<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended JUNE 30, 1999.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ____________ to _____________.
Commission File Number: 0-14315
AEGIS COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2050538
(State of Incorporation) (I.R.S. Employer Identification No.)
7880 BENT BRANCH DRIVE, SUITE 150, IRVING, TEXAS 75063
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (972) 830-1800
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
TITLE OF EACH CLASS NUMBER OF SHARES OUTSTANDING
ON AUGUST 13, 1999
COMMON STOCK $.01 PAR VALUE 52,492,616
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1998 and June 30, 1999 (unaudited).............................. 3-4
Unaudited Consolidated Statements of Operations
Three and Six Months Ended June 30, 1998 and June 30, 1999..................... 5
Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and June 30, 1999............................... 6
Notes to Unaudited Consolidated Financial Statements.............................. 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................... 11-20
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......................... 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................................................22
Item 6. Exhibits and Reports on Form 8-K.................................................... 22
SIGNATURES.................................................................................................. 23
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEGIS COMMUNICATIONS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,701 $ 829
Accounts receivable, less allowance for doubtful accounts 49,585 50,159
Notes receivable -- related parties 2,185 2,212
Current deferred tax assets 884 884
Prepaid expenses and other current assets 1,662 3,006
---------------- ----------------
Total current assets 65,017 57,090
Property and equipment, net of accumulated depreciation
of $19,924 in 1998 and $25,843 in 1999 35,277 36,473
Goodwill, net of accumulated amortization of $4,523 in
1998 and $4,208 in 1999 71,325 49,457
Deferred tax assets 6,502 10,485
Deferred financing costs, net 2,099 1,946
Other assets 324 433
---------------- ----------------
$ 180,544 $ 155,883
================ ================
</TABLE>
See accompanying notes.
3
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
---------------- ------------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Current portions of long-term obligations $ 2,758 $ 2,540
Accounts payable 7,059 6,582
Accrued compensation expense 6,414 4,212
Accrued interest expense 1,263 1,361
Other accrued expenses 9,417 11,551
Other current liabilities 2,225 1,425
---------------- ------------------
Total current liabilities 29,136 27,671
Revolving line of credit 28,100 30,000
Long-term obligations, net of current portions 36,829 33,039
Subordinated indebtedness due to affiliates 14,651 9,238
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; 29,778, $.36 cumulative Series B shares
issued and outstanding in 1998 and 1999; 77,300, 15% - 2
cumulative Series D shares issued and outstanding at
June 30, 1999; and, 44,018, 15% cumulative Series E
shares issued and outstanding at June 30, 1999
Common stock, $.01 par value, 100,000,000 shares authorized;
52,311,450 and 52,434,206 shares issued and outstanding
at December 31, 1998 and June 30, 1999, respectively 523 524
Additional paid-in capital 78,167 90,430
Treasury shares, at cost (1,421) (1,321)
Cumulative translation adjustment 34 52
Retained earnings (deficit) (5,475) (33,752)
---------------- ------------------
Total shareholders' equity 71,828 55,935
---------------- ------------------
$ 180,544 $ 155,883
================ ==================
</TABLE>
See accompanying notes.
4
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 46,843 $ 58,023 $ 89,056 $ 119,839
Cost of services, excluding depreciation
and amortization shown below 30,561 43,136 57,631 86,726
------------ ------------ ------------ ------------
Gross profit 16,282 14,887 31,425 33,113
Selling, general and administrative expenses 11,710 16,246 23,460 33,178
Depreciation 1,975 3,066 3,781 6,206
Acquisition goodwill amortization 646 596 1,217 1,469
Asset impairment charge - - - 20,399
Restructuring and other non-recurring charges - - - 541
------------ ------------ ------------ ------------
Total operating expenses 14,331 19,908 28,458 61,793
------------ ------------ ------------ ------------
Operating income (loss) 1,951 (5,021) 2,967 (28,680)
Interest expense, net 1,213 1,838 2,429 3,580
------------ ------------ ------------ ------------
Income (loss) before income taxes 738 (6,859) 538 (32,260)
Income tax expense (benefit) 397 (2,411) 657 (3,982)
------------ ------------ ------------ ------------
Net income (loss) $ 341 $ (4,448) $ (119) $ (28,278)
============ ============ ============ ============
Basic and diluted earnings (loss) per share $ 0.01 $ (0.08) $ - $ (0.54)
============ ============ ============ ============
Weighted average shares outstanding:
Basic 29,869 52,403 29,869 52,358
Diluted 34,246 52,403 29,869 52,358
</TABLE>
See accompanying notes.
5
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (119) $ (28,278)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 4,998 7,675
Deferred income taxes - (3,982)
Asset impairment charge - 20,399
Other 1,385 24
Changes in operating assets and liabilities:
Accounts receivable (6,521) (574)
Notes receivable - (27)
Other current assets 193 (1,344)
Other assets (718) (124)
Accounts payable 6,628 (477)
Accrued liabilities 1,864 30
Other current liabilities (1,489) (800)
-------------- --------------
Net cash provided by (used in) operating activities 6,221 (7,477)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,616) (7,115)
-------------- --------------
Net cash used in investing activities (5,616) (7,115)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit, net 3,000 1,900
Proceeds from affiliated debt 2,063 6,719
Principal payments on long-term debt (1,180) (2,921)
Payments on capital lease obligations (477) (1,088)
Payments on affiliated debt (2,066) -
Proceeds from issuance of common stock - 100
Proceeds from exercise of stock options - 129
Deferred financing costs (20) (119)
-------------- --------------
Net cash provided by (used in) financing activities 1,320 4,720
Net decrease in cash and cash equivalents 1,925 (9,872)
Cash and cash equivalents at beginning of period 5,288 10,701
-------------- --------------
Cash and cash equivalents at end of period $ 7,213 $ 829
============== ==============
SUPPLEMENTAL INFORMATION ON NON-CASH TRANSACTIONS:
Conversion of affiliated debt to preferred stock $ - $ 12,132
</TABLE>
See accompanying notes.
6
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE NOTED)
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unconsolidated financial statements of Aegis
Communications Group, Inc. and its subsidiaries (the "Company") for the three
and six month periods ended June 30, 1998 and 1999 have been prepared in
accordance with generally accepted accounting principles. Significant accounting
policies followed by the Company were disclosed in the notes to the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
2. THE MERGER
On July 9, 1998, Aegis, formerly known as ATC Communications Group,
Inc. ("ATC"), completed the acquisition of IQI, Inc., a New York corporation
("IQI"). The acquisition was effected through the merger (the "Merger") of ATC
Merger Sub, Inc., a New York corporation and wholly-owned subsidiary of the ATC
("Sub"), with and into IQI pursuant to an Agreement and Plan of Merger dated as
of April 7, 1998 (the "Merger Agreement") by and between ATC, Sub and IQI.
Pursuant to the Merger Agreement, each former holder of common stock,
$.001 par value, of IQI ("IQI Common Stock") received, in exchange for each such
share, 9.7513 shares of the common stock, par value $0.01 per share, of the
Company ("ATC Common Stock"). As a result of the Merger, ATC issued
approximately 34.2 million shares of ATC Common Stock and Common Stock
equivalents to holders of IQI Common Stock and IQI stock options and warrants in
a tax-free exchange. The acquisition has been accounted for as a reverse
purchase, meaning that for accounting purposes, IQI is the surviving corporation
and is treated as having acquired ATC in a purchase accounting transaction.
Accordingly, the pre-Merger consolidated financial information reported is that
of IQI. Effective upon the Merger, the Company formally changed its name to
Aegis Communications Group, Inc. and its Nasdaq National Market System symbol to
"AGIS".
7
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE NOTED)
The following unaudited condensed consolidated pro forma statements of
operations data present the consolidated results of operations of the Company as
if the Merger had occurred on January 1, 1998 and are not necessarily indicative
of what would have occurred had the Merger been completed as of that date or of
the results which may occur in the future:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1998 1999 1998 1999
-------------- -------------- -------------- -------------
(PRO FORMA) (PRO FORMA)
<S> <C> <C> <C> <C>
Total revenues $ 73,663 $ 58,023 $ 137,001 $ 119,839
Cost of services, excluding depreciation
and amortization shown below 49,532 43,136 92,336 86,726
-------------- -------------- -------------- -------------
Gross profit 24,131 14,887 44,665 33,113
Selling, general and administrative expenses 17,996 16,246 35,230 33,178
Depreciation 3,084 3,066 5,960 6,206
Acquisition goodwill amortization 873 596 1,746 1,469
Asset impairment charge - - - 20,399
Restructuring and other non-recurring charges - - - 541
-------------- -------------- -------------- -------------
Total operating expenses 21,953 19,908 42,936 61,793
-------------- -------------- -------------- -------------
Operating loss 2,178 (5,021) 1,729 (28,680)
Interest expense, net 1,560 1,838 3,120 3,580
Litigation settlement 1,900 - 1,900 -
-------------- -------------- -------------- -------------
Loss before income taxes (1,282) (6,859) (3,291) (32,260)
Income tax benefit (145) (2,411) (550) (3,982)
-------------- -------------- -------------- -------------
Net loss $ (1,137) $ (4,448) $ (2,741) $ (28,278)
============== ============== ============== =============
Pro forma net loss per share -- basic and diluted $ (0.02) $ (0.08) $ (0.05) $ (0.54)
============== ============== ============== =============
Weighted average shares outstanding 51,600 52,403 51,474 52,358
</TABLE>
Excluding an asset impairment charge, and restructuring and other non-recurring
charges, operating loss, net loss and net loss per share for the six months
ended June 30, 1999 were $(7,740), $(7,318) and $(0.14), respectively.
8
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE NOTED)
3. RESTRUCTURING AND OTHER NON-RECURRING CHARGES
On July 29, 1998, the Company announced that it would record pre-tax
restructuring charges of $13,000 related to the Merger. Current and future
expenses related to the restructuring decision which meet the specific
generally accepted accounting principles ("GAAP") criterion for accrual have
been referred to herein as "restructuring" charges, and a restructuring
accrual has been recorded to the extent the related amounts have not been
paid. Expenses related to the restructuring decision which do not meet the
specific GAAP criterion for accrual have been referred to herein as "other"
charges. "Other" charges have not been accrued, but are recognized as the
related expenses are incurred. Accordingly, the Company recorded pre-tax
charges of approximately $8,395 ($5,247, net of taxes) in the year ended
December 31, 1998 and approximately $541 ($330, net of taxes) in the quarter
ended March 31, 1999, as a part of the total restructuring. These charges are
primarily attributable to one-time write-offs of redundant hardware and
software, severance costs and the consolidation of certain administrative
functions including costs to relocate offices and employees. The Company does
not anticipate recognizing additional Merger-related restructuring charges in
1999 and none were recorded in the quarter ended June 30, 1999.
4. ASSET IMPAIRMENT CHARGE
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"), which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the estimated future
cash flows (undiscounted and without interest charges) estimated to be generated
by those assets are less than the assets' carrying value. SFAS No. 121 also
requires that when a group of assets being tested for impairment was acquired as
part of a business combination that was accounted for using the purchase method
of accounting, any goodwill that arose as part of the transaction must be
included as part of the asset grouping. In accordance with SFAS No. 121, the
Company reviews long-lived assets whenever events or changes in facts and
circumstances indicate that the carrying value of the assets may not be
recoverable. As a result of the performance of the Company's Elrick & Lavidge
("E&L") marketing research division since its acquisition (in a purchase
accounting transaction) by IQI in July 1997, the Company has performed an
analysis (based on E&L's estimated future cash flows) of the carrying value of
the goodwill associated with the purchase of E&L. As a result of this
evaluation, it was determined that the carrying value of the goodwill associated
with the purchase of E&L has been impaired. Accordingly, in the quarter ended
March 31, 1999, the Company adjusted the carrying value of E&L's long-lived
assets to their fair value resulting in a non-cash asset impairment charge of
$20.4 million, which reduced the amount of goodwill on the Company's balance
sheet. This reduction is expected to result in a decrease in the Company's
goodwill amortization expense of approximately $1.1 million annually.
9
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE NOTED)
5. SEGMENTS
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company classifies its operations into
two segments, teleservices and marketing research, which are managed separately
because each provides different services. The accounting policies of the
operating segments are the same as described in the summary of significant
accounting policies disclosed in the notes to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. The teleservices segment provides large corporations
with outsourced inbound and outbound call handling services including customer
service, help desk, customer acquisition and retention, multilingual
communications programs, facilities management, order provisioning, and database
management. The marketing research segment provides its clients, representing a
broad range of industries, with customized marketing research services including
customer satisfaction studies, quantitative and qualitative research, new
product development, data management and field marketing services such as
mystery shopping. Business segment information is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Teleservices $ 38,891 $ 52,070 $ 73,085 $ 108,179
Marketing research services 7,952 5,953 15,971 11,660
------------- ------------- ------------- -------------
Total $ 46,843 $ 58,023 $ 89,056 $ 119,839
============= ============= ============= =============
OPERATING INCOME (LOSS):
Teleservices $ 1,514 $ (4,473) $ 2,017 $ (6,658)
Marketing research services 437 (548) 950 (1,082)
Asset impairment charge - - - (20,399)
Restructuring and other charges - - - (541)
------------- ------------- ------------- -------------
Total $ 1,951 $ (5,021) $ 2,967 $ (28,680)
============= ============= ============= =============
DEPRECIATION AND AMORTIZATION:
Teleservices $ 1,812 $ 2,911 $ 3,419 $ 5,880
Marketing research services 163 155 362 326
Acquisition goodwill amortization 646 596 1,217 1,469
------------- ------------- ------------- -------------
Total $ 2,621 $ 3,662 $ 4,998 $ 7,675
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
-----------------------------
1998 1999
------------- -------------
<S> <C> <C>
TOTAL ASSETS:
Teleservices $ 96,166 $ 140,615
Marketing research services 15,345 15,268
------------- -------------
Total $ 111,511 $ 155,883
============= =============
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Merger has been accounted for as a reverse purchase, meaning
that for accounting purposes, IQI is the surviving corporation and is treated
as having acquired ATC in a purchase accounting transaction. Reported
financial results reflect the Merger and are those of IQI for the periods
ended June 30, 1998 and of the combined company on a purchase accounting
basis for the periods ended June 30, 1999. See "Notes to Unaudited
Consolidated Financial Statements - 2. The Merger."
The accompanying consolidated financial statements, in the opinion of
the Company's management, contain all material, normal and recurring adjustments
necessary to present accurately the consolidated financial condition of the
Company and the consolidated results of its operations for the periods ended
June 30, 1999. The consolidated results of operations for the periods reported
are not necessarily indicative of the results to be experienced for the entire
current year.
RESULTS OF OPERATIONS
The following table sets forth certain statements of operations data as
a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of services, excluding depreciation
and amortization shown below 65.2% 74.3% 64.7% 72.4%
------------ ------------ ------------ ------------
Gross profit 34.8% 25.7% 35.3% 27.6%
Selling, general and administrative expenses 25.0% 28.0% 26.3% 27.7%
Depreciation 4.2% 5.3% 4.2% 5.2%
Acquisition goodwill amortization 1.4% 1.0% 1.4% 1.2%
Asset impairment charge - - - 17.0%
Restructuring and other non-recurring charges - - - 0.5%
------------ ------------ ------------ ------------
Total operating expenses 30.6% 34.3% 32.0% 51.6%
------------ ------------ ------------ ------------
Operating income (loss) 4.2% (8.7%) 3.3% (23.9%)
Interest expense, net 2.6% 3.2% 2.7% 3.0%
------------ ------------ ------------ ------------
Income (loss) before income taxes 1.6% (11.8%) 0.6% (26.9%)
Income tax expense (benefit) 0.8% (4.2%) 0.7% (3.3%)
------------ ------------ ------------ ------------
Net income (loss) 0.7% (7.7%) (0.1%) (23.6%)
============ ============ ============ ============
</TABLE>
The Company experienced a net loss of $4.4 million, or 7.7% of
revenues, for the quarter ended June 30, 1999 as compared to net income of $0.1
million, or 0.7% of revenues, (a net loss of $1.1 million, or 1.5% of revenues,
on a pro forma basis) in the corresponding period in 1998.
11
<PAGE>
Revenues generated during the quarter increased approximately 24% to
$58.0 million from $46.8 million in the second quarter a year ago. The net
loss for the quarter was $4.4 million, or $0.08 per share, as compared to net
income of $0.3 million, or $.01 per share, in the previous year quarter.
Revenues increased $30.8 million, or approximately 35%, to $119.8 million
during the six months ended June 30, 1999 as compared to revenues of $89.0
million generated in the prior year period. Including a non-cash asset
impairment charge of $20.4 million, or $0.39 per share, and restructuring and
other non-recurring charges of $0.5 million ($0.3 million, net of taxes, or
$0.01 per share), the Company experienced a net loss of $28.3 million, or
$0.54 per share, for the six months ended June 30, 1999 as compared to a net
loss of $0.1 million, or nil per share, in the prior year period. Excluding
these charges, the net loss for the six month period of 1999 was
approximately $7.7 million, or $0.14 per share. Increases in revenues for the
quarter and six months ended June 30, 1999 were due to the impact of revenues
contributed by ATC subsequent to the merger of IQI and ATC completed on July
9, 1998 (the "Merger").
On a pro forma basis, revenues decreased 21% for the quarter and
approximately 13% for the six month period ended June 30, 1999 versus the prior
year periods. These decreases were primarily the result of the curtailment of
certain outbound programs by the Company's largest telecommunications client and
a large financial services client, and a decline in marketing research revenues.
Outbound teleservices revenues declined 38% and 24% for the quarter and six
months ended June 30, 1999, respectively, while marketing research revenues
dropped 25% and 27% in the same periods. These declines were offset somewhat by
6% and 11% increases in inbound teleservices revenues for the three and six
month periods, respectively.
For the three and six month periods ended June 30, 1998 and 1999, the
Company's mix of revenues was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Outbound teleservices 72.4% 43.2% 71.0% 46.9%
Inbound teleservices 10.6% 46.5% 11.0% 43.4%
------------ ------------ ------------ ------------
Teleservices total 83.0% 89.7% 82.1% 90.3%
Marketing research services 17.0% 10.3% 17.9% 9.7%
------------ ------------ ------------ ------------
Total revenues 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============
</TABLE>
On a pro forma basis, the Company's mix of revenues, for the three and
six month periods ended June 30, 1998 and 1999, was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
(PRO FORMA) (PRO FORMA)
<S> <C> <C> <C> <C>
Outbound teleservices 54.5% 43.2% 54.0% 46.9%
Inbound teleservices 34.7% 46.5% 34.3% 43.4%
------------ ------------ ------------ ------------
Teleservices total 89.2% 89.7% 88.3% 90.3%
Marketing research services 10.8% 10.3% 11.7% 9.7%
------------ ------------ ------------ ------------
Total revenues 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============
</TABLE>
12
<PAGE>
Approximately 18% of the Company's revenues during the quarter ended
June 30, 1999 were generated by the Company's largest telecommunications client
and approximately 17% by its largest financial services client as compared to
approximately 33% and nil (27% and 9%, on a pro forma basis), respectively, in
the quarter ended June 30, 1998. For the six months ended June 30, 1999,
approximately 20% of the Company's revenues were generated by the Company's
largest telecommunications client and approximately 16% by its largest financial
services client as compared to approximately 32% and nil (27% and 9%, on a pro
forma basis), respectively, in the same period in 1998.
The Company's objective is to secure recurring revenues from long-term
relationships with targeted, large corporate clients that utilize
telecommunications and marketing research strategies as integral, ongoing
elements in their marketing and customer service programs. In addition to
providing services on an outsourcing basis, in which the Company provides all or
a substantial portion of a client's teleservices and/or marketing research
needs, the Company also continues to perform project-based services for certain
clients. Project-based services, however, are frequently short-term and there
can be no assurance that these clients will continue existing projects or
provide new ones.
As part of the Company's site migration plan, Aegis opened two new
client service centers in St. Joseph, Missouri and Sierra Vista, Arizona during
the second quarter. These centers perform work that was being done in the
Company's Addison, Texas facility, which was closed in August 1999. Also during
the quarter, Aegis transitioned business and employees from its Euless, Texas
center to existing facilities in Arlington, Texas and Irving, Texas. The
Company's site strategy and center migration plan focuses on locating client
service centers in what management believes are more economically attractive
markets than those in which the Company has traditionally operated.
During the second quarter, the Company expanded its inbound customer
service relationship with its largest client. Under this addition to an
existing master agreement, Aegis has begun performing critical customer care
functions, including the handling of inbound orders and inquiries, for this
client's growing consumer customer base. This new offering is expected to
require the use of more than 500 workstations, which will be located in Aegis
client service centers in Irving and Los Angeles, and is in addition to the
inbound teleservices Aegis recently began providing for this client's small
business customers from its Fairmont, West Virginia facility. The Company no
longer furnishes traditional, hourly-rate outbound telemarketing for this
client. As such, all services now provided to this client are either inbound
or pay-for-performance outbound. Under an exclusive arrangement, the Company
also began providing 24-hours-a-day, 7-days-a-week inbound customer service
and order
13
<PAGE>
processing for WingspanBank.com, a major financial institution's Internet-based,
one-stop suite of financial services.
Also during the quarter, Aegis' Elrick & Lavidge Marketing Research
("E&L") division introduced a series of syndicated information products that
will feature the role of e-commerce in both consumer and business purchasing.
E&L also entered into an alliance with Digital Marketing Services, a firm
specializing in online data collection and majority owned by America Online.
Through this arrangement, E&L now offers clients access to America Online's
representative subscriber base of 17 million members.
For the quarter ended June 30, 1999, gross profit earned on revenues
decreased approximately $1.4 million, or 8.6%, from the quarter ended June
30, 1998. The decrease in gross profit is primarily due to one-time costs
associated with the migration of business (the "migration costs") from the
Addison, Texas client service center to new centers in Sierra Vista, Arizona
and St. Joseph, Missouri. Gross profit for the six months ended June 30, 1999
increased approximately $1.7 million, or 5.4%, primarily due to the addition
of ATC's revenues and gross profit, on a purchase accounting basis, as a
result of the Merger. Gross profit as a percentage of revenues ("gross
margin") for the quarter and six months ended June 30, 1999 was 25.7% and
27.6%, respectively, as compared to 34.8% and 35.3% in the comparable prior
year periods. The decreases in gross margin are primarily due to a decline in
capacity utilization from the prior year periods resulting from lower volumes
of business from the Company's two largest telecommunications clients, a
large financial services client and our marketing research division, and the
impact of migration costs incurred in the second quarter of 1999. The site
migration associated with these costs is now complete.
Selling, general and administrative ("SG&A") expenses increased $4.5
million, or 38.7%, in the quarter and $9.7 million, or 41.4%, in the six months
ended June 30, 1999 versus the comparable periods of 1998. As a percentage of
revenues, SG&A expenses for the quarter and six months ended June 30, 1999 were
28.0% and 27.7%, respectively, versus 25.0% and 26.3% in the comparable three
and six month periods of 1998, respectively. The increases in SG&A expenses and
SG&A expenses as a percentage of revenues are primarily attributable to the
Merger with ATC. On a pro forma basis, SG&A expenses decreased approximately
$1.8 million, or 9.7%, in the quarter and approximately $2.1 million, or 5.8%,
in the six months ended June 30, 1999 as compared to the previous year periods.
These decreases were primarily due to post-Merger reductions in redundant
overhead and lower than anticipated business volumes.
Depreciation and amortization expenses increased $1.0 million, or
39.7%, in the quarter and approximately $2.7 million, or 53.6%, in the six
months ended June 30, 1999 as compared to the prior year periods. As a
percentage of revenues, depreciation and amortization expense was 6.3% in the
quarter and 1999 and 6.4% in the first six months of 1999 versus 5.6% in the
prior year periods. The increases in depreciation and amortization expense as a
percentage of revenues are due to the addition of ATC's depreciation and
amortization expenses subsequent to the Merger, additional amortization expense
resulting from the goodwill recorded in the Merger, and additional depreciation
resulting from investments in three new client service centers completed since
the first quarter of 1998.
As a result of the performance of the Company's Elrick & Lavidge
("E&L") marketing research division since its acquisition by IQI in July
1997, the Company performed an analysis (based on E&L's estimated future cash
flows) of the carrying value of the goodwill associated with the purchase of
E&L. As a result of this evaluation, it was determined that the carrying
value of the goodwill associated with the purchase of E&L has been impaired.
Accordingly, in the first quarter of 1999, the Company adjusted the carrying
value of E&L's long-lived assets to their fair value resulting in a non-cash
asset impairment charge of $20.4 million, which reduced the amount of
goodwill on the Company's balance sheet by a corresponding amount. This
reduction is expected to result in a decrease in the Company's goodwill
amortization expense of approximately $1.1 million annually.
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<PAGE>
On July 29, 1998, the Company announced that it would record pre-tax
restructuring charges of $13.0 million related to the Merger. Restructuring
and other related non-recurring charges must be matched to the time periods
in which associated restructuring actions are taken. Accordingly, the Company
recorded pre-tax charges of $8.4 million ($5.2 million, net of taxes) in the
year ended December 31, 1998 and $0.5 million ($0.3 million, net of taxes) in
the first quarter of 1999, as part of the total restructuring. These charges
were primarily attributable to one-time write-offs of redundant hardware and
software, severance costs and the consolidation of certain administrative
functions including costs to relocate offices and employees. Management
believes that all Merger-related restructuring efforts have been completed
and all related charges recorded. The Company does not anticipate recognizing
additional Merger-related restructuring charges in 1999 and none were
recorded in the quarter ended June 30, 1999.
Net interest expense increased $0.6 million, or 51.5%, in the second
quarter and $1.2 million, or 47.4%, in the first six months of 1999 versus the
same periods in 1998, due to increased utilization of the Company's revolving
line of credit and the assumption of additional subordinated indebtedness.
The Company's statutory state and federal income tax benefit rate for
the quarter and six months ended June 30, 1999 was approximately 39.0%. The
Company's effective tax rate on reported taxable income or loss differs from the
statutory rate due primarily to the non-deductibility, for tax purposes, of the
Company's goodwill amortization expense and the asset impairment charge. The
non-deductibility of goodwill amortization expense resulted in income tax
expense in the second quarter and first six months of 1998 despite a reported
pre-tax loss.
Management knows of no trends or uncertainties other than those
mentioned above that are expected to have a material favorable or unfavorable
impact on operating results.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain information from the Company's
statements of cash flows for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------
1998 1999
-------------- ---------------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 6,221 $ (7,477)
Net cash used in investing activities (5,616) (7,115)
Net cash provided by (used in) financing activities 1,320 4,720
-------------- ---------------
Net change in cash and cash equivalents $ 1,925 $ (9,872)
============== ===============
</TABLE>
The Company has historically utilized cash flow from operations, available
borrowing capacity under its credit facilities, and subordinated indebtedness
from its shareholders (primarily Thayer Equity Investors III, L.P. ("Thayer"))
to meet its liquidity needs. Management believes the Company currently has the
liquidity and access to working capital to meet its near-term cash flow demands
through operating income and borrowings under the Credit Agreement as amended
on August 6, 1999 (see discussion of credit facility below).
During the six months ended June 30, 1999, net cash provided by
operating activities decreased approximately $13.7 million, or 220.2% versus the
prior year period primarily due to losses from operations and increases in the
Company's accounts receivable.
15
<PAGE>
Cash used in investing activities during the first six months of 1999
totaled $7.1 million, representing a $1.5 million, or 26.7%, increase from the
first six months of 1998. These expenditures primarily consisted of new
telecommunications equipment and information technology hardware and software
required in the maintenance, upgrade and expansion of the Company's operations
including the build-out of two new client service centers in the second quarter
of 1999 and the upgrade or replacement of workstations in the Company's existing
facilities. Capital expenditures during the last twelve months totaled $14.0
million and have been funded primarily with proceeds from bank borrowings and
subordinated indebtedness provided by Thayer.
During the six months ended June 30, 1999, financing activities
included net payment activity under the Company's credit facility and the
receipt of approximately $5.7 million of additional subordinated indebtedness
provided by Thayer. (See discussion of credit facility and subordinated
indebtedness below).
CREDIT FACILITY
In connection with the Merger, IQI entered into a Second Amended and
Restated Credit Agreement dated as of July 9, 1998 (the "Credit Agreement") with
The Bank of Nova Scotia ("Scotiabank") and Credit Suisse First Boston ("CSFB")
whereby Scotiabank and CSFB rolled over and continued their loan commitments to
IQI aggregating $53.0 million and Scotiabank committed to provide IQI an
additional $12.0 million in revolving loans, resulting in a total facility of
$65.0 million. The proceeds of the additional loan were used to refinance the
bank indebtedness of Advanced Telemarketing Corporation, a wholly-owned
subsidiary of ATC ("Advanced"), to pay transaction expenses, and for general
corporate and working capital needs of IQI and Advanced. As part of the
amendment of the Credit Agreement, the Company and Advanced agreed to guarantee
the IQI indebtedness and grant blanket security interests in their assets to
secure repayment of the banks' loans. The Company also pledged its shares of
Advanced common stock to the banks to secure repayment of the banks' loans.
The Credit Agreement contains various covenants that limit, among other
things, the operating subsidiaries' indebtedness, capital expenditures,
investments, payments and dividends to the Company and requires the operating
subsidiaries to meet certain financial covenants. Similarly, under the terms of
the Company's guaranty of its operating subsidiaries' obligations, the Company
is subject to certain covenants limiting, among other things, its ability to
incur indebtedness, enter into guaranties, and acquire other companies. The
Credit Agreement is secured by liens on the operating subsidiaries' accounts
receivable, furniture and equipment, and is guaranteed by the Company.
On March 31, 1999, the Company entered into the Third Amendment to the
Credit Agreement (the "Third Amendment"), which provided for new levels for
existing financial covenants and a new covenant related to earnings before
interest, taxes, depreciation and amortization ("EBITDA"). At June 30, 1999,
Aegis was in not in compliance with certain of its financial covenants contained
in the Third Amendment.
On August 6, 1999, the Company entered into the Fourth Amendment to
its Credit Agreement (the "Fourth Amendment") with Scotiabank and CSFB
whereby Scotiabank and CSFB committed to provide the Company an additional
$7.5 million in term debt, resulting in a total facility of approximately
$68.0 million, and waived the Company's defaults under certain of the
covenants through August 31, 1999. The Company is currently negotiating an
amendment of its Credit Agreement, which Management believes would cure the
Company's defaults and extend the Credit Agreement's term beyond August 31,
1999. The proceeds of the additional loan will be used for the Company's
general corporate and working capital needs. As part of the
16
<PAGE>
Fourth Amendment, Thayer agreed to guarantee the Company's indebtedness. As
part of the Fourth Amendment, Thayer agreed to guarantee the Company's
additional $7.5 million of indebtedness. In consideration of such guarantee,
the Company issued Thayer a warrant to purchase up to 800,000 shares of the
Company's Common Stock, exercisable only if the guarantee is drawn upon and
at an exercise price based on the then market price of such stock.
SUBORDINATED INDEBTEDNESS
Prior to the Merger, on July 6, 1998, the Company received an
additional financing commitment from Thayer and certain other shareholders of
IQI. Under the commitment, the Thayer-led group agreed to lend the Company, at
its election, up to an additional $4.0 million in subordinated indebtedness at
any time within 90 days after the Merger. As of October 23, 1998, the Company
had drawn the full commitment amount of $4.0 million. In connection with this
commitment and effective upon the Merger, the Company issued the Thayer-led
group additional warrants to purchase up to 350,000 shares of the Company's
Common Stock at an exercise price of $2.375 per share and provided certain
anti-dilution protection. This indebtedness is convertible into the Company's
Common Stock at a conversion price of $2.375 per share, the closing price of
such stock on July 2, 1998, the date the Thayer-led group committed to provide
this financing. This debt is in addition to, and on the same basic terms as, the
subordinated debt that Thayer had previously loaned to the Company.
In connection with the Merger, Thayer provided the Company with $6.8
million in subordinated indebtedness as well as a guarantee for $2.0 million in
bridge financing to assist in funding the Company's working capital needs. In
connection with the guarantee, and for additional consideration of $110,000, the
Company issued to Thayer warrants to purchase 1,100,000 shares of the Company's
Common Stock at an exercise price of $1.96 (110% of the average of the high and
low prices of ATC Common Stock on April 7, 1998, the day before the announcement
of the proposed Merger).
On March 30, 1999, Thayer provided the Company with approximately $5.7
million in additional subordinated indebtedness. Approximately one-half of the
proceeds from this financing were used to pay down bank debt and the remainder
for working capital purposes. The additional indebtedness is convertible into
the Company's Common Stock at a conversion price of $1.15 per share, which
represents a 26.9% premium to the closing price of Aegis Common Stock on March
25, 1999, the date that Thayer committed to provide the financing. This debt is
in addition to, and on the same basic terms as, the subordinated debt that
Thayer had previously loaned to the Company.
In an effort to reduce debt and improve the Company's balance sheet,
effective June 30, 1999, a group led by the Company's largest shareholder,
Thayer Equity Investors III, L.P. (the "Thayer-led group"), agreed to convert
approximately $12.1 million of its subordinated debt into two new series of
convertible preferred stock. The 77,300 shares of new Series D Preferred Stock
($.01 par value per share, $100 per share liquidation preference) are
convertible into Company Common Stock at $2.00 per share, and the 44,018 shares
of new Series E Preferred ($.01 par value per share, $100 per share liquidation
preference) are convertible into Company Common Stock at $2.375 per share. Both
series earn cumulative dividends (payable-in-kind in additional shares of the
respective series of Preferred Stock) at the annual rate of 15%, and are
non-voting except on specified matters. In consideration of the conversion of
the subordinated debt into preferred stock, the Company issued the Thayer-led
group warrants to purchase an additional 1,000,000 shares of Company Common
Stock at $0.90625 per share, the closing price of such stock on the conversion
date.
NOTE RECEIVABLE
Michael G. Santry, the Company's Co-Chairman, owes the Company
approximately $1.9 million under a secured promissory note dated September 16,
1997. As provided for in the Merger Agreement, Mr. Santry made a principal
payment of approximately $1.8 million on June 30, 1998.
17
<PAGE>
The Merger Agreement also provided for an extension of the maturity date of
the balance of the principal and accrued but unpaid interest on the note to
March 31, 1999. The Company subsequently has agreed to extend the maturity
date of the note to March 31, 2000, and Mr. Santry has agreed to pledge
additional collateral as security for repayment of the note.
GROWTH STRATEGIES
In addition to traditional growth strategies, management has been
pursuing opportunities for growth through merger with or acquisition of other
teleservices companies. From time to time, Aegis engages in discussions with
potential merger or acquisition candidates. Although there can be no assurances
that any proposed merger or acquisition will be successfully completed,
management requires that any candidate fit the Company's corporate and operating
strategies. Subsequent to the end of the quarter, on July 30, 1999, the Company
announced that it had engaged Merrill Lynch & Co. to assist the Company's Board
of Directors in conducting a comprehensive review of strategic alternatives to
enhance shareholder value. Aegis is evaluating various possibilities, including
a private placement of preferred or common stock to raise equity for working
capital and other purposes, a merger, the sale of a division or assets, a joint
venture or strategic alliance, or other business combination.
The Company primarily operates in the teleservices industry, which
is a fast-growing, highly competitive industry. As such, the Company
continues to implement its site strategy and center migration plan, which
focuses on locating client service centers in what management believes are
more economically attractive markets than those in which the Company has
traditionally operated. Company growth and continued implementation of this
site strategy will necessitate additional client service centers and such
facilities will have furniture, equipment and technological requirements
consistent with the Company's existing facilities. To that end, Aegis opened
two new client service centers in St. Joseph, Missouri and Sierra Vista,
Arizona in the second quarter of 1999. Management does not anticipate opening
additional new centers in 1999.
Although no assurances can be made in this regard, management
anticipates that, based on the Company's ability to secure such financing to
date, the Company should be able to secure debt or equity funding for its future
working capital needs, the capital equipment requirements of future client
service center facilities and potential acquisition opportunities.
YEAR 2000 UPDATE
GENERAL
Aegis' company-wide Year 2000 Project (the "Project") is proceeding on
schedule. The Project is addressing the issue of computer programs and embedded
computer chips being unable to distinguish between the year 1900 and the year
2000 (the "Year 2000 Issue"). In 1998, Aegis began the Project to determine the
level of its Year 2000 compliance and to plan for the remediation of any
non-compliant systems or infrastructure. The Project has focused most intently
on production systems upon which the Company is dependent for the provision of
services and the generation of revenue. As of August 13, 1999, the Company has
determined that remediation of its production systems is substantially complete,
except for the full "end-to-end" testing of systems connected to or shared with
suppliers and clients. (See discussion of the suppliers and clients category
below). The Company anticipates that its production systems will be fully Year
2000 compliant by the end of the third quarter of 1999. Any remaining business
software programs or hardware systems are expected to be made Year 2000
compliant through the Project, including those supplied by vendors, or they will
be retired or supplanted by a contingency plan. In the fourth quarter of 1998,
the Company began
18
<PAGE>
contingency planning for the impact of the Year 2000 Issue that may occur
despite efforts to remediate and mitigate such impact. Such contingency
planning was complete as of August 13, 1999. The contingency planning effort
included the amendment of the Company's disaster recovery plans to include
Year 2000 contingencies. None of the Company's other information technology
projects have been delayed due to the implementation of the Year 2000 Project.
THE PROJECT
Aegis' Project is divided into four major categories: (i) production
systems and software applications (the "Production Platform"), (ii) support
systems and applications (the "Support Systems"), (iii) infrastructure and
facilities and (iv) suppliers and clients. The Company created a Year 2000 team
and has assigned responsibility for each category requiring remediation. The
Company also has engaged third parties, including Year 2000 consultants, to
assist in the completion of various phases of the Project. The general phases
common to all categories of the Project are: (i) inventorying Year 2000 items,
(ii) assigning priorities to identified items, (iii) assessing the Year 2000
compliance of items determined to be material to the Company, (iv) repairing or
replacing material items that are determined not to be Year 2000 compliant, (v)
testing material items and (vi) designing and implementing contingency and
business continuation plans for each organization and Company location.
The inventory and priority assessment phases of each section of the
Project have been completed. The remediation phase, including repair and
replacement, is substantially complete. Material items are those believed by the
Company to have a risk that may affect revenues and related cash flows. The
Company, its Year 2000 consultants and certain of its technology suppliers are
performing the testing phases of the Project.
The Production Platform category consists of hardware and systems
software used to directly produce revenue and is typically client specific.
The remediation of this category is complete. The testing phase is ongoing as
hardware or system software is remediated, upgraded or replaced. In addition,
in the normal course of operations, production systems may require frequent
modifications to conform to changing client specifications. At such times,
regression testing is performed. All activities related to the Production
Platform, including definition, testing and implementation of Year 2000-ready
products, were complete as of August 13, 1999. Contingency planning for this
category commenced in the first quarter of 1999 and was complete as of
August 13, 1999.
The Support Systems category includes hardware and software systems and
applications used administratively and in support of the production systems and
software applications described above. The remediation of the Support Systems
requires either the conversion of those systems and software that are not Year
2000 compliant and, where available from the supplier, the replacement of such
software. The Company estimates that the software conversion phase of this
category was complete as of June 30, 1999. The testing phase was conducted as
the software was replaced and was also complete as of June 30, 1999. Contingency
planning for this category began in the first quarter of 1999 and was complete
as of August 13, 1999.
The infrastructure and facilities category consists of hardware and
systems software used in the Company's networking and systems back-up
infrastructure and Aegis' physical facilities. The remediation of this category
was complete as of August 13, 1999. The testing phase is ongoing as hardware or
systems software is remediated, upgraded or replaced. All activities related to
the infrastructure and facilities category were complete as of August 13, 1999.
Contingency planning for this category commenced in the first quarter of 1999
and was complete as of August 13, 1999.
19
<PAGE>
The suppliers and clients category includes the process of
identifying and prioritizing critical suppliers and clients at the direct
interface level, and communicating with them about their plans and progress
in addressing the Year 2000 Issue. Detailed evaluations of the most critical
third parties have been initiated. The process of evaluating these suppliers
and clients began in the third quarter of 1998 and was complete as of August
13, 1999, with follow-up reviews scheduled through the remainder of 1999.
These evaluations were followed by the development of contingency plans as
necessary. Contingency planning for this category commenced in the first
quarter of 1999 and was complete as of August 13, 1999. The Company has begun
planning with its largest clients to conduct full "end-to-end" testing of
connected or shared systems where appropriate. This testing is expected to be
complete by the end of the third quarter of 1999.
COSTS
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial position.
The estimated total cost of the Year 2000 Project is approximately $2.1 million.
This total does not include estimates of liability for non-compliance, if any.
The total amount expended on the Project through August 13, 1999, was
approximately $2.0 million.
RISKS
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and clients, the
Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 Project is expected
to significantly reduce the Company's level of uncertainty about the Year 2000
Issue and, in particular, about the Year 2000 compliance and readiness of its
material suppliers and clients. The Company believes that, with the
implementation of new business systems and completion of the Project as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
The above contains forward-looking statements including, without
limitation, statements relating to the Company's plans, strategies, objectives,
expectations, intentions, and adequate resources that are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Readers are cautioned that forward-looking statements contained in the
Year 2000 Update should be read in conjunction with the Company's disclosures
under the heading: "FORWARD LOOKING STATEMENTS" beginning below.
FORWARD LOOKING STATEMENTS
The following is a "safe harbor" statement under the Private Securities
Litigation Reform Act of 1995: Statements contained in this document that are
not based on historical facts are "forward-looking statements". Terms such as
"anticipates", "believes", "estimates", "expects", "plans", "predicts", "may",
"should", "will", the negative thereof and similar expressions are intended to
identify forward-looking statements. Such statements are by nature subject to
uncertainties and risks, including but not limited to: the Company's reliance on
certain major clients; the ability of new contracts or products to produce
material revenues; realizing cost reductions as a result of the Company's site
migration plan and renegotiated telecommunications tariff; the successful
combination of anticipated revenue growth with operating expense reduction to
result in improved profitability and cash flow; government regulation and tax
policy; economic conditions; competition and pricing; dependence on the
Company's labor force; reliance on technology; telephone service dependence;
and other operational, financial or legal risks or uncertainties detailed in
the Company's SEC filings from time to time.
20
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended June 30, 1999, the Company did not experience any
material changes in market risk exposures that affect the quantitative and
qualitative disclosures presented in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to its businesses
neither Aegis nor its subsidiaries are parties to, nor are their properties the
subject of, any material pending legal proceedings. From time to time, Aegis is
involved in litigation incidental to its business. Aegis believes that such
litigation, individually or in the aggregate, is not likely to have a material
adverse effect on our results of operations or financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.3 Certificate of Amendment to Amended and Restated Certificate of
Incorporation (filed herewith).
4.10 Series D and E Preferred Stock Certificate of Designation (filed
herewith).
10.25 Securities Exchange Agreement entered into as of June 30, 1999 by and
among Aegis Communications Group, Inc., Thayer Equity Investors III,
L.P., Edward Blank, The Edward Blank 1995 Grantor Retained Annuity
Trust and ITC Service Company (filed herewith).
10.26 Amendment, dated as of June 30, 1999, to the Registration Rights
Agreement, dated as of July 9, 1998, by and among Aegis Communications
Group, Inc., Thayer Equity Investors III, L.P., Edward Blank, The
Edward Blank 1995 Grantor Retained Annuity Trust and ITC Service
Company (filed herewith).
10.27 Series Four Warrant to Purchase Shares of Common Stock of Aegis
Communications Group, Inc. issued to Thayer Equity Investors III, L.P.,
Edward Blank, The Edward Blank 1995 Grantor Retained Annuity Trust and
ITC Service Company dated June 30, 1999 (filed herewith).
10.28 Series Five Warrant to Purchase Shares of Common Stock of Aegis
Communications Group, Inc. issued to Thayer Equity Investors III, L.P.
dated June 30, 1999 (filed herewith).
10.29 Fourth Amendment, dated as of August 6, 1999, to the Second Amended and
Restated Credit Agreement, dated as of July 9, 1998, by and among IQI,
Inc., Aegis Communications Group, Inc. as guarantor, the various
financial institutions parties thereto, the Bank of Nova Scotia, as
documentation agent and administrative agent for the lenders, and
Credit Suisse First Boston, as syndication agent for the lenders (filed
herewith).
10.30 Parent Guaranty, dated as of August 6, 1999, made by Thayer Equity
Investors III, L.P. pursuant to the Fourth Amendment to the Second
Amended and Restated Credit Agreement, in favor of each of the Bank of
Nova Scotia, as documentation agent and administrative agent for the
lenders, and Credit Suisse First Boston, as syndication agent for the
lenders (filed herewith).
27.1 Financial Data Schedule (filed herewith).
(B) Reports on Form 8-K
None.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
AEGIS COMMUNICATIONS GROUP, INC.
(The Registrant)
Dated: August 16, 1999 By: /s/ MATTHEW S. WALLER
-------------------------------------
Matthew S. Waller
Chief Financial Officer
23
<PAGE>
EXHIBITS INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
Exhibit 3.3 Certificate of Amendment to Amended and Restated
Certificate of Incorporation (filed herewith).
Exhibit 4.10 Series D and E Preferred Stock Certificate of
Designation (filed herewith).
Exhibit 10.25 Securities Exchange Agreement entered into as of
June 30, 1999 by and among Aegis Communications Group,
Inc., Thayer Equity Investors III, L.P., Edward Blank,
The Edward Blank 1995 Grantor Retained Annuity Trust
and ITC Service Company (filed herewith).
Exhibit 10.26 Amendment, dated as of June 30, 1999, to the
Registration Rights Agreement, dated as of July 9,
1998, by and among Aegis Communications Group, Inc.,
Thayer Equity Investors III, L.P., Edward Blank, The
Edward Blank 1995 Grantor Retained Annuity Trust and
ITC Service Company (filed herewith).
Exhibit 10.27 Series Four Warrant to Purchase Shares of Common Stock
of Aegis Communications Group, Inc. issued to Thayer
Equity Investors III, L.P., Edward Blank, The Edward
Blank 1995 Grantor Retained Annuity Trust and ITC
Service Company dated June 30, 1999 (filed herewith).
Exhibit 10.28 Series Five Warrant to Purchase Shares of Common Stock
of Aegis Communications Group, Inc. issued to Thayer
Equity Investors III, L.P. dated June 30, 1999 (filed
herewith).
Exhibit 10.29 Fourth Amendment, dated as of August 6, 1999, to the
Second Amended and Restated Credit Agreement, dated as
of July 9, 1998, by and among IQI, Inc., Aegis
Communications Group, Inc. as guarantor, the various
financial institutions parties thereto, the Bank of
Nova Scotia, as documentation agent and administrative
agent for the lenders, and Credit Suisse First Boston,
as syndication agent for the lenders (filed herewith).
Exhibit 10.30 Parent Guaranty, dated as of August 6, 1999, made by
Thayer Equity Investors III, L.P. pursuant to the
Fourth Amendment to the Second Amended and Restated
Credit Agreement, in favor of each of the Bank of Nova
Scotia, as documentation agent and administrative agent
for the lenders, and Credit Suisse First Boston, as
syndication agent for the lenders (filed herewith).
Exhibit 27.1 Financial Data Schedule (filed herewith).
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AEGIS COMMUNICATIONS GROUP, INC.
AEGIS COMMUNICATIONS GROUP, INC. a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State was August 2, 1985, under
the original name of Kenneth Resources, Inc.
2. On August 5, 1999, this Amended and Restated Certificate of
Incorporation was duly adopted by the directors and stockholders of
the Corporation pursuant to Section 228, 242 and 245 of the General
Corporation Law of Delaware and restates, integrates and amends the
Restated Certificate of Incorporation filed on July 9, 1998 ("Prior
Restated Certificate of Incorporation") and the text of the Prior
Restated Certificate of Incorporation is hereby amended and restated
in its entirety as follows:
FIRST: The name of this Corporation is AEGIS COMMUNICATIONS GROUP, INC. (the
"Corporation").
SECOND: The Corporation's registered office in the State of Delaware is to be
located at 1209 Orange Street, in the City of Wilmington, County of New Castle,
Zip Code 19801, and its registered agent is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
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FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue shall be 101,000,000 shares,
consisting of (a) 100,000,000 shares of Common Stock, $.01 par value per share
("Common Stock"), and (b) 1,000,000 shares of preferred stock, $.01 par value
per share ("Preferred Stock").
A. Shares of Preferred Stock may be issued from time to time in one or
more series, each such series to have such designation as may be fixed by the
Board of Directors prior to the issuance of any shares thereof. Each such
series shall have such preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the Certificate of Incorporation or of any
amendment thereto, or in the resolution or resolutions providing for the issue
of such stock adopted by the Board of Directors providing for the issue of such
series. The Preferred Stock of any series shall or may be (a) subject to
redemption at such time or times and at such price or prices; (b) entitled to
receive dividends at such rates, on such conditions and at such times;
(c) entitled to such rights upon the dissolution of, or upon the distribution of
the assets of the Corporation; and (d) made convertible into, or exchangeable
for, shares of any other class or classes, or any other series of the same or
any other class or classes of stock of the Corporation at such price or prices
or at such rates of exchange and with such adjustments as shall or may be
provided, stated or expressed in the resolution or resolutions adopted by the
Board of Directors of the Corporation providing for the issue of such series.
B. The Common Stock of the Corporation shall be subject to the prior
rights of the Preferred Stock as may be set forth in the resolution or
resolutions by the Board of Directors providing for the issuance of the
Preferred Stock. Except for such voting rights as may be provided for in the
resolution or resolutions creating one or more series of Preferred Stock, sole
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voting rights shall be in the Common Stock. Cumulative voting in any election
of directors, regardless of class or series, is hereby expressly denied.
C. By resolutions duly adopted by the Corporation's Board of
Directors, the Corporation has designated the following: (a) 29,778 shares of
Preferred Stock as Series B Preferred Stock and has issued and outstanding
29,778 shares of Series B Preferred Stock; (b) 100,000 shares of Preferred
Stock as Series D Junior Preferred Stock and has issued and outstanding no
shares of Series D Junior Preferred Stock; (c) 231,902 shares of Preferred
Stock as Series D Preferred Stock and has issued and outstanding 77,300
shares of Series D Preferred Stock; and (d) 132,053 shares of Preferred Stock
as Series E Preferred Stock and has issued and outstanding 44,018 shares of
Series E Preferred Stock.
FIFTH: No stockholder of this Corporation shall by reason of his holding shares
of any class of capital stock have any preemptive or preferential right to
purchase or subscribe to any shares of any class of this Corporation, now or
hereafter to be authorized, or any notes, debentures, bonds or other securities
convertible into or carrying warrants or options to purchase shares of any
class, now or hereafter to be authorized, whether or not the issuance of any
such shares of such notes, debentures, bonds or other securities would adversely
affect the dividend or voting rights of such stockholder other than such rights,
if any, as the Board of Directors, in its discretion, may fix; and the Board of
Directors may issue shares of any class of this Corporation, or any note,
debentures, bonds or other securities of any class of this Corporation, or any
notes, debentures, bonds, or other securities convertible into or carrying
options or warrants to purchase shares of any class, without offering any such
shares of any class, whether in whole or in part, to the existing stockholders
of any class.
SIXTH: NUMBER, ELECTION AND TERMS OF DIRECTORS. Subject to the rights, if
any, of the holders of any series of Preferred Stock to elect additional
directors under circumstances specified in a Preferred Stock designation, the
number of directors of the Corporation will not be
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less than two nor more than twelve and will be fixed from time to time in the
manner described in the bylaws of the Corporation. The directors will be
divided into three classes designated as Class I, Class II, and Class III.
Each Class of directors will stand for election at the 1999 annual
stockholders' meeting for the following terms: Class I directors will be
elected for a three-year term; Class II directors will be elected for a
two-year term; and Class III directors will be elected for a one-year term.
At each following annual stockholders' meeting, commencing with the 2000
annual stockholders' meeting, each of the successors to the directors of the
Class whose term will expire at such annual meeting will be elected for a
term running until the third annual meeting succeeding his or her election
and until his or her successor has been duly elected and qualified.
SEVENTH: A. The Corporation shall indemnify any director, officer or
employee, or former director, officer or employee of the Corporation, or any
person who may have served at its request, as a director, officer or employee
of another corporation in which it owns shares of stock, or of which it is a
creditor, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement to the full extent permitted by Section 145 of the
General Delaware Corporation Law, including the power to purchase and
maintain insurance, as provided in paragraph (g) of Section 145.
B. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv)
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for any transaction from which the director derives any improper personal
benefit. If the General Corporation Law of the State of Delaware is amended
to authorize the further elimination or limitation of the liability of the
directors, then the liability of a director to the Corporation shall be
eliminated or limited to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as so amended. Any repeal or
modification of this paragraph shall not adversely affect any right or
protection of a director of the Corporation existing hereunder with respect
to any act or omission occurring prior to or at the time of such repeal or
modification. The provisions of this paragraph shall not be deemed to limit
or preclude indemnification of a director by the Corporation for any
liability of a director which has not been eliminated by the provision of
this paragraph.
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the power to adopt, amend or repeal bylaws of the Corporation is
conferred upon the directors.
NINTH: No contract or transaction between this Corporation and any person,
firm, association, or corporation and no act of this Corporation shall, in the
absence of fraud, be invalidated or in any way affected by the fact that any of
the directors of this Corporation are pecuniarily or otherwise interested,
directly or indirectly, in such contract, transaction or act, or are related to
or interested in, as a director, stockholder, officer, employee, member or
otherwise, such person, firm, association or corporation. Any director so
interested or related who is present at any meeting of the Board of Directors or
committee of directors at which action on any such contract, transaction or act
is taken may be counted in determining the presence of a quorum at such meeting
and may vote thereat with respect to such contract, transaction or act with like
force and
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effect as if he were not so interested or related. No director so interested
or related shall, because of such interest or relationship, be disqualified
from holding his office or be liable to the Corporation or to any stockholder
or creditor thereof for any loss incurred by this Corporation under or by
reason of such contract, transaction or act, or be accountable for any gains
or profits he may have realized therein.
IN WITNESS WHEREOF, the Board of Directors has caused this Amended and
Restated Certificate of Incorporation to be executed and filed on this 16th day
of August, 1999.
AEGIS COMMUNICATIONS GROUP, INC.
By: /s/ Matthew S. Waller
---------------------------
Name: Matthew S. Waller
-------------------------
Title: Chief Financial Officer
------------------------
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SERIES D AND E PREFERRED STOCK
CERTIFICATE OF DESIGNATION
OF
-------------------------------
AEGIS COMMUNICATIONS GROUP, INC.
(A DELAWARE CORPORATION)
-------------------------------
(PURSUANT TO SECTION 151(g) OF THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE)
Aegis Communications Group, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "CORPORATION"), DOES
HEREBY CERTIFY THAT:
WHEREAS, pursuant to authority conferred upon the Board of
Directors of the Corporation (the "BOARD") by the Amended and Restated
Certificate of Incorporation of the Corporation (the "CERTIFICATE") and Section
151 of the General Corporation Law of the State of Delaware (the "DGCL"), the
following resolutions were duly adopted by unanimous written consent of the
Board dated June 30, 1999, which resolutions are still in full force and effect
and are not in conflict with any provisions of the Certificate or Bylaws of the
Corporation or any certificate of designation filed by the Corporation pursuant
to Section 151 of the DGCL;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to authority
vested in the Board by the Certificate and Section 151 of the DGCL a series of
Preferred Stock of the Corporation to be known as "Series D Preferred Stock" and
a series of Preferred Stock of the Corporation to be known as "Series E
Preferred Stock" are hereby established and provided for and the Board of
Directors hereby fixes, states and expresses the powers, designation,
preferences and relative, participating, optional and other special rights of
such series and the qualifications, limitations or restrictions of such series,
as follows:
I. DESIGNATION. The Board does hereby provide for the
issuance of two new series of Preferred Stock of the Corporation, to be
designated and known as Series D Preferred Stock and Series E Preferred Stock.
II. NUMBER OF SHARES. The number of shares constituting
the Series D Preferred Stock shall be and the same is hereby fixed at 231,902,
and the number of shares constituting the Series E Preferred Stock shall be and
the same is hereby fixed at 132,053.
III. CAPITAL. For the purpose of Section 154 of the DGCL
the amount to be represented as capital for each share of Series D Preferred
Stock is and shall at all times be $100.00, and the amount to be represented as
capital for each share of Series E Preferred Stock is and shall at all times be
$100.00.
<PAGE>
Section 1. DEFINITIONS.
(a) For purposes of this Certificate of
Designation, the following definitions shall apply:
"BUSINESS DAY" shall mean a day which is not a
Saturday, Sunday or legal holiday on which banking institutions in New York are
authorized to close.
"COMMON STOCK" shall mean the common stock, par value
$.01 per share, of the Corporation.
"COMMON STOCK'S FAIR MARKET VALUE" shall mean, as of
any date, the fair market value of a share of Common Stock on such date. Such
fair market value on a date shall mean (i) if shares of the Common Stock are
listed on a national securities exchange, the average of the closing prices as
reported for composite transactions during the 20 consecutive trading days
preceding the trading day immediately prior to such date or, if no sale occurred
on a trading day, then the mean between the closing bid and asked prices on such
exchange on such trading day; (ii) if shares of the Common Stock are traded on
the Nasdaq National Market ("NMM"), the average of the closing prices as
reported on the NMM during the 20 consecutive trading days preceding the trading
day immediately prior to such date or, if no sale occurred on a trading day,
then the mean between the highest bid and lowest asked prices as of the close of
business on such trading day, as reported on the NMM; (iii) if the shares of the
Common Stock are not traded on a national securities exchange or the NMM but are
otherwise traded over-the-counter, the arithmetic average (for consecutive
trading days) of the mean between the highest bid and lowest asked prices as of
the close of business during the 20 consecutive trading days preceding the
trading day immediately prior to such date as quoted on the National Association
of Securities Dealers Automated Quotation system or an equivalent generally
accepted reporting service; or (iv) if there is no active market for the Common
Stock, the fair market value thereof as mutually determined by the Corporation
and the holders of a Majority of the Series D and E Preferred Stock.
"DIVIDEND RATE" means 15% per annum.
"INVESTMENT VALUE" of any share of Series D Preferred
Stock or share of Series E Preferred Stock, as the case may be, means, as of any
date, the sum of (i) the Per Share Amount for such Preferred Stock, plus (ii)
the amount of any unpaid dividends on such share added to the Investment Value
of such share on any Dividend Reference Date pursuant to Section 2(a); and in
the event of any liquidation, dissolution or winding up of the Corporation,
within the meaning of Section 3, or a merger, consolidation or other transaction
involving the Corporation described in Section 4, or the redemption of such
share, unpaid dividends on such share, whether or not earned or declared, will
be added to the Investment Value of such share on the payment or distribution
date under Section 3 or 4, as the case may be, or on the Redemption Date (as
defined in Section 5), as the case may be, calculated cumulatively on a
quarterly basis to the close of business on such payment date, distribution
date, or Redemption Date, as the case may be.
"JUNIOR STOCK" shall mean the Common Stock and all
other shares of capital stock of the Corporation, whether presently outstanding
or hereafter issued, other than Series D Preferred Stock, Series E Preferred
Stock and the Series B Preferred Stock.
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"MAJORITY OF THE SERIES D AND E PREFERRED STOCK"
shall mean more than 50% of the outstanding shares of Series D Preferred Stock
and Series E Preferred Stock.
"ORIGINAL ISSUE DATE" shall mean the first date on
which shares of Series D Preferred Stock or Series E Preferred Stock are issued.
"OUTSTANDING OPTIONS" shall mean rights granted under
the Corporation's 1996 Stock Exchange Rights Plan, options granted under the
Corporation's 1992 Stock Option Plan, and options granted under the
Corporation's 1996 Stock Option and Restricted Stock Plan.
"OUTSTANDING WARRANTS" shall mean:
(i) warrants to purchase an aggregate of 1,000,000 shares
of Common Stock issued pursuant to that certain Securities Exchange Agreement
dated June 30, 1999 by and among the Corporation, Thayer, Edward Blank, The
Edward Blank 1995 Grantor Retained Annuity Trust and ITC Service Company;
(ii) warrants to purchase an aggregate of 350,000 shares
of Common Stock issued pursuant to that certain Commitment Letter dated July 2,
1998 from Thayer to the Corporation; and
(iii) a warrant to purchase an aggregate of 1,000,000
shares of Common Stock issued pursuant to that certain Reimbursement and
Indemnification Agreement dated May 4, 1998 by and among the Corporation,
Advanced Telemarketing Corporation, a Nevada corporation, and Thayer.
"PER SHARE AMOUNT" means $100.00 (appropriately
adjusted for subdivisions or combinations of the Series D Preferred Stock or
Series E Preferred Stock, as the case may be).
"PERSON" means an individual, corporation,
partnership, association, trust, limited liability company or any other entity
or organization, including a government or political subdivision or an agency,
unit or instrumentality thereof.
"PREFERRED STOCK" means Preferred Stock, $.01 par
value per share, of the Corporation.
"SERIES B CERTIFICATE OF DESIGNATION" means the
Certificate of Designation of the Series B Preferred Stock filed with the
Delaware Secretary of State on July 9, 1998.
"SERIES B PREFERRED STOCK" shall mean the Series B
Preferred Stock, par value $.01 per share, of the Corporation.
"SERIES D CERTIFICATE OF DESIGNATION" means the
Certificate of Designation of the Series D Preferred Stock filed with the
Delaware Secretary of State on June 30, 1999.
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"SERIES D PREFERRED STOCK" shall mean the Series D
Preferred Stock, par value $.01 per share, of the Corporation.
"SERIES E CERTIFICATE OF DESIGNATION" means the
Certificate of Designation of the Series E Preferred Stock filed with the
Delaware Secretary of State on June 30, 1999.
"SERIES E PREFERRED STOCK" shall mean the Series E
Preferred Stock, par value $.01 per share, of the Corporation.
"SUBSIDIARY" shall mean, with respect to the
Corporation, any Person of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or indirectly
owned by the Corporation or a Subsidiary of the Corporation.
"THAYER" shall mean Thayer Equity Investors III,
L.P., a Delaware limited partnership.
"VOTING STOCK" shall mean any shares having general
voting power in electing the Board (irrespective of whether or not at the time
stock of any other class or classes has or might have voting power by reason or
the happening of any contingency). The Common Stock is Voting Stock.
Section 2. DIVIDENDS.
(a) RIGHT TO DIVIDENDS.
(i) Each of the holders of record of
the Series D Preferred Stock and the holders of record of the Series E Preferred
Stock shall be entitled to receive, when and as declared by the Board, and out
of any funds legally available therefor, cumulative dividends at the rate and in
the manner provided herein in preference to the payment of dividends on any
Junior Stock. Dividends on each of the Series D Preferred Stock and the Series E
Preferred Stock shall accumulate and accrue on each such share from the date of
its original issue and shall accumulate and accrue from day to day thereafter,
whether or not earned or declared. Such dividends shall be cumulative so that if
such dividends in respect of any previous or current quarterly dividend period,
at the rate specified herein, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall first be
fully paid before any dividend or other distribution shall be paid or declared
and set apart for any Junior Stock. Any accumulation of dividends on the Series
D Preferred Stock or the Series E Preferred Stock shall not bear interest.
Dividends shall accumulate and accrue on each share of Series D Preferred Stock
and on each share of Series E Preferred Stock from the Original Issue Date and
shall not be affected by the transfer of shares of Series D Preferred Stock or
Series E Preferred Stock thereafter or the cancellation and issuance or
reissuance of certificates evidencing such shares.
(ii) Dividends will be calculated
cumulatively on a quarterly basis on each share of Series D Preferred Stock and
on each share of Series E Preferred Stock at the Dividend Rate per annum on the
Investment Value thereof. To the extent not paid on any March 31, June 30,
September 30 or December 31 of any year (each a "DIVIDEND REFERENCE DATE"),
commencing June 30, 1999, all dividends which have been
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calculated on each share of Series D Preferred Stock and on each share of
Series E Preferred Stock then outstanding during the three-month period (or
other period in the case of the first Dividend Reference Date) ending on such
Dividend Reference Date, whether or not earned or declared, will be added to
the Investment Value of such share and will remain a part thereof until such
dividends are paid. If any Dividend Reference Date is not a Business Day, the
dividend otherwise due on such date shall be paid on the next following
Business Day (and this extension shall be included in the determination of
such dividend payment).
(iii) The Corporation shall make all
quarterly dividend payments on the Series D Preferred Stock by issuing
additional shares of Series D Preferred Stock (a "D PIK DIVIDEND") to the
holders of all then outstanding Series D Preferred Stock, with each share of
Series D Preferred Stock to be issued in payment of a D PIK Dividend being
valued, for this purpose, at $100.00 per share (appropriately adjusted for
subdivisions or combinations of the Series D Preferred Stock). The D PIK
Dividend paid to any holder of Series D Preferred Stock may include the issuance
of a fractional share of Series D Preferred Stock, which fractional share shall
have the proportional powers, preferences, rights and privileges of a whole
share of Series D Preferred Stock.
(iv) The Corporation shall make all
quarterly dividend payments on the Series E Preferred Stock by issuing
additional shares of Series E Preferred Stock (an "E PIK DIVIDEND") to the
holders of all then outstanding Series E Preferred Stock, with each share of
Series E Preferred Stock to be issued in payment of an E PIK Dividend being
valued, for this purpose, at $100.00 per share (appropriately adjusted for
subdivisions or combinations of the Series E Preferred Stock). The E PIK
Dividend paid to any holder of Series E Preferred Stock may include the issuance
of a fractional share of Series E Preferred Stock, which fractional share shall
have the proportional powers, preferences, rights and privileges of a whole
share of Series E Preferred Stock.
(b) PRIORITY.
(i) Unless full dividends on the Series
B Preferred Stock for all past dividend periods and the then current dividend
period shall have been paid or declared and a sum sufficient for the payment
thereof set apart, (1) no dividend whatsoever (other than a dividend payable
solely in Common Stock) shall be paid or declared, and no distribution shall be
made, on any share of Series D Preferred Stock, Series E Preferred Stock or
Junior Stock, and (2) no shares of Series D Preferred Stock, Series E Preferred
Stock or Junior Stock shall be purchased, redeemed or acquired by the
Corporation (other than a redemption pursuant to Section 5 hereof) and no monies
shall be paid into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof; PROVIDED, HOWEVER, that this
restriction shall not apply to the repurchase of shares of Common Stock from
directors or employees of or consultants or advisers to the Corporation or any
Subsidiary pursuant to agreements under which the Corporation has the option to
repurchase such shares upon the occurrence of certain events, including without
limitation the termination of employment by or service to the Corporation or any
Subsidiary.
(ii) Unless full dividends on the Series
D Preferred Stock and the Series E Preferred Stock for all past dividend periods
and the then current dividend period shall have been paid by the issuance of D
PIK Dividends or E PIK Dividends, as the case may be, sufficient for the payment
thereof, (1) no dividend whatsoever (other than a dividend payable solely in
Common Stock) shall be paid or declared, and no distribution
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shall be made, on any share of Junior Stock, and (2) no shares of Junior
Stock shall be purchased, redeemed or acquired by the Corporation and no
monies shall be paid into or set aside or made available for a sinking fund
for the purchase, redemption or acquisition thereof; PROVIDED, HOWEVER, that
this restriction shall not apply to the repurchase of shares of Common Stock
from directors or employees of or consultants or advisers to the Corporation
or any Subsidiary pursuant to agreements under which the Corporation has the
option to repurchase such shares upon the occurrence of certain events,
including without limitation the termination of employment by or service to
the Corporation or any Subsidiary.
(c) ADDITIONAL DIVIDENDS. After cumulative
dividends on the Series B Preferred Stock, the Series D Preferred Stock and the
Series E Preferred Stock for all past dividend periods and the then current
dividend period shall have been declared and paid or set apart, with respect to
Series B Preferred Stock, or declared and paid by the issuance of D PIK
Dividends and E PIK Dividends sufficient for the payment thereof, with respect
to Series D Preferred Stock and Series E Preferred Stock, respectively, if the
Board shall elect to declare additional dividends, such additional dividends
shall be declared in equal amounts per share on all shares of Series D Preferred
Stock, Series E Preferred Stock, the Series B Preferred Stock and Common Stock,
but with each share of Series D Preferred Stock, Series E Preferred Stock and
the Series B Preferred Stock being entitled to dividends based upon the number
of shares of Common Stock into which such share of Series D Preferred Stock,
Series E Preferred Stock or Series B Preferred Stock, as the case may be, could
be converted, in accordance with provisions of the Series D Certificate of
Designation, the Series E Certificate of Designation or the Series B Certificate
of Designation, as the case may be, at the record date for the determination of
stockholders entitled to receive such dividend or, if no such record date is
established, on the date such dividend is declared.
Section 3. LIQUIDATION RIGHTS OF SERIES D PREFERRED
STOCK AND SERIES E PREFERRED STOCK.
(a) SERIES B PREFERRED STOCK PREFERENCE. In the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of the Series B Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether such assets are capital,
surplus, or earnings, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of the Series D Preferred Stock,
the Series E Preferred Stock or the Junior Stock, the amount specified in
Section A(iii) of the Series B Certificate of Designation.
(b) SERIES D PREFERRED STOCK AND SERIES E
PREFERRED STOCK PREFERENCE. After the payment or distribution to the holders of
the Series B Preferred Stock of the full preferential amounts aforesaid, the
holders of the Series D Preferred Stock and the holders of the Series E
Preferred Stock then outstanding shall be entitled to be paid, out of the assets
of the Corporation available for distribution to its stockholders, whether such
assets are capital, surplus, or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of the Junior
Stock, an amount equal to the Investment Value per share with respect to Series
D Preferred Stock and the Investment Value per share with respect to Series E
Preferred Stock on the date of payment. If upon any liquidation, dissolution, or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed to the holders of the Series D Preferred Stock and the holders of
Series E Preferred Stock under this Section 3(b) shall be insufficient to permit
the payment
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to such stockholders of the full preferential amounts therein, then all of
the assets of the Corporation to be distributed shall be distributed ratably
to the holders of the Series D Preferred Stock and the holders of the Series
E Preferred Stock on the basis of the number of shares of Series D Preferred
Stock and Series E Preferred Stock held.
(c) REMAINING ASSETS. After the payment or
distribution to the holders of the Series D Preferred Stock, the Series E
Preferred Stock and the Series B Preferred Stock of the full preferential
amounts aforesaid, the holders of the Common Stock, the Series D Preferred Stock
and the Series E Preferred Stock shall be entitled to receive ratably all
remaining assets of the Corporation to be distributed, but with all holders of
shares of Series D Preferred Stock and Series E Preferred Stock treated (for
this purpose only ) as if they had converted their shares of Series D Preferred
Stock and Series E Preferred Stock into Common Stock.
Section 4. MERGER, CONSOLIDATION.
(a) At any time, in the event of:
(1) any consolidation or merger of the
Corporation with or into any other corporation or other entity or person (other
than a merger of a wholly owned subsidiary into the Corporation), or
(2) a sale or other disposition of all
or substantially all of the assets of the Corporation, then:
(A) holders of the Series B
Preferred Stock shall receive, for each share of such stock in cash or in
securities (including, without limitation, debt securities) received from the
acquiring corporation, or a combination thereof, at the closing of any such
transaction, the amount specified in Section A(iii) of the Series B Certificate
of Designation;
(B) after the payment or
distribution to the holders of the Series B Preferred Stock of the full
preferential amounts stated in Section 4(a)(2)(A) hereof, holders of the Series
D Preferred Stock and the holders of the Series E Preferred Stock shall receive,
for each share of such stock in cash or in securities (including, without
limitation, debt securities) received from the acquiring corporation, or a
combination thereof, at the closing of any such transaction, an amount equal to
the Investment Value per share with respect to Series D Preferred Stock and the
Investment Value per share with respect to Series E Preferred Stock, as of the
date of full payment thereof; PROVIDED HOWEVER, in the event of any such
transaction, if the amounts available to be distributed to the holders of the
Series D Preferred Stock and the Series E Preferred Stock shall be insufficient
to permit the payment to such stockholder of the full amounts provided for in
this Section 4(a)(2)(B), then the amounts to be so distributed shall be
distributed ratably to the holders of the Series D Preferred Stock and the
Series E Preferred Stock on the basis of the number of shares of Series D
Preferred Stock and Series E Preferred Stock held; and
(C) after the payment or
distribution to the holders of the Series D Preferred Stock and the Series E
Preferred Stock of the full preferential amounts stated in Section 4(a)(2)(B)
hereof, the remaining proceeds of such transaction shall be distributed ratably
to the holders of Junior Stock then outstanding.
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(b) Any securities or other property to be
delivered to the holders of the Series D Preferred Stock, Series E Preferred
Stock, the Series B Preferred Stock or Junior Stock pursuant to Section 4(a)
hereof shall be valued as follows:
(1) Securities not subject to
investment letter or other similar restrictions on free marketability:
(A) If traded on a securities
exchange, the value shall be deemed to be the average of the closing prices of
the securities on such exchange over the 30-day period ending three (3) days
prior to the closing;
(B) If actively traded over-the-
counter, the value shall be deemed to be the average of the closing bid prices
over the 30-day period ending three (3) days prior to the closing; and
(C) If there is no active public
market, the value shall be the fair market value thereof, as mutually determined
by the Corporation and the holders of a Majority of the Series D and E Preferred
Stock.
(2) The method of valuation of
securities subject to investment letter or other restrictions on free
marketability shall be to make appropriate discount from the market value
determined as above in paragraph (1)(A), (B) or (C) to reflect the approximate
fair market value thereof, as mutually determined by the Corporation and the
holders of a Majority of the Series D and E Preferred Stock.
(3) All other securities or other
property shall be valued at the fair market value thereof, as mutually
determined by the Corporation and the holders of a Majority of the Series D and
E Preferred Stock.
(4) If the holders of a Majority of the
Series D and E Preferred Stock and the Corporation are unable to reach agreement
on any valuation matter, such valuation shall be submitted to and determined by
a nationally recognized independent investment banking firm selected by the
Board and the holders of a Majority of the Series D and E Preferred Stock (or,
if such selection cannot be made, by a nationally recognized independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules).
(c) In the event the requirements of Section
4(a) hereof are not complied with, the Corporation shall forthwith either:
(1) Cause such closing to be postponed
until such time as the requirements of this Section 4 have been complied with;
or
(2) Cancel such transaction, in which
event the rights, preferences and privileges of the holders of the Series D
Preferred Stock and the holders of the Series E Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in Section 4(d) hereof.
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(d) The Corporation shall give each holder of
record of Series D Preferred Stock and each holder of record of Series E
Preferred Stock written notice of such impending transaction not later than
thirty (30) days prior to the stockholders' meeting called to approve such
transaction, or thirty (30) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 4, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than thirty (30) days after the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the Corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of a Majority
of the Series D and E Preferred Stock.
(e) The provisions of this Section 4 are in
addition to the protective provisions of Section 8 hereof.
Section 5. REDEMPTION.
(a) RESTRICTION ON REDEMPTION AND PURCHASE.
Except as expressly provided in this Section 5, the Corporation shall not have
the right to purchase, call, redeem or otherwise acquire for value any or all of
the Series D Preferred Stock or Series E Preferred Stock.
(b) REDEMPTION. At any time after the Original
Issue Date, the Corporation may, at its option, redeem the Series D Preferred
Stock and the Series E Preferred Stock in whole, but not in part, at the
Redemption Price hereinafter specified; PROVIDED, HOWEVER, that if the
Corporation should elect to redeem the Series D Preferred Stock and the Series E
Preferred Stock, the Corporation must redeem both such series of Preferred
Stock; PROVIDED, FURTHER, that the Corporation shall not be entitled to redeem
the Series D Preferred Stock and the Series E Preferred Stock or give notice of
any redemption unless the Corporation has sufficient and lawful funds to redeem
all of the then outstanding Series D Preferred Stock and Series E Preferred
Stock. The date on which the Series D Preferred Stock and the Series E Preferred
Stock is to be redeemed pursuant to this Section 5(b) is herein called the
"REDEMPTION DATE."
(c) REDEMPTION PRICE. The Redemption Price per
share of the Series D Preferred Stock or the Series E Preferred Stock, as the
case may be (the "REDEMPTION PRICE"), shall be the Investment Value per share
thereof and shall be paid, at the Corporation's election, in cash or by the
issuance of a convertible promissory note. With respect to Series D Preferred
Stock, such convertible promissory note shall (i) bear interest at the rate of
12% per annum with such interest payable quarterly in kind, (ii) mature on a
date determined by the Corporation's Board of Directors with all unpaid
principal and accrued and unpaid interest due on such date, unless accelerated
prior to such date upon the occurrence of customary defaults, (iii) be
convertible into Common Stock at the rate of $2.00 per share (subject to
adjustments of the type set forth in Section 7 hereof), with respect to and (iv)
be subordinated to existing senior bank indebtedness. With respect to Series E
Preferred Stock, such convertible promissory note shall (1) bear interest at the
rate of 12% per annum with such interest payable quarterly in kind, (2) mature
on a date determined by the Corporation's Board of Directors with all unpaid
principal and accrued and unpaid interest
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due on such date, unless accelerated prior to such date upon the occurrence
of customary defaults, (3) be convertible into Common Stock at the rate of
$2.375 per share (subject to adjustments of the type set forth in Section 7
hereof), with respect to and (4) be subordinated to existing senior bank
indebtedness.
(d) REDEMPTION NOTICE. The Corporation shall,
not less than thirty (30) days nor more than sixty (60) days prior to the
Redemption Date give written notice ("REDEMPTION NOTICE") to each holder of
record of Series D Preferred Stock and each holder of Series E Preferred Stock
to be redeemed. The Redemption Notice shall state:
(1) That all of the outstanding shares of Series D
Preferred Stock and Series E Preferred Stock are to be
redeemed and the total number of shares being redeemed;
(2) The number of shares of Series D Preferred Stock
and/or Series E Preferred Stock held by the holder which the
Corporation will redeem, and the form of consideration to be
paid (i.e., cash or convertible promissory note);
(3) The Redemption Date and the aggregate Redemption
Price for the shares of Series D Preferred Stock and/or Series
E Preferred Stock held by such holder;
(4) That the holder's right to convert the Series D
Preferred Stock and/or Series E Preferred Stock will terminate
on the Redemption Date; and
(5) The time, place and manner in which the holder is to
surrender to the Corporation the certificate or certificates
representing the shares of Series D Preferred Stock and/or
Series E Preferred Stock to be redeemed.
(e) PAYMENT OF REDEMPTION PRICE AND SURRENDER OF
STOCK. On the Redemption Date, the Redemption Price of the Series D Preferred
Stock and the Series E Preferred Stock scheduled to be redeemed or called for
redemption shall be payable to the holders of the Series D Preferred Stock and
the holders of the Series E Preferred Stock. On or before the Redemption Date,
each holder of Series D Preferred Stock and each holder of Series E Preferred
Stock to be redeemed, unless the holder has exercised its right to convert the
shares as provided in Section 7, shall surrender the certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price for such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired.
(f) TERMINATION OF RIGHTS. If the Redemption
Notice is duly given, and if at least ten (10) days prior to the Redemption Date
the Redemption Price per share of Series D Preferred Stock or Series E Preferred
Stock, as the case may be, to be redeemed is either paid or made available for
payment, then notwithstanding that the certificates evidencing any of the shares
of Series D Preferred Stock or Series E Preferred Stock so called or scheduled
for redemption have not been surrendered, all rights with
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respect to such shares shall forthwith after the Redemption Date cease and
terminate, except only (i) the right of the holders to receive the Redemption
Price per share of such Series D Preferred Stock or Series E Preferred Stock
without interest upon surrender of their certificates therefor or (ii) the
right to receive Common Stock plus dividends upon exercise of the conversion
rights provided in Section 7 on or before the Redemption Date.
Section 6. VOTING RIGHTS. Each holder of shares of
Common Stock shall be entitled to one vote for each share thereof held. Except
as otherwise expressly provided herein or as required by law, neither the Series
D Preferred Stock nor the Series E Preferred Stock shall have voting rights.
Section 7. CONVERSION. The holders of Series D
Preferred Stock and the holders of Series E Preferred Stock shall have the
following conversion rights:
(a) RIGHT TO CONVERT. Each share of Series D
Preferred Stock and each share of Series E Preferred Stock shall be convertible,
at any time at the option of the holder thereof, into fully paid and
nonassessable shares of Common Stock.
(b) CONVERSION PRICE. The Series D Preferred
Stock shall be convertible into the number of shares of Common Stock which
results from dividing the D Conversion Price (as hereinafter defined) in effect
at the time of conversion into $100.00 for each share of Series D Preferred
Stock being converted. The Series E Preferred Stock shall be convertible into
the number of shares of Common Stock which results from dividing the E
Conversion Price (as hereinafter defined) in effect at the time of conversion
into $100.00 for each share of Series E Preferred Stock being converted. The D
Conversion Price shall be $2.00, subject to adjustment from time to time as
provided below (the "D CONVERSION PRICE"), and the E Conversion Price shall be
$2.375, subject to adjustment from time to time as provided below (the "E
CONVERSION PRICE"). The D Conversion Price and the E Conversion Price are
sometimes referred to hereinafter as the "CONVERSION PRICE."
(c) MECHANICS OF CONVERSION. Each holder of
Series D Preferred Stock or Series E Preferred Stock who desires to convert the
same into shares of Common Stock shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series D Preferred Stock, Series E Preferred Stock or Common
Stock, and shall give written notice to the Corporation at such office that such
holder elects to convert the same and shall state therein the number of shares
of Series D Preferred Stock or Series E Preferred Stock, as the case may be,
being converted. Thereupon the Corporation shall promptly issue and deliver to
such holder a certificate or certificates for the number of shares of Common
Stock to which such holder is entitled and shall promptly pay in cash or, if the
Corporation is legally or financially unable to pay such dividends in cash,
Common Stock (valued at the Common Stock's Fair Market Value at the time of
surrender), all accumulated, accrued and unpaid dividends on the shares of
Series D Preferred Stock or Series E Preferred Stock, as the case may be, being
converted, whether or not earned or declared, to and including the time of
conversion. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the certificate
representing the shares of Series D Preferred Stock or Series E Preferred Stock,
as the case may be, to be converted, and the Person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock on such date.
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(d) ADJUSTMENT FOR STOCK SPLITS AND
COMBINATIONS. If the Corporation at any time or from time to time effects a
stock split or otherwise subdivides the outstanding Common Stock into a greater
number of shares, the Conversion Price then in effect immediately before that
stock split or subdivision shall be proportionately decreased, and conversely,
if the Corporation at any time or from time to time effects a reverse stock
split or otherwise combines the outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price then in effect immediately before
the combination or reverse stock split shall be proportionately increased. Any
adjustment under this subsection (d) shall become effective at the close of
business on the date the stock split, subdivision, reverse stock split or
combination becomes effective.
(e) ADJUSTMENT FOR CERTAIN DIVIDENDS AND
DISTRIBUTIONS. If the Corporation at any time or from time to time makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Conversion Price then in effect shall be
decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction (1) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date, as the case may be, plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
PROVIDED, HOWEVER, that if such record date is fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Conversion Price shall be recomputed accordingly as of the close of business
on such record date, and thereafter the Conversion Price shall be adjusted
pursuant to this subsection (e) as of the time of actual payment of such
dividends or distributions.
(f) ADJUSTMENTS FOR OTHER DIVIDENDS AND
DISTRIBUTIONS. In the event the Corporation at any time or from time to time
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of Series D Preferred Stock and the
holders of Series E Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received had their
Series D Preferred Stock or Series E Preferred Stock, as the case may be, been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 7 with respect to the rights of the holders of the Series D
Preferred Stock or Series E Preferred Stock, as the case may be.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE
AND SUBSTITUTION. In the event that at any time or from time to time the Common
Stock issuable upon the conversion of the Series D Preferred Stock or Series E
Preferred Stock is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets, provided
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for elsewhere in this Section 7), then and in any such event each holder of
Series D Preferred Stock and each holder of Series E Preferred Stock shall
have the right thereafter to convert such stock into the kind and amount of
stock and other securities and property receivable upon such
recapitalization, reclassification or other change, by holders of the maximum
number of shares of Common Stock into which such shares of Series D Preferred
Stock or such shares of Series E Preferred Stock, as the case may be, could
have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided
herein.
(h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR
SALES OF ASSETS. If at any time or from time to time there is a capital
reorganization of the Common Stock (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section 7) or a merger or consolidation of the Corporation with or into
another corporation, or the sale of all or substantially all of the
Corporation's properties and assets to any other Person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of the Series D Preferred Stock and the holders of Series E
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series D Preferred Stock or Series E Preferred Stock, as the case may be, the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 7 with respect to the rights of the holders of the
Series D Preferred Stock or Series E Preferred Stock, as the case may be, after
the reorganization, merger, consolidation or sale to the end that the provisions
of this Section 7 (including adjustment of the appropriate Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series D
Preferred Stock or Series E Preferred Stock, as the case may be) shall be
applicable after that event and be as nearly equivalent as may be practicable.
(i) ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In
each case of an adjustment or readjustment of the Conversion Price or the number
of shares of Common Stock or other securities issuable upon conversion of the
Series D Preferred Stock or Series E Preferred Stock, the Corporation, at its
expense, shall cause independent public accountants of recognized standing
selected by the Corporation (who may be the independent public accountants then
auditing the books of the Corporation) to compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of the Series D
Preferred Stock and each registered holder of the Series E Preferred Stock at
the holder's address as shown in the Corporation's books. The certificate shall
set forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based.
(j) NOTICES OF RECORD DATE. In the event of (i)
any taking by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or (ii) any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation with or into any other corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other person or any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the Corporation shall mail to each holder of Series D
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Preferred Stock and each holder of Series E Preferred Stock at least thirty
(30) days prior to the record date specified therein, a notice specifying (1)
the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution,
(2) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (3) the date, if any, that is to be fixed, as to when
the holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for securities
or other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up.
(k) FRACTIONAL SHARES. Fractional shares of
Common Stock otherwise issuable upon conversion of shares of Series D Preferred
Stock or Series E Preferred Stock held by a single holder shall be aggregated
into whole shares and issued to such holder. Otherwise, no fractional shares of
Common Stock shall be issued upon conversion of the Series D Preferred Stock or
the Series E Preferred Stock. Except as provided above, in lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to the product of such fraction multiplied by
the Common Stock's Fair Market Value on the date of conversion.
(l) RESERVATION OF STOCK ISSUABLE UPON
CONVERSION. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series D Preferred Stock and the
Series E Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series D Preferred Stock and all outstanding shares of the Series
E Preferred Stock; and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series D Preferred Stock and the then outstanding
shares of Series E Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(m) NOTICES. Any notice required or permitted by
this Section 7 or any other provision of this Certificate of Designation to be
given to a holder of Series D Preferred Stock, a holder of Series E Preferred
Stock or to the Corporation shall be in writing and be deemed given upon the
earlier of actual receipt or three (3) days after the same has been deposited in
the United States mail, by certified or registered mail, return receipt
requested, postage prepaid, and addressed (i) to each holder of record at the
address of such holder appearing on the books of the Corporation, or (ii) to the
Corporation at 7880 Bent Branch Drive, Suite 150, Irving, Texas 75063, or (iii)
to the Corporation or any holder, at any other address specified in a written
notice given to the other for the giving of notice.
(n) PAYMENT OF TAXES. The Corporation will pay
all taxes (other than taxes based upon income) and other governmental charges
that may be imposed with respect to the issue or delivery of shares of Common
Stock upon conversion of shares of Series D Preferred Stock or Series E
Preferred Stock, including without limitation any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series D
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Preferred Stock or Series E Preferred Stock, as the case may be, so converted
were registered.
(o) NO DILUTION OR IMPAIRMENT. The Corporation
shall not amend its certificate of incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in carrying out all such action as may be reasonably necessary
or appropriate in order to protect the conversion rights of the holders of the
Series D Preferred Stock and the holders of the Series E Preferred Stock against
dilution or other impairment.
Section 8. RESTRICTIONS AND LIMITATIONS. So long as any shares
of Series D Preferred Stock or any shares of Series E Preferred Stock remain
outstanding, the Corporation shall not, and shall not permit any Subsidiary to,
without the prior vote or written consent by the holders of a Majority of the
Series D and E Preferred Stock:
(a) Authorize, create or issue any new class or
series of capital stock or any other securities convertible into equity
securities of the Corporation (other than Common Stock) having a preference
over, or being on parity with, the Series D Preferred Stock or the Series E
Preferred Stock with respect to voting, dividends, redemption, liquidation or
dissolution of the Corporation;
(b) Increase or decrease (other than by
redemption or conversion) the total number of authorized shares of Series D
Preferred Stock or Series E Preferred Stock;
(c) Increase or decrease the par value of the
Series D Preferred Stock or the Series E Preferred Stock;
(d) Alter or change the powers, preferences or
special rights of the Series D Preferred Stock or the Series E Preferred Stock
so as to affect them adversely;
(e) Merge or consolidate the Corporation with
any other entity or sell all or substantially all of the assets of the
Corporation; or
(f) Declare or pay any dividend (whether in cash
or in shares of Common Stock or any other capital stock of the Corporation) on
or declare or make any other distribution, direct or indirect, on account of the
Junior Stock or set apart any sum for any such purpose.
Section 9. NO REISSUANCE OF SERIES D PREFERRED STOCK OR SERIES
E PREFERRED STOCK. No share or shares of Series D Preferred Stock or Series E
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and, upon such event, all such shares
shall resume the status of authorized but unissued shares of Preferred Stock.
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[SIGNATURE PAGE OF CERTIFICATE OF DESIGNATION]
IN WITNESS WHEREOF, the undersigned hereby executes this
document and affirms that the facts set forth herein are true under penalty of
perjury this 30th day of June, 1999.
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
By:
------------------------------
Name:
Title:
ATTEST:
By:
---------------------------------------
Name:
Title:
<PAGE>
FORM OF
CONVERTIBLE PROMISSORY NOTE
US$
------------------ --------------------,------
New York, NY
FOR VALUE RECEIVED, on __________, _____, AEGIS COMMUNICATIONS
GROUP, INC., a Delaware corporation ("Maker" and also sometimes referred to
herein as the "Company"), promises to pay to the order of
_______________("Holder"), at _________________, or at such other place as
the Holder may from time to time designate in writing, the principal sum of
_____________________ ($ ___________), and to pay interest on the unpaid
principal balance of this Convertible Promissory Note (this "Note") on March
31, June 30, September 30 and December 31 in each year commencing on
________________, ______, at the rate and upon the terms set forth below.
Interest shall be payable by the issuance of additional Notes ("Secondary
Notes"), the principal amount of each of which shall be equal to the interest
due on the applicable interest payment date, PROVIDED, HOWEVER, that no
Secondary Note will be issued on the Maturity Date (as defined herein) and
any interest due on such date shall be payable in cash. Subject to the
proviso of the preceding sentence, any Secondary Notes shall be subject to
the same terms as this Note (except, as the case may be, with respect to
title, issuance date and aggregate principal amount).
1. INTEREST. Commencing on the date hereof and continuing until
repayment in full or conversion of this Note, interest shall accrue on the
principal balance outstanding hereunder at a rate equal to twelve percent (12%)
per annum. Interest shall be computed on the basis of a three hundred sixty
(360) day year counting the number of actual days elapsed.
2. PAYMENTS AND MATURITY. Subject to the provisions of Sections 4
and 5 hereof, the unpaid principal sum, together with interest thereon at the
rate provided herein, shall be payable as follows:
(a) Interest only on the unpaid principal sum shall be
due and payable quarterly, on each March 31, June 30, September 30 and December
31 commencing on _______________, _______; and
(b) Unless the Company elects to prepay pursuant to
Section 3(a) hereof, or unless the Company is required to prepay pursuant to
Section 3(b) hereof, the unpaid principal sum, together with interest accrued
and unpaid thereon, shall be due and payable at 10:00 a.m., New York time, on
__________, _____ (the "Maturity Date").
3. PREPAYMENT.
<PAGE>
(a) Subject to the provisions of Section 4, this Note may
be prepaid in whole or in part at any time without premium or penalty. The Maker
shall give the Holder of this Note at least thirty days prior written notice of
any prepayment under this Section 3(a). Subject to the provisions of Section 4
hereof, the amount of any partial prepayment shall first be applied to accrued
but unpaid interest owing on this Note and then to the unpaid principal balance
hereof.
(b) This Note shall automatically become due and payable
on the date of effectiveness of a Company Sale (as defined herein), PROVIDED,
that the maturity date of the Bank Indebtedness (as defined herein) has not (on
or prior to the date of the Company Sale) been accelerated, in which case such
payment of this Note shall be subject to Section 4. A "Company Sale" shall be
defined as any of (A) any sale, assignment, conveyance, transfer, lease or other
disposition, in one or a series of transactions, of all or substantially all of
the assets of the Company to any person, or group of related persons other than
to an Affiliate (as defined herein) of the Company; (B) any consolidation,
merger, recapitalization, or share exchange of the Company in which the holders
of voting stock of the Company immediately before the merger, consolidation,
recapitalization, or share exchange will not own 50% or more of the voting
shares of the continuing or surviving corporation or other entity (whether or
not the Company) immediately after such consolidation, merger, recapitalization,
or share exchange; or (C) any sale or other disposition of voting stock of the
Company representing 50% or more of the total voting power of the Company's
outstanding capital stock in one or a series of related transactions to any
person, or group of related persons. For purposes of this Note, an "Affiliate"
shall mean, with respect to any person, any other person who directly or
indirectly or through one or more intermediaries, controls, is controlled by, or
is under common control with, such person. The term "control" means the
possession, directly or indirectly, of the power to cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
4. SUBORDINATION OF NOTE.
(a) The Maker hereof agrees and the Holder by its
acceptance of this Note likewise agrees that the indebtedness represented by
this Note (the "Subordinated Indebtedness"), shall, subject to Section 4(j), be
subordinate pursuant to the terms of this Note to the prior payment in full of
all indebtedness, obligations and liabilities (the "Guaranty Obligations") of
the Maker, under Article X of that certain Second Amended and Restated Credit
Agreement, dated as of July 9, 1998 (as amended or otherwise modified from time
to time, the "Credit Agreement") among the Maker, IQI, Inc. (the "Borrower"),
the various financial institutions as are or may from time to time become
parties thereto (collectively, the "Lenders"), The Bank of Nova Scotia as
Documentation Agent and Administrative Agent for the Lenders (in such capacity,
the "Administrative Agent") and Credit Suisse First Boston as Syndication Agent
for the Lenders, to the Lenders, the Issuers and the Agents (as such capitalized
terms are defined in the Credit Agreement). Such Guaranty Obligations relate to
the indebtedness, obligations and liabilities of Borrower arising out of or in
connection with the Credit Agreement (providing for Term Loans in the principal
amount of $_________ and a Revolving Loan Commitment Amount of $______________),
the Notes and/or any of the other Loan Documents, as such capitalized terms are
defined in the Credit Agreement, in each case as the same may be modified,
renewed, extended, refunded, refinanced, replaced (through new loan or security
agreements or otherwise), increased or decreased from time to time, including,
18
<PAGE>
without limitation, as to all indebtedness, obligations and liabilities of
Borrower described in the foregoing, all principal, interest (including any
interest accruing subsequent to the date of, or which would accrue but for a
filing or a petition or other action commencing bankruptcy, insolvency or
similar proceedings with respect to the Borrower, whether or not permitted as an
enforceable claim against the Borrower pursuant to applicable bankruptcy,
insolvency or reorganization laws), and commitment, agency, facility,
structuring, restructuring and other fees payable in connection therewith,
together with any and all other expenses, indemnities or amounts payable in
connection therewith, including all expenses incurred by the Lender Parties (as
defined herein) in collecting all or any of the above or enforcing any rights
under the Credit Agreement, the Notes, each other Loan Document, or any other
agreement contemplated thereby (said indebtedness, obligations and liabilities
of the Borrower referred to above being hereinafter collectively referred to as
the "Bank Indebtedness"; the Credit Agreement, the Notes and the other Loan
Documents being collectively referred to herein as the "Senior Debt Documents;"
and the Lenders, the Issuers and the Agents being collectively referred to
herein as the "Lender Parties"). As used in this Note, the phrases "payment in
full" and "paid in full" shall mean the payment in full in cash of such amount
or obligations. To the extent any payment in respect of the Guaranty Obligations
(whether by or on behalf of the Maker, as proceeds of security or enforcement of
any right of setoff or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar persons under the bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then if such
payment is recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar person, the Guaranty Obligations or
part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred. To the extent
any Guaranty Obligation is declared to be fraudulent, invalid, or otherwise set
aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then the obligation so declared fraudulent, invalid, or otherwise
set aside (and all other amounts that would come due with respect thereto had
such obligations not been affected) shall be deemed to be reinstated and
outstanding as a Guaranty Obligation for all purposes hereof as if such
declaration, invalidity or setting aside had not occurred.
Subject to Section 5 hereof, no payment of principal or interest (other
than the issuance of Secondary Notes) may be made on the Subordinated
Indebtedness so long as any Guaranty Obligations remain in effect.
(b) Upon (i) any acceleration of the maturity of the Bank
Indebtedness, (ii) any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the property, assets or business of the Borrower upon any
dissolution, winding up, liquidation, or reorganization of the Borrower, whether
in bankruptcy, insolvency, receivership, reorganization, or other similar
proceeding or upon an assignment for the benefit of creditors, any other
marshaling of the assets and liabilities of the Borrower or any proceeding by or
against the Borrower for any relief under any bankruptcy, reorganization or
insolvency law or laws relating to the relief of debtors, readjustment of
indebtedness or reorganization, or otherwise (all or any of the foregoing in
this subsection (b)(ii) being referred to as a "Bankruptcy Event") or (iii) the
occurrence of a default in the payment of any principal or interest due under
the Credit Agreement (after the giving of any required notice and the lapse of
any
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<PAGE>
applicable grace period in accordance with the terms of the Credit Agreement,
a "Payment Default") or the "Cash Flow Coverage Ratio" (as defined in the
Credit Agreement, as executed) being less than 0.35:1 beginning for the
Company's fiscal quarter ending December 31, 1998 or 1.00:1 for each fiscal
quarter thereafter, which in either case is not waived by the Lender Parties,
and which, in the case of a Payment Default, entitles the Lender Parties to
accelerate the maturity of the Bank Indebtedness (each such event in (i),
(ii) and (iii) being referred to as a "Subordination Event") and until such
Subordination Event is rescinded, waived or otherwise cured, the Lender
Parties shall be entitled to receive payment in full of the Guaranty
Obligations before the Holder is entitled to receive any payment on account
of any principal or interest owing on this Note (other than the issuance of
Secondary Notes); PROVIDED, HOWEVER, that at such time as an acceleration of
maturity or Payment Default described in clauses (i) or (iii) above is
rescinded, cured or waived, or the Cash Flow Coverage Ratio becomes equal to
or greater than 0.35:1 beginning in the Company's fiscal quarter ending
December 31, 1998 or 1.00:1 for each fiscal quarter thereafter, then the
provisions of this subsection (b) shall no longer be effective with respect
to the event or occurrence which gave rise to such Subordination Event, and
subject to subsection (c) below, the Maker shall resume making any and all
payments of interest and principal on this Note, including any missed
payments.
(c) So long as the Guaranty Obligations remain in effect,
the Holder shall not (i) challenge the legality, validity, enforceability or
priority of the Bank Indebtedness or the legality, validity, enforceability,
perfection or priority of the liens granted pursuant to any of the Senior Debt
Documents or the rights of the Lender Parties under any of the Senior Debt
Documents; (ii) except as provided in Section 5 hereof, exercise any remedy or
commence, prosecute or participate in any action, whether private, judicial,
equitable, administrative or otherwise, including without limitation any
bankruptcy case, against the Maker or any of its assets to enforce any right
under and in respect to the Subordinated Indebtedness; or (iii) except as
provided in Section 5 hereof, have any right to accelerate the maturity of, or
institute any proceedings to enforce, any indebtedness evidenced by this Note or
otherwise take any action to collect or seek enforcement of payment of the
Subordinated Indebtedness or otherwise attempt to recover payment of the
Subordinated Indebtedness.
(d) Should any payment of any part of the Subordinated
Indebtedness be received by Holder in violation of the provisions of this
Section 4, such payment shall be delivered forthwith to the Administrative Agent
on behalf of the Lender Parties by the Holder for application to the Guaranty
Obligations in the form received except for the addition of any endorsement or
assignment necessary to effect the transfer of all rights therein to the
Administrative Agent on behalf of the Lender Parties. The Administrative Agent
is irrevocably authorized to supply any required endorsement or assignment which
may have been omitted. Until such delivery, any such payment or collateral shall
be held by the Holder in trust for the Administrative Agent on behalf of the
Lender Parties and shall not be commingled with other funds or property of the
Holder. The Holder further agrees not to sell, assign, transfer, or endorse his
claim or claims under the Subordinated Indebtedness, no matter how evidenced, to
anyone without obtaining such transferee's consent to be bound by the
provisions, of this Section 4.
(e) The Holder agrees and consents that the
Administrative Agent and the Lender Parties shall have uncontrolled power and
discretion, without notice to the Holder, to deal in any manner with the
Guaranty Obligations and the Bank Indebtedness and with all principal, interest,
20
<PAGE>
late charges, costs, and expenses payable by, or the liability of the Borrower
under the Senior Debt Documents or any other obligor in respect of the Bank
Indebtedness and the Senior Debt Documents (such obligors, together with the
Borrower being referred to herein individually as an "Obligor", and,
collectively, as the "Obligors") to such Lender Parties arising therefrom, and
with any security and guarantees therefor, including, but not by way of
limitation, any release, surrender, extension, renewal, acceleration,
compromise, or substitution.
(f) This Section 4 shall continue in full force and
effect until the Guaranty Obligations have been terminated or shall have expired
pursuant to its terms. The Lender Parties may continue, without notice to the
Holder, to extend Bank Indebtedness on the faith of this Section 4 until the
Guaranty Obligations have been terminated or shall have expired pursuant to its
terms.
(g) The Holder acknowledges and agrees that the Lender
Parties will rely upon the subordination provisions contained herein in
continuing to extend credit to the Borrower and has relied upon such provisions
in entering into the Credit Agreement. In furtherance of the foregoing, the
Holder hereby waives notice of or proof of reliance hereon.
(h) No present or future Lender Parties shall be
prejudiced in their right to enforce the subordination contained herein in
accordance with the terms hereof by any act or failure to act on the part of the
Borrower.
(i) Nothing in this Section 4 is intended as between the
Maker and the Holder to impair in any way the obligation of the Maker to pay all
amounts due hereunder in accordance with the other provisions of this Note and
to perform and comply in all respects with all of its other obligations under
this Note in a timely manner.
(j) Notwithstanding any other provision contained herein,
the Subordinated Indebtedness shall be subordinate to the prior payment in full
of the Guaranty Obligations only for so long as the aggregate amount of the Term
Loans and the Commitments (as such terms are defined in the Credit Agreement,
and hereinafter collectively referred to as the "Lenders' Commitment") do not
exceed at any time $______________-.
5. HOLDER'S RIGHTS.
(a) If (i) all the Bank Indebtedness shall have become or
be declared to be immediately due and payable, (ii) the Maker shall default in
the payment of any interest payable under this Note when due, and if any
Guaranty Obligations remain in effect, and such default shall continue
unremedied for a period of six months, or (iii) a Sub Event of Default (as
defined herein) shall have occurred then, and in any such event, the holders of
66-2/3% of the aggregate principal amount of this Note then outstanding may at
their option, by the delivery of written notice to the Maker and the
Administrative Agent, declare this Note to be due and payable, whereupon
(subject to the next two sentences) the unpaid principal amount of and accrued
interest on and all other amounts owing under this Note shall forthwith mature
and become due and payable, all without presentment, demand, protest or other
notice, all of which are hereby expressly waived. If payment of the Note is
accelerated in accordance with the foregoing, the Maker shall promptly notify
the
21
<PAGE>
Administrative Agent of the acceleration. If the Guaranty Obligations are
outstanding or remain in effect, (x) neither the Maker nor any other person may
pay this Note until 15 days after the Administrative Agent has received notice
of such acceleration, and (y) in any event, neither Maker nor any other person
may pay this Note so long as any Subordination Event shall have occurred and
shall be continuing in effect.
(b) At any time after this Note is declared due and
payable, as provided above, the holders of 66-2/3% of the aggregate principal
amount of this Note then outstanding, by written notice to the Maker, may
rescind and annul any such declaration in respect of this Note and its
consequences if (i) the Maker has paid all overdue interest on this Note, and
(ii) all Sub Debt Events of Default (as defined herein), other than non-payment
of amounts which have become due solely by reason of such declaration, have been
cured or waived by such holders; PROVIDED, that no such rescission and annulment
shall extend to or affect any subsequent Sub Debt Event of Default or impair any
right consequent thereon.
(c) Upon the occurrence of (i) a Company Sale or (ii) the
Maturity Date, the Maker shall repay in full the principal amount of the
Subordinated Indebtedness, together with all accrued interest thereon, and
notwithstanding that any Guaranty Obligations remain in effect on such repayment
date, and notwithstanding the provisions of Section 4, such repayment shall be
made unless (x) a Bankruptcy Event has occurred or (y) the maturity of the Bank
Indebtedness has been accelerated, in either of which case, any and all such
repayments shall be subject to Section 4.
6. UNSECURED NOTE. This Note is not secured by a security
interest in any assets.
7. DEFAULT RATE. After the occurrence and during the continuance
of a Sub Debt Event of Default (as defined below), in addition to all other
rights and remedies, the outstanding principal balance of this Note (and to the
extent permitted by applicable law, all unpaid interest) shall bear interest at
a rate equal to fifteen percent (15%) per annum, or such lesser rate which is
the maximum rate of interest permitted by law. A "Sub Debt Event of Default"
shall occur if:
(a) default shall be made in the payment of any amount of
interest on this Note when due (without giving effect to any grace period) and
such default shall continue for a period of five days after the Holder shall
have sent the Maker written notice of such default; or
(b) default shall be made in the payment of any amount of
principal due under this Note, when due; or
(c) a Subordination Event shall have occurred and be
continuing; or
(d) the Maker shall apply for or consent to the
appointment of a custodian, receiver, trustee or liquidator, or other
court-appointed fiduciary of all or a substantial part of its properties; or
such a custodian, receiver, trustee or liquidator or other court-appointed
fiduciary shall be appointed with or without the consent of the Maker; or the
Maker is generally not paying its debts as they become due by means of available
assets or is insolvent, or makes a general assignment for the benefit of
creditors; or the Maker files a voluntary petition in bankruptcy, or a petition
or an
22
<PAGE>
answer seeking reorganization or arrangement with creditors or seeking to
take advantage or any insolvency law, or an answer admitting the material
allegations of a petition in any bankruptcy, reorganization or insolvency
proceeding or has taken action for the purpose of effecting any of the
foregoing; or within 60 days after the commencement of any proceeding against
the Maker seeking any reorganization, rehabilitation, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
the U.S. Bankruptcy Code or any comparable state law or any successor law or
the appointment of any trustee, receiver, custodian, liquidator, or other
court-appointed fiduciary of the Maker or of all or any substantial part of
its properties, such order or appointment shall not have been vacated or
stayed on appeal or otherwise or if, within 60 days after the expiration of
any such stay, such order or appointment shall not have been vacated.
8. CONVERSION.
(a) Until this Note has been paid in full, the unpaid
principal balance of this Note, or any portion thereof, may be converted, at the
option of Holder, into a number of fully paid and nonassessable shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), equal to
(i) that portion of the unpaid principal balance of this Note being converted,
divided by (ii) [$2.00 (Series D)/$2.375 (Series E)], subject to adjustment as
provided herein (the "Conversion Price"); PROVIDED, HOWEVER, that in lieu of any
fractional share of the Company's Common Stock that would otherwise be issued to
Holder pursuant to this Section, Holder shall receive one share of the Company's
Common Stock for such fractional share.
(b) The conversion of this Note into Common Stock may be
effected at any time, on any business day prior to payment, and thereupon the
indebtedness owed under this Note, with respect to the unpaid principal balance
of this Note which has been converted, shall be extinguished.
(c) The Company shall at all times reserve and keep
available for issuance upon the conversion of the unpaid principal balance, or
any portion thereof, of this Note such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the conversion in full of
the principal amount of this Note.
(d) The number of shares of Common Stock, or the type of
securities, receivable upon conversion of this Note shall be adjusted or amended
as follows:
(i) In case of any reorganization of the Company
(or any other corporation, the stock or other securities of which are
at the time receivable on the conversion of this Note) after the date
hereof (the "Issue Date"), or in case, after such date, the Company (or
any such other corporation) shall consolidate with or merge into
another corporation (other than the merger of a wholly owned subsidiary
into the Company) or convey all or substantially all its assets to
another corporation, then and in each such case Holder, upon the
conversion hereof at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled
to receive, in lieu of the stock receivable upon the conversion of this
Note prior to such consummation, the stock or other securities or
property to which Holder would have been entitled upon such
consummation if Holder had converted this Note immediately prior
thereto.
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<PAGE>
(ii) If the Company at any time or from time to
time after the Issue Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a
dividend payable in additional shares of Common Stock, then and in each
such event the Conversion Price then in effect shall be decreased as of
the time of such issuance or, in the event such record date is fixed,
as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction (1) the numerator of
which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close
of business on such record date, and (2) the denominator of which shall
be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business
on such record date plus the number of shares of Common Stock issuable
in payment of such dividend; provided, however, that if such record
date is fixed and such dividend is not fully paid on the date fixed
therefor, the Conversion Price shall be recomputed accordingly as of
the close of business on such record date and thereafter the Conversion
Price shall be adjusted pursuant to this subparagraph (ii) as of the
time of actual payment of such dividends.
(iii) If the Company at any time or from time to
time after the Issue Date effects a subdivision of the outstanding
Common Stock, the Conversion Price then in effect immediately before
that subdivision shall be proportionately decreased and the number of
shares of Common Stock theretofore receivable upon the conversion of
this Note shall be proportionately increased. If the Company at any
time or from time to time after the Issue Date combines the outstanding
shares of Common Stock into a smaller number of shares, the Conversion
Price then in effect immediately before that combination shall be
proportionately increased and the number of shares of Common Stock
theretofore receivable upon the conversion of this Note shall be
proportionately decreased. Each adjustment under this subparagraph
(iii) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(iv) In each case of an adjustment in the shares
of Common Stock receivable on the conversion of this Note, the Company
at its expense shall cause independent public accountants of recognized
standing selected by the Company (who may be the independent public
accountants then auditing the books of the Company) to compute such
adjustment in accordance with the terms of this Note and prepare a
certificate setting forth such adjustment and showing the facts upon
which such adjustment is based. The Company will forthwith mail a copy
of each such certificate to Holder.
(e) The Company will not, by amendment of its certificate
of incorporation or through reorganization, consolidation, merger, dissolution,
issue or sale of securities, sale of assets or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this Note,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Note against impairment. Without
limiting the generality of the foregoing, the Company will take all such action
as may be necessary or appropriate in order that the Company
24
<PAGE>
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the conversion of the unpaid principal balance of this Note at the
time outstanding.
(f) In case (A) the Company shall take a record of the
holders of its Common Stock (or other stock or securities at the time receivable
upon the conversion of the unpaid principal balance of this Note) for the
purpose of entitling them to receive any dividend or other distribution, or any
right to subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or (B) of any Company Sale, or (C) of
any voluntary dissolution, liquidation or winding-up of the Company, then, and
in each such case, the Company will mail or cause to be mailed to Holder a
notice specifying, as the case may be, (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, or (ii) the date
on which such Company Sale is to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such stock or
securities at the time receivable upon the conversion of the unpaid principal
balance of this Note) shall be entitled to exchange their shares of Common Stock
(or such other stock or securities) for securities or other property deliverable
upon such Company Sale, or (ii) the effective date of any such voluntary
dissolution, liquidation or winding-up of the Company. Such notice shall be
mailed at least 30 days prior to the date therein specified.
9. USE OF PROCEEDS. The Company shall use the proceeds of this
Note for working capital and general corporate purposes.
10. COLLECTION COSTS. The Maker shall pay the Holder the
reasonable attorneys' fees and costs incurred to collect the unpaid principal
balance and interest owing on this Note and otherwise to enforce the Holder's
rights and remedies under this Note.
11. MODIFICATIONS; WAIVERS. Subject to subsection (b) below, (a)
this Note may not be amended, modified, extended, discharged or waived orally or
by course of conduct, except by an agreement in writing, signed by the party
against whom enforcement of any amendment, modification, extension, discharge,
or waiver is sought; A waiver of any provision of this Note or of any breach
thereof shall not be deemed or construed as a general waiver of such provision
or any other provision hereof or of any rights hereunder; No failure or delay in
exercising any right or remedy hereunder operates as a waiver thereof; No single
or partial exercise of any right or remedy hereunder precludes any other or
further exercise of any right or remedy hereunder and the exercise of any right
or remedy hereunder does not preclude the simultaneous or later exercise of any
other rights or remedies available at law or in equity.
(a) Notwithstanding anything to the contrary herein,
each of the parties hereto acknowledges and agrees that certain of the
provisions contained herein (including the subordination provisions of
Section 4 hereof) are solely for the benefit of the Lender Parties and their
representatives, assignees and beneficiaries, and this Note may not be
rescinded, cancelled, amended or modified in any way, and this Note may not
be assigned, sold, pledged as security or otherwise transferred nor may any
provision of this Note be waived or changed, nor may the indebtedness
evidenced hereby be cancelled, compromised or discharged in whole or in part,
in each case, without the prior written consent thereto of, so long as the
Guaranty Obligations shall remain in effect, the
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<PAGE>
Administrative Agent (on behalf of the Lender Parties), provided that such
consent shall not be unreasonably withheld in connection with an assignment
to the Holder's spouse or children or trusts for the benefit of the Holder's
spouse, children or more remote descendants of such persons.
12. HEADINGS. All headings in this Note are for convenience of
reference only and do not affect the meaning of any provision.
13. PARTIAL INVALIDITY. If any provision of this Note is at any
time held to be invalid by any court of competent jurisdiction, such invalidity
shall not effect the remaining provisions of this Note, which shall continue to
be in full force and effect.
14. NO THIRD PARTIES BENEFITTED. The provisions contained in this
Note are solely for the benefit of Maker, Holder and Lender Parties and their
respective successors and permitted assignees, and no other person or entity,
including, without limitation, any guarantor of the obligations of Maker or a
trustee in bankruptcy, is intended to be a third party beneficiary hereunder, or
to have any right, remedy, claim, benefit, priority or interest under (or
because of the existence of), or shall have any right to enforce, this Note.
15. WAIVERS. The Maker hereby waives presentment, demand for
payment, protest, notice of protest and notice of dishonor of this Note. The
Maker hereby further waives any claim, right or remedy, direct or indirect, that
Maker may now or hereafter have to enforce the subordination provisions
contained herein against Holder, in each case whether any such claim, right or
remedy arises in equity, by contract or statute, under common law or otherwise
and based on any claim, right or remedy whatsoever, including, without
limitation, (a) any right of subrogation, reimbursement or indemnification that
Maker may now or hereafter have against Borrower, (b) any claim or right to
enforce, or participate in, any claim, right or remedy which the Lender Parties
may now or hereafter have against Borrower, and (c) any benefit of, or any right
to participate in, any collateral or security for the benefit of Lender Parties.
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<PAGE>
16. GOVERNING LAW. This Note shall be governed by, and construed
in accordance with, the laws of the State of New York.
MAKER:
AEGIS COMMUNICATIONS GROUP, INC.
By:
-----------------------------------
An Authorized Officer
The terms and conditions set forth in this Convertible
Promissory Note are acknowledged, understood and accepted.
- -------------------------------------
By:
---------------------------------
An Authorized Person
27
<PAGE>
SECURITIES EXCHANGE AGREEMENT
THIS SECURITIES EXCHANGE AGREEMENT (this "AGREEMENT") is
entered into as of June 30, 1999 by and among Aegis Communications Group, Inc.,
a Delaware corporation (the "COMPANY"), Thayer Equity Investors III, L.P., a
Delaware limited partnership ("THAYER"), Edward Blank ("BLANK"), The Edward
Blank 1995 Grantor Retained Annuity Trust ("BLANK TRUST") and ITC Service
Company ("ITC"). Thayer, Blank, Blank Trust and ITC are sometimes referred to
herein, collectively, as the "NOTEHOLDERS" and, individually, as a
"NOTEHOLDER").
R E C I T A L S
A. WHEREAS, Thayer is the holder of:
(i) a Convertible Promissory Note dated July 9, 1998 in the original
principal amount of $6,872,500 made by the Company in favor of
Thayer;
(ii) a Convertible Promissory Note dated September 30, 1998 in the
original principal amount of $194,720.83 made by the Company
in favor of Thayer;
(iii) a Convertible Promissory Note dated December 31, 1998 in the
original principal amount of $216,728.11 made by the Company
in favor of Thayer;
(iv) a Convertible Promissory Note dated March 31, 1999 in the original
principal amount of $218,518.46 made by the Company in favor of
Thayer;
(v) a Convertible Promissory Note dated June 30, 1999 in the original
principal amount of $227,574.84 made by the Company in favor of
Thayer;
(vi) a Convertible Promissory Note dated July 29, 1998 in the original
principal amount of $1,418,160 made by the Company in favor of
Thayer;
(vii) a Convertible Promissory Note dated October 23, 1998 in the
original principal amount of $1,567,440 made by the Company in
favor of Thayer;
(viii) a Convertible Promissory Note dated September 30, 1998 in the
original principal amount of $29,781.36 made by the Company in
favor of Thayer;
(ix) a Convertible Promissory Note dated December 31, 1998 in the
original principal amount of $80,454.66 made by the Company in
favor of Thayer;
(x) a Convertible Promissory Note dated March 31, 1999 in the original
principal amount of $92,875.08 made by the Company in favor of
Thayer; and
<PAGE>
(xi) a Convertible Promissory Note dated June 30, 1999 in the
original principal amount of $96,724.24 made by the Company in
favor of Thayer (collectively the "THAYER NOTES").
B. WHEREAS, Blank is the holder of:
(i) a Convertible Promissory Note dated July 29, 1998 in the original
principal amount of $220,440 made by the Company in favor of
Blank;
(ii) a Convertible Promissory Note dated October 23, 1998 in the
original principal amount of $243,600 made by the Company in favor
of Blank;
(iii) a Convertible Promissory Note dated September 30, 1998 in the
original principal amount of $4,629.24 made by the Company in
favor of Blank;
(iv) a Convertible Promissory Note dated December 31, 1998 in the
original principal amount of $12,504.92 made by the Company in
favor of Blank;
(v) a Convertible Promissory Note dated March 31, 1999 in the original
principal amount of $14.435.22 made by the Company in favor of
Blank; and
(vi) a Convertible Promissory Note dated June 30, 1999 in the
original principal amount of $15,033.48 made by the Company in
favor of Blank (collectively the "BLANK NOTES").
C. WHEREAS, Blank Trust is the holder of:
(i) a Convertible Promissory Note dated July 29, 1998 in the original
principal amount of $52,250 made by the Company in favor of Blank
Trust;
(ii) a Convertible Promissory Note dated October 23, 1998 in the
original principal amount of $57,750 made by the Company in favor
of Blank Trust;
(iii) a Convertible Promissory Note dated September 30, 1998 in the
original principal amount of $1,097.25 made by the Company in
favor of Blank Trust;
(iv) a Convertible Promissory Note dated December 31, 1998 in the
original principal amount of $2,964.23 made by the Company in
favor of Blank Trust;
(v) a Convertible Promissory Note dated March 31, 1999 in the original
principal amount of $3,421.84 made by the Company in favor of
Blank Trust; and
(vi) a Convertible Promissory Note dated June 30, 1999 in the
original principal amount of $3,563.66 made by the Company in
favor of Blank Trust (collectively the "BLANK TRUST NOTES").
-2-
<PAGE>
D. WHEREAS, ITC is the holder of:
(i) a Convertible Promissory Note dated July 29, 1998 in the original
principal amount of $209,190 made by the Company in favor of ITC;
(ii) a Convertible Promissory Note dated October 23, 1998 in the
original principal amount of $231,210 made by the Company in
favor of ITC;
(iii) a Convertible Promissory Note dated September 30, 1998 in the
original principal amount of $4,392.99 made by the Company in
favor of ITC;
(iv) a Convertible Promissory Note dated December 31, 1998 in the
original principal amount of $11,867.71 made by the Company in
favor of ITC;
(v) a Convertible Promissory Note dated March 31, 1999 in the original
principal amount of $13,699.82 made by the Company in favor of
ITC; and
(vi) a Convertible Promissory Note dated June 30, 1999 in the original
principal amount of $14,267.60 made by the Company in favor of ITC
(collectively the "ITC NOTES," and together with the Thayer Notes,
the Blank Notes and the Blank Trust Notes, the "NOTES").
E. WHEREAS, the Company has agreed to issue to Thayer (i)
Series D Shares, (ii) Series E Shares and (iii) Warrants in exchange for all of
its interest in the Notes, and Thayer has agreed to such exchange on and subject
to the terms and conditions of this Agreement.
F. WHEREAS, the Company has agreed to issue to Blank, Blank
Trust and ITC (i) Series E Shares and (ii) Warrants in exchange for all of their
interest in the Notes, and such Noteholders have agreed to such exchange on and
subject to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
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<PAGE>
ARTICLE 1.
DEFINITIONS
Unless otherwise defined herein or the context otherwise
requires, the terms defined in this Article 1 shall have the meanings herein
specified for all purposes of this Agreement, applicable to both the singular
and plural forms of any of the terms herein defined.
"AGREEMENT" shall mean this Securities Exchange Agreement.
"BLANK" shall mean Edward Blank.
"BLANK NOTES" shall have the meaning assigned to such term in
the Recitals.
"BLANK TRUST" shall mean The Edward Blank 1995 Grantor
Retained Annuity Trust.
"BLANK TRUST NOTES" shall have the meaning assigned to such
term in the Recitals.
"CLOSING" and "CLOSING DATE" have the respective meanings
assigned to such terms in Section 2.2.
"COMMON STOCK" shall mean Common Stock, $.01 par value per
share, of the Company.
"COMPANY" shall mean Aegis Communications Group, Inc., a
Delaware corporation.
"GOVERNMENTAL ENTITY" shall mean any local, state, federal or
foreign (i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the Internal Revenue
Service and other taxing authorities.
"ITC" shall mean ITC Service Company.
"ITC NOTES" shall have the meaning assigned to such term in
the Recitals.
"LEGAL REQUIREMENT" shall mean any statute, law, ordinance,
rule, regulation, permit, order, writ, judgment, injunction, decree or award
issued, enacted or promulgated by any Governmental Entity or any arbitrator.
"LIEN" shall mean all liens (including judgment and mechanics'
liens, regardless of whether liquidated), mortgages, assessments, security
interests, easements, claims, pledges, trusts (constructive or other), deeds of
trust, options or other charges, encumbrances or restrictions.
"NOTEHOLDERS" shall mean Thayer, Blank, Blank Trust and ITC.
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<PAGE>
"NOTES" shall have the meaning assigned to such term in the Recitals.
"PERSON" shall mean all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures, Governmental
Entities and any other entities.
"PREFERRED STOCK" shall mean Series D Preferred Stock and Series E
Preferred Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain
Registration Rights Agreement dated July 9, 1998 by and among the Company,
Thayer, Blank, Blank Trust and ITC.
"REGISTRATION RIGHTS AMENDMENT" shall have the meaning assigned to
such term in Section 5.1 hereof.
"SECURITIES" shall mean the Series D Shares, the Series E Shares,
the Warrants, the Common Stock issuable upon conversion of the Series D
Shares and the Series E Shares, and the Common Stock issuable upon exercise
of the Warrants.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES B PREFERRED STOCK" shall mean Series B Preferred Stock, $.01
par value per share of the Company.
"SERIES D PREFERRED STOCK" shall mean Series D Preferred Stock, $.01
par value per share of the Company.
"SERIES D SHARES" shall mean an aggregate of 77,300 shares of
Series D Preferred Stock.
"SERIES E PREFERRED STOCK" shall mean Series E Preferred Stock, $.01
par value per share of the Company.
"SERIES E SHARES" shall mean an aggregate of 44,018 shares of
Series E Preferred Stock.
"THAYER" shall mean Thayer Equity Investors III, L.P., a Delaware
limited partnership.
"THAYER NOTES" shall have the meaning assigned to such term in the
Recitals.
"WARRANTS" shall mean Warrants to purchase an aggregate of
1,000,000 shares of Common Stock (subject to adjustment) at an initial
exercise price of $0.90625 per share (subject to adjustment), such Warrants
to be evidenced by certificates substantially in the form attached hereto as
EXHIBIT A.
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<PAGE>
ARTICLE 2.
EXCHANGE OF SECURITIES
2.1 EXCHANGE OF SECURITIES.
(a) Subject to the terms and conditions set forth in this
Agreement, Thayer agrees to exchange on the Closing Date all interests in the
Notes held by Thayer for (i) the number of Series D Shares set forth across its
name on ATTACHMENT A attached hereto, (ii) the number of Series E Shares set
forth across its name on ATTACHMENT A attached hereto, and (iii) a Warrant to
purchase the number of shares of Common Stock set forth across its name on
ATTACHMENT A attached hereto, on the terms and subject to the conditions set
forth herein.
(b) Subject to the terms and conditions set forth in this
Agreement, each of Blank, Blank Trust and ITC agrees to exchange on the
Closing Date all interests in the Notes held by such Noteholder for (i) the
number of Series E Shares set forth across such Noteholder's name on
ATTACHMENT A attached hereto, and (ii) a Warrant to purchase the number of
shares of Common Stock set forth across such Noteholder's name on ATTACHMENT
A attached hereto, on the terms and subject to the conditions set forth
herein.
2.2 THE CLOSING. The closing (the "CLOSING") of the surrender of Notes
by the Noteholders to the Company and the issuance of the Series D Shares,
Series E Shares and Warrants by the Company to the Noteholders shall occur at
10:00 a.m., Los Angeles time, on the date hereof, at the offices of Paul,
Hastings, Janofsky & Walker LLP, 555 South Flower Street, 23rd Floor, Los
Angeles, California 90071, or at such other time or on such other date as
shall be agreed upon among the Noteholders and the Company, such hour and
date being herein generally referred to as the "CLOSING DATE." At the Closing:
(a) Thayer shall deliver to the Company the Thayer Notes;
(b) Blank shall deliver to the Company the Blank Notes;
(c) Blank Trust shall deliver to the Company the Blank Trust
Notes;
(d) ITC shall deliver to the Company the ITC Notes;
(e) The Company shall deliver to Thayer (i) a certificate or
certificates evidencing the number of Series D Shares set forth across
Thayer's name on ATTACHMENT A attached hereto, (ii) a certificate or
certificates evidencing the number of Series E Shares set forth across
Thayer's name on ATTACHMENT A attached hereto, and (iii) a Warrant to
purchase the number of shares of Common Stock set forth across Thayer's name
on ATTACHMENT A attached hereto, against delivery of the Thayer Notes; and
(f) The Company shall deliver to each of Blank, Blank Trust and
ITC (i) a certificate or certificates evidencing the number of Series E
Shares set forth across such Noteholder's name on ATTACHMENT A attached
hereto, and (ii) a Warrant to purchase the number
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<PAGE>
of shares of Common Stock set forth across such Noteholder's name on
ATTACHMENT A attached hereto, against delivery of the Notes held by such
Noteholder.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby covenants with, and represents and warrants
to, each Noteholder as follows:
3.1 CAPITALIZATION. The authorized capital stock of the
Company immediately prior to the Closing consists solely of: (i) 100,000,000
shares of Common Stock, of which 52,492,616 shares are issued and outstanding;
and (ii) 1,000,000 shares of Preferred Stock, $.01 par value per shares, of
which (1) 29,778 shares have been designated Series B Preferred Stock (29,778
shares of which are issued and outstanding), (2) 231,902 shares have been
designated Series D Preferred Stock (none of which will be issued or outstanding
prior to the Closing) and (3) 132,053 shares of have been designated Series E
Preferred Stock (none of which will be issued or outstanding prior to the
Closing). The rights, privileges and preferences of the Series B Preferred Stock
are as stated in the Series B Preferred Stock Certificate of Designation filed
with the Secretary of State of the State of Delaware on July 9, 1998. The
rights, privileges and preferences of the Series D Preferred Stock and the
Series E Preferred Stock are as stated in the Series D and E Preferred Stock
Certificate of Designation attached hereto as EXHIBIT B. The Company's
previously designated Series A Preferred Stock and Series C Preferred Stock are
no longer outstanding and such designated preferred stock has resumed the status
of authorized but unissued preferred stock.
3.2 ORGANIZATION, STANDING, ETC. The Company is a corporation
duly organized and validly existing under the laws of the State of Delaware, and
has all requisite power and authority to carry on its business, to own and hold
its properties and assets, to enter into this Agreement, the Registration Rights
Amendment and the Securities to be or being issued by it as contemplated herein
or therein.
3.3 SERIES D SHARES. The Series D Shares are duly authorized
and, when issued and paid for in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of all
Liens and restrictions, other than Liens that might have been created by Thayer
and restrictions imposed by the Securities Act. The Common Stock issuable upon
conversion of the Series D Preferred Stock have been duly authorized and
reserved for issuance upon conversion of the Series D Preferred Stock, and, when
issued and paid for in accordance with the terms hereof, the Company's
Certificate of Incorporation and the Company's Series D and E Preferred Stock
Certificate of Designation, will be duly authorized, validly issued, fully paid
and nonassessable Common Stock, free and clear of all Liens and restrictions,
other than Liens that might have been created by Thayer and restrictions imposed
by the Securities Act.
3.4 SERIES E SHARES. The Series E Shares are duly authorized
and, when issued and paid for in accordance with the terms hereof, will be duly
authorized, validly issued,
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<PAGE>
fully paid and nonassessable, free and clear of all Liens and restrictions,
other than Liens that might have been created by the Noteholders and
restrictions imposed by the Securities Act. The Common Stock issuable upon
conversion of the Series E Preferred Stock have been duly authorized and
reserved for issuance upon conversion of the Series E Preferred Stock, and,
when issued and paid for in accordance with the terms hereof, the Company's
Certificate of Incorporation and the Company's Series D and E Preferred Stock
Certificate of Designation, will be duly authorized, validly issued, fully
paid and nonassessable Common Stock, free and clear of all Liens and
restrictions, other than Liens that might have been created by the
Noteholders and restrictions imposed by the Securities Act.
3.5 WARRANTS. The Warrants are duly authorized and, when
issued and paid for in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of all
Liens and restrictions, other than Liens that might have been created by the
Noteholders and restrictions imposed by the Securities Act. The Common Stock
issuable upon exercise of the Warrants have been duly authorized and reserved
for issuance upon exercise of the Warrants, and, when issued and paid for in
accordance with the terms hereof and the warrant agreements evidencing the
Warrants, will be duly authorized, validly issued, fully paid and nonassessable
Common Stock, free and clear of all Liens and restrictions, other than Liens
that might have been created by the Noteholders and restrictions imposed by the
Securities Act.
3.6 CORPORATE ACTS AND PROCEEDINGS. All corporate acts and
proceedings required of the Company for the authorization, execution, delivery
and performance of this Agreement, the Registration Rights Amendment and each
other agreement or instrument contemplated hereby or thereby, and the issuance
and delivery of the Securities, have been lawfully and validly taken.
3.7 BINDING OBLIGATIONS. This Agreement, the Registration
Rights Amendment and the Warrants constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforcement is limited by bankruptcy,
insolvency, moratorium, fraudulent conveyance, fraudulent transfer and other
similar laws affecting the enforcement of creditors' rights generally, and by
general equitable principles.
3.8 SECURITIES LAWS. The offer, issue and sale of the Series D
Shares, the Series E Shares and the Warrants are and will be exempt from the
registration and prospectus delivery requirements of the Securities Act, and
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. The offer, issue and sale of the Common
Stock issuable upon conversion of the Series D Preferred Stock and the Series E
Preferred Stock and the Common stock issuable upon exercise of the Warrants will
be exempt from the registration and prospectus delivery requirements of the
Securities Act, and will be registered or qualified (or will be exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
3.9 DISCLOSURE. There is no fact which the Company has not
disclosed to the Noteholders in writing which materially and adversely affects
nor, insofar as the Company can
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<PAGE>
now foresee, will materially and adversely affect, the properties, business,
prospects, results of operation or condition (financial or other) of the
Company or the ability of the Company to perform this Agreement, the
Registration Rights Amendment or any of the transactions contemplated herein
or therein.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF NOTEHOLDERS
Each Noteholder, severally and not jointly, hereby covenants
with, and represents and warrants to, the Company as follows:
4.1 EXECUTION AND DELIVERY. This Agreement and the
Registration Rights Amendment have been duly authorized by all necessary action
on the part of such Noteholder, have been duly executed and delivered by such
Noteholder and constitute the legal, valid and binding agreement of such
Noteholder, enforceable against such Noteholder in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to the rights of creditors generally and the
availability of equitable remedies.
4.2 INVESTMENT INTENT. Such Noteholder is acquiring the Series
D Shares, the Series E Shares and the Warrant to be issued to such Noteholder
for investment purposes only, for its own account and not as a nominee or agent
for any other Person, and not with a view to or for resale in connection with
any distribution thereof within the meaning of the Securities Act.
4.3 RESTRICTIONS ON TRANSFER.
(a) Such Noteholder understands and agrees that the
Series D Shares, Series E Shares and Warrant such Noteholder will be
acquiring have not been registered under the Securities Act, and that
accordingly they will not be fully transferable except as permitted under
various exemptions contained in the Securities Act, or upon satisfaction of
the registration and prospectus delivery requirements of the Securities Act.
Such Noteholder acknowledges that he or it must bear the economic risk of his
or its investment in the Series D Shares, the Series Shares and the Warrant
for an indefinite period of time (subject to the Company's obligation to
register the Common Stock underlying the Series D Shares, the Series E Shares
and the Warrants pursuant to the Registration Rights Amendment) since they
have not been registered under the Securities Act and therefore cannot be
sold unless they are subsequently registered or an exemption from
registration is available.
(b) Such Noteholder hereby agrees with the Company
that the certificates evidencing the Series D Shares, the Series E Shares and
the Warrants, and each certificate issued in transfer thereof, will bear (i)
any legend required under any applicable state securities law and (ii) the
following legend:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933.
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<PAGE>
These securities have been acquired for investment and not with a view
to distribution and may not offered for sale, sold, pledged or
otherwise transferred in the absence of an effective registration
statement for such securities under the Securities Act of 1933 or an
opinion of counsel reasonably satisfactory in form and content to the
issuer that such registration is not required under such Act."
ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING
5.1 CONDITIONS OF NOTEHOLDERS. Notwithstanding any other
provision of this Agreement, the obligations of the Noteholders to consummate
the transactions contemplated hereby shall be subject to the satisfaction, at or
prior to the Closing Date, of the following conditions:
(a) The representations and warranties of the Company
contained in Section 3 of this Agreement shall be true and correct in all
[material] respects on and as of the Closing Date with the same effect as if
made on the Closing Date and the Company shall have complied [in all material
respects] with all covenants and agreements and satisfied all conditions to be
performed by the Company or satisfied on or prior to the Closing Date;
(b) The Noteholders shall have received from Hughes &
Luce, L.L.P., counsel for the Company, a written opinion dated the Closing
Date and addressed to the Noteholders, in substantially the form attached
hereto as EXHIBIT C;
(c) The Noteholders shall have received from the Chief
Financial Officer of the Company a certificate dated the Closing Date in
substantially the form attached hereto as EXHIBIT D;
(d) The Noteholders shall have received from the Secretary
of the Company in substantially the form attached hereto as EXHIBIT E; and
(e) The Company shall have entered into an amendment to
the Registration Rights Agreement, substantially in the form attached hereto
as EXHIBIT F (the "REGISTRATION RIGHTS AMENDMENT").
5.2 CONDITIONS OF THE COMPANY. Notwithstanding any other
provision of this Agreement, the obligations of the Company to consummate the
transactions contemplated hereby shall be subject to the satisfaction, at or
prior to the Closing Date, of the following conditions:
(a) The representations and warranties of the
Noteholders contained in Section 4 of this Agreement shall be true and
correct in all respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Noteholders shall have complied with all
covenants and agreements and satisfied all conditions to be performed by the
Noteholders or satisfied on or prior to the Closing Date; and
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<PAGE>
(b) The Noteholders shall have entered into the
Registration Rights Amendment.
ARTICLE 6.
EXCHANGE NOTES
6.1 The Company agrees that, to the extent the Company elects to
redeem the Series D Shares and the Series E Shares in accordance with the
Company's Certificate of Incorporation and the Company's Series D and E
Preferred Stock Certificate of Designation by the issuance of its convertible
promissory notes, such notes shall be substantially in the form of EXHIBIT G
attached hereto.
ARTICLE 7.
GENERAL PROVISIONS
7.1 NOTICES. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given
(a) if delivered personally (including by overnight express or messenger),
upon delivery, (b) if delivered by registered or certified mail (return
receipt requested), upon the earlier of actual delivery or three days after
being mailed, or (c) if given by telecopy, upon confirmation of transmission
by telecopy, in each case to the parties at the following addresses:
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<PAGE>
(a) If to the Company, addressed to:
Aegis Communications Group, Inc.
7880 Bent Branch Drive
Suite 150
Irving, Texas 75063
Attention: Chief Executive Officer
Telecopy: (972) 868-0396
With a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: Kenneth G. Hawari, Esq.
Telecopy: (214) 939-5849
(b) If to any Noteholder, addressed to:
The address set forth under such Noteholder's
name on the signature page hereto
7.2 SEVERABILITY. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, the remaining terms and provisions of
this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or enforceable.
7.3 ENTIRE AGREEMENT. This Agreement, including the
attachments, exhibits and schedules attached hereto and other documents
referred to herein, contains the entire understanding of the parties hereto
in respect of its subject matter and supersedes all prior and contemporaneous
agreements and understandings, oral and written, between the parties with
respect to such subject matter.
7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Company and the Noteholders and their
respective successors, heirs and assigns.
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<PAGE>
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
7.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
COMPANY:
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
Title:
NOTEHOLDERS:
THAYER EQUITY INVESTORS III, L.P.,
a Delaware limited partnership
By: TC Equity Partners L.L.C.,
Its General Partner
By:
-------------------------------------
Name:
Title:
Address: Thayer Capital Partners
1455 Pennsylvania Ave., N.W.
Washington, D.C. 20004
Attention:
-------------------------
Telecopy: (202) 371--0391
--------------------------------------------
Edward Blank
Address:
------------------------------------
------------------------------------
------------------------------------
Attention:
--------------------------
Telecopy: (___) ___--_______________
<PAGE>
THE EDWARD BLANK 1995 GRANTOR
RETAINED ANNUITY TRUST
By:
-----------------------------------------
Name: Edward Blank
Title: Trustee
Address:
------------------------------------
------------------------------------
------------------------------------
Attention:
-------------------------
Telecopy: (___) ___--_______________
ITC SERVICE COMPANY
By:
----------------------------------------
Name:
Title:
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Attention:
-------------------------
Telecopy: (___) ___--______________
<PAGE>
ATTACHMENT A
<TABLE>
<CAPTION>
NOTEHOLDER SERIES D SHARES SERIES E SHARES WARRANTS
- ---------- --------------- --------------- --------
<S> <C> <C> <C>
1. Thayer Equity 77,300 32,855 907,984
Investors III, L.P.
2. Edward Blank -0- 5,106 42,091
3. The Edward Blank -0- 1,211 9,978
1995 Grantor Retained
Annuity Trust
4. ITC Service Company -0- 4,846 39,947
--------------- --------------- --------
Total 77,300 44,018 1,000,000
</TABLE>
<PAGE>
EXHIBIT A
FORM OF WARRANT
<PAGE>
EXHIBIT B
SERIES D AND E PREFERRED STOCK
CERTIFICATE OF DESIGNATION
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL
<PAGE>
EXHIBIT D
CERTIFICATE OF CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT E
CERTIFICATE OF SECRETARY
<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AMENDMENT
<PAGE>
EXHIBIT G
FORM OF CONVERTIBLE PROMISSORY NOTE
<PAGE>
EXHIBIT 10.26
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
This AMENDMENT TO REGISTRATION RIGHTS AGREEMENT dated as of
June 30, 1999 (this "AMENDMENT") is hereby entered into by and among Aegis
Communications Group, Inc., a Delaware corporation (the "COMPANY"), Thayer
Equity Investors III, L.P., a Delaware limited partnership ("THAYER"), Edward
Blank ("BLANK"), The Edward Blank 1995 Grantor Retained Annuity Trust ("BLANK
TRUST") and ITC Service Company ("ITC" and together with Thayer, Blank and Blank
Trust, the "INVESTORS").
RECITALS
A. WHEREAS, the Company and the Investors have executed
and delivered that certain Registration Rights Agreement dated as of July 9,
1998 (the "REGISTRATION RIGHTS AGREEMENT"); and
B. WHEREAS, the parties hereto have agreed to amend the
provisions of the Registration Rights Agreement, among other things, to amend
the definition of "Registrable Securities."
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company and the
Investors do hereby agree as follows:
1. RELATION TO REGISTRATION RIGHTS AGREEMENT;
DEFINITIONS.
1.1 RELATION TO REGISTRATION RIGHTS AGREEMENT.
This Amendment constitutes an integral part of the Registration Rights
Agreement.
1.2 CAPITALIZED TERMS. For all purposes of this
Amendment, capitalized terms used herein without definition shall have the
meanings specified in the Registration Rights Agreement, as said agreement shall
be in effect on the Effective Date (as defined in Section 3.1 below) after
giving effect to this Amendment.
<PAGE>
2. AMENDMENTS TO THE REGISTRATION RIGHTS AGREEMENT.
2.1 AMENDMENT TO SECTION 1 OF THE REGISTRATION
RIGHTS AGREEMENT.
(a) Section 1 of the Registration Rights
Agreement is amended by deleting each of the definitions of "Holder" and
"Registrable Securities" in its entirety and replacing it with the following:
"HOLDER" of any security means the record or
beneficial owner of such security. A Holder of any Subordinated Notes,
any Warrants, any shares of Series D Preferred Stock, any shares of
Series E Preferred Stock or any Exchange Warrants shall be treated as
the Holder of the Registrable Securities underlying such Subordinated
Notes, Warrants, shares of Series D Preferred Stock, shares of Series E
Preferred Stock or Exchange Warrants.
"REGISTRABLE SECURITIES" means (1) shares of the
Common Stock issued or issuable upon exercise of the Warrants issued
pursuant to the Commitment Letter, so long as they are owned by any of
the Investors, any limited partner of Thayer or any affiliate (as
defined in the Securities Act) of any Investor or Thayer's general
partner, (2) shares of Common Stock issued or issuable upon conversion
of Series D Preferred Stock, (3) shares of Common Stock issued or
issuable upon conversion of Series E Preferred Stock, (4) shares of
Common Stock issued or issuable upon exercise of any Exchange Warrant,
(5) shares of Common Stock issued or issuable upon conversion of the
Subordinated Notes, so long as they are owned by any of the Investors,
any limited partner of Thayer or any affiliate (as defined under the
Securities Act) of any Investor or Thayer's general partner, and (6)
any securities issued or issuable with respect to the Common Stock
referred to in clauses (1), (2), (3), (4) and (5) above by way of a
stock dividend or stock split or in connection with a combination of
shares, reclassification, recapitalization, merger or consolidation or
reorganization; provided, however, that such shares of Common Stock
shall only be treated as Registrable Securities if and so long as they
have not been (i) sold to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, or (ii)
sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof
so that all transfer restrictions and restrictive legends with respect
to such Common Stock are removed upon the consummation of such sale and
the seller and purchaser of such Common Stock receive an opinion of
counsel for the Company, which shall be in form and content reasonably
satisfactory to the seller
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<PAGE>
and buyer and their respective counsel, to the effect that such
Common Stock in the hands of the purchaser is freely transferable
without restriction or registration under the Securities Act in
any public or private transaction.
(b) Section 1 of the Registration Rights
Agreement is amended by adding the following definitions, in alphabetical order:
"EXCHANGE WARRANTS" shall mean warrants to purchase
an aggregate of 1,000,000 shares of Common Stock, issued pursuant to
that certain Securities Exchange Agreement dated June 30, 1999 (the
"SECURITIES EXCHANGE AGREEMENT") by and among the Company, Thayer,
Blank, Blank Trust and ITC.
"SECURITIES EXCHANGE AGREEMENT" shall have the
meaning assigned to such term in the definition of Exchange Warrants.
"SERIES D PREFERRED STOCK" shall mean Series D
Preferred Stock, $.01 par value per share, of the Company.
"SERIES E PREFERRED STOCK" shall mean Series E
Preferred Stock, $.01 par value per share, of the Company.
2.2 AMENDMENT TO SECTION 11(A) OF THE
REGISTRATION RIGHTS AGREEMENT. Section 11(a) of the Registration Rights
Agreement is amended by deleting it in its entirety and replacing it with
the following:
(a) INTEGRATION. This Agreement, the
Subordinated Notes, the Warrants, the Exchange Warrants and the
Securities Exchange Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof.
3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT.
3.1 EFFECTIVE DATE. This Amendment shall not
become effective until, and shall become effective when, each and every one of
the following conditions shall have been satisfied or waived by the Investors
(the "EFFECTIVE DATE").
(a) EXECUTION OF COUNTERPARTS.
Counterparts of this Amendment shall have been executed and delivered by each of
the Company and the Investors.
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<PAGE>
(b) RATIFICATION AND CONFIRMATION OF
REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement and all
representations, warranties, terms and conditions therein remain in full force
and effect, and the Company hereby confirms and ratifies each of the provisions
of the Registration Rights Agreement.
(c) CONSENTS. All necessary consents,
waivers, approvals, authorizations, registrations, filings and notifications in
connection with the authorization, execution and delivery of this Amendment have
been obtained or made and are in full force and effect.
(e) PROCEEDINGS, INSTRUMENTS, ETC. All
proceedings and actions taken on or prior to the Effective Date in connection
with the transactions contemplated by this Amendment and all instruments
incident thereto shall be in form and substance satisfactory to the Investors
and their special counsel, and the Investors and their special counsel shall
have received copies of all documents that it or they may request in connection
with such proceedings, actions and transactions (including, without limitation,
copies of court documents, certifications, and evidence of the correctness of
the representations and warranties contained herein and certifications and
evidence of the compliance with the terms and the fulfillment of the conditions
of this Amendment) in the form and substance satisfactory to the Investors and
their special counsel.
5. MISCELLANEOUS.
5.1 CROSS-REFERENCES. References in this
Amendment to any Section are, unless otherwise specified, to such Section of
this Amendment.
5.2 INSTRUMENT PURSUANT TO EXISTING REGISTRATION
RIGHTS AGREEMENT; LIMITED AMENDMENT. This Amendment is executed pursuant to
Section 11(h) of the Registration Rights Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered, and applied in
accordance with all of the terms and provisions of the Registration Rights
Agreement, including Section 11(h) thereof. Except as expressly amended herein,
any terms and conditions of the Registration Rights Agreement shall remain
unamended and unwaived. The amendments set forth herein shall be limited
precisely as provided for herein to the provisions expressly amended herein and
shall not be deemed to be a waiver of, amendment of, consent to or modification
of any other term or provision of any other document or of any transaction or
further action on the part of the Company which would require the consent of the
Investors under the Registration Rights Agreement.
-4-
<PAGE>
5.3. SUCCESSORS AND ASSIGNS. This Amendment shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
5.4 COUNTERPARTS. This Amendment may be executed
simultaneously in two or more counterparts, each of which shall be deemed to be
an original but all of which shall constitute together but one and the same
instrument.
5.5 GOVERNING LAW. This Amendment shall be
governed by and construed in accordance with the laws of the State of Delaware.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
By:____________________________________
Name:
Title:
THAYER EQUITY INVESTORS III, L.P.,
a Delaware limited partnership
By: TC Equity Partners L.L.C.,
Its General Partner
By: ______________________________
Name:
Title:
---------------------------------------
EDWARD BLANK
THE EDWARD BLANK 1995 GRANTOR
RETAINED ANNUITY TRUST
By: ___________________________________
Name: Edward Blank, trustee
ITC SERVICE COMPANY
By: ___________________________________
Name:
Title:
-6-
<PAGE>
SERIES FOUR WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
AEGIS COMMUNICATIONS GROUP, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT
REGISTRATION UNDER THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. W4 -- ___ Warrant to Purchase ____________ (________)
June 30, 1999 Shares of Common Stock, $.01 Par Value
SERIES FOUR WARRANT TO PURCHASE COMMON STOCK
of
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
Expires June 30, 2004
This certifies that, for value received,
________________________ ("HOLDER") is entitled, subject to the terms set
forth below, to purchase from Aegis Communications Group, Inc., a Delaware
corporation (the "COMPANY"), __________________ (____________) shares of
Common Stock, $.01 par value, of the Company (such class of stock being
referred to herein as "COMMON STOCK"), as constituted on June 30, 1999 (the
"ISSUE DATE"), upon surrender of this Warrant, at the principal office of the
Company referred to below, with the subscription form attached hereto duly
executed, and simultaneous payment therefor in the consideration specified in
Section 1 hereof, at the price of $0.90625 per share (the "PURCHASE PRICE").
The shares of Common Stock issued or issuable upon exercise of this Warrant
are sometimes referred to as the "WARRANT SHARES." The term "WARRANTS" as
used herein shall include this Warrant and any warrants delivered in
substitution or exchange therefor as provided herein.
<PAGE>
1. EXERCISE AND PAYMENT OF PURCHASE PRICE. This
Warrant may be exercised at any time or from time to time, on any business
day, on or after the date hereof and until 5:00 p.m. New York time on June
30, 2004 (at which time this Warrant will expire), in either case, for all or
part of the full number of shares of Common Stock called for hereby, by
surrendering it at the principal office of the Company, 7880 Bent Branch
Drive, Suite 150, Irving, Texas 75063, with the subscription form duly
executed, together with payment for the Warrant Shares payable in cash or
cash equivalents and/or by cancellation and delivery of notes evidencing any
indebtedness of Company or any of its subsidiaries. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on
the date of its surrender for exercise as provided above, and the person
entitled to receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of such shares of record as
of the close of business on such date. As soon as practicable on or after
such date, and in any event within 10 days thereof, the Company shall issue
and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of shares of Common Stock issuable
upon such exercise. Upon any partial exercise, the Company will issue and
deliver to Holder a new Warrant or Warrants with respect to the shares of
Common Stock not so transferred. No fractional shares of Common Stock shall
be issued upon exercise of this Warrant. In lieu of any fractional share to
which Holder would be entitled upon exercise, the Company shall pay cash
equal to the product of such fraction multiplied by the Purchase Price.
2. PAYMENT OF TAXES. All shares of Common Stock
issued upon the exercise of this Warrant shall be duly authorized, validly
issued and outstanding, fully paid and non-assessable. Holder shall pay all
taxes and other governmental charges that may be imposed in respect of the
issue or delivery thereof and any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of
Common Stock in any name other than that of the registered Holder of this
Warrant surrendered in connection with the purchase of such shares, and in
such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the Company's satisfaction that no tax or other charge is due.
3. TRANSFER AND EXCHANGE. This Warrant and all rights
hereunder are transferable, in whole or in part to any affiliate of Holder.
If a transfer is effected, this Warrant is transferable on the books of the
Company maintained for such purpose at its principal office referred to above
by Holder in person or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer. Each taker and holder
of this Warrant, by taking or holding the same, consents and agrees that this
Warrant, when endorsed in blank, shall be deemed negotiable and that when
this Warrant shall have been so endorsed, the Holder hereof may be treated by
the Company and all other persons dealing with this Warrant as the absolute
owner hereof for any purpose and
2
<PAGE>
as the person entitled to exercise the rights represented hereby or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered Holder hereof as the owner for all purposes.
4. CERTAIN ADJUSTMENTS.
4.1 ADJUSTMENT FOR REORGANIZATION,
CONSOLIDATION, MERGER. In case of any reorganization of the Company (or any
other corporation, the stock or other securities of which are at the time
receivable on the exercise of this Warrant) after the Issue Date, or in case,
after such date, the Company (or any such other corporation) shall
consolidate with or merge into another corporation (other than the merger of
a wholly owned subsidiary into the Company) or convey all or substantially
all its assets to another corporation, then and in each such case Holder,
upon the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation, merger or conveyance,
shall be entitled to receive, in lieu of the stock receivable upon the
exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such Holder would have been entitled upon
such consummation if such Holder had exercised this Warrant immediately prior
thereto.
4.2 ADJUSTMENTS FOR DIVIDENDS IN COMMON
STOCK. If the Company at any time or from time to time after the Issue Date
makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend payable in additional shares of Common
Stock, then and in each such event (x) the Purchase Price then in effect
shall be decreased as of the time of such issuance or, in the event such
record date is fixed, as of the close of business on such record date, by
multiplying the Purchase Price then in effect by a fraction (the "ADJUSTMENT
FACTOR") (1) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance
or the close of business on such record date, and (2) the denominator of
which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend, and (y) the number of shares of Common
Stock theretofore receivable upon exercise of this Warrant shall be increased
as of the time of such issuance or, in the event such record date is fixed,
as of the close of business on such record date, by multiplying such number
of shares of Common Stock by the reciprocal of the Adjustment Factor;
provided, however, that if such record date is fixed and such dividend is not
fully paid on the date fixed therefor, the Purchase Price and the number of
shares of Common Stock theretofore receivable upon exercise of this Warrant
shall be recomputed accordingly as of the close of business on such record
date and thereafter the Purchase Price and such number of shares of Common
Stock shall be adjusted pursuant to this Section 4.2 as of the time of actual
payment of such dividends.
3
<PAGE>
4.3 STOCK SPLIT AND REVERSE STOCK SPLIT. If
the Company at any time or from time to time after the Issue Date effects a
subdivision of the outstanding Common Stock, the Purchase Price then in
effect immediately before that subdivision shall be proportionately decreased
and the number of shares of Common Stock theretofore receivable upon the
exercise of this Warrant shall be proportionately increased. If the Company
at any time or from time to time after the Issue Date combines the
outstanding shares of Common Stock into a smaller number of shares, the
Purchase Price then in effect immediately before that combination shall be
proportionately increased and the number of shares of Common Stock
theretofore receivable upon the exercise of this Warrant shall be
proportionately decreased. Each adjustment under this Section 4.3 shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
4.4 ACCOUNTANTS' CERTIFICATE AS TO
ADJUSTMENT. In each case of an adjustment in the shares of Common Stock
receivable on the exercise of the Warrants, the Company at its expense shall
cause independent public accountants of recognized standing selected by the
Company (who may be the independent public accountants then auditing the
books of the Company) to compute such adjustment in accordance with the terms
of the Warrants and prepare a certificate setting forth such adjustment and
showing the facts upon which such adjustment is based. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant at
the time outstanding.
5. LOSS OR MUTILATION. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of reasonable discretion) of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
and (in the case of loss, theft or destruction) of indemnity satisfactory to
it (in the exercise of reasonable discretion), and (in the case of
mutilation) upon surrender and cancellation thereof, the Company will execute
and deliver in lieu thereof a new Warrant of like tenor.
6. RESERVATION OF COMMON STOCK. The Company shall at
all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the exercise of
this Warrant, such number of its shares of Common Stock as shall from time to
time be sufficient to effect exercise of this Warrant; and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect such exercise, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
7. NOTICES OF RECORD DATE. In the event of (i) any
taking by the Company of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution, or (ii) any capital
reorganization of the Company, any reclassification or
4
<PAGE>
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation (other than a
merger of a wholly owned subsidiary into the Company), or any transfer of all
or substantially all of the assets of the Company to any other person or any
voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to the Holder at least ten (10) days prior to
the record date specified therein, a notice specifying (1) the date on which
any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date
on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become
effective, and (3) the date, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up.
8. INVESTMENT REPRESENTATION AND RESTRICTION ON
TRANSFER.
8.1 SECURITIES LAW REQUIREMENTS.
(a) By its acceptance of this
Warrant, Holder hereby represents and warrants to the Company that this
Warrant and the Warrant Shares will be acquired for investment for its own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that it has no present intention of
selling, granting participations in or otherwise distributing the same. By
acceptance of this Warrant, Holder further represents and warrants that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to any person, with respect
to this Warrant or the Warrant Shares.
(b) By its acceptance of this
Warrant, Holder understands that this Warrant is not, and the Warrant Shares
will not be, registered under the Securities Act of 1933, as amended (the
"ACT"), on the basis that the issuance of this Warrant and the Warrant Shares
are exempt from registration under the Act pursuant to Section 4(2) thereof,
and that the Company's reliance on such exemption is predicated on Holder's
representations and warranties set forth herein.
(c) By its acceptance of this
Warrant, Holder understands that this Warrant and the Warrant Shares may not
be sold, transferred, or otherwise disposed of without registration under the
Act, or an exemption therefrom, and that in the absence of an effective
registration statement covering this Warrant and the Warrant Shares or an
available exemption from registration under the Act, this Warrant and the
Warrant Shares must be held indefinitely. In particular, Holder is aware that
this Warrant and the Warrant Shares may not be sold pursuant to Rule 144
promulgated under the Act unless all of the conditions of Rule 144 are
satisfied. Among the conditions for
5
<PAGE>
use of Rule 144 are the availability of current information about the Company
to the public, prescribed holding periods which will commence only upon
Holder's payment for the securities being sold, manner of sale restrictions,
volume limitations and certain other restrictions. By its acceptance of this
Warrant, Holder represents and warrants that, in the absence of an effective
registration statement covering this Warrant or the Warrant Shares, it will
sell, transfer or otherwise dispose of this Warrant and the Warrant Shares
only in a manner consistent with its representations and warranties set forth
herein and then only in accordance with the provisions of Section 8.1(d).
(d) By its acceptance of this
Warrant, Holder agrees that in no event will it transfer or dispose of any of
the Warrants or the Warrant Shares other than pursuant to an effective
registration statement under the Act, unless and until (i) Holder shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the disposition,
and (ii) if reasonably requested by the Company, at the expense of the Holder
or transferee, it shall have furnished to the Company an opinion of counsel,
reasonably satisfactory to the Company, to the effect that (A) such transfer
may be made without registration under the Act and (B) such transfer or
disposition will not cause the termination or the non-applicability of any
exemption to the registration and prospectus delivery requirements of the Act
or to the qualification or registration requirements of the securities laws
of any other jurisdiction on which the Company relied in issuing this Warrant
or the Warrant Shares.
8.2 LEGENDS; STOP TRANSFER.
(a) All certificates evidencing the
Warrant Shares shall bear a legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933. These securities have
been acquired for investment and not with a view to distribution and
may not be offered for sale, sold, pledged or otherwise transferred
in the absence of an effective registration statement for such
securities under the Securities Act of 1933 or an opinion of counsel
reasonably satisfactory in form and content to the issuer that such
registration is not required under such Act.
(b) The certificates evidencing the
Warrant Shares shall also bear any legend required by any applicable state
securities law.
(c) In addition, the Company shall
make, or cause its transfer agent to make, a notation regarding the transfer
restrictions of this Warrant and the Warrant Shares in its stock books, and
this Warrant and the Warrant Shares shall be transferred on the books of the
Company only if transferred or sold pursuant to an effective registration
statement under the Act covering the same or pursuant to and in compliance
with the provisions of Section 8.1(d).
6
<PAGE>
9. NOTICES. All notices and other communications from
the Company to the Holder of this Warrant shall be mailed by first-class
registered or certified mail, postage prepaid, to the address furnished to
the Company by Holder.
10. CHANGE; WAIVER. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
11. HEADINGS. The headings in this Warrant are for
purposes of convenience in reference only, and shall not be deemed to
constitute a part hereof.
12. GOVERNING LAW. This Warrant shall be construed and
enforced in accordance with and governed by the internal laws, and not the
law of conflicts, of the State of Delaware.
7
<PAGE>
[SIGNATURE PAGE TO SERIES FOUR WARRANT]
AEGIS COMMUNICATIONS GROUP, INC.,
A DELAWARE CORPORATION
By:______________________________________
Its:______________________________________
8
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned, registered owner of this Warrant,
irrevocably exercises this Warrant and purchases ____________ of the number
of shares of Common Stock, $.01 par value, of AEGIS COMMUNICATIONS GROUP,
INC., a Delaware corporation, purchasable with this Warrant, and herewith
makes payment therefor, all at the price and on the terms and conditions
specified in this Warrant.
DATED:______________
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip)
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned, registered owner of
this Warrant, hereby sells, assigns and transfers unto the Assignee named
below all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock, $.01 par value, set forth
below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
and does hereby irrevocably constitute and appoint _________________________
_________________________________________________ Attorney to make such
transfer on the books of AEGIS COMMUNICATIONS GROUP, INC., a Delaware
corporation, maintained for the purpose, with full power of substitution in
the premises.
DATED: ___________________
------------------------------------
(Signature)
------------------------------------
(Witness)
<PAGE>
SERIES FOUR WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
AEGIS COMMUNICATIONS GROUP, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT
REGISTRATION UNDER THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. W4 -- 1 Warrant to Purchase Nine Hundred Seven
Thousand Nine Hundred Eighty-Four (907,984)
June 30, 1999 Shares of Common Stock, $.01 Par Value
SERIES FOUR WARRANT TO PURCHASE COMMON STOCK
of
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
Expires June 30, 2004
This certifies that, for value received, Thayer Equity
Investors III, L.P. ("HOLDER") is entitled, subject to the terms set forth
below, to purchase from Aegis Communications Group, Inc., a Delaware
corporation (the "COMPANY"), Nine Hundred Seven Thousand Nine Hundred
Eighty-Four (907,984) shares of Common Stock, $.01 par value, of the Company
(such class of stock being referred to herein as "COMMON STOCK"), as
constituted on June 30, 1999 (the "ISSUE DATE"), upon surrender of this
Warrant, at the principal office of the Company referred to below, with the
subscription form attached hereto duly executed, and simultaneous payment
therefor in the consideration specified in Section 1 hereof, at the price of
$0.90625 per share (the "PURCHASE PRICE"). The shares of Common Stock issued
or issuable upon exercise of this Warrant are sometimes referred to as the
"WARRANT SHARES." The term "WARRANTS" as used herein shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
<PAGE>
SERIES FOUR WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
AEGIS COMMUNICATIONS GROUP, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT
REGISTRATION UNDER THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. W4 -- 2 Warrant to Purchase Forty-Two
Thousand Ninety-One (42,091)
June 30, 1999 Shares of Common Stock, $.01 Par Value
SERIES FOUR WARRANT TO PURCHASE COMMON STOCK
of
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
Expires June 30, 2004
This certifies that, for value received, Edward Blank
("HOLDER") is entitled, subject to the terms set forth below, to purchase
from Aegis Communications Group, Inc., a Delaware corporation (the
"COMPANY"), Forty-Two Thousand Ninety-One (42,091) shares of Common Stock,
$.01 par value, of the Company (such class of stock being referred to herein
as "COMMON STOCK"), as constituted on June 30, 1999 (the "ISSUE DATE"), upon
surrender of this Warrant, at the principal office of the Company referred to
below, with the subscription form attached hereto duly executed, and
simultaneous payment therefor in the consideration specified in Section 1
hereof, at the price of $0.90625 per share (the "PURCHASE PRICE"). The shares
of Common Stock issued or issuable upon exercise of this Warrant are
sometimes referred to as the "WARRANT SHARES." The term "WARRANTS" as used
herein shall include this Warrant and any warrants delivered in substitution
or exchange therefor as provided herein.
<PAGE>
SERIES FOUR WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
AEGIS COMMUNICATIONS GROUP, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT
REGISTRATION UNDER THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. W4 -- 3 Warrant to Purchase Nine Thousand
Nine Hundred Seventy-Eight (9,978)
June 30, 1999 Shares of Common Stock, $.01 Par Value
SERIES FOUR WARRANT TO PURCHASE COMMON STOCK
of
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
Expires June 30, 2004
This certifies that, for value received, The Edward Blank
1995 Grantor Retained Annuity Trust ("HOLDER") is entitled, subject to the
terms set forth below, to purchase from Aegis Communications Group, Inc., a
Delaware corporation (the "COMPANY"), Nine Thousand Nine Hundred
Seventy-Eight (9,978) shares of Common Stock, $.01 par value, of the Company
(such class of stock being referred to herein as "COMMON STOCK"), as
constituted on June 30, 1999 (the "ISSUE DATE"), upon surrender of this
Warrant, at the principal office of the Company referred to below, with the
subscription form attached hereto duly executed, and simultaneous payment
therefor in the consideration specified in Section 1 hereof, at the price of
$0.90625 per share (the "PURCHASE PRICE"). The shares of Common Stock issued
or issuable upon exercise of this Warrant are sometimes referred to as the
"WARRANT SHARES." The term "WARRANTS" as used herein shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
<PAGE>
SERIES FOUR WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
AEGIS COMMUNICATIONS GROUP, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT
REGISTRATION UNDER THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. W4 -- 4 Warrant to Purchase Thirty-Nine Thousand
Nine Hundred Forty-Seven (39,947)
June 30, 1999 Shares of Common Stock, $.01 Par Value
SERIES FOUR WARRANT TO PURCHASE COMMON STOCK
of
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
Expires June 30, 2004
This certifies that, for value received, ITC Service
Company ("HOLDER") is entitled, subject to the terms set forth below, to
purchase from Aegis Communications Group, Inc., a Delaware corporation (the
"Company"), Thirty-Nine Thousand Nine Hundred Forty-Seven (39,947) shares of
Common Stock, $.01 par value, of the Company (such class of stock being
referred to herein as "COMMON STOCK"), as constituted on June 30, 1999 (the
"ISSUE DATE"), upon surrender of this Warrant, at the principal office of the
Company referred to below, with the subscription form attached hereto duly
executed, and simultaneous payment therefor in the consideration specified in
Section 1 hereof, at the price of $0.90625 per share (the "PURCHASE PRICE").
The shares of Common Stock issued or issuable upon exercise of this Warrant
are sometimes referred to as the "WARRANT SHARES." The term "WARRANTS" as
used herein shall include this Warrant and any warrants delivered in
substitution or exchange therefor as provided herein.
<PAGE>
SERIES FIVE WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
AEGIS COMMUNICATIONS GROUP, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST THEREIN MAY
BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER
THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
No. W5-1 Warrant to Purchase up to
August 6, 1999 Eight Hundred Thousand (800,000)
Shares of Common Stock, $.01 Par Value
SERIES FIVE WARRANT TO PURCHASE COMMON STOCK
of
AEGIS COMMUNICATIONS GROUP, INC.,
a Delaware corporation
Expires August 6, 2004
This certifies that, for value received, THAYER EQUITY
INVESTORS III, L.P. ("HOLDER") is entitled, subject to the terms set forth
below, to purchase from Aegis Communications Group, Inc., a Delaware corporation
(the "COMPANY"), up to Eight Hundred Thousand (800,000) shares of Common Stock,
$.01 par value, of the Company (such class of stock being referred to herein as
"COMMON STOCK"), as constituted on August 6, 1999 (the "ISSUE DATE"), upon
surrender of this Warrant, at the principal office of the Company referred to
below, with the subscription form attached hereto duly executed, and
simultaneous payment therefor in the consideration specified in Section 1
hereof, at the price (the "PURCHASE PRICE") specified below. The shares of
Common Stock issued or issuable upon exercise of this Warrant are sometimes
referred to as the "WARRANT SHARES." The term "WARRANTS" as used herein shall
include this Warrant and any warrants delivered in substitution or exchange
therefor as provided herein.
The number of Warrant Shares subject to this Warrant shall
equal the product obtained by multiplying 800,000 times a fraction, (A) the
numerator of which is the amount, not to exceed $7,500,000.00 (the "GUARANTEED
AMOUNT"), drawn on that certain Parent Guaranty of even date herewith (the
"PARENT GUARANTY") issued by Holder in favor of the Lenders named in that
certain Second Amended and Restated Credit Agreement dated July 9, 1998, as
amended, and (B) the denominator of which is $7,500,000.00; PROVIDED HOWEVER,
such numerator may include amounts which Holder
<PAGE>
invests after the date hereof in the Company in the form of indebtedness or
any of the Company's debt or equity securities, or any combination of any of
the foregoing, the proceeds of which are used by the Company to pay any of
the Guaranteed Obligations (as defined in the Parent Guaranty).
The Purchase Price for all or any portion of this Warrant that
becomes exercisable shall equal the Common Stock's Fair Market Value (defined
below) as of the date all or such portion, as the case may be, of this Warrant
first becomes exercisable. "COMMON STOCK'S FAIR MARKET VALUE" shall mean, as of
any date, the fair market value of a share of Common Stock on such date. Such
fair market value on a date shall mean (i) if shares of the Common Stock are
listed on a national securities exchange, the average of the closing prices as
reported for composite transactions during the 10 consecutive trading days
preceding the trading day immediately prior to such date or, if no sale occurred
on a trading day, then the mean between the closing bid and asked prices on such
exchange on such trading day; (ii) if shares of the Common Stock are traded on
the Nasdaq National Market ("NMM"), the average of the closing prices as
reported on the NMM during the 10 consecutive trading days preceding the trading
day immediately prior to such date or, if no sale occurred on a trading day,
then the mean between the highest bid and lowest asked prices as of the close of
business on such trading day, as reported on the NMM; (iii) if the shares of the
Common Stock are not traded on a national securities exchange or the NMM but are
otherwise traded over-the-counter, the arithmetic average (for consecutive
trading days) of the mean between the highest bid and lowest asked prices as of
the close of business during the 10 consecutive trading days preceding the
trading day immediately prior to such date as quoted on the National Association
of Securities Dealers Automated Quotation system or an equivalent generally
accepted reporting service; or (iv) if there is no active market for the Common
Stock, the fair market value thereof as mutually determined by the Company and
the Holders.
1. EXERCISE AND PAYMENT OF PURCHASE PRICE. This Warrant
may be exercised at any time or from time to time, on any business day, on or
after the date that the Parent Guaranty is drawn (or that Holder makes an
investment in the Company after the date hereof, which proceeds are used to pay
any of the Guaranteed Obligations, as contemplated by the second paragraph of
this Warrant) and until 5:00 p.m. New York time on August 6, 2004 (at which time
this Warrant will expire), in either case, for all or part of the full number of
shares of Common Stock called for hereby, by surrendering it at the principal
office of the Company, 7880 Bent Branch Drive, Suite 150, Irving, Texas 75063,
with the subscription form duly executed, together with payment for the Warrant
Shares payable in cash or cash equivalents and/or by cancellation and delivery
of notes evidencing any indebtedness of Company or any of its subsidiaries. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As soon as practicable on or
after such date, and in any event within 10 days thereof, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or
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<PAGE>
certificates for the number of shares of Common Stock issuable upon such
exercise. Upon any partial exercise, the Company will issue and deliver to
Holder a new Warrant or Warrants with respect to the shares of Common Stock
not so transferred. No fractional shares of Common Stock shall be issued upon
exercise of this Warrant. In lieu of any fractional share to which Holder
would be entitled upon exercise, the Company shall pay cash equal to the
product of such fraction multiplied by the Purchase Price.
2. PAYMENT OF TAXES. All shares of Common Stock issued
upon the exercise of this Warrant shall be duly authorized, validly issued and
outstanding, fully paid and non-assessable. Holder shall pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery
thereof and any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock in any name
other than that of the registered Holder of this Warrant surrendered in
connection with the purchase of such shares, and in such case the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company's
satisfaction that no tax or other charge is due.
3. TRANSFER AND EXCHANGE. This Warrant and all rights
hereunder are transferable, in whole or in part to any affiliate of Holder. If a
transfer is effected, this Warrant is transferable on the books of the Company
maintained for such purpose at its principal office referred to above by Holder
in person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that this Warrant,
when endorsed in blank, shall be deemed negotiable and that when this Warrant
shall have been so endorsed, the Holder hereof may be treated by the Company and
all other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby or
to the transfer hereof on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered Holder hereof as the owner for all purposes.
4. CERTAIN ADJUSTMENTS.
4.1 ADJUSTMENT FOR REORGANIZATION,
CONSOLIDATION, MERGER. In case of any reorganization of the Company (or any
other corporation, the stock or other securities of which are at the time
receivable on the exercise of this Warrant) after the Issue Date, or in case,
after such date, the Company (or any such other corporation) shall consolidate
with or merge into another corporation (other than the merger of a wholly owned
subsidiary into the Company) or convey all or substantially all its assets to
another corporation, then and in each such case Holder, upon the exercise hereof
as provided in Section 1 at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the stock receivable upon the exercise of this Warrant prior
to such consummation, the stock or other securities or
3
<PAGE>
property to which such Holder would have been entitled upon such consummation
if such Holder had exercised this Warrant immediately prior thereto.
4.2 ADJUSTMENTS FOR DIVIDENDS IN COMMON STOCK.
If the Company at any time or from time to time after the Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend payable in additional shares of Common Stock, then and in
each such event (x) the Purchase Price then in effect shall be decreased as of
the time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying the Purchase Price then in
effect by a fraction (the "ADJUSTMENT FACTOR") (1) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend, and (y) the number of shares of Common
Stock theretofore receivable upon exercise of this Warrant shall be increased as
of the time of such issuance or, in the event such record date is fixed, as of
the close of business on such record date, by multiplying such number of shares
of Common Stock by the reciprocal of the Adjustment Factor; provided, however,
that if such record date is fixed and such dividend is not fully paid on the
date fixed therefor, the Purchase Price and the number of shares of Common Stock
theretofore receivable upon exercise of this Warrant shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Purchase Price and such number of shares of Common Stock shall be adjusted
pursuant to this Section 4.2 as of the time of actual payment of such dividends.
4.3 STOCK SPLIT AND REVERSE STOCK SPLIT. If the
Company at any time or from time to time after the Issue Date effects a
subdivision of the outstanding Common Stock, the Purchase Price then in effect
immediately before that subdivision shall be proportionately decreased and the
number of shares of Common Stock theretofore receivable upon the exercise of
this Warrant shall be proportionately increased. If the Company at any time or
from time to time after the Issue Date combines the outstanding shares of Common
Stock into a smaller number of shares, the Purchase Price then in effect
immediately before that combination shall be proportionately increased and the
number of shares of Common Stock theretofore receivable upon the exercise of
this Warrant shall be proportionately decreased. Each adjustment under this
Section 4.3 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
4.4 ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENT.
In each case of an adjustment in the shares of Common Stock receivable on the
exercise of the Warrants, the Company at its expense shall cause independent
public accountants of recognized standing selected by the Company (who may be
the independent public accountants then auditing the books of the Company) to
compute such adjustment in accordance with the terms of the Warrants and prepare
a certificate setting forth such adjustment and showing
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<PAGE>
the facts upon which such adjustment is based. The Company will forthwith
mail a copy of each such certificate to each holder of a Warrant at the time
outstanding.
5. LOSS OR MUTILATION. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of reasonable discretion) of the
ownership of and the loss, theft, destruction or mutilation of any Warrant and
(in the case of loss, theft or destruction) of indemnity satisfactory to it (in
the exercise of reasonable discretion), and (in the case of mutilation) upon
surrender and cancellation thereof, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor.
6. RESERVATION OF COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the exercise of this Warrant,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect exercise of this Warrant; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
such exercise, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
7. NOTICES OF RECORD DATE. In the event of (i) any
taking by the Company of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company, any merger or consolidation of the Company with or into any other
corporation (other than a merger of a wholly owned subsidiary into the Company),
or any transfer of all or substantially all of the assets of the Company to any
other person or any voluntary or involuntary dissolution, liquidation or winding
up of the Company, the Company shall mail to the Holder at least ten (10) days
prior to the record date specified therein, a notice specifying (1) the date on
which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (3) the date, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
5
<PAGE>
8. INVESTMENT REPRESENTATION AND RESTRICTION ON TRANSFER.
8.1 SECURITIES LAW REQUIREMENTS.
(a) By its acceptance of this Warrant,
Holder hereby represents and warrants to the Company that this Warrant and the
Warrant Shares will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and that it has no present intention of selling, granting
participations in or otherwise distributing the same. By acceptance of this
Warrant, Holder further represents and warrants that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to any person, with respect to this Warrant or
the Warrant Shares.
(b) By its acceptance of this Warrant,
Holder understands that this Warrant is not, and the Warrant Shares will not be,
registered under the Securities Act of 1933, as amended (the "ACT"), on the
basis that the issuance of this Warrant and the Warrant Shares are exempt from
registration under the Act pursuant to Section 4(2) thereof, and that the
Company's reliance on such exemption is predicated on Holder's representations
and warranties set forth herein.
(c) By its acceptance of this Warrant,
Holder understands that this Warrant and the Warrant Shares may not be sold,
transferred, or otherwise disposed of without registration under the Act, or an
exemption therefrom, and that in the absence of an effective registration
statement covering this Warrant and the Warrant Shares or an available exemption
from registration under the Act, this Warrant and the Warrant Shares must be
held indefinitely. In particular, Holder is aware that this Warrant and the
Warrant Shares may not be sold pursuant to Rule 144 promulgated under the Act
unless all of the conditions of Rule 144 are satisfied. Among the conditions for
use of Rule 144 are the availability of current information about the Company to
the public, prescribed holding periods which will commence only upon Holder's
payment for the securities being sold, manner of sale restrictions, volume
limitations and certain other restrictions. By its acceptance of this Warrant,
Holder represents and warrants that, in the absence of an effective registration
statement covering this Warrant or the Warrant Shares, it will sell, transfer or
otherwise dispose of this Warrant and the Warrant Shares only in a manner
consistent with its representations and warranties set forth herein and then
only in accordance with the provisions of Section 8.1(d).
(d) By its acceptance of this Warrant,
Holder agrees that in no event will it transfer or dispose of any of the
Warrants or the Warrant Shares other than pursuant to an effective registration
statement under the Act, unless and until (i) Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the disposition, and (ii) if
reasonably requested by the Company, at the expense of the Holder or transferee,
it shall have furnished to the Company an opinion of counsel, reasonably
satisfactory to the Company, to the effect that (A) such transfer may be made
without registration under the Act and (B) such transfer or disposition will not
cause the
6
<PAGE>
termination or the non-applicability of any exemption to the registration and
prospectus delivery requirements of the Act or to the qualification or
registration requirements of the securities laws of any other jurisdiction on
which the Company relied in issuing this Warrant or the Warrant Shares.
8.2 LEGENDS; STOP TRANSFER.
(a) All certificates evidencing the
Warrant Shares shall bear a legend in substantially the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933. These securities have been acquired
for investment and not with a view to distribution and may not be
offered for sale, sold, pledged or otherwise transferred in the absence
of an effective registration statement for such securities under the
Securities Act of 1933 or an opinion of counsel reasonably satisfactory
in form and content to the issuer that such registration is not
required under such Act.
(b) The certificates evidencing the
Warrant Shares shall also bear any legend required by any applicable state
securities law.
(c) In addition, the Company shall
make, or cause its transfer agent to make, a notation regarding the transfer
restrictions of this Warrant and the Warrant Shares in its stock books, and this
Warrant and the Warrant Shares shall be transferred on the books of the Company
only if transferred or sold pursuant to an effective registration statement
under the Act covering the same or pursuant to and in compliance with the
provisions of Section 8.1(d).
9. NOTICES. All notices and other communications from
the Company to the Holder of this Warrant shall be mailed by first-class
registered or certified mail, postage prepaid, to the address furnished to the
Company by Holder.
10. CHANGE; WAIVER. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
11. HEADINGS. The headings in this Warrant are for
purposes of convenience in reference only, and shall not be deemed to constitute
a part hereof.
12. GOVERNING LAW. This Warrant shall be construed and
enforced in accordance with and governed by the internal laws, and not the law
of conflicts, of the State of Delaware.
7
<PAGE>
[SIGNATURE PAGE TO SERIES FIVE WARRANT]
AEGIS COMMUNICATIONS GROUP, INC.,
A DELAWARE CORPORATION
By:
--------------------------------------
Its:
-------------------------------------
8
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned, registered owner of this Warrant, irrevocably
exercises this Warrant and purchases ____________ of the number of shares of
Common Stock, $.01 par value, of AEGIS COMMUNICATIONS GROUP, INC., a Delaware
corporation, purchasable with this Warrant, and herewith makes payment therefor,
all at the price and on the terms and conditions specified in this Warrant.
DATED:
------------
---------------------------------
(Signature of Registered Owner)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip)
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned, registered owner of this
Warrant, hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock, $.01 par value, set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint _________________________
_________________________________________________ Attorney to make such transfer
on the books of AEGIS COMMUNICATIONS GROUP, INC., a Delaware corporation,
maintained for the purpose, with full power of substitution in the premises.
DATED:
-------------------
---------------------------------
(Signature)
---------------------------------
(Witness)
<PAGE>
[EXECUTION COPY]
FOURTH AMENDMENT
THIS FOURTH AMENDMENT, dated as of August 6, 1999 (this
"AMENDMENT"), is among IQI, INC., a New York corporation (the "BORROWER"),
AEGIS COMMUNICATIONS GROUP, INC., a Delaware corporation ("AEGIS"), each of
the Borrower's Subsidiaries (the "CONSENTING OBLIGORS") and the Lenders (such
capitalized term and other capitalized terms used in this preamble and the
recitals below to have the meanings set forth in, or as defined by reference
in, ARTICLE I).
W I T N E S S E T H:
WHEREAS, the Borrower, Aegis, the Lenders, Credit Suisse First
Boston, as Syndication Agent for the Lenders, and The Bank of Nova Scotia, as
Documentation Agent and Administrative Agent for the Lenders, are parties to
the Second Amended and Restated Credit Agreement, dated as of July 9, 1998
(as amended, supplemented, amended and restated or otherwise modified prior
to the date hereof, the "EXISTING CREDIT AGREEMENT");
WHEREAS, the Borrower has requested that the Lenders amend the
Existing Credit Agreement in certain respects as described below; and
WHEREAS, the Lenders have agreed, subject to the terms and
conditions set forth herein, to amend the Existing Credit Agreement, as set
forth below (the Existing Credit Agreement, as amended by this Amendment,
being referred to as the "CREDIT AGREEMENT");
NOW, THEREFORE, in consideration of the agreements herein contained,
and for other valuable consideration receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows.
ARTICLE I
DEFINITIONS
SECTION I.1 CERTAIN DEFINITIONS. The following terms (whether or not
underscored) when used in this Amendment shall have the following meanings
(such meanings to be equally applicable to the singular and plural form
thereof):
"AEGIS" is defined in the PREAMBLE.
"AMENDMENT" is defined in the PREAMBLE.
<PAGE>
"BORROWER" is defined in the PREAMBLE.
"CONSENTING OBLIGORS" is defined in the PREAMBLE.
"CREDIT AGREEMENT" is defined in the THIRD RECITAL.
"EXISTING CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"FOURTH AMENDMENT EFFECTIVE DATE" is defined in SECTION 4.1.
SECTION I.2 OTHER DEFINITIONS. Terms for which meanings are provided
in the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendment with such meanings.
ARTICLE II
AMENDMENTS TO CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Fourth Amendment
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this ARTICLE II; except as so amended, the Existing Credit Agreement
shall continue in full force and effect.
SECTION II.1 AMENDMENTS TO RECITALS. The Recitals to the Existing
Credit Agreement are hereby amended as follows.
SECTION II.1.1 The fifth recital of the Existing Credit Agreement is
hereby amended by (a) deleting the word "and" appearing at the end of clause
(ii) thereof, (b) deleting the period (".") at the end of clause (iii)
thereof and inserting "; and" in its place, and (c) inserting a new clause
(iv) to read as follows:
"(iv) on the Fourth Amendment Effective Date, an Additional
Term Loan Commitment pursuant to which Borrowings of Additional Term
Loans, in a maximum aggregate principal amount not to exceed
$7,500,000, will be made to the Borrower in a single Borrowing
occurring on the Fourth Amendment Effective Date."
SECTION II.1.2 The sixth recital of the Existing Credit Agreement is
hereby amended by inserting the phrase "and Additional Term Loans"
immediately after the phrase "make Revolving Loans" appearing in clause (vi)
thereof.
SECTION II.2 AMENDMENTS TO ARTICLE I. Article I of the Existing
Credit Agreement is hereby amended as follows.
<PAGE>
SECTION II.2.1 Section 1.1 of the Existing Credit Agreement is
hereby amended by inserting the following definitions in such Section in the
appropriate alphabetical sequence:
"ADDITIONAL TERM LOANS" is defined in CLAUSE (b) of SECTION
2.1.1.
"ADDITIONAL TERM LOAN COMMITMENT" is defined in CLAUSE (b) of
SECTION 2.1.1.
"ADDITIONAL TERM LOAN COMMITMENT AMOUNT" means, on any date,
$7,500,000.
"ADDITIONAL TERM LOAN COMMITMENT TERMINATION DATE" means the
earliest of:
(a) August 6, 1999 (if the Additional Term Loans
have not been made on or prior to such date);
(b) the Fourth Amendment Effective Date
(immediately after the making of the Additional Term Loans
on such date); and
(c) the date on which any Commitment Termination
Event occurs.
Upon the occurrence of any event described in CLAUSE (b) or
(c), the Additional Term Loan Commitment shall terminate
automatically and without any further action.
"ADDITIONAL TERM NOTE" means a promissory note of the
Borrower payable to the order of any Lender, in form and substance
satisfactory to the Administrative Agent (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 Additional Term Loans, and also means all
other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"AMENDMENT NO. 4" means Amendment No. 4, dated as of August
6, 1999, to Second Amended and Restated Credit Agreement, among the
Borrower, Aegis and the Lenders, and consented to by each of the
Borrower's Subsidiaries.
"EXISTING TERM NOTE" means a promissory note of the
Borrower payable to the order of any Lender, in form and substance
satisfactory to the Administrative Agent (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 Existing Term Loans, and also means all
other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"FOURTH AMENDMENT EFFECTIVE DATE" is defined in Section 4.1 of
Amendment No. 4.
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<PAGE>
"PARENT GUARANTY" means the guaranty executed and delivered
by the Parent pursuant to the terms of Amendment No. 4, in form and
substance satisfactory to the Administrative Agent, as amended,
supplemented, amended and restated or otherwise modified from time
to time.
SECTION II.2.2 Section 1.1 of the Existing Credit Agreement is
hereby amended by amending and restating the following definitions in such
Section so that they read in their entireties as follows:
"PERCENTAGE" means, relative to any Lender, the applicable
percentage relating to Revolving Loans, Existing Term Loans,
Additional Term Loans or its aggregate percentage for all facilities
provided herein, as the case may be, as set forth opposite its name
on SCHEDULE VII hereto under the applicable column heading or set
forth in a Lender Assignment Agreement under the applicable column
heading, as such percentage may be adjusted from time to time
pursuant to a Lender Assignment Agreement executed by such Lender
and its Assignee Lender(s) and delivered pursuant to SECTION 11.11.
A Lender shall not have any Commitment to make Existing Term Loans,
Additional Term Loans or Revolving Loans (as the case may be) if its
percentage under the applicable column heading on SCHEDULE VII is
zero. As used herein, "Percentage" as it relates to a Lender's
Percentage of Letter of Credit Outstandings or Swing Line Loans
shall be equal to such Lender's Percentage of Revolving Loans.
"STATED MATURITY DATE" means, in the case of any (a)
Revolving Loan, Swing Line Loan or Existing Term Loan, June 30,
2003, and (b) Additional Term Loan, December 31, 1999.
"TERM LOANS" means, collectively, the Existing Term Loans
and the Additional Term Loans.
"TERM NOTE" means, as the context may require, an
Additional Term Note or an Existing Term Note.
SECTION II.2.3 Section 1.1 of the Existing Credit Agreement is
hereby amended by amending
(a) clauses (a) and (b) of the definition of "Applicable
Margin" by
(i) inserting the phrase "and each Additional Term
Loan" immediately after the phrase "each Revolving Loan" in
each place such phrase appears in such clauses, and
-4-
<PAGE>
(ii) inserting the phrase "and Additional Term
Loans" immediately after the phrase "Rate Revolving Loans"
in each place such phrase appears in such clauses (including
in each of the appropriate columns set forth below clause
(b));
(b) clauses (c) and (d) of the definition of "Applicable
Margin" by inserting the word "Existing" immediately before the word
"Term" in each place such word appears in such clauses (including in
each of the appropriate columns set forth below clause (d));
(c) the definition of "Guarantor" by inserting the phrase
"and the Parent" immediately after the phrase "other than Aegis"
appearing therein;
(d) the definition of "Guaranty" by inserting the phrase
"the Parent Guaranty," immediately before the phrase "the Aegis
Guaranty" appearing therein; and
(e) the definition of "Obligor" by inserting the phrase
"the Parent," immediately before the word "Aegis" appearing therein.
SECTION II.3 AMENDMENTS TO ARTICLE II. Article II of the Existing
Credit Agreement is hereby amended as follows.
SECTION II.3.1 Section 2.1.1 of the Existing Credit Agreement is
hereby amended by inserting an "(a)" prior to the initial sentence thereof
and adding a new clause (b) immediately before the last sentence of such
Section to read as follows:
"(b) Subject to compliance by the Borrower with the terms
hereof, in a single Borrowing occurring on the Fourth Amendment
Effective Date, each Lender with a Percentage in excess of zero of
the Additional Term Loan Commitment Amount will make Loans (relative
to such Lender, its "ADDITIONAL TERM LOANS") to the Borrower equal
to such Lender's Percentage of the aggregate amount of the Borrowing
of Additional Term Loans requested by the Borrower to be made on
such day (the commitment of each such Lender described in this
CLAUSE (b) is herein referred to as its "ADDITIONAL TERM LOAN
COMMITMENT")."
SECTION II.4 AMENDMENTS TO ARTICLE III. Article III of the Existing
Credit Agreement is hereby amended as follows.
SECTION II.4.1 Section 3.1.1 of the Existing Credit Agreement is
hereby amended by
(a) inserting the word "Existing" immediately before the
word "Term" appearing in clause (f) thereof; and
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<PAGE>
(b) re-lettering existing clause (g) thereof to clause (h)
and inserting a new clause (g) to read as follows:
"(g) shall, on the Stated Maturity Date for
Additional Term Loans, make a scheduled repayment of the
then aggregate outstanding principal amount of all
Additional Term Loans."
SECTION II.4.2 The second sentence of Section 3.1.2 of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
"Mandatory prepayments pursuant to CLAUSE (c), (d) and (h) of
SECTION 3.1.1 shall be applied, to the extent of such prepayment,
FIRST, to the outstanding principal amount Existing Term Loans (pro
rata among the scheduled repayments in CLAUSE (f) of SECTION 3.1.1)
until paid in full; SECOND, to the outstanding principal amount of
Additional Term Loans until paid in full; and, THIRD, to a permanent
reduction in the Revolving Loan Commitment Amount."
SECTION II.5 AMENDMENT TO ARTICLE VII. Section 7.1.9 of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
"SECTION 7.1.9. USE OF PROCEEDS, ETC. The Borrower shall
apply the proceeds of
(a) the Revolving Loans made on and following the
Effective Date (i) to refinance certain existing
Indebtedness of a direct, wholly-owned subsidiary of Aegis,
in connection with the Transaction, (ii) for the general
corporate and working capital needs of the Borrower and the
Subsidiary Guarantors, (iii) to make Permitted Acquisitions,
(iv) to pay the transaction fees, costs and expenses
associated with Permitted Acquisitions, and (v) to pay
related Transaction fees and expenses; and
(b) the Additional Term Loans made on the Fourth
Amendment Effective Date for the general corporate and
working capital needs of the Borrower and the Subsidiary
Guarantors."
SECTION II.6 AMENDMENT TO ARTICLE XI. Clause (b) of Section 11.1 of
the Existing Credit Agreement is hereby amended by inserting the phrase "the
Parent, Aegis or" immediately before the phrase "any Guarantor from its
obligations" appearing in such clause.
SECTION II.7 SIGNATURE PAGES TO CREDIT AGREEMENT. The Signature
Pages to the Existing Credit Agreement are hereby amended by deleting the
phrases (and the corresponding percentages appearing after each such phrase)
"Revolving Loan Commitment", "Swing Line Loan Commitment", and "Term Loan
Commitment" in each place each such phrase appears thereon.
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<PAGE>
SECTION II.8 SCHEDULE VII TO CREDIT AGREEMENT. The Existing Credit
Agreement is hereby amended by adding a new Schedule VII thereto in the form
of SCHEDULE VII hereto.
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<PAGE>
ARTICLE III
LIMITED WAIVER
Subject to the terms of this Amendment, effective on the Fourth
Amendment Effective Date, and in reliance upon the representations and
warranties made herein and in each other Loan Document, by their signatures
below the Lenders hereby waive, until August 31, 1999, any Default resulting
from the non-compliance by the Borrower with any financial covenants
contained in Section 7.2.4 of the Credit Agreement. Except as expressly
provided in this Amendment (including the limited waiver set forth in this
ARTICLE III), each Loan Document shall continue in full force and effect in
accordance with their respective terms.
ARTICLE IV
CONDITIONS TO EFFECTIVENESS
SECTION IV.1 AMENDMENT EFFECTIVE DATE. This Amendment (and the
amendments, and modifications, and the limited waiver contained herein) shall
become effective, and shall thereafter be referred to as "AMENDMENT NO. 4",
on the date (the "FOURTH AMENDMENT EFFECTIVE DATE") when all of the
conditions set forth in this SECTION 4.1 have been satisfied.
SECTION IV.1.1 EXECUTION OF COUNTERPARTS. The Administrative Agent
shall have received counterparts of this Amendment, duly executed and
delivered on behalf of the Borrower, each of the Consenting Obligors and the
Lenders.
SECTION IV.1.2 RESOLUTIONS, ETC. The Agents shall have received from
each of the Borrower and the Parent,
(a) a certificate, dated the Fourth Amendment Effective
Date, of its Secretary, Assistant Secretary or Member, as
applicable, as to (i) resolutions of its Board of Directors or
Managing Members, as applicable, then in full force and effect
authorizing the execution, delivery and performance of this
Amendment and each other Loan Document to be executed by it, and,
with respect to the Parent, evidencing (in form satisfactory to the
Lenders) the Parent's ability to timely fulfill its obligations
under the Parent Guaranty, (ii) the incumbency and signatures of
those of its officers or members, as applicable, authorized to act
on its behalf with respect to each Loan Document to be executed by
it, upon which certificate each Lender may conclusively rely until
it shall have received a further certificate of the Secretary,
Assistant Secretary or Member, as applicable, of such Person
canceling or amending such prior certificate, and (iii) the full
force and validity of each Organic Document of the Borrower and (x)
with respect to the Parent, copies thereof and (y) with respect to
the Borrower, copies of any amendments or other modifications
thereto which have been effected since July 9, 1998; and
-8-
<PAGE>
(b) a copy of a good standing certificate, dated a dated
reasonably close to the Fourth Amendment Effective Date, for each
such Person.
SECTION IV.1.3 DELIVERY OF NOTES. The Administrative Agent shall
have received, for the account of each Lender making Additional Term Loans,
its Additional Term Notes, duly executed and delivered by the Borrower.
SECTION IV.1.4 PARENT GUARANTY. The Administrative Agent shall have
received executed counterparts of the Parent Guaranty, dated the date hereof,
duly executed by an Authorized Officer of the Parent.
SECTION IV.1.5 OPINION OF COUNSEL. The Administrative Agent shall
have received a legal opinion, dated the Fourth Amendment Effective Date and
addressed to the Administrative Agent, the Syndication Agent and each of the
Lenders, from New York counsel to the Obligors, satisfactory in form and
substance to the Administrative Agent.
SECTION IV.1.6 CLOSING FEES, EXPENSES, ETC. The Administrative Agent
shall have received for the account of each Lender, all fees, costs and
expenses due and payable pursuant to Sections 3.3 and 11.3 of the Credit
Agreement or payable hereunder, if then invoiced.
SECTION IV.1.7 LEGAL DETAILS, ETC. All documents executed or
submitted pursuant hereto shall be satisfactory in form and substance to the
Administrative Agent and its counsel. The Administrative Agent and their
counsel shall have received all information and such counterpart originals or
such certified or other copies or such materials, as the Administrative Agent
or its counsel may reasonably request, and all legal matters incident to the
transactions contemplated by this Amendment shall be satisfactory to the
Administrative Agent and its counsel.
ARTICLE V
AFFIRMATION AND CONSENT
SECTION V.1 ACKNOWLEDGMENT AND REAFFIRMATION. Aegis, the Borrower
and each Consenting Obligor hereby reaffirms, as of the Fourth Amendment
Effective Date, (a) the covenants and agreements contained in each Loan
Document to which it is a party, including, in each case, as such covenants
and agreements may be modified by this Amendment and the transactions
contemplated hereby, (b) its guarantee of payment of the Obligations pursuant
to the applicable Guaranty, and (c) its obligations with respect to
collateral security under each other Loan Document to which it is a party.
SECTION V.2 REPRESENTATIONS AND WARRANTIES, ETC. Aegis, the Borrower
and each Consenting Obligor hereby certifies that, as of the date hereof (and
after giving effect to the limited waiver set forth in ARTICLE III), the
representations and warranties made by it contained in each Loan Document to
which it is a party are true and correct in all material respects with the
same effect as if
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<PAGE>
made on the date hereof, except to the extent any such representation or
warranty refers or pertains solely to a date prior to the date hereof (in
which case such representation and warranty was true and correct in all
material respects as of such earlier date).
SECTION V.3 LOAN DOCUMENTS. Aegis, the Borrower and each Consenting
Obligor further confirms that each Loan Document to which it is a party (a)
is and shall continue to be in full force and effect and the same are hereby
ratified and confirmed in all respects, except that upon the occurrence of
the Fourth Amendment Effective Date, all references in such Loan Documents to
the "Credit Agreement", "Loan Documents", "thereunder", "thereof", or words
of similar import shall mean the Credit Agreement and the Loan Documents, as
the case may be, in each case after giving effect to the amendments and other
modifications provided for in this Amendment, (b) if such Loan Document
relates to collateral security, such document shall also expressly and
completely secure all Additional Term Loans and all Obligations related
thereto and (c) if such Loan Document relates to a guarantee, such document
shall also expressly and completely guarantee all Additional Term Loans and
all Obligations related thereto.
SECTION V.4 COURSE OF DEALING, ETC. Each Consenting Obligor hereby
acknowledges and agrees that the acceptance by each Lender of this document
shall not be construed in any manner to establish any course of dealing on
any Lender's part, including the providing of any notice or the requesting of
any acknowledgment not otherwise expressly provided for in any Loan Document
with respect to any future amendment, waiver, supplement or other
modification to any Loan Document or any arrangement contemplated by any Loan
Document.
ARTICLE VI
MISCELLANEOUS
SECTION VI.1 BORROWING REQUEST. The Borrower hereby requests from
each Lender that has a Percentage in excess of zero of the Additional Term
Loan Commitment a Borrowing of Additional Term Loans in an aggregate
principal amount of $7,500,000 on August 6, 1999 as a Base Rate Loan in an
amount equal to such Lender's Percentage with respect to the Additional Term
Loan Commitment. The Borrower hereby acknowledges that, pursuant to Section
5.2.2 of the Credit Agreement, each of the delivery of this Amendment (which
all parties hereto agree shall be deemed to be a Borrowing Request) and the
acceptance by the Borrower of the proceeds of the Loans requested hereby
constitute a representation and warranty by the Borrower that, on the date of
the making of such Loans (both immediately before and after giving effect
thereto and to the application of the proceeds thereof), subject to the
limited waiver set forth in ARTICLE III, all statements made in Section 5.2.1
of the Credit Agreement are true and correct.
SECTION VI.2 CROSS-REFERENCES. References in this Amendment to any
Article or Section are, unless otherwise specified or otherwise required by
the context, to such Article or Section of this Amendment.
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<PAGE>
SECTION VI.3 LOAN DOCUMENT PURSUANT TO CREDIT AGREEMENT. This
Amendment is a Loan Document executed pursuant to the Credit Agreement and
shall be construed, administered and applied in accordance with all of the
terms and provisions of the Credit Agreement.
SECTION VI.4 SUCCESSORS AND ASSIGNS. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION VI.5 COUNTERPARTS. This Amendment may be executed by the
parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION VI.6 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
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<PAGE>
IN WITNESS WHEREOF, the signatories hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
BORROWER:
IQI, INC.
By:
--------------------------------
Title:
AEGIS:
AEGIS COMMUNICATIONS GROUP,
INC.
By:
--------------------------------
Title:
CONSENTING OBLIGORS:
INTERSERV SERVICES CORP.
By:
--------------------------------
Title:
LEXI INTERNATIONAL, INC.
By:
--------------------------------
Title:
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<PAGE>
CHILDREN'S EDUCATIONAL
PUBLISHING CORPORATION
By:
--------------------------------
Title:
ADVANCED TELEMARKETING CORP.
By:
--------------------------------
Title:
AURIC BROKERAGE, INC.
By:
--------------------------------
Title:
AURIC MANAGEMENT, INC.
By:
--------------------------------
Title:
<PAGE>
LENDERS:
THE BANK OF NOVA SCOTIA
By:
--------------------------------
Title:
CREDIT SUISSE FIRST BOSTON
By:
--------------------------------
Title:
By:
--------------------------------
Title:
<PAGE>
SCHEDULE VII
PERCENTAGES AFTER GIVING EFFECT TO AMENDMENT NO. 4
<TABLE>
<CAPTION>
REVOLVING LOAN EXISTING TERM
COMMITMENT LOANS ADDITIONAL TERM LOANS AGGREGATE PERCENTAGE
------------------------------ -------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
The Bank of Nova Scotia 71.666667% 48.498717% 50.000000% 56.721795%
Credit Suisse First
Boston 28.333333% 51.501283% 50.000000% 43.278205%
</TABLE>
<PAGE>
[EXECUTION COPY]
PARENT GUARANTY
THIS PARENT GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "GUARANTY"), dated as of August 6,
1999, is made by THAYER EQUITY INVESTORS III, L.P., a Delaware limited
partnership (the "GUARANTOR"), in favor of each of the Lenders with an
Additional Term Loan Commitment (the "LENDER PARTIES").
W I T N E S S E T H:
WHEREAS, pursuant to the Second Amended and Restated Credit Agreement,
dated as of July 9, 1998 (as amended, supplemented, amended and restated or
otherwise modified from time to time including pursuant to the Fourth Amendment,
dated as of the date hereof (the "FOURTH AMENDMENT"), among IQI, Inc., a New
York corporation (the "BORROWER"), Aegis Communications Group, Inc., a Delaware
corporation ("AEGIS") and the Lenders, the "CREDIT AGREEMENT"), among the
Borrower, Aegis, the Lenders, the Syndication Agent and the Administrative
Agent, the Lenders and the Issuer have extended Commitments to make Credit
Extensions (including Additional Term Loans) to the Borrower; and
WHEREAS, as a condition precedent to the making of the Additional Term
Loans under the Credit Agreement, the Guarantor is required to execute and
deliver this Guaranty;
NOW THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, and in order to induce the Lender Parties to make the
Additional Term Loans to the Borrower pursuant to the Credit Agreement, the
Guarantor agrees, for the benefit of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"AEGIS" is defined in the FIRST RECITAL.
"BORROWER" is defined in the FIRST RECITAL.
<PAGE>
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"FOURTH AMENDMENT" is defined in the FIRST RECITAL.
"GUARANTEED OBLIGATIONS" is defined in CLAUSE (B) of SECTION 2.1.
"GUARANTOR" is defined in the PREAMBLE.
"GUARANTY" is defined in the PREAMBLE.
"LENDER PARTIES" is defined in the PREAMBLE.
"TERMINATION DATE" means the date on which all Guaranteed Obligations
have been paid in full in cash, all obligations of the Guarantor hereunder shall
have been paid in full in cash and the Additional Term Loan Commitment shall
have terminated.
SECTION I.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION II.1. GUARANTY. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether
at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of the Additional Term Loans now or hereafter
existing, whether for principal, interest (including interest accruing
at the then applicable rate provided in the Credit Agreement after the
occurrence of any Default set forth in Section 8.1.9 of the Credit
Agreement, whether or not a claim for post-filing or post-petition
interest is allowed under applicable law following institution of a
proceeding under bankruptcy, insolvency or similar laws), fees,
expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the
operation of Sections 502(b) and 506(b) of the United States Bankruptcy
Code, 11 U.S.C. Section 502(b) and Section 506(b)); and
<PAGE>
(b) indemnifies and holds harmless each Lender Party for any
and all costs and expenses (including reasonable attorneys' fees and
expenses) incurred by such Lender Party in enforcing any rights under
this Guaranty (together with the Obligations set forth in CLAUSE (a)
hereof, the "GUARANTEED OBLIGATIONS").
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Lender Party exercise any right, assert any claim or demand or enforce
any remedy whatsoever against any Obligor or any other Person before or as a
condition to the obligations of the Guarantor hereunder.
SECTION II.2. REINSTATEMENT, ETC. The Guarantor hereby agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Guaranteed
Obligations is invalidated, declared to be fraudulent or preferential, set
aside, rescinded or must otherwise be restored by any Lender Party, including
upon the occurrence of any Default set forth in Section 8.1.9 of the Credit
Agreement or otherwise, all as though such payment had not been made.
SECTION II.3. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until the Termination Date
has occurred. The Guarantor guarantees that the Guaranteed Obligations will be
paid strictly in accordance with the terms of the Credit Agreement and each
other Loan Document under which they arise, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Lender Party with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of any
Loan Document;
(b) the failure of any Lender Party (i) to assert any claim or
demand or to enforce any right or remedy against any Obligor or any
other Person (including any other guarantor) under the provisions of
any Loan Document or otherwise, or (ii) to exercise any right or remedy
against any other guarantor (including the Guarantor) of, or collateral
securing, any Guaranteed Obligations;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Guaranteed Obligations, or
any other extension, compromise or renewal of any Guaranteed
Obligation;
(d) any reduction, limitation, impairment or termination of
any Guaranteed Obligations for any reason (other than any payment made
by the Guarantor or any other Obligor toward the repayment of the
Guaranteed Obligations), including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and
the
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<PAGE>
Guarantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of
the invalidity, illegality, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, any Guaranteed
Obligations or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to or departure from, any of the terms
of any Loan Document, other than any increase in the Additional Term
Loan Commitment Amount without the prior written affirmation and
consent of the Guarantor;
(f) any addition, exchange or release of any collateral or of
any Person that is a guarantor (including the Guarantor hereunder) of
the Guaranteed Obligations, or any surrender or non-perfection of any
collateral, or any amendment to or waiver or release of or addition to,
or consent to or departure from, any other guaranty held by any Lender
Party securing any of the Guaranteed Obligations; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any guarantor.
SECTION II.4. SETOFF. The Guarantor hereby irrevocably authorizes the
Administrative Agent and each Lender Party, without the requirement that any
notice be given to the Guarantor (such notice being expressly waived by the
Guarantor), upon the occurrence and during the continuance of any Default
described in Section 8.1.9 of the Credit Agreement or, with the consent of the
Required Lenders, upon the occurrence and during the continuance of any other
Event of Default, to setoff and appropriate and apply to the payment of the
Guaranteed Obligations (whether or not then due, and whether or not any Lender
Party has made any demand for payment of the Guaranteed Obligations), any and
all balances, claims, credits, deposits (general or special, time or demand,
provisional or final), accounts or money of the Guarantor then or thereafter
maintained with such Lender Party; PROVIDED, HOWEVER, that any such
appropriation and application shall be subject to the provisions of Section 4.8
of the Credit Agreement. Each Lender Party agrees to notify the Guarantor and
the Administrative Agent after any such setoff and application made by such
Lender Party; PROVIDED, HOWEVER, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Lender
Party under this Section are in addition to other rights and remedies (including
other rights of setoff under applicable law or otherwise) which such Lender
Party may have.
SECTION II.5. WAIVER, ETC. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and any requirement that the
Administrative Agent or any Lender Party protect, secure, perfect or insure any
security interest, mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge against or
interest in any property, or the property subject thereto, or exhaust any right
or take any action against any
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<PAGE>
Obligor or any other Person (including any other guarantor) or entity or any
collateral securing the Guaranteed Obligations.
SECTION II.6. POSTPONEMENT OF SUBROGATION, ETC. The Guarantor agrees
that it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty or any other Loan Document to which it is a
party, nor shall the Guarantor seek or be entitled to seek any contribution
or reimbursement from any Obligor, in respect of any payment made hereunder,
under any other Loan Document or otherwise, until following the Termination
Date. Any amount paid to the Guarantor on account of any such subrogation
rights prior to the Termination Date shall be held in trust for the benefit
of the Lender Parties and shall immediately be paid and turned over to the
Administrative Agent for the benefit of the Lender Parties in the exact form
received by the Guarantor (duly endorsed in favor of the Administrative
Agent, if required), to be credited and applied against the Guaranteed
Obligations, whether matured or unmatured, in accordance with SECTION 2.7;
PROVIDED, HOWEVER, that if the Guarantor has made payment to the Lender
Parties of all or any part of the Guaranteed Obligations and the Termination
Date has occurred, then at the Guarantor's request, the Administrative Agent
(on behalf of the Lender Parties) will, at the expense of the Guarantor,
execute and deliver to the Guarantor appropriate documents (without recourse
and without representation or warranty) necessary to evidence the transfer by
subrogation to the Guarantor of an interest in the Guaranteed Obligations
resulting from such payment. In furtherance of the foregoing, at all times
prior to the Termination Date, the Guarantor shall refrain from taking any
action or commencing any proceeding against any Obligor (or its successors or
assigns, whether in connection with a bankruptcy proceeding or otherwise) to
recover any amounts in the respect of payments made under this Guaranty to
any Lender Party.
SECTION II.7. PAYMENTS; APPLICATION. The Guarantor hereby agrees with
each Lender Party as follows:
(a) The Guarantor agrees that all payments made by the
Guarantor hereunder will be made in Dollars to the Administrative
Agent, without setoff, counterclaim or other defense and in accordance
with Sections 4.6 and 4.7 of the Credit Agreement, free and clear of
and without deduction for any taxes, the Guarantor hereby agreeing to
comply with and be bound by the provisions of Sections 4.6 and 4.7 of
the Credit Agreement in respect of all payments made by it hereunder
and the provisions of which Sections are hereby incorporated into and
made a part of this Guaranty by this reference as if set forth herein;
PROVIDED, that references to the "Borrower" in such Sections shall be
deemed to be references to the Guarantor, and references to "this
Agreement" in such Sections shall be deemed to be references to this
Guaranty.
(b) All payments made hereunder shall be applied upon receipt
(i) first, to the payment of all Guaranteed Obligations owing to the
Administrative Agent, in its capacity as the Administrative Agent
(including the fees and expenses of counsel to the Administrative
Agent), (ii) second, after payment in full of the amounts specified in
CLAUSE (b)(i), to the ratable payment of all interest and fees owing
with respect to the
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<PAGE>
Additional Term Loans and all costs and expenses owing to the Lender
Parties pursuant to the terms of the Credit Agreement, until paid in
full, (iii) third, after payment in full of the amounts specified in
CLAUSES (b)(i) and (b)(ii), to the ratable payment of the principal
amount of the Additional Term Loans then outstanding, (iv) fourth,
after payment in full of the amounts specified in CLAUSES (b)(i)
through (b)(iii), and following the Termination Date, to the Guarantor
or any other Person lawfully entitled to receive such surplus.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender Parties to enter into the Fourth
Amendment and make the Additional Term Loans thereunder, the Guarantor
represents and warrants to each Lender Party as set forth below.
SECTION III.1. CREDIT AGREEMENT REPRESENTATIONS AND WARRANTIES. The
Guarantor hereby represents and warrants to each Lender Party that the
representations and warranties contained in Article VI of the Credit Agreement,
insofar as the representations and warranties contained therein specifically
refer to the Guarantor and its properties, are true and correct in all material
respects, each such representation and warranty set forth in such Article
(insofar as applicable as aforesaid), together with all related definitions,
being hereby incorporated into this Guaranty by this reference as though
specifically set forth in this Article.
SECTION III.2. FINANCIAL CONDITION OF THE OBLIGORS. The Guarantor has
knowledge of each Obligor's financial condition and affairs and has adequate
means to obtain from the each Obligor on an ongoing basis information relating
thereto and to such Obligor's ability to pay and perform the Guaranteed
Obligations, and agrees to assume the responsibility for keeping, and to keep,
so informed until after the Termination Date. The Guarantor acknowledges and
agrees that the Lender Parties shall have no obligation to investigate the
financial condition or affairs of any Obligor for the benefit of the Guarantor
nor to advise the Guarantor of any fact respecting, or any change in, the
financial condition or affairs of any Obligor that might become known to any
Lender Party at any time, whether or not such Lender Party knows or believes or
has reason to know or believe that any such fact or change is unknown to the
Guarantor, or might (or does) materially increase the risk of the Guarantor as
guarantor, or might (or would) affect the willingness of the Guarantor to
continue as a guarantor of the Guaranteed Obligations.
SECTION III.3. BEST INTERESTS. It is in the best interests of the
Guarantor to execute this Guaranty inasmuch as the Guarantor will derive
substantial direct and indirect benefits from the making of the Additional Term
Loans to the Borrower by the Lender Parties pursuant to the Credit Agreement,
and the Guarantor agrees that the Lender Parties are relying on this
representation in agreeing to make the Additional Term Loans to the Borrower.
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<PAGE>
ARTICLE IV
COVENANTS, ETC.
SECTION IV.1. CREDIT AGREEMENT COVENANTS. The Guarantor covenants and
agrees that, at all times prior to the Termination Date, it will perform, comply
with and be bound by all of the agreements, covenants and obligations contained
in the Credit Agreement (including Article VII and Section 8.1.9 of the Credit
Agreement) which specifically refer to the Guarantor or its properties, each
such agreement, covenant and obligation contained in the Credit Agreement,
together with all related definitions, being hereby incorporated into this
Guaranty by this reference as though specifically set forth in this Article.
SECTION IV.2. GUARANTEED OBLIGATIONS ON DEPOSIT. The Guarantor
covenants and agrees that, at all times prior to the Termination Date, it will
maintain unfunded capital commitments in an amount sufficient to pay the
Guaranteed Obligations.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION V.1. LOAN DOCUMENT. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including ARTICLE XI thereof.
SECTION V.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. This Guaranty shall be binding upon the Guarantor and its
successors, transferees and assigns and shall inure to the benefit of and be
enforceable by each Lender Party and its respective successors, transferees and
assigns; PROVIDED, HOWEVER, that the Guarantor may not (unless otherwise
permitted under the terms of the Credit Agreement) assign any of its obligations
hereunder without the prior written consent of all Lenders.
SECTION V.3. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be, pursuant to Section 11.1 of the Credit Agreement)
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION V.4. NOTICES. All notices and other communications provided for
hereunder shall be in writing (including facsimile communication) and mailed,
telecopied or delivered to
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<PAGE>
the Guarantor, in care of the Borrower at the address or facsimile number of
the Borrower specified in the Credit Agreement or, if such notice or
communication is to the Administrative Agent, to the address or facsimile
number of the Administrative Agent specified in the Credit Agreement. All
such notices and other communications, when 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 such notice or
communication, if transmitted by facsimile, shall be deemed given when the
confirmation of transmission thereof is received b the transmitter.
SECTION V.5. NO WAIVER; REMEDIES. In addition to, and not in limitation
of, SECTION 2.3 and SECTION 2.5, no failure on the part of any Lender Party to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION V.6. CAPTIONS. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION V.7. SEVERABILITY. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION V.8. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS GUARANTY SHALL
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). THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION V.9. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES
OR THE GUARANTOR SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF
NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER,
-8-
<PAGE>
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
PROPERTY MAY BE FOUND. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. THE GUARANTOR HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM
(THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 1633 BROADWAY,
NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS AGENT TO RECEIVE, ON THE
GUARANTOR'S BEHALF AND ON BEHALF OF THE GUARANTOR'S PROPERTY, SERVICE OF
COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED
IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR
DELIVERING A COPY OF SUCH PROCESS TO THE GUARANTOR IN CARE OF THE PROCESS
AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE GUARANTOR HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE
ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
GUARANTOR 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 GUARANTOR 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
GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
SECTION V.10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
-9-
<PAGE>
ACTIONS OF THE LENDER PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER
PARTIES ENTERING INTO THE FOURTH AMENDMENT.
SECTION V.11. COUNTERPARTS. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
THAYER EQUITY INVESTORS III, L.P.
By: TC Equity Partners L.L.C.,
its General Partner
By:_________________________________
Title: Member
Accepted and Agreed for itself and
on behalf of the Lender Parties:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:_________________________________
Title:
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 829
<SECURITIES> 0
<RECEIVABLES> 52,371
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,090
<PP&E> 62,316
<DEPRECIATION> 25,843
<TOTAL-ASSETS> 155,883
<CURRENT-LIABILITIES> 27,671
<BONDS> 72,277
0
2
<COMMON> 524
<OTHER-SE> 55,409
<TOTAL-LIABILITY-AND-EQUITY> 155,883
<SALES> 0
<TOTAL-REVENUES> 119,839
<CGS> 0
<TOTAL-COSTS> 86,726
<OTHER-EXPENSES> 61,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,580
<INCOME-PRETAX> (32,260)
<INCOME-TAX> (3,982)
<INCOME-CONTINUING> (28,278)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,278)
<EPS-BASIC> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
