loans on the Effective Date shall
represent, in the aggregate, not less than 90% of the outstanding shares of
Union Common Stock and, in any case, the number of shares of Union Common Stock
required to permit Company to cause the Union Merger to occur in accordance with
the terms of the Union Acquisition Agreement and Section 253 of the Delaware
General Corporation Law, Company shall cause the Union Merger to occur under
Section 253 of the Delaware General Corporation Law on the Effective Date or as
soon thereafter as practicable and in any event within 10 days of the Effective
Date.
6.14 FURTHER ASSURANCES.
At any time or from time to time upon the request of either
Co-Administrative Agent, Company will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and things
as such Co-Administrative Agent may reasonably request in order to effect fully
the purposes of the Loan Documents and to provide for payment of the Obligations
in accordance with the terms of this Agreement, the Notes and the other Loan
Documents. In furtherance and not in limitation of the foregoing, Company shall
take, and cause each of its Subsidiaries to take, such actions as either
Co-Administrative Agent may reasonably request from time to time (including,
without limitation, the execution and delivery of guaranties, security
agreements, pledge agreements, mortgages, deeds of trust, stock powers,
financing statements and other documents, the filing or recording of any of the
foregoing, title insurance with respect to any of the foregoing that relates to
an interest in real property, and the delivery of stock certificates and other
collateral with respect to which perfection is obtained by possession) to ensure
that the Obligations are guaranteed by Subsidiary Guarantors and are secured by
substantially all of the assets of Company and its domestic Subsidiaries. In the
event that Company or any of its Subsidiaries creates a new domestic Subsidiary,
all of the capital stock or partnership interests of such new domestic
Subsidiary shall be duly and validly pledged to Collateral Agent for the benefit
of Agents and Lenders pursuant to the Collateral Documents, subject to no other
Liens.
SECTION 7.
NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
7.1 INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7.1 annexed hereto;
(iv) Indebtedness of Company and its Subsidiaries (a) under Capital
Leases capitalized on the consolidated balance sheet of Company as
liabilities, (b) with respect to sale and lease-back arrangements
identified on Schedule 7.8, or (c) secured by Liens permitted under
subsection 7.2A(iii), in an aggregate amount not exceeding, with respect to
Indebtedness incurred pursuant to clause (a) or (c) of this subsection 7.1,
$15,000,000 at any time outstanding;
(v) Company may become and remain liable with respect to Indebtedness
to any of its domestic Wholly Owned Subsidiaries, and any domestic Wholly
Owned Subsidiary of Company may become and remain liable with respect to
Indebtedness to Company or any other domestic Wholly Owned Subsidiary of
Company provided that (a) all such intercompany Indebtedness shall be
evidenced by promissory notes, (b) all such intercompany Indebtedness owed
by Company to any of its respective Subsidiaries shall be subordinated in
right of payment to the payment in full of the Obligations pursuant to the
terms of the applicable promissory notes or an intercompany subordination
agreement, in each case in form and substance satisfactory to
Co-Administrative Agents, and (c) any payment by Company or by any
Subsidiary of Company under any guaranty of the Obligations shall result in
a pro tanto reduction of the amount of any intercompany Indebtedness owed
by Company or by such Subsidiary to Company or to any of its Subsidiaries
for whose benefit such payment is made;
(vi) Company may become and remain liable with respect to the
Subordinated Notes;
(vii) Company may become and remain liable with respect to Permitted
Seller Notes, provided that the aggregate principal amount of such notes
issued shall not exceed $25,000,000; and
(viii) Company and its Subsidiaries (other than, prior to the Union
Merger Date, Merger Sub) may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed at any time
outstanding $10,000,000.
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement, or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens described in Schedule 7.2 annexed hereto;
(iii) Purchase money security interests (including mortgages,
conditional sales, Capital Leases and any other title retention or deferred
purchase devices) in tangible personal property of Company or any of its
Subsidiaries existing or created at the time of acquisition thereof or
within 30 days thereafter, and the renewal, extension and refunding of any
such security interest in an amount not exceeding the amount thereof
remaining unpaid immediately prior to such renewal, extension or refunding;
provided, however, that such Indebtedness is permitted by subsection
7.1(iv) hereof;
(iv) Other Liens on assets of Company and its Subsidiaries securing
Indebtedness in an aggregate amount not to exceed $5,000,000 at any time
outstanding; and
(v) Liens granted pursuant to the Collateral Documents.
Notwithstanding the foregoing, prior to the Union Merger Date, Merger Sub may
directly or indirectly sell, assign, pledge or encumber any shares of Union
Common Stock owned by it for cash and for fair market value so long as the
proceeds thereof are held as Cash or Cash Equivalents.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any consensual Lien upon any of its
properties or assets, whether now owned or hereafter acquired, other than Liens
excepted by the provisions of subsection 7.2A, it shall make or cause to be made
effective provision whereby the Obligations will be secured by such Lien equally
and ratably with any and all other Indebtedness secured thereby as long as any
such Indebtedness shall be so secured; provided that, notwithstanding the
foregoing, this covenant shall not be construed as a consent by Requisite
Lenders to the creation or assumption of any such Lien not permitted by the
provisions of subsection 7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except as provided herein Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
7.3 INVESTMENTS; JOINT VENTURES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in Cash
Equivalents;
(ii) Company and its Subsidiaries may continue to own the Investments
owned by them as of the Effective Date in any Subsidiaries of Company and;
(iii) Company and its Subsidiaries may make intercompany loans to the
extent permitted under subsection 7.1(v); (iv) Payco may continue to own
the Joint Ventures owned by it as of the Effective Date;
(v) Company and its Subsidiaries may make and own Investments in
Permitted Joint Ventures; provided that (a) at the time of such Investment,
and after giving effect thereto, no Potential Event of Default or Event of
Default shall have occurred and be continuing, (b) the aggregate amount of
all such Investments made after the Closing Date (other than Investments
made in accordance with the following clause (c)) shall not exceed
$5,000,000, (c) the aggregate amount of Investments made in a Permitted
Joint Venture the only assets of which are Qualified Loan Portfolios shall
not exceed $30,000,000 during any Fiscal Year and, after giving effect
thereto, the aggregate amount of such Investments do not exceed the
limitations set forth in subsection 7.7(v), and (d) Company and its
Subsidiaries shall pledge all of their respective equity interests in any
Permitted Joint Venture to Collateral Agent to secure the Obligations under
the Loan Documents (except to the extent, and only to the extent, such
pledge of the equity interests in a Permitted Joint Venture organized under
the laws of a foreign country would result in Company incurring additional
liabilities for taxes);
(vi) Company may make and own Investments consisting of notes received
in connection with any Asset Sale limited to 20% of the total sale price of
the assets sold in such Asset Sale; provided that the aggregate principal
amount of such notes at any time outstanding shall not exceed $2,000,000;
(vii) Company and its Subsidiaries may make and own Investments in
connection with a Permitted Acquisition or a Permitted Portfolio
Acquisition;
(viii) Company and its Subsidiaries may make Consolidated Maintenance
Capital Expenditures permitted by subsection 7.6;
(ix) Company and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time $2,500,000; and
(x) Company may make the Investments permitted under subsection
7.7(vi).
7.4 CONTINGENT OBLIGATIONS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Company may become and remain liable with respect to Contingent
Obligations in respect of Letters of Credit, as applicable, and
Subsidiaries of Company may become and remain liable with respect to
Contingent Obligations arising under the Subsidiary Guaranty;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under Interest Rate Agreements required
under subsection 6.10;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in the ordinary course
of business in connection with Asset Sales or other sales of assets;
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under guarantees in the ordinary course
of business of the obligations of suppliers, landlords, customers,
franchisees and licensees of Company and its Subsidiaries in an aggregate
amount not to exceed at any time $2,500,000;
(v) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under guarantees in the ordinary course
of business with respect to the performance by Company or any of its
Subsidiaries of obligations under collection contracts;
(vi) Company may become and remain liable with respect to Contingent
Obligations in respect of Earn Out Agreements in connection with Permitted
Acquisitions and Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of Forward Flow
Contracts; provided that to the extent that purchases of receivables
portfolios from a single seller (together with all Affiliates of such
seller) party to a Forward Flow Contract with Company or any of its
Subsidiaries exceed $1,250,000 in any 12-month period, any receivables
portfolio purchased during such 12-month period under a Forward Flow
Contract with such seller shall be a Qualified Loan Portfolio;
(vii) Company and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
hereto;
(viii) Subsidiaries of Company may become and remain liable with
respect to the Subordinated Note Guaranty; and
(ix) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $2,000,000.
7.5 RESTRICTED JUNIOR PAYMENTS.
Company shall not, and shall not permit any of its respective Subsidiaries
to, directly or indirectly, declare, order, pay, make or set apart any sum for
any Restricted Junior Payment; provided that (i) Company may make scheduled
interest payments in respect of the Subordinated Notes in accordance with the
terms of the Subordinated Note Indenture; (ii) Company may make scheduled
interest and principal payments in respect of the Existing Seller Note and any
Permitted Seller Notes permitted by subsection 7.1(vii) in accordance with the
terms of the Existing Seller Note and such Permitted Seller Notes; (iii) so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing or shall be caused thereby, Company may make payments in an aggregate
amount not to exceed $2,500,000 in any Fiscal Year to the extent necessary to
repurchase shares of Company Common Stock from officers, directors or employees
of Company or any of its Subsidiaries following termination of employment of any
such officer, director or employee by reason of death, disability, retirement or
resignation or following other events customarily requiring or permitting such
repurchase, in each case in accordance with the terms of customary terms of
management and/or employee stock plans, stock subscription agreements or
shareholder agreements entered into with officers, directors or employees of
Company or any of its Subsidiaries; (iv) so long as no Event of Default or
Potential Event of Default shall have occurred and be continuing or shall be
caused thereby, Company may repurchase Company Preferred Stock and make payments
of accrued and unpaid dividends to the holders of Company Preferred Stock,
provided that in no event may Company pay any dividend on or repurchase Company
Preferred Stock unless both (x) the Leverage Ratio for the most recently ended
four-Fiscal Quarter period is less than 2.0:1.0 and (y) at least 50% of the
initial aggregate principal amount of the Term Loans has been repaid; and (v)
Company and its Subsidiaries may consummate the transactions contemplated by the
Union Acquisition Documents.
7.6 FINANCIAL COVENANTS.
A. Minimum Interest Coverage Ratio. The ratio of (i) Consolidated EBITDA to
(ii) Consolidated Interest Expense for any four-Fiscal Quarter period (each such
four-Fiscal Quarter period being a "CALCULATION PERIOD") ending June 30, 1998 or
thereafter during any of the periods set forth below shall not be less than the
correlative ratio indicated:
===================================== ==========================================
PERIOD DURING MINIMUM
WHICH CALCULATION PERIOD ENDS INTEREST COVERAGE RATIO
===================================== ==========================================
06/30/98 - 12/30/99 2.00:1.00
===================================== ==========================================
12/31/99 - 06/29/00 2.25:1.00
===================================== ==========================================
06/30/00 - 12/30/00 2.50:1.00
===================================== ==========================================
12/31/00 - 6/29/01 2.75:1.00
===================================== ==========================================
Thereafter 3.00:1.00
===================================== ==========================================
B. MAXIMUM LEVERAGE RATIO. The ratio of (i) Consolidated Total Debt as
of June 30, 1998 or the last day (any such day being a "CALCULATION DATE") of
any Fiscal Quarter ending during any of the periods set forth below to (ii)
Consolidated EBITDA for the Calculation Period ending on such Calculation Date
shall not exceed the correlative ratio indicated:
=========================================== ==========================
PERIOD DURING MAXIMUM
WHICH CALCULATION DATE OCCURS LEVERAGE
RATIO
=========================================== ==========================
=========================================== ==========================
06/30/98 - 06/29/99 5.00:1.00
=========================================== ==========================
06/30/99 - 12/30/99 4.75:1.00
=========================================== ==========================
12/31/99 - 06/29/00 4.50:1.00
=========================================== ==========================
06/30/00 - 12/30/00 4.25:1.00
=========================================== ==========================
12/31/00 - 06/29/01 4.00:1.00
=========================================== ==========================
06/30/01 - 12/30/01 3.75:1.00
=========================================== ==========================
12/31/01 - 06/29/02 3.50:1.00
=========================================== ==========================
06/30/02 - 12/30/02 3.25:1.00
=========================================== ==========================
12/31/02 - 06/29/03 3.00:1.00
=========================================== ==========================
Thereafter 2.75:1.00
=========================================== ==========================
C. MINIMUM FIXED CHARGE COVERAGE RATIO. The ratio of (i) Consolidated
EBITDA to (ii) Consolidated Fixed Charges for any Calculation Period ending
after the Closing Date shall not be less than 1.05:1.00.
D. CONSOLIDATED MAINTENANCE CAPITAL EXPENDITURES. Company shall not, and
shall not permit its Subsidiaries to, make or incur in any Fiscal Year
Consolidated Maintenance Capital Expenditures in an aggregate amount in excess
of $18,000,000 (the "MAXIMUM CONSOLIDATED MAINTENANCE CAPITAL EXPENDITURES
AMOUNT"); provided that the Maximum Consolidated Maintenance Capital
Expenditures Amount for any Fiscal Year other than Fiscal Year 1998 shall be
increased by an amount equal to the excess, if any (but in no event more than
25% of the Maximum Consolidated Maintenance Capital Expenditures Amount for the
previous Fiscal Year), of the Maximum Consolidated Maintenance Capital
Expenditures Amount for the previous Fiscal Year over the actual amount of
Consolidated Maintenance Capital Expenditures for such previous Fiscal Year; and
provided further, that immediately following any acquisition permitted under
subsection 7.7(v) or 7.7(vi), the Maximum Consolidated Maintenance Capital
Expenditures Amount for the Fiscal Year during which such acquisition occurs,
and for each Fiscal Year thereafter shall be increased, in each case, by an
amount equal to the product of (i) the Maximum Consolidated Maintenance Capital
Expenditures Amount in effect immediately prior to such acquisition multiplied
by (ii) the ratio of (a) Consolidated EBITDA attributable to the business or
assets so acquired but not attributable to any Portfolio Purchase Business so
acquired to (b) Consolidated EBITDA not attributable to the Portfolio Purchase
Business of Company and its Subsidiaries without giving effect to such
acquisition, determined in the case of clauses (a) and (b) for the four-Fiscal
Quarter period most recently ended prior to such acquisition.
E. Certain Calculations.
(i) Notwithstanding any provision of this Agreement to the contrary,
(x) for purposes of calculating Consolidated EBITDA for any period
including the third and/or fourth Fiscal Quarters of 1997, Consolidated
EBITDA shall be deemed to be $29,100,000 for the third Fiscal Quarter of
1997 and $24,600,000 for the fourth Fiscal Quarter of 1997, (y) subject to
the provisions of the preceding clause (x), for purposes of calculations
under subsection 7.6, calculations shall be made as if the Union Merger and
related transactions (including, without limitation, borrowings of all the
Tranche C Term Loans) had been consummated as of January 1, 1998, and (z),
Consolidated Interest Expense and Consolidated Fixed Charges shall be
calculated prior to December 31, 1998 in accordance with Schedule 7.6E.
(ii) With respect to any period during which new Subsidiaries, assets
or businesses are acquired pursuant to subsection 7.7(v) or 7.7(vi), for
purposes of determining compliance with the financial covenants set forth
in this subsection 7.6, Consolidated EBITDA and Consolidated Interest
Expense shall be calculated with respect to such periods and such
Subsidiaries, assets or businesses on a pro forma basis (including, except
with respect to the Union Acquisition, pro forma adjustments arising out of
events which are directly attributable to a specific transaction, are
factually supportable and are expected to have a continuing impact, in each
case determined on a basis consistent with Article 11 of Regulation S-X
promulgated under the Securities Act and as interpreted by the staff of the
Securities and Exchange Commission prior to December 1996, which would
include cost savings resulting from head count reduction, closure of
facilities and similar restructuring charges, which pro forma adjustments
shall be certified by the chief financial officer of Company) using the
historical financial statements of all entities or assets so acquired or to
be acquired and the consolidated financial statements of Company and its
Subsidiaries which shall be reformulated (i) as if such acquisition, and
any acquisitions which have been consummated during such period, and any
Indebtedness or other liabilities incurred in connection with any such
acquisition had been consummated or incurred at the beginning of such
period (and assuming that such Indebtedness bears interest during any
portion of the applicable measurement period prior to the relevant
acquisition at the weighted average of the interest rates applicable to
outstanding Loans during such period), and (ii) otherwise in conformity
with certain procedures to be agreed upon between Co-Administrative Agents
and Company, all such calculations to be in form and substance satisfactory
to Co-Administrative Agents.
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES.
Company shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of Company or any of its Subsidiaries,
create any new Subsidiaries or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property or fixed assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise any part of the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person, except:
(i) any Subsidiary of Company may be merged with or into Company or
any domestic Wholly Owned Subsidiary of Company, or be liquidated, wound up
or dissolved, or all or any substantial part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed of,
in one transaction or a series of transactions, to Company or any domestic
Wholly Owned Subsidiary of Company; provided that, in the case of such a
merger, Company or such Wholly Owned Subsidiary shall be the continuing or
surviving corporation;
(ii) Company and its Subsidiaries may acquire inventory (other than
receivables portfolios), equipment and other assets in the ordinary course
of business;
(iii) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (determined in good faith by the
board of directors of Company);
(iv) Company and its Subsidiaries may make any Asset Sale of assets
that have, in the aggregate, a fair market value (determined in good faith
by the board of directors of Company) not in excess of 20% of Consolidated
EBITDA for the four-Fiscal Quarter period most recently ended prior to such
Asset Sale; provided that (x) the consideration received for such assets
shall be in an amount at least equal to the fair market value thereof
(determined in good faith by the board of directors of Company); (y) not
less than 80% of the consideration received therefor shall be cash; and (z)
the proceeds of such Asset Sales shall be applied as required by subsection
2.4B(iii)(a);
(v) Company may make acquisitions of receivables portfolios and other
assets and businesses (including acquisitions of the capital stock of
another Person), provided that:
(a) in the event that the aggregate amount of all such
acquisitions in any Fiscal Year would exceed $5,000,000 after giving
effect to any such proposed acquisition, (x) the Interest Coverage
Ratio (calculated on a pro forma basis giving effect to the proposed
acquisition) shall not be less than the ratio set forth in subsection
7.6A applicable at the time of such acquisition and (y) the Leverage
Ratio (calculated on a pro forma basis giving effect to the proposed
acquisition) shall not be greater than the ratio set forth in
subsection 7.6B applicable at the time of such acquisition;
(b) the aggregate amount expended for Permitted Acquisitions
(other than pursuant to subsection 7.7(vi)) after the Effective Date
shall not exceed $60,000,000;
(c) any receivables portfolio acquired shall be a Qualified Loan
Portfolio;
(d) the aggregate amount expended for Permitted Portfolio
Acquisitions during any Fiscal Year together with the aggregate amount
of all Investments made pursuant to subsection 7.3(v)(c) during such
Fiscal Year shall not exceed $60,000,000;
(e) that portion of Consolidated EBITDA attributable to any
assets so acquired in any single acquisition or series of related
acquisitions, as projected by Company for the twelve-month period
immediately following the date of such acquisition or the date of the
first of such series of related acquisitions, as the case may be,
shall not exceed 20% of Consolidated EBITDA for the four-Fiscal
Quarter period most recently ended prior to the date of such
acquisition, and Company shall have delivered an Officer's Certificate
to Co-Administrative Agents (together with supporting information
therefor) to the foregoing effect; and
(f) no Event of Default or Potential Event of Default shall have
occurred and be continuing at the time of such acquisition or shall be
caused thereby; and
(vi) Company may consummate the Tender Offer on the Effective Date and
the Union Merger on the Delayed-Draw Term Loan Funding Date.
Notwithstanding the foregoing, prior to the Union Merger Date, Merger Sub may
directly or indirectly sell, assign, pledge or encumber any shares of Union
Common Stock owned by it for cash and for fair market value so long as the
proceeds thereof are held as Cash or Cash Equivalents.
7.8 SALES AND LEASE-BACKS.
Except as set forth in Schedule 7.8, Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, become or remain
liable as lessee or as a guarantor or other surety with respect to any lease,
whether an Operating Lease or a Capital Lease, of any property (whether real,
personal or mixed), whether now owned or hereafter acquired, (i) which Company
or any of its Subsidiaries has sold or transferred or is to sell or transfer to
any other Person (other than Company or any of its Subsidiaries) or (ii) which
Company or any of its Subsidiaries intends to use for substantially the same
purpose as any other property which has been or is to be sold or transferred by
Company or any of its Subsidiaries to any Person (other than Company or any of
its Subsidiaries) in connection with such lease.
7.9 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) any transaction between Company and any of its Wholly
Owned Subsidiaries or between any of its Wholly Owned Subsidiaries, (ii)
reasonable and customary fees paid to members of the boards of directors of
Company and its Subsidiaries, (iii) fees, expenses and other amounts payable to
the MDC Entities on the Closing Date, the First Amendment Date and/or the
Effective Date, and (iv) the Management Fees.
7.10 DISPOSAL OF SUBSIDIARY STOCK.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except as permitted under this Agreement or the
Collateral Documents or to qualify directors if required by applicable law;
or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except as permitted under this Agreement or the Collateral
Documents or to Company, another wholly-owned Subsidiary of Company, or to
qualify directors if required by applicable law.
Notwithstanding the foregoing, prior to the Union Merger Date, Merger Sub may
directly or indirectly sell, assign, pledge or encumber shares of Union Common
Stock owned by it for cash and for fair market value.
7.11 CONDUCT OF BUSINESS.
Company shall not, and shall not permit any of its Subsidiaries to, engage
in any business other than (i) the businesses engaged in by Company and its
Subsidiaries on the Effective Date (after giving effect to the Union
Acquisition) and similar or related businesses and (ii) such other lines of
business as may be consented to by Co-Administrative Agents and Requisite
Lenders.
7.12 AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS; AMENDMENTS OF
DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS; DESIGNATION OF "DESIGNATED
SENIOR DEBT"; PREFERRED STOCK.
A. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS. Neither Company nor
any of its Subsidiaries will agree to any material amendment to, or waive any of
its material rights under, any Related Agreement (other than any Related
Agreement evidencing or governing any Subordinated Indebtedness), the MDC
Advisory Services Agreement or the Stockholders Agreement after the Effective
Date if such amendment or waiver would be adverse to Lenders without in each
case obtaining the prior written consent of Requisite Lenders to such amendment
or waiver; provided, however, that if certain performance criteria determined by
the Board of Directors of Company are met from time to time, Company may amend
the MDC Advisory Services Agreement without the consent of Lenders to provide
for an increase or increases in the annual Management Fee payable thereunder,
provided that such Management Fee shall not exceed $1,000,000 annually.
B. AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS. Company
shall not, and shall not permit any of its Subsidiaries to, amend or otherwise
change the terms of any Subordinated Indebtedness or Subordinated Note Document,
or make any payment consistent with an amendment thereof or change thereto, if
the effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or trustee or other representative on their behalf)
which would be adverse to Company or Lenders.
C. DESIGNATION OF "DESIGNATED SENIOR DEBT". Company shall not designate any
Indebtedness as "Designated Senior Debt" (as defined in the Subordinated Note
Indenture) for purposes of the Subordinated Note Indenture without the prior
written consent of Requisite Lenders.
D. PREFERRED STOCK. Without the prior written approval of Requisite
Lenders, Company shall not amend, restate, supplement or otherwise modify its
Articles of Incorporation if the effect of such amendment, restatement,
supplement or modification is to (i) increase the dividend rate payable on, or
change the redemption provisions of, the Company Preferred Stock, (ii) together
with all other amendments or changes made, increase materially the obligations
of Company to the holders of the Company Preferred Stock, (iii) confer any
additional rights on the holders of the Company Preferred Stock which would be
adverse to Company or Lenders, or (iv) provide for the issuance of any preferred
stock of Company in addition to the Company Preferred Stock or the filing or
amendment of any certificate of designation with respect thereto.
7.13 FISCAL YEAR.
Company shall not change its Fiscal Year-end from December 31.
SECTION 8.
EVENTS OF DEFAULT
IF any of the following conditions or events ("EVENTS OF DEFAULT") shall
occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; failure by Company to pay when due any amount payable to an Issuing
Lender in reimbursement of any drawing honored or payment made under a Letter of
Credit; or failure by Company to pay any interest on any Loan or any fee or any
other amount due under this Agreement within five days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries to pay when due (a) any
principal of or interest on any Indebtedness (other than Indebtedness referred
to in subsection 8.1) in an individual principal amount of $2,500,000 or more or
any items of Indebtedness with an aggregate principal amount of $5,000,000 or
more or (b) any Contingent Obligation in an individual principal amount of
$2,500,000 or more or any Contingent Obligations with an aggregate principal
amount of $5,000,000 or more, in each case beyond the end of any grace period
provided therefor; or (ii) breach or default by Company or any of its
Subsidiaries with respect to any other material term of (a) any evidence of any
Indebtedness in an individual principal amount of $2,500,000 or more or any
items of Indebtedness with an aggregate principal amount of $5,000,000 or more
or any Contingent Obligation in an individual principal amount of $2,500,000 or
more or any Contingent Obligations with an aggregate principal amount of
$5,000,000 or more or (b) any loan agreement, mortgage, indenture or other
agreement relating to such Indebtedness or Contingent Obligation(s), if in any
case under this clause (ii) the effect of such breach or default is to cause, or
to permit the holder or holders of that Indebtedness or Contingent Obligation(s)
(or a trustee on behalf of such holder or holders) to cause, that Indebtedness
or Contingent Obligation(s) to become or be declared due and payable prior to
its stated maturity or the stated maturity of any underlying obligation, as the
case may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
8.3 BREACH OF CERTAIN COVENANTS.
Failure of Company to perform or comply with any term or condition
contained in subsection 2.4, 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 BREACH OF WARRANTY.
Any material representation, warranty, certification or other statement
made by Company or any of its Subsidiaries in any Loan Document or in any
statement or certificate at any time given by Company or any of its Subsidiaries
in writing pursuant hereto or thereto or in connection herewith or therewith
shall be false in any material respect on the date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within 30 days after the earlier
of (i) an officer of Company becoming aware of such default or (ii) receipt by
Company of notice from any Agent or Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Subsidiaries (other than
Immaterial Subsidiaries) in an involuntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other similar
relief shall be granted under any applicable federal or state law; or (ii) an
involuntary case shall be commenced against Company or any of its Subsidiaries
(other than Immaterial Subsidiaries) under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Company or any of its Subsidiaries
(other than Immaterial Subsidiaries), or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of Company or any
of its Subsidiaries (other than Immaterial Subsidiaries) for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Company or any of its Subsidiaries (other than Immaterial
Subsidiaries), and any such event described in this clause (ii) shall continue
for 60 days unless dismissed, bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Company or any of its Subsidiaries (other than Immaterial Subsidiaries)
shall have an order for relief entered with respect to it or commence a
voluntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; or Company or
any of its Subsidiaries (other than Immaterial Subsidiaries) shall make any
assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in clause (i) above or this clause (ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
(i) Any money judgment, writ or warrant of attachment or similar process
involving (a) in any individual case an amount in excess of $2,500,000 or (b) in
the aggregate at any time an amount in excess of $5,000,000 (in either case not
adequately covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) shall be entered or filed against Company or
any of its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any
event later than five days prior to the date of any proposed sale thereunder);
or (ii) any money judgment shall be rendered against Company or any of its
Subsidiaries or any of their respective assets, or any settlement shall require
payment by, Company or any of its Subsidiaries in any individual case in an
amount in excess of $12,000,000; (iii) any of the following shall occur twice or
both of the following shall occur: (a) a money judgment in excess of $5,000,000
in an individual case shall be rendered against Company or any of its
Subsidiaries or any of their respective assets, or (b) a settlement shall
require payment by Company or any of its Subsidiaries in excess of $5,000,000 in
an individual case; provided, however, that the amount of any money judgment or
required settlement under the preceding clauses (ii) and (iii) shall not include
for the purposes of such clauses any portion thereof which has been paid for by
insurance or which is adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage; provided further that
for purposes of calculating payments of amounts under this subsection 8.8, no
payment shall be deemed to have been made hereunder to the extent that such
payment represents an amount reflected as a reserve in the Company's Projections
for potential liabilities arising out of events occurring prior to the Effective
Date; or
8.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any of
its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events which individually or in the
aggregate results in a Material Adverse Effect; or there shall exist an Unfunded
Current Liability, individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans with respect to
which there is no Unfunded Current Liability), which would have a Material
Adverse Effect; or
8.11 CHANGE IN CONTROL.
(i) Prior to the consummation of any initial public offering of Company
Common Stock, (a) the MDC Entities shall at any time not own, in the aggregate,
at least 51% of the combined voting power of Company voting Securities; or (b)
any Person (other than the MDC Entities), including a "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) which includes such
Person, shall purchase or otherwise acquire, directly or indirectly, beneficial
ownership of Securities of Company and, as a result of such purchase or
acquisition, any Person (together with its associates and Affiliates), shall
directly or indirectly beneficially own in the aggregate Securities representing
more than 35% of the combined voting power of Company voting Securities; or (ii)
at any time thereafter, (a) the MDC Entities together shall own, directly or
indirectly, in the aggregate, a lesser percentage of the combined voting power
of Company voting Securities than any other holder, including a "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) which includes
such holder, of such voting Securities; (b) a majority of the members of the
Board of Directors of Company shall not be Continuing Directors; or (c) any
Person (other than the MDC Entities), including a "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act) which includes such Person,
shall purchase or otherwise acquire, directly or indirectly, beneficial
ownership of Securities of Company and, as a result of such purchase or
acquisition, any Person (together with its associates and Affiliates), shall
directly or indirectly beneficially own in the aggregate Securities representing
more than 25% of the combined voting power of Company voting Securities; or
8.12 INVALIDITY OF GUARANTIES.
At any time after the execution and delivery thereof, any Guaranty of the
Obligations of Company, for any reason other than the satisfaction in full of
all Obligations, ceases to be in full force and effect or is declared to be null
and void (except with respect to the obligations thereunder of Immaterial
Subsidiaries of Company) or any Loan Party (other than Immaterial Subsidiaries
of Company) denies in writing that it has any further liability, including,
without limitation, with respect to future advances by Lenders, under any Loan
Document to which it is a party; or
8.13 FAILURE OF SECURITY.
Any Collateral Document shall, at any time, cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the satisfaction in full of the Obligations or
any other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void; or the validity or
enforceability thereof shall be contested in writing by any Loan Party; or Agent
shall not have or shall cease to have a valid security interest in any
Collateral purported to be covered thereby, perfected and with the priority
required by the relevant Collateral Document, for any reason other than the
failure of Agents or any Lender to take any action within its control, subject
only to Liens permitted under the applicable Collateral Documents; or
8.14 FAILURE TO CONSUMMATE ACQUISITIONS.
The Union Acquisition shall not be consummated in accordance with this
Agreement and the applicable Related Agreements concurrently with the making of
the Tranche C Term Loans, or the Union Merger shall not be consummated within
120 days following the Effective Date in accordance with this Agreement and the
applicable Related Agreements concurrently with the making of the Delayed-Draw
Term Loans, or the Payco Acquisition, the Accelerated Acquisition, the NSA
Acquisition, the Union Acquisition or the Union Merger shall be unwound,
reversed or otherwise rescinded in whole or in part for any reason;
8.15 DEFAULT UNDER SUBORDINATION PROVISIONS.
Company or any guarantor of Subordinated Indebtedness shall fail to comply
with the subordination provisions contained in the Subordinated Note Indenture
or any other instrument, indenture or agreement pursuant to which such
Subordinated Indebtedness is issued;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit) and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Chase Co-Administrative Agent to issue any Letter of Credit and
the right of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any other
Event of Default, Chase Co-Administrative Agent shall, upon the written request
of Requisite Lenders, by written notice to Company, declare all or any portion
of the amounts described in clauses (a) through (c) above to be, and the same
shall forthwith become, immediately due and payable, and the obligation of each
Lender to make any Loan, the obligation of Chase Co-Administrative Agent to
issue any Letter of Credit and the right of any Lender to issue any Letter of
Credit hereunder shall thereupon terminate; provided that the foregoing shall
not affect in any way the obligations of Lenders under subsection 3.3C(i) or the
obligations of Lenders to purchase participations in any unpaid Swing Line Loans
as provided in subsection 2.1A(iv).
Any amounts described in clause (b) above, when received by Chase
Co-Administrative Agent, shall be held by Chase Co-Administrative Agent pursuant
to the terms of the Collateral Account Agreement and shall be applied as therein
provided.
Notwithstanding anything contained in the second preceding paragraph, if at
any time within 60 days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Potential Events of Default (other than non-payment of the principal
of and accrued interest on the Loans, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
subsection 10.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this paragraph
are intended merely to bind Lenders to a decision which may be made at the
election of Requisite Lenders and are not intended to benefit Company and do not
grant Company the right to require Lenders to rescind or annul any acceleration
hereunder or preclude Agents or Lenders from exercising any of the rights or
remedies available to them under any of the Loan Documents, even if the
conditions set forth in this paragraph are met.
SECTION 9.
AGENTS
9.1 APPOINTMENT.
A. Each of GSCP and Chase is hereby appointed a Co-Administrative Agent
hereunder and under the other Loan Documents and each Lender hereby authorizes
each Co-Administrative Agent to act as its agent in accordance with the terms of
this Agreement and the other Loan Documents. Each of GSCP and CSI is hereby
appointed an Arranging Agent hereunder and under the other Loan Documents and
each Lender hereby authorizes each Arranging Agent to act as its agent in
accordance with the terms of this Agreement and the other Loan Documents.
SunTrust is hereby appointed Collateral Agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Collateral Agent to act as its agent
in accordance with the terms of this Agreement and the other Loan Documents.
Each Agent agrees to act upon the express conditions contained in this Agreement
and the other Loan Documents, as applicable. The provisions of this Section 9
are solely for the benefit of Agents and Lenders and Company shall have no
rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, each Agent shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for Company or any of its Subsidiaries. Upon the Effective Date, all obligations
of Arranging Agents hereunder shall terminate.
B. APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS. It is the purpose of this
Agreement and the other Loan Documents that there shall be no violation of any
law of any jurisdiction denying or restricting the right of banking corporations
or associations to transact business as agent or trustee in such jurisdiction.
It is recognized that in case of litigation under this Agreement or any of the
other Loan Documents, and in particular in case of the enforcement of any of the
Loan Documents, or in case Chase Co-Administrative Agent deems that by reason of
any present or future law of any jurisdiction Collateral Agent may not exercise
any of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that Chase Co-Administrative Agent
appoint an additional individual or institution as a separate trustee,
co-trustee, collateral agent or collateral co-agent (any such additional
individual or institution being referred to herein individually as a
"SUPPLEMENTAL COLLATERAL AGENT" and collectively as "SUPPLEMENTAL COLLATERAL
AGENTS").
In the event that Chase Co-Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to Chase
Co-Administrative Agent with respect to such Collateral shall be exercisable by
and vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Agent or such Supplemental Collateral Agent, and (ii) the provisions of
this Section 9 and of subsections 10.2 and 10.3 that refer to Collateral Agent
shall inure to the benefit of such Supplemental Collateral Agent and all
references therein to Collateral Agent shall be deemed to be references to
Collateral Agent and/or such Supplemental Collateral Agent, as the context may
require.
Should any instrument in writing from Company or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by Chase
Co-Administrative Agent for more fully and certainly vesting in and confirming
to him or it such rights, powers, privileges and duties, Company shall, or shall
cause such Loan Party to, execute, acknowledge and deliver any and all such
instruments promptly upon request by Chase Co-Administrative Agent. In case any
Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges
and duties of such Supplemental Collateral Agent, to the extent permitted by
law, shall vest in and be exercised by Collateral Agent until the appointment of
a new Supplemental Collateral Agent.
9.2 POWERS; GENERAL IMMUNITY.
A. DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent to take
such action on such Lender's behalf and to exercise such powers hereunder and
under the other Loan Documents as are specifically delegated to such Agent by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents, and
it may perform such duties by or through its agents or employees. No Agent shall
have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon any Agent any obligations in respect of
this Agreement or any of the other Loan Documents except as expressly set forth
herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible to
any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished by any Agent to Lenders or by or on behalf of Company and/or
its Subsidiaries to any Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Company or any other Person liable for the
payment of any Obligations, nor shall any Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or
as to the existence or possible existence of any Event of Default or Potential
Event of Default. Anything contained in this Agreement to the contrary
notwithstanding, neither Co-Administrative Agent shall have any liability
arising from confirmations of the amount of outstanding Loans or the Total
Utilization of Revolving Loan Commitments or the component amounts thereof.
C. EXCULPATORY PROVISIONS. Neither any Agent nor any of such Agent's
respective officers, directors, employees or agents shall be liable to Lenders
for any action taken or omitted by such Agent under or in connection with any of
the Loan Documents except to the extent caused by such Agent's gross negligence
or willful misconduct. If any Agent shall request instructions from Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, such Agent
shall be entitled to refrain from such act or taking such action unless and
until such Agent shall have received instructions from Requisite Lenders (or
such other Lenders as may be required to give such instructions under subsection
10.6). Without prejudice to the generality of the foregoing, (i) such Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender shall
have any right of action whatsoever against such Agent as a result of such Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6). Such Agent shall be entitled to refrain from exercising
any power, discretion or authority vested in it under this Agreement or any of
the other Loan Documents unless and until it has obtained the instructions of
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Each Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company and/or its Subsidiaries for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and no Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements) or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against such Agent in performing its duties hereunder or under the
other Loan Documents or otherwise in its capacity as such Agent in any way
relating to or arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
9.5 SUCCESSOR AGENTS AND SWING LINE LENDER.
A. SUCCESSOR AGENTS. Any Agent may resign at any time by giving 30 days'
prior written notice thereof to the other Agents, Lenders and Company, and any
Agent may be removed at any time with or without cause by an instrument or
concurrent instruments in writing delivered to Company and Co-Administrative
Agents and signed by Requisite Lenders. Upon any such notice of resignation or
any such removal, Requisite Lenders shall have the right, upon five Business
Days' notice to Company, to appoint a successor Agent. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, that successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Agent and the retiring or
removed Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Agent's resignation or removal
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
B. SUCCESSOR SWING LINE LENDER. Any resignation or removal of Chase
Co-Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Chase or its successor as Swing Line Lender, and any
successor Chase Co-Administrative Agent appointed pursuant to subsection 9.5A
shall, upon its acceptance of such appointment, become the successor Swing Line
Lender for all purposes hereunder. In such event (i) Company shall prepay any
outstanding Swing Line Loans made by the retiring or removed Chase
Co-Administrative Agent in its capacity as Swing Line Lender, (ii) upon such
prepayment, the retiring or removed Chase Co-Administrative Agent and Swing Line
Lender shall surrender the Swing Line Note held by it to Company for
cancellation, and (iii) Company shall issue a new Swing Line Note to the
successor Chase Co-Administrative Agent and Swing Line Lender substantially in
the form of Exhibit VI annexed hereto, in the principal amount of the Swing Line
Loan Commitment then in effect and with other appropriate insertions.
9.6 COLLATERAL DOCUMENTS.
Each Lender and Agent hereby further authorizes Collateral Agent to enter
into each Collateral Document as secured party on behalf of and for the benefit
of Agents and Lenders and agrees to be bound by the terms of each Collateral
Document; provided that Collateral Agent shall not enter into or consent to any
amendment, modification, termination or waiver of any provision contained in any
Collateral Document without the prior consent of Requisite Lenders (or, if
required pursuant to subsection 10.6, all Lenders); provided further, however,
that, without further written consent or authorization from Requisite Lenders,
Collateral Agent may execute any documents or instruments necessary to effect
the release of any asset constituting Collateral from the Lien of the applicable
Collateral Document in the event that such asset is sold or otherwise disposed
of in a transaction effected in accordance with subsection 7.7. Anything
contained in any of the Loan Documents to the contrary notwithstanding, each
Lender agrees that no Lender shall have any right individually to realize upon
any of the Collateral under any Collateral Document (including, without
limitation, through the exercise of a right of set-off against call deposits of
such Lender in which any funds on deposit in the Collateral Account may from
time to time be invested), it being understood and agreed that all rights and
remedies under the Collateral Documents may be exercised solely by Collateral
Agent for the benefit of Lenders in accordance with the terms thereof.
SECTION 10.
MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS, LETTERS OF CREDIT.
A. GENERAL. Subject to subsection 10.1B, each Lender shall have the right
at any time to (i) sell, assign, transfer or negotiate to any Eligible Assignee,
or (ii) sell participations to any Person in, all or any part of its Commitments
(together with its Letters of Credit or participations therein made or arising
pursuant to its Revolving Loan Commitment) or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall, without the consent
of Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided further, that no
such sale, assignment or transfer described in clause (i) above shall be
effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Chase Co-Administrative Agent
and recorded in the Register as provided in subsection 10.1B(ii); provided,
further that no such sale, assignment, transfer or participation of any Letter
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation; and provided further that, anything
contained herein to the contrary notwithstanding, the Swing Line Loan Commitment
and the Swing Line Loans of Swing Line Lender may not be sold, assigned or
transferred as described in clause (i) above to any Person other than a
successor Chase Co-Administrative Agent and Swing Line Lender to the extent
contemplated by subsection 9.5. Except as otherwise provided in this subsection
10.1, no Lender shall, as between Company and such Lender, be relieved of any of
its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or any granting of participations in, all or any part of its
Commitments or the Loans, the Letters of Credit or participations therein or the
other Obligations owed to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter of
Credit, or participation therein or other Obligation may (a) be assigned in
any amount to another Lender who is a Non-Defaulting Lender, or to an
Affiliate of the assigning Lender or another Lender who, in either such
case, is a Non-Defaulting Lender, with the consent of Co-Administrative
Agents (which consent shall not be unreasonably withheld) and the giving of
notice to Company; provided that, after giving effect to a proposed
assignment to another Lender, the assigning Lender shall have an aggregate
Commitment of at least $5,000,000 unless the proposed assignment
constitutes the aggregate amount of the Commitments, Loans, Letters of
Credit, and participations therein and other Obligations of the assigning
Lender, or (b) be assigned in an aggregate amount of not less than
$5,000,000 (or such lesser amount as shall constitute the aggregate amount
of the Commitments, Loans, Letters of Credit, and participations therein
and other Obligations of the assigning Lender) to any other Eligible
Assignee with the consent of Co-Administrative Agents (which consent shall
not be unreasonably withheld) and the giving of notice to Company. To the
extent of any such assignment in accordance with either clause (a) or (b)
above, the assigning Lender shall be relieved of its obligations with
respect to its Commitments, Loans, Letters of Credit, or participations
therein or other Obligations or the portion thereof so assigned. The
parties to each such assignment shall execute and deliver to Chase
Co-Administrative Agent, for its acceptance and recording in the Register,
an Assignment Agreement, together with a processing fee of $3,000 payable
by the assigning Lender and such certificates, documents or other evidence,
if any, with respect to United States federal income tax withholding
matters as the assignee under such Assignment Agreement may be required to
deliver to Chase Co-Administrative Agent pursuant to subsection
2.7B(iii)(a). Upon such execution, delivery, acceptance and recordation,
from and after the effective date specified in such Assignment Agreement,
(y) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights which
survive the termination of this Agreement under subsection 10.9B) and be
released from its obligations under this Agreement (and, in the case of an
Assignment Agreement covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall
cease to be a party hereto; provided that, anything contained in any of the
Loan Documents to the contrary notwithstanding, if such Lender is the
Issuing Lender with respect to any outstanding Letters of Credit such
Lender shall continue to have all rights and obligations of an Issuing
Lender with respect to such Letters of Credit until the cancellation or
expiration of such Letters of Credit and the reimbursement of any amounts
drawn thereunder). The Commitments hereunder shall be modified to reflect
the Commitments of such assignee and any remaining Commitments of such
assigning Lender and, if any such assignment occurs after the issuance of
the Notes hereunder, the assigning Lender shall surrender its applicable
Notes and, upon such surrender, new Notes shall be issued to the assignee
and, if applicable, to the assigning Lender, substantially in the form of
Exhibit IV-A, Exhibit IV-B, Exhibit IV-C, Exhibit V or Exhibit VI annexed
hereto, as the case may be, with appropriate insertions, to reflect the new
Commitments and/or outstanding Term Loans of the assignee and the assigning
Lender.
(ii) Acceptance by Chase Co-Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing fee referred to in subsection
10.1B(i) and any certificates, documents or other evidence with respect to
United States federal income tax withholding matters that such assignee may
be required to deliver to Chase Co-Administrative Agent pursuant to
subsection 2.7B(iii)(a), Chase Co-Administrative Agent shall, if such
Assignment Agreement has been completed and is in substantially the form of
Exhibit XIII hereto and if Co-Administrative Agents have consented to the
assignment evidenced thereby (to the extent such consent is required
pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by
executing a counterpart thereof as provided therein (which acceptance shall
evidence any required consent of Chase Co-Administrative Agent to such
assignment), (b) record the information contained therein in the Register,
and (c) give prompt notice thereof to Company. Chase Co-Administrative
Agent shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection 10.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other than an Affiliate
of the Lender granting such participation, shall not be entitled to require such
Lender to take or omit to take any action hereunder except action (i) effecting
the extension of the final maturity of the Loan allocated to such participation,
(ii) effecting a reduction of the principal amount of or affecting the rate of
interest payable on any Loan allocated to such participation, (iii) releasing
all or substantially all of the Collateral, or (iv) releasing all of the
Guarantors from their obligations under the Guaranties, and all amounts payable
by Company hereunder (including, without limitation, amounts payable to such
Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such
Lender had not sold such participation. Company and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5,
(a) any participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and
participations permitted under the foregoing provisions of this subsection 10.1,
any Lender may assign and pledge all or any portion of its Loans, the other
Obligations owed to such Lender and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning Company
and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.20.
F. LIMITATION. No assignee, participant or other transferee or any Lender's
rights shall be entitled to receive any greater payment under subsection 2.7
than such Lender would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with Company's prior written consent
or at a time when the circumstances giving rise to such greater payment did not
exist.
G. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (i) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
10.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and out
of pocket expenses of Co-Administrative Agents in connection with the
preparation of the Loan Documents; (ii) all the actual and reasonable costs of
furnishing all opinions by counsel for Company (including, without limitation,
any opinions requested by Lenders as to any legal matters arising hereunder) and
of Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to Agents (including allocated costs
of internal counsel) in connection with the negotiation, preparation, execution
and administration of the Loan Documents and the Loans and any consents,
amendments, waivers or other modifications hereto or thereto and any other
documents or matters requested by Company; (iv) all other actual and reasonable
costs and expenses incurred by Agents in connection with the negotiation,
preparation and execution of the Loan Documents and the transactions
contemplated hereby and thereby; and (v) after the occurrence of an Event of
Default, all costs and expenses, including reasonable attorneys' fees (including
allocated costs of internal counsel) and costs of settlement, incurred by Agents
and Lenders in enforcing any Obligations of or in collecting any payments due
from Company hereunder or under the other Loan Documents by reason of such Event
of Default or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
10.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 10.2, whether
or not the transactions contemplated hereby shall be consummated, Company agrees
to defend, indemnify, pay and hold harmless Agents and Lenders, and the
officers, directors, trustees, partners, employees, agents, attorneys and
affiliates of any of Agents and Lenders (collectively called the "INDEMNITEES")
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including, without limitation, securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby (including, without limitation, Lenders'
agreement to make the Loans hereunder or the use or intended use of the proceeds
of any of the Loans or the issuance of Letters of Credit hereunder or the use or
intended use of any of the Letters of Credit) (collectively called the
"INDEMNIFIED LIABILITIES"); provided that Company shall not have any obligation
to any Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent, and only to the extent, of any particular liability, obligation, loss,
damage, penalty, claim, cost, expense or disbursement that arose from the gross
negligence or willful misconduct of that Indemnitee as determined by a final
judgment of a court of competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Company shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.
10.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS.
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default each Lender is hereby authorized by Company
at any time or from time to time, without notice to Company or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender (at any office of that
Lender wherever located) to or for the credit or the account of Company against
and on account of the obligations and liabilities of Company to that Lender
under this Agreement, the Notes, the Letters of Credit and participations
therein, including, but not limited to, all claims of any nature or description
arising out of or connected with this Agreement, the Notes, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
each Agent and Lender a security interest in all deposits and accounts
maintained with such Agent or Lender as security for the Obligations.
10.5 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them shall, whether by
voluntary payment (other than a voluntary prepayment of Loans made and applied
in accordance with the terms of this Agreement), by realization upon security,
through the exercise of any right of set-off or banker's lien, by counterclaim
or cross action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to that Lender hereunder or
under the other Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to
such Lender) which is greater than the proportion received by any other Lender
in respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (i) notify Chase
Co-Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy, reorganization or insolvency proceeding of
Company or otherwise, those purchases shall be rescinded and the purchase prices
paid for such participations shall be returned to such purchasing Lender ratably
to the extent of such recovery, but without interest. Company expressly consents
to the foregoing arrangement and agrees that any holder of a participation so
purchased may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Company to that holder
with respect thereto as fully as if that holder were owed the amount of the
participation held by that holder.
10.6 AMENDMENTS AND WAIVERS.
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to any departure by Company or any
other Loan Party therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that any such amendment,
modification, termination, waiver or consent which: reduces the principal amount
of any of the Loans; reduces the percentage specified in the definition of
"Requisite Lenders" (it being understood that, with the consent of Requisite
Lenders, additional extensions of credit pursuant to this Agreement may be
included in the determination of "Requisite Lenders" on substantially the same
basis as the Tranche A Term Loan Commitments, Tranche A Term Loans, Tranche B
Term Loan Commitments, Tranche B Term Loans, Tranche C Term Loan Commitments,
Tranche C Term Loans, Revolving Loan Commitments and Revolving Loans are
included on the Effective Date); changes in any manner any provision of this
Agreement which, by its terms, expressly requires the approval or concurrence of
all Lenders; postpones the scheduled final maturity date of any of the Loans;
postpones the date or reduces the amount of any scheduled payment (but not
prepayment) of principal of any of the Loans; postpones the date on which any
interest or any fees are payable; decreases the interest rate borne by any of
the Loans (other than any waiver of any increase in the interest rate applicable
to any of the Loans pursuant to subsection 2.2E) or the amount of any fees
payable hereunder; increases the maximum duration of Interest Periods permitted
hereunder; releases all or substantially all of the Collateral; releases all of
the Guarantors from their obligations under the Guaranties; reduces the amount
or postpones the due date of any amount payable in respect of, or extends the
required expiration date of, any Letter of Credit; changes the obligations of
Lenders relating to the purchase of participations in Letters of Credit in any
manner that could be adverse to any Issuing Lender; or changes in any manner the
provisions contained in subsection 8.1 or this subsection 10.6; shall be
effective only if evidenced by a writing signed by or on behalf of all Lenders
to whom are owed Obligations being directly affected by such amendment,
modification, termination, waiver or consent. In addition, (i) any amendment,
modification, termination or waiver of any of the provisions contained in
Section 4 shall be effective only if evidenced by a writing signed by or on
behalf of Co-Administrative Agents and Requisite Lenders, (ii) no amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the Lender which is the holder of
that Note, (iii) no amendment, modification, termination or waiver of any
provision of this Agreement which disproportionately and adversely affects the
obligation of any Loan Party to make payments (including without limitation
mandatory prepayments) to the holders of the Tranche A Term Loans, the holders
of the Tranche B Term Loans, the holders of the Tranche C Loans or the holders
of the Revolving Loans and Revolving Loan Commitments, shall be effective
without the written concurrence of the holders of 51% in principal amount of the
class (i.e., Tranche A Term Loans, Tranche B Term Loans, Tranche C Loans or
Revolving Loans and Revolving Loan Commitments each being a "class" of Loans) of
Loans so disproportionately and adversely affected; (iv) no increase in the
Commitments of any Lender over the amount thereof then in effect shall be
effective without the written concurrence of that Lender, it being understood
and agreed that in no event shall waivers or modifications of conditions
precedent, covenants, Events of Default, Potential Events of Default or of a
mandatory prepayment or a reduction of any or all of the Commitments be deemed
to constitute an increase of the Commitment of any Lender and that an increase
in the available portion of any Commitment of any Lender shall not be deemed to
constitute an increase in the Commitment of such Lender, (v) no amendment,
modification, termination or waiver of any provision of subsection 2.1A(iv) or
any other provision of this Agreement relating to the Swing Line Loan Commitment
or the Swing Line Loans shall be effective without the written concurrence of
Swing Line Lender, (vi) no amendment, modification, termination or waiver of any
provision of Section 3 relating to the rights or obligations of any or all
Issuing Lenders shall be effective without the written concurrence of Chase
Co-Administrative Agent and each Lender who is an Issuing Lender with respect to
any Letter of Credit then outstanding, and (vii) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Chase Co-Administrative Agent or Co-Administrative Agent shall be
effective without the written concurrence of Chase Co-Administrative Agent or
Co-Administrative Agent, as the case may be, Chase Co-Administrative Agent may,
but shall have no obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of that Lender. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on Company in
any case shall entitle Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 10.6 shall be binding
upon each Lender at the time outstanding, each future Lender and, if signed by
Company, on Company.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 10.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Company may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and other amounts
due to be paid to such Lender with respect to all periods through such date of
termination, (ii) another financial institution satisfactory to Company and
Co-Administrative Agents (or if either Co-Administrative Agent is also a Lender
to be terminated, the successor Co-Administrative Agent and the
Co-Administrative Agent not so terminated) shall agree, as of such date, to
become a Lender for all purposes under this Agreement (whether by assignment or
amendment) and to assume all obligations of the Lender to be terminated as of
such date, and (iii) all documents and supporting materials necessary, in the
judgment of Co-Administrative Agents (or if either Co-Administrative Agent is
also a Lender to be terminated, the successor Co-Administrative Agent and the
Co-Administrative Agent not so terminated) to evidence the substitution of such
Lender shall have been received and approved by Co-Administrative Agents as of
such date.
10.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telecopy or telex, or four Business Days
after depositing it in the United States mail, registered or certified, with
postage prepaid and properly addressed; provided that notices to Chase
Co-Administrative Agent shall not be effective until received. For the purposes
hereof, the address of each party hereto shall be as set forth under such
party's name on the signature pages hereof or (i) as to Company and Chase
Co-Administrative Agent, such other address as shall be designated by such
Person in a written notice delivered to the other parties hereto and (ii) as to
each other party, such other address as shall be designated by such party in a
written notice delivered to Chase Co-Administrative Agent.
10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein shall survive
the execution and delivery of this Agreement and the making of the Loans and the
issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4, 10.4, 10.5 and 10.20 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn or paid thereunder, and the termination of this Agreement.
10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Chase Co-Administrative Agent,
Collateral Agent or any Lender in the exercise of any power, right or privilege
hereunder or under any other Loan Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement and the other
Loan Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither Chase Co-Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Chase Co-Administrative Agent, Collateral
Agent or Lenders (or to Chase Co-Administrative Agent or Collateral Agent for
the benefit of Lenders), or Chase Co-Administrative Agent, Collateral Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
10.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 HEADINGS.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
10.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Company's rights
or obligations hereunder nor any interest therein may not be assigned or
delegated by Company without the prior written consent of all Lenders.
10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE,
COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT,
COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION
10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE
COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
10.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
10.19 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Company that in any event a Lender may make disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process or by the National
Association of Insurance Commissioners or in connection with the exercise of any
remedy under the Loan Documents; provided that, unless specifically prohibited
by applicable law or court order, each Lender shall notify Company of any
request by any governmental agency or representative thereof (other than any
such request in connection with any examination of the financial condition of
such Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
in no event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.
10.20 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
It is the intention of each of the parties hereto that the Existing Credit
Agreement be amended and restated so as to preserve the perfection and priority
of all security interests securing indebtedness and obligations under the
Existing Credit Agreement and the other Loan Documents and that all indebtedness
and obligations of Company and its Subsidiaries hereunder and thereunder shall
be secured by the Collateral Documents and that this Agreement shall not
constitute a novation of the obligations and liabilities existing under the
Existing Credit Agreement or be deemed to evidence or constitute repayment of
all or any portion of any such obligations or liabilities. The parties hereto
further acknowledge and agree that this Agreement constitutes an amendment of
the Existing Credit Agreement made under the terms of subsection 10.6 thereof.
The Agreement shall become effective upon the execution of a counterpart
hereof by Company, Co-Administrative Agents, Requisite Lenders (as such term is
defined in the Existing Credit Agreement) and the New Lenders and receipt by
Company and Chase Co-Administrative Agent of written or telephonic notification
of such execution and authorization of delivery thereof; provided that, unless
and until all of the conditions set forth in subsections 4.2 and 4.4 have been
satisfied or waived in accordance with subsection 10.6 of the Existing Credit
Agreement, the Existing Credit Agreement shall remain in full force and effect
without giving effect to the amendments set forth herein, all as if this
Agreement had never been executed and delivered.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY: OUTSOURCING SOLUTIONS INC.
By: ____________________________
Name:
Title:
Notice Address:
390 South Woods Mill Road, Suite 150
Chesterfield, Missouri 63017
Attention: Daniel J. Dolan
Chief Financial Officer
Facsimile: (314) 576-1867
with a copy to:
McCown De Leeuw & Co.
31st Floor
101 East 52nd Street
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(212) 355-6945
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
<PAGE>
AGENTS AND LENDERS: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually, as a Co-Administrative Agent
and as an Arranging Agent
By: _____________________________
Authorized Signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Stephen King
Telephone: (212) 902-8123
Facsimile: (212) 357-8680
with a copy to:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Lola Small
Telephone: (212) 902-4599
Facsimile: (212) 357-4597
<PAGE>
THE CHASE MANHATTAN BANK,
individually and as a Co-Administrative Agent
By: _____________________________
Gail Weiss
Vice President
Notice Address:
270 Park Avenue, 36th Floor
New York, New York 10017
Attention: William J. Caggiano
Telephone: (212) 270-5049
Facsimile: (212) 270-1789
with a copy to:
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Sandra Miklave
Loan Servicing Group
Telephone: (212) 552-7953
Facsimile: (212) 552-5658
<PAGE>
SUNTRUST BANK, ATLANTA,
individually and as Collateral Agent
By: _____________________________
Dennis H. James, Jr.
Assistant Vice President
By: _____________________________
Name:
Title:
Notice Address:
Suntrust Bank, Atlanta
25 Park Place, 23rd Floor
Atlanta, Georgia 30303
Attention: Dennis H. James, Jr.
Telephone: (404) 588-7963
Facsimile: (404) 588-8833
With a copy to:
Suntrust Bank, Atlanta
25 Park Place, 23rd Floor
Atlanta, Georgia 30303
Attention: Devyonne Aabeel
Telephone: (404) 588-7077
Facsimile: (404) 588-8833
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: _____________________________
Name:
Title:
Notice Address:
The First National Bank of Chicago
One First National Plaza
Mail Suite 0173
Chicago, IL 60670-0173
Attention: William J. Oleferchik
Telephone: (312) 732-2947
Facsimile: (312) 732-1117
With a copy to:
The First National Bank of Chicago
One First National Plaza
Mail Suite 0364
Chicago, IL 60670-0364
Telephone: (312) 732-6503
Facsimile: (312) 732-1117
<PAGE>
BANK OF SCOTLAND
By: ______________________________
Name:
Title:
Notice Address:
Bank of Scotland
565 Fifth Avenue, 5th Floor
New York, New York 10017
Attention: John Kelly
Telephone: (212) 450-0830
Facsimile: (212) 682-5720
With a copy to:
Bank of Scotland
565 Fifth Avenue, 5th Floor
New York, New York 10017
Attention: Janet Taffe
Assistant Vice President
Telephone: (212) 450-0872
Facsimile: (212) 557-9460
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: _____________________________
Name:
Title:
Notice Address:
Merrill Lynch Asset Management
800 Scudders Mill Road - Area 2C
Plainsboro, New Jersey 08536
Attention: Anthony Clemente
Telephone: (609) 282-2092
Facsimile: (609) 282-2756
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
CREDITANSTALT - BANKVEREIN
By: _____________________________
Robert M. Biringer
Executive Vice President
By: _____________________________
Carl G. Drake
Senior Associate
Notice Address:
Creditanstalt
Two Ravina Drive, Suite 1680
Atlanta, Georgia 30346
Attention: Robert M. Biringer
Telephone: (770) 390-1850
Facsimile: (770) 390-1851
With a copy to:
Troutman Sanders
Suite 5200
600 Peachtree Street, N.W.
Atlanta, GA 30308
Attention: Hazen Dempster
Telephone: (404) 885-3000
Facsimile: (404) 885-3947
Creditanstalt
Two Greenwich Plaza
Greenwich, CT 06830
Attention: Lisa Bruno
Telephone: (203) 861-6464
Facsimile: (203) 861-6594
<PAGE>
BANKBOSTON, N.A.
By: _____________________________
Name:
Title:
Notice Address:
BankBoston, N.A.
Diversified Finance
100 Federal Street, MS 01-08-05
Boston, Massachusetts 02110
Attention: Clifford A. Gaysunas
Assistant Vice President
Telephone: (617) 434-3051
Facsimile: (617) 434-4929
With a copy to:
BankBoston, N.A.
Commercial Loan Services
100 Federal Street, MS 01-08-04
Boston, Massachusetts 02110
Attention: Joan Broderick
Administrative Officer
Telephone: (617) 434-2456
Facsimile: (617) 434-9820
<PAGE>
HELLER FINANCIAL, INC.
By: _____________________________
Name:
Title:
Notice Address:
Heller Financial
500 West Monroe Street
Chicago, Illinois 60661
Attention: Patrick Hayes
Telephone: (312) 441-7035
Facsimile: (312) 441-7357
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: _____________________________
Name:
Title:
Notice Address:
PNC Bank
345 Park Avenue, 29th Floor
New York, New York 10154
Attention: Mark Williams
Telephone: (212) 409-3724
Facsimile: (212) 409-3737
With a copy to:
PNC Bank
345 Park Avenue, 29th Floor
New York, New York 10154
Attention: Anna Di Rocco
Telephone: (212) 409-3717
Facsimile: (212) 409-3737
<PAGE>
SOUTHERN PACIFIC BANK
By: _____________________________
Name:
Title:
Notice Address:
Southern Pacific Bank
12300 Wilshire Blvd.
Los Angeles, California 90025
Attention: Chris Kelleher
Charles D. Martorano
Telephone: (310) 442-3351/3315
Facsimile: (310) 207-4067
With a copy to:
Southern Pacific Bank
12300 Wilshire Blvd.
Los Angeles, California 90025
Attention: Charles Williams
Telephone: (310) 442-3312
Facsimile: (310) 207-4067
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: _____________________________
Name:
Title:
Notice Address:
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Jeffrey Maillet
Telephone: (630) 684-6438
Facsimile: (630) 684-6740
<PAGE>
INDOSUEZ CAPITAL FUNDING II, LTD.
By: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By: _______________________
Name:
Title:
INDOSUEZ CAPITAL FUNDING III, LTD.
By: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By: ________________________
Name:
Title:
Notice Address:
Indosuez Capital
1211 Avenue of the Americas
New York, NY 10036
Attention: Francoise Berthelot
Telephone: (212) 278-2213
Facsimile: (212) 278-2254
<PAGE>
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT AND
RESEARCH, as Investment Advisor
By: _______________________
Name:
Title:
Notice Address:
Eaton Vance Management
24 Federal Street
Boston, MA 02210
Attention: Scott Page
Telephone: (617) 654-8486
Facsimile: (617) 695-9594
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By: _____________________________
Name:
Title:
Notice Address:
Pilgrim Group
Two Rennaissance Square
40 N. Central Avenue, Suite 1200
Phoenix, AZ 85004
Attention: Michael Bacevich
Telephone: (602) 417-8258
Facsimile: (602) 417-8327
<PAGE>
KZH HOLDING CORPORATION III
By: _____________________________
Name:
Title:
Notice Address:
KZH Holding Corporation III
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Virginia Conway/Joe Nerich
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
PACIFIC LIFE CBO 1998-1 LTD
By: _____________________________
Name:
Title:
Notice Address:
Pacific Mutual Insurance
700 Newport Center Drive
Newport Beach, CA 92660
Attention: Michael Long
Telephone: (714) 640-3745
Facsimile: (714) 640-3199
<PAGE>
CYPRESS TREE BOSTON PARTNERS
By: _____________________________
Name:
Title:
Notice Address:
BankBoston
100 Federal Street, Mail Stop 1-9-2
Boston, MA 02110
Attention: Patrick Morris
Telephone: (617) 434-9779
Facsimile: (617) 434-9591
<PAGE>
DELANO COMPANY
By: Pacific Investment Management Company,
as its Investment Advisor
By: _____________________________
Name:
Title:
Notice Address:
Chase Bank of Texas National Association
601 Travis Street, 8th Floor
Houston, TX 77002
Attention: Delano Company
Telephone: (713) 216-1672
Facsimile: (713) 216-8299
<PAGE>
KZH-CRESCENT CORPORATION
By: _____________________________
Name:
Title:
Notice Address:
KZH-Crescent Corporation
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
KZH-CRESCENT 2 CORPORATION
By: _____________________________
Name:
Title:
Notice Address:
KZH-Crescent 2 Corporation
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
EXECUTION
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JANUARY 26, 1998
AMONG
OUTSOURCING SOLUTIONS INC.,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
GOLDMAN SACHS CREDIT PARTNERS L.P.
AND
THE CHASE MANHATTAN BANK,
AS CO-ADMINISTRATIVE AGENTS,
GOLDMAN SACHS CREDIT PARTNERS L.P.
AND
CHASE SECURITIES INC.,
AS ARRANGING AGENTS,
AND
SUNTRUST BANK, ATLANTA,
AS COLLATERAL AGENT
<PAGE>
OUTSOURCING SOLUTIONS INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
PAGE
SECTION 1.
DEFINITIONS 3
1.1 Certain Terms..................................................... 3
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement...................................... 36
1.3 Other Definitional Provisions..................................... 36
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 36
2.1 Commitments; Loans................................................ 36
2.2 Interest on the Loans............................................. 44
2.3 Fees.............................................................. 48
2.4 Repayments, Prepayments and Reductions in Revolving
Loan Commitments; General Provisions Regarding Payments........... 49
2.5 Use of Proceeds................................................... 59
2.6 Special Provisions Governing Eurodollar Rate Loans................ 60
2.7 Increased Costs; Taxes; Capital Adequacy.......................... 63
2.8 Obligation of Lenders and Issuing Lenders to Mitigate............. 67
SECTION 3.
LETTERS OF CREDIT 68
3.1 Issuance of Letters of Credit and Lenders' Purchase
of Participations Therein......................................... 68
3.2 Letter of Credit Fees............................................. 72
3.3 Drawings and Payments and Reimbursement of Amounts Paid
Under Letters of Credit........................................... 72
3.4 Obligations Absolute.............................................. 75
3.5 Indemnification; Nature of Issuing Lender's Duties................ 76
3.6 Increased Costs and Taxes Relating to Letters of Credit........... 77
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT 78
4.1 Conditions to Existing Loans and Letters of Credit................ 78
4.2 Conditions to Tranche C Term Loans................................ 78
4.3 Conditions to Delayed-Draw Term Loans............................. 86
4.4 Conditions to All Loans........................................... 88
4.5 Conditions to Letters of Credit................................... 89
SECTION 5.
REPRESENTATIONS AND WARRANTIES 90
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries......................................... 90
5.2 Authorization of Borrowing, etc.. ................................ 91
5.3 Financial Condition; Projections.................................. 92
5.4 No Material Adverse Change; No Restricted Junior Payments......... 94
5.5 Title to Properties; Liens........................................ 94
5.6 Litigation; Adverse Facts......................................... 94
5.7 Payment of Taxes.................................................. 95
5.8 Performance of Agreements; Materially Adverse Agreements.......... 95
5.9 Governmental Regulation........................................... 95
5.10 Securities Activities............................................. 95
5.11 Employee Benefit Plans............................................ 95
5.12 Certain Fees...................................................... 96
5.13 Environmental Protection.......................................... 96
5.14 Employee Matters.................................................. 98
5.15 Solvency.......................................................... 98
5.16 Matters Relating to Collateral.................................... 98
5.17 Related Agreements................................................ 99
5.18 Disclosure........................................................ 100
5.19 Subordination of Seller Notes..................................... 101
5.20 Margin Lending Matters............................................ 101
SECTION 6.
AFFIRMATIVE COVENANTS 101
6.1 Financial Statements and Other Reports............................ 101
6.2 Corporate Existence, etc.......................................... 107
6.3 Payment of Taxes and Claims; Tax Consolidation.................... 107
6.4 Maintenance of Properties; Insurance.............................. 108
6.5 Inspection; Lender Meeting........................................ 108
6.6 Compliance with Laws, etc......................................... 108
6.7 Environmental Disclosure and Inspection........................... 109
6.8 Company's Remedial Action Regarding Hazardous Materials........... 110
6.9 Execution of Subsidiary Guaranty and Subsidiary Security
Agreements by Subsidiaries and Future Subsidiaries................ 110
6.10 Interest Rate Protection.......................................... 111
6.11 Conduct of Business of Merger Sub................................. 111
6.12 Conduct of Business of Union...................................... 112
6.13 Union Merger...................................................... 112
6.14 Further Assurances................................................ 112
SECTION 7.
NEGATIVE COVENANTS 113
7.1 Indebtedness...................................................... 113
7.2 Liens and Related Matters......................................... 114
7.3 Investments; Joint Ventures....................................... 115
7.4 Contingent Obligations............................................ 116
7.5 Restricted Junior Payments........................................ 118
7.6 Financial Covenants............................................... 118
7.7 Restriction on Fundamental Changes; Asset Sales................... 121
7.8 Sales and Lease-Backs............................................. 123
7.9 Transactions with Shareholders and Affiliates..................... 123
7.10 Disposal of Subsidiary Stock...................................... 124
7.11 Conduct of Business............................................... 124
7.12 Amendments or Waivers of Certain Related Agreements;
Amendments of Documents Relating to Subordinated
Indebtedness; Designation of "Designated Senior Debt ";
Preferred Stock................................................... 124
7.13 Fiscal Year....................................................... 125
SECTION 8.
EVENTS OF DEFAULT 125
8.1 Failure to Make Payments When Due................................. 125
8.2 Default in Other Agreements....................................... 126
8.3 Breach of Certain Covenants....................................... 126
8.4 Breach of Warranty................................................ 126
8.5 Other Defaults Under Loan Documents............................... 126
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.............. 127
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc................ 127
8.8 Judgments and Attachments......................................... 127
8.9 Dissolution....................................................... 128
8.10 Employee Benefit Plans............................................ 128
8.11 Change in Control................................................. 128
8.12 Invalidity of Guaranties. 129
8.13 Failure of Security............................................... 129
8.14 Failure to Consummate Acquisitions.129
8.15 Default Under Subordination Provisions............................ 130
SECTION 9.
AGENTS 131
9.1 Appointment....................................................... 131
9.2 Powers; General Immunity.......................................... 132
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.................................................. 134
9.4 Right to Indemnity................................................ 134
9.5 Successor Agents and Swing Line Lender............................ 134
9.6 Collateral Documents.............................................. 135
SECTION 10.
MISCELLANEOUS 136
10.1 Assignments and Participations in Loans, Letters of Credit........ 136
10.2 Expenses.......................................................... 139
10.3 Indemnity......................................................... 139
10.4 Set-Off; Security Interest in Deposit Accounts.................... 140
10.5 Ratable Sharing................................................... 141
10.6 Amendments and Waivers............................................ 141
10.7 Independence of Covenants......................................... 143
10.8 Notices........................................................... 143
10.9 Survival of Representations, Warranties and Agreements............ 144
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative............. 144
10.11 Marshalling; Payments Set Aside................................... 144
10.12 Severability...................................................... 145
10.13 Obligations Several; Independent Nature of Lenders' Rights........ 145
10.14 Headings.......................................................... 145
10.15 Applicable Law.................................................... 145
10.16 Successors and Assigns............................................ 145
10.17 Consent to Jurisdiction and Service of Process.................... 146
10.18 Waiver of Jury Trial.............................................. 146
10.19 Confidentiality................................................... 147
10.20 Counterparts; Effectiveness....................................... 147
Signature pages..............................................................S-1
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV-A FORM OF TRANCHE A TERM NOTE
IV-B FORM OF TRANCHE B TERM NOTE
IV-C FORM OF TRANCHE C TERM NOTE
V FORM OF REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF SUBSIDIARY GUARANTY
VIII FORM OF PLEDGE AGREEMENT
IX-A FORM OF SECURITY AGREEMENT
IX-B FORM OF LIMITED PARTNERSHIP SECURITY AGREEMENT
IX-C FORM OF TRADEMARK SECURITY AGREEMENT
X FORM OF COMPLIANCE CERTIFICATE
XI FORM OF OPINION OF LOAN PARTIES' COUNSEL
XII FORM OF SECOND ACKNOWLEDGEMENT AND CONSENT
XIII FORM OF ASSIGNMENT AGREEMENT
XIV FORM OF PERMITTED SELLER NOTE
XV FORM OF CERTIFICATE RE NON-BANK STATUS
XVI FORM OF COLLATERAL ACCOUNT AGREEMENT
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS, EXISTING LOANS AND PRO RATA SHARES;
LENDING OFFICES
3.1 EXISTING LETTERS OF CREDIT
4.2J CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT
5.1 SUBSIDIARIES OF COMPANY
5.13 CERTAIN ENVIRONMENTAL MATTERS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.4(iv)(a) CERTAIN EXISTING EARN OUT AGREEMENTS
7.4(iv)(b) CERTAIN EXISTING FORWARD FLOW CONTRACTS
7.6E CERTAIN FINANCIAL CALCULATIONS
7.8 CERTAIN PERMITTED SALES AND LEASE-BACKS
EXHIBIT 21
OUTSOURCING SOLUTIONS INC AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
CFC Services Corp. Delaware
A.M. Miller & Associates, Inc. Minnesota
The Continental Alliance, Inc. Washington
(d/b/a Continental Credit Services, Inc.)
Alaska Financial Services, Inc. Alaska
Southwest Credit Services, Inc. Arizona
Account Portfolios, Inc. Delaware
Account Portfolios G.P., Inc. Delaware
Account Portfolios, L.P. Georgia
Perimeter Credit, L.P. Georgia
Gulf State Credit, L.P. Georgia
Payco American Corporation Wisconsin
Payco-General American Credits, Inc. Delaware
National Account Systems, Inc. Delaware
University Accounting Service, Inc. Wisconsin
Asset Recovery & Management Corp. Wisconsin
Indiana Mutual Credit Association, Inc. Indiana
Furst and Furst, Inc. Wisconsin
Jennifer Loomis & Associates, Inc. Arizona
FM Services Corporation Arizona
Qualink, Inc. Wisconsin
Professional Recoveries Inc. Wisconsin
Payco American International Corp. Wisconsin
Reliance National Insurance Co. Ltd. Bermuda
Federal Collection Bureau, S.A. DE C.V. Mexico
Pay Tech, Inc. Wisconsin
North Shore Agency Inc. New York
Accelerated Bureau of Collections Inc. Colorado
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001027574
<NAME> Outsourcing Solutions Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029300
<NAME> CFC Services Corp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029301
<NAME> A M Miller & Associates Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029303
<NAME> Continental Alliance Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029305
<NAME> Alaska Financial Services Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029306
<NAME> Southwest Credit Services Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029307
<NAME> Account Portfolios Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029715
<NAME> Account Portfolios G.P. Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029308
<NAME> Account Portfolios LP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000076741
<NAME> Payco American Corp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029315
<NAME> Payco General American Credits Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029317
<NAME> National Account Systems Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029318
<NAME> University Accounting Service Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029319
<NAME> Asset Recovery & Management Corp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029320
<NAME> Indiana Mutual Credit Association Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029386
<NAME> Furst & Furst Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029387
<NAME> Jennifer Loomis & Associates Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029388
<NAME> FM Services Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029389
<NAME> Qualink Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029390
<NAME> Professional Recoveries Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001029391
<NAME> Payco American International Corp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001051794
<NAME> Sherman Acquisition Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058618
<NAME> ALLIED BOND & COLLECTION AGENCY INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058619
<NAME> AMERICAN CHILD SUPPORT SERVICE BUREAU INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058620
<NAME> CAPITAL CREDIT CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058621
<NAME> HIGH PERFORMANCE SERVICES INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058622
<NAME> HIGH PERFORMANCE SERVICES OF FLORIDA INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058624
<NAME> INTERACTIVE PERFORMANCE INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058625
<NAME> INTERACTIVE PERFORMANCE OF FLORIDA INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058626
<NAME> TRANSWORLD SYSTEMS INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058627
<NAME> UCO PROPERTIES INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058628
<NAME> UNION FINANCIAL SERVICES GROUP INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058629
<NAME> AMEIRCAN RECOVERY CO INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058630
<NAME> CSN CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058631
<NAME> GENAD CONNECTOR CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058632
<NAME> UCO MBA CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058633
<NAME> UNION SPECIAL STEEL CASTING CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058634
<NAME> PERIMETER CREDIT LLP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: This schedule contains summary financial information extracted from the
Form 10-K for the Year Ended December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001058635
<NAME> GULF STATE CREDIT LLP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,979
<SECURITIES> 0
<RECEIVABLES> 27,730
<ALLOWANCES> 538
<INVENTORY> 42,915
<CURRENT-ASSETS> 96,205
<PP&E> 44,695
<DEPRECIATION> 12,132
<TOTAL-ASSETS> 381,690
<CURRENT-LIABILITIES> 77,647
<BONDS> 0
0
11,699
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,690
<SALES> 0
<TOTAL-REVENUES> 271,683
<CGS> 0
<TOTAL-COSTS> 290,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,791
<INCOME-PRETAX> (47,210)
<INCOME-TAX> 11,127
<INCOME-CONTINUING> (58,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,337)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
