SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file Number 333-16867
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Outsourcing Solutions Inc.
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(Exact name of registrant as specified in its charter)
Delaware 58-2197161
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
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(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
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None None
Securities registered pursuant to Section (g) of the Act: None
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 30, 2000, the following
shares of the Registrant's common stock were issued and outstanding:
Voting common stock 5,976,389.04
Non-voting common stock 480,321.30
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6,456,710.34
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DOCUMENTS INCORPORATED BY REFERENCE: None
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PART I
ITEM 1. BUSINESS
General
Outsourcing Solutions Inc. (the "Company" or "OSI") is one of the
largest providers of accounts receivable management services in the United
States with 1999 revenues of approximately $504.4 million. The Company believes
that it differentiates itself from its competitors by providing a full range of
accounts receivable management services on a national basis that allow its
customers to outsource the management of the entire credit cycle. The breadth of
services the Company provides across all stages of the credit cycle allows
itself to cross-sell services to existing customers as well as to expand its
customer base by providing specific services to potential customers in targeted
industries. These services include collection services, portfolio purchasing
services and outsourcing services which accounted for approximately 72%, 16% and
12% of 1999 revenues, 73%, 17% and 10% of 1998 revenues and 67%, 25% and 8% of
1997 revenues, respectively.
- Collection services involve collecting on delinquent or charged-off
consumer accounts for a fixed percentage of realized collections or a
fixed fee per account.
- Portfolio purchasing services involve acquiring portfolios of
non-performing consumer receivables from credit grantors, servicing
such portfolios and retaining all amounts collected.
- Outsourcing services include contract management of accounts
receivable, billing and teleservicing.
The Company manages the marketing and execution of services within the
four stages of the credit cycle. In the first stage of the credit cycle, OSI
provides customers with the ability to outsource services including credit
authorization, usage management and customer service. Dedicated call centers
provide "first party" services for its clients performing all operations in
their name. The second stage of the credit cycle is the management of
pre-uncollectable, or charge-off, delinquency situations. OSI provides clients
with fixed fee early-out programs based on either a letter series or calling
program for accounts that are generally less than 180 days past due. In the
third stage of the credit cycle, the Company offers traditional contingent
collection services for delinquent and charged-off receivables. In the fourth
and final stage of the credit cycle, OSI acts as a principal and purchases both
new and delinquent charged-off receivables from credit grantors.
The accounts receivable management industry is highly fragmented.
Nationwide, the Company estimates there are approximately 6,000 debt collection
service companies in the United States, with the 10 largest agencies currently
accounting for 20% of industry revenues. Competition is based largely on
recovery rates, industry experience and reputation and service fees. Large
volume credit grantors typically employ more than one accounts receivable
management company at one time, and often compare performance rates and
rebalance account placements towards higher performing servicers.
The customer base for the accounts receivable management industry is
generally concentrated by credit grantors in four end-markets: banks, health
care, utilities and telecommunications. Other significant sources of account
placements include retail, student loan and governmental agencies. The Company
believes that the ongoing consolidation in the banking, health care, utilities
and telecommunication industries will benefit them by creating larger national
customers seeking to place accounts with accounts receivable management
companies that offer national rather than local and regional coverage. The
Company's customers include a full range of local, regional and national credit
grantors. Our largest customer accounted for no more than 5% of 1999 revenues.
Outsourcing Solutions Inc., a Delaware corporation, was formed in 1995
to acquire Account Portfolios L.P., one of the largest purchasers and servicers
of non-performing accounts receivables portfolios. Since its formation, the
Company has completed six additional acquisitions and has established itself as
a leading industry consolidator. The Company has experienced significant growth
in their business through internal growth and acquisitions, with its revenues
increasing from $29.6 million in 1995 to $504.4 million in 1999.
Industry
The accounts receivable management industry has experienced significant
growth over the past 15 years. The rapid growth of outstanding consumer credit
and the corresponding increase in delinquencies has resulted in credit grantors
increasingly looking to third party service providers in managing the accounts
receivable process. The contingent fee collection industry, the Company's
largest business service, is estimated to be a $6.5 billion market growing at
approximately 8% to 10% per annum. The Company's other business services such as
portfolio purchasing and outsourcing services are estimated, in the aggregate,
to be an approximately $3.0 billion market. The Company believes the following
are the key trends in the accounts receivable management industry:
- Increase in Consumer Debt and Delinquencies. Consumer debt, a leading
indicator of current and future business for accounts receivable
management companies, has increased dramatically in recent years.
Between 1990 and 1998, total consumer debt increased 67% from $3.6
trillion to $6.0 trillion. Furthermore, charged-off credit card debt
as a percentage of total outstanding consumer debt increased from 3%
in 1994 to 5.6% in 1998.
- Industry Consolidation. The American Collectors Association estimates
that in 1995 there were approximately 6,000 contingent fee companies
in the United States participating in an industry that generated over
$6.5 billion in contingent fee collection revenue in 1998. The
industry has undergone significant consolidation, with the top ten
contingent fee companies increasing their industry share to over 20%
in 1998. With over 6,000 debt collection companies in the United
States and given the financial and competitive constraints facing
these smaller companies and the limited number of liquidity options
for the owners of such businesses, the Company believes that the
industry will continue to experience consolidation. Well-capitalized
companies that offer national capabilities with a "full service"
approach to accounts receivable management are increasingly displacing
local and regional competitors.
- Customer Consolidation. The largest credit granting industries,
including banking, utilities, telecommunications and health care
account for 80% of accounts placed for collection and are experiencing
rapid consolidation. This consolidation 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. As a result, many regional customers are becoming national in
scope and are shifting account placements to accounts receivable
management companies that have the ability to service a large volume
of placements on a national basis. The Company established
relationships with many of the target industries' largest
consolidators, thereby improving its ability to capitalize on this
consolidation trend.
- Growth in Portfolio Sales. As one of the leading providers of
portfolio purchasing services, we have participated in the rapid and
consistent industry-wide increase in the amount of non-performing
consumer receivables sold by credit grantors. Portfolio sales offer
the credit grantor many benefits, including increased predictability
of cash flow reduction in monitoring and administrative expenses and
reallocation of assets from non-core business functions to core
business functions. It is estimated that $10.1 billion of charged-off
credit card debt was acquired by portfolio purchasers in 1996 and more
than $22.0 billion in 1999.
- Accelerated Trend toward Outsourcing. In an effort to focus on core
business activities and to take advantage of economies of scale,
better performance and the lower cost structure offered by collection
companies, many credit grantors have chosen to outsource some or all
aspects of the accounts receivable management process. Instead of
waiting until receivables are 180 days past due (or later) to turn
over for credit collection, credit grantors are now involving
collection companies much earlier in the process. Increasingly, credit
grantors are looking to accounts receivable management providers for
assistance with billing, customer service and complete call center
outsourcing.
- Technological Sophistication. Leading companies in the industry are
increasingly using technology to improve their collection efforts.
These initiatives include investments in proprietary databases and
computerized calling and debtor location techniques.
Competitive Advantages
The Company believes that its strong market position, national presence
and breadth of services distinguishes itself as a leading provider of accounts
receivable management services in the United States. OSI believes its
competitive advantages include:
- Benefits of Scale. The benefits of scale in the accounts receivable
industry are significant on both revenues and cost. Scale makes it
possible for the Company to compete for larger blocks of revenue,
deliver more services over a wider geographic base, leverage its fixed
costs over a broader customer base and access capital at attractive
rates. As customers consolidate geographically and seek to reduce
suppliers, a national presence also provides an important competitive
advantage.
- "One-stop-shopping" for Receivables Management Services. OSI provides
a full array of receivables management services including front-end
credit service, pre charge-off delinquency management, contingent
collection services and portfolio purchasing. This allows the Company
to manage the entire credit cycle for its customers for all sizes of
debt and across multiple industries. The Company is one of the few
industry participants to provide this breadth of services on a
national basis.
- Broad Customer Base. OSI provides services to some of the largest and
fastest growing credit grantors in a wide range of industries. OSI's
broad customer base diversifies its revenue stream and provides the
Company with significant opportunities to cross-sell services. The
Company also has long-standing relationships with many of its
customers which provides a strong base of recurring revenues.
- Technology. The Company has made, and will continue to make,
significant investmentsin technology and know-how to enhance its
competitive advantage. The Company currently has over $53 million
invested in computer hardware and software. OSI believes that its
proprietary software, including debtor-scoring models, computerized
calling and debtor databases, provides them with a competitive
advantage in pricing portfolios, providing outsourcing services and
collecting delinquent accounts. The Company's systems interface with
those of its customers to receive new account placements daily and
provide frequent updates to customers on the status of collections.
OSI has become increasingly integrated with its customers' systems
resulting in high switching costs for its customers.
- Customer Service. OSI's broad range of services and focused customer
approach enables the Company to actively support and customize
services to its customers on a cost-effective basis. This service
philosophy has provided the foundation for the Company's reputation
and when combined with its industry experience is critical in the
clients' selection process.
Growth Strategies
The Company's strategy focuses on expanding its business and enhancing
profitability through the following initiatives:
- Cross Selling Services to Existing Customers. OSI offers its customers
a wide array of services including traditional fee services, portfolio
purchasing services, pre-charge-off programs, outsourcing of accounts
receivable management functions and teleservicing. This range of
services allows OSI to cross-sell offerings within its existing
customer base and to potential customers in specifically targeted
industries.
- Expansion of Customer Base.
- Existing Target End-Markets. Increasingly, credit grantors in the
public and private sectors who have typically maintained accounts
receivable departments within their organizations are turning to
outside accounts receivable management companies. In addition,
consolidation in the banking, retail, utilities, student loan,
health care and telecommunications industries has created
national customers who are outsourcing a portion or all of their
accounts receivable management service needs to national
providers. As OSI enhances its expertise and reputation with
customers in a target end-markets the Company markets that
expertise to other credit grantors in that end-market. The
Company's relative size, our ability to provide services in all
50 states and experience in successfully managing a high volume
of placements on a national basis allows it to benefit from the
consolidation of these key industries.
- New Target Industries. OSI intends to capitalize on its expertise
and reputation to penetrate new end-markets. For example, the
Company will continue to focus on increasing its business
activities with governmental agencies at the federal, state and
local levels, which have begun to outsource tax, child support
collection and student loan accounts receivable functions to
private companies. In addition, the Company will focus on the
commercial market segment (collection of delinquent accounts owed
by businesses to other businesses) and healthcare segment of the
industry. Traditionally, the commercial market has been
underpenetrated by collection agencies given the need for
tailored collection methods which differ from those used in the
consumer market, while significant changes and cost reductions in
the healthcare market require specialized skills in the
collection of past due accounts.
- Disciplined Acquisitions. The Company has built its position as an
industry leader through strategic acquisitions of leading accounts
receivable service providers. By successfully integrating these
businesses, its management has demonstrated an ability to evaluate,
execute and integrate acquisitions. With over 6,000 contingent fee
accounts receivable collection companies in the United States, OSI
plans to pursue additional acquisitions that complement its existing
services or expand its customer base and is continually reviewing
acquisition opportunities.
- Cost Reductions. The Company's management has adopted an aggressive
approach to cost management. The Company will continue to focus on
reducing its overall costs and improving operational efficiencies.
Acquisition and Integration History
In September 1995, the Company was formed and acquired Atlanta-based
Account Portfolios, one of the largest purchasers and servicers of
non-performing accounts receivable portfolios.
In January 1996, OSI acquired Continental Credit Services, Inc.
("Continental") and A.M. Miller Associates, two industry leaders in providing
contingent fee services. Continental, which was headquartered in Seattle and
operated in eight western states, provided contingent fee services to a wide
range of end markets with particular emphasis on public utilities and regional
telecommunications. A. M. Miller, based in Minneapolis, provided contingent fee
services to the student loan and bank credit card end markets.
In November 1996, OSI acquired Payco American Corporation with corporate
offices in Brookfield, Wisconsin. Originally founded as a contingent fee service
company, Payco diversified into other outsourcing services such as student loan
billing, health care accounts receivable billing and management, and contract
management of accounts receivable and teleservicing.
In October 1997, OSI acquired the assets of North Shore Agency, Inc., a
fee service company headquartered in Westbury, New York. North Shore specialized
in "letter series" collection services for direct marketers targeted at
collecting small balance debts. The majority of North Shore's revenues were
generated from traditional contingent collections utilizing letters with the
remaining revenues derived from fixed fee letter services.
In November 1997, OSI acquired the assets of Accelerated Bureau of
Collections, Inc. Accelerated Bureau of Collections is a Denver-based national
fee service company. It specialized in credit card collection and derived
approximately 25% of its revenues from pre-charge-off programs with the
remaining 75% of revenues derived from standard contingent fee collections.
In March 1998, the Company completed the acquisition of The Union
Corporation ("Union"). Union was originally a conglomerate involved in
businesses ranging from electronic and industrial components to financial
services. Union was a leading provider of a range of outsourcing services to
both large and small clients. Union provided contingent and fixed fee collection
services and other related outsourcing services. Union provided fee services
through the following wholly-owned subsidiaries: Allied Bond & Collection
Agency, Inc., Capital Credit Corporation, and Transworld Systems, Inc. Allied,
headquartered in Trevose, Pennsylvania, provided contingent and fixed fee
collection services for large clients across a broad spectrum of industries.
Capital Credit, headquartered in Jacksonville, Florida also provided 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 one of the
largest prepaid, fixed fee provider of delinquent account management services in
the United States. Transworld's clients are primarily small companies with low
balance delinquent accounts. Union provided related outsourcing services through
its Interactive Performance, Inc. and High Performance Services, Inc.
subsidiaries. Interactive Performance headquartered in North Charleston, South
Carolina, provided a range of credit and receivables management outsourcing
services primarily in the form of teleservicing. Interactive Performance
services included inbound and outbound calling programs for credit
authorization, customer service, usage management and receivable management.
High Performance Services, headquartered in Jacksonville, Florida, provided
service similar to Interactive Performance for clients in the financial services
industry.
In 1999, as part of a strategy to increase the efficiency of its
operations by aligning the Company along business services and establishing call
centers of excellence by industry specialization and in order to market its
services under one OSI brand, the Company reorganized many of its acquired
subsidiaries. Account Portfolios changed its name to OSI Portfolio Services,
Inc. Payco American Corporation's largest debt collection subsidiary changed its
name to OSI Collection Services, Inc. and Continental, A.M. Miller, Accelerated
Bureau of Collections, Allied Bond & Collection Agency and Capital Credit merged
into OSI Collection Services. Interactive Performance changed its name to OSI
Outsourcing Services, Inc. and the Interactive Performance and High Performance
Services subsidiaries merged into OSI Outsourcing Services. The Company now
provides specialized services for the following industries: healthcare,
government, education, telecommunications/utilities, commercial, financial
services and bank card.
Recapitalization
On December 10, 1999, pursuant to a Stock Subscription and Redemption
Agreement, dated as of October 8, 1999, as amended (the "Recapitalization
Agreement"), by and among Madison Dearborn Capital Partners III, L.P. (together
with its affiliates, "MDP") the Company, and certain of the Company's
stockholders, optionholders and warrantholders: (i) the Company sold
5,323,561.08 shares of its common stock, par value $.01 per share, to certain
purchasers for an aggregate purchase price of $199.5 million; (ii) the Company
sold 100,000 shares of its Senior Mandatorily Redeemable Preferred Stock to
certain purchasers for an aggregate purchase price of $100 million; (iii) the
Company redeemed 4,792,307.20 shares of the Company's common stock (including
voting common stock, par value $.01 per share, Class A Convertible Nonvoting
Common Stock, par value $.01 per share, Class B Convertible Nonvoting Common
Stock, par value $.01 per share, Class C Convertible Nonvoting Common Stock, par
value $.01 per share and 1,114,319.33 shares of its preferred stock, no par
value) for an aggregate of $221.35 million (such transactions collectively
referred to herein as the "Recapitalization"). MDP now owns approximately 70.3%
of the outstanding common stock (75.9% of the outstanding voting common stock)
of the Company. Prior to the Recapitalization, the Company was controlled by
McCown DeLeeuw & Co., Inc., a private equity investment firm.
In connection with the Recapitalization, all members of the Company's
Board of Directors other than Timothy Beffa resigned and Paul Wood and Tim Hurd
were elected to serve as directors. In addition, the stockholders and
optionholders of the Company entered into a stockholders agreement (the
"Stockholders Agreement"). The Stockholders Agreement provides for the election
of individuals to the Board of Directors of the Company and includes
restrictions on the transfer of capital stock, and the provision of
registration, preemptive, tag along and drag along rights granted to the parties
thereto.
In conjunction with the Recapitalization, the Company also entered into
a Credit Agreement among the Company, DLJ Capital Funding, Inc., as Syndication
Agent, Harris Trust & Savings Bank, as Documentation Agent, Fleet National Bank,
N.A., as Administrative Agent and other Lenders who are parties thereto (the
"Credit Agreement"). The Credit Agreement provides for: (i) a $150 million Term
A Loan Facility; (ii) a $250 million Term B Loan Facility; and (iii) a $75
million Revolving Loan Facility. Borrowings under the Credit Agreement were used
to refinance the Company's existing credit agreement and will be used for other
working capital and general corporate purposes.
Services and Operations
The Company is one of the largest providers of accounts receivable
management services in the United States. Through its subsidiaries, the Company
offers customers collection services, portfolio purchasing services and related
outsourcing services.
Collection Services
The Company is one of the largest providers of collection services in
the United States. The Company offers a full range of contingent fee services,
including pre-charge-off programs and letter series, to most consumer credit
end-markets. The Company utilizes sophisticated management information systems
and vast experience with locating, contacting and effecting payment from
delinquent account holders in providing its core contingent fee services. With
52 call centers in 26 states and approximately 5,500 account representatives,
the Company has the ability to service a large volume of accounts with national
coverage. In addition to traditional contingent fee services involving the
placement of accounts over 120 days delinquent, creditors have begun to demand
services in which accounts are outsourced earlier in the collection cycle. The
Company has responded to this trend by developing "early-out" programs, whereby
the Company receives placed accounts that are less than 120 days past due and
earn a fixed fee per placed account rather than a percentage of realized
collections. These programs require a greater degree of technological
integration between OSI and its 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.
Contingent fee services are the traditional services provided in the
accounts receivable management industry. Credit grantors typically place
non-performing accounts after they have been deemed non-collectible, usually
when 90 to 120 days past due, agreeing to pay the servicer a commission level
calculated on the amount of collections actually made. At this point, the
receivables are usually still valued on the customer's balance sheet, albeit in
a form at least partially reserved against for possible noncollection. Customers
typically use multiple agencies on any given placement category, enabling them
to benchmark each agency's performance against the other. Placement is usually
for a fixed time frame, typically a year, at the end of which the agency returns
the uncollected receivables to the customer, which may then place them with an
alternative agency.
The commission rate for contingent fee services 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 commission rate. Creditors typically assign their charged-off
receivables to contingent fee servicers for a 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 obtain repayment and, therefore, receive a higher commission.
Tertiary placements, accounts usually over 360 days past due, generally 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.
Once the account has been placed with OSI, the fee service process
consists of (i) locating and contacting the debtor through mail, telephone, or
both, and (ii) persuading the debtor to settle his or her outstanding balance.
Work standards, or the method and order in which accounts are worked by OSI, are
specified by the customer, and contractually bind OSI. Some accounts may have
different work standards than others based on criteria such as account age or
balance. In addition, OSI must comply with the federal Fair Debt Collection
Practices Act and comparable state statutes, which restrict the methods it uses
to collect consumer debt.
The Company estimates the collectability of each placement using
sophisticated statistical scoring systems that are applied to each account. The
objective is to maximize revenues and to minimize expenses. For example, instead
of sending letters to the entire account base, a targeted telemarketing campaign
may be used to directly contact selected account groups, thus saving the costs
associated with an unnecessary broad-based mail campaign.
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:
- contract management, whereby the Company performs a range of accounts
receivable management services at the customer's or the Company's
location,
- student loan billing, whereby the Company provides billing, due
diligence and customer services,
- 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
- teleservicing whereby the Company offers inbound and outbound calling
programs to perform sales, customer retention programs, market
research and customer service.
In each client relationship, the cornerstone of the outsourcing strategy
is to customize services to its customers on terms that will lead to substantial
and increased growth rates in revenues and profit margins for the client as well
as more stabilized cash flows. Customer service and billing inquiry activities
are ideal candidates for outsourcing relationships for a number of reasons,
including: (i) the need for technological investments in automated call
management systems, (ii) activities that are labor intensive, and (iii) activity
volumes that are subject to fluctuations which make it difficult to maintain
stable employment levels and high utilization of the required equipment. By
offering outsourcing services to a variety of clients, the Company will be able
to leverage its productive resources to greater efficiency levels. In addition,
the Company will continue to develop its expertise in outsourcing service
delivery, enhancing its creativity and effectiveness in managing various inbound
programs that a captive operation does not generally have. This can translate
into higher response rates and returns on investment for the client.
Portfolio Purchasing Services
While contingent fee servicing remains the most widely used method by
credit grantors in recovering non-performing accounts, portfolio purchasing has
increasingly become a popular alternative. Beginning in the 1980's, the
Resolution Trust Company and the Federal Deposit Insurance Company, under
government mandate to do so, began to sell portfolios of non-performing loans.
Spurred on by the success of these organizations in selling charged-off debt,
other creditors likewise began to sell portfolios of non-performing debt. The
Company's management estimates the total principal value of purchased portfolios
at over $20 billion per year. The largest percentage of purchased portfolios
originated from the bank card receivable and retail markets and such portfolios
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.
The Company offers portfolio purchasing services to a wide range of
financial institutions, educational institutions 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. Under forward flow agreements, the Company agrees, subject to due
diligence, to purchase charged-off receivables on a monthly basis. Credit
grantors 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. The
Company's most recent portfolio acquisitions have been primarily purchases
pursuant to OSI's health club and bank card forward flow agreements. The Company
continues to pursue acquisitions of portfolios in various industries for both
individually negotiated and forward flow purchases.
In 1999, the Company established its own portfolio purchasing valuation
unit to complement services previously provided by an independent portfolio
valuation firm.
In order to fund an increased level of portfolio purchasing, in October
1998 the Company established a financing conduit, in association with MBIA
Insurance Corporation. The conduit is expected to provide OSI with significantly
increased purchasing capacity necessary to expand its portfolio purchasing
activities at a lower aggregate cost of capital. The transaction structure
involves off-balance sheet treatment for a significant portion of prospective
portfolio purchases and the related financing, while providing a consistent
servicing revenue stream and eventual access to any portfolio residual. Although
the Company places most of its portfolio purchases in the conduit, OSI will,
when required, continue to place certain portfolio purchases on its balance
sheet. The revenue from owned portfolios is derived from gross collections and
offset by collection costs and portfolio amortizations. Conversely, the
off-balance sheet accounting treatment for portfolios sold into the conduit
creates service fee revenues which is a percentage of gross collections, offset
by collection costs but with no portfolio amortization. From time to time the
Company may receive income from the conduit representing excess collections
above the cost to purchase the portfolio, fund the acquisition and pay service
fees.
Sales and Marketing
The Company has a sales force of approximately 100 sales representatives
providing comprehensive geographic coverage of the United States on a local,
regional and national basis, and, to a much lesser extent in, Puerto Rico,
Canada and Mexico. The Company, except its Transworld Systems subsidiary,
maintains a sales force and has a marketing strategy closely tailored to the
credit-granting markets that it serves. The Company's primary sales and
marketing objective is to expand its customer base in those customer industries
in which it has a particular expertise and to target new customers in high
growth end markets. OSI 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 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 at its principal executive offices in
Chesterfield, Missouri.
The marketing force is responsible both for identifying and cultivating
potential customers, as well as retaining or increasing market share with
existing clients. The marketing force is generally organized around specific
industries and is also trained to market the overall benefits of its services,
providing a cross-selling function for all its business units. Compensation
plans for the marketing force are incentive based, with professionals receiving
a base salary and incremental compensation based on performance. For the
Company's Transworld Systems subsidiary, it has a sales force of over 800
independent contractors based in 150 offices.
Customers
The Company's customer base includes a full range of local, regional and
national credit grantors. The Company's largest customer accounted for no more
than 5% of 1999 revenues.
Employees
The Company employs approximately 7,000 people, of which 5,500 are
account representatives, 100 are sales representatives and 1,400 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 its procedures, information systems
and regulations regarding contact with debtors. The training includes technical
topics, such as use of on-line collection systems and computerized calling
techniques, 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. Nationwide, there are approximately 6,000 debt collection service
companies in the United States, with the 10 largest agencies currently
accounting for only 20% of industry revenues. Within the collection and
outsourcing services of the Company's business, large volume credit grantors
typically employ more than one accounts receivable management company.
Competition is based largely on recovery rates, industry experience and
reputation, and service fees. Within this market, our largest competitors
include Deluxe Corporation, Dun & Bradstreet, Equifax Corporation, G.C. Services
and NCO Group.
The bidding process associated with the acquisition of purchased
portfolios has become more competitive as the number of participants in this
business has increased. However, in late 1998, the Company's primary competitor
for purchased portfolios, Commercial Financial Services, declared bankruptcy.
The Company's largest remaining competitors in this market include MCM Capital
Group Inc., Creditrust Corporation and West Capital Corporation.
Environmental, Health & Safety Matters
Current operations of OSI and its subsidiaries do not involve activities
materially affecting the environment. However, the Company's subsidiary, The
Union Corporation, is party to several pending environmental proceedings
involving the United States Environmental Protection Agency, or 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
acquisition of Union, OSI, in consultation with both legal counsel and
environmental consultants, established 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 case, the Metal Bank
Cottman Avenue site, the EPA issued a record of decision on February 6, 1998.
According to the record of decision, the cost to perform the remediation
selected by the EPA for the site is estimated by the EPA to be approximately
$17.3 million. The aggregate amount reserved by Union for this site was $18.2
million, which represented Union's best estimate of the ultimate potential legal
and consulting costs for defending its legal and technical positions regarding
remediation of this site and its portion of the potential remediation costs that
will ultimately be incurred by it, based on current information. 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. OSI periodically reviews all known
environmental claims, where information is available, to provide reasonable
assurance that reserves are adequate.
Governmental Regulatory Matters
Certain of the Company's operations are subject to the Fair Debt
Collection Practices Act, or 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 (1)
is limited in communicating with persons other than the consumer about the
consumer's debt, (2) may not telephone at inconvenient hours, and (3) must
provide verification of the debt at the consumer's request. Requirements under
state collection agency statutes vary, with most requiring compliance similar to
that required under the FDCPA. In addition, most states and certain
municipalities require collection agencies to be licensed with the appropriate
authorities before collecting debts from debtors within those jurisdictions. It
is the Company's policy to comply with the provisions of the FDCPA, comparable
state statutes and applicable licensing requirements. The Company has
established policies and procedures to reduce the likelihood of violations of
the FDCPA and related state statutes. For example, all of the Company's account
representatives receive extensive training on these policies and must pass a
test on the FDCPA and the Company's agents work in an open environment which
allows managers to monitor interaction with debtors.
From time to time, certain of the Company's subsidiaries have been
subject to consent decrees with various governmental agencies, none of which
currently have a material effect on the Company's financial condition or
operations.
ITEM 2. PROPERTIES
As of December 31, 1999, the Company and its subsidiaries operated 69
facilities in the U.S., all of which are leased, except for three administrative
and collection offices operated by Transworld Systems, which are owned. 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 and access to a number of
labor markets.
ITEM 3. LEGAL PROCEEDINGS
At December 31, 1999, 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. In addition, one of the OSI subsidiaries,
Union, is party to several pending environmental proceedings discussed elsewhere
herein. While the results of litigation cannot be predicted with certainty, the
Company has provided for the estimated uninsured amounts and costs to resolve
the pending suits and management, in consultation with legal counsel, believes
that reserves established for the ultimate settlement of such suits are adequate
at December 31, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of security holders
during the fourth quarter of the year ended December 31, 1999.
In November 1999, pursuant to written consent of shareholders of the
Company's voting common stock, the shareholders approved the amendment of the
Company's Certificate of Incorporation to (i) increase the total authorized
shares of the Voting Common Stock of the Company, (ii) increase the total
authorized shares of the Class B Non-Voting Common Stock of the Company and
(iii) provide for the authorization of 200,000 shares of other preferred stock.
These consents were executed by holders of a majority of the outstanding capital
stock of the Company.
In December 1999, pursuant to written consent of the holders of the
Company's outstanding 11% Senior Subordinated Notes due November 1, 2006, the
noteholders waived: (i) the Company's obligations under Section 4.15 of the
Indenture, including its obligations to make a Change of Control Offer in
connection with the Recapitalization; and (ii) the failure by the Company to
comply with certain technical requirements relating to the qualification and
operation of its financing subsidiary, OSI Funding Corp., as an Unrestricted
Subsidiary under the Indenture and any and all consequences arising therefrom
under the Indenture.
In December 1999, pursuant to written consent of shareholders of the
Company's voting common stock, the shareholders approved bonuses, option
acceleration and price amendments, and option grants to certain officers of the
Company. These consents were executed by holders of 3,462,726.01 shares of the
Company's voting common stock, 391,740.58 shares of the Company's Class A
non-voting common stock, 400,000 shares of the Company's Class B non-voting
common stock, and 1,040,000 shares of the Company's Class C non-voting common
stock.
In December 1999, pursuant to written consent of shareholders of the
Company's voting common stock, the shareholders approved the amendment and
restatement of the Company's Certificate of Incorporation to amend the
authorized capitalization of OSI, principally to (i) provide that voting common
stock will no longer have the ability to convert into non-voting common stock,
(ii) provide that there will be only one class of non-voting common stock and
(iii) eliminate reference to any specific series of preferred stock and instead
authorize preferred stock with rights, preferences and obligations that may be
established by the Board of Directors. Stockholders holding a majority of the
issued and outstanding shares of common stock of the Company and holders of a
majority of the issued and outstanding shares of each of the (i) preferred
stock, (ii) Class A non-voting common stock, (iii) Class B non-voting common
stock and (iv) Class C non-voting common stock executed these consents.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
No public market currently exists for the Company's Voting common stock
and Nonvoting common stock.
As of March 30, 2000, there were approximately 30 holders of record of
the Voting common stock and Nonvoting common stock.
The Company has not declared any cash dividends on any of 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 Credit Agreement dated as of November 30, 1999 among
the Company, the Lenders listed therein, DLJ Capital Funding, Inc., as the
Syndication Agent, Harris Trust and Savings Bank, as the Documentation Agent,
and Fleet National Bank, as the Administrative Agent (the "Credit Agreement")
contains certain restrictions on the Company's ability to declare or pay
dividends on its capital stock. The Indenture, the Credit Agreement and the
Certificate of Designation of the powers and preferences and relative
participating, optional and other special rights of Class A 14% Senior
Mandatorily Redeembale Preferred Stock, Series A, and Class B 14% Senior
Mandatorily Redeemable Preferred Stock, Series A, and qualifications and
limitations and restrictions thereof prohibit the declaration or payment of any
Common Stock dividends or the making of any distribution by the Company or any
subsidiary (other than dividends or distributions payable in stock of the
Company) 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 the audited Consolidated
Financial Statements of OSI as of December 31, 1998 and 1999 and for the three
years ended December 31, 1999. The audited financial statements of OSI referred
to above are included elsewhere herein. The selected historical financial data
set forth below as of September 20, 1995 and for the period January 1, 1995 to
September 20, 1995 have been derived from the audited financial statements of
Account Portfolios ("API") (as predecessor) not included herein. The selected
historical financial data set forth below as of December 31, 1995, 1996, and
1997 for the period September 21, 1995 to December 31, 1995 and for the year
ended December 31, 1996 have been derived from the audited financial statements
of OSI 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 OSI
included elsewhere herein.
<TABLE>
<CAPTION>
API OSI
(as predecessor) (as successor)
--------------- ----------------------------------------------------------------
From
From September 21
January 1 to To
September 20 December 31, Year Ended December 31,
------------ ------------ ------------------------------------------------
1995 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
($ in thousands)
Income Statement Data:
<S> <C> <C> <C> <C> <C> <C>
Operating revenue ...................... $ 21,293 $ 8,311 $ 106,331 $ 271,683 $ 479,400 $ 504,425
Salaries and benefits .................. 4,471 2,079 46,997 133,364 230,114 244,157
Other operating expenses (a) ........... 7,343 8,953 80,357 156,738 221,598 224,616
Change in control bonuses, stock option
redemption and other bonuses ..... - - - - - 10,487
Nonrecurring conversion, realignment
and relocation expenses ......... - - - - - 5,063
Transaction related costs .............. - - - - - 6,827
--------- --------- --------- --------- --------- ---------
Operating income (loss) ................ 9,479 (2,721) (21,023) (18,419) 27,688 13,275
Interest expense, net .................. 495 1,361 12,131 28,791 50,627 52,265
Income (loss) before taxes ............. 8,984 (4,082) (33,154) (47,210) (22,939) (38,990)
Provision for income taxes (benefit) ... - (1,605) (11,757) 11,127 830 759
Minority interest ...................... - - - - 572 -
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item $ 8,984 $ (2,477) $ (21,397) $ (58,337) $ (24,341) $ (39,749)
Extraordinary loss ..................... - - - - - 4,208
--------- --------- --------- --------- --------- ---------
Net income (loss) ...................... $ 8,984 $ (2,477) $ (21,397) $ (58,337) $ (24,341) $ (43,957)
========= ========= ========= ========= ========= =========
Balance Sheet Data (at end of period):
Total assets ........................... 11,272 85,652 355,207 381,690 618,491 624,712
Total debt ............................. - 36,462 247,616 324,966 528,148 518,307
Mandatorily redeemable preferred stock . - - - - - 85,716
Partners' capital/Stockholders equity
(deficit) .......................... 10,559 42,448 51,598 (5,478) (30,032) (93,948)
Other Financial Data:
Amortization of purchased portfolios ... $ 2,308 $ 5,390 $ 27,317 $52,042(c) $50,703(d) 38,722
Other depreciation and amortization .... 167 331 18,281 33,574 30,007 31,095
Cash capital expenditures .............. 574 97 2,606 9,489 13,480 18,437
On-balance sheet portfolio purchases ... 5,502 903 10,373(e) 46,494 43,186 23,176
Cash flows from:
Operating activities and
portfolio purchasing ......... 385 1,999 (2,978) (13,669) 12,066 (3,652)
Investing activities ............... 6,761 (30,104) (186,790) (73,005) (184,619) (21,549)
Financing activities ............... (20,587) 29,574 202,796 75,394 178,150 22,446
EBITDA (b) ............................. 11,954 3,000 24,575 67,197 108,398 83,092
Adjusted EBITDA (b) .................... 11,954 3,000 25,775 67,197 108,398 105,469
- ------------------------------
</TABLE>
(a) Other operating expenses include telephone, postage, supplies, occupancy
costs, data processing costs, depreciation, amortization and miscellaneous
operating expenses.
(b) EBITDA is defined as income from continuing operations before interest,
taxes, depreciation and amortization. Adjusted EBITDA reflects EBITDA as
defined above adjusted for 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 and the change in control
bonuses, stock option redemption and other bonuses; non-recurring
conversion, realignment and relocation expenses; and transaction related
expenses of $10,487, $5,063 and $6,827, respectively, in the year ended
December 31, 1999. 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.
(c) 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 of additional amortization.
(d) In the fourth quarter of 1998, the Company wrote down its investment in a
limited liability corporation (the "LLC") by $3,000 resulting from an
analysis of the carrying value of the purchased portfolios owned by the LLC.
This amount includes the $3,000.
(e) 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 ("MLQ Interests") for aggregate consideration of
$14,772. This amount excludes the $14,772.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues for the year ended December 31, 1999 were $504.4 million
compared to $479.4 million for the year ended December 31, 1998 - an increase of
5.2%. The revenue increase of $25.0 million was due primarily to increased
collection and outsourcing revenues of $19.7 million and $7.3 million from the
full year effect of the acquisition of Union in 1998. Revenues from collection
services were $362.9 million for the year ended December 31, 1999 compared to
$350.1 million for 1998. The increase in collection services revenue was due to
a 2.1% increase in existing business and $5.7 million from the Union
acquisition. The outsourcing services revenue of $61.1 million compared
favorably to $46.9 million for 1998 due to increased revenue from new and
existing business of 26.7% and $1.6 million from the Union acquisition. Revenues
from purchased portfolio services decreased 2.4% to $80.4 million for the year
ended December 31, 1999 from $82.4 million in 1998. The decreased revenue was
attributable to lower revenues from on-balance sheet portfolios and lower
strategic sales of portfolios offset by higher servicing fee revenues for the
off-balance sheet collections of portfolios which increased due to the formation
of the Company's special purpose finance company ("FINCO"). Prior to forming
FINCO, the Company would record as revenue the total collections on purchased
portfolios. Currently, for all purchased portfolios which are sold to and
financed by FINCO, the Company records as revenue a servicing fee on the total
collections of FINCO purchased portfolios. During the year ended December 31,
1999, the Company recorded revenue from FINCO servicing fees of $13.5 million on
total collections of $39.3 million compared to servicing fees of $0.8 million on
total collections of $1.9 million in 1998. When compared to the year ended
December 31, 1998, the total collections of both on and off-balance sheet
purchased portfolios increased from $65.1 million to $89.0 million in 1999 - an
increase of 36.7% or $23.9 million. The increased collections resulted primarily
from an increase in the total levels of purchased portfolios primarily as a
result of the increased buying capacity made available through FINCO.
Operating expenses, inclusive of salaries and benefits, service fees and
operating and administrative expenses, were $398.9 for the year ended December
31, 1999 and $371.0 million for the comparable period in 1998 - an increase of
7.5%. The increase in these operating expenses resulted primarily from the Union
acquisition, higher collection-related expenses associated with the increased
revenues of collection and outsourcing services, increased collection expenses
associated with the increase in collections of purchased portfolios, higher
infrastructure costs and increased advertising and promotional expenses and
consulting expenses. For the year ended December 31, 1999, amortization and
depreciation charges of $69.8 million compared to $80.7 million for 1998 - a
decrease of 13.5%. The lower amortization and depreciation charges resulted
primarily from lower on-balance sheet portfolio amortization offset partially by
additional depreciation and amortization of goodwill related to the Union
acquisition and depreciation of current year capital expenditures.
During the fourth quarter of 1998 and the first quarter of 1999, the
Company evaluated its business strategy for its operations. After the Company's
formation and seven acquisitions, the Company adopted a strategy to align the
Company along business services and establish call centers of excellence by
industry specialization. As a result, nonrecurring conversion, realignment and
relocation expenses include costs resulting from the temporary duplication of
operations, closure of certain call centers along with relocation of certain
employees, hiring and training of new employees, costs resulting from the
conversion of multiple collection operating systems to a one industry operating
system, and other one-time and redundant costs, which will be eliminated as the
realignment and integration plans are completed. These costs of $5.1 million
were recognized as incurred during 1999.
In connection with the Recapitalization, the Company incurred $10.5
million of additional compensation expense. This compensation expense consisted
primarily of expense relating to payment of cash for vested stock options and
the payment of change in control bonuses to certain officers in accordance with
terms of their employment agreements.
In addition, the Company incurred $6.8 million of transaction related
costs associated with the Recapitalization. These costs consisted primarily of
professional and advisory fees, and other expenses.
As a result of the above, the Company generated operating income of
$13.3 million for the year ended December 31, 1999. Adding back the nonrecurring
charges of $5.1 million, additional compensation expense of $10.5 million and
transaction related costs of $6.8 million, operating income was $35.7 million
for 1999 compared to $27.7 million for 1998.
Earnings before interest expense, taxes, depreciation and amortization
(EBITDA) for the year ended December 31, 1999 was $83.1 million. Adding back the
nonrecurring and transaction related expenses, EBITDA was $105.5 million for
1999 compared to $108.4 million for the year ended December 31, 1998. The
decrease was primarily attributable to the higher marketing costs associated
with branding initiatives, higher infrastructure and industry focused expenses
and the decreased portfolio service revenues resulting from the manner in which
revenues from off-balance sheet collections are recognized.
Net interest expense of $52.3 million for the year ended December 31,
1999 compared unfavorably to 1998 expense of $50.6 million due primarily to the
additional indebtedness incurred to finance the Union acquisition.
The provision for income taxes of $0.8 million was provided for state
and foreign income tax obligations, which the Company cannot offset currently by
net operating losses.
Minority interest in 1998 resulted from the Union acquisition. On
January 23, 1998, the Company acquired approximately 77% of the outstanding
common stock of Union through a tender offer. The acquisition of all remaining
outstanding common stock of Union was completed on March 31, 1998. The Company
recognized minority interest in earning of Union during the period from January
23, 1998 to March 31, 1998.
Due to the factors stated above, the loss before extraordinary item for
the year ended December 31, 1999 of $39.7 million compared unfavorably to $24.3
million in 1998.
The extraordinary item of $4.2 million, which was the write-off of
previously capitalized financing costs, resulted from the extinguishment of the
existing credit facility in conjunction with the establishment of a new credit
facility in the fourth quarter of 1999.
Primarily as a result of the nonrecurring and transaction related
expenses and the extraordinary item, net loss of $44.0 million for the year
ended December 31, 1999 compared unfavorably to the net loss of $24.3 million
for 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues for the year ended December 31, 1998 were $479.4 million
compared to $271.7 million for the year ended December 31, 1997 - an increase of
76.5%. The revenue increase of $207.7 million was due primarily to increased
collection, outsourcing and portfolio services revenues of $14.4 million - an
increase of 5.3% over 1997, and $193.3 million from the acquisitions of Union,
NSA and ABC. Revenues from collection services were $350.1 million for the year
ended December 31, 1998 compared to $180.9 million for 1997. The increase in
collection services revenues was due to a 1.0% increase in existing business and
$167.9 million from the three acquisitions. In the highly competitive collection
services business, during 1998 the Company experienced pressure on their
contingent fee rates coupled with lower bankcard placements due to credit
grantors selling them, resulting in less than anticipated growth in existing
business. Revenue from purchased portfolio services increased to $82.4 million
for the year ended December 31, 1998 compared to $67.8 million in 1997 - up
21.5%. The increased revenue was attributable to both higher collection revenue
and strategic sales of portfolios. The 1998 outsourcing revenue of $46.9 million
compared favorably to 1997 revenue of $23.0 million due primarily to the Union
acquisition.
Operating Expenses for the year ended December 31, 1998 were $451.7
million compared to $290.1 million for the year ended December 31, 1997 - an
increase of 55.7%. Operating expenses, exclusive of amortization and
depreciation charges, were $371.0 million for the year ended December 31, 1998
compared to $204.5 million in 1997. The increase in operating expenses,
exclusive of amortization and depreciation charges, resulted from the expenses
related to the increased revenue and the three acquisitions. Exclusive of the
three acquisitions' operating expenses, operating expenses were up 4.4% over
1997. Of the $451.7 million in operating expenses for the year ended December
31, 1998, $80.7 million was attributable to amortization and depreciation
charges compared to $85.6 million in 1997. Of the $80.7 million for the year
ended December 31, 1998, $50.7 million (including $3.0 million of additional
amortization to reduce its investment in a limited liability corporation - See
Note 11 to the Consolidated Financial Statements) was attributable to
amortization of the purchase price of purchased portfolios (compared to $52.0
million in 1997 including $10.0 million of additional amortization to reduce a
portion of purchased portfolios to their estimated fair value). Amortization of
goodwill and other intangibles of $15.7 million was less than $24.8 million in
1997 due to no account placement amortization in 1998 ($16.7 million in 1997)
since account placement inventory was fully amortized as of December 31, 1997,
offset partially by additional amortization of goodwill related to the three
acquisitions. The increase in depreciation of $5.5 million from $8.8 million in
1997 to $14.3 million in 1998 was attributable primarily to the additional
depreciation related to the three acquisitions.
As a result of the above, the Company generated operating income of
$27.7 million for the year ended December 31, 1998 compared to an operating loss
of $18.4 million for the year ended December 31, 1997.
Earnings before interest expense, taxes, depreciation and amortization
(EBITDA) for the year ended December 31, 1998 were $108.4 million compared to
$67.2 million for 1997. The increase of $41.2 million consisted of $35.9 million
as a result of the three acquisitions and $5.3 million primarily from $14.4
million increased revenue from operations unrelated to the acquisitions.
Net interest expense for the year ended December 31, 1998 was $50.6
million compared to $28.8 million for 1997. The increase was primarily due to
additional indebtedness incurred to finance the Union, NSA and ABC acquisitions.
The provision for income taxes of $0.8 million was primarily provided
for state income taxes, as the Company will have an obligation in some states
for the year ended December 31, 1998. In the fourth quarter of 1997, the Company
recorded a net valuation allowance 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. Recording the net valuation
allowance against the net deferred tax assets resulted in the 1997 provision for
income taxes of $11.1 million.
Minority interest in 1998 resulted from the Union acquisition. On
January 23, 1998, the Company acquired approximately 77% of the outstanding a
common stock of Union through a tender offer. The acquisition of all remaining
outstanding common stock of Union was completed on March 31, 1998. The Company
recognized minority interest in earnings of Union during the period from January
23, 1998 to March 31, 1998.
Due to the factors stated above, the net loss for the year ended
December 31, 1998 was $24.3 million compared to $58.3 million for the year ended
December 31, 1997 - an improvement of $34.0 million.
Liquidity and Capital Resources
At December 31, 1999, the Company had cash and cash equivalents of $6.1
million. The Company's credit agreement provides for a $75.0 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, 1999, the Company had outstanding $13.0 million under the revolving
credit facility leaving $60.0 million, after outstanding letters of credit,
available under the revolving credit facility.
Cash and cash equivalents decreased from $8.8 million at December 31,
1998 to $6.1 million at December 31, 1999 principally due to the use of cash of
$21.5 million for investing activities primarily for capital expenditures and
$3.7 million for operating activities and portfolio purchasing offset by net
cash from financing activities of $22.5 million, which was due to the
Recapitalization of the Company on December 10, 1999. In connection with the
Recapitalization, the Company entered into a new credit facility. The proceeds
of the new credit facility were used to refinance the indebtedness outstanding
under the then existing credit facility on the date of the Recapitalization.
Further discussion of the Recapitalization is included in the Company's
financial statements included herein. The Company also held $22.5 million of
cash for clients in restricted trust accounts at December 31, 1999.
Purchased Loans and Accounts Receivable Portfolios decreased from $55.5
million at December 31, 1998 to $39.9 million at December 31, 1999 due primarily
to amortization of purchased portfolios of $38.7 million offset partially by new
on-balance sheet portfolio purchases of $23.2 million.
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, 1999 and December 31, 1998 by type of
receivable is shown below:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------ --------------------------------
Original Gross Recorded Net Original Gross Recorded Net
Principal Value Book Value Principal Value Book Value
--------------- ------------ --------------- ------------
(in millions) (in thousands) (in millions) (in thousands)
<S> <C> <C> <C> <C>
Consumer loans..................... $2,958 $16,141 $2,114 $11,615
Student loans...................... 343 1,258 328 2,782
Credit cards....................... 958 11,837 897 26,489
Health clubs....................... 1,565 9,060 1,460 12,229
Commercial......................... 129 1,651 129 2,378
-------- -------- -------- --------
$5,953 $39,947 $4,928 $55,493
======== ======== ======== ========
</TABLE>
Net deferred taxes was zero at December 31, 1998. At December 31, 1999,
net deferred taxes was zero due to a net valuation allowance of $78.8 million.
The net deferred tax balances at December 31, 1999 and December 31, 1998 relate
principally to net operating loss carryforwards and future temporary deductible
differences. The realization of this asset is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards in years through
2019. At December 31, 1999, the Company has a cumulative net valuation allowance
of $78.8 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.
Since the Company has a history of generating net operating losses and is
expected to continue to incur significant interest expense, 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 current debt structure at December 31, 1999 consists of
$413.0 million indebtedness under the bank credit facility, $100.0 million 11%
Senior Subordinated Notes (the "Notes") and other indebtedness of $5.3 million.
See Note 6 of the Consolidated Financial Statements of OSI included elsewhere
herein for a description of the 1999 credit facility.
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. Additionally, future
portfolio purchases may require significant financing or investment. 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
expenses and to meet its debt service requirements as they become due. 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.
In October of 1998, a special-purpose finance company, OSI Funding
Corp., formed by the Company, entered into a revolving warehouse financing
arrangement for up to $100.0 million of funding capacity for the purchase of
loans and accounts receivable over its five year term. In connection with the
Recapitalization, OSI Funding Corp. converted to a limited liability company and
is now OSI Funding LLC, with OSI owning approximately 78% of the financial
interest but having only approximately 29% of the voting rights. This
arrangement will provide the Company expanded portfolio purchasing capability in
a very opportunistic buying market.
Capital expenditures for the year ended December 31, 1999 were $18.4
million. The Company expects to spend approximately $18.0 million on capital
expenditures (exclusive of any expenditures in connection with acquisitions) in
2000. 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, 1999, 1998 and 1997.
Year 2000
The Company's business applications and infrastructure functioned
flawlessly upon the beginning of the New Year and experienced no significant
Year 2000 related glitches during the year's first full week of business
operations and have continued to perform since then.
Because many of the Company's client relationships are supported through
computer system interfaces, OSI worked proactively with clients to assure Year
2000 compliance between respective computer systems. It also secured assurances
from suppliers and vendors that their products would be Year 2000 ready.
Within OSI, the Company tested and confirmed that the full range of its
computer based production systems and infrastructure were Year 2000 compliant.
In addition to services typical of most companies, like phone systems, building
services, email and office equipment, OSI's compliance program focused
especially on customer interfaces and reporting, collection and financial
systems and predictive dialers.
Spending for Year 2000 modifications and updates were expensed as
incurred and did not have a material impact on the results of operations or cash
flows. The cost of the company's Year 2000 project was funded from cash flows
generated from operations. The Company estimates that its total Year 2000
expenses were approximately $1.7 million.
Forward-Looking Statements
The following statements in this document are or may constitute
forward-looking statements made in reliance upon the safe harbor of the Private
Securities Litigation Reform Act of 1995: (1) statements concerning the
successful implementation of the Company's Year 2000 initiatives, (2) statements
concerning the anticipated costs and outcome of legal proceedings and
environmental liabilities, (3) statements regarding anticipated changes in the
Company's opportunities in its industry, (4) statements regarding the Company's
ability to fund its future operating expenses and meet its debt service
requirements as they become due, (5) statements regarding the Company's expected
capital expenditures and facilities, (6) any statements preceded by, followed by
or that include the word "believes," "expects," "anticipates," "intends,"
"should," "may," or similar expressions; and (7) other statements contained or
incorporated by reference in this document regarding matters that are not
historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially include, but are not limited to: (1) the demand for the Company's
services, (2) the demand for accounts receivable management generally, (3)
general economic conditions, (4) changes in interest rates, (5) competition,
including but not limited to pricing pressures, (6) changes in governmental
regulations including, but not limited to the federal Fair Debt Collection
Practices Act and comparable state statutes, (7) legal proceedings, (8)
environmental investigations and clean up efforts, (9) expected synergies,
economies of scale and cost savings from recent acquisitions by the Company not
being fully realized or realized within the expected time frames, (10) costs of
operational difficulties related to integrating the operations of recently
acquired companies with the Company's operations being greater than expected,
(11) the Company's ability to generate cash flow or obtain financing to fund its
operations, service its indebtedness and continue its growth and expand
successfully into new markets and services, (12) the effectiveness of the
Company's Year 2000 efforts, and (13) factors discussed from time to time in the
Company's public filings.
These forward-looking statements speak only as of the date they were
made. These cautionary statements should be considered in connection with any
written or oral forward-looking statements that the Company may issue in the
future. The Company does not undertake any obligation to release publicly any
revisions to such forward-looking statements to reflect later events or
circumstances or to reflect the occurrence of unanticipated events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to the risk of fluctuating interest rates in the
normal course of business. From time to time and as required by the Company's
Credit Agreement, the Company will employ derivative financial instruments as
part of its risk management program. The Company's objective is to manage risks
and exposures of its debt and not to trade such instruments for profit or loss.
The Company uses interest rate cap, collar and swap agreements to manage
the interest rate characteristics of its outstanding debt to a more desirable
fixed or variable rate basis or to limit the Company's exposure to rising
interest rates. In connection with the Recapitalization resulting in the Company
refinancing its then outstanding indebtedness, all interest agreements were
terminated. Therefore, at December 31, 1999, the Company had no outstanding
interest rate agreements. Pursuant to the Credit Agreement, the Company is
obligated to secure interest rate protection in the nominal amount of $150
million by July 2000.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. For debt
obligations, the table presents principal and cash flows and related
weighted-average interest rates by expected maturity dates.
Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest Rate
(Dollars in millions)
<TABLE>
<CAPTION>
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Liabilities
Long-term debt, including current portion
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate - - - - - $100.0 $100.0 $97.0
Average interest rate 11.0% 11.0% 11.0% 11.0% 11.0% 11.0%
Variable rate $2.5 $10.0 $17.5 $32.5 $40.0 $310.5 $413.0 $413.0
Average interest rate (1) (1) (1) (1) (1) (1)
(1) - One month LIBOR (5.8% at December 31, 1999) plus weighted-average margin of 3.7%.
</TABLE>
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
- ------------------------- --- -----------------------------
Timothy G. Beffa 49 Director, President and
Chief Executive Officer
William B. Hewitt 61 Director
Timothy M. Hurd 30 Director and Vice President
Scott P. Marks, Jr. 54 Director
Richard L. Thomas 69 Director
Paul R. Wood 46 Director and Vice President
Michael A. DiMarco 42 Executive Vice President -
President Fee Services
Bryan K. Faliero 34 President Portfolio Services
Michael B. Staed 53 Senior Vice President and
President Outsourcing Services
Gary L. Weller 39 Executive Vice President and
Chief Financial Officer
Timothy G. Beffa (49), 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 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.
William B. Hewitt (61), Director of the Company since February 1998. Mr. Hewitt
currently serves as a consultant to the Company since January 1998. From July
1997 to January 1998, Mr. Hewitt served as President and Chief Executive Officer
of Union and prior to that he served as President and Chief Operating Officer of
Union since May 1995. Mr. Hewitt also served as Chairman and Chief Executive
Officer of Capital Credit Corporation since September 1991, Chairman and Chief
Executive Officer of Interactive Performance, Inc. since November 1995 and
Chairman and Chief Executive Officer of High Performance Services, Inc. since
May 1996. Capital Credit Corporation, Interactive Performance, Inc. and High
Performance Services, Inc. were subsidiaries of Union.
Timothy M. Hurd (30), Director and Vice President of the Company since December
1999. Mr. Hurd is a director of Madison Dearborn Partners. Prior to joining
Madison Dearborn Partners, Mr. Hurd was with Goldman Sachs & Co. He currently
serves as a director of Woods Equipment Company, Inc. and PeopleFirst.com.
Scott P. Marks, Jr. (54), Director of the Company since January 2000. Mr. Marks
is a private investor in Chicago, IL. Mr. Marks resigned from his post as Vice
Chairman and a member of the Board of Directors of First Chicago NBD Corporation
in December, 1997, a post he had held since December, 1995. Previously he was
Executive Vice President of First Chicago Corporation and managed their
credit card business for approximately 10 years. Mr. Marks serves as a director
of ADA Business Enterprises, the for-profit subsidiary of the American Dental
Association, Pascomar Inc. and Clark Polk Land LLC.
Richard L. Thomas (69), Director of the Company since January 2000. Mr. Thomas
has been retired since May 1996. Prior to retiring, Mr. Thomas served as
Chairman of First Chicago NBD Corporation from December 1995 to May 1996. Prior
to that he served as Chairman of First Chicago Corporation from December 1991 to
December 1995. He currently serves as a director of IMC Global Inc., The PMI
Group Inc., The Sabre Group, Sara Lee Corporation and Unicom Corporation.
Paul R. Wood (46), Director and Vice President of the Company since December
1999. Mr. Wood is a managing director of Madison Dearborn Partners. Prior to
co-founding Madison Dearborn Partners, Mr. Wood was with First Chicago Venture
Capital for nine years in various leadership positions. He currently serves as a
director of Hines Horticulture, Inc., Woods Equipment Company, Inc. and Eldorado
Bankshares, Inc.
Michael A. DiMarco (42), Executive Vice President and President Collection
Services of the Company since September 1998. From 1991 until September 1998,
Mr. DiMarco was with Paging Network, Inc., a wireless communications provider,
serving in various leadership positions including Senior Vice President of
Operations and Executive Vice President of Sales. Prior to that, he served in
various senior leadership positions with the City of New York, Hertz Rent-A-Car,
Inc., ARA Services, Inc. and National Car Rental, Inc.
Bryan K. Faliero (34), President Portfolio Services of the Company since October
1997. From June 1997 to September 1997, Mr. Faliero served as Vice President,
Business Analysis for the Company. Prior to joining the Company, he was an
associate with Booz Allen & Hamilton, a strategic consultancy based in Chicago,
concentrating on operations strategy and network rationalization.
Michael B. Staed (53), Senior Vice President and President Outsourcing Services
of the Company since July 1999. From May 1998 to June 1999, Mr. Staed served as
Senior Vice President Marketing, Outsourcing for the Company. Prior to joining
the Company, he served as a partner in the consulting division of Ernst & Young
LLP for four years focusing on the global telecommunications practice.
Gary L. Weller (39), Executive Vice President and Chief Financial Officer of the
Company since July 1999. From January 1998 to June 1999, Mr. Weller served as
Senior Vice President and Chief Financial Officer of Harbour Group Ltd., an
investment firm based in St. Louis. From June 1993 to December 1997, he served
as Executive Vice President and Chief Financial Officer of Greenfield
Industries, Inc.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid or accrued for by the Company on behalf of the Company's Chief Executive
Officer and the four other most highly compensated executive officers of the
Company for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------------------------------------------------
Long Term
Compensation
Name and Other Annual Awards All Other
Salary Bonus Compensation ----------- Compensation
Principal Position Year ($) ($) ($) Options (#) ($)(1)
- ------------------ ----- ------- ------ ------------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Timothy G. Beffa 1999 370,836 365,000 2,617
President and CEO 1998 350,000 405,300
1997 320,110 457,500 41,555
Michael A. DiMarco 1999 325,000 100,000 42,373(2) 50,000 1,373,017
Executive Vice 1998(3) 108,337 220,000 14,491(2)
President - President
Fee Services
Bryan K. Faliero 1999 195,206 90,000 480,337
President Portfolio 1998 159,373 83,800 4,272
Services 1997(4) 73,945 35,000 25,000 2,412
Mike B. Staed 1999 228,337 70,000 16,000 947,505
Senior Vice President 1998(5) 135,289 89,600 9,000
And President
Outsourcing Services
Gary L. Weller 1999(6) 134,512 310,000 50,000 10,459
Executive Vice
President and CFO
- ------------------------------
</TABLE>
(1) In connection with the Recapitalization, Mr. DiMarco, Mr. Faliero and Mr.
Staed received change in control payments of $1,356,875, $475,627 and
$937,500, respectively. Remaining amounts, if any, represent split dollar
life insurance and long-term disability premiums paid by the Company along
with the Company's portion of the 401(k) contribution. Upon termination of
split dollar life insurance policy, any residual cash surrender value (cash
surrender value less premiums paid) is paid to the executive officer.
(2) Payment of taxes by the Company for includable W-2 relocation expenses.
(3) 1998 compensation based on an annual salary of $325,000. Mr. DiMarco was
hired in September 1998.
(4) 1997 compensation based on an annual salary of $138,500. Mr. Faliero was
hired in June 1997.
(5) 1998 compensation based on an annual salary of $210,000. Mr. Staed was hired
in May 1998.
(6) 1999 compensation based on an annual salary of $275,000. Mr. Weller was
hired in July 1999.
The following table sets forth grants of stock options made during the
year ended December 31, 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1999
Percent of
Number of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation
Options Employees or Base for Option Term
Name Granted In Fiscal Price Expiration ---------------------------
(#) Year ($/share) Date 5% 10%
- ----------------- ----------- ------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. DiMarco 50,000 23% $40.00 June 3, 2009 $1,258,000 $3,187,500
Mike B. Staed 16,000 7% $40.00 June 3, 2009 $403,000 $1,020,000
Gary L. Weller 50,000 23% $40.00 July 16, 2009 $1,258,000 $3,187,500
</TABLE>
The following table sets forth options exercised during the year ended
December 31, 1999 and options held by the current executives at December 31,
1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1999 AND OPTION VALUES ON
DECEMBER 31, 1999
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options at
on Value Options at December 31, 1999 December 31, 1999(1)
Exercise Realized ------------------------------ -----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ---------- ------------ ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Timothy G. Beffa 102,801.87 2,567,468 70,175 0 $1,752,270 0
Michael A. DiMarco - - 50,000 0 0 0
Bryan K. Faliero 6,250 77,968 18,750 0 $233,813 0
Michael B. Staed - - 25,000 0 0 0
Gary L. Weller - - 50,000 0 0 0
</TABLE>
(1) Based on the price per share of $37.47 determined for the Recapitalization
which was completed on December 10, 1999.
The following table sets forth option repricings during the year ended
December 31, 1999. Because no public market currently exists for the Company's
common stock, the Compensation Committee of the Board of Directors must estimate
the fair market value of the stock to set the exercise price when granting stock
options. In June 1999, the Compensation Committee determined that it had
overestimated the fair market value of the Company's common stock, and had set
the exercise price for several stock option grants significantly above fair
market value. Therefore, it amended the stock option award agreements for
certain stock option grants, including a grant to one named executive officer,
so that the exercise price more closely approximated the fair market value of
the Company's common stock.
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS
Number of Market Exercise
Securities Price of Price at
Underlying Stock at Time of Length of Original
Options Time of Repricing New Option Term
Repriced or Repricing or Exercise Remaining at Date of
Amended or Amendment Amendment Price Repricing or Amendment
Name Date (#) ($)(1) ($) ($) (Years)
- ------------------ ---------- ------------- ------------- ------------ -------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Michael B. Staed June 3, 1999 9,000 37.47 65.00 40.00 9
</TABLE>
(1) Because there is no public market for the Company's common stock, market
value at the time the options were repriced in June 1999 is not readily
determinable. Price shown is the per share price determined at the time of the
Recapitalization on December 10, 1999.
Employment Agreements
OSI has entered into employment agreements with certain officers,
including each of the named executive officers. The employment agreements
provide for initial base salaries for Messrs. Beffa, DiMarco, Faliero, Staed and
Weller of $375,000, $325,000, $210,000, $250,000 and $275,000, respectively. In
addition, the agreements provide that Mr. Beffa is eligible for an annual bonus
of up to 150% of his annual base salary and Messrs. DiMarco, Faliero, Staed and
Weller are eligible for target annual bonuses of 67%, 50%, 50% and 67%,
respectively.
On December 31 of each year, the term of each employment agreement is
automatically extended for an additional year unless the Company or the officer
gives 30 days advance termination notice. If (i) the Company terminates the
officer's employment without "cause" (as defined in the employment agreement),
(ii) the Company does not agree to extend the employment agreement upon the
expiration thereof, (iii) the officer terminates his employment because the
Company reduces his responsibilities or compensation in a manner which is
tantamount to termination of the officer's employment, or (iv) within two years
following a sale of the company (as defined in the employment agreement), the
officer resigns for "good reason" (as defined in the employment agreement), the
officer would be entitled to receive an amount equal to his total cash
compensation (base salary plus bonus, excluding, however, any change of control
bonus described below) for the preceding year and continue to receive medical
and dental health benefits for one year. If the officer's employment is
terminated by the Company "for cause", the officer is not be entitled to
severance compensation.
The employment agreements for Messrs. DiMarco, Faliero and Staed provide
that upon consummation of a sale of the Company (as defined in the employment
agreement), if the officer is employed by the Company immediately prior thereto,
he will be entitled to receive a payment from the Company in the amount of 250%
of his (i) then current base salary plus (ii) target annual bonus, reduced by
any gain for all of the options to purchase capital stock of the Company or
other equity compensation awards previously granted to the officer. Pursuant to
this provision, Messrs. DiMarco, Faliero and Staed received change in control
bonuses in 1999 upon consummation of the Recapitalization. The change in control
bonuses paid in 1999 and any future bonuses paid pursuant to this provision of
the employment agreements will be paid only if such bonus is previously approved
by a vote of more than seventy-five percent (75%) of the voting power of the
Company's outstanding stock immediately before any sale of the Company.
Director Compensation
Non-employee directors of OSI who are not affiliated with a stockholder
of the Company 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. All directors receive 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, who served as the Company's Chairman of the Board prior to December
10, 1999 received options to purchase 23,044 shares of common stock of the
Company, which options vest eight years from date of grant or earlier upon the
satisfaction of certain performance targets and/or the occurrence of certain
liquidity events. Mr. Stiefler also received an annual salary of $150,000.
Effective December 10, 1999, in connection with the Recapitalization, Mr.
Stiefler resigned as Chairman of the Board. At that time, he exercised all of
his options and received cash of $575,530. In 1998, three other directors,
Messrs. Hewitt, Jones and Marshall, each received options to purchase 3,000
shares of common stock of the Company. These options time-vested over a three
year period. Effective December 10, 1999, in connection with the
Recapitalization, all of the Company's directors except Mr. Beffa resigned from
the Board of Directors. As a result, Messrs. Hewitt, Jones and Marshall each
forfeited their options to purchase 3,000 shares of common stock of the Company.
Mr. Hewitt was subsequently elected to the Board of Directors in February 2000.
Option Plan
The Company maintains the 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 (i) 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), (ii) stock appreciation rights granted in
conjunction with stock options, (iii) restricted stock, or (iv) bonuses payable
in stock, to key salaried employees of the Company, including officers,
independent contractors of the Company and non-employee directors of the
Company.
A total of 750,000 shares of common stock of the Company are reserved
for issuance under the Stock Option Plan. As of March 24, 2000, options to
purchase up to 442,925 shares of the Company's common stock are outstanding
under the Stock Option Plan, all of which are vested and exercisable.
Board of Directors' Report on Executive Compensation
The Compensation Committee recommends compensation arrangements for the
Company's executive officers and administers the Company's Stock Option Plan. In
conjunction with the Recapitalization, all members of the Compensation Committee
resigned from the Board of Directors, effective December 10, 1999. New members
of the Compensation Committee have not yet been elected by the Board. The
Company's 1999 compensation program was designed to be competitive with
companies similar in structure and business to the Company.
The Company's 1999 executive compensation program was structured to help
the Company achieve its business objectives by:
- - Setting levels of compensation designed to attract and retain superior
executives in a highly competitive environment.
- - Designing equity-related and other performance-based incentive compensation
programs to align the interests of management with the ongoing interests of
shareholders; and
- - 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. Bonuses for 1999 were determined by certain members of the Board in March
2000 and paid shortly thereafter. The amount of bonuses earned by the Company's
executive officers were determined based upon the performance of each executive
during the year and the performance of the Company against pre-established
earnings before interest, taxes, depreciation and amortization ("EBITDA") goals.
In June 1999, the Company entered into an amended and restated
employment agreement with Timothy G. Beffa to serve as President and Chief
Executive Officer of OSI. Under the employment agreement, Mr. Beffa's base
salary for 1999 was $375,000 and his bonus target potential was $562,500, 150%
of his base salary. These amounts were established by the Compensation Committee
after consideration of compensation paid to Chief Executive Officers of
comparative companies and the relationship of his compensation to that paid to
other OSI senior executives. For 1999, Mr. Beffa's bonus was determined based
upon the following two factors, which were weighted as indicated: the Company's
performance against pre-established EBITDA goals (70%), and Mr. Beffa's
attainment of pre-established objectives, based on specific strategic
initiatives to both build a suitable management infrastructure and deliver on
strategic growth initiatives (30%). Based on the Company's EBITDA performance
and Mr. Beffa's substantial obtainment of personal objectives, Mr. Beffa's bonus
for 1999 was $365,000--64.9% of his target bonus.
Board of Directors
------------------
Timothy G. Beffa
William B. Hewitt
Timothy M. Hurd
Scott P. Marks, Jr.
Richard L. Thomas
Paul R. Wood
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 30, 2000, the authorized capital stock of the Company
consists of (i) 15,000,000 shares of Voting Common Stock, par value $.01 per
share, of which 5,976,389.04 are issued and outstanding, (ii) 2,000,000 shares
of Non-Voting Common Stock, par value $.01 per share, of which 480,321.30 are
issued and outstanding, (iii) 200,000 shares of 14% Mandatorily Redeemable
Senior Preferred Stock, no par value, of which 100,000 are issued and
outstanding and (iv) 50,000 shares of Junior Preferred Stock, no par value, of
which 7,000 are issued and outstanding.
The following table sets forth the number and percentage of shares of
each class of the Company's capital stock beneficially owned as of March 30,
2000 by (i) each person known to the Company to be the beneficial owner of more
than 5% of any class of the Company's voting equity securities, (ii) each of the
Company's directors and nominees, and (iii) all directors and executive officers
of the Company as a group.
Amount and
Nature of Percent
Name and Address Beneficial of Class
Title of Class Beneficial Owner Ownership (1)
- -------------------- ---------------------------- -------------- ---------
Voting Common Stock Madison Dearborn Capital 4,536,367.84 75.9%
Partners III, L.P.(2)
Madison Dearborn Special 4,536,367.84 75.9%
Equity III, L.P. (2)
Special Advisors
Fund I, L.L.C.(2) 4,536,367.84 75.9%
Timothy M. Hurd(2) 4,536,367.84 75.9%
Paul R. Wood(2) 4,536,367.84 75.9%
Timothy G. Beffa(3) 70,175.00 1.2%
Michael A. DiMarco(3) 57,000.00 *
Bryan K. Faliero(3) 18,750.00 *
Michael B. Staed(3) 30,337.60 *
Gary L. Weller(3) 50,000.00 *
All directors and officers 4,762,630.44 76.9%
as a group
Junior Preferred Timothy G. Beffa 81.65 1.2%
Stock Bryan K. Faliero 2.48 *
All directors and officers 84.13 1.2%
as a group
* Represents less than one percent.
(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) Includes 4,433,913.11 shares owned by Madison Dearborn Capital Partners
III, L.P., 98,452.05 shares owned by Madison Dearborn Special Equity
III, L.P. and 4,002.68 shares owned by Special Advisors Fund I, L.L.C.
with each entity managed by or affiliated with Madison Dearborn
Partners, LLC. Messrs. Hurd and Wood are a director and a managing
director, respectively, of Madison Dearborn Partners, LLC. Madison
Dearborn Capital Partners III, L.P., Madison Dearborn Special Equity
III, L.P. and Special Advisors Fund I, L.L.C. have pledged their shares
of the Company's common stock as security under the Company's Credit
Agreement. In addition, under the Stockholders Agreement, dated as of
December 10, 1999, among the Company and substantially all of the
Company's stockholders, Madison Dearborn Capital Partners III, L.P., as
principal investor, may designate individuals to serve as directors of
the Company. The Stockholders Agreement also includes restrictions on
the transfer of capital stock, and provides for registration,
preemptive, tag along and drag along rights granted to the parties
thereto, including Madison Dearborn Capital Partners III, L.P. and
certain of its affiliates. The address of all the above-mentioned
entities is c/o Madison Dearborn Partners, LLC, 3 First National Plaza,
Suite 3800, Chicago, IL 60602.
(3) Includes vested options to acquire the following number of shares of the
Company's common stock: Mr. Beffa 70,175; Mr. DiMarco 50,000; Mr.Faliero
18,750; Mr. Staed 25,000 and Mr. Weller 50,000. The address of Messrs.
Beffa, DiMarco, Staed and Weller is c/o Outsourcing Solutions Inc., 390
South Woods Mill Rd., Suite 350, Chesterfield, MO 63017. Mr. Faliero's
address is c/o OSI Portfolio Services, Inc., 2425 Commerce Ave.,
Building 1, Suite 100, Duluth, GA 30096.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition Arrangements
OSI holds 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 MLQ Investors, L.P., one of the
Company's stockholders. The recorded value of the Company's investment in the
LLC was approximately $520,000 at December 31, 1999.
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"), then an affiliate. Under the Advisory Services
Agreement, the Company received consulting, financial, and managerial functions
for a $300,000 annual fee. In 1999, the Company paid MDC Management $275,000
under the Advisory Services Agreement. On December 10, 1999, in conjunction with
the Recapitalization, the Advisory Services Agreement was amended and assigned
to Madison Dearborn Partners, Inc. ("MDP"). As amended, the annual fee under the
Advisory Services Agreement is $500,000. 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 MDP authorized by a majority of the
directors other than those who are partners, principals or employees of MDP or
any of its affiliates. The Advisory Services Agreement may be amended by written
agreement of MDP 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 December 1999 upon closing of the Recapitalization, MDP received a
one-time fee of $8.0 million for financial advice provided to OSI in connection
therewith.
Consulting Agreements
On January 26, 1998, the Company entered into a one-year Consulting
Agreement with William B. Hewitt, a director of the Company. Under the original
Consulting Agreement, Mr. Hewitt provided consulting assistance with the growing
outsourcing services of the Company at 80% of normal working hours. In addition,
Mr. Hewitt received options to purchase 10,000 shares of common stock of the
Company, which options in accordance with their terms became vested and
exercisable upon consummation of the Recapitalization. On January 25, 1999, the
Consulting Agreement was extended through March 31, 1999 and at the same time
the Consulting Agreement was renewed for the period April 1, 1999 through March
31, 2000, with the consulting services reduced to a maximum of 50 days
(approximately 20% of normal working hours). For the year ended December 31,
1999, the Company paid Mr. Hewitt $427,500.
Certain Interests of Shareholders
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 acted as co-arranger and Goldman Sachs Credit Partners, L.P., an
affiliate of Goldman Sachs, acted as co-administrative agent and lender in
connection with the then existing credit facility, and in 1999 OSI paid them
approximately $706,000 in interest in connection therewith. MLQ Investors, L.P.,
an affiliate of Goldman Sachs, owns an 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 then existing
credit facility and in 1999 OSI paid them approximately $150,000 in fees and
approximately $1,526,000 in interest in connection therewith. Additionally,
Chase Equity Associates, L.P. an affiliate of Chase Securities, owns an equity
interest in the Company.
Indebtedness of Management
During 1998, the Company advanced $117,000 to Michael A. DiMarco,
Executive Vice President and President Fee Services to facilitate his relocation
to the St. Louis area from Texas. The advance was non-interest bearing and was
repaid in full in March 1999.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See index on page 41 for a listing of consolidated financial
statements filed with this report.
2. Financial Statement Schedule
See index on page 41 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 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 (incorporated
herein by reference to Exhibit 2.6 of the Company's Form 10-K for the
year ended December 31, 1997).
2.2 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 (incorporated herein by reference to Exhibit 2.7 of the
Company's Form 10-K for the year ended December 31, 1997).
2.3 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 (incorporated herein by
reference to Exhibit 2.8 of the Company's Form 10-K for the year ended
December 31, 1997).
2.4 Stock Subscription and Redemption Agreement by and among Madison
Dearborn Capital Partners III, L.P., the Company and certain
stockholders, optionholders and warrantholders of the Company, dated
as of October 8, 1999, as amended (incorporated herein by reference to
Exhibit 2 of the Company's Current Report on Form 8-K filed on
December 23, 1999).
2.5 Assignment and Stock Purchase Agreement dated as of December 10, 1999
by and among Outsourcing Solutions Inc., Madison Dearborn Capital
Partners III, L.P., and certain other parties thereto.
2.6 Purchase Agreement dated as of December 10, 1999, by and among
Outsourcing Solutions Inc. and certain other parties thereto.
2.7 Junior Preferred Stock Purchase Agreement, dated as of December 10,
1999, by and among Outsourcing Solutions Inc. and certain other
parties thereto.
2.8 Consent Solicitation Statement, dated November 9, 1999, relating to
the Company's 11% Senior Subordinated Notes due November 1, 2006.
3.1 Fourth Amended and Restated Certificate of Incorporation of the
Company, as of December 3, 1999.
3.2 By-laws of the Company (incorporated herein by reference to Exhibit
3.2 of the Company's Registration Statement on Form S-4 filed on
November 26, 1996).
4.1 Indenture dated as of November 6, 1996 by and among the Company, the
Guarantors and Wilmington Trust Company (the "Indenture")
(incorporated herein by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-4 filed on November 26, 1996).
4.2 Specimen Certificate of 11% Senior Subordinated Note due 2006
(included in Exhibit 4.1 hereto) (incorporated herein by reference to
Exhibit 4.2 of the Company's Registration Statement on Form S-4 filed
on November 26, 1996).
4.3 Specimen Certificate of 11% Series B Senior Subordinated Note due 2006
(the "New Notes") (included in Exhibit 4.1 hereto) (incorporated
herein by reference to Exhibit 4.3 of the Company's Registration
Statement on Form S-4 filed on November 26, 1996).
4.4 Form of Guarantee of securities issued pursuant to the Indenture
(included in Exhibit 4.1 hereto) (incorporated herein by reference to
Exhibit 4.4 of the Company's Registration Statement on Form S-4 filed
on November 26, 1996).
4.5 First Supplemental Indenture dated as of March 31, 1998 by and among
the Company, the Additional Guarantors and Wilmington Trust Company
(incorporated herein by reference to Exhibit 4.5 of the Company's
Form 10-K for the year ended December 31, 1998).
10.1 Stockholders Agreement dated as of December 10, 1999 by and among the
Company and various stockholders of the Company (incorporated herein
by reference to Exhibit 10 of the Company's Current Report on Form 8-K
filed on December 23, 1999).
10.2 Advisory Services Agreement dated September 21, 1995 between the
Company and Madison Dearborn Partners, Inc., as assignee from MDC
Management Company III, L.P. as amended by Assignment Agreement dated
as of December 10, 1999 by and between Madison Dearborn Partners,
Inc., the Company and MDC Management Company III, L.P.
10.3 Registration Rights Agreement dated December 10, 1999, by and among
Outsourcing Solutions Inc., Madison Dearborn Partners III, L.P. and
certain other parties thereto.
10.4 Registration Rights Agreement dated December 10, 1999, by and among
the Company and certain other parties thereto.
10.5 Amended and Restated Employment Agreement dated as of June 4, 1999
between the Company and Timothy G. Beffa.
10.6 Amended and Restated Employment Agreement dated as of June 4, 1999
between the Company and Michael A. DiMarco.
10.7 Employment Agreement dated as of June 4, 1999 between the Company and
Bryan K. Faliero.
10.8 Amended and Restated Employment Agreement dated as of June 4, 1999
between the Company and Michael B. Staed.
10.9 Employment Agreement dated July 5, 1999 between the Company and Gary
L. Weller.
10.10 Consulting Agreement dated as of February 6, 1998 between the Company
and William B. Hewitt as amended January 25, 1999 (incorporated herein
by reference to Exhibit 10.6 of the Company's Form 10-K for the year
ended December 31, 1998).
10.11 1995 Stock Option and Stock Award Plan of the Company (incorporated
herein by reference to Exhibit 10.31 of the Company's Registration
Statement on Form S-4 filed on November 26, 1996).
10.12 First Amendment to 1995 Stock Option and Stock Award Plan of the
Company (incorporated herein by reference to Exhibit 10.13 of the
Company's Form 10-K for the year ended December 31, 1997).
10.13 Form of Non-Qualified Stock Option Award Agreement [B], as amended.
10.14 Form of Non-Qualified Stock Option Award Agreement [C], as amended.
10.15 Form of Non-Qualified Stock Option Award Agreement [E].
10.16 1998 Incentive Compensation Program (incorporated herein by reference
to Exhibit 10.15 of the Company's Form 10-K for the year ended
December 31, 1998).
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 (incorporated herein by reference to Exhibit 10.17
of the Company's Form 10-K for the year ended December 31,1997).
10.18 Credit Agreement dated as of November 30, 1999 among the Company, the
Lenders listed therein, DLJ Capital Funding, Inc., as the Syndication
Agent, and Fleet National Bank, as the Administrative Agent.
21 Subsidiaries of registrant.
27 Financial Data Schedule.
(b) Reports on Form 8-K
For the three months ended December 31, 1999, the following reports on Form 8-K
were filed:
Report on Form 8-K filed October 29, 1999.
Report on Form 8-K filed December 23, 1999.
<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/Gary L. Weller
------------------------------------
Gary L. Weller
Executive Vice President and
Chief Financial Officer
DATE: March 29, 2000
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.
Signature Title Date
/s/Timothy G. Beffa President and Chief Executive March 29, 2000
- --------------------------- Officer, Director
Timothy G. Beffa
/s/William B. Hewitt Director March 29, 2000
- ---------------------------
William B. Hewitt
/s/Timothy M. Hurd Director and Vice President March 28, 2000
- ---------------------------
Timothy M. Hurd
/s/Scott P. Marks, Jr. Director March 29, 2000
- ---------------------------
Scott P. Marks, Jr.
/s/Richard L. Thomas Director March 22, 2000
- ---------------------------
Richard L. Thomas
/s/Paul R. Wood Director and Vice President March 29, 2000
- ---------------------------
Paul R. Wood
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULE
Page
----
Consolidated Financial Statements
Outsourcing Solutions Inc. and Subsidiaries
Independent Auditors' Report.................................... F-1
Consolidated Balance Sheets at December 31,
1999 and 1998.............................................. F-2
Consolidated Statements of Operations for the
years ended December 31, 1999, 1998 and 1997............... F-3
Consolidated Statements of Stockholders' Equity
(Deficit) for the years ended
December 31, 1999, 1998 and 1997........................... F-4
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997..................... F-5
Notes to Consolidated Financial Statements...................... F-6
Consolidated Financial Statement Schedule
Independent Auditors' Report...................................... F-23
Schedule II - Valuation and Qualifying Accounts and Reserves...... F-24
<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, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
1999. 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 auditing standards generally accepted
in the United States of America. 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, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
- ------------------------
Deloitte & Touche LLP
St. Louis, Missouri
March 28, 2000
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(In thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
ASSETS 1999 1998
---- ----
Cash and cash equivalents $ 6,059 $ 8,814
Cash and cash equivalents held for clients 22,521 22,372
Accounts receivable - trade, less allowance
for doubtful receivables of $529 and $1,309 52,082 40,724
Purchased loans and accounts receivable portfolios 39,947 55,493
Property and equipment, net 43,647 40,317
Intangible assets, net 410,471 425,597
Deferred financing costs, less accumulated
amortization of $248 and $5,203 27,224 13,573
Other assets 22,761 11,601
-------- --------
TOTAL $624,712 $618,491
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable - trade $ 6,801 $ 7,355
Collections due to clients 22,521 22,372
Accrued salaries, wages and benefits 17,009 13,274
Debt 518,307 528,148
Other liabilities 68,306 77,374
Commitments and contingencies - -
Mandatorily redeemable preferred stock;
redemption amount $107,877 85,716 -
Stockholders deficit:
8% nonvoting cumulative redeemable exchangeable
preferred stock; authorized 1,250,000 shares,
973,322.32 issued and outstanding in 1998,
at liquidiation value of $12.50 per share - 12,167
Voting common stock; $.01 par value;
authorized 15,000,000 shares, 9,054,638.11
shares issued in 1999 and 3,477,126.01
shares issued and outstanding in 1998 90 35
Non-voting common stock; $.01 par value;
authorized 2,000,000 shares, 480,321.30
issued and outstanding in 1999 5 -
Class A convertible nonvoting common stock;
$.01 par value; authorized 7,500,000 shares,
391,740.58 shares issued and outstanding in 1998 - 4
Class B convertible nonvoting common stock;
$.01 par value; authorized 500,000 shares,
400,000 shares issued and outstanding in 1998 - 4
Class C convertible nonvoting common stock;
$.01 par value; authorized 1,500,000 shares,
1,040,000 shares issued and outstanding in 1998 - 10
Paid-in capital 196,339 66,958
Retained deficit (155,525) (109,210)
-------- --------
40,909 (30,032)
Common stock in treasury, at cost;
3,078,249.07 shares in 1999 (134,857) -
-------- --------
Total stockholders' deficit (93,948) (30,032)
-------- --------
TOTAL $624,712 $618,491
======== ========
See notes to consolidated financial statements.
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
- --------------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
REVENUES $ 504,425 $ 479,400 $271,683
EXPENSES:
Salaries and benefits 244,157 230,114 133,364
Service fees and other operating and
administrative expenses 154,799 140,888 71,122
Amortization of purchased loans
and accounts receivable portfolios 38,722 50,703 52,042
Amortization of goodwill and
other intangibles 16,229 15,725 24,749
Depreciation expense 14,866 14,282 8,825
Nonrecurring conversion, realignment
and relocation expenses 5,063 - -
Change in control bonuses, stock
option redemption and other bonuses 10,487 - -
Transaction related costs 6,827 - -
--------- -------- --------
Total expenses 491,150 451,712 290,102
--------- --------- --------
OPERATING INCOME (LOSS) 13,275 27,688 (18,419)
INTEREST EXPENSE - Net 52,265 50,627 28,791
--------- --------- --------
LOSS BEFORE INCOME TAXES, MINORITY
INTEREST AND EXTRAORDINARY ITEM (38,990) (22,939) (47,210)
PROVISION FOR INCOME TAXES 759 830 11,127
MINORITY INTEREST - 572 -
--------- --------- --------
LOSS BEFORE EXTRAORDINARY ITEM (39,749) (24,341) (58,337)
EXTRAORDINARY LOSS ON EXTINGUISHMENT
OF DEBT, NET OF INCOME TAXES OF $0. 4,208 - -
--------- --------- --------
NET LOSS (43,957) (24,341) (58,337)
PREFERRED STOCK DIVIDEND REQUIREMENTS AND
ACCRETION OF SENIOR PREFERRED STOCK 2,358 681 922
--------- --------- --------
NET LOSS TO COMMON STOCKHOLDERS $ (46,315) $(25,022) $(59,259)
========= ======== ========
See notes to consolidated financial statements.
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Non-voting Common Stock
Cumulative -------------------------------
Redeemable Non-voting
Preferred Classes Paid-in Retained Treasury
Stock Voting Non-voting A,B&C Capital Deficit Stock Total
--------- -------- --------- --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 10,816 $ 35 $ - $ 18 $ 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 - 18 66,958 (84,188) - (5,478)
Payment of preferred stock
dividends through issuance
of 37,435.47 shares of
preferred stock and recorded
preferred stock dividend
requirements of $1 per share 468 - - - - (681) - (213)
Net loss - - - - - (24,341) - (24,341)
-------- -------- ------- -------- --------- --------- ---------- --------
BALANCE, DECEMBER 31, 1998 12,167 35 - 18 66,958 (109,210) - (30,032)
Payment of preferred stock
dividends through issuance of
140,997.01 shares of
preferred stock and recorded
preferred stock dividend
requirements of $1 per share 1,762 - - - - (1,276) - 486
Issuance of 186,791.67 common
shares in exchange for MDP's
investment in FINCO - 2 - - 6,998 - - 7,000
Issuance of 5,273,037.98 voting
and 480,321.30 non-voting
common shares - 52 5 - 215,546 - - 215,603
Repurchase of common stock
and redemption of preferred,
non-voting common, stock
options and warrants (13,929) 1 - (18) (93,163) - (115,391) (222,500)
Recapitalization fees and
expenses - - - - - (19,466) (19,466)
Accrued dividends on
mandatorily redeemable
preferred stock - - - - - (877) - (877)
Accretion of mandatorily
redeemable preferred stock - - - - - (205) - (205)
Net loss - - - - - (43,957) - (43,957)
-------- -------- ------- -------- --------- --------- ---------- --------
BALANCE, DECEMBER 31, 1999 $ - $ 90 $ 5 $ - $ 196,339 $(155,525) $ (134,857) $(93,948)
======== ======== ======= ======== ========= ========= ========== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
OPERATING ACTIVITIES AND PORTFOLIO PURCHASING:
<S> <C> <C> <C>
Net loss $(43,957) $(24,341) $(58,337)
Adjustments to reconcile net loss to net
cash from operating activities and portfolio
purchasing:
Depreciation and amortization 34,477 32,833 35,613
Amortization of purchased loans and
accounts receivable portfolios 38,722 50,703 52,042
Extraordinary loss on extinguishment of debt 4,208 - -
Compensation expense related to redemption
of stock options and repriced options 4,635 - -
Deferred taxes - 380 10,877
Minority interest - 572 -
Change in assets and liabilities:
Purchases of loans and accounts receivable portfolios (23,176) (43,186) (46,494)
Other assets (13,245) 2,894 195
Accounts payable and other liabilities (5,316) (7,789) (7,565)
-------- -------- --------
Net cash from operating activities
and portfolio purchasing (3,652) 12,066 (13,669)
-------- -------- --------
INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired (877) (168,900) (62,913)
Investment in FINCO (2,500) (2,500) -
Acquisition of property and equipment (18,437) (13,480) (9,489)
Purchases of loans and accounts receivable portfolios
for resale toFINCO (56,664) (9,134) -
Sales of loans and accounts receivable portfolios to FINCO 56,664 9,134 -
Other 265 261 (603)
-------- -------- --------
Net cash from investing activities (21,549) (184,619) (73,005)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from term loans 400,000 225,000 55,000
Borrowings under revolving credit agreement 289,700 230,000 66,150
Repayments under revolving credit agreement (302,200) (236,350) (34,300)
Repayments of debt (397,448) (36,618) (9,763)
Deferred financing fees (21,242) (3,882) (1,993)
Proceeds from issuance of preferred and common stock 300,237 - 300
Repurchase of preferred stock, common stock and warrants (223,208) - -
Redemption of stock options (3,927) - -
Recapitalization fees (19,466) - -
-------- -------- --------
Net cash from financing activities 22,446 178,150 75,394
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,755) 5,597 (11,280)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,814 3,217 14,497
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 6,059 $ 8,814 $ 3,217
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during year for interest $ 51,232 $ 43,923 $ 26,372
======== ======== ========
Net cash paid (received) during year for taxes $ 306 $(10,995) $ 23
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION
Investment in FINCO through exchange of common stock with MDP $ 7,000 $ - $ -
======== ========= ========
</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 - Outsourcing Solutions Inc. is one of the largest
providers of accounts receivable management services in the United States.
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 under the equity 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 aggregate discounted future
net operating cash flows derived from the portfolios are less than the
aggregate carrying value (see Note 15).
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 owned are generally
recorded as revenue when received. Proceeds from strategic sales of
Receivables owned are recognized as revenue when received. Revenue from
collections and outsourcing services is recorded as such services are
provided. Deferred revenue in the accompanying balance sheet primarily
relates to certain prepaid letter services which are generally recognized
as earned as 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 30 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
certain 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.
Deferred Financing Costs - Deferred financing costs are being amortized
over the terms of the related debt agreements.
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. The Company evaluates the recoverability
of deferred tax assets and establishes a valuation allowance to reduce the
deferred tax assets to an amount that is more likely than not to be
realized.
Environmental Costs - All of the Company's environmental proceedings relate
to discontinued operations of former divisions or subsidiaries of The Union
Corporation. Costs incurred to investigate and remediate contaminated sites
are charged to the environmental reserves established in conjunction with
the Union acquisition.
Stock-Based Compensation - The Company accounts for its stock-based
compensation plan using the intrinsic value method prescribed by Accounting
Principles Board ("APB") 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 12 for the
fair value disclosures required under SFAS No. 123.
Comprehensive Income - Effective January 1, 1998, the Company adopted SFAS
No. 130, Reporting Comprehensive Income, which established standards for
the reporting and display of comprehensive income and its components. The
adoption of this statement did not affect the Company's consolidated
financial statements for the three years in the period ended December 31,
1999. Comprehensive loss for the three years in the period ended December
31, 1999 was equal to the Company's net loss.
Accounting For Transfers of Financial Assets - SFAS No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on consistent application of a financial-components
approach that focuses on control. Under this approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets
it controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered, and derecognizes liabilities when
extinguished. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. The Company adopted SFAS No. 125 for the year
ended December 31, 1997. The adoption of SFAS No. 125 did not have a
material effect on the 1997 financial statements, as the Company had no
transfers during the year ended December 31, 1997. However, commencing in
the fourth quarter of 1998, the Company began selling, concurrent with its
purchase, certain Receivables to a special-purpose entity, OSI Funding LLC
(FINCO) (see Note 18).
Segment Information - SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, established standards for the way that
public business enterprises report information about operating segments in
annual financial statements and also established standards for related
disclosures about products and services, geographic areas and major
customers. Management has considered the requirements of SFAS No. 131 and,
as discussed in Note 17, believes the Company operates in one business
segment.
New Derivatives and Hedging Accounting Standard - In June 1998, SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, was
issued, which is required to be adopted no later than January 1, 2001. The
statement provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The
Company has not determined the impact on the consolidated statement of
operations and consolidated balance sheet.
Accounting for the Costs of Computer Systems Developed or Obtained for
Internal Use - Statement of Position ("SOP") No. 98-1, Accounting for the
Costs of Computer Systems Developed or Obtained for Internal Use, provides
guidelines for capitalization of developmental costs of proprietary
software and purchased software for internal use. The adoption of SOP No.
98-1 did not have a material impact on the consolidated statement of
operations and consolidated balance sheet.
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.
Earnings Per Share - SFAS No. 128, Earnings per Share, simplified the
calculation of earnings per share and is applicable only to public
companies. Under the Securities and Exchange Commission ("SEC") disclosure
requirements, SFAS No. 128 is not currently applicable to the Company and,
accordingly, earnings per share is not presented.
Reclassifications - Certain amounts in prior periods have been reclassified
to conform to the current year presentation, including changing the balance
sheet presentation from classified to unclassified.
2. ORGANIZATION, ACQUISITIONS & RECAPITALIZATION
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 1999, the Company reorganized
many of its acquired subsidiaries. Account Portfolios, Inc. ("API") changed
its name to OSI Portfolio Services, Inc. Payco American Corporation's
("Payco") largest debt collection subsidiary changed its name to OSI
Collection Services, Inc. and Continental Credit Services, Inc.
("Continental"), A.M. Miller & Associates ("AMM"), Accelerated Bureau of
Collections, Inc. ("ABC"), and former subsidiaries of The Union Corporation
("Union"), Allied Bond & Collection Agency and Capital Credit, merged into
OSI Collection Services. Former Union subsidiary, Interactive Performance
changed its name to OSI Outsourcing Services, Inc. and the Interactive
Performance and High Perfomance services subsidiaries merged into OSI
Outsourcing 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, Canada and
Mexico.
In September 1995, the Company acquired API, a partnership which purchased
and managed 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 AMM and Continental, 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 (interest payable quarterly and
principal due July 2001) 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, 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 assets of The North
Shore Agency, Inc. ("NSA"), a fee service company specializing in letter
series collection services, and 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,
$2,533 through December 31, 1999, based on the attainment by the newly
formed subsidiary of certain financial performance targets over each of the
next two years. Future contingent payment obligations, if any, will be
accounted for as additional goodwill as the payments are made.
In January 1998, the Company acquired through a tender offer approximately
77% of the outstanding shares of Union's common stock for $31.50 per share.
On March 31, 1998, the Company acquired the remaining outstanding shares of
Union when Union merged with a wholly-owned subsidiary of the Company. The
aggregate cash purchase price of the Union acquisition was approximately
$220,000 including transaction costs of $10,900 and assumed liabilities.
The Company financed the acquisition primarily with funds provided by an
amended credit agreement . Union, through certain of its subsidiaries,
furnishes a broad range of credit and receivables management outsourcing
services as well as management and collection of accounts receivable. 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 $219,000.
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.
On December 10, 1999, the Company consummated a transaction with Madison
Dearborn Capital Partners III, L.P. ("MDP") and certain of the Company's
stockholders, optionholders and warrantholders pursuant to which MDP
acquired 75.9% of OSI's common stock, most of the then outstanding capital
stock of OSI was redeemed, refinanced its credit facility and issued
$107,000 of preferred stock (the "Recapitalization"). Total value of the
Recapitalization was approximately $790,000.
The Recapitalization has been accounted for as a recapitalization which had
no impact on the historical basis of assets and liabilities.
In accordance with the terms of the Recapitalization, the holders of
approximately 85.6% of shares of the Company's common stock outstanding
immediately prior to the Recapitalization received $37.47 in cash in
exchange for each of these shares. In addition, the holders of the
Company's preferred stock, non-voting common stock, warrants and exercised
stock options, which pursuant to the Recapitalization all outstanding
options became vested, received $37.47 in cash in exchange for each of
these instruments. Immediately following the Recapitalization, continuing
shareholders owned approximately 8.5% of the outstanding shares of the
Company's common stock.
In connection with the Recapitalization, the Company entered into a new
credit facility providing for term loans of $400,000 and revolving loans of
up to $75,000 (see Note 6). The proceeds of the initial borrowings under
the new credit facility and the issuance of approximately $300,000 of the
Company's preferred and common stock have been used to finance the payments
of cash to cash-electing shareholders, to pay the holders of stock options
and stock warrants exercised or canceled, as applicable, in connection with
the Recapitalization, to repay the Company's existing credit facility and
to pay expenses incurred in connection with the Recapitalization.
The Company incurred various costs aggregating approximately $36,780 in
connection with consummating the Recapitalization. These costs consisted
primarily of compensation costs, professional and advisory fees, and other
expenses. The compensation costs of $10,487 consists primarily of expense
relating to the payment of cash for vested stock options and the payment of
change in control bonuses to certain officers in accordance with the terms
of their respective employment agreements. Of the other transaction related
costs, which includes professional and advisory fees, and other expenses,
the Company expensed $6,827 and recorded $19,466 as an additional cost of
the repurchase of common stock in 1999. In addition to these expenses, the
Company also incurred approximately $21,100 of capitalized debt issuance
costs, which include the consent payment to existing note holders,
associated with the Recapitalization financing. These costs will be charged
to interest expense over the terms of the related debt instruments.
The unaudited pro forma consolidated financial data presented below
provides pro forma effect of the Union acquisition, the Recapitalization
and the debt extinguishment as if such transactions had occurred as of the
beginning of each period presented. 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 acquisition, the Recapitalization and the debt extinguishment been
consummated as of the beginning of each period presented, nor does the data
give effect to any transactions other than the acquisition, the
Recapitalization and the debt extinguishment.
Pro Forma
1999 1998
---- ----
Net revenues $504,425 $486,754
======== ========
Net loss $(23,865) $(26,445)
======== ========
3. PROPERTY AND EQUIPMENT
Property and equipment, which is recorded at cost, consists of the
following at December 31:
1999 1998
---- ----
Land $ 2,109 $ 2,109
Buildings 1,912 1,891
Furniture and fixtures 7,964 6,574
Machinery and equipment 3,016 2,479
Telephone equipment 9,826 8,659
Leasehold improvements 5,590 4,068
Computer hardware and software 53,843 40,785
-------- --------
84,260 66,565
Less accumulated depreciation (40,613) (26,248)
-------- --------
$ 43,647 $ 40,317
======== ========
4. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
1999 1998
---- ----
Goodwill $ 448,651 $ 447,774
Value of favorable contracts and placements 29,000 29,000
Covenants not to compete 5,053 5,021
--------- ---------
482,704 481,795
Less accumulated amortization (72,233) (56,198)
--------- ---------
$ 410,471 $ 425,597
========= =========
5. OTHER ASSETS
Other assets consist of the following at December 31:
1999 1998
---- ----
Investment in FINCO $ 12,000 $ 2,500
Prepaid postage 3,326 1,007
Other 7,435 8,094
-------- --------
$ 22,761 $ 11,601
======== ========
6. DEBT
Debt consists of the following at December 31:
1999 1998
---- ----
New Credit Facility $ 400,000 $ -
Prior Credit Facility - 396,637
Revolving Credit Facility 13,000 25,500
11% Series B Senior Subordinated Notes 100,000 100,000
Note payable to stockholder (See Note 2) 4,429 4,429
Other (including capital leases) 878 1,582
--------- ---------
Total debt $ 518,307 $ 528,148
========= =========
On April 28, 1997, the Company registered $100,000 of 11% Series B Senior
Subordinated Notes (the "Notes") which mature on November 1, 2006, with the
SEC to exchange for the then existing unregistered $100,000 of 11% Senior
Subordinated Notes (the "Private Placement"). The exchange offer was
completed by May 29, 1997. 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, including dividends.
In connection with the Recapitalization, the Company entered into a new
credit facility providing up to $475,000 of senior bank financing ("New
Credit Facility"). The proceeds of the New Credit Facility were used to
refinance $419,818 of indebtedness outstanding on the date of the
Recapitalization which resulted in an extraordinary loss of $4,208 from the
write-off of previously capitalized deferred financing fees. In addition,
the New Credit Facility will be used to provide for the Company's working
capital requirements and future acquisitions, if any.
The New Credit Facility consists of a $400,000 term loan facility and a
$75,000 revolving credit facility (the "Revolving Facility"). The term loan
facility consists of a term loan of $150,000 ("Term Loan A") and a term
loan of $250,000 ("Term Loan B"), which mature on December 10, 2005 and
June 10, 2006, respectively. The Company is required to make quarterly
principal repayments on each term loan beginning January 15, 2000 for Term
Loan B and January 15, 2001 for Term Loan A. 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 prime rate, plus 2.25% or (b)
at the reserve adjusted Eurodollar rate plus 3.25%. 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 prime rate, plus 3.0%
or (b) at the reserve adjusted Eurodollar rate plus 4.0%.
The Revolving Facility has a term of six years and is fully revolving until
December 10, 2005. 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 prime rate, plus 2.25% or (b) at the reserve
adjusted Eurodollar rate plus 3.25%. Also, outstanding under the Revolving
Facility are letters of credit of $1,989 expiring within a year.
The one month LIBOR rate (Eurodollar rate) at December 31, 1999 was 5.8%.
The three month LIBOR rate (Eurodollar rate) at December 31, 1998 was 5.3%.
The New Credit Facility is guaranteed by substantially all of the Company's
present domestic subsidiaries and is secured by substantially all of the
stock of the Company's present domestic subsidiaries and by substantially
all of the Company's domestic property assets. The New Credit 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 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 New Credit 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
certain subsidiaries that are individually, and in the aggregate
inconsequential. The Company is a holding company with no separate
operations, although it incurs some expenses. The Company has no
significant assets or liabilities other than the common stock of its
subsidiaries, debt, related deferred financing costs and accrued expenses.
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:
1999 1998
---- ----
Total assets $584,184 $595,925
======== ========
Total liabilities $123,551 $ 78,252
======== ========
Operating revenue $504,425 $479,400
======== ========
Income from operations $ 42,669 $ 39,418
======== ========
Net income $ 11,861 $ 21,189
======== ========
Maturities of debt and capital leases at December 31, 1999 are as follows:
Capital
Debt Leases
---- -------
2000 $ 2,619 $ 675
2001 14,429 95
2002 17,500 19
2003 32,500 -
2004 40,000 -
Thereafter 410,500 -
--------- --------
Total Payments 517,548 789
Less amounts representing interest 30
--------
Present value of minimum lease payments $ 759
--------- ========
$ 517,548
=========
7. OTHER LIABILITIES
Other liabilities consist of the following at December 31:
1999 1998
---- ----
Accrued acquisition related office closure
costs, over-market leases and other costs $ 7,402 $ 12,103
Accrued interest 4,494 6,851
Deferred revenue 10,242 11,285
Environmental reserves 22,218 22,726
Other 23,950 24,409
--------- ---------
$ 68,306 $ 77,374
========= =========
The environmental reserves, on an undiscounted basis, at December 31, 1999
and 1998 are for environmental proceedings as a result of the Union
acquisition. The Company is party to several pending environmental
proceedings involving the Environmental Protection Agency and comparable
state environmental agencies. All of these matters related to discontinued
operations of former divisions or subsidiaries of Union for which it has
potential continuing responsibility. Management, in consultation with both
legal counsel and environmental consultants, has established the
aforementioned liabilities that it believes are adequate for the ultimate
resolution of these environmental proceedings. However, the Company may be
exposed to additional substantial liability for these proceedings as
additional information becomes available over the long-term.
8. MANDATORILY REDEEMABLE PREFERRED STOCK
Mandatorily redeemable preferred stock consists of the following at
December 31, 1999:
14% Senior
Mandatorily
Redeemable Junior
Preferred Preferred
Stock Stock Total
------------ --------- ---------
Balance at December 31, 1998 $ - $ - $ -
Issuance of stock 77,634 7,000 84,634
Accrued dividends 856 21 877
Accretion of preferred stock 205 - 205
--------- --------- ---------
Balance at December 31, 1999 $ 78,695 $ 7,021 $ 85,716
========= ========= =========
On December 10, 1999, in connection with the Recapitalization, the Board of
Directors authorized 50,000 shares of Class A 14% Senior Mandatorily
Redeemable Preferred Stock, no par value and 150,000 shares of Class B 14%
Senior Mandatorily Redeemable Preferred Stock, no par value. Furthermore,
the Company issued 25,000 shares of Class A 14% Senior Mandatorily
redeemable Preferred Stock, ("Class A"), Series A, no par value and 75,000
shares of Class B 14% Senior Mandatorily Redeemable Preferred Stock,
("Class B"), Series A, no par value; collectively referred to as Senior
Preferred Stock; along with 596,913.07 shares of the Company's common stock
for $100,000. The Company may issue up to one additional series of each
Class A and Class B solely to the existing holders in exchange for shares
of Class A, Series A or Class B, Series A. The liquidation value of each
share of Senior Preferred Stock is $1,000 plus accrued and unpaid
dividends. Dividends, as may be declared by the Company's Board of
Directors, are cumulative at an annual rate of 14% of the liquidation value
and are payable quarterly. The Company may, at its option and upon written
notice to preferred shareholders, redeem all or any portion of the
outstanding Senior Preferred Stock on a pro-rata basis at the redemption
prices in cash at a stated percentage of the liquidation value plus cash
equal to all accrued and unpaid dividends. The redemption prices for Class
A are 110%, 114%, 107%, 103.5% and 100% of the liquidation value for the
period December 15, 1999 through June 15, 2001, June 16, 2001 through
December 14, 2003, December 15, 2003 through December 14, 2004, December
15, 2004 through December 14, 2005 and December 15, 2005 and thereafter,
respectively. The redemption price for Class B is 100% of the liquidation
value. However, on December 10, 2007, the Company must redeem all of the
shares of the Senior Preferred Stock then outstanding at a redemption price
equal to 100% of the liquidation value per share plus accrued and unpaid
dividends. Pursuant to the Company's financing arrangements, the payment of
dividends and/or the repurchase of shares of Senior Preferred Stock is
allowed as long as no default on the financing arrangements shall have
occurred. The 14% Senior Mandatorily Redeemable Preferred Stock was
recorded at $77,634 to take into account common stock issued in conjunction
with the sale of the Senior Preferred Stock and will accrete to $100,000 by
December 10, 2007 using the interest rate method.
On December 10, 1999, in connection with the Recapitalization, the Company
authorized 50,000 shares and issued 7,000 shares of Junior Preferred Stock
("Junior Preferred Shares"). The liquidation value of each Junior Preferred
Share is $1,000 plus accrued and unpaid dividends. Dividends, as may be
declared by the Company's Board of Directors, are cumulative at an annual
rate of 5% of the liquidation value until December 10, 2003 and then at an
annual rate of 8% thereafter and are payable annually; however the dividend
rate will increase to 20% upon consummation of certain events. The Company
will pay dividends in the form of additional Junior Preferred Shares. The
Company may, at its sole option and upon written notice, redeem, subject to
limitations, all or any portion of the outstanding Junior Preferred Shares
for $1,000 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. However, on January 10, 2008, the Company must
redeem all of the shares of the Junior Preferred Stock then outstanding at
a redemption price equal to $1,000 per share plus accrued and unpaid
dividends as long as all of the shares of the Senior Preferred Stock have
been redeemed. Upon consummation of a primary public offering having an
aggregate offering value of at least $50,000, each holder of Junior
Preferred Shares shall have the right to convert all, but not less than
all, into shares of voting common stock based upon the public offering
price.
9. STOCKHOLDERS' EQUITY AND WARRANTS
Each share of Non-voting common stock is convertible at the shareholders
option into an equal number of shares of Voting common stock subject to the
requirements set forth in the Company's Certificate of Incorporation.
In connection with the Recapitalization, all warrants (46,088.67) then
outstanding were exchanged for cash with each holder receiving cash for the
differential between $37.47 per share and their exercise price of $12.50.
Consequently, there are no warrants outstanding at December 31,1999.
10. INCOME TAXES
Major components of the Company's income tax provision are as follows:
1999 1998 1997
---- ---- ----
Current:
Federal $ - $ - $ -
State 550 450 250
Foreign 209 - -
------- ------- -------
Total current 759 450 250
------- ------- -------
Deferred:
Federal - - 9,513
State - 380 1,364
Foreign - - -
------- ------- -------
Total deferred - 380 10,877
------- ------- -------
Provision for income taxes $ 759 $ 830 $11,127
======= ======= =======
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.
Net deferred tax assets consist of the following at December 31:
1999 1998
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 52,302 $ 41,143
Accrued liabilities 16,812 18,001
Loans and accounts receivable 1,382 3,670
Property and equipment 1,028 1,311
Intangible assets 3,824 4,192
Tax credit carry forwards 3,418 -
-------- --------
Total deferred tax assets 78,766 68,317
Less valuation allowance (78,766) (68,317)
-------- --------
Net deferred tax assets $ - $ -
======== ========
The valuation allowance was $78,766 and $68,317 at December 31, 1999 and
1998, respectively. The Company has determined the valuation allowance
based upon the weight of available evidence regarding future taxable income
consistent with the principles of SFAS No. 109, Accounting for Income
Taxes. The $10,449 increase in the valuation allowance during 1999 was the
result of net changes in temporary differences, and an increase in the net
operating loss and tax credit carryforwards. The valuation allowance also
includes amounts related to previous acquisitions from years before 1999.
Future realization of these deferred tax assets would result in the
reduction of goodwill recorded in connection with the acquisitions.
The Company has federal net operating loss carryforwards of $127,347 as of
December 31, 1999 available to offset future taxable income of the
consolidated group of corporations. Since the Recapitalization transaction
on December 10, 1999 constituted a change of ownership, tax law imposes a
limitation on the future use of the Company's net operating loss
carryforwards generated through the date of the change in ownership. The
annual limit is equal to the long-term tax-exempt bond rate times the fair
imputed value of the Company's stock immediately before the change in
ownership. In addition, the Company acquired a net operating loss carry
forward of $3,800 with the acquisition of Union that is subject to special
tax law restrictions that limit its potential benefit. These loss
carryforwards expire between 2010 and 2019. The Company also has available
federal tax credit carryforwards of approximately $616 which expire between
2003 and 2012, federal minimum tax credit carryforwards of approximately
$759 which may be carried forward indefinitely and various state tax credit
carryforwards of approximately $2,043 with various expiration dates.
Since the Company has a history of generating net operating losses,
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.
A reconciliation of the Company's reported income tax provision to the U.S.
federal statutory rate is as follows:
1999 1998 1997
---- ---- ----
Federal taxes at statutory rate $(13,257) $(7,994) $(16,052)
State income taxes (net of federal
tax benefits) (874) 18 (2,092)
Foreign income taxes - - -
Nondeductible amortization 3,753 3,414 1,406
Other 2,371 249 (4,567)
Deferred tax valuation allowance 8,766 5,143 32,432
-------- ------- --------
Provision for income taxes $ 759 $ 830 $ 11,127
======== ======= ========
11. RELATED PARTY TRANSACTIONS
In connection with the agreements executed in connection with the
Recapitalization discussed in Note 2, the Company paid transaction costs
and advisory fees to certain Company stockholders. Such costs were $17,092
for the year end December 31, 1999.
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 for
the year ended December 31, 1997. The agreement was terminated September
30, 1997.
Subject to the agreements executed in connection with the various
acquisitions, the Private Placement discussed in Note 6 and certain
management and advisory agreements, the Company has paid to certain Company
stockholders transaction costs and advisory fees. Such costs were zero,
$3,466 and $1,600 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Under various financing arrangements associated with the Company's
acquisitions and credit facility, the Company incurred interest expense of
$3,376, $2,333 and $3,317 for the years ended December 31, 1999, 1998 and
1997, respectively, to certain Company stockholders of which one is a
financial institution and was co-administrative agent of the Company's
prior credit facility.
In December 1997, the Company invested $5,000 for a minority interest in a
limited liability corporation (the "LLC") for the purpose of acquiring
purchased loan and accounts receivable portfolios. The majority interest in
the LLC is held by an affiliate of one of the Company's stockholders. In
the fourth quarter of 1998, the Company wrote down its investment in the
LLC by $3,000 which is included in amortization expense in the accompanying
consolidated statement of operations. The write down resulted from an
analysis of the carrying value of the purchased portfolios owned by the
LLC. In December 1998, the Company entered into an agreement with the
majority owner of the LLC to settle all outstanding disputes relating to
the sourcing and collection of certain purchased loan and accounts
receivable portfolios. As part of the settlement, the Company was paid
$3,000 which was recorded in revenue in the accompanying consolidated
statement of operations.
12. 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 generally 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. As of December 31, 1999, no SARs have been granted. The
awarded stock options vest over three to four years and vesting may be
accelerated upon the occurrence of a change in control as defined in the
Plan. The options expire ten years after date of grant.
In June, 1999, 25,500 options were repriced from a grant price of $40.00 to
$25.00. In addition, 58,500 options were repriced from a grant price of
$65.00 or $50.00 to $40.00. Simultaneously, the vesting provisions of
certain options were modified to provide for prorata vesting over a
specified number of years. Accordingly, compensation expense was recognized
during 1999 as a result of these modifications of certain options. In
addition, in connection with the Recapitalization, certain options
exercised and the holders of such options received a cash payment equal to
the exercise price of such options and $37.47, the price per share at which
the Recapitalization was consummated.
A summary of the 1995 Stock Option and Stock Award Plan is as follows:
Number of
Shares of Weighted Average
Stock Subject Exercise Price
to Options Per Share
-------------- ----------------
Outstanding at January 1, 1997 246,021 $14.23
Granted 397,500 27.99
Forfeited (75,000) 22.33
----------
Outstanding at December 31, 1997 568,521 22.78
Granted 64,300 58.83
Forfeited (54,000) 35.19
----------
Outstanding at December 31, 1998 578,821 25.63
Granted 214,000 40.00
Forfeited (104,500) 28.52
Exercised (245,396) 18.59
----------
Outstanding at December 31, 1999 442,925 31.69
==========
Reserved for future option grants 307,075
Exercisable shares at December 31, 1999, 1998 and 1997 were 442,925,
105,784 and 49,647, respectively.
A summary of stock options outstanding at December 31, 1999 is as follows:
Options Outstanding Options Exercisable
-------------------------------- ----------------------
Weighted
Average
Remaining
Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
-------------- ----------- ----------- -------- ----------- --------
$12.50 70,175 6.7 years $12.50 70,175 $12.50
$25.00 116,750 7.6 years $25.00 116,750 $25.00
$40.00 256,000 9.1 years $40.00 256,000 $40.00
------- -------
$12.50-$40.00 442,925 8.6 years $31.69 442,925 $31.69
======= =======
The Company accounts for the Plan in accordance with APB Opinion No. 25,
under which no compensation cost has been recognized for the majority of
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:
1999 1998 1997
---- ---- ----
Risk free rate 5.0% 5.0% 5.44%
Expected dividend yield of stock 0% 0% 0%
Expected volatility of stock 0% 0% 0%
Expected life of option (years) 10.0 10.0 10.0
Since the Company's common stock is not publicly traded, the expected stock
price volatility is assumed to be zero. The weighted fair values of options
granted during 1999, 1998 and 1997 were $15.74, $23.14, and $12.29,
respectively. The Company's pro forma information is as follows:
1999 1998 1997
---- ---- ----
Net loss:
As reported $(43,957) $(24,341) $(58,337)
Pro forma (45,436) (25,742) (59,570)
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 as of December 31, 1999.
13. 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.
A subsidiary of the Company has several Portfolio Flow Purchase Agreements,
no longer than one year, 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 $33,303 which includes amounts purchased and
subsequently sold to FINCO (see Note 18), $25,521 and $20,661 for the years
ended December 31, 1999, 1998 and 1997, respectively.
The Company leases certain office space and computer equipment under
non-cancelable operating leases. These non-cancelable operating leases,
with terms in excess of one year, are due in approximate amounts as
follows:
Amount
--------
2000 $ 16,329
2001 14,019
2002 10,551
2003 8,033
2004 6,668
Thereafter 18,004
--------
Total lease payments $ 73,604
========
Rent expense under operating leases was $16,974, $15,800 and $8,100 for the
years ended December 31, 1999, 1998 and 1997, respectively.
14. LITIGATION
At December 31, 1999, 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. While the results of
litigation cannot be predicted with certainty, the Company has provided for
the estimated uninsured amounts and costs to resolve the pending suits and
management, in consultation with legal counsel, believes that reserves
established for the ultimate resolution of pending matters are adequate at
December 31, 1999.
15. 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, 1999 and 1998 are as follows. The carrying amount of cash and cash
equivalents and long-term debt except the Notes, approximate the fair
value. The approximate fair value of the Notes at December 31, 1999 and
1998 was $97,000 and $95,300, respectively. 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 both market pricing and 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, 1999 and 1998.
In December 1997, the Company completed an in-depth analysis of the
carrying value of its Receivables. 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 in December 1997 relating to the Receivables acquired in
September 1995 in conjunction with the Company's acquisition of API, to
reduce their carrying value to estimated fair value.
16. EMPLOYEE BENEFIT PLANS
At December 31, 1997, the Company had five defined contribution plans.
During 1998, the Company combined four of these defined contribution plans
into a new defined contribution plan sponsored by the Company. At December
31, 1999 and 1998, the Company has five defined contribution plans, four of
which it acquired through the Union acquisition, 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 $1,654, $1,570 and $276 for the years
ended December 31, 1999, 1998 and 1997, respectively.
17. ENTERPRISE WIDE DISCLOSURE
The Company operates in one business segment. As a strategic receivables
management company, the primary services of the Company consist of
collection services, portfolio purchasing services and outsourcing
services. In addition, the Company derives substantially all of its
revenues from domestic customers.
The following table presents the Company's revenue by type of service for
the year ended December 31:
1999 1998 1997
---- ---- ----
Collection services $ 362,964 $ 350,080 $ 180,871
Portfolio purchasing services 80,391 82,399 67,809
Outsourcing services 61,070 46,921 23,003
--------- --------- ---------
Total $ 504,425 $ 479,400 $ 271,683
========= ========= =========
18. PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS FINANCING
In October 1998, a special-purpose finance company, OSI Funding Corp.,
formed by the Company, entered into a revolving warehouse financing
arrangement (the "Warehouse Facility") for up to $100,000 of funding
capacity for the purchase of loans and accounts receivable portfolios over
its five year term. In connection with the Recapitalization, OSI Funding
Corp. converted to a limited liability company and is now OSI Funding LLC
("FINCO"), with OSI owning approximately 78% of the financial interest but
having only approximately 29% of the voting rights. In connection with the
establishment of the Warehouse Facility, FINCO entered into a servicing
agreement with a subsidiary of the Company to provide certain
administrative and collection services on a contingent fee basis (i.e., fee
is based on a percent of amount collected) at prevailing market rates based
on the nature and age of outstanding balances to be collected. Servicing
revenue from FINCO is recognized by the Company as collections are
received. All borrowings by FINCO under the Warehouse Facility are without
recourse to the Company.
The following summarizes the transactions between the Company and FINCO the
the year ended December 31:
1999 1998
---- ----
Sales of purchased loans and accounts receivables
portfolios by the Company to FINCO $56,664 $9,134
Servicing fees paid by FINCO to the Company $13,481 $792
Sales of purchased loans and accounts receivable portfolios by the Company
to FINCO were in the same amount and occurred shortly after such portfolios
were acquired by the Company from the various unrelated sellers. In
conjunction with sales of Receivables to FINCO and the servicing agreement,
the Company recorded servicing assets which are being amortized over the
servicing agreement. The carrying value of such servicing assets is $1,300
at December 31, 1999 and was not considered material at December 31, 1998.
At December 31, 1999 and 1998, FINCO had purchased loans and accounts
receivable portfolios of $42,967 and $8,361, respectively. At December 31,
1999 and 1998, FINCO had outstanding borrowings of $32,051 and $6,482,
respectively, under the Warehouse Facility.
19. NONRECURRING EXPENSES
After the Company's formation and seven acquisitions, the Company adopted a
strategy to align the Company along business services and establish call
centers of excellence. As a result, the Company incurred $5,063 of
nonrecurring conversion, realignment and relocation expenses for the year
ended December 31, 1999. These expenses include costs resulting from the
temporary duplication of operations, closure of certain call centers,
hiring and training of new employees, costs of converting collection
operating systems, and other one-time and redundant costs.
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Stockholders of Outsourcing Solutions Inc.:
We have audited the consolidated financial statements of Outsourcing Solutions
Inc. and it subsidiaries as of December 31, 1999 and 1998, and for each of the
three years in the period ended December 31, 1999, and have issued our report
thereon dated March 28, 2000; such consolidated financial statements and 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 consolidated
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
March 28, 2000
<PAGE>
Schedule II
Outsourcing Solutions Inc. and Subsidiaries
Valuation and Qualifying Accounts and Reserves
For the year ended December 31, 1999, 1998 and 1997
(in thousands)
Column A Column B Column C Column D Column E
- -------------------- --------- ----------------------- ---------- ----------
Additions (B)
Balance -----------------------
@ beg. Charged Charged to Deductions Balance @
of to Other (Please end of
Description Period Expenses Accounts (A) explain) Period
- ------------------------------ -------- ------------ ---------- ---------
Allowance for doubtful
accounts:
1999 1,309 651 - 1,431 529
====== ==== ==== ====== ======
1998 538 108 798 135 1,309
====== ==== ==== ====== ======
1997 641 367 - 470 538
====== ==== ==== ====== ======
(A) For 1998, Union balance at date of acquisition.
(B) Accounts receivable write-offs and adjustments, net of recoveries.
ASSIGNMENT AND STOCK PURCHASE AGREEMENT
THIS ASSIGNMENT AND STOCK PURCHASE AGREEMENT, dated as of December 10, 1999
(this "Agreement"), is made by and among Outsourcing Solutions Inc., a Delaware
corporation (the "Company"), Madison Dearborn Capital Partners III, L.P.
("MDP"), Madison Dearborn Special Equity III, L.P. ("MDSE"), Special Advisors
Fund I, L.L.C. ("SAE"), DB Capital Investors, L.P. ("DB"), First Union
Investors, Inc. ("First Union"), Abbott Capital 1330 Investors II, L.P.
("Abbott"), Abbott Capital Private Equity Fund III, L.P. ("Abbott III"), BNY
Partners Fund, L.L.C. ("BNY"), FBR Financial Fund II, L.P. ("FBR") and Harvest
Opportunity Partners, L.P. ("Harvest", and along with MDSE, SAE, DB, First
Union, Abbott, Abbott III, BNY and FBR a "Purchaser" and collectively the
"Purchasers"). Except as otherwise indicated, capitalized terms used herein are
defined in Section 7 hereof.
WHEREAS, MDP, the Company and others are parties to a Stock Subscription
and Redemption Agreement, dated as of October 8, 1999, and attached as Exhibit 1
hereto, and a First Amendment to Stock Subscription and Redemption Agreement,
dated as of the date hereof, and attached as Exhibit 2 hereto (as amended, the
"Recapitalization Agreement");
WHEREAS, MDP wishes to assign certain of its rights in, to and under the
Recapitalization Agreement to the Purchasers, and the Purchasers wish to be
assigned certain of MDP's rights in, to and under the Recapitalization
Agreement;
NOW THEREFORE, subject to the terms and conditions set forth in the
Recapitalization Agreement and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. Assignment. Subject to the terms and conditions set forth
herein, MDP hereby grants, transfers and assigns to each Purchaser, individually
and not jointly and severally, the right pursuant to the Recapitalization
Agreement to purchase from the Company such shares of Voting Common Stock or
Non-Voting Common Stock, as applicable, as set forth on Schedule 1 attached
hereto together with all rights, title, interest and remedies related thereto as
set forth in the Recapitalization Agreement or that may otherwise be available
under applicable law (the "Assignment"). Each Purchaser, individually and not
jointly and severally, hereby accepts the Assignment; provided, that the
obligations of each Purchaser pursuant to this Assignment shall be limited to
the extent of the obligations set forth in this Agreement. The Company hereby
consents to the Assignment.
Section 2. Sale of Common Stock. Pursuant to the Assignment, and subject to
the terms and conditions of the Recapitalization Agreement, the Company will
sell to each Purchaser, and each Purchaser will purchase from the Company, such
shares as set forth on Schedule 1 of Voting Common Stock, par value $0.01 per
share (the "Voting Common Stock") and Non-Voting Common Stock, par value $0.01
per share (the "Non-Voting Common Stock", together with the Voting Common Stock,
the "Common Stock"), as applicable, for a purchase price of $37.54 per share
(being the same purchase price per share of Voting Common Stock paid by MDP
under the Recapitalization Agreement).
Section 3. The Closing. The closing of the sale and purchase of the Common
Stock hereunder (the "Closing") will take place at the offices of White & Case,
1155 Avenue of the Americas, New York, New York 10036. At the Closing, the
Company will deliver to each Purchaser a certificate or certificates evidencing
the number of shares of Common Stock to be purchased by such Purchaser,
registered in the name of such Purchaser against payment of the purchase price
therefor by delivery of a cashier's or certified check or checks of immediately
available funds or by wire transfer of immediately available funds to a bank
account designated by the Company.
Section 4. Conditions Precedent to Sale of Common Stock.
4.A. Conditions to Each Party's Obligations. The respective obligations of
each of the parties hereto to effect the transactions set forth in this
Assignment shall be subject to fulfillment or waiver at or prior to the Closing
of each of the conditions set forth in Section 5.01 of the Recapitalization
Agreement.
4.B. Conditions to Obligations of the Company. The obligations of the
Company to effect the sale of the Common Stock pursuant to this Assignment shall
be subject to the fulfillment at Closing of the following conditions, any one of
which may be waived by the Company.
(a) The representations and warranties of each Purchaser set forth herein
shall be true and correct in all respects.
(b) Each Purchaser shall have performed and complied in all material
respects with
all of the covenants and agreements and satisfied in all material respects all
of the conditions required by this Assignment to be complied with or satisfied
by each Purchaser at or prior to Closing.
(c) Each other condition set forth in Section 5.02 of the Recapitalization
Agreement shall be fulfilled at or prior to the Closing.
4.C. Conditions to Obligations of each Purchaser. The obligations of each
Purchaser to effect the purchase of the Common Stock pursuant to this Assignment
shall be subject to the fulfillment at Closing of the following conditions, any
one of which may be waived by the applicable Purchasers with respect to its
obligations:
(a) The representations and warranties of the Company set forth herein
shall be true and correct in all respects.
(b) The Company shall have performed and complied in all material respects
with all of the covenants and agreements and satisfied in all material respects
all of the conditions required by this Assignment to be complied with or
satisfied by the Company at or prior to Closing.
(c) Each other condition set forth in Section 5.03 of the Recapitalization
Agreement shall be fulfilled at or prior to the Closing.
Section 5. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Purchaser each of the representations and
warranties of the Company set forth in Section 3.01 of the Recapitalization
Agreement, which are incorporated herein, were true and correct in all respects
when made on October 8, 1999.
Section 6. Purchasers' Representations and Warranties.
6.A. Purchasers' Investment Representations. Each Purchaser individually,
and not jointly or severally, hereby represents that he or it is acquiring the
Common Stock purchased hereunder for his or its own account with the present
intention of holding such securities for investment purposes and that it has no
intention of selling such securities in a public distribution in violation of
federal or state securities laws; provided that nothing contained herein will
prevent the Purchaser and the subsequent holders of such securities from
transferring such securities in compliance with applicable law and the
Stockholders Agreement. Each certificate for Common Stock will be conspicuously
imprinted with a legend substantially in the form set forth in Section 10 of the
Stockholders Agreement.
6.B. Other Representations and Warranties of the Purchasers. Each Purchaser
individually, and not jointly or severally, represents and warrants to and
covenants and agrees with, the Company that:
(i) the Purchaser is an "accredited investor" as defined in Rule 501(a)
under the Securities Act; and
(ii) the Purchaser has all requisite power and authority to enter into,
deliver and consummate the transactions contemplated by this Agreement
(including the purchase of the securities to be purchased by the Purchaser
hereunder) and this Agreement has been duly authorized, executed and delivered
by the Purchaser and constitutes a valid and binding obligation of the Purchaser
enforceable in accordance with its terms (subject to the availability of
equitable remedies and to the laws of bankruptcy and other similar laws
affecting creditors' rights generally) and, as applicable, does not violate the
Purchaser's charter, by-laws or other organizational documents.
Section 7. Definitions.
"Bylaws" means the Bylaws of the Company, as such Bylaws may be modified,
amended or amended and restated from time to time.
"Certificate of Incorporation" means the Company's Fourth Amended and
Restated Certificate of Incorporation.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency, or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
date hereof, by and among the parties hereto and others.
Section 8. Miscellaneous.
8.A. Amendments and Waivers. Except as otherwise provided herein, any
provision hereof may be amended or waived generally and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of at least a majority of the outstanding shares of Common Stock issued
hereunder and, to the extent that any modification, amendment or waiver
adversely affects the rights of the holders of any class of Common Stock, by the
holders of at least a majority of the outstanding shares initially issued
hereunder of such adversely affected class of Common Stock. No course of dealing
between the Company and any holder of Common Stock or any delay on the part of
any such holder in exercising any rights hereunder or under any agreement
contemplated hereby or under the Certificate of Incorporation or the Bylaws will
operate as a waiver of any rights of any such holder.
8.B. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith will survive the execution and delivery of this Agreement, regardless
of any investigation made by any Purchaser or on its behalf.
8.C. Successors and Assigns. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of such parties whether so expressed or not. In addition,
and whether or not any express assignment has been made, the provisions of this
Agreement which are for the Purchaser's benefit as the purchaser or holder of
Common Stock are also for the benefit of and enforceable by any subsequent
holder of such Purchaser's Common Stock.
8.D. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity, illegality
or unenforceability in such jurisdiction, without invalidating the remainder of
this Agreement in such jurisdiction or any provision hereof in any other
jurisdiction.
8.E. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same Agreement.
8.F. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
8.G. Governing Law. All issues concerning the enforceability, validity and
binding effect of this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the law of
any jurisdiction other than the State of New York.
8.H. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and shall be delivered personally or by telex or telecopy as described
below or by reputable overnight courier, and shall be deemed given on the date
on which such delivery is made. If delivered by telex or telecopy such notices
or communications shall be confirmed by a registered or certified letter (return
receipt requested), postage prepaid. 1.I.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment and Stock Purchase Agreement as of the date first written above.
OUTSOURCING SOLUTIONS INC.
By: /s/ Gary L. Weller
-----------------------------
Its: EVP
-----------------------------
MADISON DEARBORN CAPITAL PARTNERS
III, L.P.
By Madison Dearborn Partners III, L.P.
Its General Partners
By Madison Dearborn Partners, Inc.
Its General Partner
By /s/ Paul R. Wood
------------------------------
Its
------------------------------
MADISON DEARBORN SPECIALTY EQUITY
III, L.P.
By Madison Dearborn Partners III, L.P.
Its General Partners
By Madison Dearborn Partners, Inc.
Its General Partner
By /s/ Paul R. Wood
------------------------------
Its
------------------------------
SPECIAL ADVISORS FUND I, LLC
By /s/ Paul R. Wood
------------------------------
Its
------------------------------
<PAGE>
ABBOTT CAPITAL 1330 INVESTORS II, L.P.
By Abbott Capital 1330 GenPar II, L.L.C.
Its General Partners
By /s/ Thomas W. Hallagan
------------------------------
Name: Thomas W. Hallagan
Title: Manager
ABBOTT CAPITAL PRIVATE EQUITY FUND III, L.P.
By Abbott Capital Management, L.L.C.
Its General Partners
By /s/ Raymond L. Held
------------------------------
Name: Raymond L. Held
Title: Managing Director
BNY PARTNERS FUND, L.L.C.
By BNY Private Investment Management,
Inc.
Its Member Manager
By /s/ Burton M. Siegal
------------------------------
Name: Burton M. Siegal
Title: Senior Vice President
FBR FINANCIAL FUND II, L.P.
By: /s/
------------------------------
Its: Senior Managing Director
------------------------------
HARVEST OPPORTUNITY PARTNERS, L.P.
By: /s/ Joseph Jolson
------------------------------
Its: Manager
------------------------------
<PAGE>
FIRST UNION INVESTORS, INC.
By: /s/
------------------------------
Title:
------------------------------
<PAGE>
DB CAPITAL INVESTORS, L.P.
By: DB Capital Partners, L.P.
Its: General Partner
By DB Capital Partners, Inc.
By: /s/ Tyler Zachem
-----------------------------
Name: Tyler Zachem
Title: Managing Director
PURCHASE AGREEMENT
among
Outsourcing Solutions Inc.
and
the Purchasers named herein
Dated as of December 10, 1999
Relating to:
$100,000,000 in Units Consisting of
25,000 Shares of
Class A 14% Senior Mandatorily Redeemable Preferred Stock,
75,000 Shares of
Class B 14% Senior Mandatorily Redeemable Preferred Stock
and
596,913.07 Shares of Voting Common Stock, $.01 Par Value
<PAGE>
TABLE OF CONTENTS
Page
RECITALS ......................................................................1
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.01. Definitions...........................................................2
1.02. Computation of Time Periods..........................................13
1.03. Accounting Terms.....................................................13
SECTION 2
AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES
2.01. Authorization of Issue...............................................13
2.02. Sale.................................................................13
2.03. Closing..............................................................14
2.04. Allocation of Purchase Price.........................................14
SECTION 3
CONDITIONS TO CLOSING
3A. Conditions to Obligation of Each Purchaser to Close..................14
3.01A. Representations and Warranties.......................................14
3.02A. Performance; No Default Under Other Agreements.......................15
3.03A. Compliance Certificates..............................................15
(a) Officer's Certificate..........................................15
(b) Secretary's Certificate........................................15
3.04A. Opinions of Counsel..................................................15
3.05A. Recapitalization.....................................................16
3.06A. No Adverse Events....................................................16
3.07A. Financial Information................................................16
3.08A. Proceedings and Documents............................................16
3.09A. Purchase Permitted by Applicable Law, etc............................17
3.10A. Transaction Documents in Force and Effect; Information;
Certificate of Designation.......................................17
(a) Transaction Documents..........................................17
(b) Accuracy of Information........................................17
(c) Filing of Amended and Restated Certificate of
Incorporation and Certificate of Designation..................17
3.11A. No Violation; No Legal Constraints; Consents, Authorizations
and Filings, etc...................................................18
3.12A. Credit Agreement.....................................................18
3.13A. Fees and Expenses of the Recapitalization............................18
3.14A. Solvency Certificate.................................................18
3.15A. Litigation...........................................................19
3.16A. Disbursement Instructions............................................19
3.17A. Junior Preferred Stock................................................19
3B. Conditions to Obligation of the Company to Close.....................19
3.01B. Representations and Warranties.......................................19
3.02B. Compliance with Covenants............................................19
3.03B. Litigation...........................................................19
3.04B. Documentation........................................................19
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.01. Due Incorporation; Power and Authority...............................20
4.02. Capitalization.......................................................20
4.03. Subsidiaries.........................................................21
4.04. Due Authorization, Execution and Delivery............................21
(a) Agreement......................................................21
(b) Senior Preferred Stock; Certificate of Designation.............21
(c) Common Stock Registration Rights Agreement; Preferred
StockRegistration Rights Agreement.............................22
(d) Common Stock...................................................22
(e) Stockholders Agreement.........................................22
(f) Other Transaction Documents....................................22
4.05. Noncontravention; Authorizations and Approvals.......................23
4.06. Company Financial Statements.........................................23
4.07. Absence of Undisclosed Liabilities or Events.........................24
4.08. No Actions or Proceedings............................................25
4.09. Title to Properties..................................................25
4.10. Intellectual Property Rights.........................................25
4.11. Taxes................................................................25
4.12. Employee Benefit Plans...............................................27
4.13. Private Offering; No Integration or General Solicitation.............29
4.14. Eligibility for Resale Under Rule 144A...............................30
4.15. [INTENTIONALLY OMITTED]..............................................30
4.16. Insurance............................................................30
4.17. Environmental Laws and Regulations...................................30
4.18. Solvency.............................................................31
4.19. Affiliate Transactions...............................................31
4.20. Material Contracts...................................................31
4.21. Brokerage Fees.......................................................31
4.22. Employment Relations and Agreements..................................31
4.23. [INTENTIONALLY OMITTED]..............................................32
4.24. Compliance with Laws; Licenses.......................................32
SECTION 5
REPRESENTATIONS OF THE PURCHASERS
5.01. Purchase for Investment..............................................32
5.02. Organization of the Purchasers.......................................33
5.03. Authorization of Transaction.........................................33
5.04. Noncontravention.....................................................33
5.05. Brokers' Fees........................................................34
SECTION 6
PROVISIONS RELATING TO RESALES OF SECURITIES
6.01. Private Offerings....................................................34
(a) Offers and Sales of Senior Preferred Stock Only to
Institutional Accredited Investors or Qualified
Institutional Buyers.........................................34
(b) No General Solicitation........................................34
(c) Purchases by Non-Bank Fiduciaries..............................35
(d) Restrictions on Transfer; Legend...............................35
(e) No Future Liability............................................35
(f) Securities Act Restrictions....................................35
6.02. Resale Offering Assistance...........................................36
6.03. Blue Sky Compliance..................................................38
6.04. Common Stock Registration Rights Agreement; Preferred Stock
Registration Rights Agreement......................................39
6.05. No Integration.......................................................39
6.06. DTC Agreement and PORTAL.............................................39
6.07. [Intentionally Omitted]..............................................39
6.08. Form of Legend for the Securities....................................39
SECTION 7
THE SENIOR PREFERRED STOCK
7.01. Execution............................................................41
7.02. Terms of the Senior Preferred Stock..................................41
7.03. Payments and Computations............................................41
7.04. Registration; Registration of Transfer and Exchange..................41
(a) Security Register..............................................41
(b) Registration of Transfer.......................................41
(c) Exchange.......................................................42
(d) Effect of Registration of Transfer or Exchange.................42
(e) Requirements; Charges..........................................42
(f) Certain Limitations............................................42
7.05. Mutilated, Destroyed, Lost and Stolen Shares.........................42
7.06. Persons Deemed Owners................................................43
7.07. Cancellation.........................................................43
7.08. Home Office Payment..................................................44
7.09. Separability.........................................................44
7.10. Board Observation....................................................44
7.11. Reports, Books, Records and Access...................................45
SECTION 8
REDEMPTION
8.01. Right of Redemption..................................................46
8.02. Partial Redemptions..................................................46
8.03. Notice of Redemption.................................................46
8.04. Deposit of Redemption Price..........................................46
8.05. Shares Payable on Redemption Date....................................46
8.06. Shares Redeemed in Part..............................................47
SECTION 9
EXPENSES, INDEMNIFICATION AND
CONTRIBUTION AND TERMINATION
9.01. Expenses.............................................................47
9.02. Indemnification......................................................48
(a) Indemnification by the Company.................................48
(b) Indemnification by the Purchasers..............................48
(c) Notifications and Other Indemnification Procedures.............49
9.03. Contribution.........................................................50
9.04. Survival.............................................................51
9.05. Termination..........................................................51
SECTION 10
MISCELLANEOUS
10.01. Notices..............................................................52
10.02. Benefit of Agreement; Assignments and Participations.................52
10.03. No Waiver; Remedies Cumulative.......................................53
10.04. Amendments, Waivers and Consents.....................................53
10.05. Counterparts.........................................................53
10.06. Reproduction.........................................................54
10.07. Headings.............................................................54
10.08. Governing Law; Submission to Jurisdiction; Venue.....................54
10.09. Severability.........................................................55
10.10. Entirety.............................................................55
10.11. Survival of Representations and Warranties...........................56
10.12. Incorporation........................................................56
10.13. Press Releases and Public Announcements..............................56
10.14. Public Disclosures...................................................56
<PAGE>
EXHIBITS
Exhibit A - Form of Certificate of Designation
Exhibit B - Form of Preferred Stock Registration Rights Agreement
Exhibit C - Form of Common Stock Registration Rights Agreement
Exhibit D - Form of Officer's Certificate
Exhibit E - Form of Secretary's Certificate
Exhibit F-1 - Form of Opinion of Company Counsel
Exhibit F-2 - Form of Opinion of Cahill Gordon & Reindel
Exhibit G - Form of Amended and Restated Certificate of Incorporation
Exhibit H - Form of Stockholders Agreement
SCHEDULES
Schedule A - Information Relating to Purchasers
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of December 10, 1999, by and among
Outsourcing Solutions Inc., a Delaware corporation (together with its
successors, the "Company"), and Ares Leveraged Investment Fund, L.P., Ares
Leveraged Investment Fund II, L.P., DB Capital Investors, L.P., First Union
Investors, Inc., Abbott Capital 1330 Investors II, L.P., Abbott Capital Private
Equity Fund III, L.P., BNY Partners Fund, L.L.C., Heller Financial, Inc. and
Magnetite Asset Investors L.L.C. (each a "Purchaser" and, collectively, the
"Purchasers").
RECITALS
WHEREAS, upon the terms and subject to the conditions set forth
in this Agreement, the Company has agreed to sell to the Purchasers, and each
Purchaser, acting severally and not jointly, has agreed to purchase for
aggregate gross proceeds of $100.0 million from the Company, 100,000 units (the
"Units") in the aggregate consisting of (i) either one share of the Company's
Class A 14% Senior Mandatorily Redeemable Preferred Stock (the "Class A Senior
Preferred Stock") or one share of the Company's Class B 14% Senior Mandatorily
Redeemable Preferred Stock (the "Class B Senior Preferred Stock"), in each case
with terms and conditions as set forth in the Certificate of Designation, the
form of which is attached hereto as Exhibit A (the "Certificate of
Designation"), and (ii) 596,913.07 shares of the Company's Common Stock (as
defined), as set forth on Schedule A. The Class A Senior Preferred Stock
together with the Class B Senior Preferred Stock are herein referred to as the
"Senior Preferred Stock." The Senior Preferred Stock together with the shares of
Common Stock issued to the Purchasers are herein referred to as the
"Securities."
WHEREAS, the Company is issuing the Securities as part of its
recapitalization (the "Recapitalization") pursuant to a Stock Subscription and
Redemption Agreement dated as of October 8, 1999, as amended (the
"Recapitalization Agreement"), by and among the Company, Madison Dearborn
Capital Partners III, L.P. (the "Equity Investor") and certain of the
stockholders, optionholders and warrantholders of the Company party thereto.
WHEREAS, simultaneously with receipt of the proceeds from the
sale of the Securities, the Company will utilize such proceeds, proceeds from
borrowings under the Credit Agreement (as defined) and proceeds from the equity
contribution from the Equity Investor, certain Purchasers, certain other
investors and management of the Company to effect the Recapitalization.
WHEREAS, the holders of the Senior Preferred Stock from time to
time will be entitled to the benefits of a Registration Rights Agreement, dated
the date hereof (the "Preferred Stock Registration Rights Agreement"), by and
among the Company and the Purchasers in the form of Exhibit B hereto.
WHEREAS, the holders of Common Stock and Non-Voting Common Stock
from time to time will be entitled to the benefits of a Registration Rights
Agreement, dated the date hereof (the "Common Stock Registration Rights
Agreement"), by and among the Company, the Equity Investor, the Purchasers, and
others in the form of Exhibit C hereto.
WHEREAS, the holders of Common Stock and Non-Voting Common Stock
from time to time will be entitled to the benefits of the Stockholders
Agreement, dated the date hereof (the "Stockholders Agreement"), by and among
the Company, the Equity Investor, certain stockholders, optionholders and
warrantholders of the Company, the Purchasers, and others in the form of Exhibit
H hereto.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.01. Definitions. As used herein, the following terms shall
have the meanings specified herein unless the context otherwise requires
"Accredited Investor" means any Person that is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act.
"Additional Company Information" is defined in Section 6.02.
"Affiliate" means with respect to any specified Person: (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person; (ii) any other Person
that owns, directly or indirectly, 10% or more of such specified Person's
Capital Stock; or (iii) any other Person 10% or more of the Voting Stock of
which is beneficially owned or held directly or indirectly by such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. With respect to each
Purchaser, an Affiliate shall also include, without limitation, any Person
managed or advised by, or controlling or under common control with, such
Purchaser or any of its Affiliates. Notwithstanding anything to the contrary
contained herein, (x) no portfolio company of the Equity Investor nor any
portfolio company of a fund managed by or affiliated with the Equity Investor
shall be deemed an Affiliate of the Company and (y) no Purchaser or any of their
respective Affiliates shall be deemed an Affiliate of the Company.
"Agent" is defined in Section 10.08(c).
"Agreement" is defined in Section 10.04.
"Amended and Restated Certificate of Incorporation" means the
Fourth Amended and Restated Certificate of Incorporation of the Company in the
form of Exhibit G hereto.
"Applicable Law" means all applicable laws, statutes, treaties,
rules, codes (including building codes), ordinances, regulations, certificates,
orders and licenses of, and interpretations by, any Governmental Authority and
judgments, decrees, injunctions, writs, permits, orders or like governmental
action of any Governmental Authority (including any Environmental Law and any
laws pertaining to health or safety) applicable to any parties hereto (including
their respective property or operations), as appropriate.
"Assistance Period" is defined in Section 6.02.
"Audit Date" means December 31, 1998.
"Benefit Plan" is defined in Section 4.12.
"Board Observer" is defined in Section 7.10.
"Board of Directors" means the Board of Directors of the Company
or one of its Subsidiaries, as the case may be, or any authorized committee of
such Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (i) with respect to any Person that is a
corporation, corporate stock; (ii) in the case of any association or business
entity, any and all shares, interests, participations, rights or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of common stock and preferred stock of such Person; (iii)
with respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person; and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Capitalized Lease Obligation" means, at the time determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CERCLA" is defined in Section 4.17.
"Certificate of Designation" is defined in the first recital to
this Agreement.
"Change of Control" is defined in the Certificate of Designation.
"Class A Senior Preferred Stock" is defined in the first recital
to this Agreement.
"Class B Senior Preferred Stock" is defined in the first recital
to this Agreement.
"Closing Time" is defined in Section 2.03.
"COBRA" is defined in Section 4.12.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder, as amended
from time to time.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this Agreement such Commission is not existing and
performing the duties now assigned to it under the Exchange Act, the body
performing such duties at such time.
"Common Stock" means the Company's Voting Common Stock, $.01 par
value.
"Common Stock Registration Rights Agreement" is defined in the
fifth recital to this Agreement.
"Company" shall have the meaning assigned in the preamble to this
Agreement and shall include its successors and permitted assigns.
"Company Financial Statements" is defined in Section 4.06.
"Company Indemnified Person" is defined in Section 9.02(b).
"Company Property" is defined in Section 4.17.
"Compensation Commitment" is defined in Section 4.12.
"Competitor" means any Person who is engaged in the (i) accounts
receivable management services and outsourcing business, (ii) consumer debt
purchasing business (other than related to asset backed securities or similar
investments) or (iii) credit card business and shall include, without
limitation, Capital One, Providian, Metris and NCO Group; provided, that no
Person or any Affiliate thereof shall be a Competitor for purposes of this
Agreement solely by reason of (a) the beneficial ownership for investment
purposes of (x) less than 15% of the voting equity securities of any Person
engaged, directly or through its Affiliates, in the business described in
clauses (i) or (ii) or (y) less than 50% of the voting equity securities of any
Person engaged, directly or through its Affiliates, in the business described in
clause (iii), and (b) being a lender to any Person, whether or not it is a
Competitor.
"consolidated" or on a "consolidated basis," when used with
reference to any financial term in this Agreement (but not when used with
respect to any Tax Return or tax liability), means the aggregate for two or more
Persons of the amounts signified by such term for all such Persons, with
intercompany items eliminated and, with respect to net income or earnings, after
eliminating the portion of net income or earnings properly attributable to
minority interests, if any, in the capital stock of any such Person or
attributable to shares of preferred stock of any such Person not owned by any
other such Person, in accordance with GAAP.
"Controlling Person" is defined in Section 9.02(a).
"Credit Agreement" means the Credit Agreement dated as of
November 30, 1999 among the Company, certain subsidiaries of the Company, as
guarantors, DLJ Capital Funding, Inc., as Syndication Agent, Fleet National
Bank, N.A., as Administrative Agent, and Harris Trust & Savings Bank, as
Documentation Agent, and the other financial institutions from time to time
party thereto, together with the related documents (including notes, guarantees,
collateral documents, instruments and agreements executed therewith), and in
each case as amended (including any amendment and restatement thereof),
modified, renewed, refunded, replaced or refinanced from time to time, including
any agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding Subsidiaries of the Company as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of creditors.
"Depositary" is defined in Section 6.06.
"Dividend Payment Date" is defined in the Certificate of
Designation.
"Dividend Record Date" is defined in the Certificate of
Designation.
"Enforceability Exceptions" means, with respect to any specified
obligation, any limitations on the enforceability of such obligation due to
bankruptcy, insolvency, reorganization, moratorium, and other similar laws of
general applicability relating to or affecting creditors' rights or general
equity principles (other than, in any such case, any federal or state laws
relating to fraudulent transfers) and, in the case of any indemnity for
securities law obligations, to the extent such indemnity may not be enforceable
due to public policy considerations.
"Environmental Law" is defined in Section 4.17.
"Equity Investor" is defined in the second recital to this
Agreement.
"ERISA" is defined in Section 4.12.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission thereunder.
"Fair Market Value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length free market transaction,
for cash, between an informed and willing seller under no compulsion to sell and
an informed and willing buyer neither of which is under pressure or compulsion
to complete the transaction. Fair Market Value shall be determined by the Board
of Directors of the Company or the applicable Subsidiary acting reasonably and
in good faith.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"Governmental Authority" means (a) the government of the United
States or any State or other political subdivision thereof, (b) any government
or political subdivision of any other jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or (c) any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any such government.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hazardous Materials" is defined in Section 4.17.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange agreements, interest rate
swap agreements, interest rate cap agreements or interest rate collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange or interest rates.
"Holder" means any Person in whose name a share of Senior
Preferred Stock or Common Stock, as applicable, purchased pursuant hereto is
registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capitalized Lease Obligations or the balance
deferred and unpaid of the purchase price of any property (other than contingent
or "earnout" payment obligations) or representing any Hedging Obligations
(except any such balance that constitutes an accrued expense or trade payable)
or any Redeemable Capital Stock of such Person, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person in an amount equal to the lesser of the aggregate
amount of such indebtedness secured by such Lien and the value of all of the
assets of such Person securing such indebtedness (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other Person.
"Indemnified Person" is defined in Section 9.02(c).
"Institutional Accredited Investors" is defined in Section
6.01(a).
"Intellectual Property" means (a) all inventions and discoveries
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, (c) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith, (d) all broadcast rights, (e) all mask works and all
applications, registrations and renewals in connection therewith, (f) all
know-how, trade secrets and confidential business information, whether
patentable or unpatentable and whether or not reduced to practice (including
ideas, research and development, know-how, formulas, compositions and
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), (g) all computer
software (including data and related documentation), (h) all other proprietary
rights, (i) all copies and tangible embodiments thereof (in whatever form or
medium) and (j) all licenses and agreements in connection therewith.
"IRS" is defined in Section 4.12(c).
"Junior Preferred Stock" means 7,000 shares of the Company's
Junior Preferred Stock issued on the date hereof to certain stockholders of the
Company.
"Knowledge Group" means each of Timothy Beffa, Gary Weller, Eric
Fencl, Esq., Paul Wood and Timothy Hurd.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in The City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed.
"License" is defined in Section 4.24.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under Applicable
Law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Mandatory Redemption Date" means the date that is the eight year
anniversary of the Closing Time.
"Material Adverse Effect" means a material adverse effect on (a)
the business, prospects, operations, results of operations or financial
condition of the Company and its Subsidiaries, taken as a whole, (b) the ability
of the Company or any Subsidiary to perform any of its material obligations
under any of the Transaction Documents, or (c) the validity or enforceability of
any Transaction Document.
"Non-Voting Common Stock" means the Company's Non-Voting Common
Stock, $.01 par value.
"Obligations" means any accrued and unpaid dividends and other
liabilities payable by the Company under or in respect of this Agreement or the
Certificate of Designation.
"Officer" means, with respect to any Person, the President, Chief
Executive Officer or the Chief Financial Officer of such Person.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by an Officer of such Person; provided, however, that every
Officer's Certificate with respect to compliance with a covenant or condition
provided for in this Agreement 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 and
(ii) a statement as to whether, in the opinion of the signer, such condition has
been complied with.
"outstanding" means, when used with respect to the Senior
Preferred Stock as of the date of determination, all shares of Senior Preferred
Stock theretofore executed and delivered under this Agreement and the
Certificate of Designation, except:
(i) shares theretofore canceled by the Company or delivered to
the Company for cancellation;
(ii) shares for whose payment or redemption money in the necessary
amount has been theretofore set aside by the Company with a third party
in trust for the holders of such shares; provided that if such shares
are to be redeemed, notice of such redemption has been duly given as
provided in this Agreement; and
(iii) shares which have been paid pursuant to Section 7.07 or in
exchange for or in lieu of which other shares have been executed and
delivered pursuant to this Agreement, other than any such shares in
respect of which there shall have been presented to the Company proof
satisfactory to it that such shares are held by a bona fide purchaser in
whose hands such shares are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
number of the outstanding shares of Senior Preferred Stock have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
shares of Senior Preferred Stock owned by the Company or any other obligor upon
the Senior Preferred Stock or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be outstanding. Shares of Senior
Preferred Stock so owned which have been pledged in good faith may be regarded
as outstanding if the pledgee establishes to the satisfaction of the Required
Holders the pledgee's right so to act with respect to such shares and that the
pledgee is not the Company or any other obligor upon the shares or any Affiliate
of the Company or of such other obligor.
"Permitted Business" means the business of the Company and its
Subsidiaries as of the Closing Time and any other business reasonably related,
ancillary or complementary thereto.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PORTAL Market" is defined in Section 6.06.
"Preferred Stock" means, with respect to any Person, Capital
Stock of any class or classes (however designated) of such Person which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Capital Stock of any other class of such
Person. With respect to the Company, the term "Preferred Stock" shall include
the Senior Preferred Stock.
"Preferred Stock Registration Rights Agreement" is defined in the
fourth recital to this Agreement.
"Private Offering" is any offering by any of the Purchasers of
some or all of the Securities that are Registrable Securities without
registration under the Securities Act.
"property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Purchase Price" is defined in Section 2.02.
"Purchaser Indemnified Person" is defined in Section 9.02(a).
"Purchasers" is defined in the preamble to this Agreement.
"Qualified Institutional Buyer" means any Person that is a
"qualified institutional buyer" within the meaning of Rule 144A.
"Recapitalization" is defined in the second recital to this
Agreement.
"Recapitalization Agreement" is defined in the second recital to
this Agreement.
"Recapitalization Documents" means the Recapitalization Agreement
and any other related documents delivered in connection therewith.
"Redeemable Capital Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date that is 91 days after the Stated Maturity of the Senior Preferred
Stock.
"Redemption Date" means, when used with respect to any share of
Senior Preferred Stock to be redeemed, the date fixed for such redemption by or
pursuant to this Agreement or the Certificate of Designation.
"Redemption Price", when used with respect to any share of Senior
Preferred Stock to be redeemed, means the price at which it is to be redeemed
pursuant to this Agreement or the Certificate of Designation.
"Registrable Securities" means the Securities and any other
securities issued or issuable in exchange for the Securities. As to any
particular Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been distributed to the public pursuant to Rule
144, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar Applicable Law
then in force, or (d) they shall have ceased to be outstanding.
"Regulation S" means Regulation S under the Securities Act (or
any successor provision), as it may be amended from time to time.
"Release" is defined in Section 4.17.
"Reorganization" means the Company's corporate reorganization of
its Subsidiaries as described in the Recapitalization Agreement (including the
schedules thereto).
"Required Holders" means holders of more than 50% of the
outstanding shares of Senior Preferred Stock.
"Resale Materials" is defined in Section 6.02(c).
"Returns" is defined in Section 4.11(a).
"Rule 144" means Rule 144 under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Securities" is defined in the first recital to this Agreement.
"Securities Act" mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Security Register" has the meaning given to such term in Section
7.04(a).
"Senior Preferred Stock" is defined in the first recital to this
Agreement.
"Senior Subordinated Notes" means the Company's 11% Senior
Subordinated Notes due 2006.
"Significant Holder" means (a) any Purchaser that, together with
its Affiliates, holds at least 20% of the outstanding shares of Senior Preferred
Stock and (b) Ares Leveraged Investment Fund, L.P., Ares Leveraged Investment
Fund II, L.P. and any of their respective Affiliates so long as such entities
described in this clause (b) hold in the aggregate at least 15% of the
outstanding shares of Senior Preferred Stock.
"Solvent" means, with respect to any Person as of the date of any
determination, that on such date (a) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (b) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature and (c) such Person is not
engaged in a business or a transaction, and is not about to engage in a business
or a transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to current and anticipated future
capital requirements and current and anticipated future business conduct and the
prevailing practice in the industry in which such Person is engaged. In
computing the amount of contingent liabilities at any time, such liabilities
shall be computed as the amount which, in light of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Stated Maturity" means (a) with respect to any share of Senior
Preferred Stock, the Mandatory Redemption Date, (b) with respect to any dividend
on the Senior Preferred Stock, the dates specified in the Certificate of
Designation as the fixed date on which such dividend is due and payable and (c)
with respect to any other Indebtedness, the date specified in the instrument
governing such Indebtedness as the fixed date on which the principal of such
Indebtedness or any installment of interest is due and payable.
"Stockholders Agreement" has the meaning specified in the sixth
recital to this Agreement.
"Subsequent Purchaser" is defined in Section 4.13(a).
"Subsidiary" means, with respect to any Person, (a) any
corporation of which the outstanding shares of Voting Stock having at least a
majority of the votes entitled to be cast in the election of directors shall at
the time be owned, directly or indirectly, by such Person, (b) any partnership,
limited liability company, association, joint venture or other entity in which
such Person and/or one or more of its Subsidiaries have at least a majority of
the shares of Voting Stock of such entity at the time or (c) any partnership (i)
the sole general partner or the managing general partner of which is such Person
or a Subsidiary of such Person or (ii) the only general partners of which are
such Person or one or more Subsidiaries of such Person (or any combination
thereof).
"Tax" is defined in Section 4.11(a).
"Transaction Documents" means, collectively, this Agreement, the
Certificate of Designation, the Amended and Restated Certificate of
Incorporation, the Common Stock Registration Rights Agreement, the Preferred
Stock Registration Rights Agreement, the Stockholders Agreement, the Senior
Preferred Stock, the Common Stock issued hereunder, the Credit Agreement, the
Recapitalization Documents and all certificates, instruments, financial and
other statements and other documents made or delivered in connection herewith
and therewith.
"Transactions" means, collectively, the transactions provided for
in, or contemplated by, the Transaction Documents (including, without
limitation, the Recapitalization).
"United States" shall have the meaning assigned to such term in
Regulation S.
"Units" is defined in the first recital to this Agreement.
"Voting Rights Triggering Event" is defined in the Certificate of
Designation.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any Person (irrespective of whether or not, at the time,
stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency); provided that the Company's
Preferred Stock will be considered Voting Stock to the extent, at any time, the
voting rights therein entitle the holders thereof to designate a director.
1.02. Computation of Time Periods. For purposes of computation
of periods of time hereunder, the word "from" means "from and including" and the
words "to" and "until" each mean "to but excluding."
1.03. Accounting Terms. Accounting terms used but not otherwise
defined herein shall have the meanings provided in, and be construed in
accordance with, GAAP.
SECTION 2
AUTHORIZATION, ISSUANCE and sale OF SECURITIES
2.01. Authorization of Issue. The Company has authorized the
issue and sale of (i) 25,000 shares of Class A Senior Preferred Stock and 75,000
shares of Class B Senior Preferred Stock, each with terms as set forth in the
Certificate of Designation, and (ii) 596,913.07 shares of Common Stock.
2.02. Sale. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Purchaser, and each Purchaser, acting severally
and not jointly, agrees to purchase from the Company, the aggregate number of
shares of Class A Senior Preferred Stock or Class B Senior Preferred Stock, as
applicable, and the aggregate number of shares of Common Stock, in each case,
set forth on Schedule A opposite the name of such Purchaser at a purchase price
(the "Purchase Price") of $1,000 for each Unit consisting of one share of either
Class A Senior Preferred Stock or Class B Senior Preferred Stock, as applicable,
and 5.9691307 shares of Common Stock.
2.03. Closing. The purchase and sale of Securities pursuant to
this Agreement shall occur at the offices of White & Case LLP, 1155 Avenue of
the Americas, New York, New York 10005-1702, at 9:00 a.m., New York City time,
on December 10, 1999, or such other time as shall be agreed upon by the
Purchasers and the Company (such time and date of payment and delivery being
herein called the "Closing Time"). At the Closing Time, the Company will deliver
to each Purchaser certificates for the Securities to be purchased by such
Purchaser at the Closing Time, in such denominations as such Purchaser may
request (but with respect to the Senior Preferred Stock, in increments of
$1,000), dated the Closing Time and registered in such Purchaser's name, against
payment by such Purchaser to the Company by wire transfer of immediately
available funds in the amount of the Purchase Price to be paid by such Purchaser
therefor to such bank account or accounts as the Company may request in writing
at least two Business Days prior to the Closing Time.
2.04. Allocation of Purchase Price. For all income tax purposes,
the Company and the Purchasers agree that the Purchase Price for each Unit paid
by each Purchaser shall be allocable as follows: $776.3367 to each share of
Senior Preferred Stock and $37.47 to each share of Common Stock.
SECTION 3
CONDITIONS TO CLOSING
3A. Conditions to Obligation of Each Purchaser to Close. Each
Purchaser's several obligation to purchase and pay for the Securities to be
purchased by it at the Closing Time is subject to the satisfaction or waiver by
each Purchaser prior to or at the Closing Time of each of the conditions
specified below in this Section 3A:
3.01A. Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement and in each of
the other Transaction Documents shall be true and correct in all material
respects when made and at and as of the Closing Time as if made on and as of the
Closing Time (unless expressly stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date and, in any such case, there shall not
have occurred since such date and prior to the Closing Time any developments
with respect to the subject matter of any such representation and warranty which
would have a Material Adverse Effect as determined by the Purchasers in their
reasonable judgment); provided, that any representations and warranties of the
Company in this Agreement or any of the other Transaction Documents which are
qualified as to "materiality" or "Material Adverse Effect" shall be true and
correct in all respects.
3.02A. Performance; No Default Under Other Agreements. The
Company shall have performed and complied in all material respects (or such
performance or compliance shall have been waived) with all agreements and
conditions contained in this Agreement and each of the other Transaction
Documents required to be performed or complied with by it prior to or at the
Closing Time (including, without limitation, obtaining the requisite consents
and/or waivers from holders of Senior Subordinated Notes or repurchasing the
Senior Subordinated Notes pursuant to a change of control offer in accordance
with the indenture governing the Senior Subordinated Notes) and after giving
effect to the issue and sale of the Securities and the other Transactions (and
the application of the proceeds thereof as contemplated by the Transaction
Documents), no Voting Rights Triggering Event shall have occurred and be
continuing and no default or event of default shall have occurred and be
continuing under any of the other Transaction Documents.
3.03A. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to
the Purchasers an Officer's Certificate, dated the Closing Time, in the form of
Exhibit D hereto, certifying that the conditions specified in Sections 3.01A,
3.02A, 3.05A, 3.06A, 3.07A, 3.09A, 3.10A and 3.11A have been fulfilled (it being
understood that the Company does not have to certify as to any matter set forth
in any section to the extent that the determination thereof is to be made by the
Purchasers).
(b) Secretary's Certificate. The Company shall have delivered to
the Purchasers a certificate substantially in the form of Exhibit E hereto
certifying as to the Company's certificate of incorporation (including the
Certificate of Designation), bylaws and resolutions attached thereto, the
incumbency and signatures of certain officers of the Company, other corporate
proceedings of the Company relating to the authorization, execution and delivery
of the Securities, this Agreement, the Certificate of Designation, the Common
Stock Registration Rights Agreement, the Preferred Stock Registration Rights
Agreement and the other Transaction Documents to the extent the Company is a
party thereto and as to the good standing of the Company in the State of
Delaware and in each other jurisdiction in which the Company is qualified to
transact business.
3.04A. Opinions of Counsel. Such Purchaser shall have received
favorable opinions in form and substance satisfactory to it, dated the Closing
Time, from (i) various counsel for the Company, which collectively shall be
substantially in the form set forth in Exhibit F-1 and as to such other matters
as such Purchaser may reasonably request, (ii) Cahill Gordon & Reindel, certain
of the Purchasers' special counsel in connection with such transactions,
substantially in the form set forth in Exhibit F-2, and (iii) each counsel
delivering an opinion in connection with the Recapitalization, a copy of each
such legal opinion, accompanied by a letter from each such counsel (or a
statement included in such opinion) authorizing the Purchasers to rely on such
opinion.
3.05A. Recapitalization. The transactions contemplated by the
Recapitalization Documents shall have been consummated in accordance with the
Recapitalization Documents. Any amendments or waivers with respect to the
Recapitalization Documents shall be reasonably satisfactory to the Purchasers
and their respective special counsel. The Company shall have (i) received at
least $199.5 million as an equity contribution from the Equity Investor or its
designees, (ii) received at least $17.0 million as an equity contribution from
the Company's management and certain stockholders in the form of a rollover of
existing equity interests, (iii) received at least $400.0 million of term loans
and a revolving credit facility of $75.0 million (of which only $4.0 million may
be drawn at the Closing Time) under the Credit Agreement and (iv) completed the
consent solicitation with respect to, or refinanced, $100.0 million of the
Company's Senior Subordinated Notes. After giving effect to the Recapitalization
and the financing thereof, the Company shall have no more than $583.8 of
outstanding Indebtedness and the Company's only outstanding Capital Stock will
be (a) 5,956,712.25 million shares of Common Stock, including 4,843,239.78
shares issued to the Equity Investor and its designees and 596,913.07 shares
issued to the Purchasers pursuant to this Agreement, (b) 480,321.3 shares of
Non-Voting Common Stock, (c) 25,000 shares of Class A Senior Preferred Stock and
75,000 shares of Class B Senior Preferred Stock in the aggregate issued to the
Purchasers, (d) 7,000 shares of Junior Preferred Stock and (e) options to
purchase 440,425 shares of Common Stock issued to management of the Company.
3.06A. No Adverse Events. Since the Audit Date, there has been
no material adverse change in the business, prospects, operations, results of
operations, or financial condition of the Company and its Subsidiaries, taken as
a whole.
3.07A. Financial Information. The Company shall have delivered to
such Purchaser a pro forma consolidated balance sheet for the Company and its
Subsidiaries as of the Closing Time after giving effect to the Transactions,
including the issuance of the Senior Preferred Stock and the use of the proceeds
from the issuance of the Securities, which has been certified by the Chief
Financial Officer of the Company and which is in form and substance satisfactory
to such Purchaser.
3.08A. Proceedings and Documents. All corporate and other
proceedings in connection with the Transactions and the other transactions
contemplated by this Agreement and the other Transaction Documents, and all
documents and instruments incident to such transactions and the terms thereof,
shall be reasonably satisfactory to such Purchaser and such Purchaser's special
counsel, and such Purchaser and the Purchaser's special counsel shall have
received all counterpart originals or certified or other copies of all the
Transaction Documents and all documents and instruments incident to all
corporate and other proceedings or transactions in connection with the
Transactions as it or they may reasonably request. The Company shall have agreed
in writing that all fees owing as of the Closing Time pursuant to this Agreement
and the transactions contemplated hereby shall be paid in full to each Purchaser
within two Business Days following the Closing Time..
3.09A. Purchase Permitted by Applicable Law, etc. At the Closing
Time, such Purchaser's purchase of the Securities shall (a) be permitted by the
laws and regulations of each jurisdiction to which it is subject, (b) not
violate any Applicable Law (including, without limitation, Regulation U, T or X
of the Board of Governors of the Federal Reserve System) and (c) not subject
such Purchaser to any tax, penalty or liability under or pursuant to any
Applicable Law.
3.10A. Transaction Documents in Force and Effect; Information;
Certificate of Designation.
(a) Transaction Documents. The Company shall have delivered to
such Purchaser true and correct copies of all Transaction Documents and (i) such
documents (A) shall have been duly executed and delivered by the Company and its
Subsidiaries party thereto, (B) shall be in form and substance reasonably
satisfactory to such Purchaser and its special counsel and (C) shall be valid
and legally binding obligations of the Company and its Subsidiaries a party
thereto enforceable against each of them in accordance with their respective
terms, subject to the Enforceability Exceptions, and (ii) there shall have been
no material amendments, alterations, modifications or waivers of any provision
thereof since the date of this Agreement.
(b) Accuracy of Information. All information furnished by the
Company and its representatives to such Purchaser on or prior to the Closing
Time with respect to the business, management, prospects, operations, results of
operations or condition (financial or otherwise) of the Company and its
Subsidiaries, as the case may be, shall be accurate and complete in all material
respects.
(c) Filing of Amended and Restated Certificate of Incorporation
and Certificate of Designation. Each of (i) the Amended and Restated Certificate
of Incorporation and (ii) the Certificate of Designation shall have been duly
and validly approved by all necessary corporate action, shall have been filed
with the Secretary of State of Delaware and shall have become effective.
3.11A. No Violation; No Legal Constraints; Consents,
Authorizations and Filings, etc.
(a) The consummation by the Company and its Subsidiaries of the
Transactions shall not contravene, violate or conflict with any Applicable Law.
(b) All consents, authorizations and filings, if any, required in
connection with the execution, delivery and performance by the Company and its
Subsidiaries of the Transaction Documents to which they are party shall have
been obtained or made and shall be in full force and effect, and such Purchaser
shall have been furnished with appropriate evidence thereof, and all waiting
periods shall have lapsed without extension or the imposition of any conditions
or restrictions, except, in the case of the Common Stock Registration Rights
Agreement, the Preferred Stock Registration Rights Agreement and the
Stockholders Agreement, for such consents, authorizations and filings which are
required under federal or state securities laws.
(c) There shall be no inquiry, injunction, restraining order,
action, suit or proceeding pending or entered or any statute or rule proposed,
enacted or promulgated by any Governmental Authority or any other Person which,
in the opinion of the Purchasers, (i) individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse Effect or which seeks
to enjoin or seek damages against the Company or any of the Company's
Subsidiaries or any of the Purchasers as a result of the Transactions, including
the issuance of the Senior Preferred Stock, (ii) relates to any of the
Transactions and has or will have a material adverse effect on any Purchaser,
(iii) alleges liability on the part of any Purchaser in connection with this
Agreement, any other Transaction Document or the Transactions or any of the
other transactions contemplated hereby or thereby or (iv) would bar the issuance
of the Securities or the use of the proceeds thereof in accordance with the
terms of this Agreement and the other Transaction Documents.
3.12A. Credit Agreement. Such Purchaser shall have been provided
with true and correct copies of the executed Credit Agreement and any related
documents, and such Credit Agreement shall contain terms and conditions
satisfactory to such Purchaser in its sole judgment. The financial institutions
party to the Credit Agreement shall have irrevocably committed to fund the
Recapitalization simultaneously with the funding of such Purchaser's payment for
the sale of the Securities.
3.13A. Fees and Expenses of the Recapitalization. The fees and
expenses incurred in connection with the Recapitalization (including, without
limitation, the related financings) shall not exceed $48.0 million in the
aggregate.
3.14A. Solvency Certificate. Such Purchaser shall have received
a certificate from the Company's Chief Financial Officer satisfactory to such
Purchaser that shall certify that the Company and its Subsidiaries (other than
Pay Tech, Inc.), immediately after giving effect to the Recapitalization, will
be Solvent.
3.15A. Litigation. No litigation by any entity (private or
governmental) shall be pending or threatened with respect to the
Recapitalization which the Purchasers shall reasonably determine could have a
Material Adverse Effect.
3.16A. Disbursement Instructions. Such Purchaser shall have
received written instructions from the Company to such Purchaser directing the
payment of any proceeds of the Securities that are to be paid at the Closing
Time.
3.17A. Junior Preferred Stock. Such Purchaser shall have been
provided with true and correct copies of the documents governing the Company's
Junior Preferred Stock, which shall contain terms and conditions satisfactory to
such Purchaser in its sole judgment.
3B. Conditions to Obligation of the Company to Close. The
obligation of the Company to consummate the transactions to be performed by it
at the Closing Time is subject to the following conditions:
3.01B. Representations and Warranties. Each of the
representations and warranties of the Purchasers in this Agreement shall be true
and correct in all material respects when made and at and as of the Closing Time
as if made on and as of the Closing Time (unless expressly stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date).
3.02B. Compliance with Covenants. The Purchasers shall have
performed and complied with all of their covenants hereunder in all material
respects through the Closing Time.
3.03B. Litigation. No litigation by any entity (private or
governmental) shall be pending or threatened with respect to the
Recapitalization or which could prevent consummation of any of the Transactions.
3.04B. Documentation. All actions to be taken by the Purchasers
in connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance to
the Company.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Purchasers as
of the date hereof and as of the Closing Time that:
4.01. Due Incorporation; Power and Authority. Each of the Company
and the Company's Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, (b) is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, other than
any failures to so qualify, to be so licensed or to be in good standing which,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect, (c) has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as they are currently
conducted, and (d) has all requisite power and authority to enter into and
perform its obligations under each of the Transaction Documents to which it is a
party.
4.02. Capitalization. As of the Closing Time, after giving effect
to the Transactions, the authorized Capital Stock of the Company consists solely
of (a) 15.0 million shares of its Common Stock, of which 5,956,712.25 million
are issued and outstanding, (b) 2.0 million shares of its Non-Voting Common
Stock, of which 480,321.3 shares are issued and outstanding, (c) 250,000 shares
of Preferred Stock, no par value, of which (i) 50,000 shares have been
designated as the Class A Senior Preferred Stock, of which 25,000 shares are
issued and outstanding, (ii) 150,000 shares have been designated as the Class B
Senior Preferred Stock, of which 75,000 shares are issued and outstanding and
(iii) 50,000 shares have been designated as the Junior Preferred Stock, of which
7,000 shares are issued and outstanding. No shares of any class of the Capital
Stock of the Company are held by the Company in its treasury or by the Company's
Subsidiaries. All the issued and outstanding shares of Common Stock (including
all shares of Common Stock to be issued upon the exercise of warrants or
options) have been duly authorized and are (or in the case of Common Stock
issued upon exercise of warrants or options, will be) validly issued, fully paid
and nonassessable and are (or in the case of Common Stock issued upon exercise
of warrants or options, will be) free of preemptive rights. Except as set forth
in the first sentence of this Section 4.02 or on Schedule 4.02, (i) there are no
shares of Capital Stock of the Company authorized, issued or outstanding and
(ii) there are not as of the date hereof, and at the Closing Time after giving
effect to the Transactions there will not be, any outstanding or authorized
options, warrants, rights (including preemptive rights), subscriptions, claims
of any character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to Common
Stock or any other shares of Capital Stock of the Company, pursuant to which the
Company is or may become obligated to issue shares of Common Stock, any other
shares of its Capital Stock or any securities convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of the Capital Stock
of the Company. Except as set forth on Schedule 4.02, there are no voting trusts
or other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the holding, voting or disposing of
Capital Stock of the Company or any of its Subsidiaries. Except as set forth on
Schedule 4.02, neither the Company nor any of its Subsidiaries has any
outstanding bonds, debentures, notes or other obligations or other securities
that entitle the holders thereof to vote with the stockholders of the Company or
any of its Subsidiaries on any matter or which are convertible into or
exercisable for securities having such a right to vote.
4.03. Subsidiaries. Schedule 4.03 lists all of the Company's
Subsidiaries. Except as set forth on Schedule 4.03, all of the outstanding
shares of Capital Stock of each of the Company's Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and are owned,
of record and beneficially, by the Company, free and clear of all liens,
encumbrances, options or claims whatsoever, except for liens, encumbrances and
claims created pursuant to the Credit Agreement. Except as set forth on Schedule
4.03, no shares of Capital Stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to 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 evidencing the right to subscribe for, any shares of such
Subsidiary. Except as set forth on Schedule 4.03, the Company does not own,
directly or indirectly, any Capital Stock in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company 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 Person.
4.04. Due Authorization, Execution and Delivery.
(a) Agreement. This Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to the Enforceability Exceptions.
(b) Senior Preferred Stock; Certificate of Designation. The
shares of Senior Preferred Stock to be purchased by the Purchasers from the
Company are governed by the terms of the Certificate of Designation, have been
duly authorized for issuance and sale pursuant to this Agreement and, when
issued and delivered by the Company at the Closing Time as provided herein, will
have been duly and validly executed, issued and delivered by the Company, will
be fully paid and nonassessable, will not be subject to capital calls, will not
have been issued in violation of, and will not be subject to, any preemptive or
similar rights, and will constitute valid and legally binding obligations of the
Company, enforceable against it in accordance with their terms, subject to the
Enforceability Exceptions. The Certificate of Designation has been duly
authorized, executed and delivered by the Company and, when filed with the
Secretary of State of the State of Delaware, will constitute a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to the Enforceability Exceptions. The certification of
incorporation of the Company, by virtue of the Certificate of Designation, sets
forth the rights, preferences and priorities of the Senior Preferred Stock.
(c) Common Stock Registration Rights Agreement; Preferred Stock
Registration Rights Agreement. Each of the Common Stock Registration Rights
Agreement and the Preferred Stock Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the Enforceability Exceptions.
(d) Common Stock. The Company has authorized the issuance and
delivery of 596,913.07 shares of its Common Stock pursuant to this Agreement and
such shares of Common Stock have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company at the
Closing Time as provided herein, will have been duly and validly executed,
issued and delivered by the Company, will be fully paid and nonassessable, will
not be subject to capital calls, will not have been issued in violation of and
will not be subject to any preemptive or similar rights, and at the Closing Time
will constitute 8.67% of the shares of Common Stock and Non-Voting Common Stock
of the Company (determined on a fully diluted basis as of the Closing Time,
after giving effect to the Transactions and without giving effect to claims with
respect to the Company's Common Stock described in item two (2) of Schedule 4.08
hereto), such shares having the rights, restrictions, privileges and preferences
set forth in the Amended and Restated Certificate of Incorporation of the
Company, and Holders of such shares of Common Stock and Non-Voting Common Stock
will have the benefit of and be subject to the terms and conditions of the
Stockholders Agreement. A detailed calculation of the fully diluted shares of
Common Stock and Non-Voting Common Stock of the Company, after giving effect to
the Transactions, is set forth on Schedule 4.04.
(e) Stockholders Agreement. The Stockholders Agreement has been
duly authorized, executed and delivered by the Company and constitutes a valid
and legally binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to the Enforceability Exceptions.
(f) Other Transaction Documents. Each Transaction Document (other
than those referred to in paragraphs (a) through (e) of this Section 4.04) (i)
has been duly authorized, executed and delivered by the Company, to the extent a
party thereto, and (ii) constitutes a valid and legally binding obligation of
the Company, to the extent a party thereto, enforceable against the Company in
accordance with its terms, subject to the Enforceability Exceptions.
4.05. Noncontravention; Authorizations and Approvals. Assuming
the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, are made and the waiting period thereunder has been terminated
or has expired (a) the execution and delivery by the Company or any of the
Company's Subsidiaries of any of the Transaction Documents to which it is a
party, (b) the performance by any of them of their respective obligations
thereunder, (c) the consummation of the transactions contemplated thereby or (d)
the issuance and delivery of the Securities hereunder will not: (i) violate any
provision of the certificate of incorporation or by-laws of the Company or the
comparable governing documents of any of its Subsidiaries; (ii) violate any
statute, ordinance, rule, regulation, order or decree of any Governmental
Authority applicable to the Company or any of its Subsidiaries or by which any
of their respective properties or assets may be bound; (iii) require any filing
with, or permit, consent or approval of, or the giving of any notice to, or
obtaining any new or additional licenses from any Governmental Authority; and
(iv) except as set forth on Schedule 4.05, result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a material default (or give rise to any right of termination, cancellation,
payment or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement, lease, franchise agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party, or by which it or any of
their respective properties or assets are bound or subject, except for, in the
case of clauses (iii) and (iv) above, such as would not have a Material Adverse
Effect, and would not prevent or materially delay consummation of the
Transactions. No violation of any provision of the certificate of incorporation
or by-laws of the Company or the comparable governing documents of any of its
Subsidiaries exists as a result of the Reorganization.
4.06. Company Financial Statements. The Company has delivered to
each Purchaser the following financial statements (collectively, the "Company
Financial Statements"): (i) complete and correct copies of the consolidated
balance sheets of the Company and its Subsidiaries as of December 31, 1998 and
1997 and the related consolidated statements of operations, stockholders' equity
and cash flows for the years then ended, including the footnotes thereto, in
each case audited by Deloitte & Touche LLP, (ii) complete and correct copies of
the unaudited consolidated balance sheets of the Company and its Subsidiaries as
of September 30, 1999 and September 30, 1998 and as of March 31, 1999 and June
30, 1999 and the related unaudited consolidated statements of operations,
stockholders' equity and cash flows for such quarters, and, in the case of the
quarters ending September 30, 1999 and September 30, 1998, each of the months in
such quarters, respectively, then ended, (iii) complete and correct copies of
the unaudited consolidated pro forma balance sheet of the Company and its
Subsidiaries as of September 30, 1999, and the unaudited pro forma consolidated
statements of operations for the nine months ended September 30, 1999 and (iv)
complete and correct copies of unaudited consolidated monthly financial
statements for each of the months from July through October 1999, in each case
showing a comparison of such financial statements to the budget for the
applicable month. Each of the consolidated balance sheets contained in the
Company Financial Statements fairly presents in all material respects the
consolidated financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of operations, stockholders' equity
and cash flows included in the Company Financial Statements fairly presents in
all material respects the consolidated results of operations and income,
retained earnings and stockholders' equity or cash flows, as the case may be, of
the Company and its Subsidiaries for the periods to which they relate (subject,
in the case of any unaudited interim financial statements, to normal year-end
adjustments that will not be material in amount or effect), in each case in
accordance with GAAP. The pro forma financial statements of the Company and its
Subsidiaries contained in the Company Financial Statements fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the date and for the periods to which they relate, in each
case after giving effect to the Transactions, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the Transactions. All
projections provided by or on behalf of the Company to the Purchasers in
connection with the Transactions have been prepared in good faith based on
assumptions believed by management of the Company to be reasonable.
4.07. Absence of Undisclosed Liabilities or Events.
(a) Except as set forth in Schedule 4.07(a), neither the Company
nor any of its Subsidiaries has any material claims, liabilities or
indebtedness, contingent or otherwise, required to be set forth on its
consolidated balance sheet in accordance with GAAP, except as set forth in the
consolidated balance sheet as of the Audit Date or as included in the Company
Financial Statements and except for liabilities incurred subsequent to any such
date in the ordinary course of business.
(b) Except as set forth in Schedule 4.07(b), since the Audit Date
there has been no Material Adverse Effect.
(c) The information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Company to each of the
Purchasers in connection with the negotiation, preparation or delivery of this
Agreement and the other Transaction Documents or included herein or therein or
delivered pursuant hereto or thereto, when taken as a whole do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein not misleading.
4.08. No Actions or Proceedings. Except as set forth in Schedule
4.08, there is no action, suit, condemnation, expropriation or other proceeding
at law or in equity, or any arbitration or any administrative or other
proceeding by or before (or to the knowledge of the Company any investigation
by) any Governmental Authority, pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its Subsidiaries, or any
of their properties or rights which, would: (i) have a Material Adverse Effect
or (ii) is, or is seeking certification as, a class action. In addition, except
as set forth on Schedule 4.08, neither the Company nor any of its Subsidiaries
is subject to any consent decrees or judicial or administrative order under the
Fair Debt Collection Practices Act or any state law equivalent relating to the
ongoing conduct of the Company's business.
4.09. Title to Properties. Except as set forth in Schedule 4.09,
each of the Company and its Subsidiaries has (a) good and valid title to and fee
simple ownership of, or a good and valid leasehold interest in, all of its real
property, and (b) good title to, or a good and valid leasehold interest in, all
of its equipment and other personal property, in each case free and clear of all
Liens, except for (1) Liens reflected on the Company's consolidated unaudited
balance sheet as of September 30, 1999, and (2) Liens which do not materially
detract from the value of, or materially impair the use of, any material
property by the Company or any of its Subsidiaries in the operation of its
respective business or which do not have a Material Adverse Effect. Each of the
Company and its Subsidiaries have paid or discharged, or reserved for, all
lawful claims which, if unpaid, might become a Lien against any property or
assets of the Company or any of its Subsidiaries, except where the failure to do
so would not have a Material Adverse Effect.
4.10. Intellectual Property Rights. Except as set forth in
Schedule 4.10, each of the Company and its Subsidiaries owns or possesses all
Intellectual Property reasonably necessary to conduct its businesses as now
conducted, except where the expiration or loss of any of such Intellectual
Property, individually or in the aggregate, would not have a Material Adverse
Effect. To the best knowledge of the Company, (a) there is no infringement of,
or conflict with, such Intellectual Property by any third party and (b) the
conduct of its businesses as currently conducted do not infringe or conflict
with any Intellectual Property of any third party, in each case other than any
such infringements or conflicts which, individually or in the aggregate, have
not had or would not have a Material Adverse Effect.
4.11. Taxes.
(a) Tax Returns. The Company and each of its Subsidiaries has
filed or caused to be filed or will file or cause to be filed with the
appropriate taxing authorities on a timely basis all material returns and
reports ("Returns") relating to Taxes that are required to be filed by, or with
respect to, the Company and each of its Subsidiaries at or prior to the Closing
Time (taking into account any extension of time to file granted to or on behalf
of the Company or any of its Subsidiaries). All such Returns have been prepared
in compliance with all applicable laws and regulations and are true and accurate
in all material respects. As used herein, "Tax" or "Taxes" shall mean all taxes
including, without limitation, all U.S. federal, state, local and foreign
income, franchise, profits, capital gains, capital stock, sales, use, value
added, occupation, property, excise, stamp, license, payroll, social security,
withholding and all other taxes of any kind whatsoever, all estimated taxes,
deficiency assessments, and additions to tax, penalties and interest in respect
of the foregoing.
(b) Payment of Taxes. All material Tax liabilities of the Company
and its Subsidiaries due and payable with respect to all taxable years or other
taxable periods (including portions thereof) ending on or prior to the Audit
Date have been, or prior to the Closing Time will be, paid or adequately
disclosed as a liability on the most recent Company Financial Statements. All
material Tax liabilities of the Company and its Subsidiaries due and payable
with respect to all taxable years or taxable periods (including portions
thereof) which did not end prior to the day after the Audit Date and which end
at or prior to the Closing Time have been, or prior to the Closing Time will be,
paid.
(c) Other Tax Matters. Schedule 4.11 sets forth (i) each taxable
year or other taxable period of the Company and its Subsidiaries for which an
audit or other examination of Taxes by any taxing authority is currently in
progress or, to the knowledge of the Company, threatened against or with respect
to the Company or any of its Subsidiaries that, if determined adversely to the
Company or its Subsidiaries, would result in a material Tax liability of the
Company or its Subsidiaries after the Closing Time, and (ii) the taxable years
or other taxable periods of the Company and its Subsidiaries which, for income
tax purposes, will not be subject to the normally applicable statute of
limitations because of written waivers or agreements given by the Company or its
Subsidiaries.
(d) Except as set forth on Schedule 4.11:
(i) subject to Section 5.03(j) of the Recapitalization Agreement,
neither the Company nor any of its Subsidiaries has made any payments, nor
is or may become obligated (under any contract or agreement entered into at
or before the Closing Time) to make any payments, that will be
non-deductible under Section 280G of the Code (or any analogous provisions
of state, local or foreign Tax law),
(ii) the Company and each of its Subsidiaries has withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party other than such Taxes which in the
aggregate, are not material, and all material Forms W-2 and 1099 required
with respect thereto have been properly completed and timely filed;
(iii) there are no liens for material Taxes (other than current Taxes
not yet due and payable) upon the assets or properties of the Company or
any of its Subsidiaries;
(iv) the Company and its Subsidiaries are entitled to each Tax refund
claimed or received by the Company or any Subsidiary at or prior to the
Closing Time, except to the extent the disallowance of which would not
result in any material Tax liability, or loss of a pending material Tax
refund claim;
(v) the Company and its Subsidiaries are not and will not become
liable for any material Taxes as a result of the Reorganization nor will
the Reorganization create any material gains or income, the taxation of
which is deferred under Treasury Regulation ss. 1.1502-13 (or any similar
provision of state, local or foreign law);
(vi) neither the Company nor any of its Subsidiaries is a party to any
Tax allocation, sharing, or similar agreement under which the Company or
such Subsidiaries has any current or potential contractual obligation to
indemnify any other Person with respect to Taxes;
(vii) the Company and each of its Subsidiaries has properly accrued on
its respective financial statements all material Tax liabilities
(determined in accordance with GAAP) and the amount so accrued is at least
equal to its respective liability for such Taxes; and
(viii) neither the Company nor any of its Subsidiaries has any
liability for material Taxes arising as a result of the Company or any of
its Subsidiaries at any time being a member of an affiliated group (as
defined in section 1504(a) of the Code and any analogous combined,
consolidated or unitary group defined under state, local or foreign income
Tax law) other than a group the common parent of which is the Company or
any of its Subsidiaries.
4.12. Employee Benefit Plans.
(a) Schedule 4.12 contains an accurate and complete list of (i)
each "employee benefit plan" (as such term is defined in Section (3)(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
contributed to, maintained or sponsored by the Company or any of its
Subsidiaries, or with respect to which the Company or any of its Subsidiaries
has any liability or potential liability; and (ii) each other retirement,
savings, thrift, deferred compensation, severance, stock ownership, stock
purchase, stock option, performance, bonus, incentive, material fringe benefit,
hospitalization or other medical, disability, life or other insurance, and any
other welfare benefit policy, trust, understanding or arrangement contributed
to, maintained or sponsored by the Company or any of its Subsidiaries for the
benefit of any present or former employee, officer or director of the Company or
any of its Subsidiaries, or with respect to which the Company or any of its
Subsidiaries has any liability or potential liability. Each such item listed on
Schedule 4.12 is referred to herein as a "Benefit Plan."
(b) Schedule 4.12 also contains an accurate and complete list of
each agreement or commitment of the Company or any Subsidiary of the Company or
to which the Company or any of its Subsidiaries may have any liability, with or
for the benefit of any current or former employee, officer or director of the
Company or any of its Subsidiaries (including, without limitation, each
employment, compensation or termination agreement or commitment but excluding
employment agreements with annual payments of less than $100,000). Each such
item listed on Schedule 4.12 is referred to herein as a "Compensation
Commitment."
(c) With respect to each Benefit Plan that is intended to be
qualified within the meaning of Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") (i) it has received a determination letter, or in
the case of a standardized prototype plan, such prototype plan has received a
favorable determination letter from the Internal Revenue Service (the "IRS"), or
has been timely submitted for a determination letter from the IRS, that such
Benefit Plan is qualified under Section 401(a) of the Code, and, to the
knowledge of the Company and its Subsidiaries, nothing has occurred since the
date of such determination letter or submission that could adversely affect the
qualification of such Benefit Plan or the exemption from taxation of the related
trust and (ii) no such Benefit Plan is a "defined benefit plan" (as defined in
Section (3)(35) of ERISA) or a "multiemployer plan" (as defined in Section 4001
(a)(3) of ERISA).
(d) Except as described on Schedule 4.12 (i) none of the Benefit
Plans or Compensation Commitments obligates the Company or any of its
Subsidiaries to pay any separation, severance, termination or similar benefit
solely as a result of any transaction contemplated by the Recapitalization
Agreement or solely as a result of a change in control or ownership within the
meaning of Section 280G of the Code; and (ii) there is no contract, agreement,
plan or arrangement covering any employee or former employee of the Company or
any of its Subsidiaries that provides for payment, prior to or in connection
with the Recapitalization, by the Company or any of its Subsidiaries that is not
deductible under Section 162 or 404 of the Code, or that is an "excess parachute
payment" pursuant to Section 280G of the Code.
(e) (i) Each Benefit Plan and any related trust, insurance
contract or fund has been maintained and administered in substantial compliance
with its respective terms and in substantial compliance with all applicable laws
and regulations, including, but not limited to, ERISA and the Code; (ii) there
has been no application or waiver of the minimum funding standards imposed by
Section 412 of the Code with respect to any Benefit Plan, and neither the
Company nor any of its Subsidiaries is aware of any facts or circumstances that
would materially change the funded status of any such Benefit Plan; (iii)
neither the Company nor any of its Subsidiaries has incurred any liability under
Title IV of ERISA or to the Pension Benefit Guaranty Corporation; (iv) there are
no pending or, to the knowledge of the Company and its Subsidiaries, threatened,
material actions, suits, investigations or claims with respect to any Benefit
Plan or Compensation Commitment (other than routine claims for benefits), and
neither the Company nor any of its Subsidiaries has knowledge of any facts which
could give rise to (or reasonably be expected to give rise to) any such actions,
suits, investigations or claims; (v) there have been no prohibited transactions
as defined in Section 406 of ERISA or Section 4975 of the Code with respect to
any Benefit Plan; and (vi) all contributions which are due with respect to each
Benefit Plan have been timely made, and all contributions for periods ending on
the date of the Closing Time which are not then due have been accrued in
accordance with GAAP.
(f) The Company and each of its Subsidiaries has complied in all
material respects with the health care continuation requirements of Section
4980B of the Code and Part 6 of Subtitle B of Title I of ERISA ("COBRA"); and
the Company and its Subsidiaries have no obligation under any Benefit Plan,
Compensation Commitment or otherwise to provide health or other welfare benefits
to or with respect to former employees of the Company or any of its Subsidiaries
or any other person, except as specifically required by COBRA.
(g) With respect to each Benefit Plan and Compensation
Commitment, the Company has furnished or made available to the Purchasers true
and complete copies, as applicable, of (a) the plan documents, summary plan
descriptions and employee handbooks; (b) IRS Form 5500 Annual Report (including
all attachments) for the most recent plan year; (c) all related trust
agreements, insurance contracts or other funding arrangements; and (d) the most
recent favorable determination letter issued by the IRS.
4.13. Private Offering; No Integration or General Solicitation.
(a) Subject to compliance by the Purchasers with the
representations and warranties set forth in Section 5 hereof and with the
procedures set forth in Section 6 hereof, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Purchasers and to any
Person to whom any Purchaser sells any of such Securities (each, a "Subsequent
Purchaser") in the manner contemplated by this Agreement to register the
Securities under the Securities Act.
(b) The Company has not, directly or indirectly, offered, sold or
solicited any offer to buy and will not, directly or indirectly, offer, sell or
solicit any offer to buy, any security of a type or in a manner which would be
integrated with the sale of the Securities and require the Securities to be
registered under the Securities Act. None of the Company or its Affiliates or
any Person acting on its behalf (other than the Purchasers, as to whom the
Company makes no representation or warranty) has engaged or will engage in any
form of general solicitation or general advertising (within the meaning of Rule
502(c) under the Securities Act) in connection with the offering of the
Securities. With respect to the Securities, if any, sold in reliance upon the
exemption afforded by Regulation S: (i) none of the Company or its Affiliates or
any Person acting on its behalf (other than the Purchasers, as to whom the
Company makes no representation or warranty) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S and (ii) each of the
Company and its Affiliates and any Person acting on its behalf (other than the
Purchasers, as to whom the Company makes no representation or warranty) has
complied and will comply with the offering restrictions set forth in Regulation
S.
4.14. Eligibility for Resale Under Rule 144A. The Securities are
eligible for resale pursuant to Rule 144A and will not, at the Closing Time, be
of the same class as securities listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted on a U.S. automated
interdealer quotation system.
4.15. [INTENTIONALLY OMITTED].
4.16. Insurance. Each of the Company and its Subsidiaries are
insured by financially sound institutions with policies in such amounts and with
such deductibles and covering such risks as the Company deems adequate for its
and its Subsidiaries' businesses.
4.17. Environmental Laws and Regulations. Except as set forth on
Schedule 4.17, (a) Hazardous Materials have not been (i) generated, used,
treated or stored on, or transported to or from, any Company Property or (ii)
Released or disposed of on or from any Company Property, except, in the case of
clauses (i) or (ii) in a manner which could not reasonably be expected to give
rise to material liabilities under Environmental Law, (b) the Company and each
of its Subsidiaries have complied and are in compliance in all material respects
with applicable Environmental Laws and the requirements of any permits issued
under such Environmental Laws, and (c) there are no past, pending or, to the
Company's knowledge, threatened claims under Environmental Law against the
Company or any of its Subsidiaries.
For purposes of this Agreement, the following terms shall have
the following meanings: (A) "Company Property" means any real property and
improvements at any time owned, leased, or operated by the Company or any of its
Affiliates, Subsidiaries or any of their respective predecessors; (B) "Hazardous
Materials" means (i) any petroleum or petroleum products, radioactive materials
or friable asbestos and (ii) any chemicals, materials or substances defined as
"hazardous substances," under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq.
("CERCLA") and (iii) all other materials or substances the Release of which is
prohibited or regulated or as to which liability may be imposed under
Environmental Laws; (C) "Environmental Law" means any federal, state or local
statute, law, rule, regulation, ordinance or code, contractual obligation or
common law or other legal requirement, in each case in effect and as amended as
of the date hereof and the Closing Time, relating to the environment or
Hazardous Materials, including, without limitation, CERCLA, the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. ss. 6901 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean Air Act, 42
U.S.C. ss. 7401 et seq.; and the Safe Drinking Water Act, 42 U.S.C. ss. 33808 et
seq.; and (D) "Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like, into or upon any land or water or air, or otherwise entering into the
environment.
4.18. Solvency. The Company and its Subsidiaries (other than
Pay Tech, Inc.) are, and after giving effect to the Transactions will be,
Solvent.
4.19. Affiliate Transactions. Except as disclosed on Schedule
4.19, there are no understandings, agreements or arrangements with any
stockholder of the Company or its Affiliates which would be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under the Exchange
Act if an annual report on Form 10K were made on the date hereof.
4.20. Material Contracts. Except as set forth on Schedule 4.20,
neither the Company nor any Subsidiary has or is bound by (a) any agreement,
contract or commitment relating to the employment of any Person by the Company
or any Subsidiary which cannot be terminated by the Company or the Subsidiary
upon notice of 60 days or less without penalty or premium and involves annual
compensation in excess of $100,000 annually, (b) any agreement, contract or
commitment materially limiting the freedom of the Company or any Subsidiary to
engage in any line of business or to compete with any other Person or (c) any
agreement, contract or commitment not entered into in the ordinary course of
business which materially affects the business of the Company and the
Subsidiaries taken as a whole and is not cancelable without penalty within 90
days. There is no material default under any contract listed on Schedule 4.20 as
a result of the Reorganization.
4.21. Brokerage Fees. Except as disclosed on Schedule 4.21, no
agent, broker, Person or firm acting on behalf of the Company is, or will be,
entitled to any fee, commission or broker's or finder's fees from any of the
parties hereto, or from any Person controlling, controlled by, or under common
control with any of the parties hereto, in connection with this Agreement or any
of the Transactions.
4.22. Employment Relations and Agreements. Except as disclosed on
Schedule 4.22, (i) each of the Company and its Subsidiaries is in compliance in
all material respects 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; (ii) no representation question exists respecting the employees
of the Company or any of its Subsidiaries; (iii) no collective bargaining
agreement is currently being negotiated by the Company or any of its
Subsidiaries and neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement; and (iv) neither the Company nor any of its
Subsidiaries has experienced any labor difficulty during the last year except
(in the case of this clause (iv)) as would not have a Material Adverse Effect.
Except as disclosed on Schedule 4.22, there exist no employment, consulting,
severance, indemnification agreements or deferred compensation agreements
between the Company and any director, officer or employee of the Company or any
agreement that would give any Person the right to receive any payment from the
Company as a result of the Transactions.
4.23. [INTENTIONALLY OMITTED].
4.24. Compliance with Laws; Licenses.
(i) Except as set forth on Schedule 4.24, the Company and its
Subsidiaries are in compliance with all applicable laws and regulations and all
orders, judgments and decrees (including, but not limited to, the Fair Debt
Collection Practices Act and any state or local counterpart or equivalent)
relating to its business and operations (other than with respect to taxes,
Environmental Laws, employee benefits, employee relations and federal securities
laws which are the subject of specific representations contained in this
Agreement) except where the failure to so comply would not have a Material
Adverse Effect or would prevent or materially delay consummation of the
Transactions.
(ii) The Company and each of its Subsidiaries possess all
licenses, certificates of authority, certificates of need, permits or other
authorizations and regulatory approvals required by law (a "License") necessary
for the ownership of its properties and the conduct of its business as presently
conducted in each jurisdiction in which the Company and such Subsidiary is
required to possess a License, except where the failure to possess such a
License would not have a Material Adverse Effect. All such Licenses are in full
force and effect and neither the Company nor any Subsidiary has received any
written notice of any event, inquiry, investigation or proceeding threatening
the validity of such Licenses, except where the failure of such Licenses to be
in full force and effect or such event, inquiry, investigation or proceeding
would not have a Material Adverse Effect.
SECTION 5
REPRESENTATIONS OF THE PURCHASERS
Each Purchaser severally and not jointly represents and warrants
to the Company as of the date hereof and as of the Closing Time as follows:
5.01. Purchase for Investment.
(a) Such Purchaser is acquiring the Securities for its own
account, for investment and not with a view to or for offer or sale in
connection with any distribution thereof (within the meaning of the Securities
Act) that would be in violation of the securities laws of the United States or
any state thereof.
(b) Such Purchaser understands that (i) the Securities have not
been registered under the Securities Act and are being issued by the Company in
transactions exempt from the registration requirements of the Securities Act and
(ii) the Securities may not be offered or sold except pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption from registration under the Securities Act.
(c) Such Purchaser further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
Purchaser) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales only in limited amounts.
(d) Such Purchaser did not, and is not obligated to, pay any
broker or finder in connection with the transactions contemplated in this
Agreement.
(e) Such Purchaser is an Accredited Investor.
5.02. Organization of the Purchasers. Such Purchaser is a
corporation, limited partnership or limited liability company, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization.
5.03. Authorization of Transaction. Such Purchaser has full power
and authority (including full corporate, partnership or limited liability
company power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of such Purchaser, enforceable in accordance with its
terms and conditions, subject to the Enforceability Exceptions. Such Purchaser
need not give any notice to, make any filing with, or obtain any authorization,
consent or approval of any Governmental Authority in order to consummate the
transactions contemplated by this Agreement.
5.04. Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any Governmental
Authority to which such Purchaser is subject or any provisions of its charter or
by-laws or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
such Purchaser is a party or by which it is bound or to which any of its assets
is subject; provided, that notwithstanding anything to the contrary contained
herein, such Purchaser is making no representations or warranties as to
compliance with applicable securities laws.
5.05. Brokers' Fees. Such Purchaser has no liability or
obligation to pay any fees or commissions to any broker, finder or agent (other
than to the Equity Investor) with respect to the transactions contemplated by
this Agreement for which the Company could become liable or obligated.
SECTION 6
PROVISIONS RELATING TO RESALES OF Securities
6.01. Private Offerings. The Company and the Purchasers agree
that the following provisions will apply to any Private Offerings:
(a) Offers and Sales of Senior Preferred Stock Only to
Institutional Accredited Investors or Qualified Institutional Buyers.
Offers and sales of the Securities will be made only by the Holders or
Affiliates thereof qualified to do so in the jurisdictions in which such
offers or sales are made. Prior to the effectiveness of a registration
statement with respect to the Senior Preferred Stock, each offer or sale
of Senior Preferred Stock shall only be made (i) to persons whom the
offeror or seller reasonably believes to be Qualified Institutional
Buyers, (ii) to other institutional accredited investors referred to in
Rule 501(a)(1), (2), (3) or (7) of Regulation D that the offeror or
seller reasonably believes to be and, with respect to sales and
deliveries, that are Accredited Investors ("Institutional Accredited
Investors") or (iii) non-U.S. persons that are financial institutions,
investment advisors or affiliates of the foregoing or would otherwise be
substantially equivalent to an Institutional Accredited Investor outside
the United States to whom the offeror or seller reasonably believes
offers and sales of the Senior Preferred Stock may be made in reliance
upon Regulation S under the Securities Act; provided that (A) this will
not prohibit offers and sales of shares of Senior Preferred Stock
pursuant to Rule 144 (or any successor provision) to any Person or of
any Securities pursuant to a registration statement filed with the
Commission under the Securities Act, (B) no Holder shall offer or sell
any of the Securities to any Competitor of the Company; provided, that
each Purchaser shall be permitted to offer, sell or otherwise transfer
any of the Securities to any of its Affiliates and (C) each Purchaser
shall give the Company at least 5 days prior notice of any proposed
offer or sale of Securities to any Person that is not (x) a Purchaser or
one of its Affiliates or (y) a nationally recognized investment banking
firm (it being acknowledged that such firm, as an assignee, shall be
bound by the terms of this Agreement, including this Section 6.01).
(b) No General Solicitation. The Securities will be offered by
approaching prospective Subsequent Purchasers on an individual basis. No
general solicitation or general advertising (within the meaning of Rule
502(c) under the Securities Act) will be used in the United States and
no directed selling efforts (as defined in Regulation S) will be made
outside the United States in connection with the offering of the
Securities.
(c) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
Subsequent Purchaser of any Senior Preferred Stock acting as a fiduciary
for one or more third parties, in connection with an offer and sale to
such purchaser by any Holder pursuant to this Section 6.01, each third
party shall, in the judgment of the applicable Holder, be an
Institutional Accredited Investor or a Qualified Institutional Buyer or
a non-U.S. person outside the United States.
(d) Restrictions on Transfer; Legend. Upon original issuance by
the Company, and until such time as the same is no longer required under
the applicable requirements of the Securities Act, the Securities (and
all securities issued in exchange therefor or in substitution thereof)
shall bear such legend as is required under Section 6.08 of this
Agreement. The restrictions on transfer set forth herein are in addition
to any other restrictions on transfer set forth in the Transaction
Documents.
(e) No Future Liability. Following the sale of the Securities by
any Purchaser to Subsequent Purchasers in accordance with the terms of
this Section 6, such Purchaser shall not be liable or responsible to the
Company for any losses, damages or liabilities suffered or incurred by
the Company, including any losses, damages or liabilities under the
Securities Act, arising from or relating to any resale or transfer of
any Security by such Subsequent Purchaser.
(f) Securities Act Restrictions.
(i) A Holder selling Securities in a Private Offering to a
transferee that is an Accredited Investor or a Qualified Institutional
Buyer must satisfy each of the following conditions:
(1) such transferee must make all of the representations
and warranties set forth in Section 5; and
(2) such transferee must agree to be bound by the
provisions of this Section 6.01 with respect to any resale of the
Securities.
(ii) A Holder may sell its Securities to a transferee in
accordance with Regulation S under the Securities Act; provided,
however, that each of the following conditions is satisfied:
(1) the offer of Securities must not be made to a person
in the United States;
(2) either:
(A) at the time the buy order is originated, the
transferee is outside the United States or the Holder and
any person acting on its behalf reasonably believes that
the transferee is outside the United States, or
(B) the transaction must be executed in, on or
through the facilities of a designated offshore securities
market and neither the Holder nor any person acting on its
behalf knows that the transaction was pre-arranged with a
buyer in the United States;
(3) no directed selling efforts may be made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S under the Securities Act, as applicable; and
(4) the transaction must not be part of a plan or scheme
to evade the registration requirements of the Securities Act.
(iii) In the event of a proposed sale that does not qualify under
either subclause (i) or (ii) above, a Holder may sell its Securities
only if:
(1) such Holder gives written notice to the Company of its
intention to effect such sale, which notice (A) shall describe
the manner and circumstances of the proposed transaction in
reasonable detail and (B) shall designate the counsel for such
Holder, which counsel shall be reasonably satisfactory to the
Company;
(2) counsel for the Holder renders an opinion to the
effect that such proposed sale may be effected without
registration under the Securities Act or state Blue Sky laws; and
(3) such Holder or transferee complies with subclause
(i)(1) and (2) above.
6.02. Resale Offering Assistance.
(a) At any time following 12 months after the Closing Time
(provided that the Company is not then subject to, and in compliance with, the
reporting requirements of Section 13 or 15(d) of the Exchange Act) (the
"Assistance Period"), the Company will, if reasonably requested by the Required
Holders, use commercially reasonable efforts to assist the Holders of Securities
in completing any private or public resale of any portion thereof (including any
such resales of the Senior Preferred Stock pursuant to any Private Offering) in
accordance with the Holders' intended method of distribution. Such assistance
may, in each case, include the following:
(i) reasonable direct contact between the Company's senior
management and advisors and prospective purchasers at mutually agreeable
times and hosting of one or more meetings of prospective purchasers;
(ii) responding to reasonable inquiries of, and providing answers
to, each prospective purchaser who so requests concerning the Company
and its Subsidiaries (to the extent such information is available or can
be acquired and made available to prospective purchasers without
unreasonable effort or expense and to the extent the provision thereof
is not prohibited by Applicable Law or applicable confidentiality
restrictions) and the terms and conditions of the applicable
distribution;
(iii) if requested by the Required Holders, using commercially
reasonable efforts to make available information and materials to be
used in connection with the distribution (including assistance in
completion of any sales or placement agent's, if any, or in the case of
an underwritten offering, the lead managers' and co-managers' reasonable
due diligence review of the Company and its Subsidiaries); and
(iv) using commercially reasonable efforts to promptly prepare and
provide to the Holders (or any sales or placement agent therefor and any
underwriter thereof) all information with respect to the Company,
including projections, as such Holders (or any sales or placement agent
therefor and any underwriter thereof) may reasonably request. Any such
projections that will so be made available to such Holders (or each
placement or sales agent, if any, therefor and each underwriter, if any,
thereof) by the Company or any of its representatives will be prepared
in good faith based upon reasonable assumptions.
(b) During the Assistance Period, the Company will allow the
Required Holders (or any sales or placement agent therefor or, in the case of an
underwritten offering, the lead manager and co-managers thereof, in each case,
as may be selected by the Purchasers and is reasonably acceptable to the
Company), in consultation with the Company, to manage all aspects of the
distribution, including decisions as to the selection of institutions to be
approached and when and how they will be approached.
(c) During the Assistance Period, all materials supplied or
available under this Section 6.02 or under Section 4.06 by the Company
(including any materials referred to or incorporated by reference therein,
"Resale Materials") will not, to the knowledge of the Company, as of its date
and as of the closing of such Private Offering, when taken as a whole, include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. During the Assistance
Period, all information about a Holder supplied in writing to the Company by
such Holder expressly for use in any Resale Materials will not, to the knowledge
of such Holder, as of its date and as of the closing of such Private Offering,
when taken as a whole, include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) If, prior to the completion of any sale of the Securities by
the selling Holders (as evidenced by a notice in writing from the Holders to the
Company), any event shall occur or condition exist as a result of which the
Resale Materials would contain a misstatement of a material fact or an omission
of a material fact required to make the statements therein, in the light of the
circumstances, not misleading, then the Company agrees to promptly prepare and
furnish at its own expense to the selling Holders, further information so that
the statements in the Resale Materials, taken as a whole, will not contain a
misstatement of a material fact or an omission of a material fact required to
make the statements therein, in the light of the circumstances, not misleading.
The Company hereby expressly acknowledges that the indemnification and
contribution provisions of Sections 9.02 and 9.03 hereof are specifically
applicable and relate to Resale Materials.
(e) In addition (and not in limitation of the foregoing), for the
benefit of Holders and beneficial owners from time to time of Securities, the
Company shall, upon the request of any such Holder, use commercially reasonable
efforts to furnish, at its expense, to Holders and beneficial owners of
Securities and prospective purchasers thereof information ("Additional Company
Information") satisfying the requirements of subsection (d)(4) of Rule 144A.
6.03. Blue Sky Compliance. In connection with any Private
Offering of the Securities, the Company shall cooperate with the selling Holders
and counsel for the selling Holders to obtain exemptions from the application
of, or if necessary because of any change in the Applicable Law to qualify or
register the Senior Preferred Stock, and the shares of Common Stock of any
Holder, if applicable, for sale under, the Blue Sky or state securities laws of
those jurisdictions designated by the selling Holders with respect to the
relevant Securities, shall comply with such laws and shall continue such
exemptions, qualifications and registrations in effect so long as required for
the distribution of the Senior Preferred Stock and shares of Common Stock, if
applicable. The Company shall not be required to qualify as a foreign
corporation or to take any action that would subject it to general service of
process in any such jurisdiction where they are not then qualified or to
taxation as a foreign corporation. The Company will advise the selling Holders
promptly of the suspension of any exemption relating to or the qualification or
registration of the Senior Preferred Stock or the Common Stock, if applicable,
for offering, sale or trading in any jurisdiction or any initiation or threat of
any proceeding for any such purpose, and in the event of the issuance of any
order suspending such exemption, qualification or registration, the Company
shall, with the cooperation of the selling Holders, use its best efforts to
obtain the withdrawal thereof at the earliest possible moment.
6.04. Common Stock Registration Rights Agreement; Preferred Stock
Registration Rights Agreement. The Company shall comply with all provisions and
obligations of each of the Common Stock Registration Rights Agreement and the
Preferred Stock Registration Rights Agreement and shall comply with all
applicable federal and state securities laws in connection therewith.
6.05. No Integration. The Company agrees that it shall not and
(to the extent within its control) it shall cause its respective Affiliates not
to make any offer or sale of securities of any class of the Company if, as a
result of the doctrine of "integration" referred to in Rule 502 under the
Securities Act, such offer or sale would render invalid (for the purpose of (a)
the sale of the Securities by the Company to the Purchasers, (b) the resale of
Securities by the Purchasers to Subsequent Purchasers or (c) the resale of
Securities by such Subsequent Purchasers to others) any applicable exemption
from the registration requirements of the Securities Act provided by Section
4(2) thereof or by Rule 144A or Regulation S thereunder or otherwise.
6.06. DTC Agreement and PORTAL. The Company will, promptly
following the request of and with the cooperation of the Required Holders, use
its best efforts to cause the Senior Preferred Stock to be registered in
book-entry form in the name of Cede & Co., as nominee of The Depository Trust
Company (the "Depositary"), pursuant to an agreement among the Company and the
Depositary in the form then required by the Depositary. The Company will
cooperate with the Holders and use its best efforts to permit the Senior
Preferred Stock and the shares of Common Stock of Holders to be eligible for
clearance and settlement through the facilities of the Depositary. In connection
therewith, the Company shall obtain a CUSIP number for the Senior Preferred
Stock. The Company will, promptly following the request of and with the
cooperation of the Required Holders, use its best efforts to cause the
Securities (if eligible) to be eligible for the National Association of
Securities Dealers, Inc. PORTAL Market (the "PORTAL Market").
6.07. [INTENTIONALLY OMITTED].
6.08. Form of Legend for the Securities. Unless otherwise
permitted by Section 6.01(f), every share of Senior Preferred Stock issued and
delivered hereunder shall bear a legend in substantially the following form:
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT IS IN EFFECT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. THE HOLDER OF THIS SECURITY IS SUBJECT TO THE TERMS OF THE
PURCHASE AGREEMENT, DATED AS OF DECEMBER 10, 1999 (THE "PURCHASE
AGREEMENT"), AMONG OUTSOURCING SOLUTIONS INC. (THE "COMPANY") AND THE
PURCHASERS NAMED THEREIN. A COPY OF SUCH PURCHASE AGREEMENT IS AVAILABLE
AT THE OFFICES OF THE COMPANY.
Unless otherwise permitted by Section 6.01(f), each share of
Common Stock issued and delivered hereunder shall bear a legend in substantially
the following form:
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT IS IN EFFECT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. THE HOLDER OF THIS SECURITY IS SUBJECT TO THE TERMS OF THE
PURCHASE AGREEMENT AND THE REGISTRATION RIGHTS AND STOCKHOLDERS
AGREEMENT, EACH DATED AS OF DECEMBER 10, 1999, AMONG OUTSOURCING
SOLUTIONS INC. (THE "COMPANY") AND THE PARTIES NAMED THEREIN. COPIES OF
SUCH AGREEMENTS ARE AVAILABLE AT THE OFFICES OF THE COMPANY.
SECTION 7
THE senior preferred stock
7.01. Execution. The shares of Senior Preferred Stock shall be
executed on behalf of the Company by its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the shares of Senior Preferred Stock may be manual or facsimile.
Shares of Senior Preferred Stock bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such shares or did not hold such offices at the date of such shares.
7.02. Terms of the Senior Preferred Stock. The terms of the
Senior Preferred Stock shall be as set forth in the Certificate of Designation.
7.03. Payments and Computations. All payments of dividends on the
Senior Preferred Stock shall be paid to the Holders thereof at the close of
business on the Dividend Record Date and all redemption payments on the shares
of Senior Preferred Stock shall be paid to the Holders thereof as of the
applicable Redemption Date or at the Stated Maturity, as applicable. Redemption
payments on any share of Senior Preferred Stock shall be payable only against
surrender therefor, while payments of dividends on shares of Senior Preferred
Stock shall be made, in accordance with the Certificate of Designation and
subject to applicable laws and regulations, by check mailed on or before the due
date for such payment to the person entitled thereto at such person's address
appearing on the Security Register or, by wire transfer to such account as any
Holder thereof shall designate by written instructions received by the Company
no less than 15 days prior to any applicable Dividend Payment Date, which wire
instruction shall continue in effect until such time as the Holder otherwise
notifies the Company or such Holder no longer is the registered owner of such
share or shares of Senior Preferred Stock.
7.04. Registration; Registration of Transfer and Exchange.
(a) Security Register. The Company shall maintain a register (the
"Security Register") for the registration or transfer of the shares of Senior
Preferred Stock. The name and address of the Holder of each such share, records
of any transfers of the shares and the name and address of any transferee of a
share of Senior Preferred Stock shall be entered in the Security Register and
the Company shall, promptly upon receipt thereof, update the Security Register
to reflect all information received from a Holder. There shall be no more than
one Holder for each share of Senior Preferred Stock, including all beneficial
interests therein.
(b) Registration of Transfer. Upon surrender for registration of
transfer of any share of Senior Preferred Stock at the office or agency of the
Company, the Company shall execute and deliver, in the name of the designated
transferee or transferees, one or more new shares of Senior Preferred Stock, of
any authorized denominations and like aggregate number of shares.
(c) Exchange. At the option of the Holder of Senior Preferred
Stock, shares of Senior Preferred Stock may be exchanged for other shares of
Senior Preferred Stock, of any authorized denominations and of like aggregate
number of shares, upon surrender of the shares of Senior Preferred Stock to be
exchanged at such office or agency. Whenever any shares of Senior Preferred
Stock are so surrendered for exchange, the Company shall execute and deliver the
shares of Senior Preferred Stock which the Holder making the exchange is
entitled to receive.
(d) Effect of Registration of Transfer or Exchange. All shares of
Senior Preferred Stock issued upon any registration of transfer or exchange of
shares of Senior Preferred Stock shall be the valid obligations of the Company,
evidencing the same obligation, and entitled to the same benefits under this
Agreement and the Certificate of Designation, as the shares of Senior Preferred
Stock surrendered upon such registration of transfer or exchange.
(e) Requirements; Charges. Every share of Senior Preferred Stock
presented or surrendered for registration of transfer or for exchange shall (if
so required by the Company) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company duly executed, by the
Holder thereof or his attorney duly authorized in writing. No service charge
shall be made for any registration of transfer or exchange of shares of Senior
Preferred Stock, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of shares of Senior Preferred
Stock.
(f) Certain Limitations. If the shares of Senior Preferred Stock
are to be redeemed in part, the Company shall not be required (i) to issue,
register the transfer of or exchange any share of Senior Preferred Stock during
a period beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of any such shares selected for redemption
under Section 8.02 and ending at the close of business on the day of such
mailing, or (ii) to register the transfer of or exchange any shares so selected
for redemption in whole or in part, except the unredeemed portion of any shares
being redeemed in part.
7.05. Mutilated, Destroyed, Lost and Stolen Shares. If any
mutilated share or shares of Senior Preferred Stock is surrendered to the
Company, the Company shall execute and deliver in exchange therefor a new share
or shares of Senior Preferred Stock of the same aggregate number of shares and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company (a) evidence to its
satisfaction of the destruction, loss or theft of any share of Senior Preferred
Stock and (b) such security or indemnity as may be required by it to save each
of it and any agent harmless, then, in the absence of notice that such share has
been acquired by a bona fide purchaser, the Company shall execute and deliver,
in lieu of any such destroyed, lost or stolen share of Senior Preferred Stock, a
new share of Senior Preferred Stock bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen share of
Senior Preferred Stock has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new share of Senior
Preferred Stock, redeem such share of Senior Preferred Stock in accordance with
the terms hereof and of the Certificate of Designation.
Upon the issuance of any new share of Senior Preferred Stock
under this Section, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith.
Every new share of Senior Preferred Stock issued pursuant to this
Section in lieu of any destroyed, lost or stolen share of Senior Preferred Stock
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen share shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Agreement and the Certificate of Designation equally and proportionately with
any and all other shares duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen shares.
7.06. Persons Deemed Owners. Prior to due presentment of a share
of Senior Preferred Stock for registration of transfer, the Company and any
agent of the Company may treat the Person in whose name such share is registered
as the owner of such share for the purpose of receiving payment of dividends on,
or redemption of, such share and for all other purposes whatsoever, whether or
not such payment with respect to such share be overdue, and neither the Company
nor any agent of the Company shall be affected by notice to the contrary.
7.07. Cancellation. All shares of Senior Preferred Stock
surrendered for redemption, registration of transfer or exchange shall, if
surrendered to any Person other than the Company, be delivered to the Company
and shall be promptly canceled by it. The Company shall cancel any share of
Senior Preferred Stock previously issued and delivered hereunder which the
Company may have reacquired.
7.08. Home Office Payment. So long as any Purchaser or its
nominee shall be the Holder of any share of Senior Preferred Stock, and
notwithstanding anything contained in this Agreement or the Certificate of
Designation to the contrary, the Company will pay all sums becoming due on such
share by such method (which may be by check if the amount of such check is less
than $100,000, or by wire transfer of immediately available funds) and at such
address as such Purchaser shall have from time to time specified to the Company
in writing for such purpose, without the presentation or surrender of such share
or the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of any share, such Purchaser shall surrender such share for
cancellation reasonably promptly after any such request, to the Company at its
principal executive office. Prior to any sale or other disposition of any share
held by such Purchaser or its nominee such Purchaser will, at its election,
either endorse thereon the amount paid thereon and the last date to which
dividends have been paid thereon or surrender such share to the Company in
exchange for a new share or shares pursuant to Section 7.04. The Company will
afford the benefits of this Section 7.08 to any direct or indirect transferee of
any share purchased by such Purchaser under this Agreement and that has made the
same agreement relating to such share as such Purchaser made in this Section
7.08.
7.09. Separability. The Senior Preferred Stock and the shares
of Common Stock comprising the Units shall be separable at any time at the
option of the Purchasers.
7.10. Board Observation. So long as any shares of Senior
Preferred Stock are outstanding, the Required Holders shall have the right to
appoint one Board Observer (the "Board Observer") and such Board Observer shall
be appointed on each anniversary of the Closing Time; provided that the first
Board Observer may be appointed by DB Capital Investors, L.P. and First Union
Investors, Inc. at any time prior to the first meeting of the Board of Directors
after the Closing Time. The Company will give to the Board Observer notice of
all regular meetings and all special meetings of the Company's Board of
Directors at the time notice is given to the directors, will permit the Board
Observer to attend such meetings as an observer and will provide the Board
Observer and each Purchaser with all information provided to directors of the
Company at the time such information is provided to the directors; provided,
however, that such observation rights pursuant to this Section 7.10 shall be
temporarily suspended if, in the opinion of counsel of the Company, the Board
Observer's attendance at such meeting could violate any member of the Board of
Directors' fiduciary duty, any confidentiality obligation or any attorney-client
privilege that may exist in connection with such meeting. The Company shall
reimburse the Board Observer for its reasonable travel incurred in connection
with its board observation rights pursuant to this Section 7.10.
7.11. Reports, Books, Records and Access. (a) (i) As soon as
available, but in any event within thirty (30) days after the end of each fiscal
month (or with respect to any fiscal month that is the last month in a fiscal
quarter, sixty (60) days after the end of such fiscal month) of the Company, the
Company shall deliver to each Purchaser the unaudited consolidated balance sheet
of the Company and its Subsidiaries as of the end of such month, the related
consolidated statements of operations, income, cash flows, retained earnings and
shareholders' equity for such month and for the elapsed portion of the fiscal
year ended with the last day of such month, in each case setting forth
comparative figures for the corresponding month in the prior fiscal year and for
the corresponding month in the annual budget provided as required below, all of
which shall be certified by the Chief Financial Officer or equivalent officer of
the Company, subject to normal year-end audit adjustments.
(ii) As soon as available and in any event not later than thirty
(30) days after the first day of each fiscal year of the Company, the Company
shall deliver to each Purchaser an annual consolidated budget and business plan
(including consolidated budgeted statements of operations, income, cash flows,
retained earnings and shareholders' equity and balance sheets for the Company
and its Subsidiaries) prepared by the Company for each month of such fiscal
year.
(iii) Concurrently with the delivery of information packages to the
Board of Directors, the Corporation shall deliver to each Significant Holder a
duplicate and complete copy of such information package, including copies of all
financial statements and other information provide therein; provided, however,
that the provision of information packages pursuant to this Section 7.11(a)(iii)
shall be temporarily suspended, upon notice to such Significant Holders, if in
the opinion of counsel of the Company the provision of such information packages
could violate any member of the Board of Directors' fiduciary duty, any
confidentiality obligation or any attorney-client privilege that may exist in
connection therewith.
(b) If reasonably requested by any Holder, and upon reasonable
notice, the Company shall, and shall cause its Subsidiaries to, subject to
compliance with Applicable Laws and confidentiality obligations to third
parties, (x) give each Holder that is not a Competitor of the Company or any of
its Subsidiaries and their authorized representatives (including any sales or
placement agent or underwriter participating in any resale of such shares)
reasonable access during normal business hours to all contracts, books, records,
personnel, offices and other facilities and properties of the Company and its
Subsidiaries and access to their legal advisors, accountants and, to the extent
available to the Company after the Company uses reasonable efforts to obtain
them, access to the accountants' work papers; provided, that (A) the Company
will not be required to allow such access to Holders more than two times in the
aggregate, in any twelve month period and (B) any Holder that requests such
access shall give each other Holder at least 10 days' prior written notice of
such request so that any other Holder may obtain such access at the same time,
(y) permit such Holder (and any such sales or placement agent or underwriter) to
make such copies and inspections thereof as such Holder may reasonably request
and (z) furnish such Holder (and any such sales or placement agent or
underwriter) with such financial and operating data and other information with
respect to the business and properties of the Company and its Subsidiaries as
such Holder (and any such sales or placement agent or underwriter) may from time
to time reasonably request.
SECTION 8
REDEMPTION
8.01. Right of Redemption. The Senior Preferred Stock may be
redeemed at the election of the Company and otherwise upon such conditions, at
such times, in such amounts and at the applicable Redemption Price (together
with any applicable accrued and unpaid dividends to the Redemption Date)
specified in the Certificate of Designation.
8.02. Partial Redemptions. In case the Company is entitled to,
and elects to, redeem less than all of the outstanding shares of Senior
Preferred Stock, the Company shall redeem the Senior Preferred Stock pro rata
from each Holder (or as nearly pro rata as practicable). For all purposes of
this Agreement and the Certificate of Designation, unless the context otherwise
requires, all provisions relating to the redemption of Senior Preferred Stock
shall relate, in the case of any shares of Senior Preferred Stock redeemed or to
be redeemed only in part, to the portion of such shares which has been or is to
be redeemed.
8.03. Notice of Redemption. Notice of redemption shall be given
as set forth in the Certificate of Designation. Notice of redemption of shares
to be redeemed at the election of the Company shall be given by the Company and
at the expense of the Company.
8.04. Deposit of Redemption Price. Prior to any Redemption Date,
the Company shall segregate and hold in trust an amount of money sufficient to
pay the Redemption Price of, and (except if the Redemption Date shall be a
Dividend Payment Date) any applicable accrued and unpaid dividends on, all the
shares which are to be redeemed on that date.
8.05. Shares Payable on Redemption Date. If notice of redemption
shall have been given as provided above, the shares of Senior Preferred Stock so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and any applicable
accrued and unpaid dividends) such shares shall not accrue dividends. Upon
surrender of any such share for redemption in accordance with said notice, such
share shall be paid by the Company at the Redemption Price, together with any
applicable accrued and unpaid dividends to the Redemption Date; provided,
however, that dividends whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such shares, or one or more predecessor
shares, registered as such at the close of business on the relevant Dividend
Record Dates according to their terms and the provisions of this Agreement.
If any share of Senior Preferred Stock called for redemption
shall not be so paid upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, accrue dividends from the Redemption Date at
the rate provided by the Certificate of Designation.
8.06. Shares Redeemed in Part. Any share which is to be redeemed
only in part shall be surrendered at the principal offices of the Company (with,
if the Company so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute and deliver to the Holder of such share without service charge, a new
share or shares, of any authorized denomination as requested by such Holder, in
an amount equal to and in exchange for the unredeemed portion of the share so
surrendered.
SECTION 9
EXPENSES, INDEMNIFICATION AND
CONTRIBUTION AND TERMINATION
9.01. Expenses. Whether or not the transactions contemplated
hereby are consummated, the Company will pay all reasonable costs and expenses
(including reasonable and documented attorneys' and accountants' fees and
disbursements) incurred by each Purchaser or any Holder of a Security in
connection with the Transactions (including the preparation and negotiation of
the Transaction Documents), in connection with any amendments, waivers or
consents under or in respect of this Agreement, the other Transaction Documents
or the Securities (whether or not such amendment, waiver or consent becomes
effective, including, without limitation: (a) each Purchaser's reasonable and
documented out-of-pocket expenses in connection with such Purchaser's
examinations and appraisals of the properties, books and records of the Company
and its Subsidiaries, (b) the reasonable costs and expenses incurred in
enforcing, defending or declaring (or determining whether or how to enforce,
defend or declare) any rights or remedies under this Agreement, the other
Transaction Documents or the Securities or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement, the other Transaction Documents or the Securities, or by reason
of being a Holder of any Securities, (c) the reasonable costs and expenses,
including reasonable and documented consultants' and advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Subsidiary of
the Company or in connection with any work-out or restructuring of the
transactions contemplated hereby, by the other Transaction Documents or by the
Securities and (d) any transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any Governmental Authority in respect of this
Agreement or the Transaction Documents or any other document referred to herein
or therein. The Company will pay, and will save the Purchasers and each other
Holder of a Security harmless from, all claims in respect of any fees, costs or
expenses, if any, of brokers and finders in relation to the Transactions. The
Purchasers will deliver to the Company on or prior to the date that is two
Business Days prior to the date of the Closing Time an invoice for those costs
and expenses payable at the Closing Time in accordance herewith. Subject to the
last sentence of Section 3.08A, the Company will pay any costs and expenses of
the Purchasers contemplated in this Section 9.01 in connection with the Closing
Time within five Business Days after the Closing Time.
9.02. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless (i) each Purchaser and each Person who participates
as a placement or sales agent or as an underwriter in any Private Offering, (ii)
each Person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) any such Person referred to in
clause (i) (any of the Persons referred to in this clause (ii) being referred to
herein as a "Controlling Person") and (iii) the respective officers, directors,
managing directors, stockholders, partners, representatives, trustees,
fiduciaries, and agents of any Person referred to in clause (i) or any such
Controlling Person (any such Person referred to in clause (i), (ii) or (iii), a
"Purchaser Indemnified Person") against any losses, claims, damages or
liabilities, joint or several, to which such Purchaser Indemnified Person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) subject to Section 10.11, in whole or in part any inaccuracy
in any of the representations and warranties of the Company contained herein of
which the Knowledge Group had knowledge, (ii) in whole or in part upon the
failure of the Company to perform its obligations hereunder or (iii) any untrue
statement or alleged untrue statement of a material fact contained in any Resale
Materials, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein not
misleading, except insofar as the same are a result of any information furnished
in writing to the Company by such Purchaser Indemnified Person expressly for use
therein; and will reimburse each such Purchaser Indemnified Person for any legal
and other expenses incurred by such Purchaser Indemnified Person in connection
with investigating or defending any such action or claims as such expenses are
incurred. The indemnity agreement set forth in this Section 9.02(a) shall be in
addition to any liabilities that the Company may otherwise have.
(b) Indemnification by the Purchasers. Each Purchaser agrees,
severally and not jointly, to indemnify and hold harmless (i) the Company, (ii)
each Controlling Person of the Company and (iii) the respective officers,
directors, employees, representatives and agents of the Company or any such
Controlling Person (any such Person referred to in clause (i), (ii) or (iii), a
"Company Indemnified Person") against any losses, claims, damages or
liabilities, joint or several, to which such Company Indemnified Person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) in whole or in part any inaccuracy of any of such Purchaser's
representations and warranties in Section 5 or (ii) in whole or in part the
failure of such Purchaser to perform its obligations in Section 6.01(f) or 6.08;
and will reimburse the Company Indemnified Persons for any legal and other
expenses reasonably incurred by the Company Indemnified Persons in connection
with investigating or defending any such actions or claims as such expenses are
incurred. The indemnity agreement set forth in this Section 9.02(b) shall be in
addition to any liabilities that each Purchaser may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
after receipt by a Purchaser Indemnified Person or a Company Indemnified Person
(each, an "Indemnified Person") of notice of the commencement of any action,
such Indemnified Person shall, if a claim in respect thereof is to be made
against an indemnifying party under Section 9.02(a) or 9.02(b), as applicable,
notify such indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any Indemnified Person otherwise than under
Section 9.02(a) or 9.02(b), as applicable, or to the extent it is not materially
prejudiced as a proximate result of such failure. In case any such action is
brought against any Indemnified Person and it shall notify an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it shall elect within 30 days after
receiving any such notification, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such Indemnified Person (who shall not, except with the consent of the
Indemnified Person, which consent shall not be unreasonably withheld, be counsel
to the indemnifying party), and, after notice from the indemnifying party to
such Indemnified Person of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such Indemnified Person under such
paragraph for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such Indemnified Person, in connection with the
defense thereof other than reasonable costs of investigation. Notwithstanding
the foregoing, any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Person
unless (i) the Indemnified Person shall have been advised by counsel that
representation of the Indemnified Person by counsel provided by the indemnifying
party would be inappropriate due to actual or potential conflicting interests
between the indemnifying party and the Indemnified Person, including situations
in which there are one or more legal defenses available to the Indemnified
Person that are different from or additional to those available to the
indemnifying party, (ii) the indemnifying party shall have authorized in writing
the employment of counsel for the Indemnified Person at the expense of the
indemnifying party or (iii) the indemnifying party shall have failed to assume
the defense or retain counsel reasonably satisfactory to the Indemnified Person;
provided, however, that the indemnifying party shall not, in connection with any
one such action or proceeding or separate but substantially similar actions or
proceedings arising out of the same general allegations, be liable for the fees
and expenses of more than one separate firm of attorneys at any time for all
Indemnified Persons, except to the extent that local counsel, in addition to
their regular counsel, is required in order to effectively defend against such
action or proceeding. No indemnifying party shall, without the written consent
of the Indemnified Person, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the Indemnified Person is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the Indemnified Person from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any Indemnified Person.
9.03. Contribution. If the indemnification provided for in
Section 9.02 is unavailable or insufficient to hold harmless an Indemnified
Person under paragraph (a) or (b) of Section 9.02 in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
Indemnified Person, contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the (i)
relative benefits received by the Company on the one hand and the Purchasers on
the other hand from the issuance and sale of the Securities; or (ii) if the
allocation provided in clause (i) is not permitted by Applicable Law, in such
proportion as is appropriate to reflect not only the related benefits referred
to in clause (i) above but also the relative fault of the indemnifying party on
the one hand and the Indemnified Person on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Purchasers on the other hand in connection with the sale of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the fee payable to the Purchasers at the Closing Time. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party on the one hand or the Indemnified Person on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties agree that it
would not be just and equitable if contributions pursuant to this Section 9.03
were determined by pro rata allocation (even if the Indemnified Persons were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 9.03. The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 9.03 shall be deemed to include any
legal or other expenses reasonably incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9.03, no Purchaser shall be
required to contribute any amount which, when taken together with any amounts
paid by such Purchaser under Section 9.02(b) exceeds the fee payable to the
Purchasers at the Closing Time. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The obligations of the Company and the Purchasers under this
Section 9.03 shall be in addition to any liability which the Company and the
respective Purchasers may otherwise have.
9.04. Survival. The obligations of the Company under this
Section 9 will survive the payment or transfer of any Security, the enforcement,
amendment or waiver of any provision of this Agreement and the termination of
this Agreement.
9.05. Termination.
(a) The Purchasers and the Company may terminate this Agreement
by written consent of each Purchaser and the Company at any time prior to the
Closing Time. The Purchasers may terminate this Agreement, by notice to the
Company, (1) at any time at or prior to December 31, 1999 if any of the
conditions in Section 3 are not satisfied or waived in writing by the Purchasers
or are not capable of being so satisfied or waived at or prior to December 31,
1999, (2) if the Transactions have not closed prior to December 31, 1999 or (3)
at any time at or prior to the Closing Time if there has been, since the time of
execution of this Agreement or since the Audit Date, any material adverse change
in the business, prospects, operations, results of operations or financial
condition of the Company and its Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section 9.05, such termination shall be without liability of any party to any
other party except as provided in Section 9.01 hereof, and provided further that
Sections 1, 9.02, 9.03, 9.04, 10.08 and 10.11 shall survive such termination and
remain in full force and effect.
SECTION 10
MISCELLANEOUS
10.01. Notices. Except as otherwise expressly provided herein,
all notices and other communications shall have been duly given and shall be
effective (a) when delivered, (b) when transmitted via telecopy (or other
facsimile device) to the number set out below if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), (c) the day following the day on which the same has
been delivered prepaid to a reputable national overnight air courier service or
(d) the third Business Day following the day on which the same is sent by
certified or registered mail, postage prepaid, in each case to the respective
parties at the address set forth below, or at such other address as such party
may specify by written notice to the other party hereto:
(i) if to a Purchaser or its nominee, to the Purchaser or its
nominee at the address specified for such communications in Schedule
A, with a copy to (A)Cahill Gordon & Reindel, 80 Pine Street, New
York, New York 10005-1702, attention: Jonathan A. Schaffzin, Esq., and
(B) Kennedy Covington Lobdell & Hickman, L.L.P., 100 N. Tryon Street,
Suite 4200, Charlotte, North Carolina 28202, attention: Henry W.
Flint, Esq., or at such other address as the Purchaser or its nominee
shall have specified to the Company in writing;
(ii) if to any other Holder to such Holder at the address of such
Holder appearing in the Security Register or such other address as
such Holder shall have specified to the Company in writing; or
(iii) if to the Company at 390 South Woods Mill Road, Suite 350,
Chesterfield, Missouri 63017, attention: Eric Fencl, Esq., with a copy
to (A) Madison Dearborn Capital Partners III, L.P., Suite 3800, Three
First National Plaza, Chicago, Illinois 60602, attention: Timothy M.
Hurd, and (B) Kirkland & Ellis, 200 E. Randolph, Chicago, Illinois
60601, attention: Michael H. Kerr, P.C., or at such other address as
the Company shall have specified to the Holders in writing.
10.02. Benefit of Agreement; Assignments and Participations.
Except with respect to Section 7.10 and 7.11 and as otherwise expressly provided
herein, all covenants, agreements and other provisions contained in this
Agreement by or on behalf of any of the parties hereto shall bind, inure to the
benefit of and be enforceable by their respective successors and assigns
(including, without limitation, any subsequent holder of a Security) whether so
expressed or not (other than Section 6.08 as to Persons other than the
Purchasers and their Affiliates); provided, however, that the Company may not
assign and transfer any of its rights or obligations without the prior written
consent of the other parties hereto and each Subsequent Purchaser, except as
otherwise permitted under paragraph (j)(viii) of the Certificate of Designation.
Nothing in this Agreement, the Certificate of Designation or the
Securities, express or implied, shall give to any Person other than the parties
hereto, their successors and assigns and the Holders from time to time of the
Securities any benefit or any legal or equitable right, remedy or claim under
this Agreement.
10.03. No Waiver; Remedies Cumulative. No failure or delay on the
part of any party hereto or any Holder in exercising any right, power or
privilege hereunder, under the Certificate of Designation or under the
Securities and no course of dealing between the Company and any other party or
Holder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder, under the Certificate of
Designation or under the Securities preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies provided herein, in the Certificate of
Designation and in the Securities are cumulative and not exclusive of any rights
or remedies which the parties or Holders would otherwise have. No notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the other parties hereto or the Holders to any other or
further action in any circumstances without notice or demand.
10.04. Amendments, Waivers and Consents. This Agreement may be
amended, and the observance of any term hereof may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders (or, if prior to the Closing Time, Purchasers
who have agreed to purchase a majority of the shares of Senior Preferred Stock);
provided, however, that no such amendment or waiver may, without the prior
written consent of the Holder of each share of Senior Preferred Stock then
outstanding and affected thereby, subject any Purchaser or Holder to any
additional obligation hereunder. No amendment or waiver of this Agreement will
extend to or affect any obligation, covenant or agreement not expressly amended
or waived or thereby impair any right consequent thereon. As used herein, the
term this "Agreement" and references thereto shall mean this Agreement as it may
from time to time be amended or supplemented.
10.05. Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart. Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the
parties hereto.
10.06. Reproduction. This Agreement, the other Transaction
Documents and all documents relating hereto and thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Purchasers at the Closing Time (except
the shares of Senior Preferred Stock or Common Stock themselves), and (c)
financial statements, certificates and other information previously or hereafter
furnished in connection herewith, may be reproduced by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and any original document so reproduced may be destroyed. The Company
agrees and stipulates that, to the extent permitted by Applicable Law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of
business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section 10.06 shall
not prohibit the Company, any other party hereto or any Holder from contesting
any such reproduction to the same extent that it could contest the original, or
from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
10.07. Headings. The headings of the sections and subsections
hereof are provided for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
10.08. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS AGREEMENT AND THE SECURITIES SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW
OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.
(b) If any action, proceeding or litigation shall be brought by
the Company, any Purchaser or any Holder in order to enforce any right or remedy
under this Agreement or any of the Securities, the Company and each Purchaser
hereby consent and will submit, and, in the case of the Company, will cause each
of its Subsidiaries to submit, to the jurisdiction of any state or federal court
of competent jurisdiction sitting within the area comprising the Southern
District of New York on the date of this Agreement. The Company and each
Purchaser hereby irrevocably waive any objection, including, but not limited to,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which they may now or hereafter have to the bringing of any such
action, proceeding or litigation in such jurisdiction. The Company and each
Purchaser further agree that they shall not, and, in the case of the Company,
shall cause its Subsidiaries not to, bring any action, proceeding or litigation
arising out of this Agreement, the Securities or any other Transaction Document
in any state or federal court other than any state or federal court of competent
jurisdiction sitting within the area comprising the Southern District of New
York on the date of this Agreement.
(c) The Company hereby designates CT Corporation at an address in
New York City designated at the Closing Time as the designee, appointee and
agent of the Company (the "Agent") to receive, for and on behalf of the Company,
service of process in such jurisdiction in any action, proceeding or litigation
with respect to this Agreement, the Securities or any of the other Transaction
Documents (it being understood that, with prior written notice to the Required
Holders, the Company may designate any other Person as its Agent for the
purposes of this Section 10.08(c)). It is understood that a copy of such process
served on such agent will be promptly forwarded by mail to the Company at its
address set forth opposite its signature below, but the failure of the Company
to have received such copy shall not affect in any way the service of such
process. The Company further irrevocably consents to the service of process of
any of the aforementioned courts in any such action, proceeding or litigation by
the mailing of copies thereof by registered or certified mail, postage prepaid,
to the Company at its said address, such service to become effective thirty (30)
days after such mailing.
(d) Nothing herein shall affect the right of the Company or any
Holder of a share of Senior Preferred Stock to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any party hereto in any other jurisdiction. If service of process is made on a
designated agent it should be made by either (i) personal delivery or (ii)
mailing a copy of summons and complaint to the agent via registered or certified
mail, return receipt requested.
(e) THE COMPANY AND EACH PURCHASER HEREBY WAIVE ANY AND ALL
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE SECURITIES.
10.09. Severability. If any provision of this Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable to the extent of such illegality, invalidity or unenforceability
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
10.10. Entirety. This Agreement together with the other
Transaction Documents represents the entire agreement of the parties hereto and
thereto, and supersedes all prior agreements and understandings, oral or
written, if any, relating to the Transaction Documents or the transactions
contemplated herein or therein.
10.11. Survival of Representations and Warranties. All
representations and warranties and covenants and indemnities made by the Company
herein shall survive the execution and delivery of this Agreement, the issuance
and transfer of all or any portion of the Securities and the payment of Senior
Preferred Stock and any other obligations hereunder, regardless of any
investigation made at any time by or on behalf of the Purchasers or any other
holder that is Affiliated with the Purchasers; provided that the representations
and warranties made by the Company herein or pursuant to the certificates
contemplated hereby shall terminate 180 days after the Closing Time (the
"Survival Termination Date"); provided, further, that if the Company's audited
financial statements are not completed by the 150th day after the Closing Time,
the Survival Termination Date shall be tolled for one day for every day between
the 150th day after the Closing Time and the day the Company's audited financial
statements are completed. All statements contained in any certificate delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement.
10.12. Incorporation. All Exhibits and Schedules attached
hereto are incorporated as part of this Agreement as if fully set forth herein.
10.13. Press Releases and Public Announcements. No party to this
Agreement shall issue any press release or make any public announcement relating
to the subject matter of this Agreement prior to the Closing Time without the
prior written approval of each of the Purchasers and the Company; provided,
however, that any party may make any public disclosure it believes in good faith
is required by Applicable Law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing party will use its
reasonable best efforts to advise the other parties prior to making the
disclosure).
10.14. Public Disclosures. The Company shall not, and shall not
permit any of its Subsidiaries to, disclose the name or identity of any
Purchaser as an investor in the Company in any press release or other public
announcement or in any document or material filed with any governmental entity,
unless (i) such Purchaser consents to such disclosure or (ii) the Company
believes such disclosure is required by applicable law or governmental
regulations or by order of a court of competent jurisdiction or in any
registration statement, in which case the Company or such Subsidiary shall give
prior written notice to such Purchaser describing in reasonable detail the
proposed content of such disclosure and shall permit such Purchaser to review
and comment upon the form and substance of such disclosure.
10.15. Heller. Notwithstanding anything to the contrary,
nothing containedin this Agreement shall affect, limit or impair the rights and
remedies of Heller Financial, Inc. in its capacity as (i) a lender to the
Company or any Subsidiary pursuant to any agreement under which the Company or
any Subsidiary has borrowed or may borrow money, and (ii) the beneficiary of any
and all agreements entered into by the Company or any Subsidiary for the benefit
of Heller Financial, Inc., as lender.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
OUTSOURCING SOLUTIONS INC.
By: /s/ Gary L. Weller
----------------------------
Name: Gary L. Weller
Title: EVP
ARES LEVERAGED INVESTMENT FUND,
L.P.
By: Ares Management, L.P.,
its General Partner
By: /s/ Jeffrey Serota
----------------------------
Name: Jeffrey Serota
Title: Vice President
ARES LEVERAGED INVESTMENT FUND
II, L.P.
By: Ares Management II, L.P.,
its General Partner
By: /s/ Jeffrey Serota
----------------------------
Name: Jeffrey Serota
Title: Vice President
DB CAPITAL INVESTORS, L.P.
By: DB Capital Parnters, L.P.
its General Partner
By DB Capital Parners, Inc.
By: /s/ Tyler Zachem
----------------------------
Name: Tyler Zachem
Title: Managing Director
<PAGE>
FIRST UNION INVESTORS, INC.
By: /s/ Frederick W. Eubank
----------------------------
Name: Frederick W. Eubank,
II
Title: Senior Vice
President
ABBOTT CAPITAL 1330 INVESTORS
II, L.P.
By: Abbott Capital 1330 GenPar
II, L.L.C.,
its General Partner
By: /s/ Thomas W. Hallagan
----------------------------
Name: Thomas W. Hallagan
Title: Manager
ABBOTT CAPITAL PRIVATE EQUITY
FUND III, L.P.
By: Abbott Capital Management,
L.L.C.,
its General Partner
By: /s/ Raymond L. Held
----------------------------
Name: Raymond L. Held
Title: Managind Director
BNY PARTNERS FUND, L.L.C.
By: BNY Private Investment
Management, Inc.,
its Member Manager
By: /s/ Burton M. Siegal
----------------------------
Name: Burton M. Siegal
Title: Senior Vice President
<PAGE>
HELLER FINANCIAL, INC.
By: /s/ Timothy P. Davitt
----------------------------
Name: Timothy P. Davitt
Title: Vice President
MAGNETITE ASSET INVESTORS L.L.C.
By: BlackRock Financial
Management, Inc.,
as Managing Member
By: /s/ Dennis M. Schaney
----------------------------
Name: Dennis M. Schaney
Title: Managing Director
<PAGE>
JUNIOR PREFERRED STOCK PURCHASE AGREEMENT
THIS JUNIOR PREFERRED STOCK PURCHASE AGREEMENT, dated as of
December 10, 1999 (this "Agreement"), is made by and among Outsourcing Solutions
Inc., a Delaware corporation (the "Company"), and the Purchasers listed on the
signature pages hereto (each a "Purchaser" and collectively the "Purchasers").
Except as otherwise indicated, capitalized terms used herein are defined in
Section 7 hereof.
The parties hereto agree as follows:
Section 1. Authorization of Junior Preferred Stock. The Company will
authorize a class of 50,000 shares of Junior Preferred Stock, no par value per
share, having the terms and provisions set forth on Exhibit A hereto (the
"Junior Preferred Stock").
Section 2. Purchase and Sale of Junior Preferred Stock.
2A. Purchase and Sale. Subject to the terms and conditions set forth
herein, the Company will sell to each Purchaser, and each Purchaser will
purchase from the Company, such number of shares of Junior Preferred Stock as is
set forth in Schedule 1 attached hereto at a purchase price of $1,000.00 per
share.
2B. The Closing. The closing of the sale and purchase of the Junior
Preferred Stock hereunder (the "Closing") will take place at the offices of
White & Case LLP, 1155 Avenue of the Americas, New York, New York 10036. At the
Closing, the Company will deliver to each Purchaser a certificate or
certificates evidencing the number of shares of Junior Preferred Stock to be
purchased by such Purchaser, registered in the name of such Purchaser against
payment of the purchase price therefor by delivery of a cashier's or certified
check or checks of immediately available funds or by wire transfer of
immediately available funds to a bank account designated by the Company. Each
Purchaser may satisfy his or its obligation to pay the purchase price by
directing that a portion of its redemption consideration in connection with that
certain Stock Subscription and Redemption Agreement, dated October 8, 1999, and
amended as of the date hereof, to which the Company and the Purchasers are
parties, be retained by the Company.
Section 3. Restrictions on Transfers.
3.A. Restrictions. Restricted Securities are transferable pursuant to (i)
public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A
of the Securities and Exchange Commission (or any similar rule then in force) if
such rule is available, and (iii) subject to the conditions specified in
paragraph 3B, any other legally available means of transfer pursuant to the
Securities Act.
3.B. Procedure for Transfer. In connection with the transfer of any
Restricted Securities (other than a transfer referred to in clauses (i) or (ii)
of paragraph 3A above), the holder thereof will deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion (reasonably satisfactory to the Company) of counsel
which (to the Company's reasonable satisfaction) is knowledgeable in securities
law matters to the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under the Securities
Act. In addition, if the holder of such Restricted Securities delivers to the
Company an opinion of such counsel to the effect that no subsequent transfer of
such Restricted Securities will require registration under the Securities Act,
the Company will promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities Act
Legend set forth in paragraph 5A below. If the Company is not required to
deliver new certificates for such Restricted Securities not bearing such legend,
the holder thereof will not transfer the same until the prospective transferee
has confirmed to the Company in writing its agreement to be bound by the
conditions contained in this paragraph and paragraph 5A.
3.C. Transferees. Upon request of any Purchaser, the Company shall promptly
supply to such Purchaser or its prospective transferees all information required
to be delivered in connection with a transfer pursuant to Rule 144A of the
Securities and Exchange commission.
Section 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Purchaser that as of the Closing:
4.A. Organization, etc. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has all requisite corporate power and authority to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement.
4.B. Authorization; No Breach. The execution, delivery and performance of
this Agreement and all other agreements and transactions contemplated hereby and
thereby have been duly authorized by the Company. This Agreement constitutes a
valid and binding obligation of the Company enforceable in accordance with its
terms, subject to the availability of equitable remedies and to the laws of
bankruptcy and other similar laws affecting creditors' rights generally. The
execution and delivery by the Company of this Agreement and all other agreements
and instruments contemplated hereby and thereby to be executed by the Company,
and the offering, sale and issuance of the Junior Preferred Stock hereunder, do
not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any lien, security interest, charge or encumbrance upon the
Company's capital stock or assets pursuant to, (iv) give any third party the
right to accelerate any obligation under, (v) result in a violation of, or (vi)
require any authorization, consent, approval, exemption or other action by or
notice to or filing with any court or administrative or governmental body (other
than in connection with certain state and federal securities laws) or any other
third party pursuant to, the Fourth Amended and Restated Certificate of
Incorporation or the Bylaws, or any law, statute, rule, regulation, instrument,
order, judgment or decree to which the Company is subject or any agreement or
instrument to which the Company is a party, or by which its assets are bound.
The Junior Preferred Stock has been duly and validly authorized for issuance by
the Company and, when issued and paid for in accordance with this Agreement,
will be fully paid and non-assessable and free and clear of any liens and
preemptive or similar rights.
4.C. No Registration. Assuming the truth and accuracy of the
representations set forth in Section 5 hereof, the offers and sales of the
Junior Preferred Stock pursuant to the terms hereof are not required to be
registered under the Securities Act or any state securities laws.
Section 5. Purchasers' Representations and Warranties.
5.A. Purchasers' Investment Representations. Each Purchaser individually,
and not jointly or severally, hereby represents that he or it is acquiring the
Restricted Securities purchased hereunder for his or its own account with the
present intention of holding such securities for investment purposes and that it
has no intention of selling such securities in a public distribution in
violation of federal or state securities laws; provided that nothing contained
herein will prevent the Purchaser and the subsequent holders of such securities
from transferring such securities in compliance with the provisions of Section 3
hereof. Each certificate for Restricted Securities will be conspicuously
imprinted with a legend substantially in the following form (the "Securities Act
Legend"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
DECEMBER 10, 1999, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THE TRANSFER OF SUCH SECURITIES IS SUBJECT TO
THE CONDITIONS SPECIFIED IN THE JUNIOR PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 10, 1999, BETWEEN THE ISSUER (THE "COMPANY") AND THE
ORIGINAL PURCHASER HEREOF, AND THE COMPANY RESERVES THE RIGHT TO REFUSE TO
TRANSFER SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY OF SUCH CONDITIONS
WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE."
Whenever any shares of Junior Preferred Stock cease to be Restricted Securities
and are not otherwise restricted securities, the holder thereof will be entitled
to receive from the Company, without expense, upon surrender to the Company of
the certificate representing such shares of Junior Preferred Stock, a new
certificate representing such shares of Junior Preferred Stock of like tenor but
not bearing a legend of the character set forth above.
5.B. Other Representations and Warranties of the Purchasers. Each
Purchaser individually, and not jointly or severally, represents and warrants to
and covenants and agrees with, the Company that:
(i) the Purchaser has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the securities purchased
hereunder and has had full access to such other information concerning the
Company as the Purchaser may have requested and that in making its decision to
invest in the securities being purchased hereunder it is not in any way relying
on the fact that any other person has decided to be a Purchaser hereunder or to
invest in the securities;
(ii) the Purchaser (a) is an "accredited investor" as defined in Rule
501(a) under the Securities Act or (b) by reason of his business and financial
experience, and the business and financial experience of those retained by him
to advise it with respect to its investment in the securities being purchased
hereunder, he, together with such advisors, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of its prospective investment in such
securities, is able to bear the economic risk of such investment and, at the
present time, is able to afford a complete loss of such investment; and
(iii) the Purchaser has all requisite power and authority to enter into,
deliver and consummate the transactions contemplated by this Agreement
(including the purchase of the securities to be purchased by the Purchaser
hereunder) and this Agreement has been duly authorized, executed and delivered
by the Purchaser and constitutes a valid and binding obligation of the Purchaser
enforceable in accordance with its terms (subject to the availability of
equitable remedies and to the laws of bankruptcy and other similar laws
affecting creditors' rights generally) and, as applicable, does not violate the
Purchaser's charter, by-laws or other organizational documents.
Section 6. Definitions.
"Bylaws" means the Bylaws of the company, as such Bylaws may be modified,
amended or amended and restated from time to time.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency, or political subdivision thereof.
"Restricted Securities" means the Junior Preferred Stock issued hereunder
and any securities issued with respect to such Junior Preferred Stock by way of
any stock dividend or stock split, or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Restricted Securities, such securities will cease to be
Restricted Securities when they have (a) been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) become eligible for sale pursuant to Rule 144 (excluding Rule
144(k)) or Rule 144A of the Securities and Exchange Commission (or any similar
rule then in force), or (c) been otherwise transferred and new securities for
them not bearing the Securities Act Legend set forth in paragraph 5A have been
delivered by the company in accordance with paragraph 3B. Whenever any
particular securities cease to be Restricted Securities, the holder thereof will
be entitled to receive from the Company, without expense, new securities of like
tenor not bearing a Securities Act Legend of the character set forth in
paragraph 5A.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
Section 7. Miscellaneous.
7.A. Remedies. The holders of Junior Preferred Stock acquired hereunder
(directly or indirectly) will have all of the rights and remedies set forth in
this Agreement and the Certificate of Incorporation, and all of the rights and
remedies which such holders have been granted at any time under any other
agreement or contract, and all of the rights and remedies which such holders
have under any law. Any Person having any rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement, and to
exercise all other rights granted by law.
7.B. Amendments and Waivers. Except as otherwise provided herein, any
provision hereof may be amended or waived generally and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of at least a majority of the outstanding shares of Junior Preferred
Stock issued hereunder and, to the extent that any modification, amendment or
waiver adversely affects the rights of the holders of any class of Junior
Preferred Stock, by the holders of at least a majority of the outstanding shares
initially issued hereunder of such adversely affected class of Junior Preferred
Stock. No course of dealing between the Company and any holder of Junior
Preferred Stock or any delay on the part of any such holder in exercising any
rights hereunder or under any agreement contemplated hereby or under the
Certificate of Incorporation or the Bylaws will operate as a waiver of any
rights of any such holder.
7.C. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith will survive the execution and delivery of this Agreement, regardless
of any investigation made by any Purchaser or on its behalf.
7.D. Successors and Assigns.
(i) Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective successors and
assigns of such parties whether so expressed or not. In addition, and whether or
not any express assignment has been made, the provisions of this Agreement which
are for the Purchaser's benefit as the purchaser or holder of Junior Preferred
Stock are also for the benefit of and enforceable by any subsequent holder of
such Purchaser's Junior Preferred Stock.
(ii) If a sale, transfer, assignment or other disposition of any Junior
Preferred Stock is made in accordance with the provisions of this Agreement to
any Person and such securities remain Restricted Securities immediately after
such disposition, such Person shall, at or prior to the time such securities are
acquired, execute a counterpart of this Agreement with such modifications
thereto as may be necessary to reflect such acquisition, and such other
documents as are necessary to confirm such Person's agreement to become a party
to, and to be bound by, all covenants, terms and conditions of this Agreement as
theretofore amended.
7.E. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity, illegality
or unenforceability in such jurisdiction, without invalidating the remainder of
this Agreement in such jurisdiction or any provision hereof in any other
jurisdiction.
7.F. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same Agreement.
7.G. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
7.H. Governing Law. All issues concerning the enforceability, validity and
binding effect of this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the law of
any jurisdiction other than the State of New York.
7.I. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and shall be delivered personally or by telex or telecopy as described
below or by reputable over night courier, and shall be deemed given on the date
on which such delivery is made. If delivered by telex or telecopy such notices
or communications shall be confirmed by a registered or certified letter (return
receipt requested), postage prepaid. 1.K.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Junior
Preferred Stock Purchase Agreement as of the date first written above.
OUTSOURCING SOLUTIONS INC.
By: /s/ Gary L. Weller
--------------------------------
Its: EVP
--------------------------------
<PAGE>
RAINBOW TRUST ONE
By /s/ Frank J. Hanna
---------------------------------
Name: Frank J. Hanna
Title: Trustee
<PAGE>
RAINBOW TRUST TWO
By /s/ David G. Hanna
---------------------------------
Name: David G. Hanna
Title: Trustee
<PAGE>
By /s/ Alan M. Miller
---------------------------------
Name: Alan M. Miller
<PAGE>
By /s/ Timothy G. Beffa
---------------------------------
Name: Timothy G. Beffa
<PAGE>
HELLER FINANCIAL, INC.
By /s/ Mark Hutchings
---------------------------------
Name: Mark Hutchings
Title: AVP
<PAGE>
Title:
McCOWN De LEEUW & CO. III, L.P.
By /s/ David De Leeuw
---------------------------------
Name: David DeLeeuw
Title:
McCOWN De LEEUW & CO. III EUROPE, L.P.
By /s/ David DeLeeuw
---------------------------------
Name: David DeLeeuw
Title:
McCOWN De LEEUW & CO. III (ASIA), L.P.
By /s/ David DeLeeuw
---------------------------------
Name: David DeLeeuw
Title:
GAMMA FUND, L.L.C.
By /s/ David DeLeeuw
---------------------------------
Name: David DeLeeuw
Title:
OUTSOURCING SOLUTIONS INC.
--------------------------
CONSENT SOLICITATION STATEMENT
------------------------
Relating to its 11% Senior Subordinated Notes due November 1, 2006
CUSIP No. 690132AC9
------------------------
Outsourcing Solutions Inc., a Delaware corporation (the "Company"), is
hereby soliciting consents (the "Consents"), on the terms and subject to the
conditions set forth in this Consent Solicitation Statement (as it may be
supplemented or amended from time to time, the "Consent Statement") and the
related Consent Form (as it may be supplemented or amended from time to time,
the "Consent Form" and together with the Consent Statement, the "Solicitation")
from holders (each, a "Holder" and, collectively, the "Holders") of at least a
majority of the aggregate principal amount of its outstanding 11% Senior
Subordinated Notes due November 1, 2006 (the "Notes") issued pursuant to the
Indenture, dated November 6, 1996 (the "Indenture"), among the Company, the
subsidiary guarantors named therein (collectively, the "Guarantors") and
Wilmington Trust Company, as trustee (the "Trustee"), to the waiver of: (i) the
Company's obligations under Section 4.15 of the Indenture, including its
obligation to make a Change of Control Offer in connection with the
recapitalization of the Company (the "Recapitalization") by an investor group
led by an affiliate of Madison Dearborn Partners, Inc. ("MDP"); and (ii) the
failure by the Company to comply with certain technical requirements relating to
the qualification and operation of its financing subsidiary, OSI Funding Corp.
("OSI Funding"), as an Unrestricted Subsidiary under the Indenture and any and
all consequences arising therefrom under the Indenture (collectively, the
"Waivers").
The Company is offering to pay to each Holder who provides its Consent
at or prior to 5:00 p.m., New York City time, on the Expiration Date (as defined
below) a payment of $100 per $1,000 of principal amount of Notes (the "Consent
Payment"). The Company will not be obligated to make any Consent Payment in
respect of any Consents not provided at or prior to 5:00 p.m., New York City
time, on the Expiration Date. Subject to the consummation of the
Recapitalization, the Consent Payment will be made on the Consent Payment Date
(as defined below). Capitalized terms used in this Consent Statement and not
otherwise defined herein have the meanings ascribed to them in the Indenture.
In order to receive the Consent Payment, Holders of Notes must provide
their Consents (and not have revoked such Consents) at or prior to 5:00 p.m.,
New York City time, on November 19, 1999 (the "Expiration Date"), unless
extended by the Company in its sole discretion. The Company reserves the right
to extend the Solicitation on a daily basis until 5:00 p.m., New York City time,
on the date on which the Requisite Consents (as defined below) have been
obtained. Consents may be revoked at any time prior to the date on which the
Company receives the Requisite Consents.
MDP's obligation to complete the Recapitalization is expressly
conditioned upon the Company receiving the Requisite Consents to the Waivers.
See "The Recapitalization - Conditions."
See "Certain Considerations" for a discussion of certain factors that
should be considered in evaluating the Solicitation.
The Solicitation Agent for the Solicitation is:
Donaldson, Lufkin & Jenrette
November 9, 1999
<PAGE>
Any Holder desiring to give its Consent should either (i) complete and
sign the Consent Form (or a facsimile thereof) in accordance with the
instructions in the Consent Form and mail or deliver it to MacKenzie Partners,
Inc., the information and tabulation agent (the "Information Agent") or (ii)
request such Holder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such Holder. A Holder who has Notes
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact that entity if such Holder desires to give its
Consent. A Letter of Instruction is contained in the solicitation materials
provided along with this Consent Statement which may be used by a beneficial
owner to instruct the record Holder to deliver Consents.
In the event that the Solicitation is withdrawn or otherwise not
completed, the Consent Payment will not be paid or become payable to Holders of
the Notes who have validly delivered their Consents in connection with the
Solicitation. The Solicitation may be abandoned or terminated by the Company at
any time prior to the Consent Payment Date for any reason. The record date for
purposes of the Solicitation is November 5, 1999 (the "Record Date").
If Consents are received from registered Holders of at least a majority
of the aggregate principal amount of the outstanding Notes as of the Record
Date, such Consents will apply to all Notes issued under the Indenture and each
Holder of such Notes will be bound by such Consents regardless of whether such
Holder executed a Consent.
NEITHER THE COMPANY NOR DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION (THE "SOLICITATION AGENT") MAKES ANY RECOMMENDATION AS TO WHETHER OR
NOT HOLDERS SHOULD PROVIDE THEIR CONSENTS IN RESPONSE TO THE SOLICITATION.
Any questions regarding the Solicitation should be directed to the
Solicitation Agent. Requests for additional copies of this Consent Statement and
the Consent Form may be directed to the Information Agent. Beneficial owners may
also contact their broker, dealer, commercial bank or trust company for
assistance concerning the Solicitation.
THIS SOLICITATION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH SOLICITATION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS CONSENT
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
FORWARD LOOKING STATEMENTS
This Consent Statement (including the documents incorporated or deemed
incorporated by reference herein) includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of historical
fact provided or incorporated by reference herein are forward looking statements
and may contain information about financial results, economic conditions, trends
and known uncertainties. The forward-looking statements contained or
incorporated by reference herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to: (i) general economic or business conditions affecting
the account receivables management services industry, either nationally or
regionally, being less favorable than expected; (ii) expected synergies,
economies of scale and cost savings from recent acquisitions by the Company not
being fully realized or realized within the expected time frames; (iii) costs or
operational difficulties related to integrating the operations of recently
acquired companies with the Company's operations being greater than expected;
(iv) increased competition in the accounts receivable management services
industry; (v) implementation of or changes in the laws, regulations or policies
governing the accounts receivable management industry that could negatively
affect such industry; (vi) changes in general economic conditions in the United
States; (vii) the other factors discussed under the caption "Certain
Considerations" included elsewhere in this Consent Statement; and (viii) factors
discussed from time to time in the Company's public filings, including the
Annual Report on Form 10-K for the year ended December 31, 1998. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis, judgment, belief or expectations only as of the
date hereof. Neither the Company nor the Solicitation Agent undertakes any
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. In addition to the disclosure
contained herein, readers should carefully review any disclosure of risks and
uncertainties contained in other documents the Company files or has filed from
time to time with the Commission pursuant to the Exchange Act. See "Additional
Information; Incorporation of Certain Information by Reference."
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY .................................................................. 1
BACKGROUND OF THE SOLICITATION............................................ 3
Outsourcing Solutions Inc......................................... 3
Purpose of the Solicitation....................................... 3
Source of Funds for Consent Payments.............................. 3
THE RECAPITALIZATION...................................................... 4
General........................................................... 4
Sources and Uses.................................................. 5
Conditions........................................................ 5
Indemnification................................................... 6
Termination....................................................... 6
Ancillary Agreements.............................................. 6
The Purchaser..................................................... 7
Management........................................................ 7
New Senior Credit Facility........................................ 8
THE SOLICITATION.......................................................... 11
Purpose of the Solicitation....................................... 11
Consent Payment................................................... 13
Requisite Consents; Record Date; Effective Date;
Expiration Date................................................ 13
Waiver; Extensions; Amendments.................................... 13
Consent Procedures................................................ 14
Withdrawal Rights................................................. 16
Fees and Expenses................................................. 16
Information, Tabulation and Paying Agents......................... 17
CAPITALIZATION............................................................ 18
UNAUDITED PRO FORMA FINANCIAL DATA........................................ 19
CERTAIN CONSIDERATIONS.................................................... 24
Substantial Leverage; Ability to Service Debt..................... 24
Additional Borrowings Available................................... 25
Substantial Restrictions and Covenants............................ 25
Subordination; Asset Encumbrances................................. 25
Control by Principal Stockholder.................................. 26
Holding Company Structure......................................... 26
Competition....................................................... 26
Impact of Governmental Regulation................................. 27
Litigation........................................................ 27
Dependence on Key Management...................................... 27
Environmental Liabilities......................................... 27
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS............................ 28
Tax Considerations for Consenting Holders......................... 28
Tax Considerations for Non-Consenting Holders..................... 28
Backup Withholding................................................ 28
ADDITIONAL INFORMATION;
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.................... 29
MISCELLANEOUS............................................................. 30
ANNEX I .................................................................. A-1
ANNEX II.................................................................. A-3
ANNEX III................................................................. A-4
<PAGE>
SUMMARY
For your convenience, the Solicitation is summarized below. The
following summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information included or incorporated
by reference in this Consent Statement. Holders of the Notes are urged to read
carefully this Consent Statement and the documents incorporated by reference in
their entirety. Each of the capitalized terms used in this summary and not
defined herein has the meaning set forth elsewhere in this Consent Statement.
The Solicitation
The Solicitation and The Company is soliciting the Consents from
Consent Payment...... the Holders of the Notes with respect to the
Waivers. The Company is offering to pay to
each Holder who validly consents to (and does
not revoke such Consent) the Waivers prior to
5:00 p.m., New York City time, on the
Expiration Date, the Consent Payment for such
Notes. The Consent Payment will be made on
the date of the closing of the
Recapitalization (the "Consent Payment
Date"). The Company's obligation to make the
Consent Payment is expressly conditioned upon,
and subject to, the closing of the
Recapitalization.
Purpose of the The purpose of the Solicitation is to obtain
Solicitation....... the Requisite Consents to the waiver of: (i)
the Company's obligations under Section 4.15
of the Indenture, including its obligation to
make a Change of Control Offer in connection
with the Recapitalization and (ii) the failure
by the Company to comply with certain
technical requirements relating to the
qualification and operation of its financing
subsidiary, OSI Funding, as an Unrestricted
Subsidiary under the Indenture and any and all
consequences arising therefrom under the
Indenture.
Requisite Consents.... The duly executed (and not revoked) Consents
of the registered Holders of a majority of the
outstanding aggregate principal amount of the
Notes as of the Record Date (as defined) will
be required to effect the Waivers under the
Indenture governing the Notes (the "Requisite
Consents").
Effective Date ....... The Consents shall become effective
immediately upon the Company receiving the
Requisite Consents and certifying to the
Trustee that such Requisite Consents have been
received (the "Effective Date"). The Consents
shall cease to be effective in the event that
the Solicitation is abandoned or terminated by
the Company for any reason prior to the
Consent Payment Date.
Expiration Date....... The Expiration Date shall be November 19,
1999. The Company will not be obligated to
accept any Consents received after the
Expiration Date. The Company reserves the
right to extend the Solicitation on a daily
basis until 5:00 p.m., New York City time, on
the date on which the Requisite Consents have
been received.
Withdrawal Rights..... Consents may be revoked at any time prior to
the Effective Date by following the procedures
described herein.
Record Date........... Date The Record Date for purposes of the
Solicitation is the close of business on
November 5, 1999. Only Holders of Notes as of
the Record Date may execute Consentsand receive
the Consent Payment.
Waiver; Extensions; The Company expressly reserves the right, in
Amendments.......... its sole discretion, subject to applicable
law, at any time or from time to time, to
waive any conditions to the Solicitation,
extend the Expiration Date or amend the terms
of the Solicitation or terminate the
Solicitation before the Consent Payment Date
whether or not the Requisite Consents have
been received.
Brokerage Commissions. No brokerage commissions are payable by the
Holders of the Notes to the Solicitation
Agent, the Information Agent, the Company or
the Paying Agent (as defined below).
Solicitation Agent.... Donaldson, Lufkin & Jenrette Securities
Corporation.
Information and
Tabulation Agent.... MacKenzie Partners, Inc.
Paying Agent.......... U.S. Bank Trust National Association (the
"Paying Agent").
Further Information... Additional copies of this Consent Statement
may be obtained by contacting the Information
Agent or the Solicitation Agent at their
respective telephone numbers and addresses set
forth on the back cover of this Consent
Statement. Copies of the other documents
incorporated by reference herein may be
obtained as described below under "Additional
Information; Incorporation of Certain
Information by Reference."
See "Certain Considerations" beginning on page 24 for a discussion of certain
factors that should be considered in evaluating the Solicitation.
<PAGE>
BACKGROUND OF THE SOLICITATION
Outsourcing Solutions Inc.
The Company is one of the largest providers of accounts receivable
management services in the United States with revenues of $497.8 million for the
twelve months ended June 30, 1999 (the "LTM Period"). The Company believes that
it differentiates itself from its competitors by providing a full range of
accounts receivable management services on a national basis that allows its
customers to outsource the management of the entire credit cycle. The Company's
breadth of services across all stages of the credit cycle allows it to
cross-sell services to existing customers as well as to expand its customer base
by providing specific services to potential customers in targeted industries.
These services include contingent fee services, portfolio purchasing services
and outsourcing services, which accounted for approximately 72%, 17%, and 11% of
revenues for the LTM Period, respectively.
Contingent fee services involve collecting on delinquent consumer
accounts for a fixed percentage of realized collections or a fixed fee
per account.
Portfolio purchasing services involve acquiring portfolios of
non-performing consumer receivables from credit grantors, servicing
such portfolios and retaining all amounts collected.
Outsourcing services include contract management of accounts
receivable, billing and teleservicing.
The customer base for the accounts receivable management industry is
dominated by credit grantors in four end-markets: banks, health care, utilities,
and telecommunications. Other significant sources of account placements include
retail companies, and student loan and other governmental agencies. The
Company's customers include a full range of local, regional and national credit
grantors such as American Express, AT&T, Citigroup, First USA, Sony, Time
Warner, US West, Bally's, New Jersey Department of Treasury and various student
loan guaranty agencies including the California Student Aid Commission, the
Great Lakes Higher Education Corporation and USA Group Guaranty Services Inc. No
customer of the Company accounted for more than 5% of the Company's revenues in
1998.
The Company was formed in 1995 by McCown De Leeuw & Co., Inc., a private
equity investment firm, to acquire Account Portfolios, Inc., one of the largest
purchasers and servicers of non-performing accounts receivables portfolios.
Since the Company's formation it has completed six additional acquisitions and
has established itself as a leading industry consolidator. The Company has
experienced significant growth in its business through internal growth and
acquisitions, with its revenues increasing from $29.6 million in 1995 to $497.8
million in the LTM Period.
Purpose of the Solicitation
The purpose of the Solicitation is to obtain the Requisite Consents to
the waiver of: (i) the Company's obligations under Section 4.15 of the
Indenture, including its obligation to make a Change of Control Offer in
connection with the Recapitalization and (ii) the failure by the Company to
comply with certain technical requirements relating to the qualification and
operation of its financing subsidiary, OSI Funding, as an Unrestricted
Subsidiary under the Indenture and any and all consequences arising therefrom
under the Indenture. See "The Solicitation - Purpose of the Solicitation."
Source of Funds for Consent Payments
The funds necessary to pay the Consent Payments will come out of the
proceeds being raised to finance the Recapitalization. See "The Recapitalization
- - Sources and Uses."
THE RECAPITALIZATION
General
The Recapitalization will be effected pursuant to the Stock Subscription
and Redemption Agreement, dated as of October 8, 1999 (the "Purchase
Agreement"), between the Company, certain of its existing stockholders (the
"Stockholders"), warrantholders (the "Warrantholders") and optionholders (the
"Optionholders" and, collectively with the Stockholders and Warrantholders, the
"Equityholders"), and Madison Dearborn Capital Partners III, L.P. (the
"Purchaser"), a private equity investment fund.
The Recapitalization will be effected under the terms of the Purchase
Agreement as follows:
Certain new investors, which may include the Purchaser, will purchase
from the Company 100,000 units for an aggregate purchase price of
$100.0 million. Each unit will consist of one share of 14% Senior
Mandatorily Redeemable Preferred Stock (the "Preferred Stock") and a
number of shares of Common Stock that, together with all other shares
of Common Stock issued with the units, represents 8.7% of the fully
diluted common equity of the Company as of the date of the closing of
the Recapitalization (the "Closing").
The Purchaser and certain other investors will purchase Common Stock
from the Company for an aggregate purchase price ranging from $195
million to $215 million, depending upon several factors, including the
Company's revolver availability at the Closing and the transaction
fees and expenses of the Recapitalization payable by the Company or
the Purchaser. The total number of shares of Common Stock issued to
the Purchaser will represent approximately 78.0% of the fully diluted
common equity of the Company as of the Closing.
At the Closing, the Company will redeem all of its outstanding
preferred stock. Certain existing stockholders will retain a portion
of their shares of Common Stock (the "Rollover Shares"), such that the
Rollover Shares will represent approximately 6.3% of the fully diluted
common equity of the Company as of the Closing. All other shares of
Common Stock (including those issued upon the conversion of all the
Company's outstanding warrants) will be redeemed by the Company at the
Closing (the "Redemption Shares"). Each Optionholder will elect
whether to retain some or all of their options to purchase Common
Stock or to have them cashed out at the Closing.
The aggregate consideration for the Redemption Shares will be $790
million, plus or minus a working capital adjustment, and minus the sum
of the Company's debt at Closing, the value of the Rollover Shares,
certain fees and expenses of the Company, and amounts paid or payable
by the Company with respect to change of control payments to certain
employees pursuant to existing employment agreements.
All outstanding borrowings and obligations under the Company's existing
credit agreement will be replaced and refinanced by a new $475.0 million senior
credit facility (the "New Senior Credit Facility") at the Closing. The New
Senior Credit Facility will consist of (i) a six-year non-amortizing $75.0
million revolving credit facility (approximately $4.0 million of which is
expected to be drawn at Closing) and (ii) a $400.0 million term loan facility,
which will be comprised of a $125.0 million six-year amortizing term loan A
facility and a $275.0 million six and one half-year amortizing term loan B
facility. See "- New Senior Credit Facility."
Sources and Uses
The following table sets forth the expected sources and uses of funds
(dollars in millions) in connection with the Recapitalization, assuming the
Recapitalization occurred on June 30, 1999. The actual amounts of such sources
and uses may differ upon consummation of the Recapitalization and such
differences may be material.
Sources of Funds Amount Uses of Funds Amount
- --------------------- ---------- ------------------- ------------
Notes................. $ 100.0 Refinance Existing
Senior Credit Facility... $ 415.5
New Senior
Credit Facility: Assumption of the Notes... 100.0
Term Loans......... 400.0 Redemption of Capital
Stock................. 249.7
Revolving Credit
Loans........... 4.0 Rollover Shares........... 15.8
Preferred Stock ...... 100.0 Fees and Expenses......... 24.2
Common Equity
Investment.......... 195.4 Consent Payments ......... 10.0
Rollover Shares ...... 15.8 Other Indebtedness ....... 5.5
Other Indebtedness ... 5.5
--------- ----------
Total Sources ..... $ 820.7 Total Uses.......... $ 820.7
========= ==========
Conditions
The Purchase Agreement contains customary conditions to the Closing,
including that: (i) the representations and warranties of the parties are true
and correct; (ii) the parties have performed all requirements specified in the
Purchase Agreement; (iii) no preliminary injunction, decree or other order
exists that would prohibit the consummation of the transaction; (iv) no statute,
rule, regulation, executive order, decree or order of any kind exists that would
prohibit the consummation of the transaction; (v) the parties have executed a
stockholders agreement; (vi) the parties have delivered the requested
certificates; and (vii) the parties have delivered the requested opinions of
counsel.
The Purchaser's obligation to complete the Recapitalization is subject
to certain other conditions, including that: (i) no material adverse change has
occurred; (ii) all necessary third party consents have been obtained; (iii) the
Advisory Services Agreement, dated September 21, 1995, by and between OSI
Holdings Corp. and MDC Management Company III, L.P. has been assigned to
Purchaser; (iv) certain conditions to the financing of the Recapitalization have
been satisfied including, among others, that Purchaser has obtained from the
Holders, and the Trustee has taken all necessary actions with respect to, all
waivers, consents and amendments necessary to (a) waive the failure by the
Company to comply with certain technical requirements relating to the
qualification and operation of OSI Funding as an Unrestricted Subsidiary under
the Indenture and any and all consequences arising therefrom under the
Indenture, and (b) have the Holders waive the Company's obligation to make a
Change of Control Offer or to make a Change of Control Payment, in each case on
terms and conditions Purchaser and the Company each deem satisfactory; (v)
Purchaser has received the resignations, effective as of the Closing, of each
non-employee director and officer of the Company and its subsidiaries other than
those whom the Purchaser has specified in writing at least five business days
prior to the Closing; (vi) the Company has obtained the vote of stockholders
holding more than 75% of the voting power of all of the outstanding stock of the
Company approving payments the Company has made or is or may be obligated to
make that would be "parachute payments" (within the meaning of Internal Revenue
Code ss. 280G(b)) so that any such payments either will not be excess parachute
payments or will be exempt from treatment as a parachute payment under Code ss.
280G(b); (vii) the Company's preferred stock has been exchanged and the
Company's nonvoting common stock has been converted as specified in the Purchase
Agreement; (viii) the Company has neither received notification of the
termination of its business relationship with its major customers nor
experienced any material adverse change in the Company's contracts with its
major customers; (ix) the stock to be redeemed has been delivered; and (x) an
escrow agreement related to a potential working capital adjustment has been
entered into.
Indemnification
From and after the Closing, the Company must and the Purchaser must
cause the Company to maintain in effect in the Certificate of Incorporation of
the Company the provisions with respect to indemnification set forth in Article
Eight of the Certificate of Incorporation of the Company as in effect at the
Closing. Such provisions may not be amended, repealed, or otherwise modified for
a period of six (6) years from the Closing in any manner that would adversely
affect the rights thereunder of individuals (or their estates) who at the date
of the Purchase Agreement and/or as of the Closing are or were directors,
officers, employees or agents of the Company or its Subsidiaries, unless such
modification is required by law.
Termination
The Purchase Agreement may be terminated and the Recapitalization
abandoned, at any time prior to the Closing:
1. by mutual consent of the Company and the Purchaser;
2. by the Company or the Purchaser if the Recapitalization has not
been completed on or before December 31, 1999 (or such later date
as may be agreed to in writing by the Company and the Purchaser),
by reason of the failure of any condition to the consummation of
the Recapitalization which must be fulfilled to its satisfaction,
provided that no party may terminate the Purchase Agreement if
such failure has been caused primarily by such party's material
breach of the Purchase Agreement;
3. by either the Company or the Purchaser if (i) there are any
inaccuracies, misrepresentations or breaches of the breaching
party's representations or warranties in the Purchase Agreement,
such that the nonbreaching party's obligation to effect the
Recapitalization cannot be met, or (ii) the breaching party has
breached or failed to perform in all material respects any of its
material covenants or agreements contained within the Purchase
Agreement as to which notice has been given to the breaching
party and the breaching party has failed to cure or otherwise
resolve to the reasonable satisfaction of the nonbreaching party
within 15 days after receipt of such notice; or
4. by the Company or the Purchaser if a court of competent
jurisdiction or other governmental body has issued an order,
decree or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the transactions contemplated by the
Purchase Agreement and such order, decree, ruling or other action
has become final and nonappealable.
In the event of the termination of the Purchase Agreement by the
Purchaser or the Company, written notice will be given to the other party or
parties specifying the provision pursuant to which such termination is made, and
the Purchase Agreement will become void and have no effect, and there will be no
liability on the part of any party except under certain sections that survive
any termination of the Purchase Agreement.
Ancillary Agreements
Simultaneous with the Closing, an escrow agreement (the "Escrow
Agreement") and a stockholders agreement (the "Stockholders Agreement") will be
entered into. The Escrow Agreement will be among McCown De Leeuw & Co., Inc., as
the seller's representative for the Equityholders, and an escrow agent to be
identified by McCown De Leeuw & Co., Inc., as Escrow Agent (the "Escrow Agent").
The Purchase Agreement provides for adjustments to the redemption price payable
for the Redemption Shares depending on Company's closing date working capital,
and that as a result of such adjustments certain payments may be required to be
made. To facilitate such payments, the Purchase Agreement provides for the
deposit into escrow of $5.0 million otherwise payable at the Closing to the
Equityholders. The Stockholders Agreement will be among the Company, the
Purchaser and certain Equityholders and will provide for, among other things,
(i) the composition of the Company's Board of Directors (the "Board"); (ii)
certain "drag along" and "tag along" rights among the parties thereto and (iii)
certain restrictions on the ability of the Equityholders to transfer their
shares of Common Stock.
The Purchaser
MDP is one of the largest and most experienced private equity investment
firms in the United States. MDP's principals manage Madison Dearborn Capital
Partners III, L.P. ("MDCPIII"), a $2.2 billion investment fund raised in 1999,
Madison Dearborn Capital Partners II, L.P. ("MDCPII"), a $925.0 million
investment fund raised in 1996, and Madison Dearborn Capital Partners, L.P.
("MDCP"), a $550.0 million investment fund raised in 1993. Previously, MDP's
principals built a $2.0 billion management buyout and venture capital portfolio
at First Chicago Corporation. MDP focuses on management and venture capital
transactions and a wide range of other private equity investments, including
growth equity financings, recapitalizations and acquisition-oriented financing
transactions. MDP focuses on investments in several specific industries,
including financial services, communications, natural resources, consumer,
health care and industrial. MDP's long-standing investment philosophy is to
invest in companies that have outstanding management teams and the potential for
significant long-term equity appreciation.
Management
Board of Directors. Pursuant to the Stockholders Agreement, the
authorized number of directors on the Board following the Recapitalization will
be established at such number as will be determined from time to time in the
sole discretion of MDCPIII. The Stockholders Agreement provides that the
following individuals will be elected to the Board: (i) one individual
designated by MDCPIII who is a member of the Company's management, provided that
until the first annual meeting of the Company's stockholders, Timothy G. Beffa
will serve as such Management Director; and (ii) other individuals designated by
MDCPIII, who will initially be Paul R. Wood, Timothy M. Hurd and two other
persons to be specified by MDCPIII; provided that MDCPIII may authorize one or
more other persons to designate one or more additional individuals to be elected
to the Board on such terms and conditions as the Purchaser will determine in its
sole discretion.
A brief description of each person who will serve on the Board following
the Recapitalization is set forth below:
Paul R. Wood. Mr. Wood has served as a principal of MDCPIII, MDCPII and
MDCP since their respective formations in March 1999, June 1996 and January
1993, and as a Vice President or Managing Director of MDP, their indirect
general partner. Prior to that time, Mr. Wood served as Vice President of First
Chicago Venture Capital, which comprised the private equity investment
activities of First Chicago Corporation, the holding company parent of First
National Bank of Chicago. Mr. Wood serves on the board of directors of Hines
Horticulture, Inc., Eldorado Bancshares Inc., Woods Equipment Company and a
number of private companies.
Timothy M.Hurd. Mr. Hurd has served as a principal of MDCPIII and MDCPII
since their respective formations in March 1999 and June 1996, and as a Director
of MDP, their indirect general partner. Mr. Hurd joined MDP in 1996 following
his graduation from Harvard Business School. From 1992 to 1994, Mr. Hurd was
employed by Goldman, Sachs & Co. Mr. Hurd also serves on the board of directors
of Woods Equipment Company.
Timothy G. Beffa. Mr. Beffa has served as President, Chief Executive
Officer and a Director of the Company since August 1996. From August 1995 until
August 1996, Mr. Beffa served as president and chief operating officer of DIMAC
Corporation and DIMAC DIRECT Inc. and a director of DIMAC DIRECT Inc. From 1989
until August 1995, Mr. Beffa served as a vice president of DIMAC Corporation and
as senior vice president and chief financial officer of DIMAC DIRECT Inc. Prior
to joining the Company, Mr. Beffa was vice president of administration and
controller for the Internal Division of Pet Incorporated, a food and consumer
products company, where he previously had been manager of financial analysis.
Mr. Beffa currently serves as a director of DIMAC Holdings, Inc. and DIMAC
Corporation.
Executive Officers. All of the current non-director executive officers
of the Company and its subsidiaries will continue to serve in such capacities
following the Recapitalization on substantially the same terms and conditions
other than those whom the Purchaser shall have specified in writing at least
five business days prior to the Closing.
New Senior Credit Facility
DLJ Capital Funding, Inc. has issued a commitment letter to MDCPIII
under which it has committed, subject to the terms and conditions set forth
therein, to provide senior secured facilities to the Company under the New
Senior Credit Facility. The New Senior Credit Facility will consist of (i) a
six-year non-amortizing $75.0 million revolving credit facility (the "Revolving
Facility") and (ii) a $400.0 million term loan facility (the "Term Facility"),
which will be comprised of a $125.0 million six-year amortizing term loan A
facility (the "Term A Facility") and a $275.0 million six and one half-year
amortizing term loan B facility (the "Term B Facility"). Set forth below is a
brief description of the material terms of the New Senior Credit Facility.
Definitive documents relating to the New Senior Credit Facility are still being
negotiated and thus the terms set forth herein are subject to change.
Repayment
The Term A Facility and Term B. Facility mature in quarterly
installments, resulting in aggregate annual amortization payments as a
percentage of the initial principal amount as follows:
Year after Closing Annual Amortization
----------------------------- ------------------------------
(In percentage of the initial
principal amount)
Term A Facility Term B Facility*
--------------- ----------------
1............................... 0.0% 1.0%
2............................... 5.0% 1.0%
3............................... 10.0% 1.0%
4............................... 20.0% 1.0%
5............................... 25.0% 1.0%
6............................... 40.0% 94.5%
* With respect to the Term B Facility, aggregate annual amortization
payments as a percentage of the initial principal amount are 1.0% for
years 1-5.5 and 94.5% for year 6.5.
Guarantees; Security
The New Senior Credit Facility will be secured by a first-priority,
perfected lien on: (i) substantially all property and assets (tangible and
intangible) of the Company and its present and future domestic subsidiaries
(excluding OSI Funding), including all capital stock of all direct and indirect
subsidiaries of the Company (excluding OSI Funding); provided, however, that no
more than 65% of the equity interests of non-U.S. subsidiaries of the Company
will be required to be pledged as security; (ii) 100% of the capital stock of
the Company; and (iii) all intercompany indebtedness in favor of the Company and
its domestic subsidiaries (excluding OSI Funding).
Interest
At the Company's option, the interest rates per annum applicable to the
Revolving Facility, Term A Facility and Term B Facility will bear interest at
the Administrative Agent's alternate base rate or reserve-adjusted LIBO rate
plus, in each case, the applicable margins set forth below:
Applicable Margins
-----------------------------------------
Alternate Base Rate LIBO Rate
------------------- ---------
Revolving Facility............... 2.25% 3.25%
Term A Facility.................. 2.25% 3.25%
Term B Facility.................. 2.75% 3.75%
Commencing after the first two full fiscal quarters after the Closing,
the applicable margin to be used in calculating the interest rates under the
Revolving Facility and Term A Facility will be based upon the ratio of the
Company's total debt to EBITDA (the "Leverage Ratio") as follows:
Applicable Margins
-----------------------------------------------
Leverage Ratio Alternate Base Rate LIBO Rate
-------------- ------------------- ---------
>4.0x 2.25% 3.25%
-
>3.5x 1.75% 2.75%
-
>2.75x 1.25% 2.25%
-
<2.25x 0.75% 1.75%
Interest periods for the LIBO rate will be, at the Company's option,
one, two, three or six months. Interest for the LIBO rate loans will be payable
on the last business day of the applicable interest period thereof (or, if
earlier, each third month following the commencement of such interest period).
Interest on the alternative base rate loans will be payable monthly in arrears.
Prepayments
The Company is permitted to voluntarily prepay its obligations under the
New Senior Credit Facility without penalty (exclusive of customary LIBO rate
breakage costs). Obligations under the New Senior Credit Facility are subject to
customary, mandatory prepayments including, without limitation, with (i) 100% of
net cash proceeds from the issuance of debt securities and sales of assets
(subject to certain exceptions), (ii) 50% of net cash proceeds from the issuance
of equity securities (subject to the exceptions and the maintenance of a
specified leverage ratio) and (iii) 50% of excess cash flow proceeds (subject to
maintaining a specified leverage ratio).
Conditions; Covenants; Events of Default
The effectiveness of the New Senior Credit Facility will be subject to
customary conditions.
The New Senior Credit Facility will contain customary covenants
restricting the Company's ability, and the ability of its subsidiaries to (with
limited exceptions), among other things: (i) incur debt, (ii) subject the
Company's assets to liens or other encumbrances, (iii) incur contingent
liabilities, (iv) enter into sale/lease-back transactions, (v) pay dividends or
similar distributions, (vi) sell assets other than in the ordinary course of
business, (vii) merge or consolidate, (viii) enter into transactions with
affiliates, (ix) make investments or capital expenditures in excess of specified
levels and (x) refinance, defease, repurchase or prepay subordinated debt. In
addition, the New Senior Credit Facility will require the Company to meet
certain financial performance tests, including: (i) a maximum leverage ratio,
(ii) a minimum interest coverage ratio, (iii) a minimum fixed charge ratio and
(iv) a minimum EBITDA.
The New Senior Credit Facility will contain events of default customary
for a recapitalization, including, among others, a default under the New Senior
Credit Facility upon a change in control and defaults in other agreements.
<PAGE>
THE SOLICITATION
Purpose of the Solicitation
Change of Control. The Company is soliciting Consents to the waiver of
the Company's obligations under Section 4.15 of the Indenture, including its
obligation to make a Change of Control Offer in connection with the
Recapitalization. Under the Indenture, a Change of Control is defined to
include, among other things, the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than
Principals and Related Parties) of a direct or indirect interest in more than
35% of the voting power of the voting stock of the Company by way of merger or
consolidation or otherwise. Absent a waiver of the Company's obligations under
Section 4.15, the Purchaser's acquisition of approximately 78.0% of the
Company's fully diluted common equity in connection with the Recapitalization
will constitute a Change of Control under the Indenture. Section 4.15 of the
Indenture and all related defined terms are set forth in their entirety on Annex
I attached hereto.
Upon receipt by the Company of the Requisite Consents, the Consents
being solicited hereby will become effective and the Company will not be
obligated to make a Change of Control Offer or Change of Control Payment under
Section 4.15 of the Indenture in connection with the Recapitalization to any
Holder of Notes regardless of whether such Holder executed a Consent. The waiver
being solicited hereby with respect to the Change of Control relates only to the
Company's obligations under Section 4.15 of the Indenture in connection with the
Recapitalization and will not serve to waive any future rights the Holders may
have under Section 4.15 of the Indenture, or to amend, alter or otherwise modify
any of the terms of the Indenture, including Section 4.15 thereof.
Unrestricted Subsidiary Designation. The Consents will also serve to
waive the failure by the Company to comply with certain technical requirements
relating to the qualification and operation of its finance subsidiary, OSI
Funding, as an Unrestricted Subsidiary under the Indenture and any and all
consequences arising therefrom under the Indenture.
In September 1998, the Company formed OSI Funding as a qualifying
special-purpose finance company for use in helping to fund its portfolio
purchasing business. Since its formation, OSI Funding has been a
nonconsolidated, bankruptcy-remote, wholly owned subsidiary of the Company. In
connection with its formation, OSI Funding entered into a revolving warehouse
financing arrangement for up to $100.0 million of funding capacity for the
purchase of loans and accounts receivable portfolios, approximately $35.0
million of which is currently utilized. A majority of all receivables portfolios
purchased by the Company or its subsidiaries are now sold to OSI Funding
utilizing such financing arrangement. Such transactions with OSI Funding are
required to be on the same economic terms as those by which the Company or its
subsidiaries initially purchases the receivables portfolio from third party
credit grantors. A subsidiary of the Company, through a servicing agreement with
OSI Funding, provides certain administrative and collection services on a
contingent fee basis. Through OSI Funding, the Company is able to fund the
purchase of portfolios on an off-balance sheet basis, thereby substantially
increasing the Company's available cash flow for servicing its debt. The
Company's initial investment in OSI Funding was $2.5 million, and the Company
has made investments in OSI Funding aggregating $5.0 million, inclusive of the
initial investment.
Since the formation of OSI Funding, the Company has treated OSI Funding
as an Unrestricted Subsidiary under the Indenture. Unlike a Restricted
Subsidiary, which is required to guarantee payment of the Notes and generally is
subject to the covenant restrictions under the Indenture, an Unrestricted
Subsidiary is not required to guarantee payment of the Notes and, for the most
part, is not subject to such covenant restrictions. Under the Indenture, a
Subsidiary is deemed to be a Restricted Subsidiary unless it otherwise qualifies
as an Unrestricted Subsidiary.
In order for a Subsidiary to qualify as an Unrestricted Subsidiary, the
following conditions must be satisfied: (i) the Subsidiary must be designated as
an Unrestricted Subsidiary by the Company's Board of Directors pursuant to a
Board Resolution and a certified copy of such Board Resolution, together with an
Officer's Certificate certifying that such designation complied with the
applicable conditions and was in accordance with the provisions under the
Indenture relating to Restricted Payments, must be filed with the Trustee under
the Indenture; (ii) the Subsidiary has no Indebtedness other than Non-Recourse
Debt; (iii) the Subsidiary is not a party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (iv) the Subsidiary must be a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (a) to subscribe for additional Equity Interests or (b)
to maintain or preserve such Person's financial condition or cause such Person
to achieve any specified levels of operating results; (v) the Subsidiary has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; (vi) the
Subsidiary has at least one director on its board directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries; and (vii) the Subsidiary has at least one executive officer that
is not a director or executive officer of the Company or any of its Restricted
Subsidiaries. The definition of an Unrestricted Subsidiary is set forth in its
entirety on Annex II attached hereto.
It has recently come to the attention of the Company that, at the time
of formation of OSI Funding, the Company failed to take certain ministerial
actions to satisfy the technical requirements under the Indenture for the
designation of OSI Funding as an Unrestricted Subsidiary, despite the fact that
it could have been designated as such at that time. Namely, the Company did not
satisfy items (i) and (vii) set forth above at the time of formation of OSI
Funding, and the Company's obligation under the terms of OSI Funding's financing
arrangements to purchase an additional $2.5 million of equity in OSI Funding if
certain borrowing thresholds were exceeded by OSI Funding conflicted with item
(iv)(a) set forth above. The Company has since made this additional equity
investment in OSI Funding and currently does not have any obligation to purchase
or subscribe for additional equity interests in OSI Funding. But for these
deficiencies, OSI Funding would have otherwise satisfied the requirements for
qualification as an Unrestricted Subsidiary under the Indenture at the time of
its formation. Had OSI Funding been properly designated an Unrestricted
Subsidiary from the time of its formation, the Company's investments in OSI
Funding would have been Permitted Investments under the Indenture.
If OSI Funding were not to be treated as having been an Unrestricted
Subsidiary since its formation, the Company and OSI Funding would not be in
compliance with certain restrictive covenants of the Indenture. If it were
determined that the Company was not in compliance with the Indenture, the
Trustee or the Holders of 25% of the aggregate principal amount of the Notes
could notify the Company to comply with such restrictive covenants under the
Indenture, and, if the Company failed to so comply within the applicable grace
period, could declare the Notes to be immediately due and payable. In such
event, the aggregate principal amount of the Notes plus accrued and unpaid
interest thereon to the date of payment would, subject to the subordination
provisions of the Indenture, then be due and payable.
While the Company believes that its failure to properly qualify and
operate OSI Funding as an Unrestricted Subsidiary under the Indenture is a
technicality and that substantively OSI Funding should be treated as qualifying
as an Unrestricted Subsidiary since its formation, in order to remove any doubt
as to the status of OSI Funding as an Unrestricted Subsidiary for the benefit of
the Purchaser, the Company is seeking the waiver of its failure to properly
qualify and operate OSI Funding as an Unrestricted Subsidiary and any and all
consequences arising therefrom. Subject to the effectiveness of the Consents,
OSI Funding will be treated as having been duly designated as an Unrestricted
Subsidiary since its formation. Such actions will thereby cure any asserted
failure by the Company and OSI Funding to be in compliance with the provisions
of the Indenture arising as a result of the Company not having properly
qualified and operated OSI Funding as an Unrestricted Subsidiary and any and all
consequences arising therefrom.
Section 4.11 of the Indenture requires that the Company deliver to the
Trustee an opinion from an accounting, appraisal or investment banking firm of
national standing as to the fairness to the Holders of the Notes of any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million (a "Fairness Opinion").
Section 4.11 of the Indenture is set forth in its entirety on Annex III attached
hereto. The execution of the servicing agreement between the Company and OSI
Funding in connection with the formation of OSI Funding and the transactions
undertaken pursuant thereto from time to time thereafter were Affiliate
Transactions involving aggregate consideration in excess of $5.0 million. In
addition, on four occasions the sale of receivables portfolios by the Company to
OSI Funding involved aggregate consideration in excess of $5.0 million. As a
result, the Company was required in connection with the servicing agreement and
such sales to obtain Fairness Opinions. Although the Company did not obtain
Fairness Opinions at such times, it has since retained an appraisal firm of
national standing to provide such Fairness Opinions. The Company believes the
appraisal firm will be able to provide it with the Fairness Opinions. The
Company expects to receive such Fairness Opinions prior to the completion of the
Recapitalization. Upon receipt of Fairness Opinions with respect to the
transactions referred to above, the Company will have satisfied the requirements
of Section 4.11 of the Indenture with respect to any potential noncompliance
arising out of those transactions.
The Waivers constitute a single proposal with respect to the Indenture
and a consenting Holder must Consent to the Waivers as an entirety and may not
consent selectively with respect to the Waivers.
If the Consents are received from registered Holders of at least a
majority of the aggregate principal amount of the outstanding Notes, such
Consents will apply to all Notes issued under the Indenture and each Holder of
such Notes will be bound by such Consents regardless of whether such Holder
executed a Consent.
Consent Payment
The Consent Payment is an amount in cash equal to $100 for each $1,000
of principal amount of Notes as to which the Consents have been validly
delivered and not validly revoked at or prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will pay the Consent Payment on the Consent
Payment Date, subject to the Company's right to abandon or terminate the
Solicitation, in its sole discretion, prior to the Consent Payment Date. In
addition, the Company's obligation to make the Consent Payment is expressly
conditioned upon, and subject to, the Closing. In the event that the
Solicitation is withdrawn or otherwise not completed, the Consent Payment will
not be paid or become payable to Holders of the Notes who have validly delivered
their Consents in connection with the Solicitation. In all cases, payment of the
Consent Payment shall constitute consideration with respect to the tender of
Consents and will be made only after timely receipt by the Information Agent and
acceptance by the Company of (i) the properly completed and duly executed
Consents and (ii) any other documents required by the Consent.
The Consent Payments will be deposited by the Company with the Paying
Agent, which will act as agent for the consenting Holders for purposes of
receiving payment from the Company and transmitting payments to the consenting
Holders on the Consent Payment Date.
Requisite Consents; Record Date; Effective Date; Expiration Date
To effect the Waivers, the registered holders of at least a majority of
the aggregate principal amount of the Notes outstanding under the Indenture as
of the Record Date must tender their Consents thereto. Notwithstanding the
foregoing, for purposes of determining whether the Requisite Consents have been
delivered by the Holders, Notes held by the Company, any Guarantor or any of
their respective affiliates will be disregarded.
The Record Date for purposes of the Solicitation is the close of
business on November 5, 1999. Only Holders of Notes as of the Record Date may
execute Consents and receive the Consent Payment.
The Consents shall become effective immediately upon the Company
receiving the Requisite Consents and certifying to the Trustee that such
Requisite Consents have been received. The Consents shall cease to be effective,
and no Consent Payment will be made in respect thereof, in the event that the
Solicitation is abandoned or terminated by the Company for any reason prior to
the Consent Payment Date.
The Expiration Date shall be November 19, 1999. The Company will not be
obligated to accept any Consents received after the Expiration Date. The Company
reserves the right to extend the Solicitation on a daily basis until 5:00 p.m.,
New York City time, on the date on which the Requisite Consents have been
received.
Waiver; Extensions; Amendments
The Company expressly reserves the right, in its sole discretion,
subject to applicable law at any time or from time to time, to:
1. abandon or terminate the Solicitation for any reason at any time
prior to the Consent Payment Date, not accept any Consents before
the Consent Payment Date whether or not the Requisite Consents
have been received by such date, or postpone the acceptance of
any Consents or delay the Consent Payment for Consents accepted;
2. waive any condition to the Solicitation and accept all Consents
previously delivered pursuant to the Solicitation;
3. extend the Expiration Date of the Solicitation and retain all
Consents tendered pursuant thereto, subject to the withdrawal
rights of Holders; and
4. amend the Solicitation in any respect until the Consents that are
the subject thereof are delivered.
If the Company extends the Solicitation or if, for any reason, the acceptance of
the Consents is delayed or if the Company is unable to accept the Consents or
pay the Consent Payment pursuant to the Solicitation, then the Information Agent
may retain the delivered Consents which have not been previously withdrawn on
behalf of the Company, and such Consents may not be withdrawn except to the
extent consenting Holders are entitled to withdrawal rights.
Any extension, termination or amendment of the Solicitation may be made
by giving written or oral notice thereof to the Information Agent, which will be
followed as promptly as practicable by a public announcement thereof. In the
case of an extension, a public announcement will be issued prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date of the Solicitation subject to such extension. Without limiting
the manner in which the Company may choose to make any public announcement, the
Company shall have no obligation to publish, advertise or otherwise communicate
any such public announcement other than by making a release to the Dow Jones
News Service or otherwise as required by law. All Consents provided pursuant to
the Solicitation prior to any extension and not subsequently withdrawn will
remain subject to the Solicitation.
The terms of any extension or amendment of the Solicitation may vary
from the original Solicitation. There can be no assurance that the Company will
exercise its right to extend, terminate or amend the Consent Statement. If the
Company amends the terms of the Solicitation, such amendment will apply to all
Consents delivered pursuant thereto regardless of when or in what order such
Consents were delivered. The Company does not presently intend to change the
terms of the Solicitation, including the amount of the Consent Payment.
If the Company makes a material change in the terms of the Solicitation
or the information concerning the Solicitation or waives any condition of the
Solicitation that results in a material change to the circumstances of the
Solicitation, the Company will disseminate additional Solicitations and
solicitation material if and to the extent required by applicable law and will
extend the Solicitation if and to the extent required in order to permit the
Holders subject to the Solicitation adequate time to consider such materials. If
the Company decides, in its sole discretion, to increase or decrease the Consent
Payment, the Company will, to the extent required by applicable law, cause the
Solicitation to be extended, if necessary so that the Solicitation remains open
at least until the expiration of three business days from the date that such
notice is first published, sent or given by the Company. For purposes of this
paragraph, "business day" has the meaning set forth in Rule 14d-1(c)(6) under
the Exchange Act. In addition, with respect to any other material change in the
Solicitation or the information concerning the Solicitation, the minium period
during which the Solicitation must remain open following such material change
depends upon the facts and circumstances including, the relative materiality of
such terms or information.
Consent Procedures
The Notes are currently on deposit with The Depository Trust Company
("DTC") and are registered in the name of DTC's nominee, Cede & Co., as nominee
holder of the Notes. Cede & Co. will execute an omnibus proxy which will
authorize its participants (each, a "Participant") to consent with respect to
the Notes owned by it and held in the name of Cede & Co. as specified on the DTC
position listing of Cede & Co., as of the Record Date, with respect to the
Notes. The term "Holder" as used in this Consent Statement means (i) each person
(a) in whose name the Notes are registered as of the Record Date; or (b) whose
name appears on a securities position listing of DTC as the holder of an
interest in the Notes as of the Record Date and whom DTC has authorized to
consent to the Waivers and (ii) any other person who has been authorized by
proxy or in any other manner acceptable to the Company to vote Notes on behalf
of the registered Holder thereof.
Pursuant to Section 9.04 of the Indenture, a Consent with respect to all
or a portion of a Note is a continuing Consent with respect to such Note or
portion of a Note notwithstanding a subsequent transfer of ownership of such
Note. Consents may be revoked prior to the Effective Date, only by the Holder
granting such Consent (or a duly authorized proxy of such person) by following
the procedures set forth herein. Such revocation shall terminate the previously
delivered Consent with respect to such Note unless a new Consent is given prior
to the Expiration Date by following the procedure set forth herein.
Giving a Consent will not affect the right of a Holder to sell or
transfer the Notes, and such Consent shall be binding upon a subsequent holder
of the Notes.
The Company is requesting that any and all of the Holders execute the
Consent Form accompanying this Consent Statement. The Consent Form must be
executed by the Holder in the same manner as the Holder's name appears in the
register maintained by the Trustee or on a DTC securities position listing
reflecting such Holder as an owner of such Notes. If the Notes are held in more
than one name, as reflected therein, such Consent Form must be executed by each
such Holder. If the Consent Form is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and should submit with the Consent Form appropriate
evidence of authority to execute the Consent Form. If the Notes owned by a
Holder are held in different names, as reflected in such register or on such
securities position listing, separate Consent Forms must be executed covering
all such Notes. If applicable, the Consent Form should set forth the DTC
participant number relating to the Notes with respect to which a Consent is
given. In addition, if the Consent Form relates to less than the total principal
amount of the Notes at maturity held in the name of such Holder, the Holder must
list the principal amounts of the Notes at maturity to which the Consent Form
relates. Otherwise, the Consent Form will be deemed to relate to the total
principal amount of the Notes at maturity held in the name of such Holder.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
Consent should promptly contact the person in whose name its Notes are
registered and instruct such registered Holder to Consent on its behalf. A
Letter of Instruction is contained in the solicitation materials provided along
with this Consent Statement which may be used by a beneficial owner to instruct
the record Holder to deliver Consents. If a beneficial owner wishes to Consent
on its own behalf, it must, prior to completing and executing the Consent,
either make appropriate arrangements to register ownership of the Notes in its
name or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
All questions as to the validity, form, eligibility (including time of
receipt) and the acceptance of Consents will be resolved by the Company, in its
sole discretion, whose determination shall be binding. The Company reserves the
absolute right to reject all Consents that are not in proper form or the
acceptance of which could, in the opinion of its counsel, be unlawful. The
Company also reserves the right to waive any irregularities or conditions of
delivery as to particular Consents, including the requirement that Consents must
be delivered prior to the Expiration Date in order to receive the Consent
Payment. Unless waived, any irregularities in connection with the deliveries
must be cured within such time as the Company determines. None of the Company,
the Solicitation Agent, the Information Agent, the Paying Agent and any other
person will be under any duty to give notification of any such irregularities or
waiver. Deliveries of such Consents will not be deemed to have been properly
made until such irregularities have been cured or waived. The interpretation of
the Company of the terms and conditions of this Solicitation shall be binding.
Consents to the Waivers, to be effective, must be properly executed and
received by the Company prior to the Expiration Date. The method of delivery of
all documents, including the fully executed Consent Form, is at the election and
risk of the Holder. Each Holder wishing to consent to the Waivers must complete,
sign and date the Consent Form accompanying this Consent Statement (or a
facsimile thereof) in accordance with the instructions set forth herein and
therein and hand deliver, send by overnight courier or send by facsimile
transmission, to the Information Agent as follows:
By Mail, Overnight Courier or Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile:
(212) 929-0061
Confirm by Telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
HOLDERS WHO WISH TO CONSENT SHOULD HAND DELIVER, SEND BY OVERNIGHT
COURIER OR SEND BY FACSIMILE TRANSMISSION, THEIR PROPERLY COMPLETED AND EXECUTED
CONSENT FORM TO THE INFORMATION AGENT IN ACCORDANCE WITH THE INSTRUCTIONS SET
FORTH HEREIN AND THEREIN. HOWEVER, THE COMPANY RESERVES THE RIGHT TO ACCEPT ANY
CONSENT RECEIVED BY IT OR THE INFORMATION AGENT. IN NO EVENT SHOULD A HOLDER
TENDER OR DELIVER NOTES.
Withdrawal Rights
Consents may be revoked at any time prior to the Effective Date. Each
properly completed and executed Consent will be counted, notwithstanding any
transfer of the Notes to which such Consent relates, unless the procedure for
revoking Consents described below has been complied with. Consents may only be
revoked by the Holder granting such Consent (or a duly authorized proxy of such
Holder). For a revocation of Consents to be effective prior to the Effective
Date a written notice must be received by the Information Agent at its address
set forth above or on the back cover of this Consent Statement. Any such notice
of revocation must (i) specify the name of the person having executed the
Consent being revoked, (ii) identify the aggregate principal amount of the Notes
held by such person, and (iii) be signed by the Holder in the same manner as the
original signature on the Consent or be accompanied by a bond power, and a
properly completed irrevocable proxy, in each case in the name of the person
revoking the Consent, in a satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered Holder. A purported notice of
revocation which lacks any of the required information or is dispatched to any
other address will not be an effective withdrawal of a Consent previously made.
Revocation of Consents can only be accomplished in accordance with the
foregoing procedures.
Any permitted revocation of Consents may not be rescinded; and any
Consents so withdrawn will thereafter be deemed not validly tendered for
purposes of the Consent Payment; provided, however, that revoked Consents may
again be tendered by following the procedures for tendering at or prior to the
Expiration Date.
All questions as to the validity (including time of receipt) of notices
of revocation will be determined by the Company, in its sole discretion, whose
determination will be final and binding. None of the Company, the Solicitation
Agent, the Information Agent, the Paying Agent and any other person will be
under any duty to give notification of any defects or irregularities in any
notice of revocation, or shall incur any liability for failure to give any such
notification.
Fees and Expenses
In addition to the fees and expenses payable to the Solicitation Agent,
the Company will pay the Paying Agent reasonable and customary fees for its
services (and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith), and will pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Solicitation and related documents to the
beneficial owners of the Notes and in handling or forwarding their Consents.
Information, Tabulation and Paying Agents
The Information and Tabulation Agent for the Solicitation is MacKenzie
Partners, Inc. All deliveries, correspondence and questions sent or presented to
the Information Agent relating to the Solicitation should be directed to the
address or telephone number set forth on the back cover of this Consent
Statement. The Company will pay the Information Agent reasonable and customary
compensation for its services in connection with the Solicitation, plus
reimbursement for reasonable out-of-pocket expenses. The Company will indemnify
the Information Agent against certain liabilities and expenses in connection
therewith, including liabilities under the federal securities laws.
U.S. Bank Trust National Association is acting as the Paying Agent for
the Company in connection with the Solicitation. The Company will pay the Paying
Agent reasonable and customary compensation for such services, plus
reimbursement for reasonable out-of-pocket expenses.
Brokers, dealers, commercial banks and trust companies will be
reimbursed by the Company for customary mailing and handling expenses incurred
by them in forwarding material to their customers. The Company will not pay any
fees or commissions to any broker, dealer or other person (other than the
Information Agent) in connection with the Solicitation.
<PAGE>
CAPITALIZATION
The following table sets forth the Company's unaudited capitalization as
of June 30, 1999, on an actual basis and a pro forma basis giving effect to the
Recapitalization and related financing transactions as if they occurred on such
date. The information in the following table should be read in conjunction with
the "Unaudited Pro Forma Financial Data" included elsewhere in this Consent
Statement.
Unaudited
-------------------------
As of
June 30, 1999
-------------------------
Actual Pro Forma
------ ---------
(dollars in millions)
Debt:
Existing Senior Credit Facility $ 415.5 $ -
New Senior Credit Facility:(1)
Revolving Credit Facility - 4.0
Term A Facility - 125.0
Term B Facility - 275.0
Notes 100.0 100.0
Other indebtedness 5.5 5.5
------------ -------------
Total debt $ 521.0 $ 509.5
Preferred Stock - 100.0
Stockholders' deficit(2) (36.1) (123.3)
------------ -------------
Total capitalization $ 484.9 $ 486.2
============ =============
(1) The New Senior Credit Facility will provide for revolving credit
borrowings of up to $75.0 million, $4.0 million of which the Company
expects to borrow at Closing.
(2) See "Unaudited Pro Forma Consolidated Balance Sheet."
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the "Unaudited Pro
Forma Financial Data") of the Company have been derived by the application of
pro forma adjustments to the historical financial statements of the Company for
the periods indicated. The adjustments are described in the accompanying notes.
The Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1998 and the six month period ended June 30, 1999 gives effect to
the Recapitalization and related financing transactions, as if such transactions
had occurred at the beginning of the earliest period presented. The Unaudited
Pro Forma Balance Sheet as of June 30, 1999 gives effect to the Recapitalization
and related financing transactions as if such transactions occurred on such
date. The Unaudited Pro Forma Financial Data do not give effect to any other
transactions except those discussed in the accompanying notes. The Unaudited Pro
Forma Financial Data are provided for informational purposes only and do not
purport to represent the results of operations or financial position of the
Company had the Recapitalization and related financing transactions in fact
occurred on such dates nor do they purport to be indicative of the financial
position or results of operations as of any future date or any future period.
The Unaudited Pro Forma Financial Data and accompanying notes should be
read in conjunction with the financial statements and accompanying notes thereto
and the other financial information incorporated by reference herein.
<PAGE>
OUTSOURCING SOLUTIONS INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
As of June 30, 1999
-----------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents - operating $ 6,889 $ 6,889
Cash and cash equivalents held for clients 25,206 25,206
Current portion of purchase loans and
accounts receivable portfolios 30,202 30,202
Accounts receivable - trade, 45,165 45,165
Other current assets 9,209 9,209
TOTAL CURRENT ASSETS 116,671 116,671
PURCHASED LOANS AND ACCOUNTS RECEIVABLE
PORTFOLIOS 8,902 8,902
PROPERTY AND EQUIPMENT, net 40,111 40,111
DEFERRED FEES 12,307 $1,316(1) 13,623
INTANGIBLE ASSETS, net 418,452 418,452
OTHER 2,778 2,778
TOTAL ASSETS $599,221 $ 1,316 $600,537
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $8,036 8,036
Accounts payable - clients 25,206 25,206
Accrued salaries and wages 13,190 13,190
Current maturities of notes payable 18,749 $(15,304)(2) 3,445
Other current liabilities 46,171 46,171
TOTAL CURRENT LIABILITIES 111,352 96,048
(15,304)
NOTES PAYABLE, NET OF CURRENT PORTION
Term debt 370,700 26,550(2) 397,250
Revolver 26,700 (22,700)(2) 4,000
11% Senior Subordinated Notes 100,000 100,000
Other notes payable 4,818 4,818
OTHER LONG-TERM LIABILITIES 21,743 21,743
TOTAL LIABILITIES 635,313 (11,454) 623,859
REDEEMABLE PREFERRED STOCK $ - $100,000(3) $100,000
STOCKHOLDERS' EQUITY:
Common stock and additional paid in capital $ 80,170 $(65,796)(4) $ 14,374
Accumulated deficit (116,262) (21,434)(4) (137,696)
Total Stockholders' Deficit (36,092) (87,230) (123,322)
TOTAL LIABILITIES, PREFERRED $599,221 $ 1,316 $600,537
STOCK AND STOCKHOLDERS' EQUITY
See related Notes to the Unaudited Pro Forma Consolidated Balance Sheet.
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
1. Reflects deferred debt issuance costs relating to the New Senior Credit
Facility and deferred costs relating to the Consents from Holders of the
Notes of $12,750, net of write-off of existing deferred financing costs of
$11,434.
2. Reflects revolving credit and term loan borrowings and the repayment of
existing debt as follows:
Current portion of long term debt borrowings under
the New Senior Credit Facility based
on scheduled repayments $ 2,750
Retirement of existing OSI term loans (18,054)
----------------
Net Adjustment $ (15,304)
================
Long term portion of term loan borrowings under the
New Senior Credit Facility based
on scheduled repayments $ 397,250
Retirement of existing OSI term loans (370,700)
----------------
Net Adjustment $ 26,550
================
Initial draw of revolving credit notes under the
New Senior Credit Facility $ 4,000
Retirement of existing OSI revolving credit notes (26,700)
----------------
Net Adjustment $ 22,700)
================
3. Reflects the issuance of the Preferred Stock.
4. Reflects the following relating to the Recapitalization:
Equity Purchase Price $ (265,482)
Common Equity Investment 211,186
Equity related transaction expenses (11,500)
----------------
Net Adjustment $ (65,796)
================
Consent Payment $ (10,000)
Write-off of deferred financing costs (11,434)
----------------
Total Adjustment $ (21,434)
================
<PAGE>
OUTSOURCING SOLUTIONS INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS(3)
(Dollars in Thousands)
Year Ended December 31, 1998
-----------------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUES $ 479,400 $ 479,400
EXPENSES:
Salaries and benefits 230,114 230,114
Service fees and other
operating and administrative
expenses 140,888 140,888
Amortization of purchased
loans and accounts receivable
portfolios 50,703 50,703
Amortization of goodwill and
other intangibles 15,725 15,725
Depreciation expense 14,282 14,282
--------- --------
Total expenses 451,712 451,712
--------- --------
OPERATING INCOME 27,688 27,68
INTEREST EXPENSE - Net 50,627 $ 1,955(1) 52,582
--------- -------- --------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (22,939) (1,955) (24,894)
PROVISION FOR INCOME TAXES 830 -(2) 830
MINORITY INTEREST 572 572
--------- -------- --------
NET LOSS $ (24,341) $ (1,955) $ (26,296)
========= ======== ========
Six months Ended June 30, 1999
-----------------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUES $ 257,076 $ 257,076
EXPENSES:
Salaries and benefits 122,162 122,162
Service fees and other
operating and administrative
expenses 79,894 79,894
Amortization of purchased
loans and accounts receivable
portfolios 20,477 20,477
Amortization of goodwill and
other intangibles 8,204 8,204
Depreciation expense 7,225 7,225
--------- --------
Total expenses 237,962 237,962
--------- --------
OPERATING INCOME 19,114 19,114
INTEREST EXPENSE - Net 25,209 $ 1,183(1) 26,392
--------- -------- --------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (6,171) (1,183) (7,278)
PROVISION FOR INCOME TAXES 375 -(2) 375
MINORITY INTEREST - -
--------- -------- --------
NET LOSS $ (6,546) $ (1,183) $ (7,729)
========= ======== ========
See related Notes to the Unaudited Pro Forma Consolidated
Statement of Operations.
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands)
1. Adjustments to interest expense based on the pro forma capitalization of
the Company are summarized in the table below:
Year Ended Six Months
December 31, Ended June 30,
1998 1999
------------ --------------
Interest expense on Notes $ 11,000.0 $ 5,500.0
Interest expense on term loans under
the New Senior Credit Facility(A) 38,745.0 19,372.5
Commitment fee for the revolving credit
facility under the New Senior Credit
Facility(B) 355.0 177.5
Amortization of debt issuance costs related
to the Recapitalization(C) 1,961.5 980.8
Elimination of historical interest expense
(including amortization of debt (50,106.7) (24,848.0)
issuance costs)
--------------- --------------
$ 1,954.8 $ 1,182.8
=============== ==============
-----------------------------
(A) The New Senior Credit Facility will consist of the (i) Revolving
Facility and (ii) Term Facility, which will be comprised of the
Term A Facility and the Term B Facility. The Revolving Facility
and the Term A Facility will bear interest, at the Company's
option, at the Administrative Agent's alternate base rate plus
2.25% or reserve-adjusted LIBO rate, plus 3.25%. The Term B
Facility will bear interest, at the Company's option, at the
Administrative Agent's alternate base rate plus 2.75% or the
reserve-adjusted LIBO rate plus 3.75%.
After the first two full fiscal quarters after the consummation
of the Recapitalization, the applicable margin for the Revolving
Facility and the Term A Facility will be subject to change, as
set forth in the proposed terms of the New Senior Credit
Facility. The interestfor each of the pro forma periods has been
calculated based on the reserve-adjusted LIBO rate of 6.00% and
average drawn down balances based on scheduled payments.
(B) The assumed commitment fee on the unused portion of the
Revolving Facility is 0.5% per annum.
(C) Deferred financing costs of $12.75 million are amortized over
the life of the related debt ranging from six to six and
one-half years.
2. Provision for income taxes was not adjusted, as the effect of the pro forma
adjustments would have increased the Company's net operating loss carry
forwards.
3. The unaudited pro forma statement of operations excludes $10,000 of
Recapitalization and other special charges and the write-off of unamortized
financing costs of $11,434.
<PAGE>
CERTAIN CONSIDERATIONS
The Holders should carefully consider the risks described below before
making an investment decision. The risks described below are not the only ones
facing the Company. Additional risks (i) incorporated by reference and (ii) not
presently known to the Company or that it currently deems immaterial may also
impair the Company's business operations.
Substantial Leverage; Ability to Service Debt
The Company's substantial indebtedness could adversely affect its
financial health and prevent it from fulfilling its obligations under the Notes.
The Company will incur a significant amount of indebtedness in connection with
the financing of the Recapitalization. The following charts will show certain
important credit statistics for the Company and are presented assuming that the
Company had completed the Recapitalization and related financing transactions as
of the date or at the beginning of the period specified below and applied the
net proceeds as intended:
At June 30, 1999
----------------
The Company (Dollars in thousands)
Total indebtedness.......................... $ 509,513
Preferred Stock............................. $ 100,000
Stockholders' deficit....................... $ 123,322
Fiscal Year Ended Six Months Ended
December 31, 1998 June 30, 1999
----------------- ----------------
Pro forma ratio of earnings to
fixed charges(1) 1.48x 1.66x
- --------------------------------
(1) In calculating the ratio of earnings to fixed charges, earnings consist
of income before income taxes plus fixed charges. Fixed charges consists of
interest expense (which includes amortization of deferred financing costs
and debt issuance costs) and one-third of rental expenses, deemed
representative of that portion of rental expense estimated to be
attributable to interest.
The ability of the Company to make scheduled payments of principal or
interest on, or to refinance, its indebtedness will depend on future
operating performance and cash flow, which are subject to prevailing
economic conditions, prevailing interest rate levels and financial,
competitive, business and other factors beyond its control. The degree to
which the Company is leveraged could have important consequences to holders
of the Notes, including the following:
1. the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions, debt payments or general corporate
purposes may be impaired;
2. a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of interest on the Notes, and interest on other
existing indebtedness, thereby reducing the funds available to the Company
for other purposes;
3. the agreements governing the Company's long-term indebtedness, including
the New Senior Credit Facility and the Indenture, contain certain
restrictive financial and operating covenants;
4. the indebtedness under the New Senior Credit Facility will be at variable
rates of interest, which will cause the Company to be vulnerable to
increases in interest rates:
5. the indebtedness outstanding under the New Senior Credit Facility will be
secured by all accounts receivable and general intangibles of the Company
and will become due prior to the time the principal on the Notes become
due;
6. the Company is substantially more leveraged than certain of its
competitors, which might place the Company at a competitive disadvantage
7. the Company may be hindered in its ability to adjust rapidly to changing
market conditions;
8. the Company's substantial degree of leverage and negative tangible net
worth may negatively affect certain suppliers' willingness to give the
Company favorable payment terms or customers' willingness to engage the
Company; and
9. the Company's substantial degree of leverage could make it more vulnerable
in the event of a downturn in general economic conditions or in its
business.
If operating cash flow of the Company is insufficient to meet its
operating expenses or to service its debt requirements as they become due, the
Company may be required to refinance a portion of the principal of the Notes
prior to their maturity. If the Company is unable to service its indebtedness,
it will be forced to take actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing their indebtedness or
seeking additional equity capital. There can be no assurance that any of these
remedies can be effected on satisfactory terms, if at all.
Additional Borrowings Available
Despite the Company's level of indebtedness immediately following the
Recapitalization, the Company will still be able to incur substantially more
debt. This could further exacerbate the risks described above. The terms of the
Indenture do not fully prohibit the Company or its subsidiaries from doing so.
Subject to customary maintenance covenants, the New Senior Credit Facility will
permit additional borrowings of approximately $71.0 million after completion of
the Recapitalization, and all of those borrowings would be secured. If new debt
is added to the Company's current debt levels, the related risks that the
Company now faces could intensify.
Substantial Restrictions and Covenants
The New Senior Credit Facility will contain, and the Indenture currently
contains, various covenants which limit the Company's management's discretion in
the operation of its business. The New Senior Credit Facility will contain, and
the Indenture currently contains, numerous restrictive covenants, including, but
not limited to, covenants that restrict the Company's ability to incur or
refinance indebtedness, pay dividends, create liens, sell assets, and engage in
certain mergers and acquisitions. In addition, the New Senior Credit Facility
will also require the Company to maintain financial ratios. The ability of the
Company to comply with the covenants and other terms of the New Senior Credit
Facility and the Indenture, to make cash payments with respect to the Notes, and
to satisfy its other respective debt obligations (including, without limitation,
borrowings and other obligations under the New Senior Credit Facility) will
depend on the future operating performance of the Company. In the event the
Company fails to comply with the various covenants contained in the New Senior
Credit Facility and the Indenture, it would be a default thereunder, and in any
such case, the maturity of substantially all of such long-term indebtedness
could be accelerated.
Subordination; Asset Encumbrances
The Notes are subordinated in right of payment to all existing and
future Senior Debt, including the principal of (and premium, if any) and
interest on and all other amounts due on or payable in connection with Senior
Debt. As of June 30, 1999, on a pro forma basis after giving effect to the
Recapitalization, there would have been outstanding approximately $404.0 million
of Senior Debt, $475.0 million of which would have been fully secured borrowings
under the New Senior Credit Facility. By reason of such subordination, in the
event of the bankruptcy, insolvency, liquidation, reorganization, dissolution or
other winding-up of the Company or upon a default in payment with respect to, or
the acceleration of, any Senior Debt, the holders of such Senior Debt and any
other creditors who are holders of Senior Debt and creditors of subsidiaries
that are not Guarantors must be paid in full before the Holders of the Notes may
be paid. If the Company incurs any additional pari passu debt, the holders of
such debt would be entitled to share ratably with the Holders of the Notes in
any proceeds distributed in connection with any bankruptcy, insolvency,
liquidation, reorganization, dissolution or other winding-up of the Company.
This may have the effect of reducing the amount of proceeds paid to Holders of
the Notes. In addition, no cash payments may be made with respect to the
principal of (and premium, if any) or interest on the Notes if a payment default
exists with respect to Senior Debt and, under certain circumstances, no payments
may be made with respect to the principal of (and premium, if any) or interest
on the Notes for a period of up to 179 days if a non-payment default exists with
respect to Senior Debt. In addition, the Indenture permits subsidiaries of the
Company to incur debt under certain circumstances. Any debt incurred by a
subsidiary of the Company that is not a Guarantor will be structurally senior to
the Notes.
The Company will be required to grant to the lenders under the New
Senior Credit Facility security interests in substantially all of the current
and future assets of the Company, including a pledge of all of the issued and
outstanding shares of capital stock of all of the Company's direct and indirect
domestic subsidiaries. In addition, the Guarantors will be required to grant to
such lenders security interests in all of the current and future assets of the
Guarantors. In the event of a default on secured indebtedness, including the
guarantees of the Guarantors under the New Senior Credit Facility (whether as a
result of the failure to comply with a payment or other covenant, a
cross-default, or otherwise), the parties granted such security interests will
have a prior secured claim on the capital stock of the Company and the assets of
the Company and the Guarantors. If such parties should attempt to foreclose on
their collateral, the Company's financial condition and the value of the Notes
would be materially adversely affected.
Control by Principal Stockholder
Upon completion of the Recapitalization, the Purchaser will own
approximately 78.0% of the fully diluted common equity of the Company.
Consequently, MDP, as the sole general partner of the Purchaser, will have the
ability to control the business and affairs of the Company by virtue of its
ability to elect a majority of the Company's Board and its voting power with
respect to actions requiring stockholder approval. In addition, upon
consummation of the Recapitalization, all directors serving on the Company's
Board will have been selected by MDP. Some decisions regarding the Company's
operations or financial structure may present conflicts of interest between MDP
and the Holders. For example, MDP may be willing to approve acquisitions,
divestitures or other transactions undertaken by the Company that MDP believes
could increase the value of its equity investment. These types of transactions,
however, could increase the financial risk to the Holders.
Holding Company Structure
The Company conducts substantially all of its business through
subsidiaries and has few operations of its own. The Company is dependent on the
cash flow of its subsidiaries and distribution thereof from its subsidiaries to
the Company in order to meet its debt service obligations. It is not expected
that the Company will have any significant assets other than the common stock of
its subsidiaries.
Competition
The Company is engaged in a highly fragmented and competitive industry.
The Company competes with many local, regional and national accounts receivable
management companies in the markets which it serves. Some of the Company's
principal competitors are less highly-leveraged than the Company and may have
greater financial and operating flexibility.
Impact of Governmental Regulation
Certain of the Company's operations are subject to compliance with the
federal Fair Debt Collection Practices Act (the "FDCPA") and comparable statutes
in many states. Under the FDCPA, a third-party collection company is restricted
in the methods it uses in contacting consumer debtors and eliciting payments
with respect to placed accounts. Requirements under state collection agency
statutes vary, with most requiring compliance similar to that required under the
FDCPA. In addition, most states and certain municipalities require collection
agencies to be licensed with the appropriate regulatory body before operating in
such jurisdictions. The Company believes that it is in substantial compliance
with the FDCPA and comparable state statutes and that it maintains licenses in
all jurisdictions in which its operations require it to be licensed. There can
be no assurance, however, that additional federal or state legislation will not
be enacted that would further restrict the methods used in collecting placed
accounts or require additional regulatory compliance.
Litigation
Due to the nature of certain of its operations, the Company is regularly
a defendant in various legal proceedings involving claims for damages, including
class actions under the FDCPA. The Company believes that such proceedings
constitute ordinary and routine litigation incidental to its business. The costs
associated with defending such lawsuits (including payments made in connection
with settlements and judgments) have not historically had a material adverse
effect on the Company's financial condition and operating results. There can be
no assurance that the costs associated with existing or future claims against
the Company will not have a material adverse effect on the Company's financial
condition and operating results.
Dependence on Key Management
The Company's success will continue to depend to a significant extent on
its executive and other key management personnel. Although the Company has
entered into employment agreements with certain of its executive officers, there
can be no assurance that the Company will be able to retain its executive
officers and key personnel or attract additional qualified management in the
future. In addition, the success of certain of the Company's acquisitions may
depend, in part, on the Company's ability to retain management personnel of the
acquired companies.
Environmental Liabilities
One of the Company's subsidiaries, the Union Corporation ("Union"), is a
party to several pending environmental proceedings involving the United States
Environmental Protection Agency 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 inactive
subsidiaries of Union for which Union may be potentially liable. The Company has
established reserves which it believes to be adequate for the ultimate
settlement of these environmental proceedings. However, insufficient information
is available regarding the extent and scope of any remedial actions which may be
required to settle these proceedings. In addition, the costs of potential legal
and consulting fees are difficult to estimate. Accordingly, there can be no
assurance that the costs associated with settling these environmental
proceedings will not have a material adverse effect on the Company's financial
condition and operating results.
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated U.S.
federal income tax consequences of the Solicitation to the Holders of Notes.
This discussion is general in nature, and does not discuss all aspects of U.S.
federal income taxation that may be relevant to a particular Holder in light of
the Holder's particular circumstances, or to certain types of the Holders
subject to special treatment under U.S. federal income tax laws (such as
insurance companies, tax-exempt organizations, financial institutions, brokers,
dealers in securities, and taxpayers that are neither citizens nor residents of
the United States, or that are foreign corporations, foreign partnerships or
foreign estates or trusts). In addition, the discussion does not consider the
effect of any foreign, state, local or other tax laws, or any U.S. tax
considerations (e.g., estate or gift tax) other than U.S. federal income tax
considerations, that may be applicable to particular Holders. Further, this
summary assumes that the Holders hold their Notes as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based on the Code and applicable Treasury Regulations,
rulings, administrative pronouncements and decisions as of the date hereof, all
of which are subject to change or differing interpretations at any time with
possible retroactive effect.
EACH HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES TO IT OF THE
SOLICITATION.
Tax Considerations for Consenting Holders
The Company intends to treat the Consent Payments for U.S. federal
income tax purposes as a separate fee for consenting to the Waivers. As a
result, the Consent Payments will be taxable as ordinary income to the Holders.
Tax Considerations for Non-Consenting Holders
A Holder who does not Consent and therefore will not receive the Consent
Payment should not recognize any income, gain, or loss for U.S. federal income
tax purposes as a result of the Solicitation.
Backup Withholding
The receipt of the Consent Payment by a Holder who executes a Consent
may be subject to backup withholding at the rate of 31% with respect to such
payments unless such Holder (i) is a corporation or comes within certain exempt
categories and, when required, demonstrates this fact, or (ii) provides a
correct taxpayer identification number that certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. Any amount withheld under these rules will be
credited against the Holder's U.S. federal income tax liability.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO PARTICULAR HOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATIONS. HOLDERS SHOULD CONSULT THEIR
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE SOLICITATION,
INCLUDING THE EFFECT OF ANY FEDERAL, STATE, LOCAL, FOREIGN OR OTHER LAWS.
<PAGE>
ADDITIONAL INFORMATION;
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file with the
Commission periodic reports and other information relating to its business,
financial condition and other matters. These reports and other informational
filings required by the Exchange Act should be available for inspection at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549 and also should be
available for inspection and copying at the regional offices of the commission
located at Citicorp Center, 500 West Madison Street, Chicago, Illinois 60611 and
7 World Trade Center, 13th Floor, New York, New York 10048. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Commission's Web site address is http://www.sec.gov. Copies of
such material may be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549 (telephone number: 1-800-SEC-0330).
The Company's (i) Annual Report on Form 10-K for the year ended December
31, 1998 and (ii) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999 and June 30, 1999, each filed by the Company with the Commission, are
incorporated herein by reference and shall be deemed to be a part hereof.
Any statement contained in a document listed above and incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Consent Statement to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Consent Statement. In addition, all reports and
other documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Consent Statement and
before the termination of the Solicitation shall be deemed to be incorporated by
reference herein and to be made a part hereof from the date of filing of such
reports and documents. Any statement contained in this Consent Statement or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Consent Statement to
the extent that a statement contained in any reports and other documents filed
by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Consent Statement modifies or supersedes such
statement.
The information related to the Company contained in this Solicitation
should be read in conjunction with the information contained in the documents
incorporated by reference.
The Company will provide without charge to each person to whom a copy of
this Consent Statement is delivered, upon the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to Eric R. Fencl, Vice President and General Counsel, Outsourcing
Solutions Inc., 390 South Woods Mill Road, Suite 350, Chesterfield, Missouri
63017. In order to insure timely delivery of documents prior to the Expiration
Date, any such requests should be made by November 15, 1999.
<PAGE>
MISCELLANEOUS
No person has been authorized to give any information or make any
representation other than as contained in this Consent Statement and, if given
or made, such information or representation must not be relied upon as having
been authorized.
OUTSOURCING SOLUTIONS INC.
November 9, 1999
<PAGE>
ANNEX I
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase. Within 30 days following a Change of Control,
the Company shall mail to each Holder of Notes at such Holder's registered
address a notice stating: (i) that an offer (an "Offer") is being made pursuant
to this Section 4.15 as a result of a Change of Control, the length of time the
Offer shall remain open, and the maximum aggregate principal amount of Notes
that will be accepted for payment pursuant to such Offer; (ii) the purchase
price, the amount of accrued and unpaid interest and Liquidated Damages, if any,
as of the purchase date, and the purchase date (which will be no earlier than 30
days or later than 60 days from the date such notice is mailed) (the "Change of
Control Payment Date"); (iii) the circumstances and material facts regarding
such Change of Control to the extent known to the Company (including, but not
limited to, information with respect to pro forma and historical financial
information after giving effect to such Change of Control and information
regarding the Person or Persons acquiring control); (iv) that any Note not
tendered will continue to accrue interest and Liquidated Damages, if any; (v)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Offer shall cease to
accrue interest and Liquidated Damages, if any, after the Change of Control
Payment Date; (vii) that Holders electing to have any Notes purchased pursuant
to an Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(viii) that Holders shall be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (ix) that Holders
whose Notes are being purchased only in part shall be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof. The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes in connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee for cancellation the Notes so accepted together with an Officer's
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note shall be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date. Any amounts remaining after the purchase of Notes pursuant to the Change
of Control Offer shall be returned by the Paying Agent to the Company.
(c) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth herein applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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"Change of Control" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions (other than by merger or consolidation), of all or substantially
all of the assets of the Company and its Restricted Subsidiaries, taken as a
whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) (other than the Principals or their Related parties);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(iii) the acquisition by any Person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than the Principals and
their Related Parties) of a direct or indirect interest in more than 35% of the
voting power of the voting stock of the Company by way of merger or
consolidation of otherwise; or
(iv) a majority of the members of the Board of Directors of the
Company cease to be Continuing Directors.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of Directors
on the date of this Indenture or (ii) was nominated for election or elected to
such Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election.
"Principals" means each of the general partners of MDC Management
Company III, L.P., MDC Management Company IIIE, L.P. and MDC Management Company
IIIA, L.P. and any Person controlled by one or more of such general partners.
"Related Parties" means any Person controlled by the Principals,
including any partnership of which the Principals or their Affiliates is the
general partner.
<PAGE>
ANNEX II
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one director
on its board of directors that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing conditions and was
permitted pursuant to and in accordance with the provisions set forth in Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date pursuant to and in accordance with the
provisions set forth in Section 4.09 hereof, the Company shall be in default of
such covenant). The board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted to be incurred pursuant to and in accordance with the provisions
set forth in Section 4.09 hereof and (ii) no Default or Event of Default would
be in existence following such designation.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they shall not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary; provided, however, that upon the
occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary, such Subsidiary shall be included in the definition of Restricted
Subsidiary.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
<PAGE>
ANNEX III
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that might reasonably have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officer's Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of the Notes of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing.
The foregoing provisions shall not apply to the following: (i)
transactions between or among the Company and/or any of its Restricted
Subsidiaries; (ii) Restricted Payments or Permitted Investments permitted under
Section 4.07 hereof; (iii) the payment of reasonable and customary fees and
compensation to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Restricted Subsidiary of the
Company; (iv) the payment of fees in an aggregate amount not to exceed $750,000
in any twelve-month period pursuant to the Advisory Services Agreement; (v) any
other transactions pursuant to the Advisory Services Agreement or transactions
pursuant to the HBR Services Agreement, in each case, as in effect on the date
hereof; and (vi) the payment of fees and expenses as set forth under the caption
"Use of Proceeds" contained in the Offering Circular.
<PAGE>
Facsimile copies of the Consent Form will be accepted. The Consent Form
and any other required documents should be sent by each Holder or his broker,
dealer, commercial bank, trust company or nominee to the Information Agent at
the address set forth below.
--------------------
The Information and Tabulation Agent for the Solicitation is:
--------------------
MACKENZIE PARTNERS, INC.
By Mail, Overnight Courier or Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile
(212) 929-0061
Confirm by telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
--------------------
Any questions or requests for assistance or additional copies of this
Consent Statement, the Consent Form and the Letter of Instruction may be
directed to the Information Agent at the telephone number and location listed
above. You may also contact your broker, dealer, commercial bank or trust
company for assistance concerning the Solicitation.
The Solicitation Agent for the Solicitation is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Telephone Number: (212) 892-7707
Attention: Tom Pereira
LETTER OF INSTRUCTION
TO REGISTERED HOLDER
OF
OUTSOURCING SOLUTION INC.
11% Senior Subordinated Notes due November 1, 2006
CUSIP No. 690132AC9
----------------------------------------
November 9, 1999
To Our Clients:
Outsourcing Solutions Inc., a Delaware corporation (the "Company"), is
hereby soliciting consents (the "Consents"), on the terms and subject to the
conditions set forth in the Consent Solicitation Statement (as it may be
supplemented or amended from time to time, the "Consent Statement") and the
related Consent Form (as it may be supplemented or amended from time to time,
the "Consent Form" and together with the Consent Statement, the "Solicitation")
from holders (each, a "Holder" and, collectively, the "Holders") of at least a
majority of the aggregate principal amount of its outstanding 11% Senior
Subordinated Notes due November 1, 2006 (the "Notes") issued pursuant to the
Indenture, dated November 6, 1996 (the "Indenture"), among the Company, the
subsidiary guarantors named therein and Wilmington Trust Company, as trustee, to
the waiver of: (i) the Company's obligations under Section 4.15 of the
Indenture, including its obligation to make a Change of Control Offer in
connection with the recapitalization of the Company (the "Recapitalization") by
an investor group led by an affiliate of Madison Dearborn Partners, Inc.
("MDP"); and (ii) the failure by the Company to comply with certain technical
requirements relating to the qualification and operation of its financing
subsidiary, OSI Funding Corp. ("OSI Funding"), as an Unrestricted Subsidiary
under the Indenture and any and all consequences arising therefrom under the
Indenture (collectively, the "Waivers"). Enclosed for your consideration are
copies of the Consent Statement and the Consent Form. All capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Solicitation.
IN ORDER TO RECEIVE THE CONSENT PAYMENT, HOLDERS OF NOTES MUST PROVIDE THEIR
CONSENTS (AND NOT HAVE REVOKED SUCH CONSENTS) AT OR PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON NOVEMBER 19, 1999 (THE "EXPIRATION DATE"). THE CONSENTS SHALL
BECOME EFFECTIVE IMMEDIATELY UPON THE COMPANY RECEIVING THE REQUISITE CONSENTS
(AS DEFINED) AND CERTIFYING TO THE TRUSTEE THAT SUCH REQUISITE CONSENTS HAVE
BEEN RECEIVED. THE COMPANY WILL NOT BE OBLIGATED TO ACCEPT ANY CONSENTS RECEIVED
AFTER THE EXPIRATION DATE. CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE
EFFECTIVE DATE OF THE CONSENTS.
The Company is offering to pay to each Holder who provides its Consent (and
has not revoked such Consent) at or prior to 5:00 p.m., New York City time, on
the Expiration Date, a payment of $100 per $1,000 of principal amount of Notes
(the "Consent Payment"). The Company will not be obligated to make any Consent
Payment in respect of any Consents not provided at or prior to 5:00 p.m., New
York City time, on the Expiration Date. The Consent Payment will be made on the
date of the closing of the Recapitalization (the "Consent Payment Date").
If Consents are received from registered Holders of at least a majority of
the aggregate principal amount of the outstanding Notes as of the Record Date
(the "Requisite Consents"), such Consents will apply to all Notes issued under
the Indenture and each Holder of such Notes will be bound by such Consents
regardless of whether such Holder executed a Consent.
MDP's obligation to complete the Recapitalization is expressly conditioned
upon, among other things, the Company receiving the Requisite Consents to the
Waivers.
This material relating to the Solicitation is being forwarded to you as the
beneficial owner of Notes carried by us for your account or benefit but not
registered in your name. Delivery of the Consents with respect to any Notes may
only be made by us as the registered Holder and pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to deliver the
Consents with respect to any or all of the Notes held by us for your account. We
urge you to read carefully the Consent Statement, the Consent Form and the other
materials provided herewith before instructing us to deliver the Consents with
respect to such Notes.
Consents may be revoked by written notice of revocation received by
MacKenzie Partners, Inc., the information and tabulation agent (the "Information
Agent") at any time at or prior to 5:00 p.m., New York City time, on the
Effective Date. Any permitted revocation of Consents may not be rescinded; and
any Consents so withdrawn will thereafter be deemed not validly tendered for
purposes of the Consent Payment; provided, however, that revoked Consents may
again be tendered by following the procedures for tendering prior to the
Expiration Date. No Consent Payment will be made in respect of any Consent which
is not provided at or prior to 5:00 p.m., New York City time, on the Expiration
Date.
Your attention is directed to the following:
1. If you desire to deliver the Consents with respect to any Notes and
receive the Consent Payment, we must receive your instructions in ample time to
permit us to submit the Consents on your behalf at or prior to 5:00 p.m., New
York City time, on the Expiration Date.
2. The Company's obligation to pay the Consent Payments for submitted
Consents is subject to consummation of the Recapitalization.
3. MDP's obligation to complete the Recapitalization is expressly
conditioned upon the Company receiving the Requisite Consents to the Waivers.
4. The Company expressly reserves the right, in its sole discretion, subject
to applicable law at any time or from time to time, to: (i) abandon or terminate
the Solicitation for any reason at any time prior to the Consent Payment Date,
not accept any Consents before the Consent Payment Date whether or not the
Requisite Consents have been received by such date, or postpone the acceptance
of any Consents or delay the Consent Payment for Consents accepted; (ii) waive
any condition to the Solicitation and accept all Consents previously delivered
pursuant to the Solicitation; (iii) extend the Expiration Date of the
Solicitation and retain all Consents tendered pursuant thereto, subject to the
withdrawal rights of Holders, and (iv) amend the Solicitation in any respect
until the Consents that are the subject thereof are delivered.
5. Obtaining the Requisite Consents will enable the Company to proceed with
the Recapitalization. If Consents are received from registered Holders of at
least a majority of the aggregate principal amount of the outstanding Notes as
of the Record Date, such Consents will apply to all Notes issued under the
Indenture and each Holder of such Notes will be bound by such Consents
regardless of whether such Holder executed a Consent.
If you wish to have us deliver your Consents pursuant to the Solicitation,
please so instruct us by completing, executing and returning to us the
instruction form that appears below. The accompanying Consent Form is furnished
to you for informational purposes only and may not be used by you to deliver the
Consents.
IMPORTANT: The Consent Form (or a facsimile thereof) must be received by
the Information Agent at or prior to 5:00 p.m., New York City time, on the
Expiration Date in order for Holders to receive the Consent Payment.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Solicitation.
This will instruct you to deliver the undersigned's Consent with respect to
the principal amount of Notes indicated below, pursuant to the terms of and
conditions set forth in the Consent Statement November 9, 1999, and the Consent
Form.
- ----------------------------- --------------------------------------------------
Consents are to be Principal Amount
given pursuant to the as to which
Solicitation Consents are
("Yes" or "No")* given in the Solicitation
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* Unless otherwise indicated, "yes" will be assumed. Holders who desire to
receive the Consent Payment are required to provide their Consents.
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PLEASE SIGN HERE
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Signature(s)
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Name(s) (Please Print)
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Address
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Zip Code
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Area Code and Telephone No.
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Tax Identification or Social Security No.
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My Account Number With You
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Date
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CONSENT FORM
To Give Consent in Respect of
11% Senior Subordinated Notes due November 1, 2006
(CUISP No. 690132AC9)
of
OUTSOURCING SOLUTIONS INC.
Pursuant to the Consent Solicitation Statement, dated November 9, 1999
IN ORDER TO RECEIVE THE CONSENT PAYMENT, HOLDERS OF NOTES MUST PROVIDE THEIR
CONSENTS (AND NOT HAVE REVOKED SUCH CONSENTS) AT OR PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON NOVEMBER 19, 1999 (THE "EXPIRATION DATE"). THE CONSENTS SHALL
BECOME EFFECTIVE IMMEDIATELY UPON THE COMPANY RECEIVING THE REQUISITE CONSENTS
(AS DEFINED) AND CERTIFYING TO THE TRUSTEE THAT SUCH REQUISITE CONSENTS HAVE
BEEN RECEIVED. THE COMPANY WILL NOT BE OBLIGATED TO ACCEPT ANY CONSENTS RECEIVED
AFTER THE EXPIRATION DATE. CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE
EFFECTIVE DATE OF THE CONSENTS.
The Information and Tabulation Agent for the Solicitation is:
MACKENZIE PARTNERS, INC.
By Mail, Overnight Courier or
Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile
(212) 929-0061
Confirm by telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
Delivery of this Consent Form to an address other than as set forth
above will not constitute a valid delivery.
The instructions contained herein and in the Consent Statement (as defined
below) should be read carefully before this Consent is completed.
<PAGE>
By execution hereof, the undersigned acknowledges receipt of the Consent
Solicitation Statement dated November 9, 1999 (as the same may be amended from
time to time, the "Consent Statement") and this Consent Form and instructions
hereto (the "Consent Form"), which together constitute the Company's
solicitation (the "Solicitation") of consents (the "Consents") from holders
(each, a "Holder" and, collectively, the "Holders") of at least a majority of
the aggregate principal amount of the Company's outstanding 11% Senior
Subordinated Notes due November 1, 2006 (the "Notes") as of the Record Date
issued pursuant to the Indenture dated November 6, 1996 (the "Indenture"), among
the Company, the subsidiary guarantors named therein (collectively, the
"Guarantors") and Wilmington Trust Company, as trustee (the "Trustee"), to the
waiver of: (i) the Company's obligations under Section 4.15 of the Indenture,
including its obligation to make a Change of Control Offer in connection with
the recapitalization of the Company (the "Recapitalization") by an investor
group led by an affiliate of Madison Dearborn Partners, Inc. ("MDP"); and (ii)
the failure by the Company to comply with certain technical requirements
relating to the qualification and operation of its financing subsidiary, OSI
Funding Corp. ("OSI Funding"), as an Unrestricted Subsidiary under the Indenture
and any and all consequences arising therefrom under the Indenture
(collectively, the "Waivers").
The Company is offering to pay to each Holder who provides its Consent (and
has not revoked such Consent) at or prior to 5:00 p.m., New York City time, on
the Expiration Date a payment of $100 per $1,000 of principal amount of Notes
(the "Consent Payment"). The Company will not be obligated to make any Consent
Payment in respect of any Consents not provided at or prior to 5:00 p.m., New
York City time, on the Expiration Date. The Consent Payment will be made on the
date of the closing of the Recapitalization (the "Consent Payment Date").
Capitalized terms used in this Consent Form and not otherwise defined herein
have the meanings ascribed to them in the Consent Statement.
If Consents are received from registered Holders of at least a majority of
the aggregate principal amount of the outstanding Notes as of the Record Date
(the "Requisite Consents"), such Consents will apply to all Notes issued under
the Indenture and each Holder of such Notes will be bound by such Consents
regardless of whether such Holder executed a Consent.
MDP's obligation to complete the Recapitalization is expressly conditioned
upon, among other things, the Company receiving the Requisite Consents to the
Waivers.
Use this Consent Form only to provide your Consent pursuant to the
Solicitation.
The Notes are currently on deposit with the Depository Trust Company
("DTC") and are registered in the name of DTC's nominee, Cede & Co., as nominee
holder of the Notes. Cede & Co. will execute an omnibus proxy which will
authorize its participants (each, a "Participant") to consent with respect to
the Notes owned by it and held in the name of Cede & Co. as specified on the DTC
position listing of Cede & Co., as of the Record Date, with respect to the
Notes. The term "Holder" as used in this Consent Form means (i) each person (a)
in whose name the Notes are registered as of the Record Date; or (b) whose name
appears on a securities position listing of DTC as the holder of an interest in
the Notes as of the Record Date and whom DTC has authorized to consent to the
Waivers and (ii) any other person who has been authorized by proxy or in any
other manner acceptable to the Company to vote Notes on behalf of the registered
Holder thereof.
Pursuant to Section 9.04 of the Indenture, a Consent with respect to all or
a portion of a Note is a continuing Consent with respect to such Note or portion
of a Note notwithstanding a subsequent transfer of ownership of such Note.
Consents may be revoked prior to the date on which the Company receives the
Requisite Consents, only by the Holder granting such Consent (or a duly
authorized proxy of such person) by following the procedures set forth in the
Consent Statement. Such revocation shall terminate the previously delivered
Consent with respect to such Note unless a new Consent is given prior to the
Expiration Date by following the procedure set forth herein.
The Company is requesting that any and all of the Holders execute this
Consent Form. This Consent Form must be executed by the Holder in the same
manner as the Holder's name appears in the register maintained by the Trustee or
on a DTC securities position listing reflecting such Holder as an owner of such
Notes. If the Notes are held in more than one name, as reflected therein, such
Consent Form must be executed by each such Holder. If this Consent Form is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing and should
submit with this Consent Form appropriate evidence of authority to execute this
Consent Form. If the Notes owned by a Holder are held in different names, as
reflected in such register or on such securities position listing, separate
Consent Forms must be executed covering all such Notes. If applicable, this
Consent Form should set forth the DTC participant number relating to the Notes
with respect to which a Consent is given. In addition, if this Consent Form
relates to less than the total principal amount of the Notes at maturity held in
the name of such Holder, the Holder must list the principal amounts of the Notes
at maturity to which this Consent Form relates. Otherwise, this Consent Form
will be deemed to relate to the total principal amount of the Notes at maturity
held in the name of such Holder.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
Consent should promptly contact the person in whose name its Notes are
registered and instruct such registered Holder to Consent on its behalf. A
Letter of Instruction is contained in the Solicitation materials provided along
with the Consent Statement which may be used by a beneficial owner to instruct
the record Holder to deliver Consents. If a beneficial owner wishes to Consent
on its own behalf, it must, prior to completing and executing the Consent,
either make appropriate arrangements to register ownership of the Notes in its
name or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
All questions as to the validity, form, eligibility (including time of
receipt) and the acceptance of Consents will be resolved by the Company in its
sole discretion whose determination shall be binding. The Company reserves the
absolute right to reject all Consents that are not in proper form or the
acceptance of which could, in the opinion of its counsel, be unlawful. The
Company also reserves the right to waive any irregularities or conditions of
delivery as to particular Consents, including the requirement that Consents must
be delivered prior to the Expiration Date in order to receive the Consent
Payment. Unless waived, any irregularities in connection with the deliveries
must be cured within such time as the Company determines. None of the Company,
the Information Agent, the Solicitation Agent, the Paying Agent and any other
will be under any duty to give notification of any such irregularities or
waiver. Deliveries of such Consents will not be deemed to have been properly
made until such irregularities have been cured or waived. The interpretation of
the Company of the terms and conditions of this Solicitation shall be binding.
HOLDERS WHO WISH TO CONSENT SHOULD HAND DELIVER, SEND BY OVERNIGHT COURIER
OR SEND BY FACSIMILE TRANSMISSION, THEIR PROPERLY COMPLETED AND EXECUTED CONSENT
FORM TO THE INFORMATION AGENT IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH
HEREIN. HOWEVER, THE COMPANY RESERVES THE RIGHT TO ACCEPT ANY CONSENT RECEIVED
BY IT OR THE INFORMATION AGENT. IN NO EVENT SHOULD A HOLDER TENDER OR DELIVER
NOTES.
THE SOLICITATION IS NOT BEING MADE TO (NOR WILL NOTES PROVIDED BE ACCEPTED
FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR
ACCEPTANCE OF THE SOLICITATION WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION.
Delivery of documents to DTC does not constitute delivery to the
Information Agent.
The undersigned has completed, executed and delivered this Consent to
indicate the action the undersigned desires to take with respect to the
Solicitation.
Your bank or broker can assist you in completing this form. The instructions
included with this Consent Form must be followed. Questions and requests for
assistance or for additional copies of the Consent Statement and this Consent
Form may be directed to the Information Agent. See Instruction 9 below.
<PAGE>
List below the Notes to which this Consent Form relates. If the space
provided below is inadequate, list the certificate numbers and principal amounts
on a separately executed schedule and affix the schedule to this Consent Form.
Consent Payments will only be made in payments of $100 per $1,000 of principal
amount of Notes.
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DESCRIPTION OF NOTES
- ----------------------- -------------------- ---------------------- ------------
Name(s) and Principal
Address(es) of Aggregate Amount(s)
Registered Principal As To Which
Holder(s) Certificate Amount(s) Consents Are
(Please include DTC Number(s) Represented* Given in the
Number) Solicitation
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TOTAL PRINCIPAL
AMOUNT OF NOTES
- ----------------------- -------------------- ---------------------- ------------
* Unless otherwise indicated in the column labeled "Principal Amount(s) As
To Which Consents Are Given in the Solicitation" and subject to the terms
and conditions of the Consent Statement, a Holder will be deemed to have
tendered the entire aggregate principal amount represented by the Notes
indicated in the column labeled "Aggregate Principal Amount(s)
Represented." See Instruction 3.
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HOLDERS WHO WISH TO PROVIDE THEIR CONSENTS MUST COMPLETE THIS CONSENT FORM
IN ITS ENTIRETY. THE COMPANY WILL NOT BE OBLIGATED TO PAY THE CONSENT PAYMENT TO
HOLDERS OF NOTES WHO DELIVER THEIR CONSENTS AFTER THE EXPIRATION DATE.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Solicitation, the
undersigned hereby provides its Consent.
Subject to, and effective upon, the acceptance of, and payment for, the
Consent provided with this Consent Form, the undersigned hereby (i) waives the
Company's obligations under Section 4.15 of the Indenture, including its
obligation to make a Change of Control Offer in connection with the
Recapitalization; and (ii) waives the failure by the Company to properly qualify
and operate its financing subsidiary, OSI Funding, as an Unrestricted Subsidiary
under the Indenture and any and all consequences arising therefrom under the
Indenture. The undersigned hereby irrevocably constitutes and appoints the
Information Agent the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Information Agent also acts as the
agent of the Company) with respect to such Consents, with full power of
substitution and resubstitution (such power-of-attorney being deemed to be an
irrevocable power coupled with an interest) to deliver to the Company and the
Trustee this Consent Form as evidence of the undersigned's and as certification
that the Requisite Consents to the Waivers duly executed by Holders of such
Notes have been received, all in accordance with the terms and conditions of the
Solicitation.
The undersigned agrees and acknowledges that, by the execution and delivery
hereof, the undersigned makes and provides the written Consent to the Waivers as
permitted by Section 9.04 of the Indenture. The undersigned understands that any
Consent provided hereby shall remain in full force and effect until such Consent
is revoked in accordance with the procedures set forth in the Consent Statement
and this Consent Form, which procedures are hereby agreed to be applicable in
lieu of any and all other procedures for revocation set forth in the Indenture,
which are hereby waived. The undersigned understands that a revocation of such
Consent will not be effective after the Effective Date.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to give any Consent contained herein. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Information Agent or the Company to be necessary or desirable to perfect the
undersigned's Consent to the Waivers.
The undersigned understands that by providing its Consent pursuant to any of
the procedures described in the Consent Statement under the caption "The
Solicitation" and in the instructions hereto and acceptance thereof by the
Company will constitute a binding agreement between the undersigned and the
Company, upon the terms and subject to the conditions of the Solicitation.
For purposes of the Solicitation, the undersigned understands that the
Company will be deemed to have accepted validly delivered Consents (or
defectively delivered Consents with respect to which the Company has waived such
defect) if, as and when the Company gives oral, to be followed by written,
notice thereof to the Information Agent.
The undersigned understands that deliveries of Consents may be revoked by
written notice of revocation received by the Information Agent at any time at or
prior to 5:00 p.m., New York City time, on the Effective Date. Any permitted
revocation of Consents may not be rescinded; and any Consents so withdrawn will
thereafter be deemed not validly tendered for purposes of the Consent Payment;
provided, however, that revoked Consents may again be tendered by following the
procedures for tendering prior to the Expiration Date.
The undersigned understands that notice of revocation of a Consent, to be
effective, must (i) specify the name of the person having executed the Consent
being revoked, (ii) identify the aggregate principal amount of the Notes held by
such person, and (iii) be signed by the Holder in the same manner as the
original signature on the Consent or be accompanied by a bond power, and a
properly completed irrevocable proxy, in each case in the name of the person
revoking the Consent, in a satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered Holder. A purported notice of
revocation that lacks any of the required information or is dispatched to any
other address will not be effective to revoke a Consent previously given.
The undersigned understands that, under certain circumstances and subject to
certain conditions of the Solicitation (each of which the Company may waive) set
forth in the Consent Statement, the Company may not be required to accept any of
the Consents delivered (including any Consents delivered after the Expiration
Date).
All authority conferred or agreed to be conferred by this Consent Form shall
survive the death or incapacity of the undersigned and every obligation of the
undersigned under this Consent Form shall be binding upon the undersigned's
heirs, personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy and other legal representatives.
Unless otherwise indicated herein under "Special Payment Instructions," the
undersigned hereby requests that any Consent Payments to be made in connection
with the Solicitation be issued to the order of the undersigned. Similarly,
unless otherwise indicated herein under "Special Delivery Instructions," the
undersigned hereby requests that any Consent Payments to be made in connection
with the Solicitation be delivered to the undersigned at the address(es) shown
below. In the event that the "Special Payment Instructions" box or the "Special
Delivery Instructions" box or both are completed, the undersigned hereby
requests that any Consent Payments to be made in connection with the
Solicitation be issued in the name(s) of, and be delivered to, the person(s) at
the address(es) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Payment Instructions" box or "Special
Delivery Instructions" box to make any Consent Payment if the Company does not
accept any of the Consents so delivered.
<PAGE>
PLEASE SIGN HERE
(To Be Completed By All Consenting Holders of Notes)The completion,
execution and delivery of this Consent Form will be deemed to constitute a
Consent to the Waivers.
This Consent Form must be executed by the Holder in the same manner
as the Holder's name appears in the register maintained by the Trustee or
on a DTC securities position listing reflecting such Holder as an owner of
such Notes. If the Notes are held in more than one name, as reflected
therein, such Consent Form must be executed by each such Holder. If the
Consent Form is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation, or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing and should submit with the Consent Form appropriate evidence of
authority to execute the Consent Form. See Instruction 4 below. If the
Notes owned by a Holder are held in different names, as reflected in such
register or on such securities position listing, separate Consent Forms
must be executed covering all such Notes. If applicable, the Consent Form
should set forth the DTC participant number relating to the Notes with
respect to which a Consent is given. In addition, if the Consent Form
relates to less than the total principal amount of the Notes at maturity
held in the name of such Holder, the Holder must list the principal
amounts of the Notes at maturity to which the Consent Form relates.
Otherwise, the Consent Form will be deemed to relate to the total
principal amount of the Notes at maturity held in the name of such Holder.
If the signature appearing below is not of the registered holder(s)
of the Notes, then the registered holder(s) must sign a valid proxy.
X
------------------------------------------------------------------------
X
------------------------------------------------------------------------
(Signature(s) of Holder(s) or Authorized Signatory)
Dated: November _____, 1999
Name(s):
----------------------------------------------------------------
----------------------------------------------------------------
(Please Print)
Capacity:
-----------------------------------------------------------------
Address:
------------------------------------------------------------------
------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
----------------------------------------------
<PAGE>
COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (See Instruction 4 below)
Certain Signatures Must be Guaranteed by an Eligible Institution
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signature(s))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number(including area code) of Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Dated: November___ , 1999
- -------------------------------------- -------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3, 4, 5 and 7) (See Instructions 3, 4, 5 and 7)
To be completed ONLY if the Consent To be completed ONLY if the Consent
Payments to be made are to be sent Payments to be made are to be sent
to someone other than the person to an address different from that
whose signature(s) appear(s) within shown in the box entitled "Description
this Consent Form. of Notes" within this Consent Form.
Name: Name:
------------------------------ --------------------------------
(Please Print) (Please Print)
Address: Address:
--------------------------- -----------------------------
(Please Print) (Please Print)
(Zip Code) (Zip Code)
Taxpayer Identification or Social Taxpayer Identification or Social
Security Number Security Number
(See Substitute Form W-9 herein) (See Substitute Form W-9 herein)
- -------------------------------------- -------------------------------------
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Solicitation
1. Delivery of this Consent Form. A properly completed and duly executed
copy (or facsimile) of this Consent Form, and any other documents required by
this Consent Form, must be received by the Information Agent at its address set
forth herein at or prior to 5:00 p.m., New York City time, on the Expiration
Date; provided, however, that the Company will not be obligated to make the
Consent Payment to Holders who tender their Consents after the Expiration Date.
The method of delivery of this Consent Form and all other required documents to
the Information Agent is at the election and risk of Holders. If such delivery
is by mail, it is suggested that Holders use properly insured registered mail,
return receipt requested, and that the mailing be made sufficiently in advance
of the Expiration Date to permit delivery to the Information Agent at or prior
to 5:00 p.m., New York City time, on such date. Except as otherwise provided
below, the delivery will be deemed made when actually received or confirmed by
the Information Agent. This Consent Form should be sent only to the Information
Agent and not to the Company, the Trustee, the Solicitation Agent or the Paying
Agent.
2. Revocation of Consents. Consents may be revoked at any time prior to
the Effective Date. For a revocation of Consents to be effective prior to the
Effective Date a written notice must be received by the Information Agent at its
address set forth above or on the back cover of this Consent Form. Any such
notice of revocation must (i) specify the name of the person having executed the
Consent being revoked, (ii) identify the aggregate principal amount of the Notes
held by such person, and (iii) be signed by the Holder in the same manner as the
original signature on the Consent or be accompanied by a bond power, and a
properly completed irrevocable proxy, in each case in the name of the person
revoking the Consent, in a satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered Holder. A purported notice of
revocation which lacks any of the required information will not be an effective
withdraw of a Consent previously made. A purported notice of revocation that
lacks any of the required information or is dispatched to any other address will
not be effective to revoke a Consent previously given.
Revocation of Consents can only be accomplished in accordance with the
foregoing procedures.
Any permitted revocation of Consents may not be rescinded; and any
Consents so withdrawn will thereafter be deemed not validly tendered for
purposes of the Consent Payment; provided, however, that revoked Consents may
again be tendered by following the procedures for tendering at or prior to the
Expiration Date.
All questions as to the validity (including time of receipt) of notices of
withdrawal will be determined by the Company, it its sole discretion, whose
determination will be final and binding. None of the Company, the Information
Agent, the Solicitation Agent, the Paying Agent and any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal, or shall incur any liability for failure to give any such
notification.
3. Partial Tenders and Consents. If the Consent Form relates to less than
the total principal amount of the Notes at maturity held in the name of the
Holder, such Holder must list the principal amounts of the Notes at maturity
held in the name of such holder in the last column of the box entitled
"Description of Notes" herein.
4. Signatures on this Consent and Letter of Transmittal, Bond Powers and
Endorsement Guarantee of Signatures. If this Consent Form is signed by the
registered Holder(s) of the Notes tendered hereby or with respect to which
Consent is given, the signature(s) must correspond with the name(s) as written
on the face of the certificate(s) without alteration, enlargement or any change
whatsoever. If this Consent Form is signed by a Participant in DTC whose name is
shown as the owner of the Notes tendered hereby, the signature must correspond
with the name shown on the security position listing as the owner of the Notes.
IF THIS CONSENT FORM IS EXECUTED BY A HOLDER OF NOTES WHO IS NOT THE
REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID PROXY, WITH THE
SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY AN ELIGIBLE INSTITUTION.
If any of the Notes are owned of record by two or more joint owners, all
such owners must sign this Consent Form. If any of the Notes are registered in
different names, it will be necessary to complete, sign and submit as many
separate copies of this Consent Form and any necessary accompanying documents as
there are different names in which the Notes are held.
[If this Consent Form is signed by an Acting Holder, and the Consent
Payment to be made in connection with the Solicitation is to be issued to the
order of the Acting Holder, then the Acting Holder need not provide a separate
bond power. In any other case (including if this Consent Form is not signed by
the Acting Holder), the Acting Holder must transmit a separate properly
completed bond power with this Consent Form (executed exactly as the name(s) of
the registered holder(s) appear(s) on such Notes, and, with respect to a
participant in DTC whose name appears on a security position listing as the
owner of Notes exactly as the name(s) of the participant(s) appear(s) on such
security position listing), with the signature on the endorsement or bond power
guaranteed by an Eligible Institution, unless such bond powers are executed by
an Eligible Institution.]
If this Consent Form or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and proper evidence satisfactory to the Company of their
authority to so act must be submitted with this Consent Form.
Signatures on bond powers and proxies and Consents provided in accordance
with this Instruction 4 by registered Holders not executing this Consent Form
must be guaranteed by an Eligible Institution.
No signature guarantee is required if: (i) this Consent Form is signed by
the registered holder(s) of the Notes tendered herewith (or by a Participant in
DTC whose name appears on a security position listing as the owner of Notes) and
the payments for the Consent Payments to be made are to be issued, directly to
such registered Holder(s) and the "Special Payment Instructions" box of this
Consent and Letter of Transmittal has not been completed; or (ii) such Consents
are delivered for the account of an Eligible Institution. In all other cases,
all signatures on Consent Forms must be guaranteed by an Eligible Institution.
5. Special Issuance and Special Delivery Instructions. Consenting Holders
should indicate in the applicable box or boxes the name and address to which
Consent Payments to be made are to be issued or sent, if different from the name
and address of the Holder signing this Consent Form. In the case of issuance in
a different name, the taxpayer identification or social security number of the
person named must also be indicated.
6. Taxpayer Identification Number. Each consenting Holder is required to
provide the Information Agent with the Holder's correct taxpayer identification
number ("TIN"), generally the Holder's social security or federal employer
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below or, alternatively, to establish another basis
for exemption from backup withholding. A Holder must cross out item (2) in the
Certification box on Substitute Form W-9 if such Holder is subject to backup
withholding. Failure to provide the information on the form may subject the
tendering Holder to 31% federal income tax backup withholding on the payment,
including the Consent Payment, if any, made to the Holder or other payee with
respect to Consents delivered pursuant to the Solicitation. The box in Part 3 of
the form should be checked if the consenting Holder has not been issued a TIN
and has applied for a TIN or intends to apply for a TIN in the near future. If
the box in Part 3 is checked and the Information Agent is not provided with a
TIN within 60 days thereafter, the Information Agent will withhold 31% from all
such payments with respect to the Consent Payment to be made until a TIN is
provided to the Information Agent.
7. Irregularities. All questions as to the form of all documents and the
validity (including time of receipt) and deliveries and revocations of Consents
will be determined by the Company, in its sole discretion, which determination
shall be final and binding. Alternative, conditional or contingent Consents will
not be considered valid. The Company reserves the absolute right to reject any
or all of Consents that are not in proper form or the acceptance of which would,
in the Company's opinion, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of delivery as to particular
Consents. The Company's interpretations of the terms and conditions of the
Solicitation (including the instructions in this Consent Form) will be final and
binding. Any defect or irregularity in connection with deliveries of Consents
must be cured within such time as the Company determines, unless waived by the
Company. A defective Consent may, in the sole discretion of the Company,
constitute a valid Consent and will be counted for purposes of determining
whether Requisite Consents have been obtained. None of the Company, the
Information Agent, the Solicitation Agent, the Paying Agent or any other person
will be under any duty to give notice of any defects or irregularities in
deliveries of Consents or will incur any liability to Holders for failure to
give any such notice.
8. Waiver of Conditions. The Company expressly reserves the absolute right,
in its sole discretion, to amend or waive any of the conditions to the
Solicitation in the case of any Consents delivered at any time and from time to
time.
9. Requests for Assistance or Additional Copies. Any questions or requests
for assistance or additional copies of this Consent Statement may be directed to
the Information Agent at the telephone number and location listed below. You may
also contact your broker, dealer, commercial bank or trust company for
assistance concerning this Solicitation.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose Consents are accepted for
payment is required to provide the Information Agent with such Holder's correct
TIN on Substitute Form W-9 below or otherwise establish a basis for exemption
from backup withholding. If such Holder is an individual, the TIN is his social
security number. If the Information Agent is not provided with the correct TIN,
a $50 penalty may be imposed by the Internal Revenue Service, and any Consent
Payment, made with respect to Consents provided pursuant to the Solicitation may
be subject to backup withholding. Failure to comply truthfully with the backup
withholding requirements also may result in the imposition of severe criminal
and/or civil fines and penalties.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Information Agent. A foreign person, including entities, may qualify
as an exempt recipient by submitting to the Information Agent a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Holder's foreign status. A Form W-8 can be obtained from the
Information Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
If backup withholding applies, the Information Agent is required to
withhold 31% of any payments made to the Holder or other payee. Backup
withholding is not an additional federal income tax; rather, the federal income
tax liability of persons subject to backup withholding is reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on any Consent Payment, made with respect to
Consents provided pursuant to the Solicitation, the Holder is required to
provide the Information Agent with either (i) the Holder's correct TIN by
completing the form below, certifying that the TIN provided on Substitute Form
W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder
has not been notified by the Internal Revenue Service that the Holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (B) the Internal Revenue Service has notified the Holder that the Holder is
no longer subject to backup withholding; or (ii) an adequate basis for
exemption.
What Number to Give the Information Agent
The Holder is required to give the Information Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Notes. If the Notes are held in more than one name or are not held in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
<PAGE>
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING
SUBSTITUTE AND DATING BELOW.
------------------------------
Social Security Number
Form W-9 OR
------------------------------
Department of the Employer Identification Number
Treasury
Payer's Request for Taxpayer
Identification Number (TIN)
- --------------------------------------------------------------------------------
Part 2--Certification--Under the penalties of Part3--Awaiting TIN
perjury, I certify that: (1) The number shown on
this form is my correct Taxpayer Identification
Number (or I am waitingfor a number to be issued
to me) and Awaiting TIN
(2) I am not subject to backup withholding
either because I have not been notified by the
Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
- --------------------------------------------------------------------------------
Certificate Instructions--You must cross out
item (2) in Part 2 above if you have been
notified by the IRS that you are subject to
backup withholding because of underreporting
interest or dividends on your tax return.
However, if after being notified by the IRS that
you were subject to backup withholding you
received another notification from the IRS
stating that you are no longer subject to backup
withholding, do not cross out item (2).
SIGNATURE DATE , 1999
-------------------- ----------
- ------------------------------- ------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- -------------------------------- ------------------------------, 1999
Signature Date
<PAGE>
The Information and Tabulation Agent for the Solicitation is:
MACKENZIE PARTNERS, INC.
By Mail, Overnight Courier or Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile:
(212) 929-0061
Confirm by telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
--------------------
Any questions or requests for assistance or additional copies of this
Consent Statement and the Consent Form may be directed to the Information Agent
at the telephone number and location listed above. You may also contact your
broker, dealer, commercial bank or trust company for assistance concerning the
Solicitation.
The Solicitation Agent for the Solicitation is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Telephone Number: (212) 892-7707
Attention: Tom Pereira
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OUTSOURCING SOLUTIONS INC.
Outsourcing Solutions Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Outsourcing Solutions Inc.
(the "Corporation"). The Corporation was originally incorporated as OSI Holdings
Corp. in the State of Delaware on the 21st day of September, 1995 pursuant to a
Certificate of Incorporation filed with the Secretary of State of the State of
Delaware on that date.
2. This Fourth Amended and Restated Certificate of Incorporation
amends and restates the Third Amended and Restated Certificate of Incorporation
of the Corporation filed with the Secretary of State of the State of Delaware on
January 13, 1999, as amended on November 29, 1999. This Fourth Amended and
Restated Certificate of Incorporation has been adopted by the Corporation and by
its stockholders pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware.
3. On December 3, 1999, Directors of the Corporation duly
adopted resolutions authorizing the following amendment and restatement of the
Certificate of Incorporation of the Corporation, declaring such amendment and
restatement to be advisable and in the best interests of the Corporation and its
stockholders and authorizing the appropriate officers to solicit written
consents of the stockholders of the Corporation in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware. Thereafter, pursuant to resolutions of the Board of Directors, in lieu
of a meeting and vote of holders of the Corporation's common stock and preferred
stock, stockholders holding a majority of the issued and outstanding shares of
common stock of the Corporation and holders of a majority of the issued and
outstanding shares of each of the (i) preferred stock, (ii) Class A Non-Voting
Common Stock, (iii) Class B Non-Voting Common Stock and (iv) Class C Non-Voting
Common Stock of the Corporation adopted the following amendment and restatement
of the Certificate of Incorporation of the Corporation.
4. The text of Certificate of Incorporation, is hereby restated
and amended to read in its entirety as follows:
FIRST: The name of the Corporation is Outsourcing Solutions Inc.
SECOND: The registered office of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle.
The name of its registered agent in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage, directly or
indirectly, in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware as from
time to time in effect.
FOURTH: The total number of shares which the Corporation shall
have the authority to issue is 17,300,000 shares of capital stock as follows:
300,000 shares of Preferred Stock, no par value (the "Preferred Stock"),
15,000,000 shares of Voting Common Stock, par value $.01 per share (the "Voting
Common Stock") and 2,000,000 shares of Non-Voting Stock, par value $.01 per
share (the "Non-Voting Common Stock", and together with the Voting Common Stock,
the "Common Stock"). Each share of Preferred Stock is hereafter referred to as a
"Preferred Share" and collectively as "Preferred Shares." Each share of Voting
Common Stock is hereafter referred to as a "Voting Common Share" and
collectively as "Voting Common Shares". Each share of Non-Voting Common Stock is
hereafter referred to as a "Non-Voting Common Share" and collectively as
"Non-Voting Common Shares". The Voting Common Shares and Non-Voting Common
Shares are hereafter collectively referred to as "Common Shares".
A. Preferred Stock.
Authorized but unissued shares of Preferred Stock may be issued
from time to time in one or more series or classes. The Board of Directors is
hereby authorized to determine and fix by resolution all rights, preferences,
and privileges and qualifications, limitations and restrictions (including,
without limitation, voting rights, dividend rights, redemption features,
conversion rights or protective features, and the limitation and exclusion
thereof) applicable to any such series or class of Preferred Stock and the
number of shares constituting any such series or class and the designation
thereof, and, subject to the terms of any such series or class, to increase or
decrease (but not below the number of shares of such series or class then
outstanding) the number of shares of any series or class subsequent to the issue
of shares of that series or class then outstanding. In the event that the number
of shares of any series or class is so decreased, the shares constituting such
reduction shall resume the status which such shares had prior to the adoption of
the resolution originally fixing the number of such series or class.
B. Common Stock.
The voting powers, designations, preferences and relative
participating, optional or other special rights, and qualifications, or
restrictions thereof, of the Common Stock are as follows:
1. Dividend Rights. Subject to the preferential rights of the
Preferred Shares, the Board of Directors of the Corporation may, in its
discretion, out of funds legally available for the payment of dividends and at
such times and in such manner as determined by the Board of Directors, declare
and pay dividends on the Common Shares of the Corporation.
No dividend (other than a dividend in capital stock ranking on a
parity with the Common Shares or cash in lieu of fractional shares with respect
to such stock dividend) shall be declared or paid on any share or shares of any
class of stock or series thereof ranking on a parity with the Common Shares in
respect of payment of dividends for any dividend period unless there shall have
been declared, for the same dividend period, like proportionate dividends on all
shares of Common Shares then outstanding.
As and when dividends are declared or paid thereon, whether in
cash, property or securities of the Corporation, the holders of the Voting
Common Shares and of the Non-Voting Common Shares will be entitled to share
ratably, on a share for share basis, in such dividends, provided, that (i) if
dividends are declared which are payable in Voting Common Shares or Non-Voting
Common Shares, dividends will be declared which are payable at the same rate on
both classes of stock and the dividends payable in Voting Common Shares will be
payable to holders of such shares and the dividends payable in Non-Voting Common
Shares will be payable to holders of such shares and (ii) if the dividends
consist of other voting securities of the Corporation, (a) the Corporation will
make available to each holder of Non-Voting Common Shares, at such holder's
request, dividends consisting of non-voting securities of the Corporation which
are otherwise identical to the voting securities and which are convertible into
or exchangeable for such voting securities on the same terms as the Non-Voting
Common Shares are convertible into Voting Common Shares.
2. Rights on Liquidation. In the event of any liquidation,
dissolution, distribution of assets or winding up of the Corporation, whether
voluntary or involuntary (collectively, a "Liquidation"), after payment or
provision for payment of the debts and other liabilities of the Corporation and
the setting aside for payment of any preferential amount due to the holders of
any other class or series of stock (including, without limitation, the holders
of Preferred Shares), the holders of Common Shares (including, without
limitation, the Voting Common Shares and the Non-Voting Common Shares) and any
other class of stock or series thereof ranking on a parity with the Common
Shares in respect of distributions on Liquidation shall be entitled to receive
ratably on a share for share basis, any or all assets remaining to be paid or
distributed.
3. Voting Rights. Except as may be otherwise required by law,
all voting rights shall be vested in the Voting Common Shares and each holder of
Voting Common Shares shall have one vote in respect of each Voting Common Share
held by such holder on all matters to be voted upon by the stockholders of the
Corporation. The holders of the Non-Voting Shares will have no right to vote on
any matters to be voted on by the stockholders of the Corporation; provided,
that the holders of the Non-Voting Common Shares shall have the right to vote as
a separate class on any matter on which the Non-Voting Common Shares are
required to vote as a class pursuant to the General Corporation Law of the State
of Delaware.
4. Conversion.
A. Conversion of Non-Voting Common Shares.
Any holder of Non-Voting Common Shares shall have the right, at
its option, at any time and from time to time, to convert, subject to the terms
and provisions of this Section 4A, any or all of such holder's Non-Voting Common
Shares into an equal number of shares of fully paid and non-assessable shares of
Voting Common Shares as provided below; provided, however, if the holder in any
such conversion is subject to the Bank Holding Company Act of 1956, as amended
(12 U.S.C. ss.1841, et. seq.) and the regulations promulgated thereunder
(collectively and including any successor provisions, the "BHCA Act"), such
conversion may be made only if:
(i) the BHCA Act would not prohibit such holder from
holding such shares of Voting Common Shares; and
(ii) such shares of Voting Common Shares to be received
upon such conversion will be (A) distributed or sold in connection with any
public equity offering registered under the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "1933 Act"), (B)
distributed or sold in a "broker's transaction" (as defined in Rule 144(g) under
the 1933 Act) pursuant to Rule 144 under the 1933 Act or any similar rule then
in force, (C) distributed or sold to a person or group (within the meaning of
the Securities Exchange Act of 1934, as amended (the "1934 Act")) of persons if,
after such distribution or sale, such person or group of persons would not, in
the aggregate, own, control or have the right to acquire more than 2% of the
outstanding securities of the Corporation entitled to vote on the election of
directors of the Corporation, (D) distributed or sold to a person or group
(within the meaning of the 1934 Act) of persons if, prior to such sale, such
person or group of persons had control of the Corporation, (E) distributed,
sold, or held in any other manner permitted under the BHCA, including after
giving effect to the amendment of the BHCA by the Gramm-Leach-Bliley Financial
Services Act;
provided, further, that if the holder converts any Non-Voting Common Shares as
provided in clauses (i) and (ii) above and any distribution or sale of the
Non-Voting Common Shares fails to occur for any reason or such holder is not
otherwise permitted to hold the Voting Common Shares into which such shares were
converted, such holder may convert the Voting Common Shares into the Non-Voting
Common Shares converted in anticipation of such distribution or sale or other
permitted holding.
B. Conversion Procedure.
(i) Unless otherwise provided herein, each conversion of shares
of Non-Voting Common Stock into shares of Voting Common Stock will be effected
by the surrender of the certificate or certificates representing the Non-Voting
Common Shares to be converted at the principal office of the Corporation at any
time during normal business hours, together with a written notice by the holder
of such Non-Voting Common Shares stating that such holder desires to convert
such Non-Voting Common Shares, or a stated number of such Non-Voting Common
Shares, represented by such certificate(s) into shares of Voting Common Shares.
Unless otherwise provided herein, each conversion will be deemed to have been
effected as of the close of business on the date on which such certificate(s)
have been surrendered and such notice has been received, and at such time the
rights of the holder of the converted Non-Voting Common Shares, as such holder,
will cease and the person or persons in whose name or names the certificate(s)
for Voting Common Shares are to be issued upon such conversion will be deemed to
have become the holder or holders of record of the Voting Common Shares
represented thereby.
(ii) Promptly after the surrender of certificates and the receipt
of written notice, the Corporation will issue and deliver in accordance with the
surrendering holder's instructions (a) the certificate(s) for the Voting Common
Shares issuable upon such conversion and (b) a certificate representing any
Non-Voting Common Shares that was represented by the certificate(s) delivered to
the Corporation in connection with such conversion but that was not converted.
(iii) The issuance of certificates for Voting Common Shares upon
conversion of Non-Voting Common Shares will be made without charge to the
holders of such shares for any issuance tax in respect thereof (other than any
tax in connection with the issuance of shares in a different name) or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of Voting Common Shares.
(iv) The Corporation will at all times reserve and keep available
out of its authorized but unissued Voting Common Shares, solely for the purpose
of issuance upon the conversion of the Non-Voting Common Shares such number of
Voting Common Shares as are issuable upon the conversion of all outstanding
Non-Voting Common Shares. All Common Shares which are so issuable will, when
issued, be duly and validly issued, fully paid and nonassessable. The
Corporation will take all such actions as may be necessary to assure that all
such Common Shares may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which Common Shares may be listed (except for official notices of issuance
which will be immediately transmitted by the Corporation upon issuance).
(v) The Corporation will not close its books against the transfer
of Common Shares in any manner which would interfere with the timely conversion
of any Non-Voting Common Shares.
5. Stock Splits. If the Corporation in any manner subdivides or
combines the outstanding shares of one class of Common Shares, the outstanding
shares of the other class of Common Shares will be proportionately subdivided or
combined in a similar manner.
6. Notices. All notices referred to in this Article FOURTH
shall be in writing, shall be delivered personally, by facsimile or by first
class mail, postage prepaid, and shall be deemed to have been given when so
delivered or mailed to the Corporation at its principal office and to any
stockholder at such holder's address as it appears in the stock records of the
Corporation.
7. Amendment and Waiver. No amendment or waiver of any
provision of paragraph 4 of this Article FOURTH or of this paragraph 7 shall be
effective without the prior approval of both the holders of a majority of the
Voting Common Shares then outstanding, voting as a separate class, and the
holders of a majority of the Non-Voting Common Shares then outstanding, voting
as a separate class.
FIFTH: The business of the Corporation shall be managed under the
direction of the Board of Directors except as otherwise provided by law. The
number of Directors of the Corporation shall be fixed from time to time by, or
in the manner provided in, the By-Laws. Election of Directors need not be by
written ballot unless the By-Laws of the Corporation shall so provide.
SIXTH: The Board of Directors may make, alter or repeal the
By-Laws of the Corporation except as otherwise provided in the By-Laws adopted
by the Corporation's stockholders.
SEVENTH: The Directors of the Corporation shall be protected from
personal liability, through indemnification or otherwise, to the fullest extent
permitted under the General Corporation Law of the State of Delaware as from
time to time in effect.
1. A Director of the Corporation shall under no circumstances
have any personal liability to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director except for those breaches and
acts or omissions with respect to which the General Corporation Law of the State
of Delaware, as from time to time amended, expressly provides that this
provision shall not eliminate or limit such personal liability of Directors.
Neither the modification or repeal of this paragraph 1 of Article SEVENTH nor
any amendment to said General Corporation Law that does not have retroactive
application shall limit the right of Directors hereunder to exculpation from
personal liability for any act or omission occurring prior to such amendment,
modification or repeal.
2. The Corporation shall indemnify each Director and Officer of
the Corporation to the fullest extent permitted by applicable law, except as may
be otherwise provided in the Corporation's By-Laws, and in furtherance hereof
the Board of Directors is expressly authorized to amend the Corporation's
By-Laws from time to time to give full effect hereto, notwithstanding possible
self interest of the Directors in the action being taken. Neither the
modification or repeal of this paragraph 2 of Article SEVENTH nor any amendment
to the General Corporation Law of the State of Delaware that does not have
retroactive application shall limit the right of Directors and Officers to
indemnification hereunder with respect to any act or omission occurring prior to
such modification, amendment or repeal.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, said Outsourcing Solutions Inc. has caused
this Amended and Restated Certificate of Incorporation of Outsourcing Solutions
Inc. to be executed by its officer thereunto duly authorized this 7th day of
December, 1999.
OUTSOURCING SOLUTIONS INC.
By:/s/ Eric R. Fencl
--------------------------
Name: Eric Fencl
Title: Vice President and General Counsel
<PAGE>
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF CLASS A 14%
SENIOR MANDATORILY REDEEMABLE PREFERRED STOCK,
SERIES A, AND CLASS B 14% SENIOR MANDATORILY
REDEEMABLE PREFERRED STOCK, SERIES A, AND QUALIFICATIONS,
LIMITATIONS ANDRESTRICTIONS THEREOF
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
Outsourcing Solutions Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, by unanimous written consent dated December 10, 1999, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors
does hereby designate and authorize 50,000 shares of Class A 14%
Senior Mandatorily Redeemable Preferred Stock, no par value, of which
25,000 shares shall be designated Class A 14% Senior Mandatorily
Redeemable Preferred Stock, Series A, no par value; and futher
resolved that the Board of Directors does hereby designate and
authorize 150,000 shares of Class B 14% Senior Mandatorily Redeemable
Preferred Stock, no par value, of which 75,000 shares shall be
designated as Class B 14% Senior Mandatorily Redeemable Preferred
Stock, Series A, no par value, each having the designations,
preferences, relative, participating, optional and other special
rights and the qualifications, limitations and restrictions thereof
that are set forth in the Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized
and unissued shares of Preferred Stock of the Corporation a class of
Preferred Stock designated as the "Class A 14% Senior Mandatorily
Redeemable Preferred Stock." The number of shares constituting such
class shall be 50,000 and are referred to herein as the "Class A
Senior Preferred Stock." 25,000 shares of Class A Senior Preferred
Stock, designated as the "Class A 14% Senior Mandatorily Redeemable
Preferred Stock, Series A," shall be initially issued. There is hereby
created out of the authorized and unissued shares of Preferred Stock
of the Corporation a class of Preferred Stock designated as the "Class
B 14% Senior Mandatorily Redeemable Preferred Stock." The number of
shares constituting such class shall be 150,000 and are referred to
herein as the "Class B Senior Preferred Stock." 75,000 shares of Class
B Senior Preferred Stock, designated as the "Class B 14% Senior
Mandatorily Redeemable Preferred Stock, Series A," shall be initially
issued. The Class A Senior Preferred Stock and the Class B Senior
Preferred Stock are collectively referred to herein as the "Senior
Preferred Stock." The Corporation may issue up to one additional
series of the Class A Senior Preferred Stock (designated as the "Class
A 14% Mandatorily Redeemable Preferred Stock, Series B") and one
additional series of the Class B Senior Preferred Stock (designated as
the "Class B 14% Mandatorily Redeemable Preferred Stock, Series B")
pursuant to this Certificate of Designation (without complying with
paragraph (f)(ii)(A) hereof) solely to Holders of the Senior Preferred
Stock, in exchange for shares of the Class A 14% Senior Mandatorily
Redeemable Preferred Stock, Series A, or the Class B 14% Senior
Mandatorily Redeemable Preferred Stock, Series A, as applicable, as is
necessary to comply with the registration provisions of the
Registration Rights Agreement.
(b) Rank. The Senior Preferred Stock shall, with respect to
dividend distributions and distributions upon liquidation, winding-up
and dissolution of the Corporation, rank (i) senior (to the extent set
forth herein) to all classes of Common Stock of the Corporation and to
each other class or series of Capital Stock (including Capital Stock
issuable upon exercise of any options, warrants or rights to purchase
Capital Stock) of the Corporation now authorized (including the Junior
Preferred Stock) or hereafter created the terms of which do not
expressly provide that it ranks senior to, or on a parity with, the
Senior Preferred Stock as to dividend distributions and distributions
upon liquidation, winding-up and dissolution of the Corporation
(collectively referred to, together with all classes of Common Stock
of the Corporation, as "Junior Securities"); (ii) on a parity with any
class or series of Capital Stock (including Capital Stock issuable
upon exercise of any options, warrants or rights to purchase Capital
Stock) of the Corporation hereafter created the terms of which
expressly provide that such class or series will rank on a parity with
the Senior Preferred Stock as to dividend distributions and
distributions upon liquidation, winding-up and dissolution
(collectively referred to as "Parity Securities"), provided that any
such Parity Securities that were not approved by the Holders in
accordance with paragraph (f)(ii)(A) hereof shall be deemed to be
Junior Securities and not Parity Securities; and (iii) junior to each
other class or series of Capital Stock (including Capital Stock
issuable upon exercise of any options, warrants or rights to purchase
Capital Stock) of the Corporation hereafter created the terms of which
expressly provide that such class or series will rank senior to the
Senior Preferred Stock as to dividend distributions and distributions
upon liquidation, winding-up and dissolution of the Corporation
(collectively referred to as "Senior Securities"), provided that any
such Senior Securities that were not approved by the Holders in
accordance with paragraph (f)(ii)(B) hereof shall be deemed to be
Junior Securities and not Senior Securities.
(c) Dividends.
(i) From the Issue Date, the Holders of the outstanding shares of
Senior Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, dividends on each share of Senior Preferred Stock at a rate
per annum equal to 14% of the Liquidation Preference per share of
Senior Preferred Stock in effect from time to time. All dividends
shall accrue, whether or not earned or declared, on a daily basis from
the Issue Date, shall be cumulative and shall be payable quarterly in
arrears on each Dividend Payment Date, commencing on the first
Dividend Payment Date after the Issue Date. If any dividend payable on
any Dividend Payment Date on or prior to December 1, 2004 is not
declared or paid in full in cash on such Dividend Payment Date then,
to the extent of legally available funds therefor, the Liquidation
Preference of each share shall be increased on such Dividend Payment
Date by an amount (the "Accrued Dividend Amount") equal to the product
of (A) the amount payable as dividends on such share on such Dividend
Payment Date that is not paid in cash divided by the total amount
payable as dividends on such share on such Dividend Payment Date, and
(B)one-quarter (or, if the Issue Date was less than 90 days prior to
the applicable Dividend Payment Date, a fraction the numerator of
which is the number of days elapsed from the Issue Date to the
applicable Dividend Payment Date and the denominator of which is 360)
of the Accrued Dividend Rate times the then Liquidation Preference.
The amount of the dividend otherwise payable in cash that is so added
to the Liquidation Preference shall be deemed for all purposes to have
been paid in full in cash, shall not be deemed to be arrearages or in
arrears and shall not accumulate. In the event that any portion of the
Accrued Dividend Amount may not be so added to the Liquidation
Preference because of the lack of legally available funds therefor
(such portion, the "Default Dividends") and any portion of the Accrued
Dividend Amount not so added to the Liquidation Preference because of
the lack of legally available funds therefo shall be accumulated and
payable in cash. Any Default Dividends shall thereafter accrue
dividends at an annual rate equal to the Accrued Dividend Rate. All
dividends accumulating and accruing after December 1, 2004 must be
paid in cash (when, as and if declared by the Board of Directors out
of funds legally available therefor). If, at any time, any Voting
Rights Triggering Event described in clause (1), (2) or (3) of
paragraph (f)(iii)(A) shall have occurred, the per annum dividend rate
will be increased by (x) 2% per annum in the case of clause (1) or (2)
of paragraph (f)(iii)(A) during the continuance of any such Voting
Rights Triggering Event and (y) 6% per annum in the case of clause (3)
of paragraph (f)(iii)(A) beginning on the date of such Change of
Control; provided, that upon the occurrence of a Voting Rights
Triggering Event described in clause (3)(x) of paragraph (f)(iii)(A)
the Corporation may, at its option, offer to redeem the Senior
Preferred Stock pursuant to paragraph (e)(i)(C) within 30 days of the
occurrence of such Change of Control, in which case the dividend rate
will not increase by 6% per annum. After the date on which the right
of the Holders to elect and to be represented by members of the Board
of Directors ceases to exist in accordance with paragraph (f)(iii)(B),
the dividend rate will revert to the rate originally borne by the
Senior Preferred Stock. Each dividend shall be payable to the Holders
of record as they appear on the stock books of the Corporation on the
Dividend Record Date immediately preceding the related Dividend
Payment Date. Dividends shall cease to accrue and, if applicable,
accumulate in respect of the enior Preferred Stock on the date of
their redemption unless the Corporation shall have failed to pay the
relevant redemption price on Senior Preferred Stock to be redeemed on
the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to
the Holders entitled thereto.
(iii) Dividends accruing after December 1, 2004 on the Senior
Preferred Stock for any past Dividend Period and dividends in
connection with any optional redemption pursuant to paragraph (e) (i)
may be declared and paid at any time, without reference to any
Dividend Payment Date, to Holders of record on such date, not more
than forty-five (45) days prior to the payment thereof, as may be
fixed by the Board of Directors.
(iv) (A) Nodividends shall be declared by the Board of Directors
or paid or set apart for payment by the Corporation on any Parity
Securities for any period unless full cumulative dividends have been
or contemporaneously are declared and paid in full, or declared and,
if payable in cash, a sum in cash set apart sufficient for such
payment, on the Senior Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of such dividends on
such Parity Securities; provided, that with respect to dividends
payable on the Senior Preferred Stock on or prior to December 1, 2004,
any such dividends that are added to the Liquidation Preference
pursuant to paragraph (c)(i) shall be deemed to have already been paid
in full. If any dividends are not so paid, all dividends declared upon
shares of the Senior Preferred Stock and any other Parity Securities
shall be declared pro rata so that the amount of dividends declared
per share on the Senior Preferred Stock and such Parity Securities
shall in all cases bear to each other the same ratio that accrued
dividends per share on the Senior Preferred Stock and such Parity
Securities bear to each other.
(B) So long as any share of Senior Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Securities (other than
dividends in Junior Securities to the holders of Junior Securities,
including with respect to the Junior Preferred Stock), or make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement
of, any of the Junior Securities or any warrants, rights, calls or
options exercisable for or convertible into any of the Junior
Securities whether in cash, obligations or shares of the Corporation
or other property (other than in exchange for Junior Securities or
pursuant to clause (ii), (vi), (vii) or (ix) of paragraph (j)(ii)(B)),
and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of
the Junior Securities or any such warrants, rights, calls or options
(other than in exchange for Junior Securities or pursuant to clause
(ii), (vi), (vii) or (ix) of paragraph (j)(ii)(B)).
(C) So long as any share of the Senior Preferred Stock is
outstanding, the Corporation shall not (except with respect to
dividends as permitted by paragraph (c)(iv)(A)) make any payment on
account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any
of the Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Parity Securities
whether in cash, obligations or shares of the Corporation or other
property, and shall not permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase or
redeem any of the Parity Securities or any such warrants, rights,
calls or options unless full cumulative dividends determined in
accordance herewith on the Senior Preferred Stock have been or
contemporaneously are paid in full; provided, that with respect to
dividends payable on the Senior Preferred Stock on or prior to
December 1, 2004, any such dividends that are added to the Liquidation
Preference pursuant to paragraph (c)(i) shall be deemed to have
already been paid in full.
(v) Dividends payable on the Senior Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and, for periods not involving a full
calendar month, the actual number of days elapsed (not to exceed 30
days).
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the
Holders of shares of Senior Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to the
Liquidation Preference for each share outstanding, plus, without
duplication, an amount in cash equal to accrued and, if applicable,
accumulated and unpaid dividends thereon (including, without
limitation, Default Dividends) to the date fixed for Liquidation,
dissolution or winding-up (including an amount equal to a prorated
dividend for the period from the last Dividend Payment Date to the
date fixed for liquidation, dissolution or windingup) before any
distribution shall be made or any assets distributed in respect of
Junior Securities to the holders of any Junior Securities including,
without limitation, Common Stock of the Corporation. If upon any
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, the amounts available for payment with respect to the
Senior Preferred Stock and all other Parity Securities are not
sufficient to pay the Holders thereof, the Holders of the Senior
Preferred Stock and the Parity Securities will share equally and
ratably in any distribution of assets of the Corporation in proportion
to the amounts that would be payable on such distribution if the
amounts to which the Holders of the Senior Preferred Stock and any
Parity Securities are entitled were paid in full.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange, assignment or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all
of the property or assets of the Corporation nor the consolidation or
merger of the Corporation with or into one or more entities in
accordance with paragraph (j)(viii) shall be deemed to be a
liquidation, dissolution or winding-up of the affairs of the
Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may redeem the
Senior Preferred Stock at its option, in whole at any time or in part
from time to time, from any source of funds legally available
therefor, in the manner provided for in paragraph (e) (iii) hereof, at
the redemption prices in cash (expressed as a percentage of the
Liquidation Preference) set forth below for each of the Class A Senior
Preferred Stock and the Class B Senior Preferred Stock, plus, without
duplication, an amount in cash equal to all accrued and, if
applicable, accumulated and unpaid dividends (including an amount in
cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the
Redemption Date) if redeemed during the 12-month period beginning on
December 15 of each year listed below (unless otherwise specified):
Class A Senior Preferred Stock
1999 through June 15, 2001................................. 110.0%
June 16, 2001 through December 14, 2003.................... 114.0%
2003....................................................... 107.0%
2004....................................................... 103.5%
2005 and thereafter........................................ 100.0%
Class B Senior Preferred Stock
1999 and thereafter........................................ 100.0%
; provided that (I) no redemption pursuant to this paragraph (e)(i)(A)
shall be authorized or made unless prior thereto full accrued and, if
applicable, accumulated and unpaid dividends are declared and paid in
full, or declared and a sum in cash is set apart sufficient for such
payment, on the Senior Preferred Stock for all Dividend Periods
terminating on or prior to the Redemption Date, (II) any redemption
pursuant to this paragraph (e)(i)(A) must be made pro rata among the
Class A Senior Preferred Stock and the Class B Senior Preferred Stock
outstanding at such time, except that the Corporation may redeem such
shares held by Holders of fewer than ten shares (or shares held by
Holders who would hold less than ten shares as a result of such
redemption), as may be determined by the Corporation, and (III) any
redemption pursuant to this paragraph (e)(i)(A) must be for at least
$15.0 million; provided, that if less than $15.0 million of Senior
Preferred Stock is outstanding at the time of such redemption, such
redemption pursuant to this paragraph (e)(i)(A) must be for all of the
outstanding Senior Preferred Stock.
(B) [Intentionally Omitted].
(C) In addition to the foregoing paragraph (e)(i)(A), upon the
occurrence of a Change of Control, the Corporation may, at its option,
offer to redeem all but not less than all of the outstanding shares of
Senior Preferred Stock, upon not less than 30 nor more than 60 days
prior notice (but in no event may any such redemption occur more than
120 days after the occurrence of the Change of Control), such offer to
remain open for not less than 30 days, mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100%
of the Liquidation Preference thereof, plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date); provided, that no redemption
pursuant to this paragraph (e)(i)(C) shall be authorized or made
unless prior thereto full accumulated and unpaid dividends are
declared and paid in full, or declared and a sum in cash is set apart
sufficient for such payment, on the Senior Preferred Stock for all
Dividend Periods terminating on or prior to the Redemption Date.
(D) In the event of a redemption pursuant to paragraph (e)(i)(A)
hereof of only a portion of the then outstanding shares of Senior
Preferred Stock, the Corporation shall effect such redemption on a pro
rata basis according to the number of shares held by each Holder of
Senior Preferred Stock, except that the Corporation may redeem such
shares held by Holders of fewer than ten shares (or shares held by
Holders who would hold less than ten shares as a result of such
redemption), as may be determined by the Corporation.
(ii) Mandatory Redemption. On December 10, 2007 (the "Mandatory
Redemption Date"), the Corporation shall redeem, to the extent of
funds legally available therefor, in the manner provided for in
paragraph (e) (iii) hereof, all of the shares of Senior Preferred
Stock then outstanding at a redemption price equal to 100% of the
Liquidation Preference per share, plus, without duplication, an amount
in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date).
(iii) Procedures for Redemption. (A) At least 30 days and not
more than 60 days prior to the date fixed for any redemption of the
Senior Preferred Stock, written notice (the "Redemption Notice") shall
be given by first-class mail, postage prepaid, to each Holder of
record on the record date fixed for such redemption of the Senior
Preferred Stock at such Holder's address as it appears in the register
maintained by the Transfer Agent for the Senior Preferred Stock,
provided that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the redemption
of any shares of Senior Preferred Stock to be redeemed except as to
the Holder or Holders to whom the Corporation has failed to give said
notice or except as to the Holder or Holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)
(i)(A) or (C) or paragraph (e)(ii)hereof;
(2) the redemption price;
(3) whether all or less than all the outstanding shares
of Senior referred Stock are to be redeemed and the total
number of shares of Senior Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the Holder is to surrender to the Corporation,
in the manner, at the place or places and at the price
designated, his certificate or certificates representing the
shares of Senior Preferred Stock to be redeemed; and
(6) that dividends on the shares of Senior Preferred
Stock to be redeemed shall cease to accumulate and accrue on
such Redemption Date unless the Corporation defaults in the
payment of the redemption price.
(B) Each Holder shall surrender the certificate or certificates
representing such shares of Senior Preferred Stock to the Corporation,
duly endorsed (or otherwise in proper form for transfer, as determined
by the Corporation), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full redemption
price for such shares shall be payable in cash to the Person whose
name appears on such certificate or certificates as the owner thereof,
and each surrendered certificate shall be canceled and retired. In the
event that less than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on Senior Preferred Stock called for redemption shall cease
to accumulate on the Redemption Date, and all rights of the Holders of
redeemed shares shall terminate with respect thereto on the Redemption
Date, other than the right to receive the redemption price; provided,
however, that if a Redemption Notice shall have been given as provided
in paragraph (iii)(A) above and the funds necessary for redemption
(including an amount in cash in respect of all dividends that will
accumulate to the Redemption Date) shall have been irrevocably
deposited in trust for the equal and ratable benefit for the Holders
of the shares of Senior Preferred Stock to be redeemed, then, at the
close of business on the Business Day on which such funds are
segregated and set aside, the Holders of the shares to be redeemed
shall cease to be stockholders of the Corporation and shall be
entitled only to receive the redemption price.
(D) All of the shares of the Senior Preferred Stock referenced in
and created by this Certificate of Designation shall at all times
(including during any bankruptcy proceeding) be treated as and deemed
to be equity interests in the Corporation.
(f) Voting Rights.
(i) The Holders of Senior Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraphs (ii), (iii)
and (iv) below, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of
the Corporation.
(ii) (A) So long as any shares of Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any Parity
Securities (except pursuant to the Registration Rights Agreement or in
connection with the refinancing and concurrent redemption of all, but
not less than all, of the outstanding Senior Preferred Stock) without
the affirmative vote or consent of Holders of at least 60% of the then
outstanding shares of Senior Preferred Stock, voting or consenting, as
the case may be, as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
(B) So long as any shares of Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any Senior
Securities without the affirmative vote or consent of Holders of at
least 60% of the then outstanding shares of Senior Preferred Stock,
voting or consenting, as the case may be, as one class, given in
person or by proxy, either in writing or by resolution adopted at an
annual or special meeting.
(C) So long as any shares of Senior Preferred Stock are
outstanding, the Corporation shall not amend this Resolution or
Certificate of Designation so as to affect adversely the specified
rights, preferences, privileges or voting rights of Holders of shares
of Senior Preferred Stock without the affirmative vote or consent of
Holders of at least a majority of the then outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting; provided, however,
that no such amendment or waiver may, without the prior written
consent of (x) the Holder of each share of Senior Preferred Stock then
outstanding and affected thereby, (i) reduce the dividend rate on any
share of Senior Preferred Stock, (ii) postpone the Mandatory
Redemption Date or any Dividend Payment Date with respect to any share
of Senior Preferred Stock, (iii) change the percentage of the
aggregate outstanding number of shares of Senior Preferred Stock the
Holders of which shall be required to consent or take any other action
under this Certificate of Designation or (iv) make any change to
clauses (1), (2) or (4) of the definition of Voting Rights Triggering
Event and (y) at least 66 2/3% of the Holders of the then outstanding
shares of Senior Preferred Stock, (i) subject any Holder to any
additional obligation hereunder or (ii) make any change to clauses (3)
or (5) of the definition of Voting Rights Triggering Event.
(iii) (A) If (1) dividends accruing and, if applicable,
accumulating on the Senior Preferred Stock after December 1, 2004 are
in arrears and not paid in cash for one or more quarterly Dividend
Periods (whether or not consecutive) (a "Dividend Default"); (2) the
Corporation fails to redeem all of the then outstanding shares of
Senior Preferred Stock on the Mandatory Redemption Date or otherwise
fails to discharge any redemption obligation with respect to the
Senior Preferred Stock; (3) a Change of Control occurs and either (x)
the Corporation does not make an offer pursuant to paragraph (e)(i)(C)
within 30 days after such Change of Control or (y) the Corporation
fails to redeem any shares validly tendered in connection with such
offer in accordance with paragraph (e)(i)(C); (4) the Corporation
breaches or violates one or more of the provisions set forth in
paragraph (j) hereof and the breach or violation continues for a
period of 60 days or more after the Corporation receives notice
thereof specifying the default from the Holders of at least 50% of the
shares of Senior Preferred Stock then outstanding; or (5) a payment
default occurs under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Corporation or any of the Restricted Subsidiaries
(or payment of which is guaranteed by the Corporation or any of the
Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date hereof and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which a payment default
has occurred, aggregates $10.0 million or more (other than any such
payment default being contested in good faith by the Corporation),
then in the case of any of clauses (1) through (5) (each of such
clauses (1) through (5) a "Voting Rights Triggering Event"), the
number of directors constituting the Board of Directors shall be
adjusted by the number, if any, necessary to permit the Holders of the
Senior Preferred Stock, voting separately and as one class, to elect
that number of directors constituting at least 25% (rounded to the
nearest whole number) of the Board of Directors; provided, that such
number of directors shall not be less than two; provided, further,
that, in the event more than one of the above defaults occurs, at the
same or at different times, the maximum number of directors that such
Holders shall be entitled to elect is that number of directors
constituting at least 25% (rounded to the nearest whole number) of the
Board of Directors; provided, that such number of directors shall not
be less than two. Such members of the Board of Directors shall be
elected by a plurality vote of the Holders of the Senior Preferred
Stock at a meeting therefor called upon the occurrence of such Voting
Rights Triggering Event, and at every subsequent meeting at which the
terms of office of the directors so elected by the Holders of Senior
Preferred Stock expire (other than as described in paragraph
(f)(iii)(B) below). Such Holders shall be entitled to cumulative
voting rights in connection with the election of such members of the
Board of Directors. In addition to the voting rights provided herein,
any Significant Holder shall be entitled to an injunction or
injunctions to prevent material breaches of the provisions of this
Certificate of Designation and to enforce specifically the remedies
under this Certificate of Designation in any court of the United
States or any state thereof having jurisdiction, this being in
addition to any other remedy to which such Holder may be entitled at
law or in equity; provided that, notwithstanding the foregoing,
Holders holding at least a majority of the then outstanding Senior
Preferred Stock may by written consent waive any such material breach
and such Significant Holder shall thereafter terminate its enforcement
action with respect to such material breach. No such waiver or consent
shall extend to any subsequent or other material breach or impair any
right consequent thereon except to the extent expressly so waived.
(B) The right of the Holders of the Senior Preferred Stock voting
together as a separate class to elect members of the Board of
Directors as set forth in paragraph (f)(iii)(A) above shall continue
until such time as (x) in the event such right arises due to a
Dividend Default, all such accrued dividends that are in arrears on
the Senior Preferred Stock are paid in full in cash; (y) in the event
such right arises due to a Change of Control, an offer pursuant to
paragraph (e)(i)(C) is made and the related redemption is consummated
at any time within 120 days after such Change of Control; and (z) in
all other cases, the event, failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or cured by the
Corporation or waived by the Holders of at least a majority of the
shares of Senior Preferred Stock then outstanding and entitled to vote
thereon, at which time (1) the special right of the Holders of Senior
Preferred Stock so to vote as a class for the election of directors,
(2) the term of office of the directors elected by the Holders of
Senior Preferred Stock shall each terminate and the directors elected
by the holders of Common Stock or Capital Stock (other than the Senior
Preferred Stock) shall constitute the entire Board of Directors and
(3) such Voting Rights Triggering Event shall be deemed to cease to
exist or be continuing. At any time after voting power to elect
directors shall have become vested and be continuing in the Holders of
Senior Preferred Stock pursuant to paragraph (f)(iii) hereof, or if
vacancies shall exist in the offices of directors elected by the
Holders of Senior Preferred Stock, a proper officer of the Corporation
may, and upon the written request of the Holders of record of at least
25% of the shares of Senior Preferred Stock then outstanding addressed
to the secretary of the Corporation shall, call a special meeting of
the Holders of Senior Preferred Stock, for the purpose of electing the
directors which such Holders are entitled to elect. If such meeting
shall not be called by a proper officer of the Corporation within 20
days after personal service of said written request upon the secretary
of the Corporation, or within 20 days after mailing the same within
the United States by certified mail, addressed to the secretary of the
Corporation at its principal executive offices, then the Holders of
record of at least 25% of the outstanding shares of Senior Preferred
Stock may designate in writing one Holder to call such meeting at the
expense of the Corporation, and such meeting may be called by the
Person so designated upon the notice required for the annual meetings
of stockholders of the Corporation and shall be held at the place for
holding the annual meetings of stockholders. Any Holder of Senior
Preferred Stock so designated shall have, and the Corporation shall
provide, access to the lists of stockholders to be called pursuant to
the provisions hereof.
(C) At any meeting held for the purpose of electing directors at
which the Holders of Senior Preferred Stock shall have the right,
voting together as a separate class, to elect directors as aforesaid,
the presence in person or by proxy of the Holders of at least a
majority of the outstanding shares of Senior Preferred Stock entitled
to vote thereat shall be required to constitute a quorum of the Senior
Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by
the Holders of the Senior Preferred Stock may be filled by the
remaining director elected by the Holders of the Senior Preferred
Stock unless and until such vacancy shall be filled by the Holders of
the Senior Preferred Stock.
(E) Notwithstanding anything to the contrary in this paragraph
(f), DB Capital Investors, L.P., First Union Investors, Inc. and
Heller Financial, Inc. or any of their respective direct or indirect
transferees of shares of the Class B Senior Preferred Stock, or any
other Holder that is a bank holding company or any affiliate thereof
(each, a "Regulated Holder"), shall not be entitled to vote with the
other Holders of Senior Preferred Stock unless, until and to the
extent (x) permitted by the Bank Holding Company Act of 1956, as
amended, and Section 225.2(q)(2)(i) of Regulation Y promulgated
thereunder, and (y) such Regulated Holder provides written notice
thereof to the Corporation. Notwithstanding the foregoing the
Corporation shall send to each Regulated Holder any information,
consent solicitation documents, notices or any other documents or
correspondence that is sent to the Holders. Each such Regulated Holder
shall have 10 days after receipt of such information, documents or
notices to provide the Corporation with notice that it is permitted to
vote on any such matter set forth therein; provided, that if any
Regulated Holder does not give the Corporation notice within such 10
days such Regulated Holder shall be deemed not to be permitted to vote
on any such matter.
(iv) In any case in which the Holders of the Senior Preferred
Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Senior Preferred Stock
entitled to vote with respect to such matter shall be entitled to one
vote for each share of Senior Preferred Stock held.
(v) Any action required or permitted to be taken at a meeting of
Holders may be taken without a meeting, without prior notice and
without a vote, if one or more written consents, setting forth the
action so taken, shall be signed by the Holders of outstanding Senior
Preferred Stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at
which all shares of Senior Preferred Stock entitled to vote thereon
were present and voted.
(g) Conversion or Exchange; Registration Rights. The Holders of
shares of Senior Preferred Stock shall not have any rights hereunder
to convert such shares into or exchange such shares for shares of any
other class or classes or of any other series of any class or classes
of Capital Stock of the Corporation other than as provided in the
Registration Rights Agreement. The Holders of shares of Senior
Preferred Stock shall have the rights described in the Registration
Rights Agreement.
(h) Reissuance of Senior Preferred Stock. Shares of Senior
Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon
compliance with any applicable provisions of the laws of Delaware)
have the status of authorized and unissued shares of Preferred Stock
undesignated as to series and may be redesignated and reissued as part
of any series of Preferred Stock; provided that any issuance of such
shares of Preferred Stock must be in compliance with the terms hereof.
(i) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a
Business Day, such payment, redemption or exchange shall be made on
the immediately succeeding Business Day.
(j) Certain Covenants.
(i) Intentionally Omitted.
(ii) Restricted Payments.
(A) The Corporation shall not, and shall not cause or permit any
of the Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock or options, warrants or
rights to purchase Capital Stock of the Corporation (other than (x)
dividends or distributions payable solely in shares of Qualified
Capital Stock of the Corporation or in options, warrants or other
rights to acquire shares of such Qualified Capital Stock, and (y)
subject to paragraph (c)(iv), dividends or distributions in respect of
Senior Securities or Parity Securities of the Corporation that were
issued in accordance with paragraph (f)(ii)(A) or (B), as applicable);
(ii) purchase, redeem, defease or otherwise acquire or retire for
value, directly or indirectly (including through the purchase of
Capital Stock or options, warrants or rights to purchase Capital Stock
of any Person that directly or indirectly owns Capital Stock of the
Corporation), the Capital Stock or options, warrants or rights to
purchase Capital Stock of the Corporation (other than (x) any such
Capital Stock owned by the Corporation (other than Redeemable Capital
Stock) or (y) subject to paragraph (c)(iv), Senior Securities or
Parity Securities of the Corporation that were issued in accordance
with paragraph (f)(ii)(A) or (B), as applicable, or options, warrants
or other rights to acquire such Capital Stock); or
(iii) make any Investment (other than any Permitted Investment)
in any Person;
(any of the foregoing actions described in clauses (i) through (iii),
collectively, "Restricted Payments"), unless (1) immediately before and
immediately after giving effect to such Restricted Payment on a pro forma basis,
no Voting Rights Triggering Event (other than a Voting Rights Triggering Event
described in clause (3) or (5) of paragraph (f)(iii)(A)) shall have occurred and
be continuing; (2) immediately before and immediately after giving effect to
such Restricted Payment on a pro forma basis, the Corporation could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) under paragraph
(j)(iv); and (3) after giving effect to the proposed Restricted Payment, the
aggregate amount of all such Restricted Payments declared or made (or deemed
made) after the Issue Date, does not exceed the sum of:
(I) 50% of the cumulative Consolidated Net Income of the
Corporation during the period (treated as one accounting period)
beginning on the Issue Date and ending on the last day of the
Corporation's most recently ended fiscal quarter for which internal
financial statements are available at or prior to the time of such
Restricted Payment (or, if such cumulative Consolidated Net Income
shall be a deficit, minus 100% of such deficit); plus
(II) 100% of the aggregate net cash proceeds received after the
Issue Date by the Corporation from the issuance or sale (other than to
any of its Subsidiaries) of Qualified Capital Stock of the Corporation
or from the exercise of any options, warrants or rights to purchase
such Qualified Capital Stock of the Corporation or of Redeemable
Capital Stock or debt securities of the Corporation that have been
converted into such Qualified Capital Stock or any options, warrants
or rights to purchase such Qualified Capital Stock (except, in each
case, to the extent such proceeds are used to purchase, redeem or
otherwise retire Capital Stock as set forth below in clause (ii) or
(iv) of paragraph (B) below); plus
(III) in the case of the disposition or repayment of any
Investment (other than a Permitted Investment) made after the Issue
Date, an amount (to the extent not included in Consolidated Net
Income) equal to the lesser of (x) the return of capital with respect
to such Investment, less the cost of disposition of such Investment
and (y) the initial amount of such Investment; plus
(IV) so long as the Designation thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with paragraph
(j)(xi),the lesser of (x) the net book value of the Corporation's
Investment in such Unrestricted Subsidiary at the time of such
redesignation and (y) the Fair Market Value of such Investment at the
time of such redesignation; plus
(V) 100% of the aggregate amounts contributed to the capital of
the Corporation since the Issue Date; plus
(VI) 50% of any dividends received by the Corporation or a Wholly
Owned Restricted Subsidiary (except to the extent that such dividends
were already included in Consolidated Net Income) after the Issue Date
from an Unrestricted Subsidiary.
(B) Notwithstanding the foregoing clause (A), and in the case of
clauses (iii),(iv) and (vi) below, so long as no Voting Rights Triggering Event
(other than a Voting Rights Triggering Event described in clause (3) or (5)of
paragraph (f)(iii)(A)) shall have occurred and be continuing or would arise
therefrom, the foregoing provisions of clause (A) shall not prohibit the
following actions, which shall, however, be subject to paragraph (c)(iv), (each
of clauses (i) through (ix) being referred to as a "Permitted Payment"):
(i) the payment of any dividend or redemption payment within 60
days after the date of declaration thereof, if at such date of
declaration such payment was permitted by the provisions of this
Certificate of Designation, including as described under paragraph (A)
of this paragraph (j)(ii);
(ii) the repurchase, redemption, or other acquisition or
retirement of any shares of Capital Stock (or any options, warrants or
rights to purchase Capital Stock) of the Corporation or any Restricted
Subsidiary in exchange for (including any such exchange pursuant to
the exercise of a conversion right or privilege in connection with
which cash is paid in lieu of the issuance of fractional shares), or
out of the net cash proceeds of a substantially concurrent issue and
sale for cash to any Person (other than to a Restricted Subsidiary of
the Corporation) of, shares of Qualified Capital Stock (or options,
warrants or rights to purchase such Qualified Capital Stock) of the
Corporation; provided that the net cash proceeds that are utilized for
any such repurchase, redemption or other acquisition or retirement are
excluded from clause (II) of paragraph (A) of this paragraph (j)(ii);
(iii) Restricted Payments in an aggregate amount not to exceed
$10.0 million;
(iv) Investments (in addition to Permitted Investments) in
Persons engaged in a Permitted Business that are made out of the net
cash proceeds of the issuance of Qualified Capital Stock of the
Corporation; provided, that (x) such Investment is made within 30 days
of the receipt of the proceeds of the issuance of such Qualified
Capital Stock and (y) such Investment together with all other
Investments made pursuant to this clause (iv) does not exceed an
aggregate amount of $15.0 million; provided, further, that the net
cash proceeds from the sale of such shares of Qualified Capital Stock
are excluded from clause (II) of paragraph (A) of this paragraph
(j)(ii);
(v) subject to paragraph (c)(iv), any dividends or other payments
on or with respect to the Senior Preferred Stock or Parity Securities
issued in accordance with paragraph (f)(ii);
(vi) the repurchase, redemption, retirement or other acquisition
for value of any shares of Capital Stock (or options, warrants or
rights to purchase Capital Stock) of the Corporation or any Restricted
Subsidiary (other than any such repurchase, redemption, retirement or
other acquisition in connection with the Recapitalization) held by any
director, officer or employee of the Corporation or any of its
Restricted Subsidiaries pursuant to any employment agreement,
management equity subscription agreement, stock option or acquisition
agreement; provided, that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Capital Stock (or options,
warrants or rights to purchase Capital Stock) (x) from current
employees of the Corporation or any of its Restricted Subsidiaries
shall not exceed $1.0 million or (y) from former directors, officers
or employees of the Corporation or any of its Restricted Subsidiaries
shall not exceed $3.0 million, in each case in the aggregate in any
twelve-month period (other than any such repurchase, redemption,
retirement or other acquisition in connection with the
Recapitalization);
(vii) repurchases of Capital Stock (or options, warrants or
rights to purchase Capital Stock) deemed to occur upon cashless
exercise of stock options to the extent such Capital Stock (or
options, warrants or rights to purchase Capital Stock) represents a
portion of the exercise price of such options or related withholding
taxes (but only to the extent such withholding taxes do not exceed
$250,000 in any twelve-month period);
(viii) any payments on Redeemable Capital Stock issued in
accordance with this Certificate of Designation; and
(ix) payments of up to $3.0 million with respect to which the
Corporation has no indemnification rights under the agreements
governing the Recapitalization in connection with the final resolution
of any disputes existing as of the Issue Date regarding stock
ownership.
In computing the amount of Restricted Payments previously made
for purposes of clause (3) of paragraph (A) of this paragraph (j)(ii),
Restricted Payments under the immediately preceding clauses (i) and (vi) shall
be included.
The amount of all Restricted Payments (other than cash) shall be
the Fair Market Value (evidenced by a resolution of the Board of Directors set
forth in an officers' certificate delivered to the Significant Holders) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Corporation or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than the date of making any Restricted Payment,
the Corporation shall deliver to the Significant Holders an officers'
certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this paragraph (j)(ii) were
computed, which calculations may be based upon the Corporation's latest
available financial statements. No payment made in connection with the
Recapitalization shall be deemed to be a Restricted Payment hereunder.
(iii) Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Corporation shall not, and shall not cause or permit any of
the Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective or enter into any agreement with
any Person that would cause to become effective, any consensual encumbrance or
restriction of any kind, on the ability of any Restricted Subsidiary to (A)(i)
pay dividends, in cash or otherwise, or make any other distributions to the
Corporation or any of the Restricted Subsidiaries (x) on or in respect its
Capital Stock or (y) with respect to any other interest or participation in, or
measured by, its profits, or (ii) pay any Indebtedness owed to the Corporation
or any of the Restricted Subsidiaries, (B) make any Investment in the
Corporation or any of the Restricted Subsidiaries or (C) sell, lease or transfer
any of its properties or assets to the Corporation or any of the Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of: (i) any encumbrance or restriction existing under the Credit
Agreement or the Indenture and any other agreement, in each case as in effect on
the Issue Date, (ii) customary non-assignment provisions in leases, licenses and
other agreements entered into in the ordinary course of business and consistent
with past practices, (iii) Purchase Money Obligations for property acquired in
the ordinary course of business that impose restrictions of the nature described
in clause (C) above on the property so acquired, (iv) any encumbrance or
restriction, with respect to a Person that is not a Restricted Subsidiary on the
Issue Date in existence at the time such Person becomes a Restricted Subsidiary
and not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary; provided, however, that such encumbrances and
restrictions are not applicable to the Corporation or any other Restricted
Subsidiary, or the properties or assets of the Corporation or any other
Restricted Subsidiary, (v) customary restrictions with respect to a Restricted
Subsidiary pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary; provided, however, that any such restriction relates only
to the Capital Stock or assets being sold pursuant to such agreement, (vi) any
customary restriction in an agreement governing Indebtedness of a Restricted
Subsidiary incurred after the Issue Date in compliance with paragraph (j)(iv);
(vii) any encumbrance or restriction existing under any agreement that extends,
renews, refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clause (i), (iii) or (iv), or in this clause
(vii); provided, however, that the terms and conditions of any such encumbrances
or restrictions are no more restrictive than those under or pursuant to the
agreement so extended, renewed, refinanced or replaced; and (viii) applicable
law.
(iv) Incurrence of Indebtedness.
(A) The Corporation shall not, and shall not cause or permit any
of the Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, issue, guarantee or in any manner become liable for or with respect to,
contingently or otherwise (in each case, to "incur"), the payment of, any
Indebtedness (including any Acquired Indebtedness); provided, however, that the
Corporation or any Restricted Subsidiary may incur Indebtedness (including
Acquired Indebtedness), if, in either case, immediately after giving pro forma
effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Corporation
is at least equal to 2.0:1.0.
(B) Notwithstanding the foregoing, to the extent specifically
set forth below, the Corporation and the Restricted Subsidiaries may incur each
and all of the following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Corporation and its Restricted
Subsidiaries under the Senior Subordinated Notes and guarantees
thereof in an aggregate principal amount, when taken together with any
refinancings thereof pursuant to clause (ix), not to exceed $100.0
million at any one time outstanding;
(ii) Indebtedness of the Corporation and its Restricted
Subsidiaries under the Credit Agreement (and guarantees thereof) in an
aggregate principal amount not to exceed $475.0 million at any time
outstanding, less the principal amount of any scheduled or mandatory
payments made under the Credit Agreement to the extent the commitments
thereunder are reduced in connection therewith;
(iii) Indebtedness of the Corporation or any Restricted
Subsidiary outstanding on the Issue Date (other than under the Credit
Agreement and the Senior Subordinated Notes);
(iv) Indebtedness of the Corporation owing to a Wholly Owned
Restricted Subsidiary for so long as such Indebtedness is owing to a
Wholly Owned Restricted Subsidiary; provided that the disposition,
pledge or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to a Wholly Owned Restricted
Subsidiary) shall be deemed to be an incurrence of such Indebtedness
by the Corporation not permitted by this clause (iv);
(v) Indebtedness of a Restricted Subsidiary owing to and held by
the Corporation or another Restricted Subsidiary; provided that (a)
any disposition, pledge or transfer of any such Indebtedness to a
Person (other than the Corporation or a Restricted Subsidiary) shall
be deemed to be an incurrence of such Indebtedness by the obligor not
permitted by this clause (v), and (b) any transaction pursuant to
which any Restricted Subsidiary, which has Indebtedness owing to the
Corporation or any other Restricted Subsidiary, ceases to be a
Restricted Subsidiary shall be deemed to be the incurrence of
Indebtedness by such Restricted Subsidiary that is not permitted by
this clause (v);
(vi) the incurrence by the Corporation or any Restricted
Subsidiary of Hedging Obligations that are incurred (a) for the
purpose of fixing or hedging interest rate risk with respect to any
Indebtedness that is permitted to be incurred by the terms of this
Certificate of Designation or (b) for the purpose of fixing or hedging
currency exchange rate risk with respect to any currency exchanges, in
either case not for speculative purposes;
(vii) Indebtedness of the Corporation or any Restricted
Subsidiary represented by Capitalized Lease Obligations or Purchase
Money Obligations or other Indebtedness incurred or assumed in
connection with the acquisition or development of real or personal
(tangible or intangible) property in each case incurred for the
purpose of financing or refinancing all or any part of the purchase
price, or cost of installation, construction or improvement of
property used in the business of the Corporation or such Restricted
Subsidiary, in an aggregate principal amount, when taken together with
any refinancings thereof pursuant to clause (ix), not to exceed $10.0
million at any one time outstanding;
(viii) letters of credit to support workers compensation
obligations and bankers acceptances and performance bonds, surety
bonds and performance guarantees, of the Corporation or any Restricted
Subsidiary, in each case, in the ordinary course of business
consistent with past practice;
(ix) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
Indebtedness incurred under paragraph (j)(iv)(A) above or described in
clauses (B)(i), (ii), (iii) and (vii), including any successive
refinancings so long as the aggregate principal amount (or accreted
value, if applicable) of Indebtedness represented thereby is not
increased by such refinancing plus the amount of any premium or other
payment required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced plus the
amount of expenses of the Corporation or a Restricted Subsidiary
incurred in connection with such refinancing and such refinancing does
not reduce the Average Life to Stated Maturity or the Stated Maturity
of such Indebtedness;
(x) guarantees by the Corporation or any Restricted Subsidiary of
Indebtedness incurred by the Corporation or a Restricted Subsidiary so
long as the incurrence of such Indebtedness by the primary obligor
thereon was permitted under the terms of this Certificate of
Designation;
(xi) the incurrence by the Corporation's Unrestricted
Subsidiaries of Non-Recourse Debt; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Corporation; and
(xii) Indebtedness of the Corporation or any Restricted
Subsidiary in addition to that described in clauses (i) through (xi)
above, and any refinancing thereof, so long as the aggregate principal
amount of all such additional Indebtedness shall not exceed $20.0
million outstanding at any one time in the aggregate (all or part of
which may, but need not, be incurred under the Credit Agreement).
(C) For purposes of determining compliance with this paragraph
(j)(iv), in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Indebtedness described in clauses (i) through
(xii) of the immediately preceding paragraph (B), the Corporation shall, in its
sole discretion, classify such item of Indebtedness in any manner that complies
with this paragraph (j)(iv) and will only be required to include the amount and
type of such Indebtedness in one of such clauses or pursuant to paragraph
(j)(iv)(A); provided that (1) Indebtedness outstanding on the Issue Date (other
than under the Credit Agreement or the Senior Subordinated Notes) will be deemed
outstanding under clause (B)(iii), and (2) Indebtedness under the Credit
Agreement (including amounts outstanding on the Issue Date) of up to $475.0
million (as reduced under clause (B)(ii)) will be deemed incurred under clause
(B)(ii). Accrual of interest, accretion of accreted value and the payment of
interest through the issuance of securities paid-in-kind shall not be deemed to
be an incurrence of Indebtedness for purposes of this paragraph (j)(iv).
(v) Transactions with Affiliates. The Corporation shall not, and
shall not cause or permit any of the Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate of the Corporation or of a
Restricted Subsidiary (other than transactions between or among the Corporation
and/or any of its Restricted Subsidiaries) unless (A) such transaction is on
terms that are no less favorable to the Corporation or such Restricted
Subsidiary, as the case may be, than those that might reasonably have been
obtained in a comparable transaction with an unrelated Person, (B) with respect
to any transaction or series of related transactions involving aggregate value
in excess of $2.5 million, the Corporation delivers to each Significant Holder
an Officers' Certificate describing such transaction or transactions, certifying
that such transaction or transactions have been approved by a majority of the
Disinterested Directors of the Corporation, or in the event there is only one
Disinterested Director, by such Disinterested Director, and certifying that such
transaction or transactions comply with clause (A) above and (C) with respect to
any transaction or series of related transactions involving aggregate payments
in excess of $7.5 million, the Corporation delivers to each Holder a written
opinion of an Independent Financial Advisor stating that the transaction or
series of related transactions is fair to the Corporation or such Restricted
Subsidiary from a financial point of view (it being agreed that an opinion from
an Independent Financial Advisor stating that the transaction is at Fair Market
Value shall be sufficient); provided, however, that this provision shall not
apply to: (I) any transaction with an officer or director of the Corporation
(acting in such capacity) entered into in the ordinary course of business
(including compensation and employee benefit arrangements with any officer,
director or employee of the Corporation, including under any stock option or
stock incentive plans); (II) any Restricted Payment or Permitted Investment
otherwise permitted by the terms of this Certificate of Designation; (III) those
agreements and arrangements existing and as in effect on the Issue Date; (IV)
the payment of reasonable and customary fees and compensation to, and
indemnification agreements (and payments thereunder) for the benefit of,
officers, directors and employees entered into in the ordinary course of
business; (V) the agreements and arrangements pursuant to or referred to in the
Purchase Agreement, this Certificate of Designation, the Registration Rights
Agreement and the other documents entered into in connection with the
Recapitalization; (VI) so long as no Voting Rights Triggering Event has occurred
and is continuing, the payment of management, consulting, monitoring and
advisory fees and related expenses to the Equity Investor and its Affiliates not
to exceed $500,000 in any calendar year (other than the fees and unrelated
expenses incurred by and paid to or on behalf of the Equity Investor and its
Affiliates in connection with the Recapitalization, which fees and expenses are
exempt from the terms hereof); and (VII) any transaction with OSI Funding Corp.
(or any other Person engaged in business with the Corporation or any of its
Restricted Subsidiaries similar to OSI Funding Corp.'s business) entered into in
the ordinary course of business consistent with past practices.
(vi) Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries. The Corporation shall not, and shall not cause or
permit any of the Restricted Subsidiaries to, transfer, convey, sell, issue or
otherwise dispose of any Capital Stock of any Wholly Owned Restricted
Subsidiaries to any Person (other than the Corporation or a Wholly Owned
Restricted Subsidiary), unless such transfer, conveyance, sale, issue or other
disposition (x) is pursuant to and in accordance with the provisions of
paragraphs (j)(viii), (j)(ix) or, with respect to the transfer, conveyance,
sale, lease or other disposition of all of the Capital Stock of a Wholly Owned
Restricted Subsidiary, (j)(xv) or (y) is of directors' qualifying shares to the
extent required by applicable law; provided, however, that this covenant shall
not apply to any pledge of and foreclosure on Capital Stock of any Restricted
Subsidiary to secure Indebtedness under the Credit Agreement.
(vii) Payments for Consents. Neither the Corporation nor any of
its Subsidiaries shall, directly or indirectly, pay or cause to be paid any
economic consideration, whether by way of interest, fee or otherwise, to any
Holder in consideration for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Certificate of Designation
unless such economic consideration is concurrently offered to be paid or is
concurrently paid to all Holders that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
(viii) Merger, Consolidation, or Sale of Assets. The Corporation
shall not consolidate or merge with or into (whether or not the Corporation is
the surviving corporation), or directly and/or indirectly through its
Subsidiaries sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of the properties and assets of the Corporation and its
Restricted Subsidiaries taken as a whole in one or more related transactions, to
any other Person unless (A)(i) the Corporation is the surviving corporation or
(ii) the entity or the Person formed by or surviving any such consolidation or
merger (if other than the Corporation) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made (the
entity or Person described in this clause (ii), the "Successor Corporation") is
a corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (B) the Successor Corporation assumes
all the obligations of the Corporation under this Certificate of Designation and
the Purchase Agreement pursuant to an amendment or supplement hereto or thereto,
as applicable, and each other instrument, document or agreement entered into by
the Corporation in connection therewith, in each case in a form reasonably
satisfactory to the Required Holders; (C) immediately after such transaction no
Voting Rights Triggering Event (other than a Voting Rights Triggering Event
described in clause (1) (so long as, on a pro forma basis after giving effect to
such transaction, the Corporation will pay any accrued and unpaid dividends
since December 1, 2004 in cash, (3) or (5) of paragraph (f)(iii)(A)) exists; and
(D) the Corporation will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio
test set forth in paragraph (j)(iv)(A) hereof.
(ix) Successor Corporation Substituted. Upon any consolidation
of the Corporation with, or merger of the Corporation into, any other Person or
any transfer, conveyance, sale, lease or other disposition of all or
substantially all of the properties and assets of the Corporation and its
Subsidiaries taken as a whole in one or more related transactions in accordance
with paragraph (j)(viii), the Successor Corporation shall succeed to, and be
substituted for, and may exercise every right and power of, the Corporation
under this Certificate of Designation and the Purchase Agreement with the same
effect as if such Successor Corporation had been named as the Corporation herein
or therein, and thereafter, except in the case of a lease, the predecessor
Corporation shall be relieved of all obligations and covenants under this
Certificate of Designation and the Purchase Agreement.
(x) Intentionally Omitted.
(xi) Limitations on Unrestricted Subsidiaries. The Corporation
may designate after the Issue Date any Subsidiary as an "Unrestricted
Subsidiary" under this Certificate of Designation (a "Designation") only if:
(A) no Voting Rights Triggering Event (other than a Voting Rights
Triggering Event described in clause (1), (3) or (5) of paragraph
(f)(iii)(A)) shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(B) the Corporation would be permitted to make an Investment at
the time of Designation (assuming the effectiveness of such
Designation) pursuant to this Certificate of Designation in an amount
(the "Designation Amount") equal to the Fair Market Value of the
interest of the Corporation and the Restricted Subsidiaries in such
Subsidiary on such date; provided, that the Fair Market Value of
securities of such Subsidiary shall be deemed to be the cash purchase
price paid by the Corporation or such Restricted Subsidiary therefor;
and
(C) the Corporation would be permitted under this Certificate of
Designation to incur $1.00 of additional Indebtedness pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in paragraph
(j)(iv)(A) at the time of such Designation (assuming the effectiveness
of such Designation).
In the event of any such Designation, the Corporation shall be
deemed to have made an Investment for all purposes of this Certificate of
Designation in the Designation Amount.
Except to the extent permitted by paragraph (j)(ii), the
Corporation shall not, and shall not cause or permit any Restricted Subsidiary
to, at any time (x) provide credit support for or subject any of its property or
assets (other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall automatically be
deemed to be Unrestricted Subsidiaries.
The Corporation may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(A) no Voting Rights Triggering Event (other than a Voting Rights
Triggering Event described in clause (1), (3) or (5) of paragraph
(f)(iii)(A)) shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(B) all Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if incurred at such time,
be permitted to be incurred for all purposes of this Certificate of
Designation.
All Designations and Revocations must be evidenced by resolutions
of the Board of Directors of the Corporation delivered to each Significant
Holder certifying compliance with the foregoing provisions.
(xii) Conduct of Business. The Corporation and the Restricted
Subsidiaries shall not engage in any business other than a Permitted Business.
(xiii) Sale and Leaseback. The Corporation will not, and will not
permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback
Transaction unless (a) the Corporation or its Restricted Subsidiaries entering
into such Sale and Leaseback Transaction could have incurred the Indebtedness
relating to such Sale and Leaseback pursuant to paragraph (j)(iv) and (b) the
net cash proceeds of such Sale and Leaseback Transaction are at least equal to
the Fair Market Value of such property as determined by the Board of Directors
of the Corporation and are applied in accordance with paragraph (j)(xv).
(xiv) Reports; Books, Records and Access. So long as the
Corporation is subject to the periodic reporting requirements of the Exchange
Act, it will file the information required thereby with the Commission and will
furnish such information to Holders upon filing thereof with the Commission. If
the Corporation is entitled under the Exchange Act not to file such information
with the Commission, it will nonetheless file such information with the
Commission to the extent permitted by the Commission and further will furnish
such information to Holders on the date on which filing with the Commission
would have been required.
(xv) Asset Sales. (A) The Corporation shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly, consummate
an Asset Sale, unless (i) at least 85% of the consideration from such Asset Sale
is received in cash or Cash Equivalents and (ii) the Corporation or such
Restricted Subsidiary receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the shares or assets subject to such
Asset Sale; provided, however, that the amount of (x) any liabilities (as shown
on the Corporation's or such Restricted Subsidiary's most recent balance sheet)
of the Corporation or any Restricted Subsidiary that are assumed by the
transferee of such assets pursuant to any arrangement releasing the Corporation
or such Restricted Subsidiary from further liability and (y) any notes or other
obligations received by the Corporation or any such Restricted Subsidiary from
such transferee that are immediately converted by the Corporation or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision. Notwithstanding anything to
the contrary contained herein, any Asset Sale to OSI Funding Corp. (or any
successor entity thereof) in the ordinary course of business consistent with
past practices shall be deemed to have complied with clause (ii) above.
(B) Within 365 days after the receipt of any net cash proceeds
from an Asset Sale, the Corporation or the applicable Restricted Subsidiary
shall apply such net cash proceeds (i) to repay Indebtedness of the Corporation
or any Restricted Subsidiary and permanently reduce any related commitment
and/or (ii) to the acquisition of a controlling interest in any Permitted
Business, the making of a capital expenditure or the acquisition of Purchased
Portfolios or any other long-term assets, in each case, in, or that is used or
useful in, a Permitted Business and/or (iii) to make an Investment in properties
or assets that replace the properties or assets that are the subject of such
Asset Sale. Pending the final application of any such net cash proceeds, the
Corporation may invest such net cash proceeds in any manner that is not
prohibited by this Certificate of Designation and in any event may temporarily
reduce Indebtedness under a revolving credit facility otherwise permitted to be
entered into under this Certificate of Designation, or otherwise may invest such
proceeds in Cash Equivalents.
(k) Transfer Agent and Registrar. The Corporation is the transfer
agent (the "Transfer Agent") and registrar for the Senior Preferred Stock.
(l) Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Accrued Dividend Amount" shall have the meaning provided in
paragraph (c)(i).
"Accrued Dividend Rate" means an annual rate equal to 14%.
"Acquired Indebtedness" means Indebtedness of a Person (i)
assumed in connection with an Asset Acquisition from such Person or (ii)
existing at the time such Person is merged with or into or otherwise becomes a
Restricted Subsidiary of any other Person (including, without limitation, any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person merging with or into or otherwise becoming such a
Restricted Subsidiary). Acquired Indebtedness shall be deemed to be incurred on
the date of the related Asset Acquisition from any Person or the date the
acquired Person is merged with or into or otherwise becomes a Restricted
Subsidiary, as the case may be.
"Advisory Services Agreement" means the Advisory Services
Agreement, dated as of September 21, 1995, between the Company and Madison
Dearborn Capital Partners III, L.P. (as successor to MDC Management Company III,
L.P.), as amended from time to time.
"Affiliate" means with respect to any specified Person: (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person; (ii) any other Person
that owns, directly or indirectly, 10% or more of such specified Person's
Capital Stock; or (iii) any other Person 10% or more of the Voting Stock of
which is beneficially owned or held directly or indirectly by such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding
anything to the contrary contained herein, no portfolio company of Madison
Dearborn Capital Partners III, L.P., nor any portfolio company of a fund managed
by or affiliated with Madison Dearborn Partners, Inc., shall be deemed an
Affiliate of the Corporation. None of Ares, DB, First Union, Abbott Capital 1330
Investors II, L.P., Abbott Capital Private Equity Fund III, L.P., BNY Partners
Fund, L.L.C., Heller Financial, Inc. or Magnetite Asset Investors L.L.C. shall
be deemed to be an Affiliate of the Corporation.
"Ares" means Ares Leveraged Investment Fund, L.P. and Ares
Leveraged Investment Fund II, L.P. and/or any of their Affiliates.
"Asset Acquisition" means (i) an Investment by the Corporation or
any Restricted Subsidiary in any other Person pursuant to which such Person will
become a Restricted Subsidiary or will be merged or consolidated with or into
the Corporation or any Restricted Subsidiary or (ii) the acquisition by the
Corporation or any Restricted Subsidiary of the assets of any Person which
constitute substantially all of the assets of such Person, or any division or
line of business of such Person, or which is otherwise outside of the ordinary
course of business.
"Asset Sale" means any sale, issuance, conveyance, transfer or
other disposition (including pursuant to a Sale and Leaseback Transaction)
(collectively, a "transfer"), in one or a series of related transactions, of:
(i) any Capital Stock of any Restricted Subsidiary (other than to the
Corporation or any other Restricted Subsidiary); or (ii) any other properties or
assets of the Corporation or any Restricted Subsidiary other than in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include: (a) the transfer of all or substantially all of
the assets of the Corporation in a manner permitted pursuant to and in
accordance with the provisions of paragraph (j)(viii) hereof or any transfer
that constitutes a Change of Control pursuant to this Certificate of
Designation; (b) any transfer that is a Restricted Payment or Permitted
Investment that is permitted under the provisions of paragraph (j)(ii) hereof;
(c) any transfer or related series of transfers of assets with an aggregate Fair
Market Value of less than $1.0 million; or (d) any sale of a Purchased Portfolio
in the ordinary course of business.
"Average Life to Stated Maturity" means, when applied to any
Indebtedness at any date of determination, the number of years obtained by
dividing (a) the then outstanding aggregate principal amount of such
Indebtedness into (b) the sum of the total of the products obtained by
multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) which will elapse between such date and the making of
such payment.
"Board of Directors" shall have the meaning provided in the first
paragraph of this Certificate of Designation.
"Business Day" means any day except a Saturday, a Sunday, or a
day on which banking institutions in The City of New York or at a place of
payment are authorized by law, regulation or executive order to remain closed.
"Capital Stock" means, (i) with respect to any Person that is a
corporation, corporate stock; (ii) with respect to any Person that is an
association or business entity, any and all shares, interests, participations,
rights or other equivalents (however designated and whether or not voting) of
corporate stock, including each class of Common Stock and Preferred Stock of
such Person; (iii) with respect to any Person that is not a corporation, any and
all partnership, membership or other equity interests of such Person; and (iv)
any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of the assets of,
the issuing Person.
"Capitalized Lease Obligation" means, at the time determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Cash Equivalents" means, at any time, (i) United States dollars,
(ii) securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than one year from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500.0 million and a Thomson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper rated
A-1 or higher by Standard & Poor's Corporation or P-1 by Moody's Investors
Service, Inc. and in each case maturing within one year after the date of
acquisition.
"Certificate of Designation" means this Certificate of
Designation creating the Senior Preferred Stock.
"Certificate of Incorporation" shall have the meaning provided in
the first paragraph of this Certificate of Designation.
"Change of Control" means the occurrence, after the date of the
Recapitalization, of any of the following events (whether or not approved by the
Board of Directors of the Corporation): (i) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 50% or more of the total voting power of
the then outstanding Voting Stock of the Corporation; (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Corporation (together with any new
directors whose election to such board or whose nomination for election by the
stockholders of the Corporation was approved by a vote of at least a majority of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of such Board of
Directors then in office; (iii) the Corporation consolidates with or merges with
or into any Person (other than a Wholly Owned Restricted Subsidiary) or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person (other than a Wholly Owned
Restricted Subsidiary), or any corporation consolidates with or merges into or
with the Corporation, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Corporation is changed into or exchanged for
cash, securities or other property, other than any such transaction where the
outstanding Voting Stock of the Corporation is not changed or exchanged at all
(except to the extent necessary solely to reflect a change in the jurisdiction
of incorporation of the Corporation) or where (A) the outstanding Voting Stock
of the Corporation is changed into or exchanged for (x) Voting Stock of the
surviving corporation which is not Redeemable Capital Stock or (y) cash,
securities and other property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Corporation as a Restricted
Payment as described under paragraph (j)(ii) (and such amount shall be treated
as a Restricted Payment subject to the provisions described under paragraph
(j)(ii)) and (B) no "person" or "group" owns immediately after such transaction,
directly or indirectly, more of the total voting power of the then outstanding
Voting Stock of the surviving corporation than the total voting power of the
then outstanding Voting Stock of the surviving corporation held by the Permitted
Holders; or (iv) any order, judgment or decree shall be entered against the
Corporation decreeing the dissolution or split-up of the Corporation and such
order shall remain undischarged or unstayed for a period in excess of sixty
days.
"Class A Senior Preferred Stock" shall have the meaning provided
in paragraph (a).
"Class B Senior Preferred Stock" shall have the meaning provided
in paragraph (a).
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the Issue Date such Commission is not existing and performing the duties
now assigned to it under the Exchange Act, the body performing such duties at
such time.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to:
(i) vote in the election of directors of such Person
or
(ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers
or others that will control the management and policies of such
Person.
"Consolidated Cash Flow Available for Fixed Charges" means, for
any period, the Consolidated Net Income of the Corporation for such period plus
(i) an amount equal to any extraordinary loss plus any net loss realized in
connection with all Asset Sales (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of the Corporation and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was deducted in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of the
Corporation and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capitalized Lease Obligations, imputed interest
with respect to Indebtedness attributable to any Sale and Leaseback Transaction,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) any Consolidated Non-Cash
Charges that were deducted in computing such Consolidated Net Income, less (v)
the aggregate amount of contingent and "earnout" payments in respect of any
Permitted Business acquired by the Corporation or any Restricted Subsidiary that
are paid in cash during such period and less (vi) any non-cash items increasing
Consolidated Net Income for such period.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of the
aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the
Corporation for the four full fiscal quarters immediately preceding the date of
the transaction (the "Calculation Date") giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio for which consolidated financial
information of the Corporation is available (such four full fiscal quarter
period being referred to herein as the "Four Quarter Period") to the aggregate
amount of Consolidated Fixed Charges of the Corporation for such Four Quarter
Period. In the event that the Corporation or any of its Restricted Subsidiaries
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit or other similar borrowings which may be repaid and reborrowed)
subsequent to the commencement of the period for which the Consolidated Fixed
Charge Coverage Ratio is being calculated but prior to the Calculation Date,
then the Consolidated Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, assumption, guarantee or redemption of
Indebtedness, as if the same had occurred at the beginning of the applicable
Four Quarter Period. In addition, for purposes of making the computation
referred to above, (i) acquisitions (including Asset Acquisitions) that have
been made by the Corporation or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the Four Quarter Period or subsequent to such period and on
or prior to the Calculation Date shall be deemed to have occurred on the first
day of the Four Quarter Period and Consolidated Cash Flow Available For Fixed
Charges and Consolidated Fixed Charges for such period shall be calculated
giving pro forma effect (excluding any pro forma increase in revenues but
including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act) to such Asset
Acquisition and without giving effect to clause (iii) of the proviso set forth
in the definition of Consolidated Net Income, and (ii) the Consolidated Cash
Flow Available for Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and to operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Consolidated
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and to operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Consolidated Fixed Charges shall not be obligations of the
Corporation or any of its Restricted Subsidiaries following the Calculation
Date.
"Consolidated Fixed Charges" means, for any period, the sum of
(i) the consolidated interest expense of the Corporation and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capitalized Lease Obligations, imputed interest with respect to Indebtedness
attributable to any Sale and Leaseback Transaction, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding amortization of those deferred financing costs
reflected on the Corporation's combined consolidated balance sheet as of the
date of this Certificate of Designation) and (ii) the consolidated interest
expense of the Corporation and its Restricted Subsidiaries that was capitalized
during such period, and (iii) any interest expense on Indebtedness of another
Person that is guaranteed by the Corporation or one of its Restricted
Subsidiaries or secured by a Lien on assets of the Corporation or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called upon)
and (iv) the product of (a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Restricted Subsidiary) on any series
of Preferred Stock of such Person, times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current effective
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate of
the Net Income of the Corporation and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the Corporation or a Wholly Owned Restricted Subsidiary thereof, (ii)
the Net Income of any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by the
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interest transaction for
any period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the Net Income of any Unrestricted Subsidiary shall be excluded, except to the
extent set forth in clause (i) above.
"Consolidated Non-cash Charges" means, for any period, the
aggregate depreciation and amortization (including (i) amortization of goodwill,
(ii) amortization of Purchased Portfolios, (iii) amortization of amounts
reflected on the Corporation's combined consolidated balance sheet as of the
date of this Certificate of Designation related to "in-process technology," (iv)
any incremental increase in amortization of account inventory resulting from
write-ups of such inventory in connection with the purchase accounting treatment
of an acquisition and (v) amortization of other intangibles and other non-cash
charges (excluding any such intangible and non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior period)) of the
Corporation and its Restricted Subsidiaries for such period, in each case,
determined on a consolidated basis in accordance with GAAP.
"Corporation" shall have the meaning provided in the first
paragraph of this Certificate of Designation.
"Credit Agreement" means the Senior Secured Credit Facility dated
as of November 30, 1999 among the Corporation, certain subsidiaries of the
Corporation, as guarantors, DLJ Capital Funding, Inc., as Syndication Agent,
Fleet National Bank, N.A., as Administrative Agent, and Harris Trust & Savings
Bank, as Documentation Agent, and the other financial institutions from time to
time party thereto, together with the related documents (including notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith), and in each case as amended (including any amendment and
restatement thereof), modified, renewed, refunded, replaced or refinanced from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Restricted Subsidiaries of the
Corporation as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
creditors.
"DB" means DB Capital Investors, L.P. and/or any of its
Affiliates.
"Default Dividends" shall have the meaning provided in paragraph
(c)(i).
"Designation" shall have the meaning provided in
paragraph(j)(xi).
"Designation Amount" shall have the meaning provided in
paragraph(j)(xi).
"Disinterested Director" means, with respect to any transaction
or series of related transaction, a member of the Board of Directors of the
Corporation who does not have any material direct or indirect financial interest
in or with respect to such transaction or series of related transactions.
"Dividend Default" shall have the meaning provided in paragraph
(f)(iii)(A).
"Dividend Payment Date" means March 1, June 1, September 1 and
December 1 of each year.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each quarterly period from a Dividend Payment Date to the next
following Dividend Payment Date (but without including such Dividend Payment
Date).
"Dividend Record Date" means February 15, May 15, August 15 and
November 15 of each year.
"Equity Investor" means collectively, Madison Dearborn Capital
Partners III, L.P., Madison Dearborn Special Equity III, L.P. and Special
Advisers Fund I, L.L.C.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Fair Market Value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between an informed and willing seller under no compulsion to sell and
an informed and willing buyer, neither of which is under pressure or compulsion
to complete the transaction. Fair Market Value shall be determined by the Board
of Directors of the Corporation or the applicable Restricted Subsidiary acting
reasonably and in good faith.
"First Union" means First Union Investors, Inc. and/or any of its
Affiliates.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange agreements, interest rate
swap agreements, interest rate cap agreements or interest rate collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange or interest rates.
"Holder" means a holder of shares of Senior Preferred Stock as
reflected in the register maintained by the Transfer Agent for the Senior
Preferred Stock.
"incur" shall have the meaning provided in paragraph (j)(iv).
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capitalized Lease Obligations or the balance
deferred and unpaid of the purchase price of any property (other than contingent
or "earnout" payment obligations) or representing any Hedging Obligations
(except any such balance that constitutes an accrued expense or trade payable)
or any Redeemable Capital Stock of such Person, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person in an amount equal to the lesser of the aggregate
amount of such indebtedness secured by such Lien and the value of all of the
assets of such Person securing such indebtedness (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other Person.
"Indenture" means the indenture dated as of November 6, 1996, by
and between the Corporation and Wilmington Trust Company, as trustee, governing
the Senior Subordinated Notes, as amended (including any amendment and
restatement thereof), modified, renewed, refunded, replaced or refinanced from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm which is nationally recognized within the United States
of America
(i) which does not, and whose directors, officers and employees
or Affiliates do not, have a direct or indirect financial interest in
the Corporation or any of its Subsidiaries or Affiliates, and
(ii) which, in the judgment of the Board of Directors of the
Corporation, is otherwise independent and qualified to perform the
task for which it is to be engaged.
"Initial Dividend Period" means the dividend period commencing on
the Issue Date and ending on the first Dividend Payment Date to occur
thereafter.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit (including by means of a
guarantee) or capital contribution (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business) to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others or otherwise), or any
purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by any other
Person and all other items that would be classified as investments on a balance
sheet prepared in accordance with GAAP. Investments shall exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices. If the Corporation or any Restricted Subsidiary of the Corporation
sells or otherwise disposes of any Capital Stock of any direct or indirect
Restricted Subsidiary of the Corporation such that, after giving effect to any
such sale or disposition, the Corporation no longer owns, directly or
indirectly, a majority of the outstanding Capital Stock of such Restricted
Subsidiary, the Corporation shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the Fair Market Value of the
Capital Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means December 10, 1999.
"Junior Preferred Stock" means the Company's Junior Preferred
Stock issued in connection with the Recapitalization, with terms and conditions
thereof as set forth in the Certificate of Designation of the Power, Preferences
and Relative, Participating, Optional and Other Special Rights of Junior
Preferred Stock, and Qualifications, Limitations and Restrictions thereof filed
on the Issue Date.
"Junior Securities" shall have the meaning provided in paragraph
(b).
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidation Preference" means, initially, $1,000.00 per share of
Senior Preferred Stock subject to increase as provided under paragraph (c)(i)
hereof and, thereafter, means the Liquidation Preference as so increased.
"Mandatory Redemption Date" shall have the meaning provided in
paragraph (e)(ii).
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to Sale and Leaseback Transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Corporation nor any of its Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Corporation or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they shall not have any recourse to the stock or assets
of the Corporation or any of its Restricted Subsidiaries.
"Parity Securities" shall have the meaning provided in paragraph
(b).
"Permitted Business" means the business of the Corporation and
its Subsidiaries as of the Issue Date and any other business reasonably related,
ancillary or complementary thereto.
"Permitted Holders" means Ares, DB, First Union, Abbott Capital
1330 Investors II, L.P., Abbott Capital Private Equity Fund III, L.P., BNY
Partners Fund, L.L.C., Heller Financial, Inc., Magnetite Asset Investors L.L.C.
and Madison Dearborn Capital Partners III, L.P. and any of their respective
Affiliates.
"Permitted Investments" means: (i) any Investment (a) by the
Corporation or any Restricted Subsidiary in the Corporation or in a Restricted
Subsidiary or (b) by Unrestricted Subsidiaries in other Unrestricted
Subsidiaries; (ii) any Investment in cash and Cash Equivalents; (iii) any
Investment by the Corporation or any Restricted Subsidiary in a Person, if as a
result of such Investment (a) such Person becomes a Restricted Subsidiary or (b)
such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys all or substantially all of its assets to, or is liquidated into, the
Corporation or a Restricted Subsidiary; (iv) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the provisions of paragraph (j)(xv) hereof; (v) other
Investments in any Person (other than a Restricted Subsidiary) having an
aggregate Fair Market Value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (v) that are at the time
outstanding, not to exceed $7.5 million; (vi) loans and advances to employees,
directors and officers of the Corporation and the Restricted Subsidiaries in the
ordinary course of business not to exceed $5.0 million at any one time
outstanding; (vii) Investments acquired by the Corporation or any of its
Restricted Subsidiaries (A) in exchange for any other Investment or receivable
held by the Corporation or any such Restricted Subsidiary in connection with or
as a result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other Investment or receivable or (B) as a result of a
foreclosure by the Corporation or any of its Restricted Subsidiaries with
respect to any secured Investment or other transfer of title with respect to any
secured Investment in default; (viii) Investments represented by Hedging
Obligations; (ix) any Investment existing on the Issue Date; (x) any acquisition
by the Corporation or any of its Restricted Subsidiaries of Purchased
Portfolios; (xi) any acquisition of assets, Capital Stock, options, warrants or
other rights to acquire shares of Capital Stock or other securities by the
Corporation for consideration consisting of Common Stock or options, warrants or
other rights to acquire shares of Common Stock of the Corporation; and (xii)
subject to paragraph (f)(ii), Investments the payment for which consists
exclusively of Capital Stock (exclusive of Redeemable Capital Stock) or options,
warrants or other rights to acquire shares of Qualified Capital Stock.
"Permitted Payment" shall have the meaning provided in paragraph
(j)(ii).
"Person" means any individual, corporation, partnership, limited
liability corporation, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, Capital
Stock of any class or classes (however designated) of such Person which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Capital Stock of any other class of such
Person. With respect to the Corporation, the term "Preferred Stock" shall
include the Senior Preferred Stock.
"property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Purchase Agreement" means the Purchase Agreement dated December
10, 1999 by and among the Corporation, Ares Leveraged Investment Fund, L.P.,
Ares Leveraged Investment Fund II, L.P., DB Capital Investors, L.P., First Union
Investors, Inc., Abbott Capital 1330 Investors II, L.P., Abbott Capital Private
Equity Fund III, L.P., BNY Partners Fund, L.L.C., Heller Financial, Inc. and
Magnetite Asset Investors L.L.C.
"Purchase Money Obligation" means Indebtedness of a Person
incurred in the normal course of business of such Person for the purpose of
financing all or any part of the purchase price, or the cost of installation,
construction or improvement of any property or assets.
"Purchased Portfolios" means account receivable portfolios
purchased by the Corporation or any of its Restricted Subsidiaries in the
ordinary course of business.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Redeemable Capital Stock.
"Recapitalization" means the recapitalization of the Corporation
pursuant to the Stock Subscription and Redemption Agreement dated as of October
8, 1999 among the Corporation, Madison Dearborn Capital Partners III, L.P., and
the stockholders, optionholders, and warrantholders of the Corporation party
thereto, which shall be consummated on the Issue Date.
"Redeemable Capital Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily reedemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date that is 91 days after the Stated Maturity of the Senior
Preferred Stock.
"Redemption Date" with respect to any shares of Senior Preferred
Stock, means the date on which such shares of Senior Preferred Stock are
redeemed by the Corporation.
"Redemption Notice" shall have the meaning provided in paragraph
(e)(iii).
"refinancing" shall have the meaning provided in paragraph (j)
(iv).
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date among the Corporation, Ares Leveraged
Investment Fund, L.P., Ares Leveraged Investment Fund II, L.P., DB Capital
Investors, L.P., First Union Investors, Inc., Abbott Capital 1330 Investors II,
L.P., Abbott Capital Private Equity Fund III, L.P., BNY Partners Fund, L.L.C.,
Heller Financial, Inc., and Magnetite Asset Investors L.L.C. as initial
purchasers of the Senior Preferred Stock, relating to the registration of the
Senior Preferred Stock.
"Required Holders" means holders of more than 50% of the
outstanding shares of Senior Preferred Stock.
"Resolution" shall have the meaning provided in the first
paragraph of this Certificate of Designation.
"Restricted Payments" shall have the meaning provided in
paragraph (j)(ii).
"Restricted Subsidiary" means any Subsidiary of the Corporation
that has not been designated by the Board of Directors of the Corporation, by a
board resolution delivered to the Significant Holders, as an Unrestricted
Subsidiary or a direct or indirect Subsidiary of an Unrestricted Subsidiary
pursuant to and in compliance with paragraph (j)(xi). Any such designation may
be revoked by a board resolution of the Board of Directors of the Corporation
delivered to the Significant Holders subject to the provisions of paragraph
(j)(xi).
"Revocation" shall have the meaning provided in paragraph
(j)(xi).
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Corporation or a Restricted Subsidiary of any property,
whether owned by the Corporation or any Restricted Subsidiary on the Issue Date
or later acquired, which has been or is to be sold or transferred by the
Corporation or such Restricted Subsidiary to such Person or to any other Person
from whom funds have been or are to be advanced by such Person on the security
of such Property.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Securities" shall have the meaning provided in paragraph
(b).
"Senior Preferred Stock" shall have the meaning provided in
paragraph (a).
"Senior Subordinated Notes" means the Corporation's 11% Senior
Subordinated Notes due 2006.
"Significant Holder" means (x) any Holder which, together with
its Affiliates, holds at least 20% of the outstanding shares of Senior Preferred
Stock and (y) Ares Leveraged Investment Fund, L.P., Ares Leveraged Investment
Fund II, L.P. and any of their respective Affiliates so long as such entities
described in this clause (y) hold in the aggregate at least 15% of the
outstanding shares of Senior Preferred Stock.
"Stated Maturity" means (a) with respect to any share of Senior
Preferred Stock, the Mandatory Redemption Date, (b) with respect to any dividend
on the Senior Preferred Stock, the dates specified in this Certificate of
Designation as the fixed date on which the principal of such share of Senior
Preferred Stock or such dividend is due and payable and (c) with respect to any
other Indebtedness, the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness or
any installment of interest is due and payable.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which the outstanding shares of Voting Capital Stock having at
least a majority of the votes entitled to be cast in the election of directors
shall at the time be owned, directly or indirectly, by such Person, (b) any
partnership, limited liability company, association, joint venture or other
entity in which such Person and/or one or more of its Subsidiaries has at least
a majority of the shares of Voting Stock of such entity at the time or (c) any
partnership (i) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (ii) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof).
"Successor Corporation" shall have the meaning provided in
paragraph (j)(xiii).
"Transfer Agent" shall have the meaning provided in paragraph
(k).
"Unrestricted Subsidiary" means each Subsidiary of the
Corporation designated as such pursuant to and in compliance with paragraph
(j)(xi). Any such designation may be revoked by a resolution of Board of
Directors of the Corporation delivered to the Significant Holders, subject to
the provisions of such paragraph (j)(xi).
"Voting Rights Triggering Event" shall have the meaning provided
in paragraph (f)(iii).
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the Board of Directors,
managers or trustees of any Person (irrespective of whether or not, at the time,
stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary of which 100% of the outstanding Capital Stock is owned by the
Corporation and/or another Wholly Owned Restricted Subsidiary. For purposes of
this definition, any directors' qualifying shares shall be disregarded in
determining the ownership of a Restricted Subsidiary.
<PAGE>
IN WITNESS WHEREOF, said Outsourcing Solutions Inc. has caused
this Certificate of Designation to be signed by Timothy M. Hurd, its Secretary,
this 10th day of December, 1999.
OUTSOURCING SOLUTIONS INC.
By: /s/ Timothy M. Hurd
-------------------------------------
Name: Timothy M. Hurd
Title: Secretary
<PAGE>
CERTIFICATE OF DESIGNATION OF THE POWER, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS OF JUNIOR PREFERRED STOCK, AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the General Corporate Law of the State of Delaware
- --------------------------------------------------------------------------------
Outsourcing Solutions Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, by unanimous written consent dated December 10, 1999, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors
does hereby create, authorize and provide for the issuance of Junior
Preferred Stock, no par value, consisting of 50,000 shares, having the
designations, preferences, relative, participating, optional and other
special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Certificate of Incorporation and in
this Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "Junior Preferred Stock." The number of shares constituting
such Junior Preferred Stock shall be 50,000. Each share of Junior Preferred
Stock is hereafter referred to as a "Junior Preferred Share."
(b) Voting Rights.
The record holders of the issued and outstanding Junior Preferred
Shares shall have no voting rights, unless (and then only to the extent)
otherwise expressly provided by law or as set forth below.
In addition to any other vote required by this paragraph (b),
without the affirmative vote of the holders of a majority of the Junior
Preferred Stock, voting separately as a class, the Corporation shall not amend
the Certificate of Incorporation of the Corporation, including this Certificate
of Designation, if the amendment would alter or change the powers, preferences
or special rights of the shares of Junior Preferred Stock so as to affect them
adversely (within the meaning of Section 242(b)(2) of the Delaware General
Corporate Law).
(c) Dividend Rights.
(1) The record holders shall be entitled to receive in
preference to all holders of Common Stock and any other shares of capital stock
of the Corporation other than the Senior Preferred Stock (as defined below),
when, as and if declared by the Corporation's Board of Directors or a duly
authorized committee thereof, out of funds legally available for the payment
thereof, fully cumulative dividends at the Dividend Rate set forth in (c)(2)
below on the Liquidation Preference (as defined in (d) below) on each Junior
Preferred Share, to be payable in arrears in additional Junior Preferred Shares
(such dividends paid in kind being herein referred to as "PIK Dividends") on the
day immediately succeeding the last day of a Payment Period (as such term is
defined below in (c)(5)) (except that if any such date is a Saturday, Sunday or
legal holiday, then such dividends shall be payable on the next day that is not
a Saturday, Sunday or legal holiday) (each a "Dividend Payment Date"). Dividends
shall cease to accrue on each Junior Preferred Share on its date of redemption
or conversion, unless the Corporation defaults in its obligations to convert or
redeem such shares.
(2) The "Dividend Rate" shall be an annual rate of five
percent (5%) until December 10, 2003, and an annual rate of eight percent (8%)
thereafter; provided, however, that the Dividend Rate shall be increased to
twenty percent (20%) upon the consummation of (i) a Change in Control, (ii) an
Approved Sale or (iii) a Major Public Offering.
(3) PIK Dividends with respect to any Payment Period shall be
paid by delivering to the record holders of Junior Preferred Stock a number of
Junior Preferred Shares determined by dividing the Dividend Payment Amount with
respect to such Payment Period (as defined in (c)(4) below) by the Liquidation
Preference (as defined in (d) below) per share. The issuance of any such PIK
Dividend in such number of shares shall constitute full payment of such
dividend. Fractional Junior Preferred Shares payable as PIK Dividends may be
paid by the Corporation, at its option, in cash. Any additional Junior Preferred
Shares issued pursuant to this section shall be subject in all respects, except
as to issue date and the date from which dividends accrue and cumulate as set
forth below, to the same terms as the Junior Preferred Shares originally issued
hereunder.
(4) Dividends shall accrue (whether or not declared by the
Board of Directors) on the Liquidation Preference on each Junior Preferred Share
during each Payment Period and be fully cumulative on a daily basis from the
first day of each Payment Period to the last day of such Payment Period (with
the amount of accrued dividends per share, as expressed in dollars, with respect
to any Payment Period determined in accordance with the applicable Dividend Rate
or Rates being herein referred to as the "Dividend Payment Amount"). In the case
of Junior Preferred Stock issued and/or accumulated as a PIK Dividend, dividends
shall accrue (whether or not declared by the Board of Directors) on the
Liquidation Preference and be fully cumulative on a daily basis from the
Dividend Payment Date in respect of which such shares were issued as a dividend.
Dividends shall be paid to the holders of record of Junior Preferred Stock at
the close of business on the date specified by the Board of Directors of the
Corporation or a duly authorized committee thereof at the time such dividend is
declared in accordance with the Delaware General Corporation Law (each of such
dates being a "Record Date"). A Record Date shall not be more than sixty (60)
days nor less than ten (10) days prior to the applicable Dividend Payment Date.
(5) The term "Payment Period" shall mean the one year period
commencing on December 10, 1999 and each one year period thereafter during which
any Junior Preferred Shares are issued and outstanding; provided, that, for the
purpose of determining any Dividend Payment Amount, a Payment Period shall
commence on the last Dividend Payment Date on which dividends were actually
paid.
(d) Rights on Liquidation and Ranking.
In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (each a "Liquidation"), each
holder of a Junior Preferred Share shall be entitled to receive with respect to
such Junior Preferred Share, before any distribution is made to or set aside for
the holders of Common Stock (or any other shares of capital stock of the
Corporation, other than the Senior Preferred Stock), payable in cash or, if the
amount of cash available to the Corporation is insufficient, out of the other
assets of the Corporation, whether such assets are stated capital or surplus of
any nature, an amount equal to One Thousand Dollars ($1,000.00) per Junior
Preferred Share (the "Liquidation Preference"), plus all dividends accrued and
unpaid on such Junior Preferred Share on the date of final distribution to such
holder, whether or not authorized or declared. If the assets of the Corporation
available for distribution to holders of Junior Preferred Stock shall be
insufficient to permit the payment in full of the amount due such holders
pursuant to this paragraph (d), all assets of the Corporation available for
distribution to such holders shall be distributed pari passu among such holders.
The fair market value of any assets of the Corporation and the proportion of
cash and other assets distributed by the Corporation to the holders of Junior
Preferred Stock shall be reasonably determined in good faith by a vote of the
Board of Directors of the Corporation. Except as provided in this paragraph, the
holders of Junior Preferred Shares shall not be entitled to any distribution in
the event of a Liquidation. For the purposes of this paragraph, neither the
consolidation or merger of the Corporation into or with another corporation, nor
the sale of all or substantially all of the assets of the Corporation to another
corporation or any other entity shall be deemed a liquidation, dissolution or
winding-up of the affairs of the Corporation. Notwithstanding anything herein to
the contrary, the Junior Preferred Stock ranks junior in all respects to the
Senior Preferred Stock, and no dividend distributions or distributions upon
Liquidation shall be made with respect to the Junior Preferred Stock (i) unless
and until all dividend distributions and distributions upon Liquidation with
respect to the Senior Preferred Stock have been made in full, and (ii) unless
otherwise made in accordance with the limitations in the Certificate of
Designation of the Senior Preferred Stock. The Junior Preferred Stock will rank
senior to all other capital stock of the Corporation other than the Senior
Preferred Stock.
(e) Redemption Rights.
(1) Optional Redemption. To the extent that the Corporation
shall have funds legally available therefor, the Corporation may, at its option,
at any time and from time to time, and subject to the limitations in the
Certificate of Designation for the Senior Preferred Stock, redeem all or any
portion of the outstanding Junior Preferred Shares (each a "Redemption") for a
sum in cash equal to One Thousand Dollars ($1,000.00) per Junior Preferred Share
plus an amount in cash equal to all accrued and unpaid dividends on such shares
through the date fixed by the Board of Directors for such redemption (a
"Redemption Date"), whether or not authorized and declared (such sum being
referred to as the "Redemption Price").
(2) Mandatory Redemption . On January 10, 2008 (the "Mandatory
Redemption Date"), the Corporation shall redeem, to the extent of funds legally
available therefor, in the manner provided for in paragraph (e)(3) hereof, all
or any portion of the outstanding Junior Preferred Shares then outstanding at
the Redemption Price. Notwithstanding the foregoing, the Junior Preferred Stock
shall not be redeemed pursuant to this paragraph (e)(2) at any time during which
the Corporation has failed to redeem the Senior Preferred Stock in accordance
with its terms.
(3) Notice of Redemption. Not more than sixty (60) nor less
than ten (10) days prior to any Redemption Date or the Mandatory Redemption
Date, as appropriate, the Corporation shall give written notice ("Redemption
Notice") of a Redemption to each holder of Junior Preferred Shares to be
redeemed at its address as it appears on the stock records of the Corporation by
deposit thereof in first class U.S. mail, postage prepaid. The Redemption Notice
shall state:
(i) the Redemption Price;
(ii) whether all or less than all the outstanding shares of the
Junior Preferred Stock are to be redeemed and the total number of shares of the
Junior Preferred Stock being redeemed;
(iii) the date fixed for redemption;
(iv) that the holder is to surrender to the Corporation, in the
manner, at the place or places and at the Redemption Price designated, his
certificate or certificates representing the shares of Junior Preferred Stock to
be redeemed; and
(v) that dividends on the shares of the Junior Preferred Stock to
be redeemed shall cease to accumulate on such Redemption Date or Mandatory
Redemption Date unless the Corporation defaults in the payment of the Redemption
Price.
On the Redemption Date or the Mandatory Redemption Date, as the case may be, the
Corporation shall transfer to an account designated by each holder of a Junior
Preferred Share to be redeemed the Redemption Price thereof by wire transfer in
immediately available funds, but only upon each holder of Junior Preferred Stock
having surrendered the certificate representing such share of Junior Preferred
Stock to the Corporation, duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), in the manner and at the place
designated in the Redemption Notice. In the event that less than all of the
shares represented by any certificate so surrendered are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(4) Selection of Shares. The Corporation shall select the
Junior Preferred Shares to be redeemed in any Redemption in which not all Junior
Preferred Shares are able to be redeemed pursuant to this paragraph so that the
Junior Preferred Shares of each holder selected for Redemption shall bear the
same proportion to the total Junior Preferred Shares owned by that holder as the
proportion of all Junior Preferred Shares selected for Redemption bears to the
total of all then outstanding Junior Preferred Shares, but adjusted as
determined by the Board of Directors to avoid the redemption of fractional
Junior Preferred Shares. Notice having been given as provided above, if, on the
date fixed for Redemption, funds necessary for the redemption shall be available
therefor and shall have been irrevocably deposited or set aside in trust for the
holders of the Junior Preferred Shares, then, notwithstanding that the
certificates representing any shares so called for Redemption shall not have
been surrendered, dividends with respect to the shares so called shall cease to
accrue after the date fixed for Redemption, such shares will no longer be deemed
outstanding, the holders thereof shall cease to be stockholders of the
Corporation and all rights whatsoever with respect to such shares (except the
right of the holders to receive the Redemption Price without interest upon
surrender of their certificates therefor) shall terminate. If funds legally
available for such purpose are not sufficient for redemption of the Junior
Preferred Shares to be redeemed pursuant to a Redemption, then the certificates
representing such shares shall be deemed not to be surrendered, such shares
shall remain outstanding and the rights of holders of Junior Preferred Shares
thereafter shall continue to be only those of a holder of Junior Preferred
Shares. Should any Junior Preferred Shares required to be redeemed under the
terms of any Redemption not be redeemed solely by reason of limitations imposed
by law, the applicable Junior Preferred Shares shall be redeemed on the earliest
possible date thereafter that the applicable Junior Preferred Shares may be
redeemed to the maximum extent permitted by law. Except as set forth above, the
Board of Directors shall prescribe the manner in which any Redemption shall be
effected.
(f) Conversion.
(1) At the consummation of a Qualified Public Offering, each
holder of Junior Preferred Shares shall have the right to convert all, but not
less than all, of such holder's Junior Preferred Shares into a number of shares
of Voting Common Stock (the "Conversion Stock") equal to (i) the sum of (A) the
number of Junior Preferred Shares to be converted multiplied by $1,000 plus (B)
the amount of all accrued and unpaid dividends on the Junior Preferred Shares to
be converted (whether or not declared) from the last Dividend Payment Date
through the effective date of the conversion, divided by (ii) the Conversion
Price. The "Conversion Price" shall be the price per share at which the
Corporation's Voting Common Stock is sold to the public in such Qualified Public
Offering. The Corporation may, at its option, pay cash in lieu of issuing
fractional shares of Voting Common Stock in connection with such conversion. At
least 30 days prior to the effectiveness of a Qualified Public Offering, the
Corporation shall provide written notification (the "Notice") to each holder of
Junior Preferred Stock that the Corporation intends to consummate a Qualified
Public Offering. The Notice shall include the expected date of the consummation
of the Qualified Public Offering (the "Expected Date") and the expected range of
offering price to the public. At least 10 days prior to the Expected Date, each
holder of Junior Preferred Stock who elects to convert such holder's Junior
Preferred Shares into Conversion Stock shall provide written notice of such
election to the Corporation. Any holder of Junior Preferred Stock who does not
provide written notice to the Corporation shall be deemed to have elected not to
convert such holder's Junior Preferred Shares into Conversion Stock. The
Conversion Stock issued in connection with such conversion shall be entitled to
piggyback registration rights (including with respect to such Qualified Public
Offering) as set forth in the Stockholders Agreement.
(2) Except as otherwise provided herein, the conversion of
Junior Preferred Stock shall be deemed to have been effected at the time of
consummation of the Qualified Public Offering. At the time any such conversion
has been effected, the rights of the holder of the Junior Preferred Shares
converted shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Conversion Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Conversion Stock represented thereby.
(3) As soon as possible after a conversion has been effected,
the Corporation shall deliver to the converting holder a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in such name or names and such denomination or
denominations as the converting holder has specified.
(4) The issuance of certificates for shares of Conversion
Stock upon conversion of Junior Preferred Stock shall be made without charge to
the holders of such Junior Preferred Stock for any issuance tax (other than in
connection with a transfer into a different name) in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Conversion Stock. Upon conversion of each Junior
Preferred Share, the Corporation shall take all such actions as are necessary in
order to insure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable.
(5) The Corporation shall not close its books against the
transfer of Junior Preferred Stock or of Conversion Stock issued or issuable
upon conversion of Junior Preferred Stock in any manner which interferes with
the timely conversion of Junior Preferred Stock. The Corporation shall assist
and cooperate with any holder of Junior Preferred Stock required to make any
governmental filings or obtain any governmental approval prior to or in
connection with any conversion of Junior Preferred Stock hereunder (including,
without limitation, making any filings required to be made by the Corporation).
(6) The Corporation shall in connection with any Qualified
Public Offering reserve and keep available out of its authorized but unissued
shares of Conversion Stock, solely for the purpose of issuance upon the
conversion of the Junior Preferred Stock, such number of shares of Conversion
Stock as the Corporation reasonably believes may be issuable upon the conversion
of all outstanding Junior Preferred Stock. All shares of Conversion Stock which
are so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable. The Corporation shall take all such actions as may be necessary
to assure that all such shares of Conversion Stock may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Conversion Stock may be
listed (except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance). The Corporation shall not
take any action which would cause the number of authorized but unissued shares
of Conversion Stock to be less than the number of such shares required to be
reserved hereunder for issuance upon conversion of the Junior Preferred Stock.
(g) Transfers of Junior Preferred Shares. The Junior Preferred
Shares may not be sold, assigned or transferred by the holders without the prior
written consent of the Corporation, and by acceptance of any Junior Preferred
Shares, the holder agrees not to sell, assign or transfer such shares without
such consent.
(h) Merger, Consolidation, or Sale of Assets. The Corporation shall
not consolidate or merge with or into (whether or not the Corporation is the
surviving corporation), or directly and/or indirectly through its subsidiaries
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the properties and assets of the Corporation and its
subsidiaries taken as a whole in one or more related transactions, to any other
Person unless (A) (i) the Corporation is the surviving corporation or (ii) the
entity or the Person formed by or surviving any such consolidation or merger (if
other than the Corporation) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (the entity or Person
described in this clause (ii), the "Successor Corporation ") is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; and (B) the Successor Corporation assumes all the
obligations of the Corporation under this Certificate of Designation pursuant to
an amendment or supplement hereto or thereto, as applicable, in a form
reasonably satisfactory to the holders of a majority of the then issued and
outstanding shares of Junior Preferred Stock.
(i) Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Affiliate" means with respect to any specified Person: (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person; (ii) any other Person
that owns, directly or indirectly, 10% or more of such specified Person's
capital stock; or (iii) any other Person 10% or more of the voting capital stock
of which is beneficially owned or held directly or indirectly by such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Approved Sale" shall have the meaning ascribed to it in the
Stockholders Agreement (as in effect on the date hereof).
"Change of Control" shall have the meaning ascribed to it in the
Certificate of Designation for the Senior Preferred Stock.
"Common Stock" means collectively the Voting Common Stock and the
Non-Voting Common Stock.
"Qualified Public Offering" means any underwritten primary public
offering registered under the Securities Act of 1933 of capital stock of the
Corporation having an aggregate offering value of at least $50 million.
"Major Public Offering" means an underwritten primary public
offering registered under the Securities Act of 1933 of capital stock of the
Corporation in which the Corporation receives in excess of $200 million in net
proceeds (after deducting any underwriting fees or commissions).
"Non-Voting Common Stock" means the Corporation's Non-Voting
Common Stock, par value $0.01.
"Person" means any individual, corporation, partnership, limited
liability corporation, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof.
"Senior Preferred Stock" shall mean (a) the Class A 14% Senior
Mandatorily Redeemable Preferred Stock, (b) the Class B 14% Senior Mandatorily
Redeemable Preferred Stock and (c) any other securities issued or issuable with
respect to or in exchange for such Senior Preferred Stock described in clauses
(a) or (b) by way of share exchange, stock dividend, stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or pursuant to any registration agreement applicable
thereto or otherwise.
"Stockholders Agreement" means the Stockholders Agreement, dated
as of December 10, 1999, by and among the Corporation and the Persons signatory
thereto.
"Voting Common Stock" means the Corporation's Voting Common
Stock, par value $0.01.
IN WITNESS WHEREOF, said Outsourcing Solutions Inc. has caused
this Certificate of Designation of Outsourcing Solutions Inc. to be executed by
its officer thereunto duly authorized this 10th day of December, 1999.
OUTSOURCING SOLUTIONS INC.
By:/s/ Timothy M. Hurd
---------------------------------
Name: Timothy M. Hurd
Title: Secretary
ADVISORY SERVICES AGREEMENT
THIS ADVISORY SERVICES AGREEMENT (the "Agreement") is entered into
as of this 21st day of September, 1995, by and between OSI Holdings Corp. (on
behalf of itself and its subsidiaries), a Delaware corporation (the "Company"),
and MDC Management Company III, L.P., a California limited partnership ("MDC").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement the Company and certain subsidiaries of the Company have acquired all
of the partnership interests in Account Portfolios, L.P., Perimeter Credit, L.P.
and Gulf State Credit, L.P. (the "Acquisition"); and
WHEREAS, the execution and delivery of this Agreement is a material
condition to the consummation of the Acquisition.
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereinafter set forth, MDC and the Company hereto agree as follows:
1. Retention as Management Advisor. Subject to each of the terms,
conditions and provisions of this Agreement, the Company and its subsidiaries
hereby retain MDC and MDC hereby agrees to be retained by the Company and its
subsidiaries to perform those financial and managerial functions set forth in
Section 4 of this Agreement.
2. Term.
2.1 Subject to the provisions for termination set forth herein, this
Agreement shall be from the date hereof through September 21, 2005, and
automatically renewable annually thereafter unless MDC receives 30 days notice
of the termination prior to the renewal date.
2.2 The Company, by written notice to MDC, authorized by a majority
of the directors other than those who are partners, principals or employees of
MDC (or an affiliate of MDC), may terminate this Agreement for justifiable
cause, which shall mean any of the following events: material breach by MDC of
any of its obligations hereunder; misappropriation by MDC of funds or property
of the Company or other willful breach in the course of the consultancy; any
attempt by MDC to secure personal profit related to the business of the Company
and not fairly disclosed to and approved by the Board of Directors or gross
neglect by MDC in the fulfillment of its obligations hereunder.
2.3 MDC, by thirty (30) days' prior written notice to the Company,
may terminate this Agreement at any time.
3. Compensation.
3.1 Upon execution and delivery of this Agreement, the Company shall
pay MDC a transaction fee of $1,600,000 for services rendered on behalf of the
Company and its subsidiaries in connection with the Acquisition.
3.2 As compensation to MDC for its management and advisory services
to the Company and its subsidiaries under this Agreement, the Company, on behalf
of itself and its subsidiaries, agrees to pay MDC a fee in the amount of three
hundred thousand dollars ($300,000) per year. Such fee shall be payable in
arrears in equal quarterly installments, on or before the last day of March,
June, September and December, commencing on December 31, 1995.
3.3 MDC shall also be entitled to be reimbursed by the Company for
all reasonable out-of-pocket costs and expenses incurred by MDC and any of its
partners, employees or affiliates in connection with (i) providing the Services
under this Agreement, or (ii) serving as a member of the Board of Directors or
as an officer of the Company including, without limitation, all travel expenses.
Reimbursement shall be provided upon receipt by the Company of invoices from MDC
with respect to such costs and expenses.
4. Duties as Management Advisor. MDC's duties as a financial and
management consultant to the Company and its subsidiaries under the provisions
of this Agreement shall include providing services in obtaining equity, debt,
lease and acquisition financing, as well as providing other financial and
consulting services for the operation and growth of the Company at any time
during the term of this Agreement (the "Services"). Such Services shall be
rendered upon the reasonable request of the Company. MDC shall devote as much
time as reasonably necessary to the affairs of the Company.
5. Decisions. The Company reserves the right to make all decisions
with regard to any matter upon which MDC has rendered its advice and
consultation, and there shall be no liability to MDC for any such advice
accepted by the Company pursuant to the provisions of this Agreement.
6. Authority of Management Advisor. MDC shall have authority only to
act as a consultant and advisor to the Company. MDC shall have no authority to
enter into any agreement or to make any representation, commitment or warranty
binding upon the Company or to obtain or incur any right, obligation or
liability on behalf of the Company.
7. Independent Contractor. Except as may be expressly provided
elsewhere in this Agreement, MDC shall act as an independent contractor and
shall have complete charge of its personnel engaged in the performance of the
Services.
8. Books and Records. MDC's books and records with respect to the
Services and any reimbursable costs ("Books and Records") shall be kept at MDC's
office located at 3000 Sand Hill Road, Building 3, Suite 290, Menlo Park,
California 94025. The Books and Records shall be kept in accordance with
recognized accounting principles and practices, consistently applied, and shall
be made available for the Company or the Company's representatives' inspection
and copying at all times during regular office hours. MDC shall not be required
to maintain the Books and Records for more than three (3) years after
termination of this Agreement.
9. Confidential Information.
9.1 The parties acknowledge that during the course of provision of
the Services, the Company may disclose confidential information to MDC or its
affiliated companies. MDC shall treat such information as the Company's
confidential property and safeguard and keep secret all such information about
the Company, including reports and records, customer lists, trade lists, trade
practices, and prices pertaining to the Company's business coming to the
attention or knowledge of MDC because of any activities conducted by MDC under
or pursuant to this Agreement.
9.2 MDC shall exercise its best efforts and shall cause any of its
affiliated companies to exercise their best efforts to prevent any confidential
information from being disclosed to third parties, except as necessarily
required in the performance of the Services and except under terms of
confidentiality satisfactory to the Company. This obligation shall remain in
effect until the Company shall release MDC or its affiliated companies from
their obligations under this paragraph 9, but in no event later than three (3)
years after the completion of the Services. MDC shall not use any of the
Company's confidential information in any way that is detrimental to the
interests of the Company, directly or indirectly, either during the term of this
Agreement or at any time thereafter.
10. Indemnification. The Company agrees to indemnify and hold MDC
and its partners, officers, directors and agents harmless from damages, losses
or expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred or paid directly or indirectly, by MDC as a result or arising
out of any actions taken by MDC in connection with the performance of the
Services under this Agreement except to the extent that such actions resulted
solely from the gross negligence or willful misconduct of MDC. The Company
hereby further agrees to reimburse MDC for all reasonable fees and expenses
(including attorneys fees) incurred in connection with defending any such claim
to which MDC is a party, as such fees and expenses are incurred by MDC.
11. Notices and Communications.
11.1 All communications relating to the day-to-day activities
necessary to render the Services shall be exchanged between the respective
representatives of the Company and MDC, who will be designated by the parties
promptly upon commencement of the Services.
11.2 All other notices, demands, and communications required or
permitted hereunder shall be in writing and shall be delivered personally to the
respective representatives of the Company and MDC set forth below or shall be
mailed by registered mail, postage prepaid, return receipt requested. Notices,
demands and communications hereunder shall be effective: (i) If delivered
personally, on delivery; or (ii) if mailed, forty-eight (48) hours after deposit
thereof in the United States mail addressed to the party to whom such notice,
demand, or communication is given. Until changed by written notice, all such
notices, demands and communications shall be addressed as follows:
If to the Company: OSI Holdings Corp.
c/o David B. Kreiss
5605 Lake Island Drive
Atlanta, GA 30327
Tel: (404) 250-0707
Fax: (404) 250-0707
If to MDC: McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attn: Mr. Tyler Zachem
Tel: (212) 355-5500
Fax: (212) 355-6283 or
(212) 355-6945
With copies to: McCown De Leeuw & Co.
3000 Sand Hill Road
Building 3, Suite 290
Menlo Park, CA 94025
Attn: Mr. Steven A.
Zuckerman
Tel: (415) 854-6000
Fax: (415) 854-0853
12. Assignments. MDC shall not assign this Agreement in whole or in
part without the prior written consent of the Company, provided, however, that
such consent shall not be unreasonably withheld with respect to assignments to
MDC's affiliates or wholly-owned subsidiaries; and provided further, that any
such assignment shall not relieve MDC of any of its obligations under this
Agreement.
Subject to the foregoing, all the terms and conditions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
13. Applicable Law and Severability. This document shall, in all
respects, be governed by the laws of the State of Delaware applicable to
agreements executed and to be wholly performed within the State of Delaware.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provisions contained herein and any contrary present or future statute, law,
ordinance or regulation, the latter shall prevail, but the provision of this
document which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law.
14. Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents and other assurances, and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
15. Attorneys' Fees. In the event any action is instituted by a
party to enforce any of the terms and provisions contained herein, the
prevailing party in such action shall be entitled to such reasonable attorneys'
fees, costs and expenses as may be fixed by the court.
16. Time of the Essence. Time is of the essence of this Agreement
and all the terms, provisions, covenants and conditions hereof.
17. Captions. The captions appearing at the commencement of the
paragraphs hereof are descriptive only and for convenience and reference. Should
there be any conflicts between any such caption and the paragraph at the head of
which it appears, the paragraph and not such caption shall control and govern in
the construction of this document.
18. Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless it is in writing and signed
by all the parties hereto and expressly states that an amendment, change or
modification of this Agreement is intended.
19. Separate Counterparts. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and be one and the
same instrument.
20. Entire Agreement. This Agreement shall constitute the entire
understanding and agreement between the parties hereto and shall supersede any
and all letters of intent, whether written or oral, pertaining to the subject
matter of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers on the date first appearing above.
OSI HOLDINGS CORP.
By: /s/ David B. Kreiss
---------------------------
Name: David B. Kreiss
Title: President
MDC MANAGEMENT COMPANY III, L.P.,
a California limited partnership
By: /s/ David E. King
---------------------------
General Partner
<PAGE>
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement"), dated as of December 10,
1999, is by and between Madison Dearborn Partners, Inc. ("MDP"), Outsourcing
Solutions Inc. (f/k/a Outsourcing Holdings Corp.) ("OSI") and MDC Management
Company III, L.P. ("MDC").
Reference is made to the Advisory Services Agreement dated as of
September 21, 1995 (the "Advisory Services Agreement"), by and between OSI and
MDC. Capitalized terms not otherwise defined in this Instrument shall have the
meanings given to such terms in the Advisory Services Agreement.
In accordance with its rights under Section 12 of the Advisory Services
Agreement, MDC wishes to (i) assign all of its rights in, to and under the
Advisory Services Agreement to MDP and (ii) designate MDP as MDC under the
Advisory Services Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby covenant
and agree as follows:
1. Assignment and Assumption.
(a) MDC hereby assigns to MDP all of its obligations with
respect to and arising from the performance of advisory
services to OSI after the date hereof and all of its rights
under the Advisory Services Agreement, including, without
limitation, MDC's right to receive the fee set forth in
Section 3.2 of the Advisory Services Agreement.
Notwithstanding the foregoing, MDC's obligation under the
confidentiality provisions set forth in Section 9 of the
Advisory Services Agreement shall expire on the first
anniversary of the date hereof with respect to OSI
information obtained prior to the date hereof.
(b) MDP hereby accepts the foregoing assignment of MDC's rights
and hereby assumes all of MDC's obligations to perform
advisory services under the Advisory Services Agreement
after the date hereof and assumes all obligations arising
from the performance of such services.
(c) OSI hereby consents to MDC's assignment of its rights under
the Advisory Services Agreement to MDP and accepts MDP's
assumption of the obligation to perform advisory services
under the Advisory Services Agreement after the date hereof.
Notwithstanding anything to the contrary contained in
Section 12 of the Advisory Services Agreement, OSI hereby
agrees that after MDC's assignment of its rights under the
Advisory Services Agreement to MDP, MDC shall be relieved of
all of its obligations under the Advisory Services
Agreement.
2. OSI hereby represents and warrants to MDP and MDC as follows:
(a) OSI has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by OSI
has been duly authorized and approved by its Board of
Directors and no other corporate action on the part of OSI
is necessary to authorize the execution, delivery and
performance of this Agreement by OSI. This Agreement has
been duly executed and delivered by OSI and, assuming the
due execution and delivery of this Agreement by MDP and MDC,
is a valid and binding obligation of OSI enforceable against
OSI in accordance with its terms.
(b) The execution and delivery of this Agreement by OSI will
not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of OSI or the comparable governing
documents of any of its Subsidiaries; (2) violate any
statute, ordinance, rule, regulation, order or decree of any
court or of any governmental or regulatory body, agency or
authority applicable to OSI or any of its Subsidiaries or by
which any of their respective properties or assets may be
bound; (3) require any filing with, or permit, consent or
approval of, or the giving of any notice to, or obtaining
any new or additional licenses from any governmental or
regulatory body, agency or authority; and (4) except as set
forth in Section 3.01(d) of the Company's disclosure letter,
result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or
both) a material default (or give rise to any right of
termination, cancellation, payment or acceleration) under,
or result in the creation of any encumbrance upon any of the
properties or assets of OSI or any of its Subsidiaries
under, any of the terms, conditions or provisions of any
license, franchise, permit, agreement, lease, or other
instrument or obligation to which OSI or any of its
Subsidiaries is a party, or by which it or any of their
respective properties or assets are bound or subject.
(c) OSI and MDC have each fully performed all of its obligations
under the Advisory Services Agreement to date and neither is
in breach of such agreement.
3. MDC does hereby represent and warrant to MDP and OSI as follows:
(a) MDC has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by MDC
has been duly authorized by MDC and no other partnership
action on the part of MDC is necessary to authorize the
execution, delivery and performance of this Agreement by
MDC. This Agreement has been duly executed and delivered by
MDC and, assuming the due execution and delivery of this
Agreement by MDP and OSI, is a valid and binding obligation
of MDC enforceable against MDC in accordance with its terms.
(b) The execution and delivery of this Agreement by MDC will
not: (1) violate any provision of the Certificate of Limited
Partnership or By-Laws of MDC; or (2) require any filing
with, or permit, consent or approval of, or the giving of
any notice to, or obtaining any new or additional licenses
from any governmental or regulatory body, agency or
authority.
(c) MDC and OSI have each fully performed all of its obligations
under the Advisory Services Agreement to date and neither is
in breach of such agreement.
4. MDP represents and warrants to MDC and OSI as follows:
(a) MDP has all requisite partnership power and authority to
execute and deliver this Agreement and to perform its
obligations hereunder. The execution delivery and
performance of this Agreement by MDP has been duly
authorized by MDP. No other action on the part of MDP (or
its partners) is necessary to authorize the execution,
delivery and performance of this Agreement by MDP. This
Agreement has been duly executed and delivered by MDP and
assuming the due execution and delivery of this Agreement by
OSI and MDC, is a valid and binding obligation of MDP,
enforceable against MDP in accordance with its terms.
(b) The execution and delivery of this Agreement by MDP will
not: (1) violate any provision of the Certificate of Limited
Partnership or By-Laws of MDP; or (2) require any filing
with, or permit, consent or approval of, or the giving of
any notice to, or obtaining any new or additional licenses
from any governmental or regulatory body, agency or
authority.
5. This Agreement is executed and delivered pursuant to Sections 18
("Modifications or Amendments") and 12 ("Assignments") of the
Advisory Services Agreement. From the date hereof, all references
to MDC in the Advisory Services Agreement shall be deemed to be
references to MDP.
6. The first sentence of Section 3.2 shall be deleted and replaced with the
following:
As compensation to MDP for its management and advisory
services to the Company and its subsidiaries under this
Agreement, the Company, on behalf of itself and its subsidiaries,
agrees to pay MDP a fee in the amount of five hundred thousand
dollars ($500,000) per year.
1. Section 11.2 of the Advisory Services Agreement shall be amended to read
as follows:
11.2 All other notices, demands, and communications
required or permitted hereunder shall be in writing and shall be
delivered personally to the respective representatives of the
Company and MDP set forth below or shall be mailed by registered
mail, postage prepaid, return receipt requested. Notices, demands
and communications hereunder shall be effective: (i) if delivered
personally, on delivery; or (ii) if mailed, forty-eight (48)
hours after deposit thereof in the United States mail addressed
to the party to whom such notice, demand, or communication is
given. Until changed by written notice, all such notices, demands
and communication shall be addressed as follows:
If to the Company: Outsourcing Solutions Inc.
390 South Woods Mill Road
Suite 350
Chesterfield, Missouri 63017
Attention: Eric Fencl, Esq.
General Counsel
Phone: (314) 576-0022
Fax: (314) 576-1867
If to MDP: Madison Dearborn Partners, Inc.
Suite 3800
Three First National Plaza
Chicago, IL 60602
Attention: Timothy Hurd
Phone: (312) 895-1170
Fax: (312) 895-1156
with a copy to:
Kirkland & Ellis
200 E. Randolph
Chicago, IL 60601
Attention: Michael H. Kerr, P.C.
Phone: (312) 861-2000
Fax: (312) 861-2200
1. This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same Agreement, and
shall become effective when one or more of such counterparts have
been signed by each of the parties and delivered to the other
party.
1. This Agreement shall be governed by, performed, construed and
enforced in accordance with the laws of the State of New York,
without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be duly executed as of the day and year first above written.
MADISON DEARBORN PARTNERS, INC.
By: /s/ Paul R. Wood
----------------------------------------
Its:
MDC MANAGEMENT COMPANY III, L.P.
By: /s/
----------------------------------------
Its:
OUTSOURCING SOLUTIONS INC.
By: /s/ Eric R. Fencl
----------------------------------------
Its:
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 10, 1999
among
OUTSOURCING SOLUTIONS INC.,
a Delaware corporation,
the Purchasers named herein
AND
certain other parties hereto
Relating to 5,920,474.15 Shares of Common Stock, $.01 Par Value
================================================================================
<PAGE>
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of December 10, 1999, among Outsourcing Solutions Inc., a
Delaware corporation (the "Company"), Madison Dearborn Capital Partners III,
L.P. ("MDCP"), Madison Dearborn Special Equity III, L.P. ("MDSE") and Special
Advisers Fund I, L.L.C. ("SAF" and collectively with MDCP and MDSE, the "Equity
Investor") and Ares Leveraged Investment Fund, L.P., Ares Leveraged Investment
Fund II, L.P., DB Capital Investors, L.P., First Union Investors, Inc., Abbott
Capital 1330 Investors II, L.P., Abbott Capital Private Equity Fund III, L.P.,
BNY Partners Fund, L.L.C., Heller Financial, Inc., Magnetite Asset Investors
L.L.C., FBR Financial Fund II, L.P. and Harvest Opportunity Partners, L.P. (each
a "Purchaser" and, collectively, the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated
as of December 10, 1999, among the Company and certain of the Purchasers (the
"Purchase Agreement"), relating to the sale by the Company to the Purchasers of
an aggregate of (i) 25,000 shares of the Company's Class A 14% Senior
Mandatorily Redeemable Preferred Stock (the "Class A Senior Preferred Stock"),
(ii) 75,000 shares of the Company's Class B 14% Senior Mandatorily Redeemable
Preferred Stock (the "Class B Senior Preferred Stock", and together with the
Class A Senior Preferred Stock, the "Senior Preferred Stock") and (iii)
596,913.07 shares of the Company's Common Stock (as defined herein) (such shares
of Common Stock, together with the Senior Preferred Stock, the "Purchased
Securities"). In order to induce the Purchasers to enter into the Purchase
Agreement and/or to accept an assignment of the right to purchase Common Stock
pursuant to the Recapitalization Agreement, the Company has agreed to provide to
the Holders (as defined herein) the registration rights and other rights for the
Registrable Securities (as defined herein) set forth in this Agreement. The
execution of this Agreement is a condition to the obligations of the Purchasers
to purchase the Purchased Securities under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined termsshall have the following meanings:
"Advice" shall have the meaning ascribed to that term in the last
paragraph of Section 4.
"Affiliate" means, with respect to any specified Person: (i) any
other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person; (ii)
any other Person that owns, directly or indirectly, 10% or more of such
specified Person's Capital Stock; or (iii) any other Person 10% or more
of the Voting Stock of which is beneficially owned or held directly or
indirectly by such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing. With respect to each
Purchaser, an Affiliate shall also include, without limitation, any
Person managed by, or controlling or under common control with such
Purchaser or any of its Affiliates. Notwithstanding anything to the
contrary contained herein, (x) no portfolio company of MDCP nor any
portfolio company of a fund managed by or affiliated with MDCP shall be
deemed an Affiliate of the Company and (y) no Purchaser or any of their
respective Affiliates shall be deemed an Affiliate of the Company.
"Agreement" shall have the meaning ascribed to that term in the
preamble hereto.
"Black Out Period" shall have the meaning ascribed to that term
in Section 2.1.
"Board of Directors" shall mean the Board of Directors of the
Company or any authorized committee of such Board of Directors.
"Business Day" shall mean a day that is not a Legal Holiday.
"Capital Stock" shall mean, (i) with respect to any Person that
is a corporation, corporate stock, (ii) with respect to any association
or business entity, any and all shares, interests, participations or
other equivalents (however designated and whether or not voting) of
corporate stock, including each class of common stock and preferred
stock of such Person; (iii) with respect to any Person that is not a
corporation, any and all partnership, membership or other equity
interests of such Person; and (iv) any rights, warrants or options
exchangeable for or convertible into any of the foregoing.
"Certificate of Designation" shall mean the Certificate of
Designation for the Senior Preferred Stock.
"Change of Control" shall have the meaning ascribed to that term
in the Certificate of Designation.
"Class A Senior Preferred Stock" shall have the meaning ascribed
to that term in the preamble hereto.
"Class B Senior Preferred Stock" shall have the meaning ascribed
to that term in the preamble hereto.
"Common Stock" shall mean the Company's $.01 par value common
stock of any class.
"Company" shall have the meaning ascribed to that term in the
preamble hereto and shall also include the Company's successors.
"Demand" shall have the meaning ascribed to that term in Section
2.1.
"Demand Registration" shall have the meaning ascribed to that
term in Section 2.1.
"Effectiveness Period" shall have the meaning ascribed to that
term in Section 2.1.
"Equity Investor" shall have the meaning ascribed to that term in
the preamble.
"Equity Investor Shares" shall mean (a) the Common Stock held by
the Equity Investor or its designees (including all Common Stock
purchased pursuant to the Recapitalization Agreement), whether held by
any of them or any subsequent assignee or transferee and (b) any other
securities issued or issuable with respect to or in exchange for such
Common Stock by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
"Holder" shall mean each of the Purchasers and the Equity
Investor, for so long as the Purchasers or the Equity Investor own any
Registrable Securities, and their respective successors, assigns and
direct and indirect transferees who become registered owners of
Registrable Securities.
"Initial Public Equity Offering" means a primary underwritten
public offering (but excluding any offering pursuant to Form S-8 under
the Securities Act or any other publicly registered offering pursuant to
the Securities Act pertaining to an issuance of shares of Common Stock
or securities exercisable therefor under any benefit plan, employee
compensation plan, or employee or director stock purchase plan) of
Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Issue Date" means December 10, 1999.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
banking institutions in The City of New York or at a place of payment
are authorized by law, regulation or executive order to remain closed.
"Lock Up Period" shall have the meaning ascribed to that term in
Section 2.1.
"MDCP" shall have the meaning ascribed to that term in the
preamble hereto.
"MDSE" shall have the meaning ascribed to that term in the
preamble hereto.
"Person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or agency or
political subdivision thereof.
"Postponement Period" shall have the meaning ascribed to that
term in Section 2.1.
"Preferred Stock" means, with respect to any Person, Capital
Stock of any class or classes (however designated) of such Person which
is preferred as to the payment of dividends or distributions, or as to
the distribution of assets upon any voluntary or involuntary liquidation
or dissolution of such Person, over Capital Stock of any other class of
such Person. With respect to the Company, the term "Preferred Stock"
shall include the Senior Preferred Stock.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
pursuant to the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration
Statement, and all other amendments and supplements to any such
prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if
any, in such prospectus.
"Purchase Agreement" shall have the meaning ascribed to that term
in the preamble hereto.
"Purchased Securities" shall have the meaning ascribed to that
term in the preamble hereto.
"Purchasers" shall have the meaning ascribed to that term in the
preamble hereto.
"Purchaser Holder" shall mean each of the Purchasers, for so long
as the Purchasers own any Registrable Securities, and their successors,
assigns and direct and indirect transferees who become registered owners
of Registrable Securities.
"Qualifying IPO" shall mean an Initial Public Equity Offering
generating aggregate gross proceeds to the Company of at least $50.0
million.
"Recapitalization Agreement" means that certain Stock
Subscription and Redemption Agreement, dated as of October 8, 1999, by
and among MDCP and the other parties thereto, as may be amended from
time to time.
"Registrable Securities" shall mean any of (i) the Shares or (ii)
the Equity Investor Shares. As to any particular Registrable Securities,
once issued such securities shall cease to be Registrable Securities
when (a) a Registration Statement with respect to the sale of such
securities by the Holder thereof shall have been declared effective
under the Securities Act and such securities shall have been disposed of
by such Holder in accordance with such Registration Statement, (b) such
securities have been distributed to the public pursuant to Rule 144 (or
any successor provision) promulgated under the Securities Act, (c) such
securities shall have been otherwise transferred and new certificates
for them not bearing a legend restricting further transfer shall have
been delivered by the Company and subsequent disposition of such
securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (d) such
securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association
of Securities Dealers, Inc. registration and filing fees and expenses,
fees and expenses of compliance with securities or Blue Sky laws
(including, without limitation, in the event of an underwritten
offering, reasonable fees and disbursements of counsel for the
underwriters in connection with Blue Sky qualifications, if any, of the
Registrable Securities), rating agency fees, printing expenses,
messenger, telephone and delivery expenses, fees and disbursements of
counsel for the Company and all independent certified public
accountants, and, in the event of an underwritten offering, the fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including (i) any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Holders of such Registrable Securities or (ii)
fees and expenses of counsel and/or experts for the Holders).
"Registration Statement" shall mean any registration statement of
the Company which covers any of the Registrable Securities pursuant to
the provisions of this Agreement and all amendments and supplements to
any such Registration Statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Requisite Shares" shall mean a number of Registrable Securities
equivalent to not less than 35% of the Registrable Securities (excluding
Registrable Securities which are Equity Investor Shares) outstanding as
of any date of determination.
"Rule 144" shall mean Rule 144 under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Rule 144A" shall mean Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"SAF" shall have the meaning ascribed in the preamble hereto.
"SEC" shall mean the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any
time after the execution of this Agreement such Commission is not
existing and performing the duties now assigned to it under the Exchange
Act, the body performing such duties at such time.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
"Senior Preferred Stock" shall have the meaning ascribed to that
term in the preamble hereto.
"Shares" shall mean (a) the Common Stock held by the Purchasers
(including all Purchased Securities and all other Common Stock sold to
the Purchasers pursuant to the Assignment and Stock Purchase Agreement
dated as of the date hereof), whether held by any of them or any
subsequent assignee or transferee and (b) any other securities issued or
issuable with respect to or in exchange for such Common Stock by way of
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization
or otherwise.
"Stockholders Agreement" shall mean the Stockholders Agreement
dated the date hereof by and among the Company, the Equity Investor,
certain stockholders, optionholders and warrantholders and the
Purchasers.
"Voting Stock" shall mean any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the Board
of Directors, managers or trustees of any Person (irrespective of
whether or not, at the time, stock of any other class or classes shall
have, or might have, voting power by reason of the happening of any
contingency).
2. Registration Rights and Other Rights of the Holders.
2.1. Demand Registration. (a) Request for Registration. At any
time (i) the Equity Investor may make an unlimited number of written requests
(each a "Demand") for registration under the Securities Act of its Registrable
Securities (a "Demand Registration") and (ii) on or after the third year
anniversary of the Issue Date, Purchasers owning, individually or in the
aggregate, at least the Requisite Shares may make up to two Demands for a Demand
Registration. Any such Demand will specify the number of Registrable Securities
proposed to be sold and will also specify the intended method of disposition
thereof. Subject to the other provisions of this Section 2.1, the Company shall
give written notice of such Demand within 10 days after the receipt thereof to
all other Holders. Within 30 days after receipt of such notice by any Holder,
such Holder may request in writing that its Registrable Securities be included
in such registration and the Company shall include in the Demand Registration
the Registrable Securities of any such selling Holder requested to be so
included. Each such request by such other selling Holders shall specify the
number of Registrable Securities proposed to be sold and the intended method of
disposition thereof. Upon a Demand, the Company will (i) prepare, file and use
its commercially reasonable efforts to cause to become effective within 90 days
of such Demand a Registration Statement in respect of all the Registrable
Securities which Holders request for inclusion therein; provided that if such
Demand occurs during a Black Out Period or a period (not to exceed 180 days)
during which the Company is prohibited or restricted from issuing or selling
Common Stock pursuant to any underwriting or purchase agreement relating to an
underwritten public offering of Common Stock or securities convertible into or
exchangeable for Common Stock under Rule 144A or registered under the Securities
Act or any agreement with a securityholder of the Company exercising
registration rights (a "Lock Up Period"), the Company shall not be required to
notify the Holders of such Demand or file such Registration Statement prior to
the end of the Black Out Period or Lock Up Period, as the case may be, in which
event, the Company will use its commercially reasonable efforts to cause such
Registration Statement to become effective no later than 90 days after the end
of the Black Out Period or Lock Up Period, as the case may be, and (ii) keep
such Registration Statement effective for the shorter of (a) 180 days (the
"Effectiveness Period") and (b) such period of time as all of the Registrable
Securities included in such Registration Statement have been sold thereunder.
Notwithstanding anything set forth in the immediately preceding sentence, the
Company may (I) postpone the filing period, suspend the effectiveness of any
registration, suspend the use of any Prospectus and shall not be required to
amend or supplement the Registration Statement, any related Prospectus or any
document incorporated therein by reference (other than an effective registration
statement being used for an underwritten offering) in the event that, and for a
period, in the case of any particular Demand Registration, not to exceed an
aggregate of 90 days ("Black Out Period") if (i) an event or circumstance occurs
as a result of which the Registration Statement, any related Prospectus or any
document incorporated therein by reference as then amended or supplemented
would, in the Company's good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (ii) the Company determines in its good faith judgment
that (A) the disclosure of such event at such time would have a material adverse
effect on the business, operations or prospects of the Company or (B) the
disclosure otherwise relates to a material business transaction or any other
material matter, which has not yet been publicly disclosed; provided, further,
that, if the effectiveness of any Registration Statement is suspended as a
result of a Black Out Period, the Effectiveness Period shall be extended by the
number of days in any Black Out Period and (II) at any time prior to an Initial
Public Equity Offering by the Company, postpone the filing of one Demand
Registration, by giving written notice thereof to all Holders, for a period not
to exceed an aggregate of 180 days ("Postponement Period"); provided, that at
the end of the Postponement Period the Company will use its commercially
reasonable efforts to cause a Registration Statement with respect to all
Registrable Securities of Holders electing to participate in such Demand
Registration to become effective within 90 days after the end of the
Postponement Period.
In the event of the occurrence of any Black Out Period during an
Effectiveness Period or Lock Up Period, the Company will promptly notify the
Holders of Registrable Securities thereof in writing.
(b) Effective Registration. Except as specifically provided
herein, the Company is only required to effect two Demand Registrations under
Section 2.1(a)(ii) this Agreement (whether or not all of the Holders of
Registrable Securities elect to participate in such Demand Registration on the
basis set forth herein). A registration will not be deemed to have been effected
as a Demand Registration, and thereby satisfy the obligation hereunder, unless
it has been declared effective by the SEC and the Company has complied in all
material respects with its obligations under this Agreement with respect
thereto; provided that if, after it has become effective, the offering of
Registrable Securities pursuant to such registration is or becomes the subject
of any stop order, injunction or other order or requirement of the SEC or any
other governmental or administrative agency, or if any court prevents or
otherwise limits the sale of Registrable Securities pursuant to the registration
(for any reason other than the act or omissions of the Holders) for the period
of time contemplated hereby, such registration will be deemed not to have been
effected. If (i) a registration requested pursuant to Section 2.1(a)(ii) is
deemed not to have been effected or (ii) the registration requested pursuant to
Section 2.1(a)(ii) does not remain effective for the Effectiveness Period, then
the Company shall not be deemed to have effected a Demand Registration and its
obligations pursuant to Section 2.1(a)(ii) will continue. The Holders of
Registrable Securities shall be permitted to withdraw all or any part of the
Registrable Securities from a Demand Registration at any time prior to the
effective date of such Demand Registration. If at any time a Registration
Statement is filed pursuant to a Demand Registration under Section 2.1(a)(ii),
and subsequently a sufficient number of the Registrable Securities are withdrawn
from the Demand Registration so that such Registration Statement does not cover
that number of Registrable Securities at least equal to one-half of the
Registrable Securities of the Purchaser Holders outstanding as of such date, the
Holders who have not withdrawn their Registrable Securities shall have the
opportunity to include an additional number of Registrable Securities in the
Demand Registration so that such Registration Statement covers that number of
Registrable Securities at least equal to one-half of the Registrable Securities
of the Purchaser Holders outstanding as of such date. If an additional number of
Registrable Securities is not so included, the Company may withdraw the
Registration Statement. Such withdrawn Registration Statement will not count as
a Demand Registration and the Company shall continue to be obligated to effect
such registration pursuant to Section 2.1(a)(ii). Except as set forth in the
last sentence of Section 2.1(c), without the prior written consent of the
Holders of the Requisite Shares no other securityholder of the Company shall be
permitted to include their securities in a Demand Registration pursuant to
Section 2.1(a)(ii).
(c) Priority in Demand Registrations Pursuant to Section 2.1. If
a Demand Registration pursuant to this Section 2.1 involves an underwritten
offering and the lead managing underwriter advises the Company in writing that,
in its view, the number of Registrable Securities requested by the Holders to be
included in such registration, together with any other securities permitted to
be included in such registration exceeds the number which, in the view of such
lead managing underwriter, can be sold, the number of such Registrable
Securities to be included in such registration shall be allocated pro rata among
all requesting Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any Registrable
Securities thereby allocated to any such Holder that exceed such Holder's
request shall be reallocated among the remaining requesting Holders in like
manner). In the event that the number of Registrable Securities requested to be
included in such registration is less than the number which, in the view of the
lead managing underwriter, can be sold, the Company may include in such
registration the Securities the Company proposes to sell up to the number of
Securities that, in the view of the lead managing underwriter, can be sold
without adversely affecting the success of the offering, including the price at
which the Registrable Securities can be sold.
(d) Selection of Underwriter. If the Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration shall be in
the form of an underwritten offering. The Holders of a majority of Registrable
Securities to be sold in such Demand Registration shall select one or more
nationally recognized firms of investment bankers (to whom the Company shall not
have reasonably objected) to act as the managing underwriter or underwriters in
connection with such offering and shall select any additional investment bankers
and managers to be used in connection with the offering.
(e) Expenses. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 2.1(a). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to any registration statement requested pursuant to this
Section 2.1.
3. [Intentionally Omitted]
4. Registration Procedures.
In connection with the obligations of the Company with respect to
any Registration Statement pursuant to Section 2.1 hereof and pursuant to
Section 6 of the Stockholders Agreement, the Company shall:
(a) A reasonable period of time prior to the initial filing of a
Registration Statement or Prospectus and a reasonable period of time
prior to the filing of any amendment or supplement thereto, furnish to
the Holders of the Registrable Securities included in such
Registration Statement, and the managing underwriters, if any, copies
of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference)
will be subject to the review of such Holders, and such underwriters,
if any, and use reasonable commercial efforts to cause the officers
and directors of the Company, counsel to the Company and independent
certified public accountants to the Company to respond to such
reasonable inquiries as shall be necessary, in the opinion of the
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The
Company shall not file any such Registration Statement or related
Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities included in such
Registration Statement shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the applicable time period required hereunder; cause the related
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all securities
covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(c) Notify the Holders of Registrable Securities to be sold and
the managing underwriters, if any, promptly, and (if requested by any
such Person), confirm such notice in writing, (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment is proposed
to be filed and (B) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of
any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or
related Prospectus or for additional information, (iii) of the
issuance by the SEC, any state securities commission, any other
governmental agency or any court of any stop order, order or
injunction suspending or enjoining the use of a Prospectus or the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities
for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any event or
information becoming known that makes any statement made in a
Registration Statement or related Prospectus untrue in any material
respect or that requires the making of any changes in such
Registration Statement or Prospectus so that, in the case of a
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any 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, and that in
the case of a Prospectus, it will not contain any untrue statement of
a material fact or omit to state any 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;
(d) Use its commercially reasonable efforts to avoid the issuance
of or, if issued, obtain the withdrawal of any order enjoining or
suspending the use of a Prospectus or the effectiveness of a
Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction described in
Section 4(h), at the earliest practicable moment;
(e) If requested by the lead managing underwriters, if any, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any,
reasonably believe should be included therein, and (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment under the Securities Act as soon as practicable after the
Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided,
however, that the Company shall not be required to take any action
pursuant to this Section 4(e) that would, in the opinion of counsel
for the Company, violate applicable law;
(f) Upon written request to the Company, furnish to each Holder
of Registrable Securities to be sold pursuant to a Registration
Statement and each managing underwriter, if any, without charge, at
least one conformed copy of such Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested (including those
previously furnished or incorporated by reference) as soon as
practicable after the filing of such documents with the SEC;
(g) Deliver to each Holder of Registrable Securities to be sold
pursuant to a Registration Statement, and the underwriters, if any,
without charge, as many copies of the Prospectus (including each form
of prospectus) and each amendment or supplement thereto as such
persons reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of
the selling Holders of Registrable Securities and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto;
(h) Prior to any public offering of Registrable Securities, use
its commercially reasonable efforts to register or qualify or
cooperate with the Holders of Registrable Securities to be sold, the
underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any
such Holder or underwriter reasonably requests in writing; keep each
such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective hereunder and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration
Statement; provided, however, that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it
is not then so qualified or (ii) take any action which would subject
it to general service of process or to taxation in any jurisdiction
where they are not so subject;
(i) In connection with any sale or transfer of Registrable
Securities that will result in such Securities no longer being
Registrable Securities, cooperate with the Holders thereof and the
managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
sold, which certificates shall not bear any restrictive legends and
shall be in a form eligible for deposit with The Depository Trust
Company, and to enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters, if any, or such Holders may request at least two
Business Days prior to any sale of Registrable Securities;
(j) Upon the occurrence of any event contemplated by Section
4(c)(v), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to
each Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(k) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing
underwriters, if any) in order to expedite or facilitate the
disposition of such Registrable Securities, and, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration: (i) make such
representations and warranties to the underwriters and selling
Holders, if any, with respect to the business of the Company and its
subsidiaries (including with respect to businesses or assets acquired
or to be acquired by any of them), and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters if any, addressed
to each of the underwriters, and selling Holders, if any), covering
the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by
such underwriters or selling Holders; (iii) use their commercially
reasonable efforts to obtain customary "cold comfort" letters and
updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial
data is, or is required to be, included in the Registration
Statement), addressed (where reasonably possible) to each of the
underwriters and selling Holders, if any, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings; (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the
underwriters, if any, than those set forth in Section 5 hereof (or
such other provisions and procedures acceptable to the managing
underwriters, if any); and (v) deliver such documents and certificates
as may be reasonably requested by the managing underwriters, if any,
to evidence the continued validity of the representations and
warranties made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company;
(l) Make available for inspection by a representative of any
underwriter participating in any such disposition of Registrable
Securities, and any attorney, consultant or accountant retained by
such selling Holders or underwriter, at the offices where normally
kept, during reasonable business hours, all pertinent financial and
other records, corporate documents and properties of the Company and
its subsidiaries (including with respect to businesses and assets
acquired or to be acquired to the extent that such information is
available to the Company), and cause the officers, directors, agents
and employees of the Company and its subsidiaries (including with
respect to businesses and assets acquired or to be acquired to the
extent that such information is available to the Company) to supply
all information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or accountant in
connection with such Registration Statement; provided, however, that
such Persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to Federal securities
laws in connection with the filing of the Registration Statement or
the use of any Prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard such information by such Person or (iv) such
information becomes available to such Person from a source other than
the Company and its subsidiaries and such source is not bound by a
confidentiality agreement;
(m) Comply with all applicable rules and regulations of the SEC
and make generally available to their securityholders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act, no later than 45
days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold
to underwriters in a firm commitment or reasonable efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter
after the effective date of a Registration Statement, which statement
shall cover said period, consistent with the requirements of Rule 158
under the Securities Act; and
(n) Cooperate with each seller of Registrable Securities covered
by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to be
included in a Registration Statement to furnish to the Company such information
regarding (i) the intended method of distribution of such Registrable Securities
(ii) such Holder and (iii) the Registrable Securities held by such Holder as is
required by law to be disclosed in such Registration Statement and the Company
may exclude from such Registration Statement the Registrable Securities of any
Holder who unreasonably fails to furnish such information within a reasonable
time after receiving such request. The Company shall not be required to provide
indemnification to any underwriter or any other person relating to information
referred to in clauses (i) and (ii) provided to the Company in writing
specifically for inclusion in such Registration Statement.
If any such Registration Statement refers to any Holder by name
or otherwise as the Holder of any securities of the Company, then such Holder
shall have the right to require (i) the insertion therein of language, in form
and substance reasonably satisfactory to such Holder, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act, the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 4(c)(ii), 4(c)(iii),
4(c)(iv) or 4(c)(v) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each Holder of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof or (y) the Advice, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus.
5. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Holder,
each underwriter who participates in an offering of Registrable Securities,
their respective Affiliates, each Person, if any, who controls any of such
parties within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act and each of their respective directors, officers, employees and
agents, as follows:
(i) from and against any and all loss, liability, claim, damage
and expense whatsoever, joint or several, as incurred, arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto),
covering Registrable Securities, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) from and against any and all loss, liability, claim, damage
and expense whatsoever, joint or several, as incurred, to the extent
of the aggregate amount paid in settlement of any litigation (other
than amounts the Holders agree to pay in any written settlement
agreement), or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the prior written consent of the Company; and
(iii) from and against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of one counsel
chosen by the Holders or any underwriter (except to the extent
otherwise expressly provided in Section 5(c) hereof)), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section
5(a);
provided that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to the Company by a Holder or any
underwriter in writing expressly for use in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) or
(ii) contained in any preliminary prospectus if such Holder or such underwriter
failed to send or deliver a copy of the Prospectus (in the form it was first
provided to such parties for confirmation of sales) to the Person asserting such
losses, claims, damages or liabilities on or prior to the delivery of written
confirmation of any sale of securities covered thereby to such Person in any
case where such delivery is required by the Securities Act and such Prospectus
would have corrected such untrue statement or omission. Any amounts advanced by
the Company to an indemnified party pursuant to this Section 5 as a result of
such losses shall be returned to the Company if it shall be finally determined
by such a court in a judgment not subject to appeal or final review that such
indemnified party was not entitled to indemnification by the Company.
(b) By accepting the benefits of this Agreement, each Holder
agrees, severally and not jointly, to indemnify and hold harmless the Company,
each underwriter who participates in an offering of Registrable Securities and
the other selling Holders and each of their respective directors, officers
(including each officer of the Company who signed the Registration Statement),
employees and agents and each Person, if any, who controls the Company, any
underwriter or any other selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
loss, liability, claim, damage and expense whatsoever described in the indemnity
contained in Section 5(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such selling Holder expressly for use in
the Registration Statement (or any amendment thereto), or any such Prospectus
(or any amendment or supplement thereto). Notwithstanding the provisions of this
Section 5(b), a Holder of Registrable Securities shall not be required to pay
any indemnification in an amount in excess of the net proceeds received by such
Holder in the offering to which such Registration Statement relates.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party, but failure to so notify an indemnifying party
shall not relieve such indemnifying party from any liability which it may have
other than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of any such action. If an
indemnifying party so elects within a reasonable time after receipt of such
notice, such indemnifying party, jointly with any other indemnifying party, may
assume the defense of such action with counsel chosen thereby and approved by
the indemnified parties defendant in such action; provided that if any such
indemnified party reasonably determines, based on advice of counsel, that there
may be legal defenses available to such indemnified party which are different
from or in addition to those available to such indemnifying party or that
representation of such indemnifying party and any indemnified party by the same
counsel would present a conflict of interest, then such indemnifying party or
parties shall not be entitled to assume such defense. If an indemnifying party
is not entitled to assume the defense of such action as a result of the proviso
to the preceding sentence, counsel for such indemnifying party shall be entitled
to conduct the defense of such indemnifying party and counsel for each
indemnified party or parties shall be entitled to conduct the defense of such
indemnified party or parties. If an indemnifying party assumes the defense of an
action in accordance with and as permitted by the provisions of this paragraph,
such indemnifying party shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel), separate
from its own counsel, for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 5 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and the Holders, as incurred; provided that notwithstanding the
provisions of this Section 5(d), a Holder of Registrable Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holder in the offering to which such Registration
Statement relates exceeds the amount of any damages that such Holder has
otherwise been required to pay and no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Company and the Holders, such
parties shall contribute to such aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of the Company,
on the one hand, and Holders, on the other hand, with respect to the statements
or omissions which resulted in such loss, liability, claim, damage or expense,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holders, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by or on behalf of the Holders, on
the other, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Holders of the Registrable Securities agree that it would not be just
and equitable if contribution pursuant to this Section 5 were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the relevant equitable considerations. For purposes of this Section
5, each Affiliate of each Holder, and each director, officer, employee, agent
and Person, if any, who controls a Holder or such Affiliate within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each Person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.
(e) The indemnity and contribution covenants contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any investigation made by or on behalf of a Holder or any Person controlling a
Holder, (ii) any sale of any Registrable Securities pursuant to this Agreement
and receipt by the Holders of the proceeds thereof, or (iii) any termination of
this Agreement for any reason, including after the initial filing of the
Registration Statement to which these indemnity and contribution covenants
relate.
6. Rule 144A
The Company shall use its commercially reasonable efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder or beneficial owner of Registrable Securities,
make available other information as required by, and so long as necessary to
permit, sales of Registrable Securities pursuant to Rule 144A. Notwithstanding
the foregoing, nothing in this Section 6 shall be deemed to require the Company
to register any of its securities pursuant to the Exchange Act.
7. Underwritten Registrations
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Registrable Securities on
the basis reasonably provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
8. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder of any of its obligations under this Agreement, each Holder and the
Company, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and each Holder agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach of any of the provisions of this Agreement and each hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor the
Equity Investor will enter into any agreement that is inconsistent with the
rights granted to the Holders and indemnified persons in this Agreement or
otherwise conflicts with the provisions hereof. Without the written consent of
the Purchaser Holders of a majority of the outstanding Shares held by Purchaser
Holders, the Company and the Equity Investor shall not grant to any Person any
rights which conflict with or are inconsistent with the provisions of this
Agreement; it being acknowledged that the Company may grant rights to Demand
Registrations without requiring that the Purchaser Holders be granted any rights
with respect thereto (including but not limited to piggy-back registration
rights) so long as the Purchaser Holders are treated in the same manner with
respect to such newly granted rights as the Equity Investor is treated.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of MDCP and the
Holders of not less than a majority of the then outstanding Shares.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of a majority of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement; provided, however, that the
provisions of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding sentence.
Notwithstanding the foregoing, no amendment, modification, supplement, waiver or
consent with respect to Section 5 shall be made or given otherwise than with the
prior written consent of each Holder or former Holder affected thereby.
(d) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to the Company, as provided in the Purchase Agreement,
(ii) if to the Equity Investor:
Madison Dearborn Capital Partners III, L.P.
Suite 3800, Three First National Plaza
Chicago, IL 60602
Attention: Timothy M. Hurd
(iii) if to the Purchasers, as provided in the Purchase
Agreement, or
(iv) if to any other Person who is then the registered Holder
of Shares or Registrable Securities, to the address of such Holder as
it appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder of Shares and Equity
Investor Shares. The Company may not assign any of its rights hereunder without
the prior written consent of each Holder of Shares and Equity Investor Shares;
provided that a merger or consolidation of the Company with another Person
pursuant to which the issuer or issuers of any securities issued to Holders of
Shares and Equity Investor Shares in connection with such merger or
consolidation becomes obligated under this Agreement shall not be considered an
assignment. Notwithstanding the foregoing, no successor or assignee of the
Company shall have any of the rights granted under this Agreement until such
Person shall acknowledge its rights and obligations hereunder by a signed
written statement of such person's acceptance of such rights and obligations. If
any transferee of any Holder shall acquire Shares and/or Equity Investor Shares
in any manner, whether by operation of law or otherwise, such Shares or Equity
Investor Shares shall be held subject to all of the terms of this Agreement, and
by taking and holding such Shares or Equity Investor Shares such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(g) Governing Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
YORK. THE COMPANY, THE EQUITY INVESTOR AND THE PURCHASERS HEREBY IRREVOCABLY
SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS.
(h) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
All references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise
(j) Legends. Each Holder agrees that the following legend shall
be placed on certificates representing any Shares or Equity Investor Shares
owned by them:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF A REGISTRATION
RIGHTS AGREEMENT DATED AS OF December 10, 1999, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF OUTSOURCING SOLUTIONS INC. AND IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY
ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT.
The Company agrees to remove the legend on the Shares and Equity Investor Shares
upon the resale of such Shares and Equity Investor Shares in accordance with the
terms of this Agreement.
(k) Notwithstanding anything to the contrary, nothing
contained in this Agreement shall affect, limit or impair the rights and
remedies of Heller Financial, Inc. in its capacity as (i) a lender to the
Company or any Subsidiary pursuant to any agreement under which the Company or
any Subsidiary has borrowed or may borrow money, and (ii) the beneficiary of any
and all agreements entered into by the Company or any Subsidiary for the benefit
of Heller Financial, Inc. as lender.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the date first written above.
OUTSOURCING SOLUTIONS INC.
By: /s/ Gary L. Weller
--------------------------------
Name: Gary L. Weller
Title: EVP
MADISON DEARBORN CAPITAL PARTNERS
III, L.P.
By: Madison Dearborn Partners III,
L.P.
Its General Partners
By: Madison Dearborn Partners, Inc.
Its General Partner
By: /s/ Paul R. Wood
--------------------------------
Name: Paul R. Wood
Title:
ARES LEVERAGED INVESTMENT FUND, L.P.
By: Ares Management, L.P.,
its General Partner
By: /s/ Jeffrey Serota
--------------------------------
Name: Jeffrey Serota
Title: VP
<PAGE>
ARES LEVERAGED INVESTMENT FUND II,
L.P.,
By: Ares Management II, L.P.,
its General Partner
By: /s/ Jeffrey Serota
--------------------------------
Name: Jeffrey Serota
Title: VP
DB CAPITAL INVESTORS, L.P.
By: DB Capital Partners, L.P.
its General Partner
By: DB Capital Partners, Inc.
By: /s/ Tyler Zachem
--------------------------------
Name: Tyler Zachem
Title: Managing Director
FIRST UNION INVESTORS, INC.
By: /s/
--------------------------------
Name:
Title:
ABBOTT CAPITAL 1330 INVESTORS II,
L.P.
By: Abbott Capital 1330 GenPar II,
L.L.C.,
its General Partner
By: /s/ Thomas W. Hallagan
--------------------------------
Name: Thomas W. Hallagan
Title: Manager
<PAGE>
ABBOTT CAPITAL PRIVATE EQUITY FUND
III, L.P.
By: Abbott Capital Management,
L.L.C.,
its General Partner
By: /s/ Raymond L. Held
--------------------------------
Name: Raymond L. Held
Title: Managing Director
BNY PARTNERS FUND, L.L.C.
By: BNY Private Investment
Management, Inc.,
its Member Manager
By: /s/ Burton Siegal
--------------------------------
Name: Burton Siegal
Title: Senior V.P.
HELLER FINANCIAL, INC.
By: /s/ Timothy P. Davitt
--------------------------------
Name: Timothy P. Davitt
Title: Vice President
MAGNETITE ASSET INVESTORS L.L.C.
By: Blackrock Financial Management,
Inc.
as Managing Member
By: /s/ Dennis M. Schaney
--------------------------------
Name: Dennis M. Schaney
Title: Managing Director
<PAGE>
FBR FINANCIAL FUND II, L.P.
By: /s/ Edward M. Wheeler
--------------------------------
Name: Edward M. Wheeler
Title: Senior Managing Director
HARVEST OPPORTUNITY PARTNERS, L.P.
By: /s/ Joseph A. Jolson
--------------------------------
Name: Joseph A. Jolson
Title:Managing Member
MADISON DEARBORN SPECIAL EQUITY
III, L.P.
By: Madison Dearborn Partners
III, L.P.,
Its General Partners
By: Madison Dearborn Partners, Inc.,
Its General Partner
By: /s/ Paul R. Wood
--------------------------------
Name:
Title:
SPECIAL ADVISORS FUND I, LLC
By: /s/ Paul R. Wood
--------------------------------
Name:
Title:
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 10, 1999
among
OUTSOURCING SOLUTIONS INC.,
a Delaware corporation
AND
the Purchasers named herein
Relating to:
25,000 Shares of
Class A 14% Senior Mandatorily Redeemable Preferred Stock, and
75,000 Shares of
Class B 14% Senior Mandatorily Redeemable Preferred Stock
================================================================================
<PAGE>
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of December 10, 1999, among Outsourcing Solutions Inc., a
Delaware corporation (the "Company"), and Ares Leveraged Investment Fund, L.P.,
Ares Leveraged Investment Fund II, L.P., DB Capital Investors, L.P., First Union
Investors, Inc., Abbott Capital 1330 Investors II, L.P., Abbott Capital Private
Equity Fund III, L.P., BNY Partners Fund, L.L.C., Heller Financial, Inc. and
Magnetite Asset Investors L.L.C. (each a "Purchaser" and, collectively, the
"Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated
as of December 10, 1999, among the Company and the Purchasers (the "Purchase
Agreement"), relating to the sale by the Company to the Purchasers of an
aggregate of (i) 25,000 shares of the Company's Class A 14% Senior Mandatorily
Redeemable Preferred Stock (the "Class A Senior Preferred Stock"), (ii) 75,000
shares of the Company's Class B 14% Senior Mandatorily Redeemable Preferred
Stock (the "Class B Senior Preferred Stock," and together with the Class A
Senior Preferred Stock, the "Senior Preferred Stock"), and (iii) 596,913.07
shares of the Company's Common Stock (as defined herein) (such shares of Common
Stock, together with the Senior Preferred Stock, the "Purchased Securities"). In
order to induce the Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide to the Holders (as defined herein) the registration rights
for the Registrable Securities (as defined herein) set forth in this Agreement.
The execution of this Agreement is a condition to the obligations of the
Purchasers to purchase the Purchased Securities under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"Advice" shall have the meaning ascribed to that term in the last
paragraph of Section 3.
"Affiliate" means, with respect to any specified Person: (i) any
other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person; (ii)
any other Person that owns, directly or indirectly, 10% or more of such
specified Person's Capital Stock; or (iii) any other Person 10% or more
of the Voting Stock of which is beneficially owned or held directly or
indirectly by such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing. With respect to each
Purchaser, an Affiliate shall also include, without limitation, any
Person managed by, or controlling or under common control with such
Purchaser or any of its Affiliates. Notwithstanding anything to the
contrary contained herein, (x) no portfolio company of the Equity
Investor nor any portfolio company of a fund managed by or affiliated
with the Equity Investor shall be deemed an Affiliate of the Company and
(y) no Purchaser or any of their respective Affiliates shall be deemed
an Affiliate of the Company.
"Agreement" shall have the meaning ascribed to that term in the
preamble hereto.
"Black Out Period" shall have the meaning ascribed to that term
in Section 2.1.
"Board of Directors" shall mean the Board of Directors of the
Company or any authorized committee of such Board of Directors.
"Business Day" shall mean a day that is not a Legal Holiday.
"Capital Stock" shall mean, (i) with respect to any Person that
is a corporation, corporate stock, (ii) with respect to any association
or business entity, any and all shares, interests, participations or
other equivalents (however designated and whether or not voting) of
corporate stock, including each class of common stock and preferred
stock of such Person; (iii) with respect to any Person that is not a
corporation, any and all partnership, membership or other equity
interests of such Person; and (iv) any rights, warrants or options
exchangeable for or convertible into any of the foregoing.
"Change of Control" shall have the meaning ascribed to that term
in the Certificate of Designation for the Senior Preferred Stock.
"Class A Senior Preferred Stock" is defined in the first recital
to this Agreement.
"Class B Senior Preferred Stock" is defined in the first recital
to this Agreement.
"Common Stock" shall mean the Company's $.01 par value common
stock of any class.
"Company" shall have the meaning ascribed to that term in the
preamble hereto and shall also include the Company's successors.
"Demand" shall have the meaning ascribed to that term in Section
2.1.
"Demand Registration" shall have the meaning ascribed to that
term in Section 2.1.
"Effectiveness Period" shall have the meaning ascribed to that
term in Section 2.1.
"Equity Investor" means Madison Dearborn Capital Partners III,
L.P.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
"Holder" shall mean each of the Purchasers, for so long as the
Purchasers own any Registrable Securities, and their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities.
"Initial Public Equity Offering" means a primary underwritten
public offering (but excluding any offering pursuant to Form S-8 under
the Securities Act or any other publicly registered offering pursuant to
the Securities Act pertaining to an issuance of shares of Common Stock
or securities exercisable therefor under any benefit plan, employee
compensation plan, or employee or director stock purchase plan) of
Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Issue Date" means December 10, 1999.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
banking institutions in The City of New York or at a place of payment
are authorized by law, regulation or executive order to remain closed.
"Lock Up Period" shall have the meaning ascribed to that term in
Section 2.1.
"Person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or agency or
political subdivision thereof.
"Piggy-Back Registration" shall have the meaning ascribed to that
term in Section 2.2.
"Postponement Period" shall have the meaning ascribed to that
term in Section 2.1.
"Preferred Stock" means, with respect to any Person, Capital
Stock of any class or classes (however designated) of such Person which
is preferred as to the payment of dividends or distributions, or as to
the distribution of assets upon any voluntary or involuntary liquidation
or dissolution of such Person, over Capital Stock of any other class of
such Person. With respect to the Company, the term "Preferred Stock"
shall include the Senior Preferred Stock.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
pursuant to the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration
Statement, and all other amendments and supplements to any such
prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if
any, in such prospectus.
"Purchase Agreement" shall have the meaning ascribed to that term
in the preamble hereto.
"Purchased Securities" shall have the meaning ascribed to that
term in the preamble hereto.
"Purchasers" shall have the meaning ascribed to that term in the
preamble hereto.
"Registrable Securities" shall mean any of the Shares. As to any
particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a Registration Statement
with respect to the sale of such securities by the Holder thereof shall
have been declared effective under the Securities Act and such
securities shall have been disposed of by such Holder in accordance with
such Registration Statement, (b) such securities have been distributed
to the public pursuant to Rule 144 (or any successor provision)
promulgated under the Securities Act, (c) such securities shall have
been otherwise transferred and new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the
Company and subsequent disposition of such securities shall not require
registration or qualification under the Securities Act or any similar
state law then in force or (d) such securities shall have ceased to be
outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association
of Securities Dealers, Inc. registration and filing fees and expenses,
fees and expenses of compliance with securities or Blue Sky laws
(including, without limitation, in the event of an underwritten
offering, reasonable fees and disbursements of counsel for the
underwriters in connection with Blue Sky qualifications, if any, of the
Registrable Securities), rating agency fees, printing expenses,
messenger, telephone and delivery expenses, fees and disbursements of
counsel for the Company and all independent certified public
accountants, and, in the event of an underwritten offering, the fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including (i) any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Holders of such Registrable Securities or (ii)
fees and expenses of counsel and/or experts for the Holders).
"Registration Statement" shall mean any registration statement of
the Company which covers any of the Registrable Securities pursuant to
the provisions of this Agreement and all amendments and supplements to
any such Registration Statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Requisite Shares" shall mean a number of Registrable Securities
equivalent to not less than 35% of the Registrable Securities
outstanding as of any date of determination.
"Rule 144" shall mean Rule 144 under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Rule 144A" shall mean Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"SEC" shall mean the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any
time after the execution of this Agreement such Commission is not
existing and performing the duties now assigned to it under the Exchange
Act, the body performing such duties at such time.
"Securities" shall mean the Senior Preferred Stock, Common Stock,
any preferred or common stock equivalents, participations or interests
and any options, warrants or securities convertible into or exercisable
or exchangeable for Senior Preferred Stock or Common Stock or any
preferred or common stock equivalents, participations or interests.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
"Senior Preferred Stock" shall have the meaning ascribed to that
term in the preamble hereto.
"Shares" shall mean (a) the Senior Preferred Stock sold to the
Purchasers pursuant to the Purchase Agreement, whether held by any of
them or any subsequent assignee or transferee and (b) any other
securities issued or issuable with respect to or in exchange for the
Senior Preferred Stock by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Voting Stock" shall mean any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the Board
of Directors, managers or trustees of any Person (irrespective of
whether or not, at the time, stock of any other class or classes shall
have, or might have, voting power by reason of the happening of any
contingency).
"Withdrawal Election" shall have the meaning ascribed to that
term in Section 2.3.
2. Registration Rights and Other Rights and Obligations of the
Holders.
2.1. Demand Registration. (a) Request for Registration. At any
time on or after the first year anniversary of the Issue Date, Holders owning,
individually or in the aggregate, at least the Requisite Shares may make up to
two written requests (a "Demand") for registration under the Securities Act of
their Registrable Securities (a "Demand Registration"). Any such Demand will
specify the number of Registrable Securities proposed to be sold and will also
specify the intended method of disposition thereof. Subject to the other
provisions of this Section 2.1, the Company shall give written notice of such
Demand within 10 days after the receipt thereof to all other Holders. Within 30
days after receipt of such notice by any Holder, such Holder may request in
writing that its Registrable Securities be included in such registration and the
Company shall include in the Demand Registration the Registrable Securities of
any such selling Holder requested to be so included. Each such request by such
other selling Holders shall specify the number of Registrable Securities
proposed to be sold and the intended method of disposition thereof. Upon a
Demand, the Company will (i) prepare, file and use its commercially reasonable
efforts to cause to become effective within 90 days of such Demand a
Registration Statement in respect of all the Registrable Securities which
Holders request for inclusion therein; provided that if such Demand occurs
during a Black Out Period or a period (not to exceed 180 days) during which the
Company is prohibited or restricted from issuing or selling Senior Preferred
Stock pursuant to any underwriting or purchase agreement relating to an
underwritten public offering of Senior Preferred Stock or securities convertible
into or exchangeable for Senior Preferred Stock under Rule 144A or registered
under the Securities Act or any agreement with a securityholder of the Company
exercising registration rights pursuant to an agreement in existence on the date
hereof (a "Lock Up Period"), the Company shall not be required to notify the
Holders of such Demand or file such Registration Statement prior to the end of
the Black Out Period or Lock Up Period, as the case may be, in which event, the
Company will use its commercially reasonable efforts to cause such Registration
Statement to become effective no later than 90 days after the end of the Black
Out Period or Lock Up Period, as the case may be, and (ii) keep such
Registration Statement effective for the shorter of (a) 180 days (the
"Effectiveness Period") and (b) such period of time as all of the Registrable
Securities included in such Registration Statement have been sold thereunder.
Notwithstanding anything set forth in the immediately preceding sentence, the
Company may (I) postpone the filing period, suspend the effectiveness of any
registration, suspend the use of any Prospectus and shall not be required to
amend or supplement the Registration Statement, any related Prospectus or any
document incorporated therein by reference (other than an effective registration
statement being used for an underwritten offering) in the event that, and for a
period, in the case of any particular Demand Registration, not to exceed an
aggregate of 90 days ("Black Out Period") (i) an event or circumstance occurs as
a result of which the Registration Statement, any related Prospectus or any
document incorporated therein by reference as then amended or supplemented
would, in the Company's good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (ii)(A) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a material
adverse effect on the business, operations or prospects of the Company or (B)
the disclosure otherwise relates to a material business transaction or any other
material matter, which has not yet been publicly disclosed; provided, further,
that, if the effectiveness of any Registration Statement is suspended as a
result of a Black Out Period, the Effectiveness Period shall be extended by the
number of days in any Black Out Period and (II) at any time prior to an Initial
Public Offering by the Company, postpone the filing of one Demand Registration,
by giving written notice thereof to all Holders, for a period not to exceed an
aggregate of 180 days ("Postponement Period"); provided, that at the end of the
Postponement Period the Company will use its commercially reasonable efforts to
cause a Registration Statement with respect to all Registrable Securities of
Holders electing to participate in such Demand Registration to become effective
within 90 days after the end of the Postponement Period.
In the event of the occurrence of any Black Out Period during an
Effectiveness Period or Lock Up Period, the Company will promptly notify the
Holders of Registrable Securities thereof in writing.
Upon a Demand, the Company may elect, at its option, to effect an
A/B exchange within the time periods referred to above, which shall be deemed to
satisfy the Company's obligations to effect a registration under this Agreement.
(b) Effective Registration. Except as specifically provided
herein, the Company is only required to effect two Demand Registrations under
this Agreement (whether or not all of the Holders of Registrable Securities
elect to participate in such Demand Registration on the basis set forth herein).
A registration will not be deemed to have been effected as a Demand
Registration, and thereby satisfy the obligation hereunder, unless it has been
declared effective by the SEC and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto;
provided that if, after it has become effective, the offering of Registrable
Securities pursuant to such registration is or becomes the subject of any stop
order, injunction or other order or requirement of the SEC or any other
governmental or administrative agency, or if any court prevents or otherwise
limits the sale of Registrable Securities pursuant to the registration (for any
reason other than the act or omissions of the Holders) for the period of time
contemplated hereby, such registration will be deemed not to have been effected.
If (i) a registration requested pursuant to this Section 2.1 is deemed not to
have been effected or (ii) the registration requested pursuant to this Section
2.1 does not remain effective for the Effectiveness Period, then the Company
shall not be deemed to have effected a Demand Registration and its obligations
pursuant to this Section 2.1 will continue. The Holders of Registrable
Securities shall be permitted to withdraw all or any part of the Registrable
Securities from a Demand Registration at any time prior to the effective date of
such Demand Registration. If at any time a Registration Statement is filed
pursuant to a Demand Registration, and subsequently a sufficient number of the
Registrable Securities are withdrawn from the Demand Registration so that such
Registration Statement does not cover that number of Registrable Securities at
least equal to one-half of the Registrable Securities outstanding as of such
date, the Holders who have not withdrawn their Registrable Securities shall have
the opportunity to include an additional number of Registrable Securities in the
Demand Registration so that such Registration Statement covers that number of
Registrable Securities at least equal to one-half of the Registrable Securities
outstanding as of such date. If an additional number of Registrable Securities
is not so included, the Company may withdraw the Registration Statement. Such
withdrawn Registration Statement will not count as a Demand Registration and the
Company shall continue to be obligated to effect such registration pursuant to
this Section 2.1. Except as set forth in the last sentence of Section 2.1(c),
without the prior written consent of the Holders of the Requisite Shares no
other securityholder of the Company shall be permitted to include their
securities in a Demand Registration.
(c) Priority in Demand Registrations Pursuant to Section 2.1. If
a Demand Registration pursuant to this Section 2.1 involves an underwritten
offering and the lead managing underwriter advises the Company in writing that,
in its view, the number of Registrable Securities requested by the Holders to be
included in such registration, together with any other securities permitted to
be included in such registration exceeds the number which, in the view of such
lead managing underwriter, can be sold, the number of such Registrable
Securities to be included in such registration shall be allocated pro rata among
all requesting Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any Registrable
Securities thereby allocated to any such Holder that exceed such Holder's
request shall be reallocated among the remaining requesting Holders in like
manner). In the event that the number of Registrable Securities requested to be
included in such registration is less than the number which, in the view of the
lead managing underwriter, can be sold, the Company may include in such
registration the Securities the Company proposes to sell up to the number of
Securities that, in the view of the lead managing underwriter, can be sold
without adversely affecting the success of the offering, including the price at
which the Registrable Securities can be sold.
(d) Selection of Underwriter. If the Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration shall be in
the form of an underwritten offering. The Holders of a majority of the
Registrable Securities to be sold in such Demand Registration shall select one
or more nationally recognized firms of investment bankers (to whom the Company
shall not have reasonably objected) to act as the managing underwriter or
underwriters in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the offering.
(e) Expenses. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 2.1(a). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to any registration statement requested pursuant to this
Section 2.1.
2.2. Piggy-Back Registration. If at any time the Company
proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account of any Securities (including,
but not limited to, an Initial Public Equity Offering) or for the account of any
of its respective securityholders of any Securities (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute forms that may be
adopted by the SEC), (ii) a registration statement filed in connection with an
offer or offering of securities solely to the Company's existing securityholders
or (iii) a Demand Registration), then the Company shall give written notice of
such proposed filing to the Holders of Registrable Securities as soon as
practicable (but in no event less than 20 Business Days before the anticipated
filing date), and such notice shall offer such Holders the opportunity to
register such number of Registrable Securities as each such Holder may request
(which request shall specify the Registrable Securities intended to be disposed
of by such Holder and the intended method of distribution thereof) (a
"Piggy-Back Registration"). The Company shall use its best efforts to cause the
managing underwriter or underwriters of such proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Company or any other securityholder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof; provided, however,
in no event shall the Company be required to reduce the number of securities
proposed to be sold by the Company or alter the terms of the securities proposed
to be sold by the Company in order to induce the managing underwriter or
underwriters to permit Registrable Securities to be included. Any Holder shall
have the right to withdraw its request for inclusion of its Registrable
Securities in any Registration Statement pursuant to this Section 2.2 by giving
written notice to the Company of its request to withdraw prior to the
effectiveness of the Registration Statement. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective;
provided that the Company shall give prompt notice thereof to participating
Holders. The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2,
and each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a Registration Statement effected pursuant to
this Section 2.2.
No registration effected under this Section 2.2, and no failure
to effect a registration under this Section 2.2, shall relieve the Company of
its obligation to effect a registration upon the request of Holders pursuant to
Section 2.1, and no failure to effect a registration under this Section 2.2 and
to complete the sale of Registrable Securities in connection therewith shall
relieve the Company of any other obligation under this Agreement.
2.3. Reduction of Offering. If the lead managing underwriter of
any underwritten offering described in Section 2.2 has informed, in writing, the
Holders of the Registrable Securities requesting inclusion in such offering that
it is its view that the total number of securities which the Company, the
Holders and any other Persons desiring to participate in such registration
intend to include in such offering is such as to materially and adversely affect
the success of such offering, including the price at which such securities can
be sold, then: first, the securities other than Registrable Securities of the
Holders and securities of the Company included in such offering shall be reduced
in their entirety before any reduction of Registrable Securities; and second, to
the extent the reduction set forth in the immediately preceding clause is
insufficient to reduce the number of securities requested for inclusion in such
offering to a number, which, in the view of the lead managing underwriter, can
be sold without materially and adversely affecting the success of the offering,
the number of Registrable Securities to be offered for the account of such
Holders participating in such registration shall be reduced or limited pro rata
in proportion to the respective number of securities requested to be registered
to the extent necessary to reduce the total number of Registrable Securities
requested to be included in such offering to the number of securities, if any,
recommended by such lead managing underwriter. If a reduction in the Registrable
Securities pursuant to this paragraph would, in the judgment of the lead
managing underwriter, be insufficient to substantially eliminate the adverse
effect that inclusion of the Registrable Securities requested to be included
would have on such offering, such Registrable Securities will be excluded from
such offering. In no event shall the Company be required to reduce the number of
securities to be sold by it in the offering.
If, as a result of the proration provisions of this Section 2.3,
any Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Holder has requested to be included, such
Holder may elect to withdraw his request to include Registrable Securities in
such registration (a "Withdrawal Election"); provided that a Withdrawal Election
shall be made prior to the effectiveness of the Registration Statement and shall
be irrevocable and, after making a Withdrawal Election, a Holder shall no longer
have any right to include Registrable Securities in the registration as to which
such Withdrawal Election was made.
2.4. Lock-Up of Holders. If the Company has complied with all of
its obligations with respect to a Demand Registration or a Piggy-Back
Registration that is a firm commitment underwritten public offering, all Holders
of Registrable Securities, upon request of the lead managing underwriter with
respect to such underwritten public offering, agree not to sell or otherwise
dispose of any Registrable Security owned by them for a period not to exceed 90
days from the consummation of such underwritten public offering; provided that
Registrable Securities which had been requested for inclusion in a Demand
Registration or a Piggy-Back Registration but which were not so included
pursuant to Section 2.1(c) or Section 2.3 shall only be subject to the
restriction on sale and disposition in this Section 2.4 for a period not to
exceed 60 days from the consummation of such underwritten public offering.
3. Registration Procedures.
In connection with the obligations of the Company with respect to
any Registration Statement pursuant to Sections 2.1 and 2.2 hereof, the Company
shall:
(a) A reasonable period of time prior to the initial filing of a
Registration Statement or Prospectus and a reasonable period of time
prior to the filing of any amendment or supplement thereto, furnish to
the Holders of the Registrable Securities included in such
Registration Statement, and the managing underwriters, if any, copies
of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference)
will be subject to the review of such Holders, and such underwriters,
if any, and use reasonable commercial efforts to cause the officers
and directors of the Company, counsel to the Company and independent
certified public accountants to the Company to respond to such
reasonable inquiries as shall be necessary, in the opinion of the
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The
Company shall not file any such Registration Statement or related
Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities included in such
Registration Statement shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the applicable time period required hereunder; cause the related
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all securities
covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(c) Notify the Holders of Registrable Securities to be sold and
the managing underwriters, if any, promptly, and (if requested by any
such Person), confirm such notice in writing, (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment is proposed
to be filed and (B) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of
any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or
related Prospectus or for additional information, (iii) of the
issuance by the SEC, any state securities commission, any other
governmental agency or any court of any stop order, order or
injunction suspending or enjoining the use of a Prospectus or the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities
for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any event or
information becoming known that makes any statement made in a
Registration Statement or related Prospectus untrue in any material
respect or that requires the making of any changes in such
Registration Statement or Prospectus so that, in the case of a
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any 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, and that in
the case of a Prospectus, it will not contain any untrue statement of
a material fact or omit to state any 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;
(d) Use its commercially reasonable efforts to avoid the issuance
of or, if issued, obtain the withdrawal of any order enjoining or
suspending the use of a Prospectus or the effectiveness of a
Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction described in
Section 3(h), at the earliest practicable moment;
(e) If requested by the lead managing underwriters, if any, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any,
reasonably believe should be included therein, and (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment under the Securities Act as soon as practicable after the
Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided,
however, that the Company shall not be required to take any action
pursuant to this Section 3(e) that would, in the opinion of counsel
for the Company, violate applicable law;
(f) Upon written request to the Company, furnish to each Holder
of Registrable Securities to be sold pursuant to a Registration
Statement and each managing underwriter, if any, without charge, at
least one conformed copy of such Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested (including those
previously furnished or incorporated by reference) as soon as
practicable after the filing of such documents with the SEC;
(g) Deliver to each Holder of Registrable Securities to be sold
pursuant to a Registration Statement, and the underwriters, if any,
without charge, as many copies of the Prospectus (including each form
of prospectus) and each amendment or supplement thereto as such
persons reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of
the selling Holders of Registrable Securities and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto;
(h) Prior to any public offering of Registrable Securities, use
its commercially reasonable efforts to register or qualify or
cooperate with the Holders of Registrable Securities to be sold, the
underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any
such Holder or underwriter reasonably requests in writing; keep each
such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective hereunder and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration
Statement; provided, however, that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it
is not then so qualified or (ii) take any action which would subject
it to general service of process or to taxation in any jurisdiction
where they are not so subject;
(i) In connection with any sale or transfer of Registrable
Securities that will result in such Securities no longer being
Registrable Securities, cooperate with the Holders thereof and the
managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
sold, which certificates shall not bear any restrictive legends and
shall be in a form eligible for deposit with The Depository Trust
Company, and to enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters, if any, or such Holders may request at least two
Business Days prior to any sale of Registrable Securities;
(j) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to
each Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(k) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing
underwriters, if any) in order to expedite or facilitate the
disposition of such Registrable Securities, and, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration: (i) make such
representations and warranties to the underwriters and selling
Holders, if any, with respect to the business of the Company and its
subsidiaries (including with respect to businesses or assets acquired
or to be acquired by any of them), and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters if any, addressed
to each of the underwriters, and selling Holders, if any), covering
the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by
such underwriters or selling Holders; (iii) use their commercially
reasonable efforts to obtain customary "cold comfort" letters and
updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial
data is, or is required to be, included in the Registration
Statement), addressed (where reasonably possible) to each of the
underwriters and selling Holders, if any, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings; (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the
underwriters, if any, than those set forth in Section 4 hereof (or
such other provisions and procedures acceptable to the managing
underwriters, if any); and (v) deliver such documents and certificates
as may be reasonably requested by the managing underwriters, if any,
to evidence the continued validity of the representations and
warranties made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company;
(l) Make available for inspection by a representative of any
underwriter participating in any such disposition of Registrable
Securities, and any attorney, consultant or accountant retained by
such selling Holders or underwriter, at the offices where normally
kept, during reasonable business hours, all pertinent financial and
other records, corporate documents and properties of the Company and
its subsidiaries (including with respect to businesses and assets
acquired or to be acquired to the extent that such information is
available to the Company), and cause the officers, directors, agents
and employees of the Company and its subsidiaries (including with
respect to businesses and assets acquired or to be acquired to the
extent that such information is available to the Company) to supply
all information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or accountant in
connection with such Registration Statement; provided, however, that
such Persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to Federal securities
laws in connection with the filing of the Registration Statement or
the use of any Prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard such information by such Person or (iv) such
information becomes available to such Person from a source other than
the Company and its subsidiaries and such source is not bound by a
confidentiality agreement;
(m) Comply with all applicable rules and regulations of the SEC
and make generally available to their securityholders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act, no later than 45
days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold
to underwriters in a firm commitment or reasonable efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter
after the effective date of a Registration Statement, which statement
shall cover said period, consistent with the requirements of Rule 158
under the Securities Act; and
(n) Cooperate with each seller of Registrable Securities covered
by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to be
included in a Registration Statement to furnish to the Company such information
regarding (i) the intended method of distribution of such Registrable Securities
(ii) such Holder and (iii) the Registrable Securities held by such Holder as is
required by law to be disclosed in such Registration Statement and the Company
may exclude from such Registration Statement the Registrable Securities of any
Holder who unreasonably fails to furnish such information within a reasonable
time after receiving such request. The Company shall not be required to provide
indemnification to any underwriter or any other person relating to information
referred to in clauses (i) and (ii) provided to the Company in writing
specifically for inclusion in such Registration Statement.
If any such Registration Statement refers to any Holder by name
or otherwise as the Holder of any securities of the Company, then such Holder
shall have the right to require (i) the insertion therein of language, in form
and substance reasonably satisfactory to such Holder, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act, the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv) or 3(c)(v) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(j) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each Holder of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 3(j) hereof or (y) the Advice, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus.
4. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Holder,
each underwriter who participates in an offering of Registrable Securities,
their respective Affiliates, each Person, if any, who controls any of such
parties within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act and each of their respective directors, officers, employees and
agents, as follows:
(i) from and against any and all loss, liability, claim, damage
and expense whatsoever, joint or several, as incurred, arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto),
covering Registrable Securities, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) from and against any and all loss, liability, claim, damage
and expense whatsoever, joint or several, as incurred, to the extent
of the aggregate amount paid in settlement of any litigation (other
than amounts the Holders agree to pay in any written settlement
agreement), or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the prior written consent of the Company; and
(iii) from and against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of one counsel
chosen by the Holders or any underwriter (except to the extent
otherwise expressly provided in Section 4(c) hereof)), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section
4(a);
provided that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to the Company by a Holder or any
underwriter in writing expressly for use in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) or
(ii) contained in any preliminary prospectus if such Holder or such underwriter
failed to send or deliver a copy of the Prospectus (in the form it was first
provided to such parties for confirmation of sales) to the Person asserting such
losses, claims, damages or liabilities on or prior to the delivery of written
confirmation of any sale of securities covered thereby to such Person in any
case where such delivery is required by the Securities Act and such Prospectus
would have corrected such untrue statement or omission. Any amounts advanced by
the Company to an indemnified party pursuant to this Section 4 as a result of
such losses shall be returned to the Company if it shall be finally determined
by such a court in a judgment not subject to appeal or final review that such
indemnified party was not entitled to indemnification by the Company.
(b) By accepting the benefits of this Agreement, each Holder
agrees, severally and not jointly, to indemnify and hold harmless the Company,
each underwriter who participates in an offering of Registrable Securities and
the other selling Holders and each of their respective directors, officers
(including each officer of the Company who signed the Registration Statement),
employees and agents and each Person, if any, who controls the Company, any
underwriter or any other selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
loss, liability, claim, damage and expense whatsoever described in the indemnity
contained in Section 4(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such selling Holder expressly for use in
the Registration Statement (or any amendment thereto), or any such Prospectus
(or any amendment or supplement thereto). Notwithstanding the provisions of this
Section 4(b), a Holder of Registrable Securities shall not be required to pay
any indemnification in an amount in excess of the net proceeds received by such
Holder in the offering to which such Registration Statement relates.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party, but failure to so notify an indemnifying party
shall not relieve such indemnifying party from any liability which it may have
other than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of any such action. If an
indemnifying party so elects within a reasonable time after receipt of such
notice, such indemnifying party, jointly with any other indemnifying party, may
assume the defense of such action with counsel chosen thereby and approved by
the indemnified parties defendant in such action; provided that if any such
indemnified party reasonably determines, based on advice of counsel, that there
may be legal defenses available to such indemnified party which are different
from or in addition to those available to such indemnifying party or that
representation of such indemnifying party and any indemnified party by the same
counsel would present a conflict of interest, then such indemnifying party or
parties shall not be entitled to assume such defense. If an indemnifying party
is not entitled to assume the defense of such action as a result of the proviso
to the preceding sentence, counsel for such indemnifying party shall be entitled
to conduct the defense of such indemnifying party and counsel for each
indemnified party or parties shall be entitled to conduct the defense of such
indemnified party or parties. If an indemnifying party assumes the defense of an
action in accordance with and as permitted by the provisions of this paragraph,
such indemnifying party shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel), separate
from its own counsel, for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and the Holders, as incurred; provided that, notwithstanding the
provisions of this Section 4(d), a Holder of Registrable Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holder in the offering to which such Registration
Statement relates exceeds the amount of any damages that such Holder has
otherwise been required to pay and no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Company and the Holders, such
parties shall contribute to such aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of the Company,
on the one hand, and Holders, on the other hand, with respect to the statements
or omissions which resulted in such loss, liability, claim, damage or expense,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holders, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by or on behalf of the Holders, on
the other, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Holders of the Registrable Securities agree that it would not be just
and equitable if contribution pursuant to this Section 4 were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the relevant equitable considerations. For purposes of this Section
4, each Affiliate of each Holder, and each director, officer, employee, agent
and Person, if any, who controls a Holder or such Affiliate within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each Person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.
(e) The indemnity and contribution covenants contained in this
Section 4 shall remain operative and in full force and effect regardless of (i)
any investigation made by or on behalf of a Holder or any Person controlling a
Holder, (ii) any sale of any Registrable Securities pursuant to this Agreement
and receipt by the Holders of the proceeds thereof or (iii) any termination of
this Agreement for any reason, including after the initial filing of the
Registration Statement to which these indemnity and contribution covenants
relate
5. Rule 144A
The Company shall use its commercially reasonable efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder or beneficial owner of Registrable Securities,
make available other information as required by, and so long as necessary to
permit, sales of Registrable Securities pursuant to Rule 144A. Notwithstanding
the foregoing, nothing in this Section 5 shall be deemed to require the Company
to register any of its securities pursuant to the Exchange Act.
6. Underwritten Registrations
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Registrable Securities on
the basis reasonably provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder of any of its obligations under this Agreement, each Holder and the
Company, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and each Holder agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach of any of the provisions of this Agreement and each hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not enter into
any agreement that is inconsistent with the rights granted to the Holders and
indemnified persons in this Agreement or otherwise conflicts with the provisions
hereof. Without the written consent of the Holders of a majority of the
outstanding Shares, the Company shall not grant to any Person any rights which
conflict with or are inconsistent with the provisions of this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Holders
of not less than a majority of the then outstanding Shares. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders whose securities
are being sold pursuant to a Registration Statement and that does not directly
or indirectly affect the rights of other Holders may be given by Holders of a
majority of the Registrable Securities being sold by such Holders pursuant to
such Registration Statement; provided, however, that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or consent with
respect to Section 4 shall be made or given otherwise than with the prior
written consent of each Holder or former Holder affected thereby.
(d) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to the Company, as provided in the Purchase Agreement,
(ii) if to the Purchasers, as provided in the Purchase Agreement,
or
(iii) if to any other Person who is then the registered Holder of
Shares or Registrable Securities, to the address of such Holder as it
appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder of Shares. The Company
may not assign any of its rights hereunder without the prior written consent of
each Holder of Shares; provided that a merger or consolidation of the Company
with another Person pursuant to which the issuer or issuers of any securities
issued to Holders of Shares in connection with such merger or consolidation
becomes obligated under this Agreement shall not be considered an assignment.
Notwithstanding the foregoing, no successor or assignee of the Company shall
have any of the rights granted under this Agreement until such Person shall
acknowledge its rights and obligations hereunder by a signed written statement
of such person's acceptance of such rights and obligations. If any transferee of
any Holder shall acquire Shares in any manner, whether by operation of law or
otherwise, such Shares shall be held subject to all of the terms of this
Agreement, and by taking and holding such Shares such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(g) Governing Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
YORK. THE COMPANY AND THE PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
(h) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
All references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(j) Legends. Each Holder agrees that the following legend shall
be placed on certificates representing any Securities owned by them:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF A REGISTRATION
RIGHTS AGREEMENT DATED AS OF DECEMBER 10, 1999, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF OUTSOURCING SOLUTIONS INC. AND IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY
ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT.
The Company agrees to remove the legend on the Shares upon the resale of such
Shares in accordance with the terms of this Agreement.
(k) Notwithstanding anything to the contrary, nothing contained
in this Agreement shall affect, limit or impair the rights and remedies of
Heller Financial, Inc. in its capacity as (i) a lender to the Company or any
Subsidiary pursuant to any agreement under which the Company or any Subsidiary
has borrowed or may borrow money, and (ii) the beneficiary of any and all
agreements entered into by the Company or any Subsidiary for the benefit of
Heller Financial, Inc., as lender.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the date first written above.
OUTSOURCING SOLUTIONS INC.
By:/s/ Gary L. Weller
---------------------------------
Name: Gary L. Weller
Title: EVP
ARES LEVERAGED INVESTMENT FUND, L.P.
By: Ares Management, L.P.,
its General Partner
By: /s/ Jeffrey Serota
--------------------------------
Name: Jeffrey Serota
Title: Vice President
ARES LEVERAGED INVESTMENT FUND II,
L.P.
By: Ares Management II, L.P.,
its General Partner
By: /s/ Jeffrey Serota
--------------------------------
Name: Jeffrey Serota
Title: Vice President
DB CAPITAL INVESTORS, L.P.
By: DB Capital Partners, L.P.
By DB Capital Partners, Inc.
By: /s/ Tyler Zachem
--------------------------------
Name: Tyler Zachem
Title: Managing Director
<PAGE>
FIRST UNION INVESTORS, INC.
By: /s/
--------------------------------
Name:
Title:
ABBOTT CAPITAL 1330 INVESTORS II,
L.P.
By: Abbott Capital 1330 GenPar II,
L.L.C.,
its General Partner
By: /s/ Thomas W. Hallagan
--------------------------------
Name: Thomas W. Hallagan
Title: Manager
ABBOTT CAPITAL PRIVATE EQUITY FUND
III, L.P.
By: Abbott Capital Management,
L.L.C.,
its General Partner
By: /s/ Raymond L. Held
--------------------------------
Name: Raymond L. Held
Title: Managing Director
BNY PARTNERS FUND, L.L.C.
By: BNY Private Investment
Management, Inc.,
its Member Manager
By: /s/ Burton M. Siegal
--------------------------------
Name: Burton M. Siegal
Title:Senior VP
<PAGE>
HELLER FINANCIAL, INC.
By: /s/ Timothy P. Davitt
--------------------------------
Name: Timothy P. Davitt
Title: Vice President
MAGNETITE ASSET INVESTORS L.L.C.
By: Blackrock Financial Management,
Inc.
As Managing Member
By: /s/ Dennis M. Schaney
--------------------------------
Name: Dennis M. Schaney
Title: Managing Director
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Agreement, dated as of the 4th day of June, 1999 amends and
restates the Employment Agreement dated as of as of the 27th day of August,
1996, as amended on May 14, 1997 and August 27, 1997, between Outsourcing
Solutions Inc. (formerly known as OSI Holdings Corp.), a Delaware corporation,
with offices at 390 South Woods Mill Road, Suite 350, Chesterfield, Missouri
63017 (the "Company"), and Timothy G. Beffa, an individual residing in the State
of Missouri (the "Employee").
R E C I T A L S
WHEREAS, the Company desires to secure the services and
employment of the Employee on behalf of the Company, and the Employee desires to
enter into employment with the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties hereto, each intending to be legally
bound hereby, agree as follows:
1. Employment. The Company hereby employs the Employee as Chief
Executive Officer of the Company, and the Employee accepts such employment for
the term of the employment specified in Section 3 below. During the Employment
Term (as defined below), the Employee shall serve as the Chief Executive Officer
of the Company, performing such duties as shall be reasonably required of such
an employee of the Company, and shall have such other powers and perform such
other additional executive duties as may from time to time be assigned to him by
the Board of Directors of the Company. During the Employment Term, the Employee
shall serve as a member of the Board of Directors of the Company. The Employee's
primary place of employment shall be St. Louis, Missouri. The Company and the
Employee each acknowledge that the Employee shall be required to travel
extensively in connection with the performance of his duties hereunder,
particularly during the first year of employment. The Company and the Employee
further acknowledge that the Company's headquarters shall be relocated to St.
Louis.
2. Performance. The Employee will serve the Company faithfully
and to the best of his ability and will devote substantially all of his time,
energy, experience and talents during regular business hours and as otherwise
reasonably necessary to such employment, to the exclusion of all other business
activities; provided, however, that the Employee may continue to serve on
outside boards of directors of which he is a member as of the date hereof.
3. Employment Term. The employment term shall begin on the date
of this Agreement and continue until December 31, 1999, unless earlier
terminated pursuant to Section 7 below (the "Employment Term"); provided, that
on December 31, 1999 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 no less than Three
Hundred Seventy Five Thousand Dollars ($375,000.00).
(b) Bonus. Commencing on January 1, 1999, the Employee shall be
eligible for an annual bonus of up to 150% of his base salary. Annual bonuses
shall be based on the satisfaction of performance targets established by the
Board of Directors on or before March 31 of each year for such year.
(c) 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.
(d) 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.
(e) Automobile. The Company shall assume the Employee's lease
obligations with respect to his current automobile and pay for all gas, oil,
maintenance and insurance for such automobile.
5. Expenses. The Employee shall be reimbursed by the Company
for all reasonable expenses incurred by him in connection with the performance
of his duties hereunder in accordance with policiese stablished by the Board
from time to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the
Employment Term and thereafter, (a) the Employee will not divulge, transmit or
otherwise disclose (except as legally compelled by court order, and then only to
the extent required, after prompt notice to the Company of any such order),
directly or indirectly, other than in the regular and proper course of business
of the Company, any confidential knowledge or information with respect to the
operations or finances of the Company or with respect to confidential or secret
processes, services, techniques, customers or plans with respect to the Company
and (b) the Employee will not use, directly or indirectly, any confidential
information for the benefit of anyone other than the Company; provided, however,
that the Employee has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Employee. All new processes, techniques, know-how, inventions, plans, products,
patents and devices developed, made or invented by the Employee, alone or with
others, while an employee of the Company, shall be and become the sole property
of the Company, unless released in writing by the Company, and the Employee
hereby assigns any and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall
not take any action to disparage or criticize to any third parties any of the
services of the Company or to commit any other action that injures or hinders
the business relationships of the Company.
All files, records, documents, memorandums, notes or other
documents relating to the business of Company, whether prepared by Employee or
otherwise coming into his possession in the course of the performance of his
services 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.
(a) If (i) Employee's employment is terminated by the Company without
"cause," (ii) the Company does not agree to extend the Employment Term upon the
expiration thereof, (iii) Employee terminates his employment because the Company
reduces his responsibilities or compensation in a manner which is tantamount to
termination of Employee's employment, or (iv) within two years following a Sale
of the Company (as defined in Section 8(c) of this Agreement), the Employee
gives notice to the Company of his resignation for "Good Reason" (as defined in
Section 8(b) hereof) setting forth in reasonable detail the circumstances
claimed to constitute Good Reason and stating that it constitutes notice
pursuant to this Section 8(a), and the stated basis for Good Reason has not been
fully corrected within sixty (60) days from the date of such notice, the
Employee shall be entitled to (x) 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 in a lump sum on the date of termination
or the date on which the Employment Term expires, as the case may be, and (y)
continue to receive the benefits referred to in Section 4(c) during the one year
period following the date of termination or expiration (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
Agreement, 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.
(b) For purposes of this Agreement, "Good Reason" shall mean the
occurrence, without the Employee's consent, of any of the following events
during the Employment Term within two years following a Sale of the Company: (A)
a relocation of the principal location of the performance of work by the
Employee beyond a thirty mile radius of such location as of the time of the Sale
of the Company; (B) an assignment to the Employee of duties that result in a
material diminution of the Employee's duties and responsibilities under this
Agreement, (C) a reduction of the Employee's base salary in effect as of the
time of the Sale of the Company, (D) a material breach of the Company's
obligations set forth in this Agreement, or (E) the failure of any acquiror of,
or successor to, all or substantially all of the assets or business of the
Company to expressly assume this Agreement and agree to perform all of the
obligations of the Company hereunder.
(c) For the purposes of this Agreement, "Sale of the Company" shall mean
(i) a stock sale, merger, consolidation, combination, reorganization or other
transaction resulting in less than fifty percent (50%) of the combined voting
power of the surviving or resulting entity being owned by the shareholders of
the Company immediately prior to such transaction or (ii) the sale or other
disposition of all or substantially all of the assets or business of the Company
(other than, in the case of either clause (i) or (ii) above, in connection with
any employee benefit plan of the Company or an Affiliate); provided, however,
that a public offering of the capital stock of the Company shall not be a "Sale
of the Company."
9. Notice. Any notices required or permitted hereunder shall
be in writing and shall be deemed to have been given when personally delivered
or when mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
Timothy G. Beffa
2015 Kings Pointe Drive
St. Louis, Missouri 63005
If to the Company:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
Attention: Vice President and General Counsel
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, or in the event of any dispute or controversy arising out of or
relating to this Agreement, the costs and expenses (including attorney's fees
and disbursements) 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 principal claims. Notwithstanding the
foregoing, following a Sale of the Company, all reasonable costs and expenses
(including attorney's fees and disbursements) incurred by the Employee in an
action or claim to enforce any provision or term of this Agreement, and all
costs and expenses of any court proceeding or arbitration in connection with any
dispute or controversy arising out of or relating to this Agreement, shall be
promptly paid or reimbursed by the Company or its successor; provided, however,
that no payment or reimbursement shall be made of such costs or expenses if and
to the extent that the court or arbitrator adjudicating or deciding the matter
determines that any of the Employee's litigation assertions or defenses were in
bad faith or frivolous. Pending the resolution of any court proceeding or
arbitration described in this Section 10(c), the Company or its successor shall
continue payment of all amounts and benefits due the Employee under this
Agreement.
(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 8 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/ Eric R. Fencl
--------------------------
Name: Eric R. Fencl
Title: Vice President and
General Counsel
EMPLOYEE
/s/ Timothy G. Beffa
---------------------------
TIMOTHY G. BEFFA
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Agreement, dated as of the 4th day of June, 1999 amends and
restates the Employment Agreement dated as of the 1st day of September, 1998
between Outsourcing Solutions Inc., a Delaware corporation, with offices at 390
South Woods Mill Road, Suite 350, Chesterfield, Missouri 63017 (the "Company"),
and Michael A. DiMarco, 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
Executive Vice President--President of Fee Services 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 Executive Vice President--President of Fee Services 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, 1999, unless earlier
terminated pursuant to Section 7 below (the "Employment Term"); provided, that
on December 31, 1999 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 no less than Three
Hundred Twenty Five Thousand Dollars ($325,000.00).
(b) Bonus. Commencing on January 1, 1999, the Employee shall be
eligible for a target annual bonus of 67% of his base salary. Annual bonuses
shall be based on the satisfaction of performance targets established by the
Board of Directors on or before March 31 of each year for such year.
(c) 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.
(d) 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.
5. Expenses.
(a) 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.
(b) The Employee shall be reimbursed by the Company for normal moving
and relocation expenses incurred by Employee to move his residence to the St.
Louis metropolitan area, including reasonable and customary real estate
commission, closing costs and discount points and reasonable expenses for
temporary living, return home travel and family travel to St. Louis for house
purchasing purposes. If requested by Employee, Company shall provide an advance
of $115,000 to facilitate Employee's relocation, to be repaid to the Company no
later than 48 hours following the closing of the sale of Employee's current
residence in Fairview, Texas.
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 for two years 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, provided that Employee shall
not be prohibited from such solicitation or employment if such employee (a)
initiated discussions with Employee without any direct or indirect solicitation
from Employee, (b) responded to a general public solicitation, or (c) has
terminated employment with the Company prior to commencement of discussions with
Employee.
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.
(a) If (i) Employee's employment is terminated by the Company without
"cause," (ii) the Company does not agree to extend the Employment Term upon the
expiration thereof, (iii) Employee terminates his employment because the Company
reduces his responsibilities or compensation in a manner which is tantamount to
termination of Employee's employment, or (iv) within two years following a Sale
of the Company (as defined in Section 9 of this Agreement), the Employee gives
notice to the Company of his resignation for "Good Reason" (as defined in
Section 8(b) hereof) setting forth in reasonable detail the circumstances
claimed to constitute Good Reason and stating that it constitutes notice
pursuant to this Section 8(a), and the stated basis for Good Reason has not been
fully corrected within sixty (60) days from the date of such notice, the
Employee shall be entitled to (x) receive an amount equal to his total cash
compensation (base salary plus bonus, excluding, however, any Change in Control
Bonus paid pursuant to Section 9 hereof) 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 in a lump sum on the date of termination
or the date on which the Employment Term expires, as the case may be, and (y)
continue to receive the benefits referred to in Section 4(c) during the one year
period following the date of termination or expiration (the "Severance Period");
provided, however, if any such event occurs prior to the extension of the
initial Employment Term, the Employee shall be entitled to (A) an amount equal
to his then current salary, payable in a lump sum on the date of termination,
(B) an amount equal to his target annual bonus, payable in a lump sum on the
date of termination, and (C) continue to receive the benefits referred to in
Section 4(c) 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 Agreement, 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.
(b) For purposes of this Agreement, "Good Reason" shall mean the
occurrence, without the Employee's consent, of any of the following events
during the Employment Term within two years following a Sale of the Company: (A)
a relocation of the principal location of the performance of work by the
Employee beyond a thirty mile radius of such location as of the time of the Sale
of the Company; (B) an assignment to the Employee of duties that result in a
material diminution of the Employee's duties and responsibilities under this
Agreement, (C) a reduction of the Employee's base salary in effect as of the
time of the Sale of the Company, (D) a material breach of the Company's
obligations set forth in this Agreement, or (E) the failure of any acquiror of,
or successor to, all or substantially all of the assets or business of the
Company to expressly assume this Agreement and agree to perform all of the
obligations of the Company hereunder.
9. Change in Control Bonus. Upon consummation of a "Sale of the
Company," if the Employee is employed by the Company immediately prior thereto,
he will be entitled to receive a payment from the Company in the amount of 250%
of his (i) then current base salary plus (ii) target annual bonus, reduced by
his "Option Gain" and subject to any applicable withholding or employment taxes.
Such amount (the "Change in Control Bonus") will be paid to the Employee in
immediately available funds in a lump-sum at the time such Sale of the Company
is consummated. The foregoing to the contrary notwithstanding, the Employee will
only be entitled to receive the Change in Control Bonus if the Change in Control
Bonus is previously approved by a vote of more than seventy-five percent (75%)
of the voting power of the Company's outstanding stock immediately before any
Sale of the Company. For purposes of this Agreement, the following terms have
the meanings set forth below:
"Sale of the Company" - a (i) a stock sale, merger, consolidation,
combination, reorganization or other transaction resulting in less than
fifty percent (50%) of the combined voting power of the surviving or
resulting entity being owned by the shareholders of the Company
immediately prior to such transaction or (ii) the sale or other
disposition of all or substantially all of the assets or business of the
Company (other than, in the case of either clause (i) or (ii) above, in
connection with any employee benefit plan of the Company or an
Affiliate); provided, however, that a public offering of the capital
stock of the Company shall not be a "Sale of the Company."
"Option Gain" - the aggregate amount computed for all of the options to
purchase capital stock of the Company or other equity compensation
awards theretofore granted to the Employee, of the excess of the
consideration received by the holders of the Company's common stock for
a share of such common stock in connection with the applicable Sale of
the Company over the exercise price of the option or other award, if
any, multiplied by the number of shares of the Company's common stock
covered by each such option or award. The amount of the Option Gain
shall be finally and conclusively determined by the Board of Directors
of the Company in its good faith.
10. 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:
Michael A. DiMarco
247 Doulton Place
Town and Country, Missouri 63141
If to the Company:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
Attn: President
11. 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, or in the event of any dispute or controversy arising out of or
relating to this Agreement, the costs and expenses (including attorney's fees
and disbursements) 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 principal claims. Notwithstanding the
foregoing, following a Sale of the Company, all reasonable costs and expenses
(including attorney's fees and disbursements) incurred by the Employee in an
action or claim to enforce any provision or term of this Agreement, and all
costs and expenses of any court proceeding or arbitration in connection with any
dispute or controversy arising out of or relating to this Agreement, shall be
promptly paid or reimbursed by the Company or its successor; provided, however,
that no payment or reimbursement shall be made of such costs or expenses if and
to the extent that the court or arbitrator adjudicating or deciding the matter
determines that any of the Employee's litigation assertions or defenses were in
bad faith or frivolous. Pending the resolution of any court proceeding or
arbitration described in this Section 11(c), the Company or its successor shall
continue payment of all amounts and benefits due the Employee under this
Agreement.
(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 8 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/ Michael A. DiMarco
----------------------------------
Michael A. DiMarco
EMPLOYMENT AGREEMENT
This Agreement is made as of the 4th day of June, 1999 between
Outsourcing Solutions Inc., a Delaware corporation, with offices at 390 South
Woods Mill Road, Suite 350, Chesterfield, Missouri 63017 (the "Company"), and
Bryan Faliero, an individual residing in the State of Georgia (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
Division President, Portfolio Services 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
Division President, Portfolio Services 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 Atlanta, Georgia.
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, 1999, unless earlier
terminated pursuant to Section 7 below (the "Employment Term"); provided, that
on December 31, 1999 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 no less than Two
Hundred Ten Thousand Dollars ($210,000.00).
(b) Bonus. Commencing on January 1, 1999, the Employee shall be
eligible for a target annual bonus of 50% of his base salary. Annual bonuses
shall be based on the satisfaction of performance targets established by the
Board of Directors on or before March 31 of each year for such year.
(c) 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.
(d) 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.
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 for two years 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, provided that Employee shall
not be prohibited from such solicitation or employment if such employee (a)
initiated discussions with Employee without any direct or indirect solicitation
from Employee, (b) responded to a general public solicitation, or (c) has
terminated employment with the Company prior to commencement of discussions with
Employee.
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.
(a) If (i) Employee's employment is terminated by the Company without
"cause," (ii) the Company does not agree to extend the Employment Term upon the
expiration thereof, (iii) Employee terminates his employment because the Company
reduces his responsibilities or compensation in a manner which is tantamount to
termination of Employee's employment, or (iv) within two years following a Sale
of the Company (as defined in Section 9 of this Agreement), the Employee gives
notice to the Company of his resignation for "Good Reason" (as defined in
Section 8(b) hereof) setting forth in reasonable detail the circumstances
claimed to constitute Good Reason and stating that it constitutes notice
pursuant to this Section 8(a), and the stated basis for Good Reason has not been
fully corrected within sixty (60) days from the date of such notice, the
Employee shall be entitled to (x) receive an amount equal to his total cash
compensation (base salary plus bonus, excluding, however, any Change in Control
Bonus paid pursuant to Section 9 hereof) 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 in a lump sum on the date of termination
or the date on which the Employment Term expires, as the case may be, and (y)
continue to receive the benefits referred to in Section 4(c) during the one year
period following the date of termination or expiration (the "Severance Period");
provided, however, if any such event occurs prior to the extension of the
initial Employment Term, the Employee shall be entitled to (A) an amount equal
to his then current salary, payable in a lump sum on the date of termination,
(B) an amount equal to his target annual bonus, payable in a lump sum on the
date of termination, and (C) continue to receive the benefits referred to in
Section 4(c) 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 Agreement, 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.
(b) For purposes of this Agreement, "Good Reason" shall mean the
occurrence, without the Employee's consent, of any of the following events
during the Employment Term within two years following a Sale of the Company: (A)
a relocation of the principal location of the performance of work by the
Employee beyond a thirty mile radius of such location as of the time of the Sale
of the Company; (B) an assignment to the Employee of duties that result in a
material diminution of the Employee's duties and responsibilities under this
Agreement, (C) a reduction of the Employee's base salary in effect as of the
time of the Sale of the Company, (D) a material breach of the Company's
obligations set forth in this Agreement, or (E) the failure of any acquiror of,
or successor to, all or substantially all of the assets or business of the
Company to expressly assume this Agreement and agree to perform all of the
obligations of the Company hereunder.
9. Change in Control Bonus. Upon consummation of a "Sale of the
Company," if the Employee is employed by the Company immediately prior thereto,
he will be entitled to receive a payment from the Company in the amount of 250%
of his (i) then current base salary plus (ii) target annual bonus, reduced by
his "Option Gain" and subject to any applicable withholding or employment taxes.
Such amount (the "Change in Control Bonus") will be paid to the Employee in
immediately available funds in a lump-sum at the time such Sale of the Company
is consummated. The foregoing to the contrary notwithstanding, the Employee will
only be entitled to receive the Change in Control Bonus if the Change in Control
Bonus is previously approved by a vote of more than seventy-five percent (75%)
of the voting power of the Company's outstanding stock immediately before any
Sale of the Company. For purposes of this Agreement, the following terms have
the meanings set forth below:
"Sale of the Company" - a (i) a stock sale, merger, consolidation,
combination, reorganization or other transaction resulting in less than
fifty percent (50%) of the combined voting power of the surviving or
resulting entity being owned by the shareholders of the Company
immediately prior to such transaction or (ii) the sale or other
disposition of all or substantially all of the assets or business of the
Company (other than, in the case of either clause (i) or (ii) above, in
connection with any employee benefit plan of the Company or an
Affiliate); provided, however, that a public offering of the capital
stock of the Company shall not be a "Sale of the Company."
"Option Gain" - the aggregate amount computed for all of the options to
purchase capital stock of the Company or other equity compensation
awards theretofore granted to the Employee, of the excess of the
consideration received by the holders of the Company's common stock for
a share of such common stock in connection with the applicable Sale of
the Company over the exercise price of the option or other award, if
any, multiplied by the number of shares of the Company's common stock
covered by each such option or award. The amount of the Option Gain
shall be finally and conclusively determined by the Board of Directors
of the Company in its good faith.
10. 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:
Bryan Faliero
3635 Cantrell Rd. N. E.
Atlanta, GA 30319
If to the Company:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
Attn: President
<PAGE>
11. 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, or in the event of any dispute or controversy arising out of or
relating to this Agreement, the costs and expenses (including attorney's fees
and disbursements) 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 principal claims. Notwithstanding the
foregoing, following a Sale of the Company, all reasonable costs and expenses
(including attorney's fees and disbursements) incurred by the Employee in an
action or claim to enforce any provision or term of this Agreement, and all
costs and expenses of any court proceeding or arbitration in connection with any
dispute or controversy arising out of or relating to this Agreement, shall be
promptly paid or reimbursed by the Company or its successor; provided, however,
that no payment or reimbursement shall be made of such costs or expenses if and
to the extent that the court or arbitrator adjudicating or deciding the matter
determines that any of the Employee's litigation assertions or defenses were in
bad faith or frivolous. Pending the resolution of any court proceeding or
arbitration described in this Section 11(c), the Company or its successor shall
continue payment of all amounts and benefits due the Employee under this
Agreement.
(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 8 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.
<PAGE>
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/ Bryan Faliero
------------------------------------
Bryan Faliero
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Agreement, dated as of the 4th day of June, 1999 amends and
restates the Employment Agreement dated as of the 11th day of May, 1998 between
Outsourcing Solutions Inc., a Delaware corporation, with offices at 390 South
Woods Mill Road, Suite 350, Chesterfield, Missouri 63017 (the "Company"), and
Michael Staed, 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 Senior
Vice President - President of Outsourcing Services 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 Senior Vice President - President of Outsourcing Services 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 no less than Two
Hundred Fifty Thousand Dollars ($250,000.00).
(b) Bonus. Commencing on January 1, 1999, the Employee shall be
eligible for a target annual bonus of 50% of his base salary. Annual bonuses
shall be based on the satisfaction of performance targets established by the
Board of Directors on or before March 31 of each year for such year.
(c) 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.
(d) 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.
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 for two years 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, provided that Employee shall
not be prohibited from such solicitation or employment if such employee (a)
initiated discussions with Employee without any direct or indirect solicitation
from Employee, (b) responded to a general public solicitation, or (c) has
terminated employment with the Company prior to commencement of discussions with
Employee.
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.
(a) If (i) Employee's employment is terminated by the Company without "cause,"
(ii) the Company does not agree to extend the Employment Term upon the
expiration thereof, (iii) Employee terminates his employment because the Company
reduces his responsibilities or compensation in a manner which is tantamount to
termination of Employee's employment, or (iv) within two years following a Sale
of the Company (as defined in Section 9 of this Agreement), the Employee gives
notice to the Company of his resignation for "Good Reason" (as defined in
Section 8(b) hereof) setting forth in reasonable detail the circumstances
claimed to constitute Good Reason and stating that it constitutes notice
pursuant to this Section 8(a), and the stated basis for Good Reason has not been
fully corrected within sixty (60) days from the date of such notice, the
Employee shall be entitled to (x) receive an amount equal to his total cash
compensation (base salary plus bonus, excluding, however, any Change in Control
Bonus paid pursuant to Section 9 hereof) 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 in a lump sum on the date of termination
or the date on which the Employment Term expires, as the case may be, and (y)
continue to receive the benefits referred to in Section 4(c) during the one year
period following the date of termination or expiration (the "Severance Period");
provided, however, if any such event occurs prior to the extension of the
initial Employment Term, the Employee shall be entitled to (A) an amount equal
to his then current salary, payable in a lump sum on the date of termination,
(B) an amount equal to his target annual bonus, payable in a lump sum on the
date of termination, and (C) continue to receive the benefits referred to in
Section 4(c) 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 Agreement, 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.
(b) For purposes of this Agreement, "Good Reason" shall mean the
occurrence, without the Employee's consent, of any of the following events
during the Employment Term within two years following a Sale of the Company: (A)
a relocation of the principal location of the performance of work by the
Employee beyond a thirty mile radius of such location as of the time of the Sale
of the Company; (B) an assignment to the Employee of duties that result in a
material diminution of the Employee's duties and responsibilities under this
Agreement, (C) a reduction of the Employee's base salary in effect as of the
time of the Sale of the Company, (D) a material breach of the Company's
obligations set forth in this Agreement, or (E) the failure of any acquiror of,
or successor to, all or substantially all of the assets or business of the
Company to expressly assume this Agreement and agree to perform all of the
obligations of the Company hereunder.
9. Change in Control Bonus. Upon consummation of a "Sale of the
Company," if the Employee is employed by the Company immediately prior thereto,
he will be entitled to receive a payment from the Company in the amount of 250%
of his (i) then current base salary plus (ii) target annual bonus, reduced by
his "Option Gain" and subject to any applicable withholding or employment taxes.
Such amount (the "Change in Control Bonus") will be paid to the Employee in
immediately available funds in a lump-sum at the time such Sale of the Company
is consummated. The foregoing to the contrary notwithstanding, the Employee will
only be entitled to receive the Change in Control Bonus if the Change in Control
Bonus is previously approved by a vote of more than seventy-five percent (75%)
of the voting power of the Company's outstanding stock immediately before any
Sale of the Company. For purposes of this Agreement, the following terms have
the meanings set forth below:
"Sale of the Company" - a (i) a stock sale, merger, consolidation,
combination, reorganization or other transaction resulting in less than
fifty percent (50%) of the combined voting power of the surviving or
resulting entity being owned by the shareholders of the Company
immediately prior to such transaction or (ii) the sale or other
disposition of all or substantially all of the assets or business of the
Company (other than, in the case of either clause (i) or (ii) above, in
connection with any employee benefit plan of the Company or an
Affiliate); provided, however, that a public offering of the capital
stock of the Company shall not be a "Sale of the Company."
"Option Gain" - the aggregate amount computed for all of the options to
purchase capital stock of the Company or other equity compensation
awards theretofore granted to the Employee, of the excess of the
consideration received by the holders of the Company's common stock for
a share of such common stock in connection with the applicable Sale of
the Company over the exercise price of the option or other award, if
any, multiplied by the number of shares of the Company's common stock
covered by each such option or award. The amount of the Option Gain
shall be finally and conclusively determined by the Board of Directors
of the Company in its good faith.
10. 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:
Michael Staed
13231 Thornhill Drive
Town & Country, Missouri 63131
If to the Company:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
Attn: President
11. 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, or in the event of any dispute or controversy arising out of or
relating to this Agreement, the costs and expenses (including attorney's fees
and disbursements) 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 principal claims. Notwithstanding the
foregoing, following a Sale of the Company, all reasonable costs and expenses
(including attorney's fees and disbursements) incurred by the Employee in an
action or claim to enforce any provision or term of this Agreement, and all
costs and expenses of any court proceeding or arbitration in connection with any
dispute or controversy arising out of or relating to this Agreement, shall be
promptly paid or reimbursed by the Company or its successor; provided, however,
that no payment or reimbursement shall be made of such costs or expenses if and
to the extent that the court or arbitrator adjudicating or deciding the matter
determines that any of the Employee's litigation assertions or defenses were in
bad faith or frivolous. Pending the resolution of any court proceeding or
arbitration described in this Section 11(c), the Company or its successor shall
continue payment of all amounts and benefits due the Employee under this
Agreement.
(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 8 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.
<PAGE>
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/ Michael B. Staed
------------------------------------
Michael Staed
EMPLOYMENT AGREEMENT
This Agreement is made as of the 6th day of July, 1999 between
Outsourcing Solutions Inc., a Delaware corporation, with offices at 390 South
Woods Mill Road, Suite 350, Chesterfield, Missouri 63017 (the "Company"), and
Gary L. Weller, 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
Executive Vice President and 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 as Executive Vice President and 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, 1999, unless earlier
terminated pursuant to Section 7 below (the "Employment Term"); provided, that
on December 31, 1999 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 no less than Two
Hundred Seventy Five Thousand Dollars ($275,000.00).
(b) Bonus. The Company shall pay the Employee a signing bonus,
subject to withholding and other applicable taxes, of $125,000, payable on or
before July 31, 1999. For the period commencing on the date of this Agreement
and ending on December 31, 1999, the Employee shall also receive a bonus of
$184,250, subject to withholding and other applicable taxes, provided the
Employee remains employed by the Company and on its payroll on the date annual
bonuses for 1999 are distributed to other key employees of the Company.
Commencing on January 1, 2000, the Employee shall be eligible for an annual
target bonus of up to 67% of his base salary. Annual bonuses (other than the
guaranteed bonus for 1999) shall be based on the satisfaction of performance
targets established by the Board of Directors on or before March 31 of each year
for such year.
(c) 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.
(d) 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.
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 for two years 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, provided that Employee shall
not be prohibited from such solicitation or employment if such employee (a)
initiated discussions with Employee without any direct or indirect solicitation
from Employee, (b) responded to a general public solicitation, or (c) has
terminated employment with the Company prior to commencement of discussions with
Employee.
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; Non-Competition Covenant.
(a) If (i) Employee's employment is terminated by the Company without
"cause," (ii) the Company does not agree to extend the Employment Term upon the
expiration thereof, (iii) Employee terminates his employment because the Company
reduces his responsibilities or compensation in a manner which is tantamount to
termination of Employee's employment, or (iv) within two years following a Sale
of the Company (as defined in Section 8(c) of this Agreement), the Employee
gives notice to the Company of his resignation for "Good Reason" (as defined in
Section 8(b) hereof) setting forth in reasonable detail the circumstances
claimed to constitute Good Reason and stating that it constitutes notice
pursuant to this Section 8(a), and the stated basis for Good Reason has not been
fully corrected within sixty (60) days from the date of such notice, the
Employee shall be entitled to (x) 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 in a lump sum on the date of termination
or the date on which the Employment Term expires, as the case may be, and (y)
continue to receive the benefits referred to in Section 4(c) during the one year
period following the date of termination or expiration (the "Severance Period");
provided, however, if any such event occurs prior to Employee receiving the
guaranteed bonus for 1999 referred to in Section 4(b), the Employee shall be
entitled to (A) an amount equal to his then current salary, payable in a lump
sum on the date of termination, (B) an amount equal to his target annual bonus,
payable in a lump sum on the date of termination, (C) the guaranteed bonus
payment for 1999 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 (d) continue
to receive the benefits referred to in Section 4(c) 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
Agreement, 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.
(b) For purposes of this Agreement, "Good Reason" shall mean the
occurrence, without the Employee's consent, of any of the following events
during the Employment Term within two years following a Sale of the Company: (A)
a relocation of the principal location of the performance of work by the
Employee beyond a thirty mile radius of such location as of the time of the Sale
of the Company; (B) an assignment to the Employee of duties that result in a
material diminution of the Employee's duties and responsibilities under this
Agreement, (C) a reduction of the Employee's base salary in effect as of the
time of the Sale of the Company, (D) a material breach of the Company's
obligations set forth in this Agreement, or (E) the failure of any acquiror of,
or successor to, all or substantially all of the assets or business of the
Company to expressly assume this Agreement and agree to perform all of the
obligations of the Company hereunder.
(c) For the purposes of this Agreement, "Sale of the Company" shall mean
(i) a stock sale, merger, consolidation, combination, reorganization or other
transaction resulting in less than fifty percent (50%) of the combined voting
power of the surviving or resulting entity being owned by the shareholders of
the Company immediately prior to such transaction or (ii) the sale or other
disposition of all or substantially all of the assets or business of the Company
(other than, in the case of either clause (i) or (ii) above, in connection with
any employee benefit plan of the Company or an Affiliate); provided, however,
that a public offering of the capital stock of the Company shall not be a "Sale
of the Company."
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:
Gary L. Weller
17511 Country Lake Estates Court
Chesterfield, Missouri 63005
If to the Company:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
Attention: President and Chief Executive Officer
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, or in the event of any dispute or controversy arising out of or
relating to this Agreement, the costs and expenses (including attorney's fees
and disbursements) 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 principal claims. Notwithstanding the
foregoing, following a Sale of the Company, all reasonable costs and expenses
(including attorney's fees and disbursements) incurred by the Employee in an
action or claim to enforce any provision or term of this Agreement, and all
costs and expenses of any court proceeding or arbitration in connection with any
dispute or controversy arising out of or relating to this Agreement, shall be
promptly paid or reimbursed by the Company or its successor; provided, however,
that no payment or reimbursement shall be made of such costs or expenses if and
to the extent that the court or arbitrator adjudicating or deciding the matter
determines that any of the Employee's litigation assertions or defenses were in
bad faith or frivolous. Pending the resolution of any court proceeding or
arbitration described in this Section 10(c), the Company or its successor shall
continue payment of all amounts and benefits due the Employee under this
Agreement.
(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 8 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/ Gary L. Weller
------------------------------------
Gary L. Weller
OUTSOURCING SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT [B]
This Agreement (the "Agreement"), dated , is made
---------------
between Outsourcing Solutions Inc. (the "Company") and (the
------------------
"Optionee"). All capitalized terms that are not defined herein shall have the
meaning as defined in the Company's 1995 Stock Option and Stock Award Plan, as
amended (the "Plan"). References to "he," "him," and "his" shall mean the
feminine form of such terms, when applicable.
W I T N E S S E T H :
--------------------
1. Grant of Option. Pursuant to the provisions of the Plan, the
Company hereby grants to the Optionee, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase from the Company, all or any part of an aggregate
of shares of $0.01 par value common stock of the Company (the "Stock") at
-------
a per share purchase price equal to $ .00 (the "Option"), such Option to be
--
exercisable as hereinafter provided. The Option shall not be treated as an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended.
2. Terms and Conditions. It is understood and agreed that
the Option evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. The Option shall expire ten (10) years
after the date indicated above.
(b) Exercise of Option. Subject to the other terms of this
Agreement and the Plan, the Option may be exercised on or after the date which
is eight years from the date hereof; provided, however, that such Option shall
become exercisable (i) with respect to fifty percent (50%) of the shares of
Stock subject to the Option on or after the satisfaction by the Company of such
reasonable performance targets as are established in good faith by the Committee
or the Board in writing on or before December 31 of each year for the next
succeeding year, as set forth in a resolution of the Committee or the Board (as
applicable), as to that percentage of the total shares of Stock covered by this
Option set forth on Schedule I attached hereto and (ii) with respect to the
remaining fifty percent (50%) of the shares of Stock subject to the Option upon
the occurrence of a Liquidation Event, as defined on Schedule I attached hereto,
subject to the achievement by the Company of internal rate of return targets as
set forth on such Schedule I, plus any shares of Stock as to which the Option
could have been exercised prior to satisfaction of such conditions in (i) and/or
(ii) in a particular year (if any) but was not so exercised. Notwithstanding the
foregoing, the Option shall become fully exercisable as to those shares of Stock
referred in clause (i) above immediately upon the occurrence of a Change in
Control (as defined in Section 3 below).
Any exercise of all or any part of this Option shall be
accompanied by a written notice to the Company specifying the number of shares
of Stock as to which the Option is being exercised. Notation of any partial
exercise shall be made by the Company on Schedule II attached hereto.
(c) Consideration. At the time of any exercise of the Option, the
purchase price of the shares of Stock as to which the Option shall be exercised
shall be paid to the Company (i) in cash, (ii) with Stock already owned for at
least eight months by the Optionee having a total fair market value, as
determined in accordance with Section 6(a) of the Plan ("Fair Market Value"),
equal to the purchase price of such Stock, or (iii) a combination of cash and
Stock (such Stock having already been owned for at least eight months by the
Optionee) having a total Fair Market Value, as so determined, equal to the
purchase price of such Stock.
(d) Exercise Upon Death, Disability or Termination of Employment.
(i) In the event of the death of the Optionee while an employee of the Company
or a subsidiary of the Company, the Option, to the extent such Option would be
exercisable in accordance with Section 2(b) hereof as of the date of his death,
may be immediately exercised after his death by the legal representative of the
Optionee's estate or by the legatee of the Optionee under his last will for a
period of two years from the date of his death or until the expiration of the
stated period of the Option, whichever period is the shorter.
(ii) If the Optionee's employment with the Company or a
subsidiary of the Company shall terminate by reason of permanent disability (as
defined in the last sentence of this Section 2(d)(ii)), his Option, to the
extent exercisable in accordance with Section 2(b) hereof as of the date of such
termination, may be immediately exercised after such termination of employment
but may not be exercised after the expiration of the period of one year from the
date of such termination of employment or of the stated period of the Option,
whichever period is the shorter; provided, however, that if the Optionee dies
within a period of one year from the date of such termination of employment, any
unexercised Option, to the extent exercisable in accordance with Section 2(b)
hereof as of the date of such termination, may be exercised after his death by
the legal representative of his estate or by the legatee of the Optionee under
his last will until the expiration of the period of two years from the date of
his death or of the stated period of the Option, whichever period is the
shorter. For purposes of this Agreement, "permanent disability" shall mean an
inability (as determined by the Committee) to perform duties and services as an
employee of the Company or a subsidiary of the Company by reason of a medically
determinable physical or mental impairment, supported by medical evidence, which
can be expected to last for a continuous period of not less than eight (8)
months.
(iii) If (A) the Company or a subsidiary of the Company
terminates the Optionee's employment with the Company or such subsidiary and
such termination is not "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement, dated as of September 21, 1995, as amended and restated
on January 10, 1996 and on February 16, 1996 and as may be further amended from
time to time, by and among the Company, the MDC Entities (as defined therein),
APT (as defined therein), the Management Stockholders (as defined therein) and
the Non-Management Stockholders (as defined therein) (as amended, the
"Stockholders Agreement")) or (B) the Optionee terminates employment with the
Company or such subsidiary for "good reason" (as defined in Section 2.5(c) of
the Stockholders Agreement), the Optionee's Option, to the extent such Option
would have been exercisable in accordance with Section 2(b) hereof as of the
date of such termination, may thereafter be immediately exercised but may not be
exercised after the expiration of the period of one year from the date of such
termination of employment or of the stated period of the Option, whichever
period is the shorter; provided, however, that if the Optionee dies within a
period one year from the date of such termination of employment, any unexercised
Option, to the extent such Option would have been exercisable in accordance with
Section 2(b) hereof as of the date of such termination, may thereafter be
exercised by the legal representative of his estate or by the legatee of the
Optionee under his last will until the expiration of the period of two years
from the date of his death or of the stated period of the Option, whichever
period is the shorter.
(iv) If the Optionee's employment with the Company or a
subsidiary of the Company is terminated by reason of the Optionee's retirement
after attaining both five (5) years of continuous service with the Company or a
subsidiary of the Company and 59 1/2 years of age, to the extent exercisable in
accordance with Section 2(b) hereof as of the date of such termination, such
Option may thereafter be immediately exercised but may not be exercised after
the expiration of the period of two (2) years from the date of such termination
of employment or of the stated period of the Option, whichever period is the
shorter; provided, however, that if the Optionee dies within a period of two (2)
years from the date of such termination of employment, any unexercised Option,
to the extent exercisable in accordance with Section 2(b) hereof as of the date
of such termination, may thereafter be exercised by the legal representative of
his estate or by the legatee of the Optionee under his last will until the
expiration of the period of two years from the date of his death or of the
stated period of the Option, whichever period is the shorter.
(v) If the Optionee's employment is terminated by the Company or
a subsidiary of the Company "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement) or if the Optionee's employment is terminated for any
reason not described in this Section 2(d), the Optionee's Option shall terminate
on the date of such termination.
(e) Nontransferability. This Option shall not be transferable
other than by will or by the laws of descent and distribution.
(f) Withholding Taxes. If required by applicable law, the
Optionee shall be required to pay withholding taxes, if any, to the Company in
cash at the time of receipt of Stock upon the exercise of all or any part of
this Option; provided, however, tax withholding obligations may be met by the
withholding of Stock otherwise deliverable to the Optionee pursuant to
procedures approved by the Committee; provided further, however, the amount of
Stock so withheld shall not exceed the minimum required withholding obligation.
In no event shall Stock be delivered to any Optionee until he has paid to the
Company in cash the amount of tax required to be withheld by the Company under
applicable law, if any, or has elected to have such tax withholding obligations,
if any, met by the withholding of Stock in accordance with procedures approved
by the Committee.
(g) No Rights as Stockholder. The Optionee shall have no dividend
rights or any other rights as a stockholder with respect to any shares of Stock
subject to the Option until he has given written notice of exercise of the
Option and paid in full for such shares.
(h) No Right to Continued Employment. This Option shall not
confer upon the Optionee any right with respect to continuance of employment by
the Company or a subsidiary of the Company, nor shall it interfere in any way
with the right of the Company or such a subsidiary to terminate his employment
at any time.
(i) Inconsistency with Plan. Notwithstanding any provision herein
to the contrary, this Option provides the Optionee with no greater rights or
claims than are specifically provided for under the Plan. If and to the extent
that any provision contained herein is inconsistent with the Plan, the Plan
shall govern.
(j) Compliance with Laws, Regulations, Stockholders Agreement,
Etc. This Option and the obligation of the Company to sell and deliver shares of
Stock hereunder, shall be subject to (i) all applicable federal and state laws,
rules and regulations, (ii) any registration, qualification, approvals or other
requirements imposed by any government or regulatory agency or body which the
Committee shall, in its sole discretion, determine to be necessary or applicable
and (iii) the terms of the Stockholders Agreement in all respects. Moreover,
this Option may not be exercised if its exercise, or the receipt of shares of
Stock pursuant thereto, would be contrary to applicable law.
3. Change in Control. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if a "Sale of the Business," as
defined in and contemplated by Section 2.4 of the Stockholders Agreement shall
have occurred.
4. Investment Representation. If at the time of exercise of all
or part of this Option the Stock is not registered under the Securities Act of
1933, as amended (the "Securities Act"), and/or there is no current prospectus
in effect under the Securities Act with respect to the Stock, the Optionee shall
execute, prior to the issuance of any shares of Stock to the Optionee by the
Company, an agreement (in such form as the Committee may specify) in which the
Optionee represents and warrants that the Optionee is purchasing or acquiring
the shares acquired under this Agreement for the Optionee's own account, for
investment only and not with a view to the resale or distribution thereof, and
represents and agrees that any subsequent offer for sale or distribution of any
of such shares shall be made only pursuant to either (i) a registration
statement on an appropriate form under the Securities Act, which registration
statement has become effective and is current with regard to the shares being
offered or sold, or (ii) a specific exemption from the registration requirements
of the Securities Act, but in claiming such exemption the Optionee shall, prior
to any offer for sale or sale of such shares, obtain a prior favorable written
opinion, in form and substance satisfactory to the Committee, from counsel for
or approved by the Committee, as to the applicability of such exemption thereto.
5. Disposition of Stock. Any shares of Stock received by the
Optionee upon exercise of this Option (or any interest or right in such shares)
cannot be sold, assigned, pledged or transferred in any manner except as
permitted by the Stockholders Agreement.
6. Optionee Bound by Plan; Stockholders Agreement. The Optionee
hereby acknowledges receipt of a copy of the Plan and the Stockholders Agreement
and agrees to be bound by all of the terms and provisions thereof, including the
terms and provisions adopted after the granting of this Option but prior to the
complete exercise hereof, subject to the last paragraph of Section 16 of the
Plan as in effect on the date hereof.
7. Notices. Any notice hereunder to the Company shall be
addressed to it at c/o McCown De Leeuw & Co., 101 East 52nd Street, 31st Floor,
New York, New York 10022, Attention: David King, and any notice hereunder to the
Optionee shall be addressed to him at , Attention: ,
-------------- --------------
subject to the right of either party to designate at any time hereafter in
writing some other address.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
9. Counterparts. This Agreement has been executed in two
counterparts each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by an appropriate officer and the Optionee has executed this Agreement,
both on the day and year first above written.
OUTSOURCING SOLUTIONS INC.
By:
--------------------------------
Name:Timothy Beffa
Title: President & CEO
OPTIONEE
(L.S.)
- ---------------------------
<PAGE>
SCHEDULE I
Subject to paragraph (b) of Section 2 of the Agreement, the Option will vest and
become exercisable in accordance with paragraph (1) below with respect to fifty
percent (50%) of the shares of Stock subject to the Option and the Option will
vest and become exercisable in accordance with paragraph (2) below with respect
to the remaining fifty percent (50%) of the shares of Stock subject to the
Option.
(1) With respect to 50% of the shares of Stock subject to the Option:
Subject to the achievement of annual performance targets established by the
Board of Directors of the Company (the "Board") or the Committee (as defined in
the Agreement) in consultation with management, this portion of the Option will
vest evenly on an annual basis over five (5) years beginning on the date of the
Agreement, i.e., with respect to 20% of the total number of shares subject to
this portion of the Option in each year (the "Annual Option Allocation").
50% of the Annual Option Allocation not vested in any year would be subject to
catch-up vesting in the immediately following year, based upon the achievement
of the performance targets applicable to such immediately following year, and to
the extent such Annual Option Allocation does not vest in such immediately
following year, it shall be forfeited and the Option shall never be exercisable
with respect to the shares covered by such unvested portion of such Annual
Option Allocation; provided, however, that, notwithstanding the foregoing, the
Option may become exercisable with respect to such shares to the extent
otherwise provided in paragraph (b) of Section 2 of the Agreement.
(2) With respect to 50% of the shares of Stock subject to the Option:
This portion of the Option will vest upon the occurrence of a "Liquidation
Event" (as defined below), subject to the achievement by the Company of McCown
De Leeuw & Co. ("MDC") internal rate of return ("IRR") targets according to the
schedule set forth below :
<PAGE>
================================================================================
Year
- --------------------------------------------------------------------------------
1 2 3 4 5
-----------------------------------------------------------------------
25.00% 0.00% 0.00% 0.00% 20.00% 40.00%
-----------------------------------------------------------------------
30.00% 0.00% 0.00% 20.00% 40.00% 60.00%
-----------------------------------------------------------------------
MDC IRR* 35.00% 0.00% 20.00% 40.00% 60.00% 80.00%
-----------------------------------------------------------------------
40.00% 20.00% 40.00% 60.00% 80.00% 100.00%
-----------------------------------------------------------------------
45.00% 40.00% 60.00% 80.00% 100.00%
-----------------------------------------------------------------------
50.00% 60.00% 80.00% 100.00%
-----------------------------------------------------------------------
55.00% 60.00% 100.00%
-----------------------------------------------------------------------
75.00% 80.00%
-----------------------------------------------------------------------
100.00% 100.00%
-----------------------------------------------------------------------
*After giving effect to exercise of management options.
================================================================================
For purposes of this Agreement, "Liquidation Event" shall mean a sale by MDC of
any of its shares of common stock of the Company to an unaffiliated third party
(including, without limitation, in a public offering). Upon a Liquidation Event
in which MDC sells less than all of its shares of common stock of the Company,
this portion of the Option will partially vest and become exercisable, in
accordance with the foregoing schedule, on a ratable basis based upon the
proportion of MDC shares sold in the Liquidation Event relative to the total
number of shares owned by MDC immediately prior to the Liquidation Event.
<PAGE>
SCHEDULE II
NOTATIONS AS TO PARTIAL EXERCISE
========== ============ ============ =========== =========
Number of Balance of
Date of Purchased Shares on Authorized Notation
Exercise Shares Option Signature Date
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
---------- ------------ ------------ ----------- ---------
========== ============ ============ =========== =========
<PAGE>
SCHEDULE II
Page 2
This STOCK OPTION AMENDMENT AGREEMENT (this "Amendment
Agreement"), dated as of June 3, 1999, is made by and among OUTSOURCING
SOLUTIONS INC., a Delaware corporation (the "Company"), and
(the "Optionee").
- ---------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Optionee is a common law employee of the Company;
WHEREAS, the Optionee is the holder of an outstanding option (the
"Option") to purchase an aggregate of shares of $0.01 par value common
-----------
stock of the Company ("Stock") awarded pursuant to the Outsourcing Solutions
Inc. (formerly OSI Holdings Corp.) 1995 Stock Option and Stock Award Plan, as
amended (the "Plan"), and that certain Agreement, dated , 199 , between
--------- -
the Company and the Optionee (the "Option Agreement"); and
WHEREAS, the parties hereto desire to amend the terms and
conditions of the Option Agreement to modify the exercise terms thereof as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Amendment of Option Agreement. The Option Agreement
shall be and hereby is amended by: (a) deleting Schedule I of the Option
Agreement in its entirety and re-designating Schedule II as Schedule I of the
Option Agreement, and (b) deleting paragraph (b) of Section 2 of the Option
Agreement in its entirety and inserting the following in lieu thereof:
"(b) Exercise of Option. (i) Subject to the other terms of
the Agreement and the Plan, the Option may be exercised on or after the
dates indicated below as to that percentage of the total shares of Stock
subject to the Option as set forth below opposite each such date, plus
any shares of Stock as to which the Option could have been exercised
previously, but was not so exercised:
Date Percentage
---- ----------
-------------- 50%
-------------- 25%
-------------- 25%
(ii) Notwithstanding the foregoing provisions of Section 2(b)(i)
hereof, but subject to Section 2(a) and 2(d) hereof, immediately prior
to a "Change in Control," as hereinafter defined, the Option may be
exercised with respect to all or any portion of the total number of
shares of Stock covered by the then unexercised Option.
(iii) Any exercise of all or any part of the Option shall be
accompanied by a written notice to the Company specifying the whole
number of shares of Stock as to which the Option is being exercised.
Upon the valid exercise of all or any part of the Option, a certificate
(or certificates) for the number of shares of Stock with respect to
which the Option is exercised shall be issued in the name of the
Optionee, subject to the other terms and conditions of the Agreement and
the Plan. Notation of any partial exercise shall be made by the Company
on Schedule I attached hereto."
Section 2. Optionee Bound by Plan. The Optionee hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all of the
terms and provisions of the Plan and the Option Agreement, as amended hereby,
including, without limitation, the terms and provisions of the Plan and the
amended Option Agreement adopted after the date hereof.
Section 3. Not a Contract of Employment. This Amendment Agreement
shall not be deemed to constitute a contract of employment between the Optionee
and the Company or its subsidiaries or affiliates, nor shall any provision
hereof restrict the right of the Company and/or its subsidiaries or affiliates
to discharge the Optionee, or restrict the right of the Optionee to terminate
his employment with the Company or its subsidiaries or affiliates, subject to
any employment agreement currently or hereafter in effect between the Optionee
and the Company and/or any such subsidiary or affiliate.
Section 4. Successors and Assigns. This Amendment Agreement shall
be binding upon and inure to the benefit of the Optionee and his legal
representatives, executors, administrators, heirs, distributees and legatees and
shall be binding upon and inure to the benefit of the Company, and any
subsidiary or affiliate, and any successor organizations, to any of the
foregoing which may employ the Optionee.
Section 5. Governing Law; Severability. This Amendment Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware. If, under such law, any portion of this Amendment Agreement is at any
time deemed to be in conflict with any applicable statute, rule, judicial
interpretation binding on the parties, regulation or ordinance, such portion
shall be deemed to be modified or altered to conform thereto or, if that is not
possible, to be omitted from this Amendment Agreement; and the invalidity of any
such portion shall not affect the force, effect and validity of the remaining
portions hereof.
Section 6. Stockholder Approval. This Amendment Agreement shall
become effective on the date it is approved by more than seventy-five percent
(75%) of the voting power of the Company's outstanding stock, and, if such
approval is not obtained prior to December 31, 1999, this Amendment Agreement
shall thereupon automatically be canceled and deemed to have been null and void
ab initio.
Section 7. Miscellaneous. Except as expressly amended hereby, the
terms and conditions of the Option Agreement shall remain unchanged and in full
force and effect. No term or provision of this Amendment Agreement may be
amended, changed, waived, discharged or terminated orally, but may only be
amended, changed, waived, discharged or terminated by an instrument in writing
executed by each of the parties to this Amendment Agreement. Section headings of
this Amendment Agreement are for convenience of reference only and shall not be
considered a part of this Amendment Agreement. This Amendment Agreement may be
executed in one or more counterparts, all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment
Agreement as of the day and year first written above.
OUTSOURCING SOLUTIONS, INC.
By:
--------------------------
Name:
Title:
OPTIONEE
-------------------------
OUTSOURCING SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT [C]
This Agreement (the "Agreement"), dated [ ] , 1996, is made
between Outsourcing Solutions Inc. (the "Company") and Timothy G. Beffa (the
"Optionee"). All capitalized terms that are not defined herein shall have the
meaning as defined in the Outsourcing Solutions Inc. 1995 Stock Option and Stock
Award Plan, as amended (the "Plan"). References to "he," "him," and "his" shall
mean the feminine form of such terms, when applicable.
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the Plan, the
Company hereby grants to the Optionee, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase from the Company, all or any part of an aggregate
of 41,555.21 shares of $0.01 par value common stock of the Company (the "Stock")
at a per share purchase price equal to $12.50 (the "Option"), such Option to be
exercisable as hereinafter provided. The Option shall not be treated as an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended.
2. Terms and Conditions. It is understood and agreed that the
Option evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. The Option shall expire ten (10) years
after the date indicated above.
(b) Exercise of Option. Subject to the other terms of this
Agreement and the Plan, the Option may be exercised on or after the date which
is eight years from the date hereof; provided, however, that notwithstanding any
other provision of this Agreement, the Option shall only be cumulatively
exercisable with respect to an aggregate number of shares of Stock equal to 2.5%
of the number of shares of Stock, if any, issued by the Company from time to
time, prior to the expiration date of the Option, upon conversion by the holders
thereof of the Company's Preferred Stock and provided further that, subject to
the preceding clause, such Option shall become exercisable (i) with respect to
fifty percent (50%) of the shares of Stock subject to the Option on or after the
satisfaction by the Company of such reasonable performance targets as are
established in good faith by the Committee or the Board in writing on or before
December 31 of each year for the next succeeding year, as set forth in a
resolution of the Committee or the Board (as applicable), as to that percentage
of the total shares of Stock covered by this Option set forth on Schedule I
attached hereto and (ii) with respect to the remaining fifty percent (50%) of
the shares of Stock subject to the Option upon the occurrence of a Liquidation
Event, as defined on Schedule I attached hereto, subject to the achievement by
the Company of internal rate of return targets as set forth on such Schedule I,
plus any shares of Stock as to which the Option could have been exercised prior
to satisfaction of such conditions in (i) and/or (ii) in a particular year (if
any) but was not so exercised. Notwithstanding the foregoing, the Option shall
become fully exercisable as to those shares of Stock referred in clause (i)
above immediately upon the occurrence of a Change in Control (as defined in
Section 3 below).
Any exercise of all or any part of this Option shall be
accompanied by a written notice to the Company specifying the number of shares
of Stock as to which the Option is being exercised. Notation of any partial
exercise shall be made by the Company on Schedule II attached hereto.
(c) Consideration. At the time of any exercise of the Option, the
purchase price of the shares of Stock as to which the Option shall be exercised
shall be paid to the Company (i) in cash, (ii) with Stock already owned for at
least eight months by the Optionee having a total fair market value, as
determined in accordance with Section 6(a) of the Plan ("Fair Market Value"),
equal to the purchase price of such Stock, or (iii) a combination of cash and
Stock (such Stock having already been owned for at least eight months by the
Optionee) having a total Fair Market Value, as so determined, equal to the
purchase price of such Stock.
(d) Exercise Upon Death, Disability or Termination of Employment.
(i) In the event of the death of the Optionee while an employee of the Company
or a subsidiary of the Company, the Option, to the extent such Option would be
exercisable in accordance with Section 2(b) hereof as of the date of his death,
may be immediately exercised after his death by the legal representative of the
Optionee's estate or by the legatee of the Optionee under his last will for a
period of two years from the date of his death or until the expiration of the
stated period of the Option, whichever period is the shorter.
(ii) If the Optionee's employment with the Company or a
subsidiary of the Company shall terminate by reason of permanent disability (as
defined in the last sentence of this Section 2(d)(ii)), his Option, to the
extent exercisable in accordance with Section 2(b) hereof as of the date of such
termination, may be immediately exercised after such termination of employment
but may not be exercised after the expiration of the period of one year from the
date of such termination of employment or of the stated period of the Option,
whichever period is the shorter; provided, however, that if the Optionee dies
within a period of one year from the date of such termination of employment, any
unexercised Option, to the extent exercisable in accordance with Section 2(b)
hereof as of the date of such termination, may be exercised after his death by
the legal representative of his estate or by the legatee of the Optionee under
his last will until the expiration of the period of two years from the date of
his death or of the stated period of the Option, whichever period is the
shorter. For purposes of this Agreement, "permanent disability" shall mean an
inability (as determined by the Committee) to perform duties and services as an
employee of the Company or a subsidiary of the Company by reason of a medically
determinable physical or mental impairment, supported by medical evidence, which
can be expected to last for a continuous period of not less than eight (8)
months.
(iii) If (A) the Company or a subsidiary of the Company
terminates the Optionee's employment with the Company or such subsidiary and
such termination is not "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement, dated as of September 21, 1995, as amended and restated
on January 10, 1996 and on February 16, 1996 and as may be further amended from
time to time, by and among Outsourcing Solutions Inc., the MDC Entities (as
defined therein), APT (as defined therein), the Management Stockholders (as
defined therein) and the Non-Management Stockholders (as defined therein) (as
amended, the "Stockholders Agreement")) or (B) the Optionee terminates
employment with the Company or such subsidiary for "good reason" (as defined in
Section 2.5(c) of the Stockholders Agreement), the Optionee's Option, to the
extent such Option would have been exercisable in accordance with Section 2(b)
hereof as of the date of such termination, may thereafter be immediately
exercised but may not be exercised after the expiration of the period of one
year from the date of such termination of employment or of the stated period of
the Option, whichever period is the shorter; provided, however, that if the
Optionee dies within a period one year from the date of such termination of
employment, any unexercised Option, to the extent such Option would have been
exercisable in accordance with Section 2(b) hereof as of the date of such
termination, may thereafter be exercised by the legal representative of his
estate or by the legatee of the Optionee under his last will until the
expiration of the period of two years from the date of his death or of the
stated period of the Option, whichever period is the shorter.
(iv) If the Optionee's employment with the Company or a
subsidiary of the Company is terminated by reason of the Optionee's retirement
after attaining both five (5) years of continuous service with the Company or a
subsidiary of the Company and 59 1/2 years of age, to the extent exercisable in
accordance with Section 2(b) hereof as of the date of such termination, such
Option may thereafter be immediately exercised but may not be exercised after
the expiration of the period of two (2) years from the date of such termination
of employment or of the stated period of the Option, whichever period is the
shorter; provided, however, that if the Optionee dies within a period of two (2)
years from the date of such termination of employment, any unexercised Option,
to the extent exercisable in accordance with Section 2(b) hereof as of the date
of such termination, may thereafter be exercised by the legal representative of
his estate or by the legatee of the Optionee under his last will until the
expiration of the period of two years from the date of his death or of the
stated period of the Option, whichever period is the shorter.
(v) If the Optionee's employment is terminated by the Company or
a subsidiary of the Company "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement) or if the Optionee's employment is terminated for any
reason not described in this Section 2(d), the Optionee's Option shall terminate
on the date of such termination.
(e) Nontransferability. This Option shall not be transferable
other than by will or by the laws of descent and distribution.
(f) Withholding Taxes. If required by applicable law, the
Optionee shall be required to pay withholding taxes, if any, to the Company in
cash at the time of receipt of Stock upon the exercise of all or any part of
this Option; provided, however, tax withholding obligations may be met by the
withholding of Stock otherwise deliverable to the Optionee pursuant to
procedures approved by the Committee; provided further, however, the amount of
Stock so withheld shall not exceed the minimum required withholding obligation.
In no event shall Stock be delivered to any Optionee until he has paid to the
Company in cash the amount of tax required to be withheld by the Company under
applicable law, if any, or has elected to have such tax withholding obligations,
if any, met by the withholding of Stock in accordance with procedures approved
by the Committee.
(g) No Rights as Stockholder. The Optionee shall have no dividend
rights or any other rights as a stockholder with respect to any shares of Stock
subject to the Option until he has given written notice of exercise of the
Option and paid in full for such shares.
(h) No Right to Continued Employment. This Option shall not
confer upon the Optionee any right with respect to continuance of employment by
the Company or a subsidiary of the Company, nor shall it interfere in any way
with the right of the Company or such a subsidiary to terminate his employment
at any time.
(i) Inconsistency with Plan. Notwithstanding any provision herein
to the contrary, this Option provides the Optionee with no greater rights or
claims than are specifically provided for under the Plan. If and to the extent
that any provision contained herein is inconsistent with the Plan, the Plan
shall govern.
(j) Compliance with Laws, Regulations, Stockholders Agreement,
Etc. This Option and the obligation of the Company to sell and deliver shares of
Stock hereunder, shall be subject to (i) all applicable federal and state laws,
rules and regulations, (ii) any registration, qualification, approvals or other
requirements imposed by any government or regulatory agency or body which the
Committee shall, in its sole discretion, determine to be necessary or applicable
and (iii) the terms of the Stockholders Agreement in all respects. Moreover,
this Option may not be exercised if its exercise, or the receipt of shares of
Stock pursuant thereto, would be contrary to applicable law.
3. Change in Control. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if a "Sale of the Business," as
defined in and contemplated by Section 2.4 of the Stockholders Agreement shall
have occurred.
4. Investment Representation. If at the time of exercise of all
or part of this Option the Stock is not registered under the Securities Act of
1933, as amended (the "Securities Act"), and/or there is no current prospectus
in effect under the Securities Act with respect to the Stock, the Optionee shall
execute, prior to the issuance of any shares of Stock to the Optionee by the
Company, an agreement (in such form as the Committee may specify) in which the
Optionee represents and warrants that the Optionee is purchasing or acquiring
the shares acquired under this Agreement for the Optionee's own account, for
investment only and not with a view to the resale or distribution thereof, and
represents and agrees that any subsequent offer for sale or distribution of any
of such shares shall be made only pursuant to either (i) a registration
statement on an appropriate form under the Securities Act, which registration
statement has become effective and is current with regard to the shares being
offered or sold, or (ii) a specific exemption from the registration requirements
of the Securities Act, but in claiming such exemption the Optionee shall, prior
to any offer for sale or sale of such shares, obtain a prior favorable written
opinion, in form and substance satisfactory to the Committee, from counsel for
or approved by the Committee, as to the applicability of such exemption thereto.
5. Disposition of Stock. Any shares of Stock received by the
Optionee upon exercise of this Option (or any interest or right in such shares)
cannot be sold, assigned, pledged or transferred in any manner except as
permitted by the Stockholders Agreement.
6. Optionee Bound by Plan; Stockholders Agreement. The Optionee
hereby acknowledges receipt of a copy of the Plan and the Stockholders Agreement
and agrees to be bound by all of the terms and provisions thereof, including the
terms and provisions adopted after the granting of this Option but prior to the
complete exercise hereof, subject to the last paragraph of Section 16 of the
Plan as in effect on the date hereof.
7. Notices. Any notice hereunder to the Company shall be
addressed to it at c/o McCown De Leeuw & Co., 101 East 52nd Street, 31st Floor,
New York, New York 10022, Attention: David King, and any notice hereunder to the
Optionee shall be addressed to him at 2015 Kings Pointe Drive, St. Louis,
Missouri 63005, subject to the right of either party to designate at any time
hereafter in writing some other address.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
9. Counterparts. This Agreement has been executed in two
counterparts each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Outsourcing Solutions Inc. has caused this
Agreement to be executed by an appropriate officer and the Optionee has executed
this Agreement, both on the day and year first above written.
OUTSOURCING SOLUTIONS INC.
By:
---------------------------------
Title:
------------------------------
OPTIONEE
(L.S.)
- ---------------------------
<PAGE>
SCHEDULE I
Subject to paragraph (b) of Section 2 of the Agreement, the Option will vest and
become exercisable in accordance with paragraph (1) below with respect to fifty
percent (50%) of the shares of Stock subject to the Option and the Option will
vest and become exercisable in accordance with paragraph (2) below with respect
to the remaining fifty percent (50%) of the shares of Stock subject to the
Option.
(1) With respect to 50% of the shares of Stock subject to the
Option: Subject to the achievement of annual performance targets established by
the Board of Directors of the Company (the "Board") or the Committee (as defined
in the Agreement) in consultation with management, this portion of the Option
will vest evenly on an annual basis over five (5) years beginning on the date of
the Agreement, i.e., with respect to 20% of the total number of shares subject
to this portion of the Option in each year (the "Annual Option Allocation").
50% of the Annual Option Allocation not vested in any year would be subject to
catch-up vesting in the immediately following year, based upon the achievement
of the performance targets applicable to such immediately following year, and to
the extent such Annual Option Allocation does not vest in such immediately
following year, it shall be forfeited and the Option shall never be exercisable
with respect to the shares covered by such unvested portion of such Annual
Option Allocation; provided, however, that, notwithstanding the foregoing, the
Option may become exercisable with respect to such shares to the extent
otherwise provided in paragraph (b) of Section 2 of the Agreement.
(2) With respect to 50% of the shares of Stock subject to the
Option: This portion of the Option will vest upon the occurrence of a
"Liquidation Event" (as defined below), subject to the achievement by the
Company of McCown De Leeuw & Co. ("MDC") internal rate of return ("IRR") targets
according to the schedule set forth below :
<PAGE>
================================================================================
Year
-------------------------------------------------------------------
1 2 3 4 5
-------------------------------------------------------------------
25.00% 0.00% 0.00% 0.00% 20.00% 40.00%
-------------------------------------------------------------------
30.00% 0.00% 0.00% 20.00% 40.00% 60.00%
-------------------------------------------------------------------
MDC IRR* 35.00% 0.00% 20.00% 40.00% 60.00% 80.00%
-------------------------------------------------------------------
40.00% 20.00% 40.00% 60.00% 80.00% 100.00%
-------------------------------------------------------------------
45.00% 40.00% 60.00% 80.00% 100.00%
-------------------------------------------------------------------
50.00% 60.00% 80.00% 100.00%
-------------------------------------------------------------------
55.00% 60.00% 100.00%
-------------------------------------------------------------------
75.00% 80.00%
-------------------------------------------------------------------
100.00% 100.00%
===================================================================
*After giving effect to exercise of management options.
===================================================================
For purposes of this Agreement, "Liquidation Event" shall mean a sale by MDC of
any of its shares of common stock of the Company to an unaffiliated third party
(including, without limitation, in a public offering). Upon a Liquidation Event
in which MDC sells less than all of its shares of common stock of the Company,
this portion of the Option will partially vest and become exercisable, in
accordance with the foregoing schedule, on a ratable basis based upon the
proportion of MDC shares sold in the Liquidation Event relative to the total
number of shares owned by MDC immediately prior to the Liquidation Event.
<PAGE>
SCHEDULE II
NOTATIONS AS TO PARTIAL EXERCISE
- --------------- --------------- ---------------- ---------------- --------------
Number of Balance of
Date of Purchased Shares on Authorized Notation
Exercise Shares Option Signature Date
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
- --------------- --------------- ---------------- ---------------- --------------
This STOCK OPTION AMENDMENT AGREEMENT (this "Amendment
Agreement"), dated as of June 3, 1999, is made by and among OUTSOURCING
SOLUTIONS INC., a Delaware corporation (the "Company"), and Timothy G. Beffa
(the "Optionee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Optionee is a common law employee of the Company;
WHEREAS, the Optionee is the holder of an outstanding option (the
"Option") to purchase an aggregate of 41,555.21 shares of $0.01 par value common
stock of the Company ("Stock") awarded pursuant to the Outsourcing Solutions
Inc. (formerly OSI Holdings Corp.) 1995 Stock Option and Stock Award Plan, as
amended (the "Plan"), and that certain Agreement, dated March 14, 1997, between
the Company and the Optionee (the "Option Agreement"); and
WHEREAS, the parties hereto desire to amend the terms and
conditions of the Option Agreement to modify the exercise terms thereof as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Amendment of Option Agreement. The Option Agreement
shall be and hereby is amended by: (a) deleting Schedule I of the Option
Agreement in its entirety and re-designating Schedule II as Schedule I of the
Option Agreement, and (b) deleting paragraph (b) of Section 2 of the Option
Agreement in its entirety and inserting the following in lieu thereof:
"(b) Exercise of Option. (i) Subject to the other terms of
the Agreement and the Plan, the Option may be exercised on or after the
dates indicated below as to that percentage of the total shares of Stock
subject to the Option as set forth below opposite each such date, plus
any shares of Stock as to which the Option could have been exercised
previously, but was not so exercised:
Date Percentage
---- ----------
June 3, 1999 50%
March 14, 2000 25%
March 14, 2001 25%
(ii) Notwithstanding the foregoing provisions of Section 2(b)(i)
hereof, but subject to Section 2(a) and 2(d) hereof, immediately prior
to a "Change in Control," as hereinafter defined, the Option may be
exercised with respect to all or any portion of the total number of
shares of Stock covered by the then unexercised Option.
(iii) Any exercise of all or any part of the Option shall be
accompanied by a written notice to the Company specifying the whole
number of shares of Stock as to which the Option is being exercised.
Upon the valid exercise of all or any part of the Option, a certificate
(or certificates) for the number of shares of Stock with respect to
which the Option is exercised shall be issued in the name of the
Optionee, subject to the other terms and conditions of the Agreement and
the Plan. Notation of any partial exercise shall be made by the Company
on Schedule I attached hereto."
Section 2. Optionee Bound by Plan. The Optionee hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all of the
terms and provisions of the Plan and the Option Agreement, as amended hereby,
including, without limitation, the terms and provisions of the Plan and the
amended Option Agreement adopted after the date hereof.
Section 3. Not a Contract of Employment. This Amendment Agreement
shall not be deemed to constitute a contract of employment between the Optionee
and the Company or its subsidiaries or affiliates, nor shall any provision
hereof restrict the right of the Company and/or its subsidiaries or affiliates
to discharge the Optionee, or restrict the right of the Optionee to terminate
his employment with the Company or its subsidiaries or affiliates, subject to
any employment agreement currently or hereafter in effect between the Optionee
and the Company and/or any such subsidiary or affiliate.
Section 4. Successors and Assigns. This Amendment Agreement shall
be binding upon and inure to the benefit of the Optionee and his legal
representatives, executors, administrators, heirs, distributees and legatees and
shall be binding upon and inure to the benefit of the Company, and any
subsidiary or affiliate, and any successor organizations, to any of the
foregoing which may employ the Optionee.
Section 5. Governing Law; Severability. This Amendment Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware. If, under such law, any portion of this Amendment Agreement is at any
time deemed to be in conflict with any applicable statute, rule, judicial
interpretation binding on the parties, regulation or ordinance, such portion
shall be deemed to be modified or altered to conform thereto or, if that is not
possible, to be omitted from this Amendment Agreement; and the invalidity of any
such portion shall not affect the force, effect and validity of the remaining
portions hereof.
Section 6. Stockholder Approval. This Amendment Agreement shall
become effective on the date it is approved by more than seventy-five percent
(75%) of the voting power of the Company's outstanding stock, and, if such
approval is not obtained prior to December 31, 1999, this Amendment Agreement
shall thereupon automatically be canceled and deemed to have been null and void
ab initio.
Section 7. Miscellaneous. Except as expressly amended hereby, the
terms and conditions of the Option Agreement shall remain unchanged and in full
force and effect. No term or provision of this Amendment Agreement may be
amended, changed, waived, discharged or terminated orally, but may only be
amended, changed, waived, discharged or terminated by an instrument in writing
executed by each of the parties to this Amendment Agreement. Section headings of
this Amendment Agreement are for convenience of reference only and shall not be
considered a part of this Amendment Agreement. This Amendment Agreement may be
executed in one or more counterparts, all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment
Agreement as of the day and year first written above.
OUTSOURCING SOLUTIONS, INC.
By:
------------------------------
Name: Eric R. Fencl
Title: Vice President & General Counsel
OPTIONEE
Timothy G. Beffa
OUTSOURCING SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT [E]
This Non-qualified Stock Option Award Agreement (this "Agreement"),
dated as of , 199 , is made between Outsourcing Solutions Inc.
----------- -
(the "Company") and (the "Optionee"). All capitalized terms used herein
------
that are not defined herein shall have the respective meanings given to such
terms in the Outsourcing Solutions Inc. (formerly OSI Holdings Corp.) 1995
Stock Option and Stock Award Plan, as amended (the "Plan").
W I T N E S S E T H :
- - - - - - - - - -
1. Grant of Option. Pursuant to the provisions of the Plan, the
Company hereby grants to the Optionee, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase from the Company all or any part of an aggregate of
shares of the $0.01 par value common stock of the Company (the "Stock"), at a
per share purchase price equal to $ (the "Option"), such Option to be
exercisable as hereinafter provided. The Option shall not be treated as an
"incentive stock option," as defined in Section 422 of the Code.
2. Terms and Conditions. It is understood and agreed that the
Award evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. The Option shall expire ten (10) years
after the date indicated above.
(b) Exercise of Option. (i) Subject to the other terms of this
Agreement and the Plan, the Option may be exercised on or after the dates
indicated below as to that percentage of the total shares of Stock subject to
the Option as set forth below opposite each such date, plus any shares of Stock
as to which the Option could have been exercised previously, but was not so
exercised.
Date Percentage
---- ----------
------------------------------------ 25%
------------------------------------ 25%
------------------------------------ 25%
------------------------------------ 25%
(ii) Notwithstanding the foregoing provisions of Section
2(b)(i) hereof, but subject to Section 2(a) and 2(d) hereof, immediately prior
to a "Sale of the Business," as defined in and contemplated by Section 2.4 of
the Stockholders Agreement, dated as of September 21, 1995, as amended and
restated on January 10, 1996, and February 16, 1996, and as may be further
amended from time to time, by and among OSI Holdings Corp., the MDC Entities,
APT, the Management Stockholders and the Non-Management Stockholders (all as
defined therein) (the "Stockholders Agreement"), the Option may be exercised
with respect to all or any portion of the total number of shares of Stock
covered by the then unexercised Option.
(iii) Any exercise of all or any part of the Option shall be
accompanied by a written notice to the Company specifying the whole number of
shares of Stock as to which the Option is being exercised. Upon the valid
exercise of all or any part of the Option, a certificate (or certificates) for
the number of shares of Stock with respect to which the Option is exercised
shall be issued in the name of the Optionee, subject to the other terms and
conditions of this Agreement and the Plan. Notation of any partial exercise
shall be made by the Company on Schedule I attached hereto.
(c) Consideration. At the time of any exercise of the Option,
the purchase price of the shares of Stock as to which the Option shall be
exercised shall be paid to the Company (i) in United States dollars by personal
check, bank draft or money order, (ii) if permitted by applicable law and
approved by the Committee in accordance with the Plan, with Stock, duly endorsed
for transfer to the Company, owned by the Optionee (or the Optionee and his
spouse jointly) for at least six (6) months prior to the tender thereof and not
used for another such exercise during such six-month period and having a total
fair market value, as determined in accordance with Paragraph 6(a) of the Plan
("Fair Market Value"), on the date of such exercise of the Option equal to such
purchase price of such shares of Stock, or (iii) a combination of the
consideration provided for in the foregoing clauses (i) and (ii) of this Section
2(c) having a total Fair Market Value on the date of such exercise equal to the
purchase price of such shares of Stock.
(d) Exercise Upon Death, Disability or Termination of
Employment. The Option shall terminate upon the termination, for any reason, of
the Optionee's employment with the Company or a subsidiary of the Company, and
no shares of Stock may thereafter be purchased under the Option, except as
follows:
(i) In the event of the death of the Optionee while an
employee of the Company or a subsidiary of the Company, the Option, to
the extent exercisable in accordance with Section 2(b)(i) or 2(b)(ii)
at the time of his or her death, may be exercised after the Optionee's
death by the legal representative of the Optionee's estate or the
legatee of the Optionee under his last will until the earlier to occur
of the second anniversary of the Optionee's death and the stated
expiration date of the Option.
(ii) If the Optionee's employment with the Company or a
subsidiary of the Company shall terminate by reason of permanent
disability (as defined in the last sentence of this Section 2(d)(ii)),
the Option, to the extent exercisable in accordance with Section 2(b)(i)
or 2(b)(ii) upon such termination of employment, may be exercised after
such termination until the earlier to occur of the first anniversary of
such termination and the stated expiration date of the Option. For
purposes of this Agreement, "permanent disability" shall mean an
inability (as determined by the Committee) to perform duties and
services as an employee of the Company or a subsidiary of the Company by
reason of a medically determinable physical or mental impairment,
supported by medical evidence, which can be expected to last for a
continuous period of not less than eight (8) months.
(iii) If (A) the Company or a subsidiary of the Company
terminates the Optionee's employment with the Company or such subsidiary
and such termination is not "for cause" (as defined in Section 2.5(d) of
the Stockholders Agreement), or (B) the Optionee terminates employment
with the Company or such subsidiary for "good reason" (as defined in
Section 2.5(c) of the Stockholders Agreement), the Option, to the extent
exercisable in accordance with Section 2(b)(i) or 2(b)(ii) upon such
termination of employment, may be exercised after such termination until
the earlier to occur of the first anniversary of such termination and
the stated expiration date of the Option.
(iv) If the Optionee's employment with the Company or a
subsidiary of the Company is terminated by reason of the Optionee's
retirement after attaining both five (5) years of continuous service
with the Company or a subsidiary of the Company and 59 1/2 years of age,
the Option, to the extent exercisable in accordance with Section 2(b)(i)
or 2(b)(ii) upon such retirement, may be exercised after such retirement
until the earlier to occur of the second anniversary of such retirement
and the stated expiration date of the Option.
(v) If the Optionee dies during the one-year or two-year
period following termination of his or her employment specified in
Section 2(d)(ii), 2(d)(iii) or 2(d)(iv), the Option, to the extent the
Option would have been exercisable pursuant to Section 2(d)(ii), 2(d)
(iii) or 2(d)(iv) as of the date of the Optionee's death, may be
exercised after the Optionee's death by the legal representative of his
estate or the legatee of the Optionee under his last will until the
earlier to occur of the second anniversary of the Optionee's death and
the stated expiration date of the Option.
(vi) If the Optionee's employment is terminated by the Company
or a subsidiary of the Company "for cause" (as defined in Section 2.5(d)
of the Stockholders Agreement) or under circumstances not otherwise
described in this Section 2(d), the Option shall automatically, without
any further action required by the Company, terminate on the date of
such termination of employment and shall cease to thereafter be
exercisable with respect to any shares of Stock.
(e) Nontransferability. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and are
exercisable, during the lifetime of the Optionee, only by him.
(f) Withholding Taxes. At the time of receipt of Stock upon the
exercise of all or any part of the Option, the Optionee shall be required to pay
to the Company in cash (or make other arrangements, in accordance with Section
12 of the Plan, for the satisfaction of) any taxes of any kind required by law
to be withheld with respect to such Stock; provided, however, tax withholding
obligations may be met, in whole or in part, by the withholding of shares of
Stock otherwise deliverable to the Optionee upon such exercise pursuant to
procedures approved by the Committee; provided further, however, the amount of
shares so withheld may not exceed the amount necessary to satisfy required
Federal, state, local and foreign withholding obligations using the minimum
statutory rate. In no event shall Stock or other property be delivered to the
Optionee until the Optionee has paid to the Company in cash, or made
arrangements satisfactory to the Company regarding the payment of, the amount of
any taxes of any kind required by law to be withheld with respect to the Stock
subject to the Option, and the Company shall have the right to deduct any such
taxes from any payment of any kind otherwise due to the Optionee.
(g) No Rights as Stockholder. The Optionee shall not become
the beneficial owner of the shares of Stock subject to the Option, nor have any
rights to dividends or other rights as a shareholder with respect to any such
shares, until the Optionee has exercised the Option in accordance with the
provisions hereof and of the Plan.
(h) No Right to Continued Employment. The Option shall not
confer upon the Optionee any right to be retained in the service of the Company
or a subsidiary of the Company, nor restrict in any way the right of the Company
or any subsidiary of the Company, which right is hereby expressly reserved, to
terminate his employment at any time with or without cause.
(i) Inconsistency with Plan. Notwithstanding any provision
herein to the contrary, the Option provides the Optionee with no greater rights
or claims than are specifically provided for under the Plan. If and to the
extent that any provision contained in this Agreement is inconsistent with the
Plan, the Plan shall govern.
(j) Compliance with Laws, Regulations, Stockholders Agreement.
The Option and the obligation of the Company to sell and deliver shares of Stock
hereunder shall be subject in all respects to (i) all applicable Federal and
state laws, rules and regulations, (ii) any registration, qualification,
approvals or other requirements imposed by any government or regulatory agency
or body which the Committee shall, in its sole discretion, determine to be
necessary or applicable and (iii) the terms of the Stockholders Agreement in all
respects. Moreover, the Option may not be exercised if its exercise, or the
receipt of shares of Stock pursuant thereto, would be contrary to applicable
law.
3. Investment Representation. If at the time of exercise of all or
part of the Option the Stock is not registered under the Securities Act of 1933,
as amended (the "Securities Act"), and/or there is no current prospectus in
effect under the Securities Act with respect to the Stock, the Optionee shall
execute, prior to the issuance of any shares of Stock to the Optionee by the
Company, an agreement (in such form as the Committee may specify) in which the
Optionee, among other things, represents, warrants and agrees that the Optionee
is purchasing or acquiring the shares acquired under this Agreement for the
Optionee's own account, for investment only and not with a view to the resale or
distribution thereof, that the Optionee has knowledge and experience in
financial and business matters, that the Optionee is capable of evaluating the
merits and risks of owning any shares of Stock purchased or acquired under this
Agreement, that the Optionee is a person who is able to bear the economic risk
of such ownership and that any subsequent offer for sale or distribution of any
of such shares shall be made only pursuant to (i) a registration statement on an
appropriate form under the Securities Act, which registration statement has
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, the Optionee shall, prior to any offer for sale or sale of such shares,
obtain a prior favorable written opinion, in form and substance satisfactory to
the Committee, from counsel for or approved by the Committee, as to the
applicability of such exemption thereto.
4. Disposition of Stock. In addition to the restrictions set forth
in Section 3, no share of Stock received by the Optionee upon exercise of the
Option (or any interest or right in such shares) can be sold, assigned, pledged
or transferred in any manner except as permitted by the Stockholders Agreement
5. Optionee Bound by Plan; Stockholders Agreement. The Optionee
hereby acknowledges receipt of a copy of the Plan and the Stockholders Agreement
and agrees to be bound by all of the terms and provisions of each thereof,
including the terms and provisions adopted after the granting of the Option but
prior to the complete exercise hereof, subject to the last paragraph of Section
16 of the Plan as in effect on the date hereof.
6. Notices. Any notice hereunder to the Company shall be addressed
to
it at 390 South Woods Mill Road, Suite 350, Chesterfield, Missouri 63017,
Attention: Chief Financial Officer, and any notice hereunder to the Optionee,
shall be addressed to him at ,
--------------------------------------------------
Attention: , subject to the right of either party to designate
------------------
at any time hereafter in writing some other address.
7. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware applicable to contracts executed and to be performed entirely within
such state, without regard to the conflict of law provisions thereof.
8. Severability. If any of the provisions of this Agreement should
bedeemed unenforceable, the remaining provisions shall remain in full force and
effect.
9. Modification. Except as otherwise permitted by the Plan, this
Agreement may not be modified or amended, nor may any provision hereof be
waived, in any way except in writing signed by the party against whom
enforcement thereof is sought.
10. Counterparts. This Agreement has been executed in two
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Outsourcing Solutions Inc. has caused this
Agreement to be executed by a duly authorized officer and the Optionee has
executed this Agreement, both as of the day and year first above written.
OUTSOURCING SOLUTIONS INC.
By
----------------------------
Name: Timothy G. Beffa
Title: President & Chief Executive
Officer
OPTIONEE
---------------------------
<PAGE>
NOTATIONS AS TO PARTIAL EXERCISE
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Date of Number of Shares Balance of Shares Authorized Notation
Exercise of Stock Purchased of Stock on Option Signature Date
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U.S.$475,000,000
CREDIT AGREEMENT,
dated as of November 30, 1999,
among
OUTSOURCING SOLUTIONS INC.,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS AND OTHER PERSONS
FROM TIME TO TIME PARTIES HERETO,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent,
HARRIS TRUST AND SAVINGS BANK,
as the Documentation Agent,
and
FLEET NATIONAL BANK,
as the Administrative Agent.
ARRANGED BY:
DLJ CAPITAL FUNDING, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms.....................................................3
1.2. Use of Defined Terms.............................................39
1.3. Cross-References.................................................40
1.4. Accounting and Financial Determinations; etc.....................40
ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES AND LETTERS OF
CREDIT
2.1. Commitments......................................................40
2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment.........40
2.1.2. Letter of Credit Commitment......................................41
2.1.3. Term A Loan Commitment...........................................42
2.1.4. Term B Loan Commitment...........................................42
2.2. Reduction of the Commitment Amounts..............................42
2.2.1. Optional.........................................................42
2.2.2. Mandatory........................................................42
2.3. Borrowing Procedures.............................................43
2.3.1. Borrowing Procedure..............................................43
2.3.2. Swing Line Loans.................................................43
2.4. Continuation and Conversion Elections............................45
2.5. Funding..........................................................45
2.6. Issuance Procedures..............................................46
2.6.1. Other Lenders' Participation.....................................46
2.6.2. Disbursements....................................................46
2.6.3. Reimbursement....................................................47
2.6.4. Deemed Disbursements.............................................47
2.6.5. Nature of Reimbursement Obligations..............................48
2.7. Register; Notes..................................................48
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application..........................50
3.1.1. Repayments and Prepayments.......................................50
3.1.2. Application......................................................54
3.2. Interest Provisions..............................................55
3.2.1. Rates............................................................55
3.2.2. Post-Maturity Rates..............................................55
3.2.3. Payment Dates....................................................55
3.3. Fees.............................................................56
3.3.1. Commitment Fee...................................................56
3.3.2. Administrative Agent's Fees......................................56
3.3.3. Letter of Credit Fee.............................................56
ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful.......................................57
4.2. Deposits Unavailable.............................................57
4.3. Increased LIBO Rate Loan Costs, etc..............................57
4.4. Funding Losses...................................................58
4.5. Increased Capital Costs..........................................58
4.6. Taxes............................................................59
4.7. Payments, Computations, etc......................................62
4.8. Sharing of Payments..............................................62
4.9. Setoff...........................................................63
4.10. Change of Lending Office.........................................63
4.11. Replacement of Lenders...........................................63
4.12. Limitation on Additional Amounts, etc............................64
ARTICLE V CONDITIONS TO CREDIT EXTENSIONS
5.1. Initial Credit Extension.........................................65
5.1.1. Resolutions, etc.................................................65
5.1.2. Transaction Consummated..........................................65
5.1.3. Transaction Documents............................................66
5.1.4. Closing Date Certificate.........................................67
5.1.5. Delivery of Notes................................................67
5.1.6. Payment of Outstanding Indebtedness, etc.........................67
5.1.7. Administrative Agent's Fee Letter, Closing Fees, Expenses, etc...67
5.1.8. Financial Information; Material Adverse Change...................68
5.1.9. Opinions of Counsel; Reliance Letters............................68
5.1.10. Filing Agent, etc................................................68
5.1.11. Subsidiary Guaranty..............................................69
5.1.12. Solvency, etc....................................................69
5.1.13. Pledge Agreements................................................69
5.1.14. Patent Security Agreement, Copyright Security Agreement
and Trademark Security Agreement...............................70
5.1.15. Perfection Certificates..........................................70
5.1.16. Insurance........................................................70
5.1.17. Corporate, Tax and Capital Structure.............................71
5.1.18. Litigation.......................................................71
5.2. All Credit Extensions............................................71
5.2.1. Compliance with Warranties, No Default, etc......................71
5.2.2. Credit Extension Request, etc....................................71
5.2.3. Satisfactory Legal Form..........................................71
ARTICLE VI REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc................................................72
6.2. Due Authorization, Non-Contravention, etc........................72
6.3. Government Approval, Regulation, etc.............................72
6.4. Validity, etc....................................................73
6.5. Financial Information............................................73
6.6. No Material Adverse Change.......................................73
6.7. Litigation, Labor Controversies, etc.............................73
6.8. Subsidiaries.....................................................74
6.9. Ownership of Properties; Capital Securities......................74
6.10. Taxes............................................................74
6.11. Pension and Welfare Plans........................................74
6.12. Environmental Warranties.........................................75
6.13. Accuracy of Information..........................................76
6.14. Regulations U and X..............................................76
6.15. Year 2000........................................................76
6.16. Status of Obligations as Senior Indebtedness, etc................76
6.17. Solvency.........................................................77
ARTICLE VII COVENANTS
7.1. Affirmative Covenants............................................77
7.1.1. Financial Information, Reports, Notices, etc.....................77
7.1.2. Maintenance of Existence; Compliance with Laws, etc..............79
7.1.3. Maintenance of Properties........................................79
7.1.4. Insurance........................................................80
7.1.5. Books and Records................................................80
7.1.6. Environmental Law Covenant.......................................81
7.1.7. Use of Proceeds..................................................81
7.1.8. Subsidiary Guarantors, Security, etc.............................82
7.1.9. Hedging Obligations..............................................82
7.1.10. Year 2000........................................................83
7.1.11. Maintenance of Corporate Separateness............................83
7.1.12. Existing and Future Owned Real Property..........................83
7.1.13. Permitted Receivables Transaction................................84
7.2. Negative Covenants...............................................85
7.2.1. Business Activities..............................................85
7.2.2. Indebtedness.....................................................85
7.2.3. Liens............................................................88
7.2.4. Financial Condition and Operations...............................90
7.2.5. Investments......................................................93
7.2.6. Restricted Payments, etc.........................................95
7.2.7. Capital Expenditures, etc........................................96
7.2.8. No Prepayment of Subordinated Debt...............................97
7.2.9. Issuance of Capital Securities...................................97
7.2.10. Consolidation, Merger, etc.......................................98
7.2.11. Permitted Dispositions...........................................98
7.2.12. Modification of Certain Documents................................99
7.2.13. Transactions with Affiliates.....................................99
7.2.14. Restrictive Agreements, etc......................................99
7.2.15. Sale and Leaseback..............................................100
7.2.16. Accounting Changes..............................................100
7.3. UAS and the Student Loan Collection Business....................100
7.3.1. Business Activities.............................................100
7.3.2. Indebtedness....................................................100
7.3.3. Liens...........................................................101
7.3.4. Investments.....................................................101
7.3.5. Restricted Payments, etc........................................101
7.3.6. Consolidation, Merger...........................................101
7.4. OSIFC...........................................................101
ARTICLE VIII EVENTS OF DEFAULT
8.1. Listing of Events of Default....................................101
8.1.1. Non-Payment of Obligations......................................101
8.1.2. Breach of Warranty..............................................102
8.1.3. Non-Performance of Certain Covenants and Obligations............102
8.1.4. Non-Performance of Other Covenants and Obligations..............102
8.1.5. Default on Other Indebtedness...................................102
8.1.6. Judgments.......................................................102
8.1.7. Pension Plans...................................................102
8.1.8. Change in Control...............................................103
8.1.9. Bankruptcy, Insolvency, etc.....................................103
8.1.10. Impairment of Security, etc.....................................103
8.1.11. Failure of Subordination........................................104
8.1.12. Redemption......................................................104
8.2. Action if Bankruptcy............................................104
8.3. Action if Other Event of Default................................104
ARTICLE IX
THE AGENTS
9.1. Actions.........................................................105
9.2. Funding Reliance, etc...........................................105
9.3. Exculpation; Notice of Default..................................105
9.4. Successors......................................................106
9.5. Credit Extensions by each Managing Agent and each Issuer........107
9.6. Credit Decisions................................................107
9.7. Copies, etc.....................................................107
9.8. Reliance by Managing Agents and Issuers.........................107
9.9. The Managing Agents and the Issuers.............................108
9.10. Documentation Agent.............................................108
ARTICLE X MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc........................................108
10.2. Notices; Time...................................................110
10.3. Payment of Costs and Expenses...................................110
10.4. Indemnification.................................................111
10.5. Survival........................................................112
10.6. Severability....................................................112
10.7. Headings........................................................112
10.8. Execution in Counterparts, Effectiveness, etc...................113
10.9. Governing Law; Entire Agreement.................................113
10.10. Successors and Assigns..........................................113
10.11. Sale and Transfer of Credit Extensions; Participations in
Credit Extensions Notes.......................................113
10.11.1. Assignments.....................................................113
10.11.2. Participations..................................................115
10.12. Other Transactions..............................................116
10.13. Independence of Covenants.......................................117
10.14. Confidentiality.................................................117
10.15. Forum Selection and Consent to Jurisdiction.....................117
10.16. Waiver of Jury Trial............................................118
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages; Notice Information; LIBOR Office;
Domestic Office
ANNEX I - Corporate and Capital Structure
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term A Note
EXHIBIT A-3 - Form of Term B Note
EXHIBIT A-4 - Form of Swing Line Note
EXHIBIT B-1 - Form of Borrowing Request
EXHIBIT B-2 - Form of Issuance Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Borrower Closing Date Certificate
EXHIBIT E - Form of Compliance Certificate
EXHIBIT F - Form of Subsidiary Guaranty
EXHIBIT G-1 - Form of Shareholders' Pledge Agreement
EXHIBIT G-2 - Form of Borrower Pledge and Security Agreement
EXHIBIT G-3 - Form of Subsidiary Pledge and Security Agreement
EXHIBIT H - Form of Perfection Certificate
EXHIBIT I - Form of Solvency Certificate
EXHIBIT J - Form of Interco Subordination Agreement
EXHIBIT K - Form of Lender Assignment Agreement
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 30, 1999, is made by and among
OUTSOURCING SOLUTIONS INC., a Delaware corporation (the "Borrower"), the various
financial institutions and other Persons (as defined below) from time to time
parties hereto (the "Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as the
syndication agent (in such capacity, the "Syndication Agent"), the Lead Arranger
and the Sole Book Running Manager, HARRIS TRUST AND SAVINGS BANK, as the
documentation agent (in such capacity, the "Documentation Agent"), and FLEET
NATIONAL BANK ("Fleet"), as the administrative agent (in such capacity, the
"Administrative Agent").
W I T N E S S E T H:
WHEREAS, in accordance with and subject to the terms and conditions
contained in the Stock Subscription and Redemption Agreement, dated as of
October 8, 1999 (the "Recapitalization Agreement"), by and among Madison
Dearborn Capital Partners III, L.P., a Delaware limited partnership ("MDCP"),
the Borrower and all of the existing equity holders of the Borrower immediately
prior to the effectiveness of the Recapitalization Agreement (the "Existing
Shareholders"), and upon the consummation of the Transaction referred to below,
(i) MDCP will, by way of a recapitalization (the "Recapitalization"), become the
direct controlling shareholder of the Borrower, and (ii) certain Existing
Shareholders (the "Rollover Shareholders") will retain certain shares of OSI
Common Stock and options to purchase OSI Common Stock;
WHEREAS, in connection with the Recapitalization, the Borrower intends to
refinance (the "Refinancing") its existing senior credit facilities evidenced by
that certain Credit Agreement, dated as of November 6, 1996 (as amended,
supplemented, amended and restated or otherwise modified prior to the Closing
Date, the "Existing Credit Agreement"), among the Borrower, the lenders party
thereto, and certain financial institutions as the co-administrative agents;
WHEREAS, in connection with the Recapitalization, the Borrower delivered a
consent solicitation statement (the "Consent Solicitation Statement") relating
to the Subordinated Notes, dated November 9, 1999, to the holders of the
Subordinated Notes (the "Subordinated Note Holders") pursuant to which the
Borrower solicited (the "Solicitation") the consent of the Subordinated Note
Holders to the waiver of, among other things, the Borrower's obligation pursuant
to Section 4.15 of the Subordinated Note Indenture to make a Change of Control
Offer (as such term is defined in the Subordinated Note Indenture) in connection
with the Recapitalization and any and all consequences arising therefrom under
the Subordinated Note Indenture;
WHEREAS, in connection with the Recapitalization and the Refinancing, and
pursuant to the applicable Transaction Documents, prior to or contemporaneously
with the consummation of the Recapitalization and the making of the initial
Credit Extensions hereunder, the Borrower will
(a) receive common equity proceeds of approximately $200,000,000
pursuant to the Recapitalization Agreement (which proceeds shall have been
paid by MDCP and its designees to the Borrower) such that, immediately
after giving effect to the Recapitalization, MDCP and its designees shall
be the holder of approximately 82.5% of the issued and outstanding OSI
Common Stock, representing more than 77% of the OSI Common Stock on a
fully diluted basis, in each case on the Closing Date;
(b) issue (the "PIK Preferred Equity Issuance"), on terms and
conditions, and pursuant to documentation (the "PIK Preferred Equity
Documents"), reasonably satisfactory in all respects to the Managing
Agents, redeemable preferred equity securities (the "PIK Preferred
Equity") for not less than $100,000,000 in gross cash proceeds to certain
purchasers thereof (collectively, the "PIK Preferred Equity Holders"); and
(c) issue (the "Junior PIK Preferred Equity Issuance" and, together
with the PIK Preferred Equity Issuance, the "Preferred Equity Issuances"),
on terms and conditions, and pursuant to documentation (the "Junior PIK
Preferred Equity Documents" and, together with the PIK Preferred Equity
Documents, the "Preferred Equity Documents"), reasonably satisfactory in
all respects to the Managing Agents, preferred equity securities (the
"Junior PIK Preferred Equity" and, together with the PIK Preferred Equity,
the "Preferred Equity") to certain of the Existing Shareholders (together
with the PIK Preferred Equity Holders, the "Preferred Equity Holders") for
not less than $7,000,000 of gross cash proceeds, in connection with the
Recapitalization.
The transactions set forth in clauses (a) through (c) above, together with the
Recapitalization, the Refinancing, the Solicitation and each of the other
transactions contemplated thereby and hereby (including the initial Credit
Extensions hereunder, but excluding any Credit Extensions made after the Closing
Date), shall hereinafter be collectively referred to as the "Transaction", which
Transaction shall be consummated for an aggregate amount of approximately
$826,000,000 (which shall include the payment of Transaction-related fees and
expenses not in excess of $47,000,000);
WHEREAS, in order to partially finance the Transaction and in connection
with the post-closing ongoing working capital and general corporate needs of the
Borrower and its Subsidiaries, the Borrower desires to obtain the following
financing facilities from the Lenders:
(a) a Term A Loan Commitment and a Term B Loan Commitment pursuant
to which Borrowings of Term Loans will be made to the Borrower on the
Closing Date in a maximum, original principal amount of $150,000,000 (in
the case of Term A Loans) and $250,000,000 (in the case of Term B Loans);
(b) a Revolving Loan Commitment (to include availability for
Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to which
Borrowings of Revolving Loans, in a maximum aggregate principal amount
(together with all Swing Line Loans and Letter of Credit Outstandings) not
to exceed $75,000,000 will be made to the Borrower from time to time on
and subsequent to the Closing Date but prior to the Revolving Loan
Commitment Termination Date;
(c) a Letter of Credit Commitment pursuant to which the Issuer will
issue Letters of Credit for the account of the Borrower and the Subsidiary
Guarantors from time to time on and subsequent to the Closing Date but
prior to the Revolving Loan Commitment Termination Date in a maximum
aggregate Stated Amount at any one time outstanding not to exceed
$25,000,000 (provided, that the aggregate outstanding principal amount of
Revolving Loans and Swing Line Loans, and Letter of Credit Outstandings at
any time shall not exceed the then existing Revolving Loan Commitment
Amount); and
(d) a Swing Line Loan Commitment pursuant to which Swing Line Loans
will be made to the Borrower from time to time on and subsequent to the
Closing Date but prior to the Revolving Loan Commitment Termination Date;
and
WHEREAS, the Lenders and the Issuer are willing, on the terms and subject
to the conditions hereinafter set forth, to extend the Commitments and make
Loans to the Borrower and issue (or participate in) Letters of Credit;
NOW, THEREFORE, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Account" means any account (as that term is defined in Section 9-106 of
the UCC) of the Borrower or any of its Subsidiaries arising from the sale or
lease of goods or rendering of services.
"Adjusted Base Rate" means, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Adjusted
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Adjusted LIBO Rate" means, with respect to any LIBO Rate Loan for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" is defined in the preamble and includes each other
Person appointed as the successor Administrative Agent pursuant to Section 9.4.
"Administrative Agent's Fee Letter" means the confidential letter, dated
December 1, 1999, between the Borrower and the Administrative Agent.
"Affected Lender" is defined in Section 4.11.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person. "Control" of a Person means the power, directly or indirectly, (a) to
vote (under ordinary circumstances) 10% or more of the Capital Securities (on a
fully diluted basis) of such Person for the election of directors, managing
members or general partners (as applicable) or (b) to direct or cause the
direction of the management and policies of such Person (whether by contract or
otherwise).
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Closing Date and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified from time to time and
in effect on such date.
"Alternative Receivables Program" is defined in clause (a) of Section
7.1.13.
"Annualized Basis" means, (a) with respect to the end of the first Fiscal
Quarter of the Borrower ending after the Closing Date, the applicable amount for
such Fiscal Quarter multiplied by four, (b) with respect to the second Fiscal
Quarter of the Borrower ending after the Closing Date, the applicable amount for
such Fiscal Quarter and the immediately preceding Fiscal Quarter multiplied by
two, and (c) with respect to the third Fiscal Quarter of the Borrower ending
after the Closing Date, the applicable amount for such Fiscal Quarter and the
immediately preceding two Fiscal Quarters multiplied by one and one-third.
"Applicable Commitment Fee" means, (a) for each day from the Closing Date
to (but excluding) the date upon which the Compliance Certificate for the second
full Fiscal Quarter to have commenced and ended after the Closing Date is
required to be delivered by the Borrower to the Administrative Agent pursuant to
clause (c) of Section 7.1.1, a fee which shall accrue at a rate of 1/2 of 1% per
annum, and (b) at all times from the date the Compliance Certificate described
in clause (a) above is required to be delivered, a fee which shall accrue at the
applicable rate per annum set forth below under the column entitled "Applicable
Commitment Fee", determined by reference to the applicable Leverage Ratio
referred to below:
Leverage Ratio Applicable Commitment Fee
-------------- -------------------------
greater than or equal
to 4.00:1.00 0.500%
less than 4.00:1.00 0.375%
The Leverage Ratio used to compute the Applicable Commitment Fee shall be that
set forth in the Compliance Certificate most recently delivered by the Borrower
to the Administrative Agent; changes in the Applicable Commitment Fee resulting
from a change in the Leverage Ratio shall become effective upon delivery by the
Borrower to the Administrative Agent of a new Compliance Certificate pursuant to
clause (c) of Section 7.1.1. If the Borrower shall fail to deliver a Compliance
Certificate by the delivery due date specified in such clause, the Applicable
Commitment Fee from and including the day immediately following such delivery
due date to (but excluding) the date the Borrower delivers to the Administrative
Agent a Compliance Certificate shall conclusively be equal to the highest
Applicable Commitment Fee set forth above.
"Applicable Margin" means, at all times during the applicable periods set
forth below,
(a) on any date, with respect to the unpaid principal amount of each
Term B Loan maintained as a (i) Base Rate Loan, 3.00% per annum and (ii)
LIBO Rate Loan, 4.00% per annum;
(b) from the Closing Date to (but excluding) the date upon which the
Compliance Certificate for the second full Fiscal Quarter to have
commenced and ended after the Closing Date is required to be delivered by
the Borrower to the Administrative Agent pursuant to clause (c) of Section
7.1.1, with respect to the unpaid principal amount of each (i) Revolving
Loan and Term A Loan maintained as a Base Rate Loan, 2.25% per annum, and
(ii) Revolving Loan and Term A Loan maintained as a LIBO Rate Loan, 3.25%
per annum; and
(c) at all times from the date the Compliance Certificate described
in clause (b) above is required to be delivered, with respect to the
unpaid principal amount of each Revolving Loan and Term A Loan, the rate
determined by reference to the applicable Leverage Ratio and at the
applicable percentage per annum set forth below under the column entitled
"Applicable Margin for Base Rate Loans", in the case of such Loans made or
maintained as Base Rate Loans, or by reference to the applicable Leverage
Ratio and at the applicable percentage per annum set forth below under the
column entitled "Applicable Margin for LIBO Rate Loans", in the case of
such Loans made or maintained as LIBO Rate Loans:
Applicable Applicable
Leverage Ratio Margin For Margin For
Base Rate Loans LIBO Rate Loans
greater than or equal
to 4.00:1.00 2.25% 3.25%
greater than or equal to
3.50:1.00 and less than 1.75% 2.75%
4.00:1.00
greater than or equal to
2.75:1.00 and less than 1.25% 2.25%
3.50:1.00
less than 2.75:1.00 0.75% 1.75%
The Leverage Ratio used to compute the Applicable Margin shall be the Leverage
Ratio set forth in the Compliance Certificate most recently delivered by the
Borrower to the Administrative Agent; changes in the Applicable Margin resulting
from a change in the Leverage Ratio shall become effective upon delivery by the
Borrower to the Administrative Agent of a new Compliance Certificate pursuant to
clause (c) of Section 7.1.1. If the Borrower shall fail to deliver a Compliance
Certificate by the delivery due date specified in such clause, the Applicable
Margin from and including the day immediately following such delivery due date
to (but excluding) the date the Borrower delivers to the Administrative Agent a
Compliance Certificate shall conclusively be equal to the highest Applicable
Margin set forth above.
"Assignee Lender" is defined in Section 10.11.1.
"Assignor Lender" is defined in Section 10.11.1.
"Authorized Officer" is defined in clause (b) of Section 5.1.1.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Adjusted Base Rate.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America.
"Borrower" is defined in the preamble.
"Borrower Closing Date Certificate" means the closing date certificate
executed and delivered by the Borrower pursuant to the terms of this Agreement,
substantially in the form of Exhibit D hereto.
"Borrower Pledge and Security Agreement" means the Pledge and Security
Agreement executed and delivered by an Authorized Officer of the Borrower,
substantially in the form of Exhibit G-2 hereto, together with any supplemental
Foreign Pledge Agreements delivered from time to time pursuant to any Loan
Document, in each case as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Borrowing" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders required to make such
Loans on the same Business Day and pursuant to the same Borrowing Request in
accordance with Section 2.1.
"Borrowing Request" means a Loan request and certificate duly executed by
an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1
hereto.
"Business Day" means any day that is not a Saturday, Sunday or other day
on which commercial banks in Boston, Massachusetts or New York City are
authorized or required by law to remain closed; provided, that when used in
connection with a LIBO Rate Loan, the term "Business Day" shall also exclude any
day on which banks are not open for dealings in Dollar deposits in the London
interbank market.
"Capital Expenditures" means for any period, the sum of (a) the aggregate
amount of all expenditures of the Borrower and its Subsidiaries for fixed or
capital assets made during such period which, in accordance with GAAP, would be
classified as capital expenditures, and (b) the aggregate amount of the
principal component of all Capitalized Lease Liabilities incurred during such
period by the Borrower and its Subsidiaries; provided, that Capital Expenditures
shall not include (i) any such expenditures or any such principal component
funded with (x) any Casualty Proceeds, as permitted under clause (h) of Section
3.1.1 or (y) any Net Disposition Proceeds or the proceeds received from any
Disposition of obsolete equipment permitted under clause (a) of Section 7.2.11
(collectively referred to as the "Excluded Proceeds"); or (ii) any Investment
made under Section 7.2.5 (other than pursuant to clause (d)(i) thereof, but then
only to the extent such expenditures were not funded with Excluded Proceeds).
"Capital Securities" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's capital, whether now outstanding
or issued after the Closing Date.
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which have been (or, in accordance with GAAP, should be) classified as
capitalized leases, and for purposes of each Loan Document the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a premium or
a penalty.
"Carry-Forward Amount" is defined in Section 7.2.7.
"Cash Collateralize" means, with respect to a Letter of Credit, the
deposit of immediately available funds into a cash collateral account maintained
with (or on behalf of) the Administrative Agent on terms satisfactory to the
Administrative Agent in an amount equal to the Stated Amount of such Letter of
Credit.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation of (or unconditionally guaranteed by) the
United States (or any agency or political subdivision thereof, to the
extent such obligations are supported by the full faith and credit of the
United States) maturing not more than one year from the date of
acquisition thereof;
(b) any direct obligation issued by any State of the United States
(or any agency or political subdivision thereof) maturing not more than
one year from the date of acquisition thereof and (i) backed by the full
faith and credit of such State or (ii) at the time of acquisition, having
the highest rating obtainable from either S&P or Moody's;
(c) commercial paper maturing not more than 365 days from the date
of acquisition and rated A-1 or higher by S&P or P-1 or higher by Moody's;
(d) any certificate of deposit, time deposit, or bankers acceptance,
maturing not more than one year after its date of acquisition, or any
demand deposit accounts which, in any case, is issued by or established at
either (i) any bank organized under the laws of the United States (or any
State thereof) and which has (x) a credit rating of A2 or higher from
Moody's or A or higher from S&P and (y) a combined capital and surplus
greater than $250,000,000 or (ii) any Lender;
(e) any repurchase agreement having a term of 7 days or less entered
into with any Lender or any commercial banking institution satisfying the
criteria set forth in clause (c)(i) which (i) is secured by a fully
perfected security interest in any obligation of the type described in
clause (a), and (ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase
obligation of such commercial banking institution thereunder; or
(f) shares of investment companies that are registered under the
Investment Company Act of 1940, as amended, and that invest solely in one
or more of the types of securities described in clauses (a) through (e)
above.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of any property of the Borrower or any of its Subsidiaries.
"Casualty Proceeds" means, with respect to any Casualty Event, the cash
amount of any insurance proceeds under any casualty insurance policy or
condemnation awards received by the Borrower or any of its Subsidiaries in
connection therewith, but excluding any proceeds or awards required to be paid
to a creditor (other than the Lenders) which holds a Lien on the property which
is the subject of such Casualty Event which Lien (i) is a Permitted Lien and
(ii) has priority over the Liens securing the Obligations.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means
(a) the failure of Madison at any time to, directly or indirectly,
(i) own beneficially on a fully diluted basis at least 51% of the issued
and outstanding OSI Common Stock, all such OSI Common Stock to be held
free and clear of all Liens (other than Liens granted under a Loan
Document) or (ii) have the right to designate or cause to be elected a
majority of the Board of Directors of the Borrower; or
(b) at any time after the creation of a Public Market, any person or
group (within the meaning of Sections 13(d) and 14(d) under the Exchange
Act), other than Madison, becoming the ultimate "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of Voting Securities representing 30% or more of the Voting
Securities of the Borrower on a fully diluted basis; or
(c) the occurrence of any "Change of Control" (or similar term)
under (and as defined in) any Subordinated Debt Document.
"Closing Date" means the date (which shall be a Business Day) of the
initial Credit Extension hereunder.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"Commitment" means, as the context may require, a Lender's Term A Loan
Commitment, Term B Loan Commitment, Revolving Loan Commitment, Letter of Credit
Commitment or Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, the Term A Loan
Commitment Amount, the Term B Loan Commitment Amount, the Revolving Loan
Commitment Amount, the Letter of Credit Commitment Amount or the Swing Line Loan
Commitment Amount.
"Commitment Termination Date" means, as the context may require, the Term
A Loan Commitment Termination Date, the Term B Loan Commitment Termination Date
or the Revolving Loan Commitment Termination Date.
"Commitment Termination Event" means
(a) the occurrence of any Event of Default described in clauses (a)
through (d) of Section 8.1.9 with respect to the Borrower; or
(b) the occurrence and continuance of any other Event of Default and
either (i) the declaration of all or any portion of the Loans to be due
and payable pursuant to Section 8.3 or (ii) the giving of notice by the
Administrative Agent, acting at the direction of the Required Lenders, to
the Borrower that the Commitments have been terminated.
"Compliance Certificate" means a certificate duly completed and executed
by the chief financial or accounting Authorized Officer of the Borrower,
substantially in the form of Exhibit E hereto, together with such changes
thereto as the Administrative Agent may from time to time reasonably request for
the purpose of monitoring the Borrower's compliance with the financial covenants
contained herein.
"Consent Solicitation Statement" is defined in the third recital.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the Indebtedness of any
other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the Capital Securities of any other Person. The amount of any Person's
obligation under any Contingent Liability shall be deemed to be the outstanding
principal amount of the debt, obligation or other liability guaranteed thereby
(reduced to the extent that such Person's obligation thereunder is reduced by
applicable law or valid contractual agreement).
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Copyright Security Agreement" means any Copyright Security Agreement
executed and delivered by any Obligor in substantially the form of Exhibit C to
either Pledge and Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of any
Stated Expiry Date of any existing Letter of Credit, by the applicable
Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"Current Assets" means, on any date, all assets (other than receivables
portfolios owned on the Closing Date and thereafter acquired by the Borrower or
any of its Subsidiaries in connection with any Permitted Portfolio Acquisition)
which, in accordance with GAAP, would be included as current assets on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date as
current assets.
"Current Liabilities" means, on any date, all amounts which, in accordance
with GAAP, would be included as current liabilities on a consolidated balance
sheet of the Borrower and its Subsidiaries at such date, excluding current
maturities of Indebtedness.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented, amended and restated or
otherwise modified from time to time by the Borrower with the written consent of
the Required Lenders.
"Disposition" (or similar words such as "Dispose") means any sale,
transfer, lease, contribution or other conveyance (including by way of merger)
of, or the granting of options, warrants or other rights to, any of the
Borrower's or its Subsidiaries' assets (including accounts receivables and
Capital Securities of Subsidiaries) to any other Person (other than to another
Obligor) in a single transaction or series of related transactions (provided,
that "Disposition" shall exclude the write-off in the ordinary course of
business of amounts owing to the Borrower or its Subsidiaries which the Borrower
has determined to be uncollectible).
"DLJ" is defined in the preamble.
"Documentation Agent" is defined in the preamble.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means the office of a Lender designated as its "Domestic
Office" on Schedule II hereto or in a Lender Assignment Agreement, or such other
office within the United States as may be designated from time to time by notice
from such Lender to the Administrative Agent and the Borrower.
"Domestic Subsidiary" means any Subsidiary that is incorporated or
organized in or under the laws of the United States, any state thereof or the
District of Columbia.
"EBITDA" means, for any applicable period, the sum for the Borrower and
its Subsidiaries on a consolidated basis of
(a) Net Income,
plus
(b) the amount deducted in determining Net Income representing
non-cash charges or expenses, including depreciation and amortization
(excluding any non-cash charges representing an accrual of or reserve for
cash charges to be paid within the next twelve months),
plus
(c) the amount deducted in determining Net Income representing
income taxes (other than for the OSIFC Family) (whether paid or deferred),
plus
(d) the amount deducted in determining Net Income representing
Interest Expense and all fees, expenses and management bonuses (to the
extent, in the case of management bonuses, paid at or accrued for or prior
to the Closing Date) and financing costs incurred in connection with the
Transaction,
plus
(e) the amount deducted in determining Net Income representing fees
paid to Madison in an aggregate amount not to exceed $500,000 per annum;
provided, however, that "EBITDA" for any such applicable period ending on March
31, 2000, June 30, 2000 and September 30, 2000 shall be increased by an amount
equal to $9,000,000, $6,000,000 and $3,000,000, respectively.
"Environmental Laws" means all applicable and legally binding federal,
state or local statutes, laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders) relating to
public health and safety and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to Sections of ERISA also refer to any successor Sections thereto.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any applicable period, the excess (if any),
of
(a) EBITDA for such applicable period;
over
(b) the sum (for such applicable period) of
(i) the cash portion of Interest Expense (net of cash
interest income) for such applicable period;
plus
(ii) voluntary and mandatory prepayments of, and scheduled
repayments of, the principal amount of Total Debt, including
Capitalized Lease Liabilities, Term Loans and Revolving Loans
(provided, that, in the case of Revolving Loans, there is a
corresponding permanent reduction in the Revolving Loan Commitment
Amount), in each case, to the extent actually made and for such
applicable period;
plus
(iii) all federal, state and foreign income taxes actually
paid or payable in cash by the Borrower and its Subsidiaries for
such applicable period;
plus
(iv) Capital Expenditures actually made during such applicable
period pursuant to clause (a) of Section 7.2.7 (excluding Capital
Expenditures constituting Capitalized Lease Liabilities and by way
of the incurrence of Indebtedness permitted pursuant to clause (e)
of Section 7.2.2 to a vendor of any assets permitted to be acquired
pursuant to Section 7.2.7 to finance the acquisition of such
assets);
plus
(v) the amount of the net increase (if any) of Current Assets,
other than cash and Cash Equivalent Investments, over Current
Liabilities of the Borrower and its Subsidiaries for such applicable
period;
plus
(vi) Investments permitted and actually made, in cash,
pursuant to clause (d)(i), (g), (k) or (m) of Section 7.2.5 during
such applicable period (excluding Investments financed with the
proceeds of any issuance of Capital Securities or Indebtedness other
than Revolving Loans);
plus
(vii) Restricted Payments (in an amount not to exceed
$500,000) paid pursuant to clause (c) of Section 7.2.6 made during
such applicable period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Proceeds" is defined in the definition of "Capital
Expenditures".
"Exemption Certificate" is defined in clause (e) of Section 4.6.
"Existing Credit Agreement" is defined in the second recital.
"Existing Letters of Credit" means each letter of credit identified in
Item 2.1.2 of the Disclosure Schedule.
"Existing Shareholders" is defined in the first recital.
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fee Letter" means the confidential letter, dated October 8, 1999, between
DLJ and MDCP.
"Filing Agent" is defined in Section 5.1.10.
"Filing Statement" is defined in Section 5.1.10.
"Fiscal Month" means any fiscal month of a Fiscal Year.
"Fiscal Quarter" means a quarter ending on the last day of March, June,
September or December.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (e.g., the "2000 Fiscal Year") refer to the Fiscal Year
ending on December 31 of such calendar year.
"Fixed Charge Coverage Ratio" means, at the end of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter and each of the
three immediately prior Fiscal Quarters of
(a) EBITDA for all such Fiscal Quarters
to
(b) the sum of
(i) Capital Expenditures actually made during such applicable
period pursuant to clause (a) of Section 7.2.7 (excluding Capital
Expenditures constituting Capitalized Lease Liabilities and by way
of the incurrence of Indebtedness permitted pursuant to clause (e)
of Section 7.2.2 to a vendor of any assets permitted to be acquired
pursuant to Section 7.2.7 to finance the acquisition of such
assets);
plus
(ii) the cash portion of Interest Expense (net of cash
interest income) for all such Fiscal Quarters, provided that for the
first three Fiscal Quarters ending after the Closing Date, Interest
Expense shall be determined on an Annualized Basis;
plus
(iii) all scheduled payments of principal of Total Debt
(including the Term Loans and the principal portion of any
Capitalized Lease Liabilities) during all such Fiscal Quarters,
provided that for the first three Fiscal Quarters ending after the
Closing Date, such payments shall be determined on an Annualized
Basis;
plus
(iv) Restricted Payments made or permitted to be made pursuant
to clause (a) of Section 7.2.6 during all such Fiscal Quarters;
plus
(v) all federal, state and foreign income taxes actually paid
or payable in cash by the Borrower and its Subsidiaries for all such
Fiscal Quarters.
"Fleet" is defined in the preamble.
"Foreign Pledge Agreement" means any supplemental pledge agreement
governed by the laws of a jurisdiction other than the United States or a State
thereof executed and delivered from time to time by the Borrower or any
Subsidiary Guarantor pursuant to the terms of the applicable Pledge and Security
Agreement, in form and substance reasonably satisfactory to the Administrative
Agent, as may be necessary or desirable under the laws of organization or
incorporation of a Subsidiary to further protect or perfect the Lien on and
security interest in any Collateral (as defined in a Pledge and Security
Agreement).
"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" is defined in Section 1.4.
"Governmental Authority" means the government of the United States, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank,
the NAIC or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance (including any petroleum product) within
the meaning of any other Environmental Laws.
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under currency exchange agreements, interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and all other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
any Loan Document refer to such Loan Document as a whole and not to any
particular Section, paragraph or provision of such Loan Document.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification or exception to such opinion or certification
(i) which is of a "going concern" or similar nature, (ii) which relates to the
limited scope of examination of matters relevant to such financial statement
(except, in the case of matters relating to any acquired business or assets, in
respect of the period prior to the acquisition by such Obligor of such business
or assets), or (iii) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause the
Borrower to be in default of any of its obligations under Section 7.2.4.
"including" and "include" means including without limiting the generality
of any description preceding such term, and, for purposes of each Loan Document,
the parties hereto agree that the rule of ejusdem generis shall not be
applicable to limit a general statement, which is followed by or referable to an
enumeration of specific matters, to matters similar to the matters specifically
mentioned.
"Indebtedness" of any Person means:
(a) all obligations of such Person for borrowed money or for the
deferred purchase price of property or services (exclusive of (i) deferred
purchase price arrangements in the nature of open or other accounts
payable owed to suppliers on normal terms in connection with the purchase
of goods and services in the ordinary course of business, (ii) accrued
expenses incurred in the ordinary course of business and (iii) Specified
Liabilities (until such time as the obligation associated with such
Specified Liabilities is recorded as a liability on the balance sheet of
the Borrower in accordance with GAAP)) and all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities;
(d) net liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with
GAAP, all Indebtedness of the types referred to in clauses (a) through (d)
above (excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including Indebtedness arising
under conditional sales or other title retention agreements), whether or
not such Indebtedness shall have been assumed by such Person or is limited
in recourse; provided, however, that, to the extent such Indebtedness is
limited in recourse to the assets securing such Indebtedness, the amount
of such Indebtedness shall be limited to the fair market value of such
assets;
(f) for purposes of Section 8.1.5 only, all other items which, in
accordance with GAAP, would be included as liabilities on the liability
side of the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(g) all Receivables Facility Outstandings; and
(h) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer (but only to the extent such Person is
liable for such Indebtedness), but shall not include any preferred stock.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Interco Subordination Agreement" means the Intercompany Subordination
Agreement, substantially in the form of Exhibit J hereto, executed and delivered
by two or more Obligors pursuant to the terms of this Agreement, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Intercompany Note" means, with respect to the Borrower or any of its
Subsidiaries, as the maker thereof, a promissory note substantially in the form
of Exhibit A to any Pledge Agreement (with such modifications as the
Administrative Agent may consent to, such consent not to be unreasonably
withheld), which promissory note shall evidence all intercompany loans which may
be made from time to time by the payee thereunder to such maker and shall be
duly endorsed and pledged by the payee in favor of the Administrative Agent.
"Interest Coverage Ratio" means, at the end of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter and each of the
three immediately prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
to
(b) the cash portion of Interest Expense (net of cash interest
income) for all such Fiscal Quarters; provided that for the first full
three Fiscal Quarters ending after the Closing Date, Interest Expense
shall be determined on an Annualized Basis.
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense of the Borrower and its Subsidiaries for such
applicable period, as determined in accordance with GAAP, including the portion
of any payments made in respect of Capitalized Lease Liabilities allocable to
interest expense, but excluding (to the extent included in interest expense)
up-front fees and expenses and the amortization of all deferred financing costs.
"Interest Period" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and shall end on (but exclude) the day which numerically corresponds to such
date one, two, three or six months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such month), as the
Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4;
provided, however, that
(a) the Borrower shall not be permitted to select Interest Periods
to be in effect at any one time which have expiration dates occurring on
more than eight different dates (it being understood that there shall not
be more than eight contracts in respect of LIBO Rate Loans in effect at
any one time);
(b) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall
end on the Business Day next preceding such numerically corresponding
day); and
(c) no Interest Period for any Loan may end later than the Stated
Maturity Date for such Loan.
"Investment" means, relative to any Person,
(a) any loan, advance or extension of credit made by such Person to
any other Person (other than officers and employees in the ordinary course
of business for commissions, travel, relocation and similar expenses),
including the purchase by such Person of any bonds, notes, debentures or
other debt securities of any other Person; and
(b) any Capital Securities acquired by such Person in any other
Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such Investment.
"ISP Rules" is defined in Section 10.9.
"Issuance Request" means a Letter of Credit request and certificate duly
executed by an Authorized Officer of the Borrower, substantially in the form of
Exhibit B-2 hereto.
"Issuer" means the Administrative Agent in its capacity as Issuer of the
Letters of Credit. At the request of the Administrative Agent and with the
Borrower's consent (not to be unreasonably withheld), another Lender or an
Affiliate of the Administrative Agent may issue one or more Letters of Credit
hereunder. Furthermore, the parties hereto acknowledge and agree that The Chase
Manhattan Bank and BankBoston, N.A. shall each be deemed to be an "Issuer" under
the terms of this Agreement with respect to the Existing Letters of Credit
issued by each one of them.
"Junior PIK Preferred Equity" is defined in clause (c) of the fourth
recital.
"Junior PIK Preferred Equity Documents" is defined in clause (c) of the
fourth recital.
"Junior PIK Preferred Equity Holders" is defined in clause (c) of the
fourth recital.
"Junior PIK Preferred Equity Issuance" is defined in clause (c) of the
fourth recital.
"Lender Assignment Agreement" means an assignment agreement substantially
in the form of Exhibit K hereto.
"Lenders" is defined in the preamble (and includes any Person that becomes
a Lender pursuant to Section 10.11.1).
"Lender's Environmental Liability" means any and all losses, liabilities,
obligations, penalties, claims, litigation, demands, defenses, costs, judgments,
suits, proceedings, damages (including consequential damages), disbursements or
expenses of any kind or nature whatsoever (including reasonable attorneys' fees
at trial and appellate levels and experts' fees and disbursements and expenses
incurred in investigating, defending against or prosecuting any litigation,
claim or proceeding) which may at any time be imposed upon, or asserted or
awarded against, the Administrative Agent, the Syndication Agent, any Lender,
the Issuers or any of such Person's Affiliates, shareholders, directors,
officers, employees, and agents in connection with or arising from:
(a) any Hazardous Material on, in, under or affecting all or any
portion of any property of the Borrower or any of its Subsidiaries, the
groundwater thereunder, or any surrounding areas thereof to the extent
caused by Releases from the Borrower's or any of its Subsidiaries' or any
of their respective predecessors' properties;
(b) any investigation, claim, litigation or proceeding related to
personal injury arising from exposure or alleged exposure to Hazardous
Materials handled by the Borrower or any of its Subsidiaries;
(c) any misrepresentation, inaccuracy or breach of any warranty,
contained or referred to in Section 6.12;
(d) any violation or claim of violation by the Borrower or any of
its Subsidiaries of any Environmental Laws; or
(e) the imposition of any lien for damages caused by or the recovery
of any costs for the cleanup, release or threatened release of Hazardous
Material by the Borrower or any of its Subsidiaries, or in connection with
any property owned or formerly owned by the Borrower or any of its
Subsidiaries.
"Letter of Credit" means (i) any standby letters of credit issued on or
after the Closing Date for the account of the Borrower or any Subsidiary
Guarantor (other than UAS) in accordance with the terms of this Agreement and
(ii) each of the Existing Letters of Credit.
"Letter of Credit Commitment" means the Issuers' obligation to issue
Letters of Credit pursuant to Section 2.1.2 and, with respect to each Revolving
Loan Lender, the obligations of each such Lender to participate in such Letters
of Credit pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum amount
of $25,000,000, as such amount may be permanently reduced from time to time
pursuant to Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to the
sum of (i) the then aggregate amount which is undrawn and available under all
issued and outstanding Letters of Credit, and (ii) the then aggregate amount of
all unpaid and outstanding Reimbursement Obligations.
"Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of
(a) Total Debt less cash and Cash Equivalent Investments (in each
case, exclusive of the Restricted Cash Balance on such date) of the
Borrower and its Subsidiaries on a consolidated basis outstanding at such
time;
to
(b) EBITDA for the period of four consecutive Fiscal Quarters ended
on such date.
"LIBO Rate" means, with respect to any LIBO Rate Loan for any Interest
Period, the rate appearing on Page 3750 of the Telerate Service (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to Dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for Dollar deposits with a maturity comparable to
such Interest Period. In the event that such rate is not available at such time
for any reason, then the "LIBO Rate" with respect to such LIBO Rate Loan for
such Interest Period shall be the rate at which Dollar deposits of $5,000,000,
and for a maturity comparable to such Interest Period, are offered by the
principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a rate of interest determined by
reference to the Adjusted LIBO Rate.
"LIBOR Office" means the office of a Lender designated as its "LIBOR
Office" on Schedule II hereto or in a Lender Assignment Agreement, or such other
office designated from time to time by notice from such Lender to the Borrower
and the Administrative Agent, whether or not outside the United States, which
shall be making or maintaining the LIBO Rate Loans of such Lender.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or other priority or preferential
arrangement of any kind or nature whatsoever, to secure payment of a debt or
performance of an obligation.
"Loan" means, as the context may require, a Revolving Loan, a Term Loan or
a Swing Line Loan of any type.
"Loan Documents" collectively means this Agreement, the Letters of Credit,
the Notes, each Rate Protection Agreement, the Interco Subordination Agreement,
the Fee Letter, the Administrative Agent's Fee Letter, each agreement pursuant
to which the Administrative Agent is granted a Lien to secure the Obligations,
each Credit Extension Request and each other agreement, certificate, document or
instrument (in each case other than any Transaction Documents) delivered in
connection with any Loan Document, whether or not specifically mentioned herein
or therein.
"Madison" means Madison Dearborn Capital Partners III, L.P., a Delaware
limited partnership, Madison Dearborn Partners III, L.P., a Delaware limited
partnership, and any Person that the general partner of Madison Dearborn
Partners III, L.P. has the power to direct or cause the direction of the
management and policies thereof (whether by contract or otherwise).
"Managing Agents" means, as the context may require, the Administrative
Agent and/or the Syndication Agent.
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations, results of operations, business prospects (which could
reasonably be expected to result in a Default) or financial condition of the
Borrower and its Subsidiaries taken as a whole, (ii) the rights and remedies of
any Secured Party under any Loan Document or (iii) the ability of any Obligor to
perform its Obligations under any Loan Document.
"Material Documents" means, collectively, the Recapitalization Agreement
(including any and all exhibits thereto), the Preferred Equity Documents
(including any and all exhibits thereto), the Consent Solicitation Statement,
and the Organic Documents of the Borrower and the Subsidiary Guarantors, in each
case as amended, supplemented, amended and restated or otherwise modified from
time to time in accordance with Section 7.2.12.
"MDCP" is defined in the first recital.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means each mortgage, deed of trust or other agreement, in any
case in form and substance reasonably satisfactory to the Administrative Agent,
executed and delivered by any Obligor in favor of the Administrative Agent for
the benefit of the Secured Parties pursuant to the requirements of this
Agreement, under which a Lien is granted on the real property and fixtures
described therein, in each case as amended, supplemented, amended and restated
or otherwise modified from time to time.
"NAIC" means the National Association of Insurance Commissioners.
"Net Debt Proceeds" means with respect to the incurrence, sale or issuance
by the Borrower or any of its Subsidiaries of any Indebtedness (other than any
Indebtedness permitted by Section 7.2.2, as such Section may be amended or
modified with the consent of the Required Lenders), the excess of:
(a) the gross cash proceeds received by such Person from such
incurrence, sale or issuance,
over
(b) the sum of (i) all reasonable and customary underwriting
commissions and legal, investment banking, brokerage and accounting and
other professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred in
connection with such incurrence, sale or issuance and (ii) in the case of
any Indebtedness incurred, sold or issued by any Non-Guarantor that is a
Foreign Subsidiary, any taxes or other costs or expenses resulting from
repatriating any such proceeds to the United States.
"Net Disposition Proceeds" means, with respect to any Disposition of any
assets of the Borrower or any of its Subsidiaries permitted pursuant to clause
(d) of Section 7.2.11, the excess of
(a) the gross cash proceeds received by such Person from any such
Disposition and any cash payments when received in respect of promissory
notes or other non-cash consideration delivered to such Person in respect
thereof,
over
(b) the sum of (i) all reasonable and customary fees and expenses
with respect to legal, investment banking, brokerage and accounting and
other professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred in
connection with such Disposition, (ii) all Taxes and other governmental
costs and expenses actually paid or estimated by such Person (in good
faith) to be payable in cash in connection with such Disposition
(including, in the event of a Disposition of non-U.S. assets, any such
taxes or other costs or expenses resulting from repatriating any such
proceeds to the United States), (iii) payments made by such Person to
retire Indebtedness (other than the Credit Extensions) of such Person
where payment of such Indebtedness is required in connection with such
Disposition and (iv) reserves for purchase price adjustments, including
earn-out payments, and retained fixed liabilities that are payable by the
Borrower or such Subsidiary in cash to the extent required under GAAP in
connection with such Disposition;
provided, however, that if, after the payment of all Taxes, purchase price
adjustments, including earn-out payments, and retained fixed liabilities with
respect to such Disposition, the amount of estimated Taxes, purchase price
adjustments, including earn-out payments, and retained fixed liabilities, if
any, pursuant to clause (b)(ii) or (b)(iv) above exceeded the amount of Taxes,
purchase price adjustments, including earn-out payments, and retained fixed
liabilities amount actually paid in cash in respect of such Disposition, the
aggregate amount of such excess shall, at such time, constitute Net Disposition
Proceeds.
"Net Equity Proceeds" means with respect to the sale or issuance by the
Borrower to any Person of any Capital Securities of the Borrower, or any
warrants or options with respect to any such Capital Securities or the exercise
of any such warrants or options after the Closing Date (other than any sale or
issuance to, or exercise by, any directors, officers, employees or consultants
of the Borrower and its Subsidiaries), the excess of:
(a) the gross cash proceeds received by the Borrower from such sale,
exercise or issuance,
over
(b) all reasonable and customary underwriting commissions and legal,
investment banking, brokerage, accounting and other professional fees,
sales commissions and disbursements and all other reasonable fees,
expenses and charges, in each case actually incurred in connection with
such sale or issuance.
"Net Income" means, for any period, the aggregate of all amounts
(exclusive of (i) extraordinary gains and losses, (ii) gains and losses from
Dispositions, and (iii) non-cash restructuring charges, but including dividends
or distributions paid in cash by OSIFC to the Borrower) which would be included
as net income on the consolidated financial statements of the Borrower and its
Subsidiaries for such period; provided, however, that non-recurring expenses
associated with personnel and facility relocations, strategic reviews, branding
and Year 2000 compliance incurred during any of the four Fiscal Quarters ending
prior to the Closing Date shall be included in the determination of Net Income.
"Non-Domestic Secured Party" means any Secured Party that is not a "United
States person", as defined under Section 7701(a)(30) of the Code.
"Non-Excluded Taxes" means any Taxes other than net income and franchise
Taxes imposed with respect to any Secured Party by a Governmental Authority
under the laws of which such Secured Party is organized or in which it maintains
its applicable lending office or under the jurisdiction of which such Secured
Party maintains a fixed place of business or otherwise engages in business.
"Non-Guarantor" means Pay Tech, and each other Subsidiary of the Borrower
which is not a Subsidiary Guarantor.
"Note" means, as the context may require, a Revolving Note, a Term A Note,
a Term B Note or a Swing Line Note.
"Obligations" means all obligations (monetary or otherwise, whether
absolute or contingent, matured or unmatured) of each Obligor arising under or
in connection with a Loan Document, including the principal of and premium, if
any, and interest (including interest accruing during the pendency of any
proceeding of the type described in Section 8.1.9, whether or not allowed in
such proceeding) on the Loans and all Reimbursement Obligations.
"Obligor" means, as the context may require, the Borrower and each other
Person (other than (i) a Secured Party and (ii) any OSI Shareholder) obligated
under any Loan Document.
"Organic Document" means, relative to any Person, as applicable, its
certificate of incorporation, by-laws, certificate of partnership, partnership
agreement, certificate of formation, limited liability agreement and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of such Person's partnership interests, limited liability company interests or
authorized shares of Capital Securities.
"OSI Common Stock" means the common stock of the Borrower, $0.01 par value
per share.
"OSI Shareholders" means MDCP and each other shareholder of the OSI Common
Stock who is obligated under the Shareholders' Pledge Agreement.
"OSIFC" means OSI Funding Corp., a Delaware corporation and a wholly owned
Subsidiary of the Borrower (which shall be converted to a non-Subsidiary limited
liability company after the Closing Date as contemplated in Section 7.4).
"OSIFC Family" and "OSIFC Family Member" means OSIFC and/or any Subsidiary
of OSIFC, either collectively or individually, as the context may require.
"OSIPS" means OSI Portfolio Services, Inc. (formerly known as Account
Portfolios, Inc.), a Delaware corporation and a wholly owned Subsidiary of the
Borrower.
"Other Person" is defined in the definition of "Subsidiary".
"Other Taxes" means any and all stamp, documentary or similar taxes, or
any other excise or property taxes or similar levies that arise on account of
any payment made or required to be made under any Loan Document or from the
execution, delivery, registration, recording or enforcement of any Loan
Document; provided, that the term "Other Taxes" shall not include any net income
or franchise taxes.
"Outstanding Amount" is defined in clause (c) of Section 2.3.2.
"Participant" is defined in Section 10.11.2.
"Patent Security Agreement" means any Patent Security Agreement executed
and delivered by any Obligor in substantially the form of Exhibit A to either
Pledge and Security Agreement, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Pay Tech" means Pay Tech, Inc., a Wisconsin corporation and a Subsidiary
of the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or
any corporation, trade or business that is, along with the Borrower, a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under Section 4069 of ERISA.
"Percentage" means, as the context may require, any Lender's RL
Percentage, Term A Loan Percentage or Term B Loan Percentage.
"Perfection Certificate" means the Perfection Certificate executed and
delivered by an Authorized Officer of each Obligor that is a party to Pledge and
Security Agreement pursuant to Section 5.1.15 or 7.1.8, substantially in the
form of Exhibit H hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Permitted Acquisition" means an acquisition of Capital Securities (by
merger, consolidation, purchase or otherwise) or of all or substantially all of
the assets by the Borrower or any Subsidiary (other than any OSIFC Family
Member) from any Person in which the following conditions are satisfied:
(a) immediately before and after giving effect to such acquisition
no Default shall have occurred and be continuing or would result therefrom
(including under Section 7.2.1);
(b) the Borrower shall have delivered to the Administrative Agent a
Compliance Certificate for the period of four full Fiscal Quarters
immediately preceding such acquisition (prepared in good faith and in a
manner and using such methodology which is consistent with the most recent
financial statements delivered pursuant to Section 7.1.1) giving pro forma
effect to the consummation of such acquisition and evidencing compliance
with the covenants set forth in Section 7.2.4;
(c) such acquisition, if an acquisition of Capital Securities, shall
result in the issuer of such Capital Securities becoming a wholly owned
Subsidiary; and
(d) upon the consummation of such acquisition, the provisions of
Section 7.1.8 are complied with.
"Permitted Lien" means any Lien described in Section 7.2.3.
"Permitted Portfolio Acquisition" is defined in clause (m) of Section
7.2.5.
"Permitted Receivables Amount" means (initially) $100,000,000, as such
amount may be cumulatively increased from time to time following the 2001 Fiscal
Year (in an aggregate amount not to exceed $55,000,000 over the term of this
Agreement) by the "Increased Amount" set forth below if the Leverage Ratio as of
the last day of any Fiscal Year is less than that set forth below (provided,
that, (i) once a particular Leverage Ratio has been achieved, the Permitted
Receivables Amount shall only be subsequently increased if at least the next
succeeding minimum Leverage Ratio (the "Next Ratio") is achieved in a subsequent
Fiscal Year and (ii) if, in any given Fiscal Year, the Leverage Ratio falls
below the next succeeding minimum Leverage Ratio below the Next Ratio, the
Permitted Receivables Amount will be cumulatively increased by the full amount
of the applicable Increased Amounts set forth below (i.e., if, at the end of
Fiscal Year 1, the Leverage Ratio is 2.80:1.00 and, thereafter, the Leverage
Ratio is 2.20:1.00 at the end of Fiscal Year 2, on and as of the appropriate
date, the Permitted Receivables Amount will be increased by $20,000,000)):
Leverage Ratio
Less Than Increased Amount
--------------- ----------------
3.25:1.00 $15,000,000
2.75:1.00 $10,000,000
2.25:1.00 $10,000,000
1.75:1.00 $10,000,000
1.25:1.00 $10,000,000
The Leverage Ratio used to compute the Increased Amount shall be that set forth
in the Compliance Certificate delivered by the Borrower to the Administrative
Agent for the fourth Fiscal Quarter of each Fiscal Year (beginning with the
fourth Fiscal Quarter of the 2001 Fiscal Year); provided, that the Increased
Amount shall only become effective from and subsequent to the date such
Compliance Certificate is actually delivered and only if such Compliance
Certificate also demonstrates that (i) no Default shall have occurred and be
continuing and (ii) the Borrower was in compliance with the covenants set forth
in Section 7.2.4 during the fourth Fiscal Quarter of the Fiscal Year in respect
of which such Compliance Certificate is delivered.
"Permitted Receivables Transaction" means any transaction (including any
Alternative Receivables Program), providing for the sale or financing of
Accounts with customary limited recourse based on the collectability of the
Accounts sold, consummated pursuant to and in accordance with the Receivables
Documents.
"Permitted Refinancing" means, as to any Indebtedness (other than the
Obligations), the incurrence of other Indebtedness (whether with the same or
different lenders) to refinance such existing Indebtedness or the amendment,
renewal or other modification of such existing Indebtedness; provided that, in
the case of such other Indebtedness or modified Indebtedness, the following
conditions are satisfied:
(i) the weighted average life to maturity of such refinancing or
modified Indebtedness shall be greater than or equal to the weighted
average life to maturity of the Indebtedness being refinanced or modified,
and the first scheduled principal payment in respect of such refinancing
or modified Indebtedness shall not be earlier than the first scheduled
principal payment in respect of the Indebtedness being refinanced or
modified;
(ii) the principal amount of such refinancing or modified
Indebtedness shall be less than or equal to the principal amount then
outstanding of the Indebtedness being refinanced or modified;
(iii) the respective obligor or obligors shall be the same on
the refinancing or modified Indebtedness as on the Indebtedness being
refinanced or modified;
(iv) the security, if any, for the refinancing or modified
Indebtedness shall be the same as that for the Indebtedness being
refinanced or modified (except to the extent that less security is granted
to holders of the refinancing Indebtedness or modified Indebtedness);
(v) the refinancing or modified Indebtedness is subordinated to the
Obligations to the same degree, if any, or to a greater degree as the
Indebtedness being refinanced or modified; and
(vi) with respect to any refinancing or modification of the
Indebtedness evidenced by the Subordinated Notes, no material terms
applicable to such refinancing or modified Indebtedness and, if
applicable, the related guarantees of such refinancing or modified
Indebtedness (including covenants, events of default, acceleration rights
and remedies) shall be more favorable to the lenders with respect to such
refinancing or modified Indebtedness than the terms that are applicable
under the instruments and documents governing the Indebtedness being
refinanced or modified.
"Person" means any natural person, corporation, limited liability company,
partnership, joint venture, association, trust or unincorporated organization,
Governmental Authority or any other legal entity, whether acting in an
individual, fiduciary or other capacity.
"PIK Preferred Equity" is defined in clause (b) of the fourth recital.
"PIK Preferred Equity Documents" is defined in clause (b) of the fourth
recital.
"PIK Preferred Equity Holders" is defined in clause (b) of the fourth
recital.
"PIK Preferred Equity Issuance" is defined in clause (b) of the fourth
recital.
"Pledge Agreement" means, as the context may require, the Shareholders'
Pledge Agreement, the Borrower Pledge and Security Agreement and/or the
Subsidiary Pledge and Security Agreement.
"Pledge and Security Agreement" means, as the context may require, the
Borrower Pledge and Security Agreement and/or the Subsidiary Pledge and Security
Agreement.
"Pledged Subsidiary" means each Subsidiary in respect of which the
Administrative Agent has been granted a security interest in or a pledge of (i)
any of the Capital Securities of such Subsidiary or (ii) any Intercompany Notes
of such Subsidiary owing to the Borrower or another Subsidiary.
"Preferred Equity" is defined in clause (c) of the fourth recital.
"Preferred Equity Documents" is defined in clause (c) of the fourth
recital.
"Preferred Equity Holders" is defined in clause (c) of the fourth recital.
"Preferred Equity Issuance" is defined in clause (c) of the fourth
recital.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by Fleet National Bank, as its prime rate in effect at its
principal office in Boston, Massachusetts; each change in the Prime Rate shall
be effective from and including the date such change is publicly announced as
being effective.
"Public Market" shall exist if (i) a Public Offering has been consummated
and (ii) any Capital Securities of the Borrower has been distributed by means of
an effective registration statement under the Securities Act.
"Public Offering" means a public offering of Capital Securities of the
Borrower pursuant to an effective registration statement under the Securities
Act.
"Quarterly Payment Date" means the 15th day of January, April, July and
October, or, if any such day is not a Business Day, the next succeeding Business
Day.
"Rate Protection Agreement" means, collectively, any interest rate swap,
cap, collar or similar agreement entered into by the Borrower or any of its
Subsidiaries under which the counterparty of such agreement is (or at the time
such agreement was entered into, was) a Lender or an Affiliate of a Lender.
"Recapitalization" is defined in the first recital.
"Recapitalization Agreement" is defined in the first recital.
"Receivables Agreement" means that certain Sale and Servicing Agreement,
dated as of October 28, 1998, by and among the Borrower, Gulf State Credit,
L.L.C., OSIFC and OSIPS, as in effect on the Closing Date.
"Receivables Documents" means the Receivables Agreement, the Triple-A One
Credit Agreement, the Triple-A One Commercial Paper, and the Variable Funding
Notes, in each case as amended, supplemented, amended and restated or otherwise
modified from time to time in accordance with Section 7.2.12.
"Receivables Facility Outstandings" means, at any date of determination,
the principal amount of commercial paper issued and outstanding under the
Triple-A One Credit Agreement and pursuant to the Permitted Receivables
Transaction.
"Refinancing" is defined in the second recital.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
"Register" is defined in clause (b)(i) of Section 2.7.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Related Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" is defined in Section 4.11.
"Replacement Notice" is defined in Section 4.11.
"Repurchase Payments" means amounts expended to repurchase, redeem, or
otherwise retire for value any shares of the Borrower's Capital Securities
(together with options or warrants in respect of any thereof) held by officers,
directors, employees and individual persons who are consultants of the Borrower
(or any of their respective estates or beneficiaries under such estates).
"Required Lenders" means, at any time, Lenders holding at least 51% of the
Total Exposure Amount.
"Resource Conservation and Recovery Act" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended.
"Restricted Cash Balance" means, as of the last day of any Fiscal Quarter,
the aggregate amount of all cash, deposits and Cash Equivalent Investments which
is not owned by the Borrower or any of its Subsidiaries but instead is being
held by the Borrower or any such Subsidiary for the benefit of any of their
respective customers which are not included as "cash and cash equivalents" on
the consolidated balance sheet of the Borrower and its Subsidiaries.
"Restricted Payment" means the declaration or payment of any dividend
(other than dividends to be paid or in fact paid in Capital Securities of the
Borrower or any Subsidiary or by an increase in the liquidation preference of
any Capital Securities of the Borrower or any Subsidiary) on, or the making of
any payment or distribution on account of, or setting apart assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of any class of Capital Securities of the Borrower or any
Subsidiary or any warrants or options to purchase any such Capital Securities,
whether now or hereafter outstanding, or the making of any other payment or
distribution (other than in Capital Securities or by an increase in the
liquidation preference of any Capital Securities of the Borrower or any
Subsidiary) in respect thereof, either directly or indirectly, whether in cash
or property, obligations of the Borrower or any Subsidiary or otherwise.
"Revolving Loan" is defined in Section 2.1.1.
"Revolving Loan Commitment" means, relative to any Lender, such Lender's
obligation (if any) to make Revolving Loans pursuant to Section 2.1.1.
"Revolving Loan Commitment Amount" means, on any date, $75,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Revolving Loan Commitment Termination Date" means the earliest of
(a) December 10, 2005;
(b) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to the terms of this
Agreement; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in the preceding clause (b) or (c),
the Revolving Loan Commitments shall terminate automatically and without any
further action.
"Revolving Loan Lender" is defined in Section 2.1.1.
"Revolving Note" means a promissory note of the Borrower payable to any
Revolving Loan Lender, in the form of Exhibit A-1 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to such Revolving Loan
Lender resulting from outstanding Revolving Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"RL Percentage" means, relative to any Lender, the applicable percentage
relating to Revolving Loans set forth on Schedule II hereto under the Revolving
Loan Commitment column or set forth in a Lender Assignment Agreement under the
Revolving Loan Commitment column, as such percentage may be adjusted from time
to time pursuant to Lender Assignment Agreements executed by such Lender and its
Assignee Lender and delivered pursuant to Section 10.11.1. A Lender shall not
have any Revolving Loan Commitment if its percentage under the Revolving Loan
Commitment column is zero.
"Rollover Shareholders" is defined in clause (ii) of the first recital.
"S&P" means Standard & Poor's Rating Services, a division of McGraw-Hill,
Inc.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means, collectively, the Lenders, the Issuers, the
Managing Agents, each counterparty to a Rate Protection Agreement that is (or at
the time such Rate Protection Agreement was entered into, was) a Lender or an
Affiliate thereof and (in each case), each of their respective successors,
transferees and assigns.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders' Pledge Agreement" means the Pledge Agreement executed and
delivered by each of the OSI Shareholders, substantially in the form of Exhibit
G-1 hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Solicitation" is defined in the third recital.
"Solvent" means, with respect to any Person and its Subsidiaries on a
particular date, that on such date (a) the fair value of the property of such
Person and its Subsidiaries on a consolidated basis is greater than the total
amount of liabilities, including contingent liabilities, of such Person and its
Subsidiaries on a consolidated basis, (b) the present fair salable value of the
assets of such Person and its Subsidiaries on a consolidated basis is not less
than the amount that will be required to pay the probable liability of such
Person and its Subsidiaries on a consolidated basis on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not believe
that it or its Subsidiaries will, incur debts or liabilities beyond the ability
of such Person and its Subsidiaries to pay as such debts and liabilities mature,
and (d) such Person and its Subsidiaries on a consolidated basis is not engaged
in business or a transaction, and such Person and its Subsidiaries on a
consolidated basis is not about to engage in business or a transaction, for
which the property of such Person and its Subsidiaries on a consolidated basis
would constitute an unreasonably small capital. The amount of Contingent
Liabilities at any time shall be computed as the amount that, in light of all
the facts and circumstances existing at such time, can reasonably be expected to
become an actual or matured liability, including as an asset all Contingent
Liabilities and indemnifications provided by a third party in favor of such
Person and its Subsidiaries.
"Specified Liabilities" means liabilities of the Borrower or any of its
Subsidiaries arising from agreements delivered after the Closing Date in
connection with acquisitions or dispositions of any business, assets or
Subsidiary of the Borrower or any of its Subsidiaries in respect of
indemnification, adjustment of purchase price (including earn-out arrangements),
similar obligations or from guarantees or letters of credit, surety bonds or
performance bonds securing the performance of the Borrower or any such
Subsidiary pursuant to such agreements.
"Stated Amount" means, on any date and with respect to a particular Letter
of Credit, the total amount then available to be drawn under such Letter of
Credit.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means
(a) with respect to all Term A Loans, December 10, 2005;
(b) with respect to all Term B Loans, June 10, 2006; and
(c) with respect to all Revolving Loans and Swing Line Loans,
December 10, 2005.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
of one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D. LIBO Rate
Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements without benefit of or credit for proration, exemptions
or offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.
"Student Loan Collection Business" means billing, portfolio management,
default aversion and debt collection services for the purpose of collecting
loans issued or guaranteed under a student financial assistance program.
"Subordinated Debt" means unsecured Indebtedness of each Obligor
(including the Indebtedness evidenced by the Subordinated Notes) subordinated in
right of payment to the Obligations pursuant to documentation containing
redemption and other prepayment events, maturities, amortization schedules,
covenants, events of default, remedies, acceleration rights, subordination
provisions and other material terms satisfactory to the Required Lenders.
"Subordinated Debt Documents" means, collectively, the Subordinated Note
Indenture and each of the loan agreements, indentures, note purchase agreements,
promissory notes, guarantees, and other instruments (including the Subordinated
Notes) and agreements evidencing the terms of Subordinated Debt, as amended,
supplemented, waived, amended and restated or otherwise modified in accordance
with Section 7.2.12.
"Subordinated Note Holders" is defined in the third recital.
"Subordinated Note Indenture" means the Indenture, dated November 6, 1996,
between the Borrower, the guarantors signatory thereto, and Wilmington Trust
Company, as trustee, as in effect on the Closing Date and, thereafter, as
amended, supplemented, amended and restated or otherwise modified in accordance
with Section 7.2.12, and any refinancings or replacements thereof.
"Subordinated Notes" means the Borrower's 11% senior subordinated notes
due 2006, as in effect on the Closing Date and, thereafter, as amended,
supplemented, amended and restated or otherwise modified in accordance with
Section 7.2.12.
"Subordination Provisions" is defined in Section 8.1.11.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership or other entity ("Other Person") of which more
than 50% of the Voting Securities of such Other Person (irrespective of whether
at the time Capital Securities of any other class or classes of such Other
Person shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned or controlled by such Person, by
such Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person.
"Subsidiary Guarantor" means each Domestic Subsidiary that has executed
and delivered to the Administrative Agent the Subsidiary Guaranty (or a
supplement thereto) pursuant to the terms of this Agreement.
"Subsidiary Guaranty" means the subsidiary guaranty executed and delivered
by each Subsidiary Guarantor pursuant to the terms of this Agreement,
substantially in the form of Exhibit F hereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"Subsidiary Pledge and Security Agreement" means the Pledge and Security
Agreement executed and delivered by an Authorized Officer of each Subsidiary,
substantially in the form of Exhibit G-3 hereto, together with any supplemental
Foreign Pledge Agreements delivered from time to time pursuant to the terms of
the Pledge and Security Agreement, in each case as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Summary" is defined in clause (a) of Section 7.1.13.
"Swing Line Lender" means the Administrative Agent, in its capacity as the
Swing Line Lender.
"Swing Line Loan" is defined in clause (b) of Section 2.1.1.
"Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.1.
"Swing Line Loan Commitment Amount" means, on any date, $7,500,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Swing Line Note" means a promissory note of the Borrower payable to the
Swing Line Lender, in the form of Exhibit A-4 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to the Swing Line Lender resulting
from outstanding Swing Line Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"Syndication Agent" is defined in the preamble.
"Taxes" means any and all income, stamp or other taxes, duties, levies,
imposts, charges, assessments, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, and all interest, penalties or similar liabilities with respect
thereto.
"Term A Loan" is defined in Section 2.1.3.
"Term A Loan Commitment" means, relative to any Lender, such Lender's
obligation (if any) to make Term A Loans pursuant to Section 2.1.3.
"Term A Loan Commitment Amount" means, on any date, $150,000,000.
"Term A Loan Commitment Termination Date" means the earlier of (a) the
Closing Date (immediately after the making of the Term A Loans on such date) and
(b) the date on which any Commitment Termination Event occurs. Upon the
occurrence of any event described in clause (a) or (b), the Term A Loan
Commitments shall terminate automatically and without any further action.
"Term A Note" means a promissory note of the Borrower payable to any
Lender, in the form of Exhibit A-2 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from outstanding
Term A Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"Term A Loan Percentage" means, relative to any Lender, the applicable
percentage relating to Term A Loans set forth on Schedule II hereto under the
Term A Loan Commitment column or set forth in a Lender Assignment Agreement
under the Term A Loan Commitment column, as such percentage may be adjusted from
time to time pursuant to Lender Assignment Agreements executed by such Lender
and its Assignee Lender and delivered pursuant to Section 10.11.1. A Lender
shall not have any Term A Loan Commitment if its percentage under the Term A
Loan Commitment column is zero.
"Term B Loan" is defined in Section 2.1.4.
"Term B Loan Commitment" means, relative to any Lender, such Lender's
obligation (if any) to make Term B Loans pursuant to Section 2.1.4.
"Term B Loan Commitment Amount" means, on any date, $250,000,000.
"Term B Loan Commitment Termination Date" means the earlier of (a) the
Closing Date (immediately after the making of the Term B Loans on such date); or
(b) the date on which any Commitment Termination Event occurs. Upon the
occurrence of any event described in clause (a) or (b), the Term B Loan
Commitments shall terminate automatically and without any further action.
"Term B Note" means a promissory note of the Borrower payable to any
Lender, in the form of Exhibit A-3 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from outstanding
Term B Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"Term B Loan Percentage" means, relative to any Lender, the applicable
percentage relating to Term B Loans set forth on Schedule II hereto under the
Term B Loan Commitment column or set forth in a Lender Assignment Agreement
under the Term B Loan Commitment column, as such percentage may be adjusted from
time to time pursuant to Lender Assignment Agreements executed by such Lender
and its Assignee Lender and delivered pursuant to Section 10.11.1. A Lender
shall not have any Term B Loan Commitment if its percentage under the Term B
Loan Commitment column is zero.
"Term Loans" means, collectively, the Term A Loans and the Term B Loans.
"Termination Date" means the date on which all Obligations have been paid
in full (other than indemnity obligations not yet due and payable) in cash, all
Letters of Credit have been terminated, expired or Cash Collateralized, all Rate
Protection Agreements have been terminated and all Commitments shall have
terminated.
"Total Debt" means, on any date, the outstanding principal amount of all
Indebtedness of the Borrower and its Subsidiaries of the type referred to in
clauses (a), (b) and (c), in each case, of the definition of "Indebtedness" and,
without duplication, any Contingent Liability in respect of any of the
foregoing.
"Total Exposure Amount" means, on any date of determination (and without
duplication), the outstanding principal amount of all Loans, the aggregate
amount of all Letter of Credit Outstandings and the unfunded amount of the
Commitments.
"Trademark Security Agreement" means any Trademark Security Agreement
executed and delivered by any Obligor substantially in the form of Exhibit B to
either Pledge and Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"Tranche" means, as the context may require, the Term A Loans, the Term B
Loans or the Revolving Loans.
"Transaction" is defined in the fourth recital.
"Transaction Documents" means each of the Material Documents and all other
agreements, documents, instruments, certificates, filings, consents, approvals,
board of directors resolutions and opinions furnished pursuant to or in
connection with the Recapitalization, the Refinancing, the Preferred Equity
Issuances, the Solicitation, and the other transactions contemplated hereby or
thereby, in each case as amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with Section 7.2.12.
"Triple-A One" means Triple-A One Funding Corp., a Delaware corporation.
"Triple-A Commercial Paper" means commercial paper issued by Triple-A One
to fund advances made by Triple-A One to OSIFC evidenced by the Variable Funding
Notes.
"Triple-A One Credit Agreement" means the Triple-A One Credit Agreement,
dated as of October 28, 1998, among OSIFC, Triple-A One, and MBIA Insurance
Corporation, as in effect on the Closing Date.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UAS" means University Accounting Service, Inc., a Wisconsin corporation,
as such corporation's name may be changed from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided, that if, with respect to any Filing Statement
or by reason of any provisions of law, the perfection or the effect of
perfection or non-perfection of the security interests granted to the
Administrative Agent pursuant to the applicable Loan Document is governed by the
Uniform Commercial Code as in effect in a jurisdiction of the United States
other than New York, UCC means the Uniform Commercial Code as in effect from
time to time in such other jurisdiction for purposes of the provisions of each
Loan Document and any Filing Statement relating to such perfection or effect of
perfection or non-perfection.
"United States" or "U.S." means the United States of America, its fifty
states and the District of Columbia.
"Variable Funding Notes" means, collectively, the variable funding notes
or certificates issued by OSIFC to Triple-A One to finance the purchase of
receivables by OSIFC pursuant to the Triple-A One Credit Agreement, as in effect
on the Closing Date.
"Voting Securities" means, with respect to any Person, Capital Securities
of any class or kind ordinarily having the power to vote (that is, not
contingent on the happening of any event) for the election of directors,
managers or other voting members of the governing body of such Person.
"Welfare Plan" means a "welfare plan", as such term is defined in Section
3(1) of ERISA.
"wholly owned" refers to any Subsidiary all of the outstanding common
stock (or similar equity interest) of which (other than any director's
qualifying shares or investments by foreign nationals mandated by applicable
laws) is owned directly or indirectly by the Borrower.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Agreement
shall have such meanings when used in each other Loan Document and the
Disclosure Schedule, and each notice and other communication delivered from time
to time in connection with any Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in a
Loan Document to any Article or Section are references to such Article or
Section of such Loan Document, and references in any Article, Section or
definition to any clause are references to such clause of such Article, Section
or definition.
SECTION 1.4. Accounting and Financial Determinations; etc. (a) Unless
otherwise specified, all accounting terms used in each Loan Document shall be
interpreted, and all accounting determinations and computations thereunder
(including under Section 7.2.4 and the definitions used in such calculations)
shall be made, in accordance with those generally accepted accounting principles
("GAAP") applied in the preparation of the financial statements referred to in
clause (a) of Section 5.1.8. Unless otherwise expressly provided, all financial
covenants and defined financial terms shall be computed on a consolidated basis
for the Borrower and its Subsidiaries (other than the OSIFC Family), in each
case without duplication.
(b) For purposes of computing the Leverage Ratio, the Interest Coverage
Ratio and the Fixed Charge Coverage Ratio, such ratios (and any financial
calculations or components required to be made or included therein) shall be
determined, with respect to the relevant period, after giving pro forma effect
to each acquisition and Disposition of a Person, business or asset consummated
during such period, together with all transactions relating thereto consummated
during such period (including any incurrence, assumption, refinancing or
repayment of Indebtedness), as if such acquisition, Disposition and related
transactions had been consummated on the first day of such period, in each case
based on historical actual results accounted for in accordance with GAAP. In
furtherance of, and not in limitation of, the preceding sentence, any
determination to be made in accordance with this clause for any period
commencing prior to the Closing Date shall give pro forma effect to the
Transaction as provided in the preceding sentence.
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement, the Lenders and the Issuers severally agree to make Credit
Extensions as set forth below.
SECTION 2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment.
From time to time on any Business Day occurring from and after the Closing Date
but prior to the Revolving Loan Commitment Termination Date,
(a) each Lender that has a Revolving Loan Commitment (referred to as
a "Revolving Loan Lender") agrees that it will make loans (relative to
such Lender, its "Revolving Loans") to the Borrower equal to such Lender's
RL Percentage of the aggregate amount of each Borrowing of the Revolving
Loans requested by the Borrower to be made on such day; and
(bi the Swing Line Lender agrees that it will make loans (its "Swing
Line Loans") to the Borrower equal to the principal amount of the Swing
Line Loan requested by the Borrower to be made on such day. The Commitment
of the Swing Line Lender described in this clause is herein referred to as
its "Swing Line Loan Commitment".
On the terms and subject to the conditions hereof, the Borrower may from time to
time borrow, prepay and reborrow Revolving Loans and Swing Line Loans. No
Revolving Loan Lender shall be permitted or required to make any Revolving Loan
if, after giving effect thereto, the aggregate outstanding principal amount of
all Revolving Loans of such Revolving Loan Lender, together with such Lender's
RL Percentage of the aggregate amount of all Swing Line Loans and Letter of
Credit Outstandings, would exceed such Lender's RL Percentage of the then
existing Revolving Loan Commitment Amount. Furthermore, the Swing Line Lender
shall not be permitted or required to make Swing Line Loans if, after giving
effect thereto, (i) the aggregate outstanding principal amount of all Swing Line
Loans would exceed the then existing Swing Line Loan Commitment Amount or (ii)
unless otherwise agreed to by the Swing Line Lender, in its sole discretion, the
sum of all Swing Line Loans and Revolving Loans made by the Swing Line Lender
plus the Swing Line Lender's RL Percentage of the aggregate amount of Letter of
Credit Outstandings would exceed the Swing Line Lender's RL Percentage of the
then existing Revolving Loan Commitment Amount.
SECTION 2.1.2. Letter of Credit Commitment. Each of the parties hereto
acknowledge and agree that all Existing Letters of Credit shall continue as
Letters of Credit for all purposes under the Loan Documents. In addition, from
time to time on any Business Day occurring from and after the Closing Date but
prior to the Revolving Loan Commitment Termination Date, each Issuer agrees that
it will, to the extent requested by the Borrower,
(a) issue one or more Letters of Credit in the Stated Amount
requested by the Borrower on such day; or
(b) extend the Stated Expiry Date of an existing standby Letter of
Credit previously issued hereunder.
No Stated Expiry Date shall be scheduled to occur beyond the earlier of (i) the
Revolving Loan Commitment Termination Date and (ii) unless otherwise agreed to
by the applicable Issuer in its sole discretion, one year from the date of such
issuance or extension. No Issuer shall be permitted or required to issue any
Letter of Credit if, after giving effect thereto, (i) the aggregate amount of
all Letter of Credit Outstandings would exceed the Letter of Credit Commitment
Amount or (ii) the sum of the aggregate amount of all Letter of Credit
Outstandings plus the aggregate principal amount of all Revolving Loans and
Swing Line Loans then outstanding would exceed the Revolving Loan Commitment
Amount.
SECTION 2.1.3. Term A Loan Commitment. In a single Borrowing on any
Business Day occurring on or prior to the Term A Loan Commitment Termination
Date, each Lender that has a Term A Loan Commitment agrees that it will make
loans (relative to such Lender, its "Term A Loans") to the Borrower equal to
such Lender's Term A Loan Percentage of the aggregate amount of the Borrowing of
Term A Loans requested by the Borrower to be made on such day. No amounts paid
or prepaid with respect to Term A Loans may be reborrowed.
SECTION 2.1.4. Term B Loan Commitment. In a single Borrowing on any
Business Day occurring on or prior to the Term B Loan Commitment Termination
Date, each Lender that has a Term B Loan Commitment agrees that it will make
loans (relative to such Lender, its "Term B Loans") to the Borrower equal to
such Lender's Term B Loan Percentage of the aggregate amount of the Borrowing of
Term B Loans requested by the Borrower to be made on such day. No amounts paid
or prepaid with respect to Term B Loans may be reborrowed.
SECTION 2.2. Reduction of the Commitment Amounts. The Commitment
Amounts are subject to reduction from time to time pursuant to this Section.
SECTION 2.2.1. Optional. The Borrower may, from time to time on any
Business Day occurring on and after the Closing Date, voluntarily reduce the
amount of the Revolving Loan Commitment Amount, the Swing Line Loan Commitment
Amount or the Letter of Credit Commitment Amount on the Business Day so
specified by the Borrower; provided, however, that all such reductions shall
require at least three Business Day's prior notice to the Administrative Agent
and be permanent, and any partial reduction of any Commitment Amount shall be in
a minimum amount of $500,000 and in an integral multiple of $100,000. Any
optional or mandatory reduction of the Revolving Loan Commitment Amount pursuant
to the terms of this Agreement which reduces the Revolving Loan Commitment
Amount below the sum of (i) the Swing Line Loan Commitment Amount and (ii) the
Letter of Credit Commitment Amount shall result in an automatic and
corresponding reduction of the Swing Line Loan Commitment Amount and/or Letter
of Credit Commitment Amount (as directed by the Borrower in a notice to the
Administrative Agent delivered together with the notice of such voluntary
reduction in the Revolving Loan Commitment Amount) to an aggregate amount not in
excess of the Revolving Loan Commitment Amount, as so reduced, without any
further action on the part of the Swing Line Lender or any Issuer.
SECTION 2.2.2. Mandatory. Following the prepayment in full of the Term
Loans, the Revolving Loan Commitment Amount shall, without any further action,
automatically and permanently be reduced on the date the Term Loans would
otherwise have been required to be prepaid pursuant to clause (e), (f), (g) or
(h) of Section 3.1.1, in an amount equal to the amount by which the Term Loans
would otherwise be required to be prepaid if Term Loans had been outstanding.
SECTION 2.3. Borrowing Procedures. Loans (other than Swing Line Loans)
shall be made by the Lenders in accordance with Section 2.3.1, and Swing Line
Loans shall be made by the Swing Line Lender in accordance with Section 2.3.2.
SECTION 2.3.1. Borrowing Procedure. In the case of other than Swing Line
Loans, by delivering a Borrowing Request to the Administrative Agent on or
before 12:00 p.m. (noon) on a Business Day, the Borrower may from time to time
irrevocably request, on not less than one Business Day's notice in the case of
Base Rate Loans, or three Business Days' notice in the case of LIBO Rate Loans,
and in either case not more than ten Business Days' notice, that a Borrowing be
made, in the case of LIBO Rate Loans, in a minimum amount of $2,000,000 and an
integral multiple of $500,000, in the case of Base Rate Loans, in a minimum
amount of $500,000 and an integral multiple of $100,000 or, in either case, in
the unused amount of the applicable Commitment; provided, however, that all of
the initial Loans shall be made as Base Rate Loans. On the terms and subject to
the conditions of this Agreement, each Borrowing shall be comprised of the type
of Loans, and shall be made on the Business Day, specified in such Borrowing
Request. In the case of other than Swing Line Loans, on or before 1:00 p.m. on
such Business Day each Lender that has a Commitment to make the Loans being
requested shall deposit with the Administrative Agent same day funds in an
amount equal to such Lender's Percentage of the requested Borrowing. Such
deposit will be made to an account which the Administrative Agent shall specify
from time to time by notice to the Lenders. To the extent funds are received
from the Lenders, the Administrative Agent shall make such funds available to
the Borrower by wire transfer to the accounts the Borrower shall have specified
in its Borrowing Request. No Lender's obligation to make any Loan shall be
affected by any other Lender's failure to make any Loan.
SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice to the Swing
Line Lender on or before 12:00 noon on any Business Day (followed (within one
Business Day) by the delivery of a confirming Borrowing Request) occurring on
and after the Closing Date through (but excluding) the Revolving Loan Commitment
Termination Date, the Borrower may from time to time irrevocably request that
Swing Line Loans be made by the Swing Line Lender in an aggregate minimum
principal amount of $250,000 and an integral multiple of $50,000; provided, that
the aggregate principal amount of Swing Line Loans shall at no time exceed the
Swing Line Loan Commitment Amount. Subject to Section 5.2, all Swing Line Loans
shall be made as Base Rate Loans and shall not be entitled to be converted into
LIBO Rate Loans. The proceeds of each Swing Line Loan shall be made available by
the Swing Line Lender to the Borrower by wire transfer to the account the
Borrower shall have specified in its notice therefor by the close of business on
the Business Day telephonic notice is received by the Swing Line Lender.
(b) Each Revolving Loan Lender (other than the Swing Line Lender)
irrevocably agrees that it will, at the request of the Swing Line Lender in its
sole and absolute discretion at any time, make a Revolving Loan (which shall
initially be funded as a Base Rate Loan) in an amount equal to such Lender's RL
Percentage of the aggregate principal amount of all such Swing Line Loans then
outstanding (such outstanding Swing Line Loans hereinafter referred to as the
"Refunded Swing Line Loans"); provided, that if any Default described in clauses
(a) through (d) of Section 8.1.9 shall have occurred and be continuing, the
procedures set forth in the last two sentences of this clause shall apply and no
other provisions of this clause shall be applicable. On or before 11:00 a.m. on
the first Business Day following receipt by each Revolving Loan Lender of a
request to make Revolving Loans as provided in the preceding sentence, each
Revolving Loan Lender shall deposit in an account specified by the Swing Line
Lender the amount so requested in same day funds and such funds shall be applied
by the Swing Line Lender to repay the Refunded Swing Line Loans. At the time the
Revolving Loan Lenders make the above referenced Revolving Loans the Swing Line
Lender shall be deemed to have made, in consideration of the making of the
Refunded Swing Line Loans, Revolving Loans in an amount equal to the Swing Line
Lender's RL Percentage of the aggregate principal amount of the Refunded Swing
Line Loans. Upon the making (or deemed making, in the case of the Swing Line
Lender) of any Revolving Loans pursuant to this clause, the amount so funded
shall become outstanding under such Revolving Loan Lender's Revolving Note and
shall no longer be owed under the Swing Line Note. All interest payable with
respect to any Revolving Loans made (or deemed made, in the case of the Swing
Line Lender) pursuant to this clause shall be appropriately adjusted to reflect
the period of time during which the Swing Line Lender had outstanding Swing Line
Loans in respect of which such Revolving Loans were made. Each Revolving Loan
Lender's obligation to make the Revolving Loans referred to in this clause shall
be absolute and unconditional and shall not be affected by any circumstance,
including (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, any Obligor or any
Person for any reason whatsoever; (ii) the occurrence or continuance of any
Default (other than a Default which the Swing Line Lender is deemed to have
notice of pursuant to clause (b) of Section 9.3); (iii) any adverse change in
the condition (financial or otherwise) of any Obligor; (iv) the acceleration or
maturity of any Obligations or the termination of any Commitment after the
making of any Swing Line Loan; (v) any breach of any Loan Document by any
Person; or (vi) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing. If, prior to the making of a Revolving
Loan pursuant to this clause, any Default described in clauses (a) through (d)
of Section 8.1.9 shall have occurred and be continuing, each Revolving Loan
Lender will, on the date such Revolving Loan was to have been made, purchase an
undivided participation interest in the Refunded Swing Line Loan in an amount
equal to its RL Percentage of the aggregate principal amount of such Refunded
Swing Line Loan. Each Revolving Loan Lender will immediately transfer to the
Swing Line Lender, in immediately available funds, the amount of its
participation in such Refunded Swing Line Loan.
(c) If any Revolving Loan Lender does not make a Revolving Loan (or
otherwise purchase from the Revolving Loan Lender an undivided participation
interest) in an amount (the "Outstanding Amount") equal to such Lender's RL
Percentage of the aggregate principal amount of all Refunded Swing Line Loans
pursuant to clause (b) above on the applicable due date with respect thereto,
then such Revolving Loan Lender shall promptly pay to the Swing Line Lender on
demand such Outstanding Amount with interest thereon accruing at the Federal
Funds Effective Rate for each day from (and including) the date such Outstanding
Amount should have been made available to the Swing Line Lender to (but
excluding) the date upon which such Revolving Loan Lender actually paid such
Outstanding Amount to the Swing Line Lender. If such Revolving Loan Lender pays
such Outstanding Amount to the Swing Line Lender, then, on and as of the date of
such payment, such Outstanding Amount shall constitute such Revolving Loan
Lender's Loan including in such Refunded Swing Line Loan or the consideration
for the purchase of its undivided participation interest, as the case may be.
(d) The failure or refusal of any Revolving Loan Lender to make a
Revolving Loan (or otherwise purchase from the Revolving Loan Lender an
undivided participation interest) in an amount equal to such Lender's RL
Percentage of the aggregate principal amount of all Refunded Swing Line Loans
pursuant to clause (b) above on the applicable due date with respect thereto
shall not (i) relieve any other Revolving Loan Lender from its several
obligation hereunder to make a Revolving Loan (or otherwise purchase an
undivided participation interest) pursuant to clause (b) above and (ii) impose
upon such other Revolving Loan Lender any liability with respect to such failure
or refusal or otherwise increase such other Revolving Loan Lender's RL
Percentage of the Revolving Loan Commitment Amount.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon on a Business Day, the Borrower may from time to time irrevocably elect, on
not less than one Business Day's notice in the case of Base Rate Loans, or three
Business Days' notice in the case of LIBO Rate Loans, and in either case not
more than ten Business Days' notice, that all, or any portion in an aggregate
minimum amount of $500,000 and an integral multiple of $100,000 be, in the case
of Base Rate Loans, converted into LIBO Rate Loans or be, in the case of LIBO
Rate Loans, converted into Base Rate Loans or continued as LIBO Rate Loans (in
the absence of delivery of a Continuation/Conversion Notice with respect to any
LIBO Rate Loan at least three Business Days (but not more than ten Business
Days) before the last day of the then current Interest Period with respect
thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a
Base Rate Loan); provided, however, that (x) each such conversion or
continuation shall be pro rated among the applicable outstanding Loans of all
Lenders that have made such Loans, and (y) no portion of the outstanding
principal amount of any Loans may be continued as, or be converted into, LIBO
Rate Loans when any Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION 2.6. Issuance Procedures. By delivering to the Administrative
Agent an Issuance Request on or before 12:00 noon on a Business Day, the
Borrower may from time to time irrevocably request on not less than two nor more
than ten Business Days' notice, in the case of an initial issuance of a Letter
of Credit and not less than two Business Days' prior notice, in the case of a
request for the extension of the Stated Expiry Date of a standby Letter of
Credit (in each case, unless a shorter notice period is agreed to by the
applicable Issuer, in its sole discretion), that such Issuer issue, or extend
the Stated Expiry Date of, a Letter of Credit in such form as may be requested
by the Borrower and approved by such Issuer, solely for the purposes described
in Section 7.1.7. Each Letter of Credit shall by its terms be stated to expire
on a date (its "Stated Expiry Date") no later than the earlier to occur of (i)
the Revolving Loan Commitment Termination Date or (ii) (unless otherwise agreed
to by the Issuer, in its sole discretion), one year from the date of its
issuance. Each Issuer will make available to the beneficiary thereof the
original of the Letter of Credit which it issues.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit, and without further action, each Revolving Loan Lender (other
than the applicable Issuer) shall be deemed to have irrevocably purchased, to
the extent of its RL Percentage, a participation interest in such Letter of
Credit (including the Contingent Liability in respect thereof), and such
Revolving Loan Lender shall, to the extent of its RL Percentage, be responsible
for reimbursing within one Business Day the applicable Issuer for any amount
drawn under a Letter of Credit which has not been reimbursed by the Borrower in
accordance with Section 2.6.3. In addition, such Revolving Loan Lender shall, to
the extent of its RL Percentage, be entitled to receive a ratable portion of the
Letter of Credit fees payable pursuant to Section 3.3.3 with respect to each
Letter of Credit (other than the issuance fees payable to the Issuer of such
Letter of Credit pursuant to the last sentence of Section 3.3.3) and of interest
payable pursuant to Section 3.2 with respect to any Reimbursement Obligation. To
the extent that any Revolving Loan Lender has reimbursed any Issuer for a
Disbursement, such Lender shall be entitled to receive its ratable portion of
any amounts subsequently received (from the Borrower or otherwise) in respect of
such Disbursement.
SECTION 2.6.2. Disbursements. The applicable Issuer will notify the
Borrower and the Administrative Agent promptly of the presentment for payment of
any Letter of Credit issued by such Issuer, together with notice of the date
(the "Disbursement Date") such payment shall be made (each such payment, a
"Disbursement"). Subject to the terms and provisions of such Letter of Credit
and this Agreement, the applicable Issuer shall make such payment to the
beneficiary (or its designee) of such Letter of Credit. Prior to 1:00 p.m. on
the first Business Day following the Disbursement Date, the Borrower will
reimburse the Administrative Agent, for the account of the applicable Issuer,
for all amounts which such Issuer has disbursed under such Letter of Credit,
together with interest thereon at a rate per annum equal to the rate per annum
then in effect for Base Rate Loans (with the then Applicable Margin for
Revolving Loans accruing on such amount) pursuant to Section 3.2 for the period
from the Disbursement Date through the date of such reimbursement. Without
limiting in any way the foregoing and notwithstanding anything to the contrary
contained herein or in any separate application for any Letter of Credit, the
Borrower hereby acknowledges and agrees that it shall be obligated to reimburse
the applicable Issuer upon each Disbursement of a Letter of Credit, and it shall
be deemed to be the obligor for purposes of each such Letter of Credit issued
hereunder (whether the account party on such Letter of Credit is the Borrower or
a Subsidiary Guarantor (other than UAS)).
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.6.2 to reimburse the applicable
Issuer with respect to each Disbursement (including interest thereon), and, upon
the failure of the Borrower to reimburse such Issuer, each Revolving Loan
Lender's obligation under Section 2.6.1 to pay to such Issuer its RL Percentage
of any drawing under a Letter of Credit, shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or such Revolving Loan Lender, as the case
may be, may have or have had against such Issuer or any Lender, including any
defense based upon the failure of any Disbursement to conform to the terms of
the applicable Letter of Credit (if, in such Issuer's good faith opinion, such
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Letter of Credit;
provided, however, that after paying in full its Reimbursement Obligation
hereunder or paying its RL Percentage of any drawing under a Letter of Credit,
as the case may be, nothing herein shall adversely affect the right of the
Borrower or such Lender, as the case may be, to commence any proceeding against
such Issuer for any wrongful Disbursement made by the Issuer under a Letter of
Credit as a result of acts or omissions constituting gross negligence or wilful
misconduct on the part of such Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during
the continuation of any Default under Section 8.1.9 or upon notification by the
Administrative Agent (acting at the direction of the Required Lenders) to the
Borrower of its obligations under this Section, following the occurrence and
during the continuation of any other Event of Default,
(a) the aggregate Stated Amount of all Letters of Credit shall,
without demand upon or notice to the Borrower or any other Person, be
deemed to have been paid or disbursed by the applicable Issuer of such
Letters of Credit (notwithstanding that such amount may not in fact have
been paid or disbursed); and
(b) the Borrower shall be immediately obligated to reimburse such
Issuer for the amount deemed to have been so paid or disbursed by such
Issuer.
Amounts payable by the Borrower pursuant to this Section shall be deposited in
immediately available funds with the Administrative Agent and held as collateral
security for the Reimbursement Obligations. When all Defaults giving rise to the
deemed disbursements under this Section have been cured or waived the
Administrative Agent shall return to the Borrower all amounts then on deposit
with the Administrative Agent pursuant to this Section which have not been
applied to the satisfaction of the Reimbursement Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower, each
other Obligor and, to the extent set forth in Section 2.6.1, each Revolving Loan
Lender shall assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. No Issuer (except to the extent of its own
gross negligence or wilful misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or the proceeds thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise;
or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a Letter
of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to any Issuer or any Revolving Loan Lender hereunder.
In furtherance and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by any Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon each
Obligor and each such Secured Party, and shall not put such Issuer under any
resulting liability to any Obligor or any Secured Party, as the case may be.
SECTION 2.7. Register; Notes.
(a) Each Lender may maintain in accordance with its usual practice an
account or accounts evidencing the Indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder. In the
case of a Lender that does not request, pursuant to clause (c) below, execution
and delivery of a Note evidencing the Loans made by such Lender to the Borrower,
such account or accounts shall, to the extent not inconsistent with the
notations made by the Administrative Agent in the Register, be conclusive and
binding on the Borrower absent manifest error; provided, however, that the
failure of any Lender to maintain such account or accounts shall not limit or
otherwise affect any Obligations of any Obligor.
(b) The Borrower hereby designates the Administrative Agent to serve as
the Borrower's agent, solely for the purpose of this clause, to maintain a
register (the "Register") on which the Administrative Agent will record each
Lender's Commitments, the Loans made by each Lender and each repayment in
respect of the principal amount of the Loans of each Lender and annexed to which
the Administrative Agent shall retain a copy of each Lender Assignment Agreement
delivered to the Administrative Agent pursuant to Section 10.11.1. Failure to
make any recordation, or any error in such recordation, shall not affect the
Borrower's obligation in respect of such Loans. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders shall treat each Person in whose name a
Loan (and as provided in clause (c) below the Note evidencing such Loan, if any)
is registered as the owner thereof for all purposes of this Agreement,
notwithstanding notice or any provision herein to the contrary. A Lender's
Commitment and the Loans made pursuant thereto may be assigned or otherwise
transferred in whole or in part only by registration of such assignment or
transfer in the Register. Any assignment or transfer of a Lender's Commitment or
the Loans made pursuant thereto shall be registered in the Register only upon
delivery to the Administrative Agent of a Lender Assignment Agreement duly
executed by the assignor thereof and the compliance by the parties thereto with
the other requirements of Section 10.11.1. No assignment or transfer of a
Lender's Commitment or the Loans made pursuant thereto shall be effective unless
such assignment or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section.
(c) The Borrower agrees that, upon the request to the Administrative Agent
by any Lender, the Borrower will execute and deliver to such Lender, as
applicable, a Revolving Note, a Term A Note and/or a Term B Note evidencing the
Loans made by such Lender. The Borrower hereby irrevocably authorizes each
Lender to make (or cause to be made) appropriate notations on the grid attached
to such Lender's Notes (or on any continuation of such grid), which notations,
if made, shall evidence, inter alia, the date of, the outstanding principal
amount of, and the interest rate and Interest Period applicable to the Loans
evidenced thereby. Such notations shall, to the extent not inconsistent with the
notations made by the Administrative Agent in the Register, be conclusive and
binding on the Borrower absent manifest error; provided, however, that the
failure of any Lender to make any such notations or any error in any such
notations shall not limit or otherwise affect any Obligations of any Obligor.
The Loans evidenced by any such Note and interest thereon shall at all times
(including after assignment pursuant to Section 10.11.1) be represented by one
or more Notes payable to the order of the payee named therein and its registered
assigns. A Note and the obligation evidenced thereby may be assigned or
otherwise transferred in whole or in part only by registration of such
assignment or transfer of such Note and the obligation evidenced thereby in the
Register (and each Note shall expressly so provide). Any assignment or transfer
of all or part of an obligation evidenced by a Note shall be registered in the
Register only upon surrender for registration of assignment or transfer of the
Note evidencing such obligation, accompanied by a Lender Assignment Agreement
duly executed by the assignor thereof, and thereupon, if requested by the
assignee, one or more new Notes shall be issued to the designated assignee (and
to the assignor, if the assignor is retaining any of the Loans) and the old Note
shall be returned by the Administrative Agent to the Borrower marked
"exchanged". No assignment of a Note and the obligation evidenced thereby shall
be effective unless it shall have been recorded in the Register by the
Administrative Agent as provided in this Section.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application. The Borrower
agrees that the Loans shall be repaid and prepaid pursuant to the following
terms.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay
in full the unpaid principal amount of each Loan upon the applicable Stated
Maturity Date therefor. Prior thereto, payments and prepayments of Loans shall
or may be made as set forth below.
(a) From time to time on any Business Day, the Borrower may make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any
(i) Loans (other than Swing Line Loans); provided, however,
that (A) in the case of Term Loans, the Borrower may elect to prepay
either Term A Loans or Term B Loans, such prepayment to be applied
pro rata among the Term Loans so prepaid of the same type and, if
applicable, having the same Interest Period of all Lenders that have
made such Term Loans (to be applied as set forth in clause (a) of
Section 3.1.2 and with the amount of such prepayment of the Term A
Loans or Term B Loans, as applicable, being applied to the remaining
scheduled amortization payments thereof in direct order in
accordance with the amount of each such remaining Term A Loan or
Term B Loan amortization payments); (B) with respect to Term B Loans
only, there shall be a prepayment fee of (1) 2.0% of the principal
amount of such Loans voluntarily prepaid on or prior to December 10,
2000, (2) 1.0% of the principal amount of such Loans voluntarily
prepaid from (and including) December 11, 2000 through (and
including) December 10, 2001, and (3) 0% thereafter; (C) any such
prepayment of Revolving Loans shall be made pro rata among the
Revolving Loans of the same type and, if applicable, having the same
Interest Period of all Lenders that have made such Revolving Loans;
(D) all such voluntary prepayments shall require at least one but no
more than five Business Days' prior written notice to the
Administrative Agent; and (E) all such voluntary partial prepayments
of any Loans shall be in an aggregate minimum amount of $500,000 and
an integral multiple of $100,000.
(ii) Swing Line Loans; provided, that (A) all such voluntary
prepayments shall require prior telephonic notice to the Swing Line
Lender on or before 1:00 p.m. on the day of such prepayment (such
notice to be confirmed in writing within 24 hours thereafter); and
(B) all such voluntary partial prepayments shall be in an aggregate
minimum amount of $200,000 and an integral multiple of $100,000.
(b) On each date when the sum of (i) the aggregate outstanding
principal amount of all Revolving Loans and Swing Line Loans and (ii) the
aggregate amount of all Letter of Credit Outstandings exceeds the
Revolving Loan Commitment Amount (as it may be reduced from time to time
pursuant to this Agreement), the Borrower shall make a mandatory
prepayment of Revolving Loans or Swing Line Loans (or both) and, if
necessary, Cash Collateralize Letter of Credit Outstandings, in an
aggregate amount equal to such excess.
(c) On the Stated Maturity Date for Term A Loans and on each
Quarterly Payment Date occurring during any period set forth below, the
Borrower shall make a scheduled repayment of the aggregate outstanding
principal amount, if any, of all Term A Loans in an amount equal to the
amount set forth below opposite the Stated Maturity Date or such Quarterly
Payment Date, as applicable:
Amount of Required
Period Principal Repayment
------ -------------------
10/16/00 through (and
including) 10/16/01 $1,875,000.00
10/17/01 through (and
including) 10/15/02 $3,750,000.00
10/16/02 through (and
including) 10/15/03 $7,500,000.00
10/16/03 through (and
including) 10/15/04 $9,375,000.00
10/16/04 through (and
including) 10/17/05 $12,000,000.00
Stated Maturity Date for
Term A Loans $12,000,000.00 or, if different,
the then outstanding principal
amount of all Term A Loans.
(d) On the Stated Maturity Date for Term B Loans and on each
Quarterly Payment Date occurring during any period set forth below, the
Borrower shall make a scheduled repayment of the aggregate outstanding
principal amount, if any, of all Term B Loans in an amount equal to the
amount set forth below opposite the Stated Maturity Date or such Quarterly
Payment Date, as applicable:
<PAGE>
Amount of Required
Period Principal Repayment
------ -------------------
Closing Date through (and
including) 04/15/05 $625,000.00
04/16/05 through (and
including) 04/17/06 $47,250,000.00
Stated Maturity Date for
Term B Loans $47,250,000.00 or, if different,
the then outstanding principal
amount of all Term B Loans.
(e) No later than five Business Days following the delivery by the
Borrower of its annual audited financial reports required pursuant to
clause (b) of Section 7.1.1 (beginning with the financial reports
delivered in respect of the 2000 Fiscal Year), the Borrower shall deliver
to the Administrative Agent a calculation of the Excess Cash Flow for the
Fiscal Year last ended and, no later than five Business Days following the
delivery of such calculation, make or cause to be made a mandatory
prepayment of the Term Loans in an amount equal to 50% of the Excess Cash
Flow (if any) for such Fiscal Year to be applied as set forth in Section
3.1.2; provided, however, that such prepayment shall only be required to
be made to the extent that the amount of Indebtedness, as reduced by
giving effect to such prepayment, would result in a Leverage Ratio of
greater than 3.50:1.00 on a pro forma basis as of the date of such
prepayment.
(f) No later than one Business Day (in the case of Net Debt
Proceeds) or 30 calendar days (in the case of Net Disposition Proceeds)
following the receipt of any Net Disposition Proceeds from any Disposition
or a series of related Dispositions, the aggregate amount of which is in
excess of $50,000 or Net Debt Proceeds by the Borrower or any of its
Subsidiaries, the Borrower shall deliver to the Administrative Agent a
calculation of the amount of such Net Disposition Proceeds or Net Debt
Proceeds, as the case may be, and, to the extent the amount of such Net
Disposition Proceeds or Net Debt Proceeds, as the case may be, with
respect to any single transaction or series of related transactions,
exceeds $2,000,000, make a mandatory prepayment of the Term Loans in an
amount equal to 100% of such Net Disposition Proceeds or Net Debt
Proceeds, as the case may be, to be applied as set forth in Section 3.1.2;
provided, that no mandatory prepayment on account of such Net Disposition
Proceeds shall be required under this clause if the Borrower informs the
Administrative Agent no later than 30 days following the receipt of any
Net Disposition Proceeds of its or its Subsidiary's good faith intention
to apply such Net Disposition Proceeds to the acquisition of other assets
or property consistent with the business permitted to be conducted
pursuant to Section 7.2.1 (including by way of merger or Investment)
within 365 days following the receipt of such Net Disposition Proceeds,
with the amount of such Net Disposition Proceeds unused after such 365 day
period being applied to the Loans pursuant to Section 3.1.2.
(g) The Borrower shall, concurrently with the receipt of any Net
Equity Proceeds by the Borrower or any of its Subsidiaries, deliver to the
Administrative Agent a calculation of the amount of such Net Equity
Proceeds, and no later than five Business Days following the delivery of
such calculation, and, to the extent that the amount of such Net Equity
Proceeds with respect to any single transaction or series of related
transactions exceeds $2,000,000, and subject to the proviso below, make or
cause to be made a mandatory prepayment of the Term Loans in an amount
equal to 50% of such Net Equity Proceeds to be applied as set forth in
Section 3.1.2; provided, however, that such prepayment shall only be
required to be made to the extent that the amount of Indebtedness, as
reduced by giving effect to such prepayment would result in a Leverage
Ratio of greater than 3.50:1 on a pro forma basis as of the date of such
prepayment;
(h) The Borrower shall, no later than the 60th calendar day
following the receipt by the Borrower or any of its Subsidiaries of any
Casualty Proceeds in excess of $2,000,000 (individually or in the
aggregate in any Fiscal Year), make or cause to be made a mandatory
prepayment of the Term Loans in an amount equal to 100% of such Casualty
Proceeds, to be applied as set forth in Section 3.1.2; provided, that no
mandatory prepayment on account of Casualty Proceeds shall be required
under this clause if the Borrower informs the Administrative Agent no
later than 60 days following the occurrence of the Casualty Event
resulting in such Casualty Proceeds of its or its Subsidiary's good faith
intention to apply such Casualty Proceeds to the rebuilding or replacement
of the damaged, destroyed or condemned assets or property subject to such
Casualty Event or the acquisition of other assets or property consistent
with the business permitted to be conducted pursuant to Section 7.2.1
(including by way of merger or Investment) and in fact uses or commits to
use such Casualty Proceeds to rebuild or replace the damaged, destroyed or
condemned assets or property subject to such Casualty Event or to acquire
such other property or assets within 365 days following the receipt of
such Casualty Proceeds, with the amount of such Casualty Proceeds unused
after such 365 day period being applied to the Loans pursuant to Section
3.1.2; provided further, however, that at any time when any Event of
Default shall have occurred and be continuing or Casualty Proceeds not
applied as provided above shall exceed $2,000,000, such Casualty Proceeds
will be deposited in an account maintained with the Administrative Agent
for disbursement at the request of the Borrower to pay for such
rebuilding, replacement or acquisition.
(i) Immediately upon any acceleration of the Stated Maturity Date of
any Loans pursuant to Section 8.2 or Section 8.3, the Borrower shall repay
all the Loans, unless, pursuant to Section 8.3, only a portion of all the
Loans is so accelerated (in which case the portion so accelerated shall be
so repaid).
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4.
SECTION 3.1.2. Application. Amounts prepaid pursuant to Section 3.1.1
shall be applied as set forth in this Section.
(a) Subject to clause (b), each prepayment or repayment of the
principal of the Loans shall be applied, to the extent of such prepayment
or repayment, first, to the principal amount thereof being maintained as
Base Rate Loans, and second, subject to the terms of Section 4.4, to the
principal amount thereof being maintained as LIBO Rate Loans.
(b) Each prepayment of Term Loans made pursuant to clauses (e), (f),
(g) and (h) of Section 3.1.1 shall be applied (i) first, pro rata to a
mandatory prepayment of the outstanding principal amount of all Term A
Loans and Term B Loans (with the amount of such prepayment of the Term A
Loans and the Term B Loans being applied to the remaining scheduled
amortization payments of the Term A Loans or Term B Loans, as the case may
be, in inverse order in accordance with the amount of each such remaining
Term A Loan or Term B Loan amortization payments, and (ii) second, once
all Term Loans have been repaid in full, to the repayment of any
outstanding Revolving Loans and, in the case of prepayments pursuant to
clause (e), (f), (g) or (h) of Section 3.1.1, to a reduction of the
Revolving Loan Commitment Amount in accordance with Section 2.2.2;
provided, however, that, in the case of any prepayment of Term B Loans
made pursuant to clause (e), (f), (g) or (h) of Section 3.1.1, if the
Borrower (at any time prior to the repayment in full of the Term A Loans)
elects in writing, in its sole discretion, to permit any Lender that has
Term B Loans to decline to have such Loans so prepaid, then any Lender
that has Term B Loans may, by delivering a notice to the Administrative
Agent at least one Business Day prior to the date that such prepayment is
to be made, decline to have such Loans prepaid with the amounts set forth
above, in which case 50% of the amounts that would have been applied to a
prepayment of such Lender's Term B Loans shall instead be applied to a
prepayment of the principal amount of all outstanding Term A Loans until
all outstanding Term A Loans have been prepaid in full, with the balance
being retained by the Borrower.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with the
terms set forth below.
SECTION 3.2.1. Rates. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate
Loan, equal to the sum of the Adjusted Base Rate from time to time in
effect plus the Applicable Margin; provided that all Swing Line Loans
shall always accrue interest at the then effective Applicable Margin for
Revolving Loans maintained as Base Rate Loans; and
(b) on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the Adjusted LIBO
Rate for such Interest Period plus the Applicable Margin.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount
of any Loan or Reimbursement Obligation is due and payable (whether on the
Stated Maturity Date, upon acceleration or otherwise), or after any other
monetary Obligation of the Borrower shall have become due and payable, the
Borrower shall pay, but only to the extent permitted by law, interest (after as
well as before judgment) on such amounts at a rate per annum equal to the
Adjusted Base Rate from time to time in effect, plus the Applicable Margin for
Term B Loans accruing interest at the Base Rate, plus a margin of 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in part,
of principal outstanding on any Loan which is a LIBO Rate Loan on the
principal amount so paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the Closing Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, on the date occurring on each three-month interval occurring
after the first day of such Interest Period); and
(e) on that portion of any Loans the Stated Maturity Date of which
is accelerated pursuant to Section 8.2 or 8.3, immediately upon such
acceleration.
Interest accrued on Loans or other monetary Obligations after the date such
amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth below.
All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender, for the period (including
any portion thereof when any of its Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Closing Date and continuing through the applicable Commitment Termination Date,
a commitment fee in an amount equal to the Applicable Commitment Fee, in each
case on such Lender's Percentage of the sum of the average daily unused portion
of the Revolving Loan Commitment Amount (net of Letter of Credit Outstandings,
in the case of the Revolving Loan Commitment Amount). All commitment fees
payable pursuant to this Section shall be calculated on a year comprised of 360
days and payable by the Borrower in arrears on the Closing Date and thereafter
on each Quarterly Payment Date, commencing with the first Quarterly Payment Date
following the Closing Date, and on the Revolving Loan Commitment Termination
Date. The making of Swing Line Loans shall not constitute usage of the Revolving
Loan Commitment with respect to the calculation of commitment fees to be paid by
the Borrower to the Lenders (other than in the case of the Swing Line Lender).
SECTION 3.3.2. Administrative Agent's Fees. The Borrower agrees to pay
to the Administrative Agent, for its own account, the fees in the amounts and on
the dates set forth in the Administrative Agent's Fee Letter
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent, for the pro rata account of the each applicable Issuer and
each Revolving Loan Lender, a Letter of Credit fee in an amount equal to the
then effective Applicable Margin for Revolving Loans maintained as LIBO Rate
Loans, multiplied by the Stated Amount of each such Letter of Credit, such fees
being payable quarterly in arrears on each Quarterly Payment Date following the
date of issuance of each Letter of Credit and on the Revolving Loan Commitment
Termination Date. The Borrower further agrees to pay to each applicable Issuer
quarterly in arrears on each Quarterly Payment Date following the date of
issuance of each Letter of Credit and on the Revolving Loan Commitment
Termination Date a fronting fee as specified in the Administrative Agent's Fee
Letter or as otherwise agreed to by the Borrower and the applicable Issuer.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower and the
Administrative Agent, be conclusive and binding on the Borrower) that the
introduction of or any change in or in the interpretation of any law makes it
unlawful, or any Governmental Authority asserts that it is unlawful, for such
Lender to make or continue any Loan as, or to convert any Loan into, a LIBO Rate
Loan, the obligations of such Lender to make, continue or convert any such LIBO
Rate Loan shall, after the determination thereof, forthwith be suspended until
such Lender shall notify the Administrative Agent that the circumstances causing
such suspension no longer exist, and all outstanding LIBO Rate Loans payable to
such Lender shall automatically convert into Base Rate Loans at the end of the
then current Interest Periods with respect thereto or sooner, if required by
such law or assertion.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to it in its relevant market; or
(b) by reason of circumstances affecting its relevant market,
adequate means do not exist for ascertaining the interest rate applicable
hereunder to LIBO Rate Loans;
then, upon notice from the Administrative Agent to the Borrower and the Lenders,
the obligations of all Lenders under Sections 2.3 and 2.4 to make or continue
any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be
suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
reimburse each Lender and each Issuer for any increase in the cost to such
Lender or such Issuer of, or any reduction in the amount of any sum receivable
by such Secured Party in respect of, such Secured Party's Commitments and the
making of Credit Extensions hereunder (including the making, continuing or
maintaining (or of its obligation to make or continue) any Loans as, or of
converting (or of its obligation to convert) any Loans into, LIBO Rate Loans)
that arise in connection with any change in, or the introduction, adoption,
effectiveness, interpretation, reinterpretation or phase-in after the Closing
Date of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any Governmental Authority, except
for (i) such changes with respect to increased capital costs and Taxes which are
governed by Sections 4.5 and 4.6, respectively, and (ii) increased costs which
are already included in the determination of the Statutory Reserve Rate. Each
affected Secured Party shall promptly notify the Administrative Agent and the
Borrower in writing of the occurrence of any such event, stating the reasons
therefor and the additional amount required fully to compensate such Secured
Party for such increased cost or reduced amount. Such additional amounts shall
be payable by the Borrower directly to such Secured Party within ten days of its
receipt of such notice, and such notice shall, in the absence of manifest error,
be conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make or
continue any portion of the principal amount of any Loan as, or to convert any
portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result
of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loan on a date other than the scheduled last day
of the Interest Period applicable thereto, whether pursuant to Article III
or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance with
the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/Conversion Notice therefor;
but in each case other than due to such Lender's failure to fulfill its
obligations hereunder, then, upon the written notice of such Lender to the
Borrower (with a copy to the Administrative Agent), the Borrower shall, within
ten days of its receipt thereof, pay directly to such Lender such amount as will
(in the reasonable determination of such Lender) reimburse such Lender for such
loss or expense. Such written notice shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If, after the Closing Date, any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any Governmental
Authority affects or would affect the amount of capital required or expected to
be maintained by any Secured Party or any Person controlling such Secured Party,
and such Secured Party determines (in good faith but in its sole and absolute
discretion) that the rate of return on its or such controlling Person's capital
as a consequence of the Commitments or the Credit Extensions made, or the
Letters of Credit participated in, by such Secured Party is reduced to a level
below that which such Secured Party or such controlling Person could have
achieved but for the occurrence of any such circumstance, then upon notice from
time to time by such Secured Party to the Borrower, the Borrower shall within
five days following receipt of such notice pay directly to such Secured Party
additional amounts sufficient to compensate such Secured Party or such
controlling Person for such reduction in rate of return. A statement of such
Secured Party as to any such additional amount or amounts shall, in the absence
of manifest error, be conclusive and binding on the Borrower. In determining
such amount, such Secured Party may use any reasonable method of averaging and
attribution that it (in its sole and absolute discretion) shall deem applicable.
SECTION 4.6. Taxes. The Borrower covenants and agrees as follows with
respect to Taxes.
(a) Any and all payments by the Borrower under each Loan Document
shall be made without setoff, counterclaim or other defense, and free and
clear of, and without deduction or withholding for or on account of, any
Taxes, except to the extent any Taxes are imposed by law. In the event
that any Taxes are required by law to be deducted or withheld from any
payment required to be made by the Borrower to or on behalf of any Secured
Party under any Loan Document, then:
(i) subject to clause (f), if such Taxes are Non-Excluded
Taxes, the amount of such payment shall be increased as may be
necessary such that such payment is made, after withholding or
deduction for or on account of such Non-Excluded Taxes, in an amount
that is not less than the amount provided for in such Loan Document;
and
(ii) the Borrower shall withhold the full amount of such Taxes
from such payment (as increased pursuant to clause (a)(i), if
applicable) and shall pay such amount to the Governmental Authority
imposing such Taxes in accordance with applicable law.
(b) In addition, the Borrower shall pay any and all Other Taxes
imposed on or with respect to a Secured Party to the relevant Governmental
Authority imposing such Other Taxes in accordance with applicable law.
(c) As promptly as practicable after the payment of any Taxes or
Other Taxes, and in any event within 45 days of any such payment, the
Borrower shall furnish to the Administrative Agent a copy of an official
receipt (or a certified copy thereof) or if obtaining such receipt or copy
is impractical, other documentation necessary for purposes of claiming a
foreign tax credit evidencing the payment of such Taxes or Other Taxes.
The Administrative Agent shall make copies thereof available to any Lender
upon request therefor.
(d) Subject to clause (f), the Borrower shall indemnify each Secured
Party for any Non-Excluded Taxes and Other Taxes levied, imposed, assessed
on or actually paid by or on behalf of such Secured Party (whether or not
such Non-Excluded Taxes or Other Taxes are correctly or legally asserted
by the relevant Governmental Authority). Promptly upon having actual
knowledge that any such Non-Excluded Taxes or Other Taxes have been
levied, imposed or assessed, and promptly upon notice thereof by any
Secured Party, the Borrower shall pay such Non-Excluded Taxes or Other
Taxes directly to the relevant Governmental Authority (provided, however,
that no Secured Party shall be under any obligation to provide any such
notice to the Borrower). In addition, the Borrower shall indemnify each
Secured Party for any incremental Taxes that are paid or payable by such
Secured Party as a result of any failure of the Borrower to pay any Taxes
when due to the appropriate Governmental Authority or to deliver to the
Administrative Agent, pursuant to clause (c), documentation evidencing the
payment of Taxes or Other Taxes. With respect to indemnification for
Non-Excluded Taxes and Other Taxes actually paid by any Secured Party or
the indemnification provided in the immediately preceding sentence, such
indemnification shall be made within 30 days after the date such Secured
Party makes written demand therefor. The Borrower acknowledges that any
payment made to any Secured Party or to any Governmental Authority in
respect of the indemnification obligations of the Borrower provided in
this clause shall constitute a payment in respect of which the provisions
of clause (a) and this clause shall apply.
(e) Each Non-Domestic Secured Party, on or prior to the date on
which such Non-Domestic Secured Party becomes a Secured Party hereunder
(and from time to time thereafter upon the request of the Borrower or the
Administrative Agent, but only for so long as such Non-Domestic Secured
Party is legally entitled to do so), shall deliver to the Borrower and the
Administrative Agent either
(i) two properly completed and duly executed copies of (A)
Internal Revenue Service Form W-8BEN and (B) Internal Revenue
Service Form 4224 or Form 1001 or, in either case, an applicable
successor form; or
(ii) in the case of a Non-Domestic Secured Party that is not
legally entitled to deliver either form listed in clause (e)(i), (x)
a certificate in form and substance reasonably satisfactory to the
Borrower and the Administrative Agent of a duly authorized officer
of such Non-Domestic Secured Party to the effect that such
Non-Domestic Secured Party is not (A) a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of
the Borrower within the meaning of Section 881(c)(3)(B) of the Code,
or (C) a controlled foreign corporation receiving interest from a
related person within the meaning of Section 881(c)(3)(C) of the
Code (such certificate, an "Exemption Certificate") and (y) two
properly completed and duly executed copies of Internal Revenue
Service Form W-8BEN or applicable successor form, in each case
certifying that such Non-Domestic Secured Party is entitled to
receive payments under this Agreement and the Notes without
deduction or withholding of any Non-Excluded Taxes. Each such
Non-Domestic Secured Party further agrees to deliver to each of the
Borrower and the Administrative Agent an additional copy of such
relevant form on or before the date such form expires or becomes
obsolete or after the occurrence of any event (including a change in
applicable lending office) requiring a change in the most recent
forms so delivered by it, in each case certifying that such
Non-Domestic Secured Party is entitled to an exemption from
withholding or deduction for or on account of Non-Excluded Taxes in
connection with payments under this Agreement or under any of the
Notes. Each such Non-Domestic Secured Party shall promptly notify
the Borrower and the Administrative Agent of any changes in
circumstances unique to such Non-Domestic Secured Party, and not
including a change in law, that would modify or render invalid any
claimed exemption or reduction.
(f) The Borrower shall not be obligated to gross up any payments to
any Secured Party pursuant to clause (a)(i), or to indemnify any Secured
Party pursuant to clause (d), in respect of Taxes to the extent imposed as
a result of (i) the failure of such Secured Party to deliver to the
Borrower the form or forms and/or an Exemption Certificate, as applicable
to such Secured Party, pursuant to clause (e), (ii) such form or forms
and/or Exemption Certificate not establishing a complete exemption from
U.S. federal withholding Tax or the information or certifications made
therein by the Secured Party being untrue or inaccurate on the date
delivered in any material respect, or (iii) the Secured Party designating
a successor lending office at which it maintains its Loans which has the
effect of causing such Secured Party to become obligated for Tax payments
in excess of those in effect immediately prior to such designation;
provided, however, that the Borrower shall be obligated to gross up any
payments to any such Secured Party pursuant to clause (a)(i), and to
indemnify any such Secured Party pursuant to clause (d), in respect of
United States federal withholding Taxes if (i) any such failure to deliver
a form or forms or an Exemption Certificate or the failure of such form or
forms or Exemption Certificate to establish a complete exemption from U.S.
federal withholding Tax or inaccuracy or untruth contained therein
resulted from a change in any applicable statute, treaty, regulation or
other applicable law or any interpretation of any of the foregoing
occurring after the date on which such Secured Party became a Secured
Party hereunder, which change rendered such Secured Party no longer
legally entitled to deliver such form or forms or Exemption Certificate or
otherwise ineligible for a complete exemption from U.S. federal
withholding Tax, or rendered the information or certifications made in
such form or forms or Exemption Certificate untrue or inaccurate in a
material respect or (ii) the obligation to gross up payments to any such
Secured Party pursuant to clause (a)(i) or to indemnify any such Secured
Party pursuant to clause (d) is with respect to an assignee Secured Party
as a result of an assignment made at the request of the Borrower.
(g) If a Secured Party receives a refund in respect of Taxes as to
which it has been grossed up by the Borrower pursuant to clause (a)(i) or
indemnified by the Borrower pursuant to clause (d) and such Secured Party
determines in its sole, good faith judgment that such refund is
attributable to such gross up or indemnification, then such Secured Party
shall pay such amount to the Borrower as such Secured Party determines to
be the proportion of the refund as will leave it, after such payment, in
no better or worse financial position with respect to Tax liabilities and
related expenses than it would have been in the absence of such payment.
No Secured Party shall be obligated to disclose information regarding its
tax affairs or computations to the Borrower in connection with this clause
or any other provision of this Section.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided in a Loan Document, all payments by the Borrower pursuant to each Loan
Document shall be made by the Borrower to the Administrative Agent for the pro
rata account of the Secured Parties entitled to receive such payment. All
payments shall be made without setoff, deduction or counterclaim not later than
1:00 p.m. on the date due in same day or immediately available funds to such
account as the Administrative Agent shall specify from time to time by notice to
the Borrower. Funds received after that time shall be deemed to have been
received by the Administrative Agent on the next succeeding Business Day. The
Administrative Agent shall promptly remit in same day funds to each Secured
Party its share, if any, of such payments received by the Administrative Agent
for the account of such Secured Party. All interest (including interest on LIBO
Rate Loans) and fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the period
for which such interest or fee is payable over a year comprised of 360 days (or,
in the case of interest on a Base Rate Loan (calculated at other than the
Federal Funds Effective Rate), 365 days or, if appropriate, 366 days). Payments
due on other than a Business Day shall (except as otherwise required by clause
(c) of the definition of the term "Interest Period") be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees in connection with that payment.
SECTION 4.8. Sharing of Payments. If any Secured Party shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Credit Extension or Reimbursement
Obligation (other than pursuant to the terms of Section 4.3, 4.4, 4.5 or 4.6) in
excess of its pro rata share of payments obtained by all Secured Parties, such
Secured Party shall purchase from the other Secured Parties such participations
in Credit Extensions made by them as shall be necessary to cause such purchasing
Secured Party to share the excess payment or other recovery ratably (to the
extent such other Secured Parties were entitled to receive a portion of such
payment or recovery) with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Secured Party, the purchase shall be rescinded and each Secured
Party which has sold a participation to the purchasing Secured Party shall repay
to the purchasing Secured Party the purchase price to the ratable extent of such
recovery together with an amount equal to such selling Secured Party's ratable
share (according to the proportion of (a) the amount of such selling Secured
Party's required repayment to the purchasing Secured Party to (b) total amount
so recovered from the purchasing Secured Party) of any interest or other amount
paid or payable by the purchasing Secured Party in respect of the total amount
so recovered. The Borrower agrees that any Secured Party purchasing a
participation from another Secured Party pursuant to this Section may, to the
fullest extent permitted by law, exercise all its rights of payment (including
pursuant to Section 4.9) with respect to such participation as fully as if such
Secured Party were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law any Secured Party receives a secured claim in lieu of a setoff to which this
Section applies, such Secured Party shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Secured Parties entitled under this Section to share in the
benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Secured Party shall, upon the occurrence and
during the continuance of any Default described in clauses (a) through (d) of
Section 8.1.9 or, with the consent of the Required Lenders, upon the occurrence
and during the continuance of any other Event of Default, have the right to
appropriate and apply to the payment of the Obligations owing to it (whether or
not then due), and (as security for such Obligations) the Borrower hereby grants
to each Secured Party a continuing security interest in, any and all balances,
credits, deposits, accounts (other than any trust accounts comprised entirely of
moneys held in trust for the benefit of Persons other than the Borrower and its
Affiliates) or moneys of the Borrower then or thereafter maintained with such
Secured Party (other than the Restricted Cash Balance); provided, however, that
any such appropriation and application shall be subject to the provisions of
Section 4.8. Each Secured Party agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Secured
Party; provided, however, that the failure to give such notice shall not affect
the validity of such setoff and application. The rights of each Secured Party
under this Section are in addition to other rights and remedies (including other
rights of setoff under applicable law or otherwise) which such Secured Party may
have.
SECTION 4.10. Change of Lending Office. Each Secured Party agrees that if
it makes any demand for payment under Section 4.3, 4.5 or 4.6, or if any
adoption or change of the type described in Section 4.1 shall occur with respect
to it, it will, if requested by the Borrower, file a certificate or document
reasonably requested by the Borrower and/or use reasonable efforts (in either
case, consistent with its internal policy and legal and regulatory restrictions
and so long as such efforts would not be disadvantageous to it, as determined in
its sole discretion) to designate a different lending office if the filing of
such certificate or document or the making of such a designation would reduce or
obviate the need for the Borrower to make payments under Section 4.3, 4.5 or
4.6, or would eliminate or materially reduce the effect of any adoption or
change described in Section 4.1; provided, however, that nothing in this Section
shall affect or postpone any of the Obligations of the Borrower or the right of
any Secured Party provided in Section 4.1, 4.3, 4.5 or 4.6.
SECTION 4.11. Replacement of Lenders. If any Lender (an "Affected
Lender") makes a demand upon the Borrower for (or if the Borrower is otherwise
required to pay) amounts pursuant to Section 4.3, 4.5 or 4.6 (and the payment of
such amounts are, and are likely to continue to be, more onerous in the
reasonable judgment of the Borrower than with respect to the other Lenders), or
gives notice pursuant to Section 4.1 requiring a conversion of such Affected
Lender's LIBO Rate Loans to Base Rate Loans or suspending such Lender's
obligation to make Loans as, or to convert Loans into, LIBO Rate Loans, the
Borrower may, within 30 days of receipt by the Borrower of such demand or
notice, as the case may be, give notice (a "Replacement Notice") in writing to
the Administrative Agent and such Affected Lender of its intention to replace
such Affected Lender with a financial institution or other Person (a
"Replacement Lender") designated in such Replacement Notice; provided, however,
that no Replacement Notice may be given by the Borrower if (i) such replacement
conflicts with any applicable law or regulation, (ii) any Event of Default shall
have occurred and be continuing at the time of such replacement or (iii) prior
to any such replacement, such Lender shall have taken any necessary action under
Section 4.5 or 4.6 (if applicable) so as to eliminate the continued need for
payment of amounts owing pursuant to Section 4.5 or 4.6. If the Administrative
Agent shall, in the exercise of its reasonable discretion and within 30 days of
its receipt of such Replacement Notice, notify the Borrower and such Affected
Lender in writing that the Replacement Lender is satisfactory to the
Administrative Agent (such consent not being required where the Replacement
Lender is already a Lender), then such Affected Lender shall, subject to the
payment of any amounts due pursuant to Section 4.4, assign, in accordance with
Section 10.11.1, all of its Commitments, Loans, Notes (if any) and other rights
and obligations under this Agreement and all other Loan Documents (including
Reimbursement Obligations, if applicable) to such Replacement Lender; provided,
however, that (i) such assignment shall be without recourse, representation or
warranty and shall be on terms and conditions reasonably satisfactory to such
Affected Lender and such designated financial institution, (ii) the purchase
price paid by such Replacement Lender shall be in the amount of such Affected
Lender's Loans and its Percentage of outstanding Reimbursement Obligations,
together with all accrued and unpaid interest and fees in respect thereof, plus
all other amounts (including the amounts demanded and unreimbursed under
Sections 4.3, 4.5 and 4.6), owing to such Affected Lender hereunder and (iii)
the Borrower shall pay to the Affected Lender and the Administrative Agent all
reasonable out-of-pocket expenses incurred by the Affected Lender and the
Administrative Agent in connection with such assignment and assumption
(including the processing fees described in Section 10.11.1). Upon the effective
date of an assignment described above, the Replacement Lender shall become a
"Lender" for all purposes under the Loan Documents.
SECTION 4.12. Limitation on Additional Amounts, etc. Notwithstanding
anything to the contrary contained in Sections 4.3, 4.5 or 4.6 of this
Agreement, unless a Lender gives notice to the Borrower that it is obligated to
pay an amount under any such Section within 90 days after the later of (x) the
date the Lender incurs the respective increased costs, Taxes, loss, expense or
liability, reduction in amounts received or receivable or reduction in return on
capital or (y) the date such Lender has actual knowledge of its incurrence of
their respective increased costs, Taxes, loss, expense or liability, reductions
in amounts received or receivable or reduction in return on capital, then such
Lender shall only be entitled to be compensated for such amount by such Borrower
pursuant to Sections 4.3, 4.5 or 4.6, as the case may be, to the extent the
costs, Taxes, loss, expense or liability, reduction in amounts received or
receivable or reduction in return on capital are incurred or suffered on or
after the date which occurs 90 days prior to such Lender giving notice to the
Borrower that it is obligated to pay the respective amounts pursuant to Sections
4.3, 4.5 or 4.6, as the case may be. This Section shall have no applicability to
any Section of this Agreement other than Sections 4.3, 4.5 or 4.6.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extension. The obligations of the Lenders
and, if applicable, the Issuers to fund the initial Credit Extension shall be
subject to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section.
SECTION 5.1.1. Resolutions, etc. The Managing Agents shall have received
from each Obligor, as applicable, (i) a copy of a good standing certificate,
dated a date reasonably close to the Closing Date, for each such Person and (ii)
a certificate, dated the Closing Date and with counterparts for each Lender,
duly executed and delivered by such Person's Secretary or Assistant Secretary,
managing member or general partner, as applicable, as to
(a) the fact that a complete and correct copy of the resolutions of
each such Person's Board of Directors (or other managing body, in the case
of other than a corporation) then in full force and effect authorizing, to
the extent relevant, all aspects of the Transaction applicable to such
Person and the execution, delivery and performance of each Loan Document
to be executed by such Person and the transactions contemplated hereby and
thereby is attached to such certificate and that those resolutions have
not been amended, modified or rescinded by subsequent action;
(b) the incumbency and signatures of those of its officers, managing
member or general partner, as applicable, authorized to act with respect
to each Loan Document to be executed by such Person (each, an "Authorized
Officer"); and
(c) the full force and validity of each Organic Document of such
Person and copies thereof;
upon which certificates each Secured Party may conclusively rely until it shall
have received a further certificate of the Secretary, Assistant Secretary,
managing member or general partner, as applicable, of any such Person canceling
or amending the prior certificate of such Person.
SECTION 5.1.2. Transaction Consummated. The Transactions shall have been
consummated for an aggregate amount not in excess of $826,000,000, and in
connection therewith:
(a) The Recapitalization shall have been consummated pursuant to the
Recapitalization Agreement (and all of the conditions to effecting or
consummating the Recapitalization set forth in the Recapitalization
Agreement shall have been duly satisfied or, with the consent of the
Managing Agents and the Required Lenders, waived) and, pursuant thereto,
(i) the Borrower shall have received common equity proceeds
of approximately $200,000,000, and
(ii) MDCP and its designees shall have become the holder of
approximately 82.5% of the issued and outstanding OSI Common Stock,
representing more than 77% of the OSI Common Stock on a fully
diluted basis, in each case on the Closing Date.
(b) The Rollover Shareholders shall continue to hold approximately
8.0% of the issued and outstanding OSI Common Stock, representing
approximately 7.5% of the OSI Common Stock on a fully diluted basis, in
each case on the Closing Date.
(c) The Preferred Equity Issuances shall have been consummated on
terms and conditions reasonably satisfactory in all respects to the
Managing Agents and, pursuant to
(i) the PIK Preferred Equity Issuance, the Borrower shall have
issued the PIK Preferred Equity for not less than $100,000,000 in
gross cash proceeds to the PIK Preferred Equity Holders pursuant to
the PIK Preferred Equity Documents; and
(ii) the Junior PIK Preferred Equity Issuance, the Borrower
shall have issued (pursuant to the Junior PIK Preferred Equity
Documents) the Junior PIK Preferred Equity to certain of the
Existing Shareholders for not less than $7,000,000 of gross cash
proceeds, in connection with the Recapitalization.
SECTION 5.1.3. Transaction Documents. (a) The Managing Agents shall have
received (with copies for each Lender that shall have requested in writing
copies thereof) copies of fully executed versions of the Transaction Documents
other than the Consent Solicitation Statement, certified to be true and complete
copies thereof by an Authorized Officer of the Borrower. Each Material Document
shall be in full force and effect and shall not have been modified or waived in
any material respect, nor shall there have been any forbearance to exercise any
rights with respect to any of the material terms or provisions relating to the
conditions to the consummation of the Recapitalization, the Preferred Equity
Issuances and the Solicitation set forth in the applicable Material Document
unless otherwise agreed to by the Required Lenders.
(b) With respect to the Solicitation, the Managing Agents shall have
received evidence satisfactory in all respects to each of them that the
Subordinated Note Holders of at least a majority of the aggregate principal
amount of the Subordinated Notes shall have executed and delivered a consent
pursuant to the Consent Solicitation Statement, such that the terms, conditions
and waivers contained in the Consent Solicitation Statement shall be binding on
and enforceable against all of the Subordinated Note Holders.
SECTION 5.1.4. Closing Date Certificate. The Managing Agents shall have
received, with counterparts for each Lender, the Borrower Closing Date
Certificate, dated the Closing Date and duly executed and delivered by an
Authorized Officer of the Borrower, in which certificate the Borrower shall
agree and acknowledge that the statements made therein shall be deemed to be
true and correct representations and warranties in all material respects of the
Borrower as of such date, and, at the time each such certificate is delivered,
such statements shall in fact be true and correct in all material respects (it
being understood that the Borrower shall not have to certify as to any matter
set forth in this Agreement to the extent that the determination thereof is to
be made (as expressly provided for in this Agreement) by either Managing Agent
or any Lender). All documents and agreements required to be appended to the
Borrower Closing Date Certificate (including documentation evidencing that,
after giving effect to the Transaction and each other transaction contemplated
hereby (including the initial Credit Extensions hereunder), all Obligations,
including those to pay principal of and interest (including interest accruing
subsequent to the filing of, or which would have accrued but for the filing of,
a petition for bankruptcy, reorganization or similar proceeding, whether or not
allowed as a claim under such proceeding) on the Loans and Reimbursement
Obligations, and fees and expenses in connection therewith, constitute "Senior
Bank Debt" (as defined in the Subordinated Note Indenture)) shall be in form and
substance reasonably satisfactory to the Managing Agents.
SECTION 5.1.5. Delivery of Notes. The Managing Agents shall have
received, for the account of each Lender that has requested a Note in writing
three Business Days prior to the Closing Date, such Lender's Notes duly executed
and delivered by an Authorized Officer of the Borrower.
SECTION 5.1.6. Payment of Outstanding Indebtedness, etc. All Indebtedness
identified in Item 7.2.2(b) of the Disclosure Schedule (including, pursuant to
the Refinancing, all Indebtedness outstanding under the terms of the Existing
Credit Agreement (other than the Existing Letters of Credit)), together with all
interest, all prepayment premiums, if any, and other amounts due and payable
with respect thereto, shall have been paid in full from the proceeds of the
initial Credit Extension and the commitments in respect of such Indebtedness
shall have been terminated, and all Liens securing payment of any such
Indebtedness have been released and the Administrative Agent shall have received
all executed UCC termination statements (Form UCC-3) or other instruments as may
be suitable or appropriate in connection therewith.
SECTION 5.1.7. Administrative Agent's Fee Letter, Closing Fees, Expenses,
etc.
(a) The Administrative Agent shall have received the Administrative
Agent's Fee Letter, duly executed and delivered by an Authorized Officer of the
Borrower.
(b) Each Managing Agent shall have received for its own account, or for
the account of each Lender, as the case may be, all fees, costs and expenses due
and payable pursuant to Sections 3.3 and 10.3, to the extent then invoiced. The
Managing Agents shall be satisfied that the aggregate amount of fees and
expenses paid or payable in connection with the Transaction shall not exceed
$47,000,000.
SECTION 5.1.8. Financial Information; Material Adverse Change. (a) The
Managing Agents shall have received, with counterparts for each Lender,
(i) (A) consolidated financial statements of the Borrower including
balance sheets and income and cash flow statements as of the end of and
for each of the last three Fiscal Years ended December 31, 1998, December
31, 1997 and December 31, 1996 audited by independent public accountants
of recognized national standing and prepared in conformity with GAAP,
together with the report thereon; and (B) unaudited interim financial
statements of the Borrower prepared in each case in the same manner as the
historical audited statements for the first three Fiscal Quarters of the
1999 Fiscal Year and for the same Fiscal Quarters of the 1998 Fiscal Year;
and
(ii) a consolidated pro forma balance sheet of the Borrower and its
Subsidiaries, as of September 30, 1999, certified by the chief financial
or accounting Authorized Officer of the Borrower, giving effect to the
consummation of the Transaction and each other transaction contemplated by
this Agreement and the Transaction Documents, and reflecting the proposed
legal and capital structures of the Borrower and its Subsidiaries, which
legal and capital structure shall be satisfactory in all material respects
to the Managing Agents; and
(b) Since December 31, 1998, there has not been any material adverse
change in the business, operations, results of operations, business prospects or
financial condition of the Borrower and its Subsidiaries taken as a whole.
SECTION 5.1.9. Opinions of Counsel; Reliance Letters. The Managing
Agents shall have received opinions, dated the Closing Date and addressed to the
Managing Agents and all of the Lenders, from
(a) Kirkland & Ellis, New York counsel to the Obligors, in form and
substance satisfactory to the Managing Agents; and
(b) local counsel to the Obligors, in form and substance, and from
counsel, in each case satisfactory to the Managing Agents, from the States
of California, Florida, Georgia, Missouri and Wisconsin.
SECTION 5.1.10. Filing Agent, etc. All UCC financing statements (Form
UCC-1) or other similar financing statements and UCC termination statements
(Form UCC-3) required pursuant to the Loan Documents (collectively, the "Filing
Statements") shall have been delivered to CT Corporation System or another
similar filing service company acceptable to the Managing Agents (the "Filing
Agent"). The Filing Agent shall have acknowledged in a writing satisfactory to
the Managing Agents and their counsel (i) the Filing Agent's receipt of all
Filing Statements, (ii) that the Filing Statements have either been submitted
for filing in the appropriate filing offices or will be submitted for filing in
the appropriate offices within ten days following the Closing Date and (iii)
that the Filing Agent will notify the Managing Agents and their counsel of the
results of such submissions within 30 days following the Closing Date.
SECTION 5.1.11. Subsidiary Guaranty. The Managing Agents shall have
received the Subsidiary Guaranty, dated as of the Closing Date, duly executed
and delivered by an Authorized Officer of each Subsidiary Guarantor.
SECTION 5.1.12. Solvency, etc. The Managing Agents shall have received,
with counterparts for each Lender, a certificate duly executed and delivered by
the chief financial or accounting Authorized Officer of the Borrower, dated the
Closing Date, in the form of Exhibit I attached hereto.
SECTION 5.1.13. Pledge Agreements. The Managing Agents shall have
received,
(a) the Shareholders' Pledge Agreement, dated as of the Closing
Date, and duly executed and delivered by an Authorized Officer of each OSI
Shareholder that is not a natural person and each other OSI Shareholder
that is a natural person in his/her individual capacity together with the
certificates evidencing the shares of the OSI Common Stock owned by such
OSI Shareholders and pledged pursuant to the Shareholders' Pledge
Agreement, which certificates in each case shall be accompanied by undated
instruments of transfer duly executed in blank;
(b) each Pledge and Security Agreement, dated as of the Closing
Date, duly executed and delivered by an Authorized Officer of the Borrower
and each Subsidiary Guarantor together with
(i) the certificates evidencing all of the issued and
outstanding shares of Capital Securities pledged pursuant to the
Pledge and Security Agreement, which certificates in each case shall
be accompanied by undated instruments of transfer duly executed in
blank, or, if any such shares of Capital Securities pledged pursuant
to such Pledge and Security Agreement are uncertificated securities,
the Administrative Agent shall have obtained "control" (as defined
in the UCC) over such shares of Capital Securities) and such other
instruments and documents as shall be necessary or in the reasonable
opinion of the Administrative Agent desirable under applicable law
to perfect (subject to Permitted Liens) the first priority security
interest of the Administrative Agent in such shares of Capital
Securities;
(ii) executed copies of UCC financing statements (Form UCC-1)
naming each such Obligor executing a Pledge and Security Agreement
as a debtor and the Administrative Agent as the secured party, or
other similar instruments or documents to be filed under the UCC of
all jurisdictions as may be necessary or, in the opinion of the
Managing Agents and their counsel, desirable to perfect the security
interests of the Administrative Agent pursuant to such Pledge and
Security Agreement;
(iii) executed copies of proper UCC termination statements
(Form UCC-3), if any, necessary to release all Liens and other
rights of any Person (other than Permitted Liens) (i) in any
collateral described in any security agreement previously executed
and delivered by any Person, and (ii) securing any of the
Indebtedness identified in Item 7.2.2(b) of the Disclosure Schedule,
together with such other UCC termination statements (Form UCC-3) as
the Managing Agents may reasonably request from such Obligors; and
(iv) certified copies of UCC Requests for Information or
Copies (Form UCC-11), or a similar search report certified by a
party acceptable to the Managing Agents, dated a date reasonably
near to the Closing Date, listing effective financing statements
which name such Obligor (under its present name and certain of its
previous names) as the debtor and which are filed in certain of the
jurisdictions in which filings are to be made pursuant to clause
(ii) above, together with copies of such financing statements; and
The Managing Agents and their counsel shall be satisfied that (i) the Lien
granted to the Administrative Agent, for the benefit of the Secured Parties in
the Collateral (subject to Permitted Liens) is a first priority (or local
equivalent thereof) security interest, and (ii) no Lien exists on any of the
Collateral (as defined in the applicable Pledge Agreement) other than the Lien
created in favor of the Administrative Agent, for the benefit of the Secured
Parties, pursuant to a Loan Document.
SECTION 5.1.14. Patent Security Agreement, Copyright Security Agreement
and Trademark Security Agreement. The Managing Agents shall have received the
Patent Security Agreement, the Copyright Security Agreement and the Trademark
Security Agreement, as applicable, each dated as of the Closing Date, duly
executed and delivered by an Authorized Officer of each Obligor that has
delivered a Pledge and Security Agreement.
SECTION 5.1.15. Perfection Certificates. The Managing Agents shall have
received Perfection Certificates, dated as of the Closing Date, duly executed
and delivered by an Authorized Officer of the Borrower and each Subsidiary
Guarantor.
SECTION 5.1.16. Insurance. The Managing Agents shall have received
certified copies of the insurance policies (or binders in respect thereof), from
one or more insurance companies satisfactory to the Managing Agents, evidencing
coverage required to be maintained pursuant to each Loan Document.
SECTION 5.1.17. Corporate, Tax and Capital Structure. The corporate, tax,
capital and ownership structure (including Organic Documents), shareholders
agreements and the management of the Borrower both before and after the
Transaction shall be reasonably satisfactory to the Managing Agents in all
respects. The corporate and capital structure of the Borrower and its
Subsidiaries on the Closing Date shall be as set forth in Annex I hereto.
SECTION 5.1.18. Litigation. There shall exist no pending or threatened
action, suit, investigation, litigation or proceeding pending or threatened in
any court or before any arbitrator or governmental instrumentality which (a)
contests the consummation of the Transaction or the legality or validity of any
Loan Document or any Transaction Document, or (b) could reasonably be expected
to have a Material Adverse Effect.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and
each Issuer to make any Credit Extension (including the initial Credit
Extension) shall be subject to the satisfaction of each of the conditions
precedent set forth below.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both
immediately before and immediately after giving effect to any Credit Extension
(but, if any Default of the nature referred to in Section 8.1.5 shall have
occurred with respect to any other Indebtedness, without giving effect to the
application, directly or indirectly, of the proceeds thereof) the following
statements shall be true and correct:
(a) the representations and warranties set forth in each Loan
Document shall, in each case, be true and correct in all material respects
with the same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties shall be
true and correct in all material respects as of such earlier date); and
(b) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request, etc. The Administrative Agent
shall have received a Borrowing Request if Loans are being requested, or an
Issuance Request if a Letter of Credit is being requested or extended. Each of
the delivery of a Borrowing Request or Issuance Request and the acceptance by
the Borrower of the proceeds of such Credit Extension shall constitute a
representation and warranty by the Borrower that on the date of such Credit
Extension (both immediately before and after giving effect to such Credit
Extension and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct in all material respects.
SECTION 5.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of any Obligor shall be reasonably
satisfactory in form and substance to the Managing Agents and their counsel. The
Managing Agents and their counsel shall have received all information,
approvals, opinions, documents or instruments as either Managing Agent or its
counsel may reasonably request, if the Managing Agents believe in good faith
that a Default may have occurred and is continuing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Secured Parties a party hereto to enter into this
Agreement and to make Credit Extensions hereunder, the Borrower represents and
warrants to each Secured Party a party hereto as set forth in this Article.
SECTION 6.1. Organization, etc. Each Obligor (i) is validly organized and
existing and in good standing under the laws of the state or jurisdiction of its
incorporation or organization, (ii) is duly qualified to do business and is in
good standing as a foreign entity in each jurisdiction where the nature of its
business requires such qualification (except where the failure to be so
qualified or in good standing as a foreign entity could not reasonably be
expected to have a Material Adverse Effect), and (iii) has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to enter into and perform its Obligations under each Loan Document to
which it is a party and to own and hold under lease its property and to conduct
its business substantially as currently conducted by it (except where the
failure to hold any such licenses, permits or other approvals could not
reasonably be expected to have a Material Adverse Effect).
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by each Obligor of each Loan Document executed or to be
executed by it, each such Obligor's participation in the consummation of all
aspects of the Transaction, and the execution, delivery and performance by such
Obligor of the agreements executed and delivered by it in connection with the
Transaction are in each case within each such Person's powers, have been duly
authorized by all necessary action, and do not
(a) contravene any (i) Obligor's Organic Documents, (ii) contractual
restriction binding on or affecting any Obligor (other than any such
contractual restriction that shall have been waived on or prior to the
Closing Date or the failure to obtain thereof could not reasonably be
expected to have a Material Adverse Effect or that which will not lead to
any liability by a Secured Party), (iii) court decree or order binding on
or affecting any Obligor or (iv) law or governmental regulation binding on
or affecting any Obligor; or
(b) result in, or require the creation or imposition of, any Lien on
any Obligor's properties (except as permitted or required by this
Agreement).
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority or other Person (other than those which (i) have been, or on the
Closing Date will be, duly obtained or made or waived and which are, or on the
Closing Date will be, in full force and effect or (ii) the failure to obtain or
make could not reasonably be expected to have a Material Adverse Effect) is
required for the consummation of the Transaction or the due execution, delivery
or, to the extent applicable, performance by any Obligor of any Loan Document to
which it is a party, or for the due execution, delivery and/or, to the extent
applicable, performance of the Transaction Documents, in each case by the
parties thereto or the consummation of the Transaction. Neither the Borrower nor
any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. Each Loan Document and each Transaction
Document (other than the Consent Solicitation) to which each Obligor is a party
constitute, or will, on the due execution and delivery thereof by such Obligor,
constitute, the legal, valid and binding obligations of such Obligor,
enforceable against it in accordance with its terms (except, in any case, as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and by
principles of equity).
SECTION 6.5. Financial Information. (a) The financial statements of the
Borrower and its Subsidiaries furnished to the Managing Agents and each Lender
pursuant to Section 5.1.8(a)(i) have been prepared in accordance with GAAP
consistently applied, and present fairly in all material respects the
consolidated financial condition of the Persons covered thereby as at the dates
thereof and the results of their operations for the periods then ended.
(b) The pro forma balance sheets furnished to the Agents and each Lender
pursuant to Section 5.1.8(a)(ii) fairly presents in all material respects the
pro forma estimated financial condition of the Borrower as of such date.
(c) All balance sheets, all statements of operations, shareholders' equity
and cash flow and all other financial information (other than projections) of
each of the Borrower and its Subsidiaries furnished pursuant to Section 7.1.1
have been and will for periods following the Closing Date be prepared in
accordance with GAAP consistently applied, and do or will present fairly in all
material respects the consolidated financial condition of the Persons covered
thereby as at the dates thereof and the results of their operations for the
periods then ended.
SECTION 6.6. No Material Adverse Change. There has been no material
adverse change in the business, operations, results of operations, business
prospects which could reasonably be expected to result in a Default, or
financial condition of the Borrower and its Subsidiaries taken as a whole since
December 31, 1998.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Borrower or any of its Subsidiaries, threatened
litigation, action, proceeding or labor controversy
(a) except as disclosed in Item 6.7 of the Disclosure Schedule,
affecting the Borrower or any such Subsidiary or any of their respective
properties, businesses, assets or revenues, which could reasonably be
expected to have a Material Adverse Effect, and no adverse development has
occurred in any labor controversy, litigation, arbitration or governmental
investigation or proceeding disclosed in Item 6.7; or
(b)which purports to affect the legality, validity or
enforceability of any Loan Document, any Transaction Document or the
Transaction.
SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries except
those Subsidiaries
(a) existing on the Closing Date which are identified in Item 6.8 of
the Disclosure Schedule; or
(b) which are permitted to have been organized or acquired in
accordance with Section 7.2.5 or 7.2.10.
Item 6.8 of the Disclosure Schedule (a) lists, with respect to each Subsidiary,
(i) the state or jurisdiction of such Subsidiary's incorporation or organization
and (ii) the percentage of shares or interests of the Capital Securities of such
Subsidiary owned by the Borrower or another Subsidiary, and (b) identifies each
Subsidiary which is a Foreign Subsidiary.
SECTION 6.9. Ownership of Properties; Capital Securities. (a) The
Borrower and each of its Subsidiaries owns (i) in the case of owned real
property, good and marketable fee title to, and (ii) in the case of owned
personal property, good and valid title to, or, in the case of leased real or
personal property, valid and enforceable leasehold interests (as the case may
be) in, all of its properties and assets, real and personal, tangible and
intangible, of any nature whatsoever, free and clear in each case of all Liens
or claims, except for Permitted Liens.
(b) All of the issued and outstanding shares of OSI Common Stock and all
of the issued and outstanding shares of Capital Securities of each of the
Pledged Subsidiaries are, in each case, duly authorized and validly issued,
fully paid and non-assessable.
SECTION 6.10. Taxes. Each of the Borrower and its Subsidiaries has filed
all Federal, State and other material Tax returns and reports required by law to
have been filed by it and has paid all Taxes and governmental charges thereby
shown to be due and owing, except any such Taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 6.11. Pension and Welfare Plans. During the twelve-
consecutive-month period prior to the Closing Date and prior to the date of any
Credit Extension hereunder, no steps have been taken to terminate any Pension
Plan, and no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition
exists or event or transaction has occurred with respect to any Pension Plan
which might result in the incurrence by the Borrower or any member of the
Controlled Group of any material liability, fine or penalty. Except as disclosed
in Item 6.11 of the Disclosure Schedule, neither the Borrower nor any member of
the Controlled Group has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 6.12. Environmental Warranties. Except as, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Borrower or any of its Subsidiaries have been, and
continue to be, owned or leased by the Borrower and its Subsidiaries in
compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or threatened
(i) written claims, complaints, notices or requests for information
received by the Borrower or any of its Subsidiaries with respect to any
alleged violation of any Environmental Law, or (ii) written complaints,
notices or inquiries to the Borrower or any of its Subsidiaries regarding
potential liability under any Environmental Law;
(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by the Borrower or
any of its Subsidiaries;
(d) the Borrower and its Subsidiaries have been issued and are in
compliance with all permits, certificates, approvals, licenses and other
authorizations relating to environmental matters and necessary or
desirable for their businesses;
(e) no property now or previously owned or leased by the Borrower or
any of its Subsidiaries is listed or proposed for listing (with respect to
owned property only) on the National Priorities List pursuant to CERCLA,
on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries;
(g) neither the Borrower nor any Subsidiary has directly transported
or directly arranged for the transportation of any Hazardous Material to
any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state
list or which is the subject of federal, state or local enforcement
actions or other investigations which may lead to material claims against
the Borrower or such Subsidiary for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the Borrower
or any Subsidiary; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower which, with the passage of
time, or the giving of notice or both, would give rise to liability under
any Environmental Law.
SECTION 6.13. Accuracy of Information. None of the factual information
heretofore or contemporaneously furnished in writing to any Secured Party and
prepared by or on behalf of any Obligor in connection with any Loan Document or
any transaction contemplated hereby (including the Transaction) contains as of
the date made any untrue statement of a material fact, or omits to state any
material fact necessary to make any such factual information not misleading, and
no other factual information hereafter furnished in connection with any Loan
Document by or on behalf of any Obligor in writing to any Secured Party will
contain as of the date made any untrue statement of a material fact or will omit
to state any material fact necessary to make any such factual information not
misleading on the date as of which such factual information is dated or
certified.
SECTION 6.14. Regulations U and X. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Credit Extensions
will be used to purchase or carry margin stock or otherwise for a purpose which
violates, or would be inconsistent with, Board Regulation U or Regulation X.
Terms for which meanings are provided in Board Regulation U or Regulation X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section with such meanings.
SECTION 6.15. Year 2000. Each Obligor has developed a program to address
on a timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by such Obligor may be unable to recognize and properly
perform date-sensitive functions involving certain dates prior to and any date
after December 31, 1999). Based on such program, the Year 2000 Problem could not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.16. Status of Obligations as Senior Indebtedness, etc. The
subordination provisions relating to the Subordinated Debt (including the
subordination provisions set forth in the Subordinated Note Indenture) are
enforceable against the holders of the applicable Subordinated Debt by the
holder of any "Senior Bank Debt" (as defined in the Subordinated Note Indenture)
or any similar term referring to the Obligations (as defined in any other
Subordinated Debt Document). All Obligations (including those to pay principal
of and interest (including interest accruing subsequent to the filing of, or
which would have accrued but for the filing of, a petition for bankruptcy,
reorganization or similar proceeding, whether or not allowed as a claim under
such proceeding) on the Loans and Reimbursement Obligations, and fees and
expenses in connection therewith) constitute "Senior Bank Debt" (as defined in
the Subordinated Note Indenture) or any similar term referring to the
Obligations (as defined in any other Subordinated Debt Document) and all such
Obligations are entitled to the benefits of the subordination created by such
Subordinated Debt Documents. The Borrower acknowledges that the Managing Agents,
each Lender and each Issuer are entering into this Agreement and are extending
their respective Commitments in reliance upon the subordination provisions of
the Subordinated Debt Documents (including the subordination provisions set
forth in the Subordinated Note Indenture).
SECTION 6.17. Solvency. The Transaction (including the incurrence of the
initial Credit Extension hereunder, and the execution and delivery by the
Subsidiary Guarantors of the Subsidiary Guaranty) will not involve or result in
any fraudulent transfer or fraudulent conveyance under the provisions of Section
548 of the Bankruptcy Code (11 U.S.C. ss.101 et seq., as from time to time
hereafter amended, and any successor or similar statute) or any applicable state
law relating to fraudulent transfers or fraudulent conveyances. After giving
effect to each Credit Extension hereunder, the Borrower and each Subsidiary
Guarantor is Solvent.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower covenants and agrees
with each of the Secured Parties that from the Closing Date until the
Termination Date has occurred, the Borrower will, and will cause its
Subsidiaries to, perform or cause to be performed the obligations set forth
below.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or cause to be furnished, to the Managing Agents (with
sufficient copies for each Lender) copies of the following financial statements,
reports, notices and information:
(a) as soon as available and in any event within 60 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, an
unaudited consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such Fiscal Quarter and consolidated statements of income
and cash flow of the Borrower and its Subsidiaries for such Fiscal Quarter
and for the period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Quarter, and including (in each case),
in comparative form the figures for the corresponding Fiscal Quarter in,
and year to date portion of, the immediately preceding Fiscal Year,
certified as complete and correct by the chief financial or accounting
Authorized Officer of the Borrower;
(b) as soon as available and in any event within 105 days after the
end of each Fiscal Year, a copy of the consolidated balance sheets of the
Borrower and its Subsidiaries, and the related consolidated statements of
income and cash flow of the Borrower and its Subsidiaries for such Fiscal
Year, setting forth in comparative form the figures for the immediately
preceding Fiscal Year and, in the case of such consolidated balance sheets
and statements of income and cash flow, audited (without any Impermissible
Qualification) by a "Big Five" accounting firm or any other independent
public accountants acceptable to the Managing Agents, which shall include
a calculation of the financial covenants set forth in Section 7.2.4 and
stating that, in performing the examination necessary to deliver the
audited financial statements of the Borrower and its Subsidiaries, no
knowledge was obtained of any Event of Default;
(c) concurrently with the delivery of the financial information
pursuant to clauses (a) and (b), a Compliance Certificate, executed by the
chief financial or accounting Authorized Officer of the Borrower, showing
compliance with the financial covenants set forth in Section 7.2.4 and
stating that no Default has occurred and is continuing (or, if a Default
has occurred, specifying the details of such Default and the action that
the Borrower or an Obligor has taken or proposes to take with respect
thereto);
(d) as soon as possible and in any event within five days after the
Borrower or any Subsidiary obtains knowledge of the occurrence of a
Default, a statement of an Authorized Officer of the Borrower setting
forth details of such Default and the action which the Borrower or such
Subsidiary has taken and proposes to take with respect thereto;
(e) as soon as possible and in any event within five days after the
Borrower or any Subsidiary obtains knowledge of (i) the occurrence of any
material adverse development with respect to any litigation, action,
proceeding or labor controversy described in Item 6.7 of the Disclosure
Schedule or (ii) the commencement of any litigation, action, proceeding or
labor controversy of the type and materiality described in Section 6.7,
notice thereof and, to the extent either Managing Agent requests, copies
of all documentation relating thereto;
(f) promptly after the sending or filing thereof, copies of all
reports, notices, prospectuses and registration statements which the
Borrower or any Subsidiary files with the SEC or any national securities
exchange;
(g) immediately upon becoming aware of (i) the institution of any
steps by any Person to terminate any Pension Plan, (ii) the failure to
make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under Section 302(f) of ERISA, (iii) the
taking of any action with respect to a Pension Plan which could result in
the requirement that any Obligor furnish a bond or other security to the
PBGC or such Pension Plan, or (iv) the occurrence of any event with
respect to any Pension Plan which could result in the incurrence by any
Obligor of any material liability, fine or penalty, notice thereof and
copies of all documentation relating thereto;
(h) promptly upon receipt thereof, copies of all "management
letters" submitted to any Obligor by the independent public accountants
referred to in clause (b) in connection with each audit made by such
accountants;
(i) promptly following the mailing or receipt of any notice or
report delivered under the terms of any Preferred Equity or any
Subordinated Debt Documents, copies of such notice or report; and
(j) such other financial and other information as any Lender or
Issuer through either Managing Agent may from time to time reasonably
request (including information and reports in such detail as either
Managing Agent may request with respect to the terms of and information
provided pursuant to the Compliance Certificate).
SECTION 7.1.2. Maintenance of Existence; Compliance with Laws, etc. The
Borrower will
(a) preserve and maintain its legal existence and qualification as a
foreign corporation in each jurisdiction where the nature of its business
or the location of its assets requires it to be so qualified, except to
the extent the failure to be so qualified would not result in a Material
Adverse Effect;
(b) cause each of its Subsidiaries to, except as otherwise permitted
by Section 7.2.10, preserve and maintain its legal existence and
qualification as a foreign entity in each jurisdiction where the nature of
its business or the location of its assets requires it to be so qualified,
except to the extent the failure to be so qualified would not result in a
Material Adverse Effect; and
(c) comply with all applicable laws, rules, regulations and orders,
including the payment (before the same become delinquent) of all material
Taxes imposed upon the Borrower or any Subsidiary or upon their property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP have been set aside on the books of the Borrower or any such
Subsidiary, as applicable, except to the extent the failure to comply with
all such laws rules, regulations and orders (other than any relating to
the payment of material Taxes) would not result in a Material Adverse
Effect.
SECTION 7.1.3. Maintenance of Properties. Except to the extent the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Borrower will, and will cause each of its Subsidiaries to, maintain,
preserve, protect and keep its and their respective properties in good repair,
working order and condition (ordinary wear and tear excepted), and make
necessary repairs, renewals and replacements so that the business carried on by
the Borrower and its Subsidiaries may be properly conducted at all times, unless
the Borrower or such Subsidiary determines that the continued maintenance of
such property is no longer economically desirable.
SECTION 7.1.4. Insurance. The Borrower will, and will cause each of
its Subsidiaries to maintain:
(a) insurance on its property with financially sound and reputable
insurance companies against loss and damage in at least the amounts (and
with only those deductibles) customarily maintained, and against such
risks as are typically insured against in the same general area, by
Persons of comparable size engaged in the same or similar business as the
Borrower and its Subsidiaries; and
(b) all worker's compensation, employer's liability insurance or
similar insurance as may be required under the laws of any state or
jurisdiction in which it may be engaged in business.
Without limiting the foregoing, all insurance policies required pursuant to this
Section shall (i) name the Administrative Agent on behalf of the Secured Parties
as mortgagee (in the case of property insurance) or additional insured (in the
case of liability insurance), as applicable, and provide that no cancellation or
modification of the policies will be made without thirty days' prior written
notice to the Administrative Agent.
SECTION 7.1.5. Books and Records. (a) The Borrower will, and will
cause each of its Subsidiaries to,
(i) keep books and records in accordance with GAAP which
accurately reflect all of its business affairs and transactions;
(ii) permit the Managing Agents or any of their respective
representatives, at reasonable times and intervals and upon reasonable
notice to the Borrower to visit each of the Borrower's and its
Subsidiaries' offices, to discuss such Person's financial matters with its
officers and employees, and its independent public accountants (and the
Borrower hereby authorizes such independent public accountant to discuss
each of such Person's financial matters with the Managing Agents or any of
their respective representatives whether or not any representative of such
Person is present, so long as a representative of such Person has been
afforded a reasonable opportunity to be present) and to examine (and
photocopy extracts from) any of such Person's books and records; and
(iii) afford each other Secured Party or any of its respective
representatives the opportunity to visit the Borrower's and its
Subsidiaries' offices once per calendar year (such date to be determined
by the Borrower and each such Secured Party to be given reasonable notice
thereof), to discuss such Person's financial matters with its officers and
employees, and its independent public accountants (and the Borrower hereby
authorizes such independent public accountant to discuss each of such
Person's financial matters with each such Secured Party or any of their
respective representatives whether or not any representative of such
Person is present, so long as a representative of such Person has been
afforded a reasonable opportunity to be present) and to examine (and
photocopy extracts from) any of such Person's books and records; provided,
however, that each such Secured Party or any of their respective
representatives, at reasonable times and intervals and upon reasonable
notice to the Borrower, shall be permitted to do any of the foregoing at
any time after the occurrence and during the continuation of an Event of
Default.
(b) If an Event of Default shall have occurred and be continuing, the
Borrower shall pay any fees of such independent public accountant incurred in
connection with any Secured Party's exercise of its rights pursuant to clause
(a).
SECTION 7.1.6. Environmental Law Covenant. The Borrower will, and will
cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary material
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in compliance
therewith, and handle all Hazardous Materials in compliance with all
applicable Environmental Laws, in each case except where the failure to
comply with the terms of this clause could not reasonably be expected to
have a Material Adverse Effect; and
(b) promptly notify the Administrative Agent and provide copies upon
receipt of all written claims, complaints, notices or inquiries which (i)
relate to the condition of its facilities and properties in respect of, or
as to compliance with, Environmental Laws and (ii) could (singly or in the
aggregate) reasonably be expected to have a Material Adverse Effect, and
shall promptly resolve any non-compliance with Environmental Laws (except
to the extent being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have
been set aside on its books or except for any such non-compliance which
could not reasonably be expected to have a Material Adverse Effect) and
keep its property free of any material Lien imposed by any Environmental
Law.
SECTION 7.1.7. Use of Proceeds. The Borrower will
(a) apply the proceeds of the Term Loans to refinance Indebtedness
and other amounts owing under the Existing Credit Agreement and to
partially finance the consummation of the Transaction;
(b) apply the proceeds of the Revolving Loans (i) to refinance
Indebtedness and other amounts owing under the Existing Credit Agreement
and to partially finance the consummation of the Transaction with
Borrowings of Revolving Loans on the Closing Date in an amount not to
exceed $7,000,000 and (ii) for post-closing working capital and general
corporate purposes of the Borrower and the Subsidiary Guarantors (other
than UAS); and
(c) use Letters of Credit only for purposes of supporting working
capital and general corporate purposes of the Borrower and the Subsidiary
Guarantors (other than UAS).
SECTION 7.1.8. Subsidiary Guarantors, Security, etc. The Borrower will,
and will cause each Subsidiary Guarantor to, execute any documents, Perfection
Certificates, Filing Statements, agreements and instruments, and take all
further action (including filing Mortgages, to the extent required under Section
7.1.12) that may be required under applicable law, or that either Managing Agent
may reasonably request, in order to effectuate the transactions contemplated by
the Loan Documents and in order to grant, preserve, protect and perfect the
perfection and priority of the Liens created or intended to be created by the
Loan Documents. Unless otherwise agreed to by the Required Lenders, the Borrower
will cause any subsequently acquired or organized Domestic Subsidiary (other
than any OSIFC Family Member) to execute a Subsidiary Guaranty (or a supplement
thereto) and each applicable Loan Document in favor of the Secured Parties. In
addition, from time to time, the Borrower will, at its cost and expense,
promptly secure the Obligations by pledging or creating, or causing to be
pledged or created, perfected Liens with respect to such of its assets and
properties as either Managing Agent or the Required Lenders shall designate (it
being understood that it is the intent of the parties that the Obligations shall
be secured by, among other things, substantially all the assets of the Borrower
and (unless otherwise agreed to by the Required Lenders) the Subsidiary
Guarantors (including, subject to Section 7.1.12, real and personal property
acquired subsequent to the Closing Date); provided, that (i) neither the
Borrower nor any such Subsidiary shall be required to pledge more than 65% of
the Voting Securities of any Foreign Subsidiary, (ii) following a Public
Offering or a series of Public Offerings in which the Borrower shall have
received in the aggregate no less than $100,000,000 in net cash proceeds, and so
long as no Default shall have occurred and is then continuing, the Required
Lenders may elect to release the OSI Common Stock (together with the guarantee
obligations related thereto from the OSI Shareholders) held in pledge under the
Shareholders' Pledge Agreement and (iii) following the release of its
obligations as a guarantor (and for so long as it is not a guarantor) under the
Subordinated Debt Documents, and if no Default shall have occurred and is
continuing, (A) UAS shall be released from its obligations as a "Subsidiary
Guarantor" under the Subsidiary Guaranty and (B) any Collateral (as such term is
defined in the Subsidiary Pledge and Security Agreement) which has been pledged
by UAS pursuant to the Subsidiary Pledge and Security Agreement shall be
released, in each case without any action on the part of any other party. Such
Liens will be created under the Loan Documents in form and substance reasonably
satisfactory to the Administrative Agent, and the Borrower shall deliver, or
cause to be delivered, to the Lenders all such instruments and documents
(including legal opinions, title insurance policies and lien searches) as the
Administrative Agent shall reasonably request to evidence compliance with this
Section.
SECTION 7.1.9. Hedging Obligations. Within seven months following the
Closing Date, the Administrative Agent shall have received evidence satisfactory
to it that the Borrower has entered into interest rate swap, cap, collar or
similar arrangements (including such Indebtedness accruing interest at a fixed
rate by its terms) designed to protect the Borrower against fluctuations in
interest rates with respect to at least $150,000,000 of the aggregate principal
amount of the Term Loans for a period of at least three years from the Closing
Date, with terms reasonably satisfactory to the Borrower and the Administrative
Agent.
SECTION 7.1.10. Year 2000. (a) The Borrower shall take all action
reasonably necessary to assure that its computer based systems are able to
effectively process data including dates on and after January 1, 2000. At the
reasonable request of either Managing Agent or any Lender, the Borrower shall
provide such Person with assurance reasonably acceptable to such Person of the
Borrower's Year 2000 capability.
(b) The Borrower will promptly notify the Administrative Agent in the
event the Borrower discovers or determines that any computer application
(including those of its suppliers and vendors) that is material to its or any of
its Subsidiaries' businesses and operations will not be Year 2000 compliant as
of January 1, 2000, except to the extent that such failure could not reasonably
be expected to have a Material Adverse Effect.
SECTION 7.1.11. Maintenance of Corporate Separateness. The Borrower
will, and will cause each of its Subsidiaries to, satisfy customary corporate
formalities, including the holding of regular board of directors' and
shareholders' meetings and the maintenance of corporate offices and records.
Neither the Borrower nor any Subsidiary which is not an OSIFC Family Member
shall make any payment to a creditor of any OSIFC Family Member in respect of
any liability of such OSIFC Family Member (unless such payment is pursuant to
the Permitted Receivables Transaction and otherwise specifically permitted by
any Loan Document), and no bank account of any OSIFC Family Member shall be
commingled with any bank account of the Borrower or any of its Subsidiaries
which is not an OSIFC Family Member. Any financial statements distributed to any
creditors of any OSIFC Family Member shall clearly establish the separateness of
such OSIFC Family Member from the Borrower and its Subsidiaries which are not
OSIFC Family Members and each lender to an OSIFC Family Member shall be notified
in writing by such OSIFC Family Member that such lender will not have any
recourse to the assets of the Borrower and its Subsidiaries which are not OSIFC
Family Members. Neither the Borrower nor any of its Subsidiaries shall take any
action, or conduct its affairs in a manner, which is likely to result in the
corporate existence of any OSIFC Family Member which is a direct Subsidiary of
the Borrower or any Subsidiary which is not an OSIFC Family Member being ignored
by any court of competent jurisdiction, or in the assets and liabilities of the
Borrower or any Subsidiary which is not an OSIFC Family Member being
substantively consolidated with those of any OSIFC Family Member in a
bankruptcy, reorganization or other insolvency proceeding.
SECTION 7.1.12. Existing and Future Owned Real Property. (a) Within 30
days after the Closing Date, the Borrower shall deliver to the Administrative
Agent, as mortgagee for the ratable benefit of the Secured Parties, counterparts
of each Mortgage relating to each piece of real property owned by the Borrower
or any Subsidiary Guarantor (other than any such real property that has a net
book value of less than $1,500,000), each dated as of the date of such delivery,
duly executed by the Borrower or such Subsidiary Guarantor, together with
(i) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of such Mortgage as may be
necessary or, in the reasonable opinion of the Administrative Agent,
desirable effectively to create a valid, perfected first priority Lien,
subject to Permitted Liens, against the properties purported to be covered
thereby;
(ii) mortgagee's title insurance policies in favor of the
Administrative Agent, as mortgagee for the ratable benefit of the Secured
Parties, in amounts and in form and substance and issued by insurers, in
each case reasonably satisfactory to the Administrative Agent, with
respect to the property purported to be covered by such Mortgage, insuring
that title to such property is marketable and that the interests created
by the Mortgage constitute valid first Liens thereon free and clear of all
defects and encumbrances other than Permitted Liens, and such policies
shall also include, to the extent available, a revolving credit
endorsement and such other endorsements as the Administrative Agent shall
reasonably request and shall be accompanied by evidence of the payment in
full of all premiums thereon; and
(iii) such other approvals, opinions or documents as the
Administrative Agent may reasonably request.
(b) At all times after the Closing Date, the Borrower shall, and shall
cause each Subsidiary Guarantor to, execute and deliver or cause to be executed
and delivered Mortgages that may be necessary to create a valid, first priority
perfected Lien (subject only to Permitted Liens) against any real property
acquired from time to time by the Borrower or any such Subsidiary Guarantor
(other than any such real property that has a net book value of less than
$1,000,000), together with the appropriate items described in clauses (a)(i)
through (a)(iii) above.
SECTION 7.1.13. Permitted Receivables Transaction. The Borrower will
cause the Subsidiaries comprising the OSIFC Family to maintain in effect the
Permitted Receivables Transaction in effect on the Closing Date or,
alternatively, upon the termination by the Borrower, or receipt of written
notice (or such other form of notice otherwise permitted to be given under the
terms of the then effective Receivables Documents) of termination from MBIA
Insurance Corporation (or such other entity serving in a similar capacity as
MBIA Insurance Corporation under the then effective Receivables Documents) by
the Borrower, the Borrower will,
(a) within 45 days of the termination or receipt of notice of
termination, as the case may be, of the Permitted Receivables Transaction
then in effect, deliver to the Managing Agents a detailed summary (the
"Summary") of terms and conditions with respect to another program (the
"Alternative Receivables Program") providing for the sale or financing of
Accounts with customary limited recourse based on the collectability of
the Accounts sold, which Summary shall be satisfactory to the Managing
Agents and indicate that the Alternative Receivables Program shall be,
upon the consummation thereof, substantially similar to the Permitted
Receivables Transaction (including the Receivables Documents evidencing
such Permitted Receivables Transaction) being replaced, and in an amount
of not less than that in effect on the Closing Date; and
(b) within 90 days of the termination or receipt of notice of
termination, as the case may be, of the Permitted Receivables Transaction
then in effect, cause the Subsidiaries comprising the OSIFC Family to
consummate the Alternative Receivables Program on the terms and conditions
set forth in the Summary, which terms and conditions shall not have been
modified or waived in any material respect unless otherwise agreed to by
the Managing Agents.
SECTION 7.2. Negative Covenants. The Borrower covenants and agrees with
each of the Secured Parties that from the Closing Date until the Termination
Date has occurred, the Borrower will not, and will not permit its Subsidiaries
to, perform or cause to be performed the obligations set forth below.
SECTION 7.2.1. Business Activities. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any business other than the
business of the Borrower and its Subsidiaries on the Closing Date, and any other
business reasonably related, ancillary or complementary thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, other than:
(a) Indebtedness in respect of the Obligations;
(b) until the Closing Date, Indebtedness that is to be repaid in
full which is identified in Item 7.2.2(b) of the Disclosure Schedule;
(c) Indebtedness existing as of the Closing Date which is identified
in Item 7.2.2(c) of the Disclosure Schedule, and Permitted Refinancings of
such Indebtedness;
(d) (i) unsecured Indebtedness of the Borrower and its Subsidiaries
(A) incurred in the ordinary course of business of the Borrower and its
Subsidiaries (including open accounts extended by suppliers on normal
trade terms in connection with purchases of goods and services which are
not overdue for a period of more than 90 days or, if overdue for more than
90 days, as to which a dispute exists and adequate reserves in conformity
with GAAP have been established on the books of the Borrower or such
Subsidiary) and (B) in respect of performance, surety, statutory, appeal
bonds or similar obligations provided in the ordinary course of business,
but excluding (in each case), Indebtedness incurred through the borrowing
of money or Contingent Liabilities in respect thereof, and (ii)
Indebtedness constituting Specified Liabilities, which Indebtedness may,
to the extent permitted by clause (w) of Section 7.2.3, be secured;
(e) Indebtedness of the Borrower and its Subsidiaries (i) in respect
of industrial revenue bonds or other similar governmental or municipal
bonds, (ii) incurred to finance the acquisition of equipment or other
property of the Borrower and its Subsidiaries (pursuant to purchase money
mortgages or otherwise, whether owed to the seller or a third party) used
in the ordinary course of business of the Borrower and its Subsidiaries
(provided, that such Indebtedness is incurred within 60 days of the
acquisition of such property) and (iii) Capitalized Lease Liabilities;
provided, that the aggregate amount of all Indebtedness outstanding
pursuant to this clause (e) shall not at any time exceed $15,000,000;
(f) Indebtedness of any Subsidiary which is not an OSIFC Family
Member owing to the Borrower or any other Subsidiary which is not an OSIFC
Family Member, which Indebtedness
(i) shall, if payable to the Borrower or a Subsidiary
Guarantor, be evidenced by one or more Intercompany Notes, duly
executed and delivered in pledge to the Administrative Agent
pursuant to the applicable Pledge and Security Agreement, and shall
not be forgiven or otherwise discharged for any consideration other
than payment in cash (provided, that only the amount repaid shall be
discharged); and
(ii) if incurred by a Non-Guarantor owing to the Borrower or a
Subsidiary Guarantor, shall not (when aggregated with the amount of
Investments made by the Borrower and the Subsidiary Guarantors in
Non-Guarantors under clause (e)(i) of Section 7.2.5) exceed
$3,000,000 at any time outstanding;
(g) unsecured Indebtedness (not evidenced by a note or other
instrument) of the Borrower owing to a Subsidiary that has previously
executed and delivered to the Administrative Agent the Interco
Subordination Agreement (or a supplement thereto);
(h) unsecured Subordinated Debt of the Borrower evidenced by the
Subordinated Notes incurred pursuant to the terms of the Subordinated Debt
Documents in a principal amount not to exceed $100,000,000, and unsecured
Contingent Liabilities of the Subsidiary Guarantors in respect of such
Subordinated Debt, but only if such Contingent Liabilities are
subordinated to the Obligations on substantially the same terms as such
Subordinated Debt of the Borrower is subordinated to the Obligations and,
in each case, Permitted Refinancings of such Subordinated Debt and
Contingent Liabilities which continue to satisfy the terms of the
definition of "Subordinated Debt";
(i) Indebtedness of a Person existing at the time such Person became
a Subsidiary of the Borrower, together with all Indebtedness assumed by
the Borrower or any Subsidiary in connection with any Permitted
Acquisition (including any Permitted Acquisition of assets), in an
aggregate amount not to exceed $15,000,000 at any time outstanding, but
only to the extent that such Indebtedness was not created or incurred in
contemplation of such Person becoming a Subsidiary or such Permitted
Acquisition;
(j) Indebtedness of the OSIFC Family incurred in connection with the
Permitted Receivables Transaction in an aggregate amount at any time not
to exceed the Permitted Receivables Amount;
(k) Hedging Obligations of the Borrower or any of its Subsidiaries
which is not an OSIFC Family Member in respect of the Credit Extensions or
otherwise entered into by the Borrower or such Subsidiary to hedge against
interest rate or currency exchange rate fluctuations, in each case arising
in the ordinary course of business of the Borrower and its Subsidiaries
which are not OSIFC Family Members and not for speculative purposes;
(l) Indebtedness in respect of netting services, overdraft
protections and otherwise in connection with deposit accounts;
(m) Indebtedness incurred by Foreign Subsidiaries for working
capital purposes in an amount not to exceed $1,000,000;
(n) Permitted Refinancings of the Indebtedness listed above (other
than Indebtedness of the type permitted under clause (a) hereof);
(o) other unsecured Indebtedness issued in respect of the Restricted
Payment described in clause (b) of Section 7.2.6 which, when aggregated
with the amount of Restricted Payments made pursuant to such clause, does
not exceed $5,000,000 (which amount shall be increased Dollar-for-Dollar
by the amount of any cash payments made by any new shareholders of OSI
Common Stock in connection with their purchase of such OSI Common Stock)
over the term of this Agreement, and then only if such Indebtedness is,
except as otherwise consented to by the Administrative Agent, subordinated
on terms and conditions no less favorable to any Secured Party than those
contained in the Interco Subordination Agreement;
(p) Indebtedness incurred in connection with any transaction
otherwise permitted pursuant to Section 7.2.15; and
(q) other unsecured Indebtedness of the Borrower and its
Subsidiaries (other than Indebtedness of Non-Guarantors owing to the
Borrower or Subsidiary Guarantors) which are not OSIFC Family Members in
an aggregate amount at any time outstanding not to exceed $15,000,000;
provided, however, that no Indebtedness otherwise permitted by (A) clause (e),
(f)(ii), (i), (k), (o) or (q) shall be assumed or otherwise incurred if a
Default has occurred and is then continuing or would result therefrom, and (B)
clause (m) shall be assumed or otherwise incurred if a Default would result
therefrom.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or permit to exist any Lien upon any
of its property (including Capital Securities of any Person), revenues or
assets, whether now owned or hereafter acquired, except the following (each, a
"Permitted Lien"):
(a) Liens securing payment of the Obligations;
(b) until the Closing Date, Liens securing payment of Indebtedness
of the type described in clause (b) of Section 7.2.2;
(c) Liens existing as of the Closing Date and disclosed in Item
7.2.3(c) of the Disclosure Schedule securing Indebtedness described in
clause (c) of Section 7.2.2, including any Permitted Refinancings of such
Indebtedness; provided, that no such Lien shall encumber any additional
property and the amount of Indebtedness if any, secured by such Lien is
not increased from that existing on the Closing Date;
(d) Liens securing Indebtedness of the type permitted under clause
(e) of Section 7.2.2; provided, that such Lien (i) is granted within 60
days after such Indebtedness is incurred and (ii) secures only the assets
that are the subject of the Indebtedness referred to in such clause;
(e) Liens securing Indebtedness permitted by clause (i) of Section
7.2.2; provided, that such Liens existed prior to such Person becoming a
Subsidiary, were not created in anticipation thereof and attach only to
specific tangible assets of such Person (and not assets of such Person
generally);
(f) statutory and common law Liens in favor of carriers,
warehousemen, mechanics, materialmen and landlords granted in the ordinary
course of business for amounts not overdue or being diligently contested
in good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books;
(g) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance
or other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, bids, leases or other
similar obligations (other than for borrowed money) entered into in the
ordinary course of business or to secure obligations on surety and appeal
bonds or performance bonds;
(h) judgment Liens which do not result in an Event of Default under
Section 8.1.6;
(i) easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other similar encumbrances not interfering in
any material respect with the value or use of the property to which such
Lien is attached;
(j) Liens for Taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books;
(k) Liens on Accounts or other related assets of the OSIFC Family
created in connection with the Permitted Receivables Transaction;
(l) Liens solely on cash earnest money deposits in connection with
any letter of intent or purchase agreement entered into by the Borrower or
any of its Subsidiaries;
(m) Liens encumbering customary initial deposits and margin
deposits, and similar Liens attaching to commodity trading accounts or
other brokerage accounts incurred in the ordinary course of business;
(n) Liens in connection with the sale of accounts receivables by
a Foreign Subsidiary;
(o) Liens securing Indebtedness of Foreign Subsidiaries permitted
under Section 7.2.2 so long as any such Lien attaches only to the assets
of the respective Foreign Subsidiary that has incurred such Indebtedness;
(p) non-consensual Liens which may arise or be created under
Environmental Laws that are being contested in good faith and as to which
adequate reserves have been established to the extent required by GAAP and
secure obligations that would not reasonably be expected to have a
Material Adverse Effect;
(q) Liens arising from precautionary UCC financing statement filings
regarding operating leases;
(r) leases, subleases, licenses and sublicenses granted to third
parties in the ordinary course of business, in each case not interfering
in any material respect with the operations or business of the Borrower
and its Subsidiaries or the Liens of the Secured Parties granted by the
Loan Documents;
(s) extensions, renewals and replacements of any of the foregoing
Liens to the extent and for so long as the Indebtedness secured hereby is
expressly permitted hereunder and remains outstanding;
(t) landlord Liens arising under any lease contracts entered into by
the Borrower or any of its Subsidiaries in the ordinary course of business
(so long as no financing statements have been filed by such landlord);
(u) statutory Liens of depository or collecting banks on items in
collection and any accompanying documents or the proceeds thereof;
(v) Liens securing Indebtedness of the type permitted under clause
(p) of Section 7.2.2; and
(w) Liens to secure Indebtedness incurred in the ordinary course of
business and Indebtedness permitted under clause (d)(ii) of Section 7.2.2,
in an aggregate amount not to exceed $5,000,000 at any time outstanding.
SECTION 7.2.4. Financial Condition and Operations. The Borrower will
not permit any of the events set forth below to occur.
(a) The Borrower will not permit the Leverage Ratio as of the last
day of any Fiscal Quarter occurring during any period set forth below to
be greater than the ratio set forth opposite such period:
Period Leverage Ratio
------ --------------
01/01/00 through (and
including) 03/31/01 5.00:1.00
04/01/01 through (and
including) 06/30/01 4.75:1.00
07/01/01 through (and
including) 12/31/01 4.50:1.00
01/01/02 through (and
including) 06/30/02 4.25:1.00
07/01/02 through (and
including) 12/31/02 3.75:1.00
01/01/03 through (and
including) 06/30/03 3.50:1.00
07/01/03 through (and
including) 06/30/04 3.00:1.00
07/01/04 through (and
including) 12/31/04 2.50:1.00
01/01/05 and thereafter 2.00:1.00
(b) The Borrower will not permit the Interest Coverage Ratio as of
the last day of any Fiscal Quarter occurring during any period set forth
below to be less than the ratio set forth opposite such period:
Period Interest Coverage Ratio
------ -----------------------
01/01/00 through (and
including) 03/31/01 1.80:1.00
04/01/01 through (and
including) 03/31/02 2.00:1.00
04/01/02 through (and
including) 09/30/02 2.25:1.00
10/01/02 through (and
including) 06/30/03 2.50:1.00
07/01/03 through (and
including) 06/30/04 3.00:1.00
07/01/04 through (and
including) 12/31/04 4.00:1.00
01/01/05 and thereafter 5.00:1.00
(c) The Borrower will not permit the Fixed Charge Coverage Ratio as
of the last day of any Fiscal Quarter (beginning with the first Fiscal
Quarter of the 2000 Fiscal Year) to be less than (i) 1.25:1.00 through
(and including) December 31, 2002 and (ii) 1.15:1.00 for each Fiscal
Quarter thereafter.
(d) The Borrower will not permit EBITDA for the period of four
consecutive Fiscal Quarters ending on the last day of any Fiscal Quarter
occurring during any period set forth below to be less than the amount set
forth opposite such period:
Period EBITDA
------ ------
01/01/00 through (and
including) 03/31/01 $95,000,000
04/01/01 through (and
including) 09/30/01 $100,000,000
10/01/01 through (and
including) 09/30/02 $105,000,000
10/01/02 through (and
including) 06/30/03 $110,000,000
07/01/03 through (and
including) 12/31/03 $115,000,000
01/01/04 through (and
including) 06/30/04 $120,000,000
07/01/04 through (and
including) 12/31/04 $130,000,000
01/01/05 through (and
including) 12/31/05 $140,000,000
01/01/06 and thereafter $150,000,000
SECTION 7.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, purchase, make, incur, assume or permit to exist any
Investment in any other Person, except:
(a) Investments existing on the Closing Date and identified in
Item 7.2.5(a) of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(d) without duplication, Investments permitted as (i) Capital
Expenditures pursuant to Section 7.2.7 (including any such Investments
which would otherwise constitute Capital Expenditures but for the
operation of clause (i) of the proviso to the definition of "Capital
Expenditures"), (ii) Indebtedness pursuant to Section 7.2.2 and (iii)
Restricted Payments pursuant to clause (b) of Section 7.2.6;
(e) Investments by way of (i) contributions to capital or purchases
of Capital Securities by the Borrower in any Subsidiaries (other than any
OSIFC Family Member) or by any Subsidiary in other Subsidiaries (in either
case, other than any OSIFC Family Member); provided, that the aggregate
amount of intercompany loans made pursuant to clause (f)(ii) of Section
7.2.2 and Investments under this clause made by the Borrower and
Subsidiary Guarantors in Non-Guarantors shall not exceed $3,000,000 at any
time, or (ii) contributions to capital by any Subsidiary in the Borrower;
(f) Investments made by the Borrower and its Subsidiaries that
constitute (i) accounts receivable arising, (ii) trade debt granted, or
(iii) deposits made in connection with the purchase price of goods or
services, in each case in the ordinary course of business;
(g) Investments made by the Borrower and its Subsidiaries
constituting Permitted Acquisitions in an aggregate amount not to exceed
$35,000,000 (which amount shall include the assumption of all Indebtedness
in connection with such Permitted Acquisition and the aggregate amount of
Specified Liabilities (but only to the extent the obligations associated
with such Specified Liabilities are recorded as liabilities on the
consolidated balance sheet of the Borrower and its Subsidiaries in
accordance with GAAP), regardless of the date on which such Specified
Liabilities are actually recorded) in any single transaction or series of
related transactions;
(h) Investments consisting of any deferred portion of the sales
price received by the Borrower or any Subsidiary in connection with any
Disposition permitted under Section 7.2.11 to the extent such deferred
portion does not exceed the portion of such sales price which may be
non-cash under Section 7.2.11;
(i) Investments in the ordinary course of business in the form of
loans and advances to officers, directors and employees of the Borrower or
any of its Subsidiaries to finance the purchase of Capital Securities of
Borrower, so long as the aggregate amount of (x) any such loan or advance
does not exceed the purchase price of the Capital Securities so financed
and (y) all such loans and advances does not exceed $5,000,000 at any time
outstanding;
(j) Investments made by the Borrower or any of its Subsidiaries,
solely with proceeds which have been contributed, directly or indirectly
after the Closing Date, to the Borrower or such Subsidiary as cash equity
from holders of Borrower's Capital Securities for the purpose of making an
Investment identified in a notice to the Administrative Agent on or prior
to the date that such capital contribution is made, which Investments
shall result in the Borrower or such Subsidiary acquiring a majority
controlling interest in or substantially all of the assets of the Person
in which such Investment was made or from which such assets were purchased
or increasing any such controlling interest already maintained by it;
(k) Investments in OSIFC in an aggregate amount not to exceed
$5,000,000, which amount shall be in addition to the amount of Investments
made by the Borrower and its Subsidiaries and existing on the Closing
Date;
(l) Investments made with Casualty Proceeds in accordance with the
provisions of clause (h) of Section 3.1.1;
(m) Investments consisting of acquisitions of receivables portfolios
("Permitted Portfolio Acquisitions"); provided, that the aggregate amount
expended by the Borrower and its Subsidiaries for Permitted Portfolio
Acquisitions shall not exceed $15,000,000 in any Fiscal Year; and
(n) other Investments made by the Borrower and its Subsidiaries
(other than any Investments of the type permitted in clauses (a) through
(m) above) in an amount not to exceed $10,000,000 over the term of this
Agreement;
provided, however, that
(o) any Investment which when made complies with the requirements of
clause (a), (b), (c) or (d) of the definition of the term "Cash Equivalent
Investment" may continue to be held notwithstanding that such Investment
if made thereafter would not comply with such requirements; and
(p) no Investment otherwise permitted by clause (d)(i), (d)(ii)
(except to the extent permitted under Section 7.2.2), (g) or (i) shall be
permitted to be made if any Default has occurred and is continuing or
would result therefrom.
SECTION 7.2.6. Restricted Payments, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, declare or make a Restricted Payment, or
make any deposit for any Restricted Payment (other than Restricted Payments made
by Subsidiaries to the Borrower or wholly owned Subsidiaries) in excess of
$2,000,000 in the aggregate over the term of this Agreement (which amount may
not be added to the additional Restricted Payments permitted in clauses (a)
through (c) below); provided, however, that, notwithstanding any of the
foregoing, the Borrower may make additional Restricted Payments, without
duplication,
(a) beginning December 1, 2004, to the extent necessary to make
scheduled dividend payments on the PIK Preferred Equity in accordance with
the PIK Preferred Equity Documents;
(b) in respect of Repurchase Payments; provided, that the aggregate
consideration paid for such Repurchase Payments, when aggregated with the
amount of Indebtedness incurred pursuant to clause (o) of Section 7.2.2
(without duplication), shall not exceed $5,000,000 over the term of this
Agreement; and
(c) in respect of advisory fees in an amount not to exceed $500,000
in the aggregate in any Fiscal Year.
Notwithstanding any of the foregoing, the Borrower may make any such Restricted
Payment only so long as (a) both before and after giving effect to such
Restricted Payment, no Default shall have occurred and be continuing, and (b)
the Borrower shall have delivered to the Administrative Agent (A) financial
statements prepared on a pro forma basis to give effect to such Restricted
Payment for the period of four consecutive Fiscal Quarters ending with the
Fiscal Quarter then last ended for which financial statements and the Compliance
Certificate relating thereto have been delivered to the Administrative Agent
pursuant to Section 7.1.1 and (B) a certificate of the Borrower executed by an
Authorized Officer of the Borrower demonstrating that the financial results
reflected in such financial statements would comply with the requirements of
Section 7.2.4 for the Fiscal Quarter in which such Restricted Payment is to be
made.
SECTION 7.2.7. Capital Expenditures, etc. Subject (in the case of
Capitalized Lease Liabilities) to clause (e) of Section 7.2.2, (a) the Borrower
will not, and will not permit any of its Subsidiaries to, make or commit to make
Capital Expenditures other than Capital Expenditures made or committed to be
made by the Borrower and its Subsidiaries in any Fiscal Year which in the
aggregate do not exceed, (i) for the 2000 Fiscal Year, $25,000,000, and (ii) for
each Fiscal Year thereafter, $20,000,000; provided, however, that
notwithstanding anything to the contrary in this clause, in the event that the
amount of Capital Expenditures permitted to be made by the Borrower and its
Subsidiaries during any Fiscal Year (or portion thereof) pursuant to this clause
(prior to giving effect to any increase in such permitted amounts pursuant to
this proviso) is greater than the aggregate amount of such Capital Expenditures
made by the Borrower and its Subsidiaries during such Fiscal Year (or portion
thereof), such excess (up to an aggregate of 50% of the amount set forth
opposite such Fiscal Year, each such amount of excess, a "Carry-Forward Amount")
may be carried forward to the immediately succeeding Fiscal Year and utilized to
make Capital Expenditures in such succeeding Fiscal Year (it being understood
and agreed that a Carry-Forward Amount may not be carried beyond the Fiscal Year
immediately succeeding the Fiscal Year in which it arose ). With respect to any
Carry-Forward Amount, (i) it shall be certified by the Borrower to the
Administrative Agent in the Compliance Certificate delivered for the last Fiscal
Quarter of such Fiscal Year, and (ii) it shall be deemed to be used prior to the
Borrower and its Subsidiaries using any amount of Capital Expenditures permitted
for such immediately succeeding Fiscal Year.
(b) The parties acknowledge and agree that the permitted Capital
Expenditure amounts set forth in clause (a) above shall be exclusive of (i) the
amount of Capital Expenditures actually made with cash capital contributions
made to the Borrower or any of its Subsidiaries, directly or indirectly, by any
Person other than the Borrower and its Subsidiaries, after the Closing Date and
specifically identified in a certificate delivered by an Authorized Officer of
the Borrower to the Administrative Agent on or about the time such capital
contribution or equity issuance is made (but in any event prior to the time of
the Capital Expenditure made with such capital contribution or equity issuance);
provided, that, to the extent such cash capital contributions or any proceeds
from such equity issuance constitute Net Equity Proceeds arising from the
issuance by the Borrower of its Capital Securities, only that portion of such
Net Equity Proceeds which are not required to be applied as a prepayment
pursuant to clause (g) of Section 3.1.1 may be used for Capital Expenditures
pursuant to this clause and (ii) any portion of any acquisition that is
permitted under Section 7.2.5 (other than pursuant to clause (d) thereof) that
is accounted for as a Capital Expenditure.
SECTION 7.2.8. No Prepayment of Subordinated Debt. The Borrower will
not, and will not permit any of its Subsidiaries to,
(a) make any payment or prepayment of principal of, or premium or
interest on, any Subordinated Debt (i) other than the stated, scheduled
date for payment of interest set forth in the applicable Subordinated Debt
Documents, (ii) other than with Net Equity Proceeds (after application
pursuant to clause (g) of Section 3.1.1) in accordance with the applicable
Subordinated Debt Documents or (iii) which would violate the terms of this
Agreement or the applicable Subordinated Debt Documents;
(b) redeem, retire, purchase, defease or otherwise acquire any
Subordinated Debt; or
(c) make any deposit (including the payment of amounts into a
sinking fund or other similar fund) for any of the foregoing purposes.
Furthermore, neither the Borrower nor any Subsidiary will designate any
Indebtedness other than the Obligations as "Designated Senior Debt" (or any
analogous term) in any Subordinated Debt Document.
SECTION 7.2.9. Issuance of Capital Securities. The Borrower will not,
and will not permit any of its Subsidiaries (other than Pay Tech) to, (a) issue
any Capital Securities (whether for value or otherwise) to any Person other than
(i) (in the case of Subsidiaries) the Borrower or another wholly owned
Subsidiary, (ii) for transfers, replacements and exchanges of then outstanding
shares of Capital Securities, (iii) for stock splits, stock dividends and
issuances which do not decrease the percentage ownership of the Borrower or any
of its Subsidiaries in any class of the Capital Securities of such Subsidiary
(and for which the Secured Parties continue to have a first priority pledge of
such Capital Securities), (iv) to qualify directors to the extent required by
applicable law and (v) for issuances by newly created or acquired Subsidiaries
in accordance with the terms of this Agreement, or (b) become liable in respect
of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire
or make any other payment in respect of any Capital Securities of the Borrower
(other than obligations for Repurchase Payments) or any Subsidiary or any
option, warrant or other right to acquire any such Capital Securities; provided,
however, that, notwithstanding any of the foregoing, the Borrower may issue its
Capital Securities to the extent that, after giving effect to any such issuance,
no Default shall result therefrom.
SECTION 7.2.10. Consolidation, Merger, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other Person, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or any division thereof),
except
(a) Pay Tech may liquidate or dissolve, and any other Subsidiary may
liquidate or dissolve voluntarily into, and may merge with and into, the
Borrower (so long as the Borrower is the surviving corporation) or any
other Subsidiary (provided, however, that a Subsidiary Guarantor may only
liquidate or dissolve into, or merge with and into, the Borrower or
another Subsidiary Guarantor), and the assets or Capital Securities of any
Subsidiary may be purchased or otherwise acquired by the Borrower or any
other Subsidiary (provided, however, that the assets or Capital Securities
of any Subsidiary Guarantor may only be purchased or otherwise acquired by
the Borrower or another Subsidiary Guarantor unless such assets are of the
type described in clause (a) or (c) of Section 7.2.11); provided, further,
that in no event shall any Pledged Subsidiary consolidate with or merge
with and into any Subsidiary other than another Pledged Subsidiary unless
after giving effect thereto, the Administrative Agent shall have a
perfected pledge of, and security interest in and to, at least the same
percentage of the issued and outstanding interests of Capital Securities
(on a fully diluted basis) of the surviving Person as the Administrative
Agent had immediately prior to such merger or consolidation in form and
substance satisfactory to the Administrative Agent and its counsel,
pursuant to such documentation and opinions as shall be necessary in the
reasonable opinion of the Administrative Agent to create, perfect or
maintain the collateral position of the Secured Parties therein; and
(b) so long as no Default has occurred and is continuing or would
occur after giving effect thereto, the Borrower or any of its Subsidiaries
may (to the extent permitted by clause (g) of Section 7.2.5) purchase all
or substantially all of the assets or Capital Securities of any Person (or
any division thereof), or acquire such Person by merger.
SECTION 7.2.11. Permitted Dispositions. The Borrower will not, and will
not permit any of its Subsidiaries to, Dispose of any of the Borrower's or such
Subsidiaries' assets (including accounts receivable and Capital Securities of
Subsidiaries) to any Person in one transaction or a series of transactions
unless:
(a) such Disposition is of inventory, obsolete equipment or
receivables portfolios, in each case Disposed of in the ordinary course
of business;
(b) such Disposition is permitted by Section 7.2.10;
(c) such Disposition is of Accounts or other related assets and
ancillary rights in property pursuant to the Permitted Receivables
Transaction; or
(d) such Disposition is not described in clauses (a) through (c)
above and (i) such Disposition is for not less than the fair market value
of the assets to be Disposed, (ii) the consideration received by the
Borrower or such Subsidiary consists of at least 80% cash, (iii) the Net
Disposition Proceeds received from such Disposition, together with the Net
Disposition Proceeds of all other assets Disposed pursuant to this clause
since the Closing Date, does not exceed (individually or in the aggregate)
$10,000,000 over the term of this Agreement, and (iv) an amount equal to
the Net Disposition Proceeds received from such Disposition are applied in
accordance with Sections 3.1.1 and 3.1.2.
SECTION 7.2.12. Modification of Certain Documents. After the Closing
Date, the Borrower will not, and will not permit any of its Subsidiaries to,
consent to any amendment, supplement, waiver or other modification of, or enter
into any forbearance from exercising any rights with respect to the terms or
provisions contained in,
(a) the Subordinated Debt Documents, other than any amendment,
supplement, waiver or modification for which no fee is payable to the
holders of the Subordinated Debt in excess of $1,000,000 in the aggregate
over the term of this Agreement and which (i) extends the date or reduces
the amount of any required repayment, prepayment or redemption of the
principal of such Subordinated Debt, (ii) reduces the rate or extends the
date for payment of the interest, premium (if any) or fees payable on such
Subordinated Debt, (iii) makes the covenants, events of default or
remedies in such Subordinated Debt Documents less restrictive on the
Borrower or its Subsidiaries, (iv) does not in any way adversely affect
the interests of the Secured Parties hereunder or under the Loan Documents
or (v) is of a technical or clarifying nature; or
(b) any of the Material Documents, other than any amendment,
supplement, waiver or modification which (i) does not in any way adversely
affect the interests of the Secured Parties hereunder or under the Loan
Documents or (ii) is of a technical or clarifying nature; or
(c) any of the Receivables Documents, other than any such amendment,
supplement, waiver or modification which (i) would extend the maturity
thereof, (ii) does not in any way adversely affect the interests of the
Secured Parties hereunder or under the Loan Documents or (iii) is of a
technical or clarifying nature.
SECTION 7.2.13. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into or cause or permit to
exist any arrangement, transaction or contract (including for the purchase,
lease or exchange of property or the rendering of services) with any of its
other Affiliates, unless such arrangement, transaction or contract is (i) on
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than it could obtain in an arm's-length transaction with a Person that is not an
Affiliate, (ii) of the kind which would be entered into by a prudent Person in
the position of the Borrower or such Subsidiary with a Person that is not one of
its Affiliates, (iii) fees paid to MDCP on the Closing Date and thereafter in an
amount not to exceed $500,000 per annum, (iv) the Permitted Receivables
Transaction, and (v) the Investment described in clause (i) of Section 7.2.5 in
an amount not to exceed $5,000,000 at any time outstanding.
SECTION 7.2.14. Restrictive Agreements, etc. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into any agreement
prohibiting
(a) the creation or assumption of any Lien for the benefit of any
Secured Party;
(b) the ability of any Obligor to amend or otherwise modify any Loan
Document; or
(c) the ability of any Subsidiary to make any payments, directly or
indirectly, to the Borrower, including by way of dividends, advances,
repayments of loans, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments.
The foregoing prohibitions shall not apply to restrictions contained (i) in any
Loan Document, (ii) in the case of clause (a), in any agreement governing any
Indebtedness permitted by clause (e) of Section 7.2.2 as to the assets financed
with the proceeds of such Indebtedness or (iii) in the case of clauses (a) and
(c), in (A) any agreement of a Non-Guarantor governing the Indebtedness
permitted by clause (f)(ii) of Section 7.2.2 or (B) any Receivables Documents.
SECTION 7.2.15. Sale and Leaseback. Other than with respect to the
properties listed in Item 7.2.15 of the Disclosure Schedule, the Borrower will
not, and will not permit any of its Subsidiaries to, directly or indirectly
enter into any agreement or arrangement providing for the sale or transfer by it
of any property (now owned or hereafter acquired) to a Person and the subsequent
lease or rental of such property or other similar property from such Person.
SECTION 7.2.16. Accounting Changes. The Borrower will not, and will not
permit any of its Subsidiaries to, change its Fiscal Year from twelve
consecutive calendar months ending on December 31.
SECTION 7.3. UAS and the Student Loan Collection Business.
Notwithstanding anything to the contrary in this Agreement, with respect to UAS
and the Student Loan Collection Business, the Borrower covenants and agrees with
each Managing Agent, each Lender and each Issuer that until the Termination Date
has occurred, the Borrower will, and will cause UAS and, to the extent
applicable, each other Subsidiary to, perform or cause to be performed the
obligations set forth below.
SECTION 7.3.1. Business Activities. UAS will not engage in any
business activity
(a) other than in connection with the Student Loan Collection
Business; and
(b) so long as UAS is a Subsidiary Guarantor, in any State of the
United States (or any political subdivision thereof) where, under
applicable law, UAS's guarantee of the Obligations pursuant to the
Subsidiary Guaranty would prohibit UAS from engaging in the Student Loan
Collection Business in such State (or political subdivision).
SECTION 7.3.2. Indebtedness. UAS will not create, incur, assume or
permit to exist any Indebtedness, except Indebtedness (a) existing as of the
Closing Date which is identified in Item 7.2.2(c) of the Disclosure Schedule,
and Permitted Refinancings of such Indebtedness, (b) in respect of UAS's
guarantee of (i) the Obligations pursuant to the Subsidiary Guaranty and (ii)
the obligations of the Borrower under and pursuant to the Subordinated Debt
Documents, and (c) which is intercompany Indebtedness otherwise permitted
pursuant to this Agreement.
SECTION 7.3.3. Liens. UAS will not create, incur, assume or permit to
exist any Lien upon any of its property, revenues or assets, whether now owned
or hereafter acquired, except Permitted Liens created, incurred, assumed or
otherwise existing (a) in the ordinary course of the Student Loan Collection
Business and (b) pursuant to any Loan Document.
SECTION 7.3.4. Investments. UAS will not purchase, make, incur, assume
or permit to exist any Investment in any other Person (including Investments in
the Borrower or any other Subsidiary) nor will the Borrower or any other
Subsidiary purchase, make, incur, assume or permit to exist any Investment in
UAS, except, in any case, as otherwise permitted under clauses (a), (b) and
(e)(i) of Section 7.2.5.
SECTION 7.3.5. Restricted Payments, etc. UAS will, within 45 days
following the end of each Fiscal Quarter, declare and make a Restricted Payment
to the Borrower in an aggregate amount such that, immediately after giving
effect to any such Restricted Payment, UAS would not have a "positive net worth"
(as defined in any regulations or laws binding on or applicable to UAS) in
excess of "positive net worth" plus $500,000.
SECTION 7.3.6. Consolidation, Merger. UAS will not liquidate or
dissolve, consolidate with, or merge into or with, any other Person, or purchase
or otherwise acquire all or substantially all of the assets of any Person (or
any division thereof).
SECTION 7.4. OSIFC Transaction. Each of the Secured Parties agree that,
notwithstanding anything to the contrary set forth in this Agreement, within
thirty days following the Closing Date, the Borrower may (a) cause OSIFC to
convert its corporate status to that of a limited liability company and Dispose
of (or permit OSIFC to issue additional) Capital Securities of OSIFC such that,
after giving effect to such Disposition (and/or issuance), OSIFC will no longer
be a Subsidiary of the Borrower, and (b) make a Restricted Payment in an
aggregate amount not to exceed $3,500,000 in connection with such conversion and
Disposition (and/or issuance).
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Article shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall default
in the payment or prepayment when due of
(a) any principal of any Loan, or any Reimbursement Obligation or
any deposit of cash for collateral purposes pursuant to Section 2.6.4; or
(b) interest on any Loan, any Reimbursement Obligation, any fee
described in Article III, or any other monetary Obligations and such
default shall continue unremedied for a period of three Business Days
after such amount was due.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
any Obligor made or deemed to be made in any Loan Document to which such Obligor
is party or any other writing or certificate (including any certificates
delivered pursuant to Article V) furnished by or on behalf of any Obligor to any
Secured Party for the purposes of or in connection with any Loan Document is or
shall be incorrect when made or deemed to have been made in any material
respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance or observance of any of its
obligations under Section 7.1.1, 7.1.7, 7.1.13 or 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the due performance or observance of any other
agreement contained in any Loan Document to which such Obligor is party, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by either Managing Agent or any
Lender.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in
the payment of any amount when due (subject to any applicable grace period),
whether by acceleration or otherwise, of any principal or stated amount of, or
interest or fees on, of any Indebtedness (other than Indebtedness described in
Section 8.1.1) of any Obligor having a principal or stated amount, individually
or in the aggregate, in excess of $5,000,000, or a default shall occur in the
performance or observance of any obligation or condition with respect to such
Indebtedness if the effect of such default is to accelerate the maturity of any
such Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause or declare such Indebtedness
to become due and payable or to require such Indebtedness to be prepaid,
redeemed, purchased or defeased, or require an offer to purchase or defease such
Indebtedness to be made, prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money, individually or in the aggregate, in excess of $5,000,000 (exclusive of
any amounts fully covered by insurance or indemnification (less any applicable
deductible) and as to which the insurer has acknowledged in writing its
responsibility to cover such judgment or order) shall be rendered against any
Obligor and either (i) such judgment shall not have been vacated or discharged
or stayed or bonded pending appeal within 30 days after the entry thereof
(unless the judgment allows for a longer period of time for payment) or (ii)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess
of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. Any Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing
its inability or unwillingness generally to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in the appointment of a
trustee, receiver, sequestrator or other custodian for any substantial
part of the property of any thereof, or make a general assignment for the
benefit of creditors;
(c) in the absence of such application, consent or acquiescence in
or permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for a substantial part of the property of
any thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days; provided, that each Obligor hereby
expressly authorizes each Secured Party to appear in any court conducting
any relevant proceeding during such 60-day period to preserve, protect and
defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law or any dissolution, winding up or liquidation
proceeding, in respect thereof, and, if any such case or proceeding is not
commenced by any Obligor, such case or proceeding shall be consented to or
acquiesced in by such Person or shall result in the entry of an order for
relief or shall remain for 60 days undismissed; provided, that the each
Obligor hereby expressly authorizes each Secured Party to appear in any
court conducting any such case or proceeding during such 60-day period to
preserve, protect and defend their rights under the Loan Documents; or
(e) take any action authorizing, or in furtherance of, any of the
foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document or any
Lien granted thereunder shall (except in accordance with its terms), in whole or
in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; any Obligor or
any other party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; except as permitted
under any Loan Document or as a result of a Secured Party's wilful misconduct or
gross negligence, any Lien securing any Obligation shall, in whole or in part,
cease to be (subject to Permitted Liens) a perfected first priority Lien; or,
except as permitted under any Loan Document or as a result of a Secured Party's
wilful misconduct or gross negligence, the Administrative Agent, for the benefit
of the Secured Parties,shall fail to have a valid, first priority pledge of at
least 80.5% of the issued and outstanding OSI Common Stock on a fully diluted
basis.
SECTION 8.1.11. Failure of Subordination. Unless otherwise waived or
consented to by the Secured Parties in writing, the subordination provisions
relating to any Subordinated Debt (the "Subordination Provisions") shall fail to
be enforceable by the Secured Parties in accordance with the terms thereof or
the monetary Obligations shall fail to constitute "Senior Indebtedness" (or a
similar term) referring to the Obligations; or any Obligor shall, directly or
indirectly, disavow or contest in any manner (i) the effectiveness, validity or
enforceability of any of the Subordination Provisions, (ii) that the
Subordination Provisions exist for the benefit of the Secured Parties or (iii)
that all payments of principal of or premium and interest on the Subordinated
Debt, or realized from the liquidation of any property of any Obligor, shall be
subject to any of such Subordination Provisions.
SECTION 8.1.12. Redemption. Any event shall occur which, under the
terms of any Subordinated Debt Document, shall require the Borrower or any of
its Subsidiaries to purchase, redeem or otherwise acquire or offer to purchase,
redeem or otherwise acquire all or any portion of the principal amount of any
such Subordinated Debt prior to its final stated maturity date.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 8.1.9 with respect to the Borrower shall
occur, the Commitments (if not theretofore terminated) shall automatically
terminate and the outstanding principal amount of all outstanding Loans and all
other Obligations (including Reimbursement Obligations) shall automatically be
and become immediately due and payable, without notice or demand to any Person,
and each Obligor shall automatically and immediately be obligated to Cash
Collateralize all Letter of Credit Outstandings.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of Section
8.1.9 with respect to the Borrower) shall occur for any reason, whether
voluntary or involuntary, and be continuing, the Administrative Agent, upon the
direction of the Required Lenders, shall by notice to the Borrower declare all
or any portion of the outstanding principal amount of the Loans and other
Obligations (including Reimbursement Obligations) to be due and payable and/or
the Commitments (if not theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and other Obligations which shall be so
declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate and the Borrower shall automatically and immediately
be obligated to Cash Collateralize all Letter of Credit Outstandings.
ARTICLE IX
THE AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints DLJ as its Syndication
Agent and Fleet as its Administrative Agent under and for purposes of each Loan
Document. Each Lender authorizes each Managing Agent to act on behalf of such
Lender under each Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the
Managing Agents (with respect to which each Managing Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise advised by
counsel in order to avoid contravention of applicable law), to exercise such
powers hereunder and thereunder as are specifically delegated to or required of
such Managing Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. Each Lender hereby indemnifies (which
indemnity shall survive any termination of this Agreement) each Managing Agent,
pro rata according to such Lender's proportionate Total Exposure Amount, from
and against any and all liabilities, obligations, losses, damages, claims, costs
or expenses of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against, such Managing Agent in any way relating to
or arising out of any Loan Document, including reasonable attorneys' fees, and
as to which such Managing Agent is not reimbursed by the Borrower; provided,
however, that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs or expenses which are
determined by a court of competent jurisdiction in a final proceeding to have
resulted from such Managing Agent's gross negligence or wilful misconduct.
Neither Managing Agent shall be required to take any action under any Loan
Document, or to prosecute or defend any suit in respect of any Loan Document,
unless it is indemnified hereunder to its satisfaction. If any indemnity in
favor of either Managing Agent shall be or become, in such Managing Agent's
determination, inadequate, such Managing Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent shall
have been notified in writing by any Lender by 3:00 p.m. on the Business Day
prior to a Borrowing that such Lender will not make available the amount which
would constitute its Percentage of such Borrowing on the date specified
therefor, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If and to the
extent that such Lender shall not have made such amount available to the
Administrative Agent, such Lender and the Borrower severally agree to repay the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date the Administrative Agent made such
amount available to the Borrower to the date such amount is repaid to the
Administrative Agent, at the interest rate applicable at the time to Loans
comprising such Borrowing (in the case of the Borrower) and (in the case of a
Lender), at the Federal Funds Effective Rate for the first two Business Days
after which such amount has not been repaid, and thereafter at the interest rate
applicable to Loans comprising such Borrowing.
SECTION 9.3. Exculpation; Notice of Default. (a) Neither Managing Agent
nor any Issuer nor any of their respective directors, officers, employees or
agents shall be liable to any Lender for any action taken or omitted to be taken
by it under any Loan Document, or in connection herewith or therewith, except
for its own wilful misconduct or gross negligence, nor responsible for any
recitals or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of any Loan Document, nor for the
creation, perfection or priority of any Liens purported to be created by any of
the Loan Documents, or the validity, genuineness, enforceability, existence,
value or sufficiency of any collateral security, nor to make any inquiry
respecting the performance by any Obligor of its Obligations. Any such inquiry
which may be made by either Managing Agent or any Issuer shall not obligate it
to make any further inquiry or to take any action. The Administrative Agent and
each Issuer shall be entitled to rely upon advice of counsel concerning legal
matters and upon any notice, consent, certificate, statement or writing which
the Administrative Agent believes to be genuine and to have been presented by a
proper Person.
(b) Neither Managing Agent, the Swing Line Lender nor any Issuer shall be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless any such Person has received written notice from (A) in
the case of the Administrative Agent, the Swing Line Lender or any Issuer, a
Lender or the Borrower referring to this Agreement describing such Default or
Event of Default and stating that such notice is a "notice of default" and (B)
in the case of the Syndication Agent, from the Administrative Agent as set forth
in the immediately following sentence. In the event that the Administrative
Agent receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Syndication Agent and the Lenders.
SECTION 9.4. Successors. The Syndication Agent may resign as such upon
one Business Day's notice to the Borrower and the Administrative Agent. The
Administrative Agent may resign as such at any time upon at least 30 days' prior
notice to the Borrower and all Lenders. If the Administrative Agent at any time
shall resign, the Required Lenders may, with the consent of the Borrower (not to
be unreasonably withheld), appoint another Lender as a successor Administrative
Agent which shall thereupon become the Administrative Agent hereunder. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall be entitled to receive from the
retiring Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations under the Loan Documents. After
any retiring Administrative Agent's resignation hereunder as the Administrative
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Administrative Agent
under the Loan Documents, and Sections 10.3 and 10.4 shall continue to inure to
its benefit.
SECTION 9.5. Credit Extensions by each Managing Agent and each Issuer.
Each Managing Agent and each Issuer, in its individual capacity as a Lender
shall have the same rights and powers with respect to (x)(i) in the case of a
Managing Agent, the Credit Extensions made by it or any of its Affiliates and
(ii) in the case of an Issuer, the Loans made by it or any of its Affiliates,
and (y) the Notes held by it or any of its Affiliates as any other Lender and
may exercise the same as if it were not a Managing Agent or Issuer. Each
Managing Agent, each Issuer and each of their respective Affiliates, in each
case, in its individual capacity, may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if such Managing Agent or Issuer were not a
Managing Agent or Issuer hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Managing Agent and each other Lender, and based on such
Lender's review of the financial information of the Borrower and its
Subsidiaries, the Loan Documents (the terms and provisions of which being
satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitments. Each Lender also acknowledges that it will,
independently of each Managing Agent and each other Lender, and based on such
other documents, information and investigations as it shall deem appropriate at
any time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under the
Loan Documents.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of the
Loan Documents (unless concurrently delivered to the Lenders by the Borrower).
The Administrative Agent will distribute to each Lender each document or
instrument received for its account and copies of all other communications
received by the Administrative Agent from the Borrower for distribution to the
Lenders by the Administrative Agent in accordance with the terms of the Loan
Documents.
SECTION 9.8. Reliance by Managing Agents and Issuers. Each Managing Agent
and each Issuer shall be entitled to rely upon any certification, notice or
other communication (including any thereof by telephone, telecopy, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper Person, and upon advice and statements of legal
counsel, independent accountants and other experts selected by such Managing
Agent or such Issuer, as the case may be. As to any matters not expressly
provided for by the Loan Documents, each Managing Agent and each Issuer shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of the Lenders as is required in such circumstance, and such instructions of
such Lenders and any action taken or failure to act pursuant thereto shall be
binding on all Secured Parties. For purposes of applying amounts in accordance
with this Section, each Managing Agent shall be entitled to rely upon any
Secured Party that has entered into a Rate Protection Agreement with any Obligor
for a determination (which such Secured Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding
Obligations owed to such Secured Party under any Rate Protection Agreement.
Unless it has actual knowledge evidenced by way of written notice from any such
Secured Party and the Borrower to the contrary, each Managing Agent, in acting
in such capacity under the Loan Documents, shall be entitled to assume that no
Rate Protection Agreements or Obligations in respect thereof are in existence or
outstanding between any Secured Party and any Obligor.
SECTION 9.9. The Managing Agents and the Issuers. Notwithstanding
anything else to the contrary contained in any Loan Document, the Managing
Agents and the Issuers, in their respective capacities as such, shall have no
duties or responsibilities under any Loan Document nor any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into any Loan
Document or otherwise exist against either Managing Agent or any Issuer, as
applicable, in such capacity, except as are explicitly set forth in any such
Loan Document.
SECTION 9.10. Documentation Agent. The Lender identified on the signature
pages of this Agreement as the "Documentation Agent" shall not have any right,
power, obligation, liability, responsibility or duty under this Agreement (or
any other Loan Document) other than those applicable to all Lenders as such.
Without limiting the foregoing, the Lender so identified as the "Documentation
Agent" shall not have or be deemed to have any fiduciary relationship with any
other Lender. Each Lender acknowledges that it has not relied, and will not
rely, on the Lender so identified as the "Documentation Agent" in deciding to
enter into this Agreement and each other Loan Document to which it is a party or
in taking or not taking action hereunder or thereunder.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of each Loan
Document (other than Rate Protection Agreements, under which amendments,
modifications and waivers may be effected by the Applicable Obligor and
Applicable Lender, each a party thereto) may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, that
no such amendment, modification or waiver shall:
(a) modify this Section without the consent of all Lenders;
(b) increase the aggregate amount of any Credit Extensions required
to be made by a Lender pursuant to its Commitments, extend any final
Commitment Termination Date or reduce any fees described in Article III
payable to any Lender without the consent of such Lender;
(c) extend any scheduled date of payment of principal for any
Lender's Loan, or reduce the principal amount of, rate of interest or fees
on any Loan or Reimbursement Obligations (which shall in each case include
the conversion of all or any part of the Obligations into equity of any
Obligor), or extend the scheduled date on which interest or fees are
payable in respect of such Loan or Reimbursement Obligation, in each case,
without the consent of the Lender which has made such Loan or, in the case
of a Reimbursement Obligation, the applicable Issuer owed, and those
Lenders participating in, such Reimbursement Obligation (it being
understood and agreed, however, that any vote to rescind any acceleration
made pursuant to Sections 8.2 and 8.3 of amounts owing with respect to the
Loans and other Obligations shall only require the vote of the Required
Lenders);
(d) reduce the percentage set forth in the definition of "Required
Lenders" or modify any requirement hereunder that any particular action be
taken by all Lenders without the consent of all Lenders;
(e) except as otherwise expressly provided in a Loan Document
(including the sale or transfer of Accounts and other related assets in
accordance with the Permitted Receivables Transaction), release (i) the
Borrower from its Obligations under the Loan Documents or any Subsidiary
Guarantor from its Obligations under the Subsidiary Guaranty, as
applicable (other than in connection with a Disposition of all or
substantially all of the Capital Securities of a Subsidiary Guarantor in a
transaction permitted by Section 7.2.10 or 7.2.11) or (ii) all or
substantially all of the collateral under the Loan Documents, in each case
without the consent of all Lenders;
(f) (i) amend, modify or waive clause (b) of Section 3.1.1 or (ii)
have the effect (either immediately or at some later time) of enabling the
Borrower to satisfy a condition precedent to the making of a Revolving
Loan or the issuance of a Letter of Credit unless such amendment,
modification or waiver shall have been consented to by the Lenders holding
a majority of the aggregate amount of the then outstanding Revolving Loan
Commitments.
(g) change any of the terms of Section 2.3.2 without the consent of
the Swing Line Lender;
(h) amend, modify or waive the provisions of clause (b) of Section
3.1.2 or effect any amendment, modification or waiver that by its terms
adversely affects the rights of Lenders participating in any Tranche
differently from those of Lenders participating in other Tranches, unless
such amendment, modification or waiver shall have been consented to by the
holders of at least a majority of the aggregate amount of Loans
outstanding under the Tranche or Tranches affected by such modification,
or, in the case of a modification affecting the Revolving Loan
Commitments, the Lenders holding a majority of the aggregate amount of the
then outstanding Revolving Loan Commitments;
(i) affect adversely the interests, rights or obligations of either
Managing Agent (in its capacity as a Managing Agent) or any Issuer, unless
consented to by such Managing Agent or such Issuer, as the case may be;
(j) amend, modify or waive the provisions of Section 9.10, without
the consent of Harris Trust and Savings Bank, so long as such financial
institution is a Lender hereunder; or
(k) with respect to any LIBO Rate Loan, amend, waive or modify the
requirement that the Interest Period relative to any such Loan be one,
two, three or six months in duration, unless consented to by each Lender
making such Loan.
No failure or delay on the part of either Managing Agent, any Issuer or any
Lender in exercising any power or right under any Loan Document shall operate as
a waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on any Obligor in any case shall
entitle it to any notice or demand in similar or other circumstances. No waiver
or approval by either Managing Agent, any Issuer or any Lender under any Loan
Document shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
For purposes of this Section, the Syndication Agent, in coordination with
the Administrative Agent, shall have primary responsibility, together with the
Borrower, in the negotiation, preparation and documentation relating to any
amendment, modification or waiver under this Agreement, any other Loan Document
or any other agreement or document related hereto or thereto contemplated
pursuant to this Section.
SECTION 10.2. Notices; Time. All notices and other communications
provided under each Loan Document shall be in writing or by facsimile and
addressed, delivered or transmitted, if to the Borrower or either Managing
Agent, at its address or facsimile number set forth on Schedule II hereto, and
if to a Lender or Issuer, to the applicable Person at its address or facsimile
number set forth on Schedule II hereto or set forth in the Lender Assignment
Agreement pursuant to which such Lender became a Lender hereunder, or, in any
case, at such other address or facsimile number as may be designated by any such
party in a notice to the other parties. Any notice, if mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when the confirmation of transmission
thereof is received by the transmitter. Unless otherwise indicated, all
references to the time of a day in a Loan Document shall refer to Boston,
Massachusetts time.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay
on demand all reasonable fees and expenses of the Managing Agents (including the
fees and out-of-pocket expenses of Mayer, Brown & Platt, counsel to the
Syndication Agent and Lead Arranger, Palmer & Dodge LLP, counsel to the
Administrative Agent, and of local counsel, if any, who may be retained by or on
behalf of the Managing Agents) in connection with
(a) the negotiation, preparation, execution and delivery of each
Loan Document, including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to any Loan Document
as may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of any Loan
Document (including the Filing Statements) and all amendments,
supplements, amendment and restatements and other modifications to any
thereof, searches made following the Closing Date in jurisdictions where
Filing Statements (or other documents evidencing Liens in favor of the
Secured Parties) have been filed or recorded and any and all other
documents or instruments of further assurance required to be filed or
recorded, or refiled or rerecorded by the terms of any Loan Document; and
(c) the preparation and review of the form of any document or
instrument relevant to any Loan Document.
The Borrower further agrees to pay, and to save each Secured Party harmless from
all liability for, any stamp or other Taxes which may be payable in connection
with the execution or delivery of each Loan Document, the Credit Extensions or
the issuance of the Notes. The Borrower also agrees to reimburse each Secured
Party upon demand for all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and legal expenses of counsel to each Secured Party)
incurred by such Secured Party in connection with (x) the negotiation of any
restructuring or "work-out" with the Borrower, whether or not consummated, of
any Obligations and (y) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Secured Party, the Borrower hereby
indemnifies, exonerates and holds each Secured Party and each of their
respective officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements, whether incurred in
connection with actions between or among the parties hereto or the parties
hereto and third parties (collectively, the "Indemnified Liabilities"), incurred
by the Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Credit Extension,
including all Indemnified Liabilities arising in connection with the
Transaction;
(b) the entering into and performance of any Loan Document by any of
the Indemnified Parties (including any action brought by or on behalf of
the Borrower as the result of any determination by the Required Lenders
pursuant to Article V not to fund any Credit Extension, provided that any
such action is resolved in favor of such Indemnified Party);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by any Obligor or any Subsidiary
thereof of all or any portion of the Capital Securities or assets of any
Person, whether or not an Indemnified Party is party thereto;
(d) any investigation, litigation or proceeding (including any
threatened investigation, litigation or proceeding) related to any
environmental cleanup, audit, compliance or other matter relating to any
Obligor or any Subsidiary with respect to the protection of the
environment or relating to the Release by any Obligor or any Subsidiary
thereof of any Hazardous Material;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by any Obligor or any Subsidiary of any
Hazardous Material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental
Law), regardless of whether caused by, or within the control of, such
Obligor or such Subsidiary; or
(f) each Lender's Environmental Liability (the indemnification
herein shall survive repayment of the Obligations and any transfer of the
property of any Obligor or any of its Subsidiaries by foreclosure or by a
deed in lieu of foreclosure for any Lender's Environmental Liability,
regardless of whether caused by, or within the control of, such Obligor or
such Subsidiary);
except for Indemnified Liabilities arising for the account of a particular
Indemnified Party by reason of the relevant Indemnified Party's gross negligence
or wilful misconduct. Except with respect to such gross negligence or wilful
misconduct, each Obligor and its successors and assigns hereby waive, release
and agree not to make any claim or bring any cost recovery action against, any
Indemnified Party under CERCLA or any state equivalent, or any similar law now
existing or hereafter enacted. It is expressly understood and agreed that to the
extent that any Indemnified Party is strictly liable under any Environmental
Laws, each Obligor's obligation to such Indemnified Party under this indemnity
shall likewise be without regard to fault on the part of any Obligor with
respect to the violation or condition which results in liability of an
Indemnified Party. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, each Obligor agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under Sections
4.3,4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under
Section 9.1, shall in each case survive any assignment from one Lender to
another (in the case of Sections 10.3 and 10.4) and the occurrence of the
Termination Date. The representations and warranties made by each Obligor in
each Loan Document shall survive the execution and delivery of such Loan
Document.
SECTION 10.6. Severability. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 10.7. Headings. The various headings of each Loan Document are
inserted for convenience only and shall not affect the meaning or interpretation
of such Loan Document or any provisions thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be an original (whether such counterpart is originally executed
or an electronic copy of an original and each party hereto expressly waives its
rights to receive originally executed documents other than with respect to any
Notes)and all of which shall constitute together but one and the same agreement.
This Agreement shall become effective when counterparts hereof executed on
behalf of the Borrower, each Managing Agent and each Lender (or notice
thereof satisfactory to the Managing Agents) shall have been received by the
Managing Agents.
SECTION 10.9. Governing Law; Entire Agreement. EACH LOAN DOCUMENT
(OTHER THAN THE LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT) WILL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF CREDIT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN
SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL
STANDBY PRACTICES (ISP98--INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER
590 (THE "ISP RULES")) AND, AS TO MATTERS NOT GOVERNED BY THE ISP RULES, THE
INTERNAL LAWS OF THE STATE OF NEW YORK. The Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
thereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign or
transfer its rights or obligations hereunder without the consent of all of the
Lenders.
SECTION 10.11. Sale and Transfer of Credit Extensions; Participations in
Credit Extensions Notes. Each Lender may assign, or sell participations in, its
Loans, Letters of Credit and Commitments to one or more other Persons in
accordance with this the terms set forth below.
SECTION 10.11.1. Assignments. Any Lender (an "Assignor Lender"),
pursuant to a Lender Assignment Agreement,
(a) with the written consent of the Borrower, each Managing Agent
and, in the case of assignments of Revolving Loans and Letters of Credit,
the Issuers (which consent(s) (i) shall not be unreasonably delayed or
withheld and (ii) of the Borrower shall not be required upon the
occurrence and during the continuance of any Default or Event of Default),
may at any time assign and delegate to one or more commercial banks, other
financial institutions or funds that are regularly engaged in making,
purchasing or investing in loans or securities; and
(b) with written notice to the Borrower, each Managing Agent and, in
the case of assignments of Revolving Loans and Letters of Credit, the
Issuers (but without the consent of any such Person), may assign and
delegate to any of its Affiliates or Related Funds or to any other Lender
or any Affiliate or Related Fund of any other Lender;
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Assignor Lender's Loans
and Commitments (and in the case of any assignment of Revolving Loan
Commitments, related participations in Letters of Credit and Letter of Credit
Outstandings) (which assignment and delegation shall be, as among Revolving Loan
Commitments, Revolving Loans and participations in Letters of Credit and Letter
of Credit Outstandings, of a constant, and not a varying, percentage) is in a
minimum aggregate amount of (i) $2,500,000, in the case of Term Loans and Term
Loan Commitments, and $5,000,000, in the case of Revolving Loans and Revolving
Loan Commitments (provided, that (1) assignments that are made on the same day
to a Related Fund may be treated as a single assignment for purposes of the
minimum amount and (2) no minimum amount shall be required in the case of any
assignment between two Lenders so long as the Assignor Lender has an aggregate
amount of Loans and Commitments of at least $5,000,000 following such
assignment), unless the Borrower and the Administrative Agent otherwise consent
or (ii) the then remaining amount of such Assignor Lender's Loans and
Commitments; provided, however, that any such Assignee Lender will comply, if
applicable, with the provisions contained in Section 4.6 and each Obligor and
the Administrative Agent shall be entitled to continue to deal solely and
directly with such Assignor Lender in connection with the interests so assigned
and delegated to an Assignee Lender until
(A) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Lender, shall have been delivered to the Borrower and the
Administrative Agent by such Assignor Lender and such Assignee Lender;
(B) such Assignee Lender shall have executed and delivered to the
Borrower and each Managing Agent a Lender Assignment Agreement, accepted
by each Managing Agent;
(C) the processing fees described below shall have been paid; and
(D) the Administrative Agent shall have registered such assignment
and delegation in the Register pursuant to clause (b) of Section 2.7.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement and such assignment and delegation is registered pursuant
to clause (b) of Section 2.7, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Any Assignor Lender that shall have previously requested and
received any Note or Notes in respect of any Tranche to which any such
assignment applies shall, upon the acceptance by the Administrative Agent of the
applicable Lender Assignment Agreement, mark such Note or Notes "exchanged" and
deliver them to the Borrower (against, if the Assignor Lender has retained Loans
or Commitments with respect to the applicable Tranche and has requested
replacement Notes pursuant to clause (c) of Section 2.7, its receipt from the
Borrower of replacement Notes in the principal amount of the Loans and
Commitments of the applicable Tranche retained by it). Such Assignor Lender or
such Assignee Lender (unless the Assignor Lender or the Assignee Lender is DLJ
or one of its Affiliates) must also pay a processing fee to the Administrative
Agent upon delivery of any Lender Assignment Agreement in the amount of $3,500,
unless such assignment and delegation is by a Lender to its Affiliate or Related
Fund or if such assignment and delegation is by a Lender to a Federal Reserve
Bank, as provided below or is otherwise consented to by the Administrative
Agent. Any attempted assignment and delegation not made in accordance with this
Section shall be null and void. Nothing contained in this Section shall prevent
or prohibit any Lender from pledging its rights (but not its obligations to make
Loans or participate in Letters of Credit or Letter of Credit Outstandings)
under this Agreement and/or its Loans hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank and any
Lender that is a fund that invests in bank loans may pledge all or any portion
of its rights (but not its obligations to make Loans or participate in Letters
of Credit or Letter of Credit Outstandings) hereunder to any trustee or any
other holder or representative of holders of obligations owed or securities
issued by such fund as security for such obligations or securities. In the event
that S&P, Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in
the case of Lenders that are insurance companies (or Best's Insurance Reports,
if such insurance company is not rated by Insurance Watch Ratings Service))
shall, after the date that any Lender with a Commitment to make Revolving Loans
or participate in Letters of Credit or Letter of Credit Outstandings becomes a
Lender, downgrade the long-term certificate of deposit rating or long-term
senior unsecured debt rating of such Lender, and the resulting rating shall be
below BBB-, Baa3 or C (or BB, in the case of Lender that is an insurance company
(or B, in the case of an insurance company not rated by InsuranceWatch Ratings
Service)) respectively, then any Issuer or the Borrower shall have the right,
but not the obligation, upon notice to such Lender and the Administrative Agent,
to replace such Lender with an Assignee Lender in accordance with and subject to
the restrictions contained in this Section, and such Lender hereby agrees to
transfer and assign without recourse (in accordance with and subject to the
restrictions contained in this Section) all its interests, rights and
obligations in respect of its Revolving Loan Commitment under this Agreement to
such Assignee Lender; provided, however, that (i) no such assignment shall
conflict with any law, regulation or order of any Governmental Authority and
(ii) such Assignee Lender shall pay to such Lender in immediately available
funds on the date of such assignment the principal of and interest and fees (if
any) accrued to the date of payment on the Loans made, and Letters of Credit
participated in, by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
SECTION 10.11.2. Participations. Any Lender may sell to one or more
commercial banks or other Persons (each of such commercial banks and other
Persons being herein called a "Participant") participating interests in any of
the Loans, Commitments, or other interests of such Lender hereunder; provided,
however, that
(a) no participation contemplated in this Section shall relieve such
Lender from its Commitments or its other obligations under any Loan
Document;
(b) such Lender shall remain solely responsible for the performance
of its Commitments and such other obligations;
(c) each Obligor and each Managing Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under each Loan Document;
(d) no Participant, unless such Participant is an Affiliate of such
Lender or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action under any Loan Document, except
that such Lender may agree with any Participant that such Lender will not,
without such Participant's consent, take any actions of the type described
in clauses (a), (b), (c) or (f) of Section 10.1 with respect to
Obligations participated in by such Participant; and
(e) the Borrower shall not be required to pay any amount under this
Agreement that is greater than the amount which it would have been
required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 7.1.1, 10.3 and 10.4, shall be considered
a Lender. Each Participant shall only be indemnified for increased costs
pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender which
sold such participating interest to such Participant concurrently is entitled to
make, and does make, a claim on the Borrower for such increased costs. Any
Lender that sells a participating interest in any Loan, Commitment or other
interest to a Participant under this Section shall indemnify and hold harmless
the Borrower and the Administrative Agent from and against any Taxes, penalties,
interest or other costs or losses (including reasonable attorneys' fees and
expenses) incurred or payable by the Borrower or the Administrative Agent as a
result of the failure of the Borrower or the Administrative Agent to comply with
its obligations to deduct or withhold any Taxes from any payments made pursuant
to this Agreement to such Lender or the Administrative Agent, as the case may
be, which Taxes would not have been incurred or payable if such Participant had
been a Non-Domestic Lender that was entitled to deliver to the Borrower, the
Administrative Agent or such Lender, and did in fact so deliver, a duly
completed and valid Form W-8BEN or W-8ECI (or applicable successor form)
entitling such Participant to receive payments under this Agreement without
deduction or withholding of any United States federal Taxes.
Each Lender shall, as agent of the Borrower solely for the purpose of this
Section, record in book entries maintained by such Lender the name and the
amount of the participating interest of each Participant entitled to receive
payments in respect of any participating interests sold pursuant to this
Section.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude any Managing Agent, any Issuer or any other Lender from engaging
in any transaction, in addition to those contemplated by the Loan Documents,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.13. Independence of Covenants. All covenants contained in
this Agreement and each other Loan Document shall be given independent effect
such that, in the event 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 be
otherwise within the limitations of, another covenant shall not, unless
expressly so provided in such first covenant, avoid the occurrence of a Default
or an Event of Default if such action is taken or such condition exists.
SECTION 10.14. Confidentiality. (a) Subject to the provisions of clause
(b)of this Section, each Lender agrees that it will use its reasonable best
efforts not to disclose without the prior consent of the Borrower (other than to
its employees, auditors, advisors or counsel or to another Lender if the Lender
or such Lender's holding or parent company in its sole discretion determines
that any such party should have access to such information, provided such
Persons shall be subject to the provisions of this Section to the same extent as
such Lender) any information which is now or in the future furnished pursuant to
this Agreement or any other Loan Document, provided that any Lender may disclose
any such information (i) as has become generally available to the public other
than by virtue of a breach of this clause by the respective Lender or any other
Person to whom such Lender has provided such information as permitted by this
Section, (ii) as may be required or appropriate in any report, statement or
testimony submitted to any municipal, state or Federal regulatory body having or
claiming to have jurisdiction over such Lender or to the Federal Reserve Board
or the Federal Deposit Insurance Corporation or similar organizations (whether
in the United States or elsewhere) or their successors, (iii) as may be required
or appropriate in respect to any summons or subpoena or in connection with any
litigation, (iv) in order to comply with any law, order, regulation or ruling
applicable to such Lender, (v) to either Managing Agent, (vi) to any prospective
or actual transferee or participant in connection with any contemplated transfer
or participation of any of the Notes or Commitments or any interest therein by
such Lender, provided that such prospective transferee agrees to be bound by the
confidentiality provisions contained in this Section, (vii) to any direct or
indirect contractual counterparty in swap agreements or such contractual
counterparty's professional advisor (so long as such contractual counterparty or
professional advisor to such contractual counterparty agrees to be bound by the
provisions of this Section) and (viii) to the NAIC or any similar organization
or any nationally recognized rating agency that requires access to information
about a Lender's investment portfolio in connection with ratings issued with
respect to such Lender.
(b) The Borrower hereby acknowledges and agrees that each Lender may share
with any of its Affiliates, and such Affiliates may share with such Lender, any
information related to the Borrower or any of its Subsidiaries, provided such
Persons shall be subject to the provisions of this Section to the same extent as
such Lender.
SECTION 10.15. Forum Selection and Consent to Jurisdiction. ANY
LITIGATIONBASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE MANAGING AGENTS, THE LENDERS, THE ISSUER OR
THE BORROWER IN CONNECTION HEREWITH OR THEREWITH MAY BE BROUGHT AND MAINTAINED
IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
MANAGING AGENTS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL
OR OTHER PROPERTY MAY BE FOUND. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION
10.2. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER
HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY
IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.
SECTION 10.16. Waiver of Jury Trial. EACH MANAGING AGENT, EACH LENDER, THE
ISSUER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, EACH LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF SUCH MANAGING AGENT,
SUCH LENDER, THE ISSUER OR THE BORROWER IN CONNECTION THEREWITH. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH
MANAGING AGENT, EACH LENDER AND THE ISSUER ENTERING INTO THE LOAN DOCUMENTS.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of December
, 1999.
- ---
OUTSOURCING SOLUTIONS INC.
By:/s/ Eric R. Fencl
-----------------------------------
Title: V.P./General Counsel
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent
By: /s/ James L. Paradise
----------------------------------
Title: Senior Vice President
FLEET NATIONAL BANK,
as the Administrative Agent
By: /s/
----------------------------------
Title: Managing Director
HARRIS TRUST AND SAVINGS BANK,
as the Documentation Agent
By: /s/
----------------------------------
Title: Vice President
<PAGE>
LENDERS:
DLJ CAPITAL FUNDING, INC.
By: /s/ James L. Paradise
----------------------------------
Title: Senior Vice President
FLEET NATIONAL BANK
By: /s/
----------------------------------
Title: Director
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By: /s/
----------------------------------
Title: Vice President
<PAGE>
BANK OF AMERICA
By: /s/
----------------------------------
Title: Vice President
<PAGE>
BANK ONE, NA (FORMERLY KNOWN AS THE
FIRST NATIONAL BANK OF CHICAGO)
By: /s/
----------------------------------
Title: Senior Vice President
<PAGE>
THE CHASE MANHATTAN BANK
By: /s/ William J. Caggiano
----------------------------------
Title: Managing Director
<PAGE>
DRESDNER BANK AG, NEW YORK & GRAND
CAYMAN BRANCHES
By: /s/ John W. Sweeney
----------------------------------
Title: Vice President
By: /s/ John R. Morrison
----------------------------------
Title: Vice President
<PAGE>
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Andrew G. Pollack
----------------------------------
Title: Corporate Banking Officer
Leveraged Finance
<PAGE>
WACHOVIA BANK, N.A.
By: /s/
----------------------------------
Title: Senior Vice President
<PAGE>
WELLS FARGO BANK, N.A.
By: /s/
----------------------------------
Title: Vice President
SUBSIDIARIES OF THE REGISTRANT Exhibit 21
The following is a list of the Company's subsidiaries and jurisdictions of
incorporation or organization as of March 24, 2000, except for unnamed
subsidiaries which, considered in the aggregate as a single subsidiary, would
not constitute a significant subsidiary.
Jurisdiction of
Incorporation
Name of Subsidiary or Organization
- ----------------------- ---------------
OSI Portfolio Services, Inc. Delaware
Perimeter Credit, L.L.C. Delaware
Gulf State Credit, L.L.C. Delaware
OSI Support Services, Inc. Wisconsin
OSI Collection Services, Inc. Delaware
University Accounting Service, Inc. Wisconsin
Asset Recovery & Management Corp. Wisconsin
Indiana Mutual Credit Association, Inc. Indiana
Jennifer Loomis & Associates, Inc. Arizona
Qualink, Inc. Wisconsin
Grable, Greiner & Wolff, Inc. Wisconsin
Professional Recoveries Inc. Wisconsin
Payco American International Corp. Wisconsin
Federal Collection Bureau, S.A. de C.V. Mexico
North Shore Agency, Inc. New York
North Shore Agency Collection Corporation, Canada Canada
The Union Corporation Delaware
OSI Outsourcing Services, Inc. Delaware
Transworld Systems, Inc. California
OSI SPE LLC Delaware
<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, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001027574
<NAME> Outsourcing Solutions Inc. and Subsidiaries
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 28,580
<SECURITIES> 0
<RECEIVABLES> 52,611
<ALLOWANCES> 529
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 84,260
<DEPRECIATION> 40,613
<TOTAL-ASSETS> 624,712
<CURRENT-LIABILITIES> 0
<BONDS> 0
85,716
0
<COMMON> 95
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 624,712
<SALES> 0
<TOTAL-REVENUES> 504,425
<CGS> 0
<TOTAL-COSTS> 491,150
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,265
<INCOME-PRETAX> (38,990)
<INCOME-TAX> 759
<INCOME-CONTINUING> (39,749)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,208)
<CHANGES> 0
<NET-INCOME> (43,957)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
