STOCK SUBSCRIPTION AND REDEMPTION AGREEMENT
BY AND AMONG
MADISON DEARBORN CAPITAL PARTNERS III, L.P.,
THE STOCKHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS
OF OUTSOURCING SOLUTIONS INC.
SIGNATORY HERETO
AND
OUTSOURCING SOLUTIONS INC.
Dated as of October 8, 1999
STOCK SUBSCRIPTION AND REDEMPTION AGREEMENT
STOCK SUBSCRIPTION AND REDEMPTION AGREEMENT, dated as of October
8, 1999 (this "Agreement"), by and among Madison Dearborn Capital Partners III,
L.P. (the "Purchaser"), Outsourcing Solutions Inc., a Delaware corporation (the
"Company") and the stockholders, warrantholders and optionholders of the
Company, in each case listed on the signature pages hereto.
WHEREAS, the Purchaser desires to subscribe for, and the Company
desires to issue to Purchaser, shares of the voting common stock (the "Voting
Common Stock"), $.01 par value per share, of the Company and shares of Senior
Mandatorily Redeemable Preferred Stock of the Company, on the terms and subject
to the conditions set forth herein;
WHEREAS, the stockholders of the Company (each a "Stockholder"
and collectively the "Stockholders") own an aggregate of 5,308,866.59 shares of
Voting Common Stock, Class A Convertible Nonvoting Common Stock, $.01 par value
per share (the "Class A Stock"), Class B Convertible Nonvoting Common Stock,
$.01 par value per share (the "Class B Stock") and Class C Convertible Nonvoting
Common Stock, $.01 par value per share (the "Class C Stock" and collectively
with the Class A Stock and Class B Stock, the "Nonvoting Common Stock" and
together with the Voting Common Stock, the "Common Stock") and 1,094,855.24
shares of preferred stock, no par value (the "Preferred Stock"), constituting
all of the issued and outstanding capital stock of the Company (collectively,
the "Capital Stock");
WHEREAS, the warrantholders of the Company (each a
"Warrantholder" and collectively the "Warrantholders") own in the aggregate
warrants (the "Warrants") to purchase a total of 46,088.67 shares of Common
Stock of the Company, constituting all of the issued and outstanding warrants of
the Company;
WHEREAS, the optionholders of the Company (each an "Optionholder"
and collectively the "Optionholders") own in the aggregate options (the
"Options") exercisable to purchase a total of 704,821.2 shares of Common Stock
of the Company, constituting all of the issued and outstanding options of the
Company (with the Capital Stock, Warrants and Options being herein collectively
referred to as the "Company Securities");
WHEREAS, certain of the Stockholders desire to convert, prior to
the consummation of the transactions described herein, shares of Nonvoting
Common Stock into shares of Voting Common Stock as set forth herein;
WHEREAS, the Company desires to redeem or repurchase, and certain
Stockholders, Warrantholders and Optionholders desire to have redeemed or
repurchased certain Company Securities, including all Nonvoting Common Stock
remaining after the conversion referred to above, all Preferred Stock, all
Warrants and Options in each case as set forth on Exhibit C or Schedule 2.05 of
the Company's disclosure letter (collectively the "Redemption Securities") (such
Stockholders, Warrantholders and Optionholders with respect to the securities to
be redeemed being herein referred to as the "Redemption Securityholders");
WHEREAS, certain Stockholders and Optionholders desire to retain
shares of Voting Common Stock none of which will be issued upon exchange of the
Preferred Stock (the "Rollover Common Stock") and Options (the "Rollover
Options") which are not otherwise being redeemed or repurchased by the Company
in each case as set forth on Exhibit C or Schedule 2.05 of the Company's
disclosure letter (the "Rollover Stockholders" and "Rollover Optionholders" and
collectively the "Rollover Holders" with respect to the Voting Common Stock and
Options being retained);
WHEREAS, all outstanding borrowings and obligations under the
Second Amended and Restated Credit Agreement, dated as of January 26, 1998, (as
amended) among the Company, the lenders listed therein, and the agents thereof
shall be replaced and refinanced by a new $475.0 million senior credit facility
at the Closing as described in the Senior Letter (the "Refinancing");
WHEREAS, the Purchaser, with the cooperation and in the name of
the Company, shall seek the consents of the holders (the "Noteholders") of the
11% Senior Subordinated Notes, due 2006, as necessary to (i) keep such notes
outstanding notwithstanding the change of control of the Company, (ii) waive any
defaults thereunder that exist, have existed or that may exist as a result of
the transactions contemplated hereby and (iii) make such amendments to the
Indenture, dated as of November 6, 1996, between the Company and Wilmington
Trust Company, as Trustee (the "Indenture"), as may be necessary to permit the
MBIA conduit facility described in Section 5.03(g)(1) and (2) to operate in
accordance with past practice (the "Consent Solicitation" and, together with the
other transactions described above, the "Recapitalization");
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
ISSUANCE OF STOCK; PAYMENT OF SUBSCRIPTION PRICE; CLOSING
1.01 Issuance of Stock. (a) Subject to the terms and conditions
set forth in this Agreement, the Company agrees to issue and sell to Purchaser,
and Purchaser agrees to purchase, on the Closing Date (as hereinafter defined):
(i) a number of shares of Voting Common Stock determined as set forth below; and
(ii) 50,000 shares of Senior Mandatorily Redeemable Preferred Stock (the
"Mezzanine Preferred" and together with the Voting Common Stock to be purchased
by Purchaser, the "Sale Stock"); provided, that if at the Closing the Company
enters into a separate purchase agreement with Purchaser and other investors for
the sale and issuance of the Mezzanine Preferred, the obligation to purchase
Mezzanine Preferred hereunder shall be superseded and replaced without further
action by the Parties hereto; provided, that no such agreement or assignment
shall relieve Purchaser of its obligation to purchase the amount of Mezzanine
Preferred described herein. The Mezzanine Preferred shall have such terms as are
consistent with the terms therefor set forth in the Preferred Letter. The
certificate or certificates representing Sale Stock shall be issued and
delivered in the name or names and in the denominations specified by Purchaser
in a notice to be delivered to the Company no later than the day prior to
Closing Date.
(b) The number of shares of Sale Stock comprised of Voting Common
Stock shall be determined as follows: (i) the Purchase Price divided by (ii) the
Redemption Consideration.
1.02 Price. In full consideration for the purchase by Purchaser
of the Sale Stock, Purchaser shall pay to the Company on the Closing Date (i)
the Purchase Price for the Voting Common Stock and (ii) $50,000,000 for the
Mezzanine Preferred. For purposes of this Section 1.02, the "Purchase Price"
shall be not less than $200 million and not more than $220 million, the final
amount of which shall be specified by the Purchaser in writing to the Company no
later than two business days prior to the Closing and shall depend on the
revolver availability at Closing under the Refinancing and the third party fees
and expenses of the Recapitalization payable by the Company or the Purchaser;
provided that to the extent the third party fees and expenses of the
Recapitalization exceed $45 million, the $220 million cap on the Purchase Price
referred to above shall be increased by an amount equal to the excess of such
fees and expenses over $45 million; provided, further, that notwithstanding the
foregoing the final Purchase Price amount shall not be less than the aggregate
Redemption Consideration payable to Redemption Securityholders with respect to
Redemption Securities less $70,000,000. Such amount shall be payable by wire
transfer of funds to an account specified by the Company in writing to the
Purchaser notice of which shall be provided no later than two business days
prior to the Closing Date. This paragraph shall be subject to the satisfaction
of the conditions to Purchaser's obligation to close set forth in Article V
hereof.
"Debt" shall mean (i) indebtedness of the Company and its
Subsidiaries determined in accordance with generally accepted accounting
principles ("GAAP") (including, without limitation, capital leases), except for
intercompany loans and advances between or among the Company and its
Subsidiaries and (ii) any prepayment penalties or redemption premiums resulting
from the transactions contemplated by this Agreement (but excluding any amount
contemplated by clause (B) (iii) of the definition of Aggregate Consideration
set forth in Section 2.03(a)).
1.03 Escrow; Sellers' Representative. At or prior to Closing, the
Company shall deposit in escrow (the "Escrow Account") with an escrow agent
selected by XxXxxx De Leeuw & Co., Inc., as representative for the Redemption
Securityholders (the "Sellers' Representative") and reasonably acceptable to the
Company (the "Escrow Agent"), as Escrow Agent pursuant to the terms of an Escrow
Agreement substantially in the form attached hereto as Exhibit B (the "Escrow
Agreement"), $5,000,000 (the "Escrow Amount") from which payments arising from
the adjustments pursuant to Section 1.05 shall be made. The Escrow Amount shall
bear interest and shall be released as set forth in the Escrow Agreement. The
funds in the Escrow Account shall thereafter be released to the Redemption
Securityholders, or the Company, as the case may be, only as provided herein and
the Escrow Agreement. None of Purchaser or the Company shall be responsible to
the Stockholders, Warrantholders or Optionholders for any loss, damage or
expense such holders may suffer as a result of any action of the Sellers'
Representative. The Sellers' Representative shall not be responsible to the
Stockholders, the Optionholders or Warrantholders for any loss or damages such
holders may suffer by the performance by the Sellers' Representative of its
duties under this Agreement, other than loss or damage arising from willful
violation of the law by the Sellers' Representative or gross negligence in the
performance by the Sellers' Representative of its duties under this Agreement.
The Sellers' Representative shall be indemnified by the Stockholders,
Optionholders and Warrantholders against any and all losses, damages and
expenses, whether or not resulting from third party claims, including interest
and penalties with respect thereto, asserted against or incurred or sustained by
any indemnifying holder as a result of or arising out of any and all of the
Sellers' Representative's actions taken as Seller's Representative. The Escrow
Account shall only be used to satisfy the obligations set forth in Section 1.05
and will not be subject to any counterclaims or rights of set-off by the Company
or any other Person.
1.04 Closing. The closing of the transactions that constitute the
Recapitalization (the "Closing") shall take place at the offices of White & Case
LLP, 1155 Avenue of the Americas, New York, New York, as soon as practicable
after the last of the conditions set forth in Article V hereof is fulfilled or
waived (subject to applicable law) but in no event later than the fifth business
day thereafter, or at such other time and place and on such other date as
Purchaser and the Company shall determine (the "Closing Date").
1.05 Working Capital Adjustment. (a) Not more than five business
days or less than three business days prior to the Closing Date, the Company
shall prepare and deliver to Purchaser an estimate of the consolidated Working
Capital (as hereinafter defined) of the Company and its Subsidiaries (the
"Estimated Working Capital") as of the Closing Date which shall quantify in
reasonable detail the items constituting such Working Capital. The Company shall
consult with the Purchaser in the preparation of the Estimated Working Capital
and shall permit Purchaser to ask questions and make inquiries of the Company
with respect thereto; provided, that the Company's good faith estimate of
Working Capital as of the Closing Date shall be final and binding for purposes
of determining Estimated Working Capital. Working capital (the "Working
Capital") shall be equal to the sum of current assets other than purchased loans
of the Company and its Subsidiaries less current liabilities of the Company and
its Subsidiaries, in each case determined in accordance with GAAP on a
consolidated basis, consistently applied with the Financial Statements;
provided, that in determining Working Capital, there shall be no duplication of
amounts paid or payable that would have the effect of reducing Aggregate
Consideration more than once on account of such amounts so paid or payable. Any
item that would have been included as a reduction under clause (B) of the
definition of Aggregate Consideration but for the fact that an invoice therefor
had not been received as of the Closing Date, shall be included as a current
liability for purposes of determining Working Capital notwithstanding that an
invoice therefor is received after the Closing Date. If the Estimated Working
Capital is less than - $6,134,000, then the Aggregate Consideration shall be
reduced by the amount of such deficiency. If Estimated Working Capital is
greater than -$6,134,000, then the Aggregate Consideration shall be increased by
the amount of such difference.
(b) Promptly after the Closing Date, and in any event not later
than forty-five (45) days following the Closing Date, the Company shall prepare
a statement of the consolidated Working Capital of the Company and its
Subsidiaries at the Closing Date (the "Working Capital Statement").
(c) After preparation of the Working Capital Statement, the
Company promptly shall deliver the Working Capital Statement to the Sellers'
Representative and to the Sellers' Representative's accountants (which shall be
one firm designated to the Company) for review and the Sellers' Representative
and the Sellers' Representative's accountants may make inquiries of the Company
and/or the Company's accountants regarding questions concerning or disagreements
with the Working Capital Statement arising in the course of such review. The
Sellers' Representative's and the Sellers' Representative accountants shall
complete their review of the Working Capital Statement within forty-five (45)
days of the delivery of the Working Capital Statement to the Sellers'
Representative. Promptly following completion of their review, the Sellers'
Representative shall submit to the Company a letter regarding its concurrence or
disagreement with the accuracy of the Working Capital Statement. Unless the
Sellers' Representative delivers a letter disagreeing with the accuracy of the
Working Capital Statement within such forty-five (45) day period, the Working
Capital Statement shall be final and binding upon the parties. Following
delivery of such letter, if the Sellers' Representative shall disagree as to the
computation of any item in the Working Capital Statement, the Sellers'
Representative and the Company shall attempt promptly to resolve such
disagreement in good faith. If a resolution of such disagreement has not been
effected within fifteen (15) days (or longer, as mutually agreed by the parties)
after delivery of such letter, the Sellers' Representative or the Company may
submit such disagreement to Ernst & Young LLP. The determination of such firm
with respect to such disagreement and the accuracy of the Working Capital
Statement as a result shall be completed within 45 days of its submission to
such accountants and shall be final and binding. Working Capital as finally
determined in accordance herewith shall be referred to as "Closing Date Working
Capital." The fees, costs and expenses of the independent accounting firm
selected in the event of a dispute shall be shared equally by the Company and
the Redemption Securityholders (in the case of such Redemption Securityholders,
by payment out of the Escrow Account).
(d) If Closing Date Working Capital is less than the Estimated
Working Capital, then funds in the Escrow Account equal to the amount of such
deficiency (but in no event to exceed $5,000,000) shall be released to the
Company to pay to the Company the amount of any such deficiency within one (1)
business day after the determination of Closing Date Working Capital by wire
transfer of immediately available funds to an account designated in writing by
the Company. If Closing Date Working Capital exceeds the Estimated Working
Capital, then the Company shall pay into the Escrow Account, for release to all
Stockholders, Optionholders and Warrantholders in accordance with the Escrow
Agreement, the amount of any such excess (but in no event to exceed an
additional $5,000,000, except as provided in paragraph (f) below) within one (1)
business day after the determination of Closing Date Working Capital by wire
transfer of immediately available funds. Any amounts remaining in the Escrow
Account after the foregoing adjustments shall be released to all Stockholders,
Optionholders and Warrantholders pro rata according to their relative share of
the Fully Diluted Equity Number. Adjustments or payments pursuant to Sections
1.05(d) or (f) shall not be included in, or result in any adjustment to,
Aggregate Consideration as defined in Section 2.03.
(e) Notwithstanding that the amount of the deficiency referred to
in Section 1.05(d) may exceed the amount of funds in the Escrow Account, the
obligation of any Redemption Securityholders to make any payment required by
this Section 1.05 shall be fully and unconditionally satisfied by the payment to
the Company of $5,000,000 of funds in the Escrow Account.
(f) Simultaneous with any payment into or release from the Escrow
Account required by Section 1.05(d), the Company shall deposit into the Escrow
Account an additional $2,000,000 in immediately available funds.
ARTICLE II
REDEMPTION OF THE REDEMPTION STOCK; OPTIONS; WARRANTS
2.01 Conversion. (a) No later than 3 days prior to the Closing,
each holder of Nonvoting Common Stock shall convert or exchange, as applicable,
each share of Nonvoting Common Stock held by such holder into a share of Voting
Common Stock in accordance with Exhibit C.
(b) If any share of Voting Common Stock is to be delivered upon
conversion to a Person other than the Person in whose name the certificate
surrendered for the purposes of such conversion are registered, it shall be a
condition to the conversion that the certificates so surrendered shall be
properly endorsed or accompanied by appropriate stock powers with the signatures
guaranteed and otherwise in proper form for transfer, that such transfer
otherwise be proper and that the Person requesting such transfer pay to the
Company any transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction to the Company that such taxes have been paid or
are not required to be paid.
(c) If any certificate representing Nonvoting Common Stock or
Preferred Stock shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed, the Company will issue on conversion of such lost, stolen
or destroyed certificate the shares of Voting Common Stock deliverable in
respect thereof; provided, that the Person to whom the Voting Common Stock is
deliverable shall, as a condition precedent to the delivery thereof, agree to
indemnify the Company against any claim that may be made against the Company
with respect to the certificate claimed to have been lost, stolen or destroyed.
If required by the Company, an indemnity bond must be supplied by the
Stockholder that is sufficient in the reasonable judgment of the Company to
protect the Company from any loss that it may suffer if a certificate is
replaced.
2.02 Redemption of Redemption Securities. Upon the terms and
subject to the conditions set forth in this Agreement, each of the Redemption
Securityholders agrees to deliver to the Company for redemption or repurchase on
the Closing Date, and the Company agrees to redeem or repurchase from each of
the Redemption Securityholders on the Closing Date, the number of Redemption
Securities set forth opposite the names of such Redemption Securityholders on
Exhibit C attached hereto including all Nonvoting Common Stock, all Preferred
Stock and all Common Stock issued upon exchange of the Preferred Stock. The
certificates representing any Capital Stock included in the Redemption
Securities shall be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by the Redemption Securityholders transferring the same to
the Company with all necessary transfer tax and other revenue stamps, acquired
at the Company's expense, affixed and canceled. Such Redemption Securityholders
agree to cure any deficiencies with respect to the endorsement of the
certificates representing the Capital Stock owned by such Redemption
Securityholders or with respect to the stock power accompanying any such
certificates. Redemption Securityholders holding Warrants or Options included in
the Redemption Securities shall execute and deliver such documents and
instruments as Purchaser may reasonably request to evidence the cancellation of
such Warrants and Options. Upon consummation of the Recapitalization, there
shall be no Preferred Stock (other than the Mezzanine Preferred) outstanding.
2.03 Capital Stock. (a) Upon the surrender to the Company of a
certificate or certificates (a "Certificate") evidencing Capital Stock included
in the Redemption Securities, the Company shall pay by wire transfer of
immediately available funds to the Person (as defined in Section 7.17 hereof)
entitled thereto the Redemption Consideration times the number of shares of such
Capital Stock as payment in full therefor.
The "Redemption Consideration" shall be determined at Closing and
shall be equal to (i) (A) the Aggregate Consideration less (B) the Escrow Amount
plus (C) the aggregate exercise price for all Warrants and Options outstanding
immediately prior to the Closing divided by (ii) the sum of (A) the total number
of shares of Voting Common Stock and Nonvoting Common Stock outstanding at
Closing (assuming the actions described in Section 2.01 have occurred) and (B)
the total number of shares of Voting Common Stock into which Warrants, Options
and Preferred Stock (including accruals for payment-in-kind dividends as of
Closing whether or not then exchangeable) outstanding at Closing are
exercisable, convertible or exchangeable (whether or not presently exercisable,
convertible or exchangeable) (the sum of (A) and (B) in clause (ii) being the
"Fully Diluted Equity Number"). In calculating the Redemption Consideration and
Fully Diluted Equity Number, no Warrant or Option shall be included that would
have an exercise price equal to or in excess of the amount of Redemption
Consideration if such Warrant or Option were included in such calculation.
"Aggregate Consideration" shall mean (A) an aggregate of
$790,000,000, less (B) the sum of the following items: (i) the amount of Debt at
Closing; (ii) the fees and expenses specified in Section 3.01(s) of this
Agreement along with other fees and expenses paid or payable by the Company
(including, without limitation, legal and other advisory fees and expenses) in
connection with this Agreement; (iii) amounts paid or payable by the Company,
arising from the change in control of the Company resulting from this Agreement
including, without limitation, change of control payments to certain employees
of the Company pursuant to the agreements set forth on Schedule 1.02 of the
Company's disclosure letter (based on a gross entitlement of $4,498,000 before
deductions pursuant to such agreements); (iv) fees, expenses or other amounts
paid or payable in connection with obtaining the consents or waivers of any
third party required to consummate the purchase and redemption contemplated by
this Agreement (including the fees, expenses or other amounts paid in connection
with the amendments to the agreements contemplated by Section 5.03(g), but
excluding consent and waiver fees, expenses and other amounts paid or payable to
holders of the Senior Subordinated Notes and the expenses related to obtaining
such consents and waivers); and (v) the fees and expenses of the Stockholders,
Warrantholders or Optionholders paid or payable by the Company, if any, in
connection with this Agreement and the transactions contemplated hereby, (C)
plus or minus, as applicable, the adjustment provided for in Section 1.05(a)
based on the Estimated Working Capital.
(b) If the Redemption Consideration (or any portion thereof) is
to be delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Redemption Consideration that the Certificates so surrendered
shall be properly endorsed or accompanied by appropriate stock powers with the
signatures guaranteed and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the Person requesting such transfer pay to
the Company any transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction of the Company that such taxes have been paid or
are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Company will issue in
exchange for such lost, stolen or destroyed Certificate the Redemption
Consideration deliverable in respect thereof as determined in accordance with
this Article I, provided that, the Person to whom the Redemption Consideration
is paid shall, as a condition precedent to the payment thereof, agree to
indemnify the Company against any claim that may be made against the Company
with respect to the Certificate claimed to have been lost, stolen or destroyed.
If required by the Company, an indemnity bond must be supplied by the
Stockholder that is sufficient in the reasonable judgment of the Company to
protect the Company from any loss that it may suffer if a certificate is
replaced.
2.04 Warrants. Immediately prior to Closing, each outstanding
Warrant to purchase Common Stock (the "Warrants"), whether or not immediately
exercisable, shall be deemed exercised for shares of Voting Common Stock and
each holder thereof, shall be entitled in cancellation and settlement therefor
to payments in cash (subject to any applicable withholding taxes, if any, the
"Warrant Payment"), equal to the product of (x) the total number of shares
subject to such Warrant as to which such Warrant could have been exercisable and
(y) the excess of the Redemption Consideration over the exercise price per share
of Voting Common Stock subject to such Warrant.
2.05 Options. Each Optionholder listed on Schedule 2.05 of the
Company's disclosure letter hereby agrees not to exercise such person's Options
at any time prior to or at the Closing. To the extent indicated on Schedule 2.05
of the Company's disclosure letter, certain Optionholders will receive payments
in cash (subject to any applicable withholding taxes, the "Cash Payment"), at
Closing, equal to the product of (x) the total number of shares of Voting Common
Stock subject to such Option as to which such Option could have been exercised
as of Closing and (y) the excess of the Redemption Consideration over the
exercise price per share of Voting Common Stock subject to such Option. The
Company will provide each other Optionholder not included on Schedule 2.05 of
the Company's disclosure letter the right to elect either (i) not to exercise
such person's Options prior to or at the Closing or (ii) to accept, in
cancellation and settlement therefor, a Cash Payment at the Closing. The Company
shall provide to Purchaser, three business days prior to the Closing, a list
specifying the election made by each Optionholder (other than those identified
on Schedule 2.05 of the Company's disclosure letter) accompanied by a
counterpart to this Agreement pursuant to which such Optionholder agrees to be
bound by such election subject to the terms and conditions of this Agreement.
Each Optionholder that has not accepted a Cash Payment in cancellation and
settlement therefor hereby agrees to execute at the Closing the Amended and
Restated Stockholders Agreement.
2.06 Rollover Holders. The Rollover Stockholders and the Rollover
Optionholders (including the Optionholders listed on Schedule 2.05 and the
Optionholders who agree not to exercise their Options pursuant to Section 2.05)
agree not to include their Rollover Common Stock and Rollover Options in the
Redemption Securities to be redeemed or repurchased by the Company pursuant to
this Agreement and hereby irrevocably waive any and all rights to have their
Rollover Common Stock and Rollover Options so redeemed or repurchased pursuant
to this Agreement. The Rollover Holders acknowledge that the Rollover Common
Stock and the Rollover Options will have a deemed value at the Closing equal to
the Redemption Consideration (less the applicable exercise price in the case of
Rollover Options) and that the Common Stock to be sold to Purchaser pursuant to
Section 1.01 has been priced on that basis.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser and, with respect to Sections
3.01(a), (b), and (d), to each Stockholder as follows:
(a) Due Organization, Good Standing and Corporate Power. Each of
the Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation and each such corporation has all requisite
corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of the Company
and its Subsidiaries is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except in such jurisdictions where
the failure to be so qualified or licensed and in good standing would
not have a material adverse effect on the business, prospects,
operations, results of operations, or financial condition (the
"Condition") of the Company and its Subsidiaries taken as a whole. The
Company has made available complete and correct copies of the
Certificate of Incorporation and By-Laws of the Company and the
comparable governing documents of each of its Subsidiaries, in each case
as amended to the date of this Agreement.
(b) Authorization and Validity of Agreement. The Company has full
power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by the Company, and the consummation by it of the transactions
contemplated hereby, have been duly authorized and approved by its Board
of Directors and its stockholders and no other corporate action on the
part of the Company is necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the consummation of
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, assuming the due execution
and delivery of this Agreement by the Purchaser and each Stockholder, is
a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
(c) Capitalization. (i) The authorized capital stock of the
Company consists of 7,500,000 shares of Voting Common Stock, 7,500,000
shares of Class A Non-Voting Common Stock, 500,000 shares of Class B
Non-Voting Common Stock, 1,500,000 shares of Class C Non-Voting Common
Stock and 1,250,000 shares of Preferred Stock. As of the date hereof,
(A) 3,477,126.01 shares of Voting Common Stock were issued and
outstanding; (B) 391,740.58 shares of Class A Non-Voting Common Stock
were issued and outstanding; (C) 400,000 shares of Class B Non-Voting
Common Stock were issued and outstanding; (D) 1,040,000 shares of Class
C Non-Voting Common Stock were issued and outstanding; (E) 1,094,855.24
shares of Preferred Stock were issued and outstanding; and (F) no shares
of Voting Common Stock were held in the treasury of the Company. All
issued and outstanding shares of capital stock of the Company have been
validly issued and are fully paid and nonassessable. Except as set forth
in this Section 3.01(c)(i) or in Section 3.01(c)(i) of the Company's
disclosure letter (the "Company's disclosure letter"), delivered
concurrently with the delivery of this Agreement, (i) there are no
shares of capital stock of the Company authorized, issued or outstanding
and (ii) there are not as of the date hereof, and at Closing there will
not be, any outstanding or authorized options, warrants, rights,
subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments, contingent
or otherwise, relating to Common Stock or any other shares of capital
stock of the Company, pursuant to which the Company is or may become
obligated to issue shares of Common Stock, any other shares of its
capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of the capital stock
of the Company. The Company has no authorized or outstanding bonds,
debentures, notes or other indebtedness the holders of which have the
right to vote (or convertible or exchangeable into or exercisable for
securities having the right to vote) with the stockholders of the
Company or any of its Subsidiaries on any matter ("Voting Debt").
(ii) Section 3.01(c)(ii) of the Company's disclosure letter lists
all of the Company's Subsidiaries. Except as set forth on Section
3.01(c)(ii) of the Company's disclosure letter, all of the outstanding
shares of capital stock of each of the Company's Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable and
are owned, of record and beneficially, by the Company, free and clear of
all liens, encumbrances, options or claims whatsoever, except for liens,
encumbrances and claims created pursuant to that certain Second Amended
and Restated Credit Agreement, dated as of January 26, 1998 among the
Company, the Lenders listed therein as Lenders, Xxxxxxx Xxxxx Credit
Partners L.P. and The Chase Manhattan Bank, as Co-Administrative Agents,
Xxxxxxx Xxxxx Credit Partners L.P. and Chase Securities Inc., as
Arranging Agents, and Sun Trust Bank, Atlanta, as Collateral Agent, as
amended. Except as set forth on Section 3.01(c)(ii) of the Company's
disclosure letter, no shares of capital stock of any of the Company's
Subsidiaries are reserved for issuance and there are no outstanding or
authorized options, warrants, rights, subscriptions, claims of any
character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to
the capital stock of any Subsidiary, pursuant to which such Subsidiary
is or may become obligated to issue any shares of capital stock of such
Subsidiary or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of such Subsidiary.
Except as set forth on Section 3.01(c)(ii) of the Company's disclosure
letter, the Company does not own, directly or indirectly, any capital
stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the
Company nor any of its Subsidiaries is subject to any obligation or
requirement to provide funds for or to make any investment (in the form
of a loan, capital contribution or otherwise) to or in any Person. The
Company's Subsidiaries have no Voting Debt.
(d) Consents and Approvals; No Violations. Assuming (i) the
filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), are made and the waiting period
thereunder has been terminated or has expired, the execution and
delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby will not: (1) violate
any provision of the Certificate of Incorporation or By-Laws of the
Company or the comparable governing documents of any of its
Subsidiaries; (2) violate any statute, ordinance, rule, regulation,
order or decree of any court or of any governmental or regulatory body,
agency or authority applicable to the Company or any of its Subsidiaries
or by which any of their respective properties or assets may be bound;
(3) require any filing with, or permit, consent or approval of, or the
giving of any notice to, or obtaining any new or additional licenses
from any governmental or regulatory body, agency or authority; and (4)
except as set forth in Section 3.01(d) of the Company's disclosure
letter, result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a material default
(or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any Encumbrance (as
defined herein) upon any of the properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, lease, franchise agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party,
or by which it or any of their respective properties or assets are bound
or subject, except for, in the case of clauses (3) and (4) above, such
as would not have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole, and would not prevent or
materially delay consummation of the transactions contemplated by this
Agreement. No violation of any provision of the Certificate of
Incorporation or By-Laws of the Company or the comparable governing
documents of any of its Subsidiaries exists as a result of the
Reorganization.
(e) Financial Statements; Commission Filings. (i) The Company has
heretofore furnished the Purchaser with the consolidated balance sheets
of the Company and its Subsidiaries as at December 31, 1998 and 1997 and
the related consolidated statements of operations, changes in
stockholder's equity and cash flows for the periods then ended, audited
by Deloitte & Touche LLP (the "Audited Financial Statements") and the
unaudited consolidated balance sheet of the Company as at June 30, 1999,
and the related unaudited consolidated statements of operations, changes
in stockholders' equity and cash flows for the six month period then
ended (the "Unaudited Financial Statements" and together with the
Audited Financial Statements, the "Financial Statements"). The
consolidated unaudited balance sheet as at June 30, 1999, is sometimes
referred to herein as the "Balance Sheet" and June 30, 1999, is
sometimes herein referred to as the "Balance Sheet Date." Such Financial
Statements including the footnotes thereto, except as indicated therein,
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered
thereby, are consistent with the books and records of the Company and
fairly present in all material respects the financial position of the
Company and its Subsidiaries and the results of their operations and
cash flows at such dates and for such periods except that the Unaudited
Financial Statements do not contain footnotes and are subject to
year-end adjustments.
(ii) The Company has filed all forms, reports and documents with
the Securities and Exchange Commission (the "Commission") required to be
filed by it pursuant to the Federal securities laws and the Commission
rules and regulations thereunder, and all forms, reports and documents
filed with the Commission by the Company (collectively, the "Commission
Filings") have complied in all material respects with the applicable
requirements of the Federal securities laws and the Commission rules and
regulations promulgated thereunder. As of their respective dates, the
Commission Filings did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(f) Absence of Certain Changes. Other than as set forth in
Section 3.01(f) of the Company's disclosure letter, since the Balance
Sheet Date, there has been no material adverse change in the Condition
of the Company and its Subsidiaries taken as a whole.
(g) Title to Properties; Encumbrances. Except as set forth in
Section 3.01(g) of the Company's disclosure letter, the Company and each
of its Subsidiaries has good and valid title to (i) all of its material
tangible properties and assets (real and personal), including, without
limitation, all the material properties and assets reflected in the
Balance Sheet except as indicated in the notes thereto and except for
properties and assets reflected in the Balance Sheet which have been
sold or otherwise disposed of in the ordinary course of business after
the Balance Sheet Date, and (ii) all the material tangible properties
and assets purchased by the Company and any of its Subsidiaries since
the Balance Sheet Date except for such properties and assets which have
been sold or otherwise disposed of in the ordinary course of business;
in each case subject to no encumbrance, lien, security interest, charge
or other restriction (each an "Encumbrance") of any kind or character,
except as reflected in Section 3.01(g) of the Company's disclosure
letter and except for (1) Encumbrances reflected on the Balance Sheet,
and (2) Encumbrances which do not materially detract from the value of,
or materially impair the use of, any material property by the Company or
any of its Subsidiaries in the operation of its respective business or
which do not have a material adverse effect on the Condition of the
Company and its Subsidiaries, taken as a whole.
(h) Leases. Section 3.01(h) of the Company's disclosure letter
contains a list of all leases to which the Company or any Subsidiary is
a party requiring an annual aggregate payment of at least $100,000. The
Company or its applicable Subsidiary has a good and valid leaseholder
interest in and to all of the real property subject to any such lease
with respect to which it is a lessee ("Leased Property"). Except as
otherwise set forth in Section 3.01(h) of the Company's disclosure
letter, each lease set forth therein is in full force and effect and is
enforceable in accordance with its terms; there are no material leases,
subleases, licenses, concessions or other agreements (written or oral)
granting to any person or entity (other than the Company or its
Subsidiaries) the right to use or occupy the Leased Property; all rents
and additional rents due to date from the Company or such Subsidiary on
each such lease have been paid; in each case, neither the Company nor
any Subsidiary has received notice that it is in material default
thereunder; and, to the knowledge of the Company there exists no
material event, occurrence, condition or act (including the consummation
of the transactions contemplated hereby) which, with the giving of
notice, the lapse of time or the happening of any further event or
condition, would become a material default by the Company or any
Subsidiary under such lease.
(i) Material Contracts. Except as set forth in Section 3.01(h),
3.01(i) or 3.01(m) of the Company's disclosure letter, neither the
Company nor any Subsidiary has or is bound by (a) any agreement,
contract or commitment relating to the employment of any Person by the
Company or any Subsidiary which cannot be terminated by the Company or
the Subsidiary upon notice of 60 days or less without penalty or premium
and involve annual compensation in excess of $100,000 annually, (b) any
agreement, contract or commitment materially limiting the freedom of the
Company or any Subsidiary to engage in any line of business or to
compete with any other Person or (c) any agreement, contract or
commitment not entered into in the ordinary course of business which
materially affects the business of the Company and the Subsidiaries
taken as a whole and is not cancelable without penalty within 90 days.
There is no material default under any contract listed on Section
3.01(i) of the Company's disclosure letter as a result of the
Reorganization (as hereinafter defined).
(j) Compliance with Laws. (i) Except as set forth in Section
3.01(k) of the Company's disclosure letter, the Company and its
Subsidiaries are in compliance with all applicable laws and regulations
and all orders, judgments and decrees (including, but not limited to,
the Fair Debt Collection Practices Act and any state or local
counterpart or equivalent) relating to its business and operations
(other than with respect to taxes, Environmental Laws, employee
benefits, employee relations and federal securities laws which are the
subject of specific representations contained in this Agreement) except
where the failure to so comply would not have a material adverse effect
on the Condition of the Company and its Subsidiaries taken as a whole or
would prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(ii) The Company and each of its Subsidiaries possess all
licenses, certificates of authority, certificates of need, permits or
other authorizations and regulatory approvals required by law (a
"License") necessary for the ownership of its properties and the conduct
of its business as presently conducted in each jurisdiction in which the
Company and such Subsidiary is required to possess a License, except
where the failure to possess such a License would not have a material
adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole. All such Licenses are in full force and effect and
neither the Company nor any Subsidiary has received any written notice
of any event, inquiry, investigation or proceeding threatening the
validity of such Licenses, except where the failure of such Licenses to
be in full force and effect or such event, inquiry, investigation or
proceeding would not have a material adverse effect on the Condition of
the Company and its Subsidiaries, taken as a whole.
(k) Litigation. Except as set forth in Section 3.01(k) of the
Company's disclosure letter, there is no action, suit, condemnation,
expropriation or other proceeding at law or in equity, or any
arbitration or any administrative or other proceeding by or before (or
to the knowledge of the Company any investigation by) any governmental
or other instrumentality or agency, pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any of its
Subsidiaries, or any of their properties (including, but not limited to,
Leased Property) or rights which, would: (i) have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a
whole; (ii) would prevent or materially delay consummation of the
transactions contemplated by this Agreement or (iii) is, or is seeking
certification as, a class action. In addition, except as set forth in
Section 3.01(k) of the Company's disclosure letter, neither the Company
nor any of its Subsidiaries is subject to any consent decrees or
judicial or administrative order under the Fair Debt Collection Practice
Act or any state law equivalent relating to the ongoing conduct of the
Company's business.
(l) Employee Benefit Plans. (i) Section 3.01(l) of the Company's
disclosure letter contains an accurate and complete list of (a) each
"employee benefit plan" (as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
contributed to, maintained or sponsored by the Company or any of its
Subsidiaries, or with respect to which the Company or any of its
Subsidiaries has any liability or potential liability; and (b) each
other retirement, savings, thrift, deferred compensation, severance,
stock ownership, stock purchase, stock option, performance, bonus,
incentive, material fringe benefit, hospitalization or other medical,
disability, life or other insurance, and any other welfare benefit
policy, trust, understanding or arrangement contributed to, maintained
or sponsored by the Company or any of its Subsidiaries for the benefit
of any present or former employee, officer or director of the Company or
any of its Subsidiaries, or with respect to which the Company or any of
its Subsidiaries has any liability or potential liability. Each such
item listed on Schedule 3.01(l) is referred to herein as a "Benefit
Plan."
(ii) Section 3.01(l) of the Company's disclosure letter also
contains an accurate and complete list of each agreement or commitment
of the Company or any Subsidiary of the Company or to which the Company
or any of its Subsidiaries may have any liability, with or for the
benefit of any current or former employee, officer or director of the
Company or any of its Subsidiaries (including, without limitation, each
employment, compensation or termination agreement or commitment but
excluding employment agreements with annual payments of less than
$100,000). Each such item listed on Schedule 3.01(l) is referred to
herein as a "Compensation Commitment."
(iii) With respect to each Benefit Plan that is intended to be
qualified within the meaning of Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code") (a) it has received a
determination letter, or in the case of a standardized prototype plan,
such prototype plan has received a favorable determination letter from
the Internal Revenue Service (the "IRS"), or has been timely submitted
for a determination letter from the IRS, that such Benefit Plan is
qualified under Section 401(a) of the Code, and, to the knowledge of the
Company and its Subsidiaries, nothing has occurred since the date of
such determination letter or submission that could adversely affect the
qualification of such Benefit Plan or the exemption from taxation of the
related trust; and (b) no such Benefit Plan is a "defined benefit plan"
(as defined in Section 3(35) of ERISA) or a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(iv) Except as described in Section 3.01(l) of the Company's
disclosure letter (a) none of the Benefit Plans or Compensation
Commitments obligates the Company or any of its Subsidiaries to pay any
separation, severance, termination or similar benefit solely as a result
of any transaction contemplated by this Agreement or solely as a result
of a change in control or ownership within the meaning of Section 280G
of the Code; and (b) there is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company or
any of its Subsidiaries that provides for payment, prior to or in
connection with this transaction by the Company or any of its
Subsidiaries that is not deductible under Section 162 or 404 of the
Code, or that is an "excess parachute payment" pursuant to Section 280G
of the Code.
(v) (a) Each Benefit Plan and any related trust, insurance
contract or fund has been maintained and administered in substantial
compliance with its respective terms and in substantial compliance with
all applicable laws and regulations, including, but not limited to,
ERISA and the Code; (b) there has been no application or waiver of the
minimum funding standards imposed by Section 412 of the Code with
respect to any Benefit Plan, and neither the Company nor any of its
Subsidiaries is aware of any facts or circumstances that would
materially change the funded status of any such Benefit Plan; (c)
neither the Company nor any of its Subsidiaries has incurred any
liability under Title IV of ERISA or to the Pension Benefit Guaranty
Corporation; (d) there are no pending or, to the knowledge of the
Company and its Subsidiaries, threatened, material actions, suits,
investigations or claims with respect to any Benefit Plan or
Compensation Commitment (other than routine claims for benefits), and
neither the Company nor any of its Subsidiaries has knowledge of any
facts which could give rise to (or reasonably be expected to give rise
to) any such actions, suits, investigations or claims; (e) there have
been no prohibited transactions as defined in Section 406 of ERISA or
Section 4975 of the Code with respect to any Benefit Plan; and (f) all
contributions which are due with respect to each Benefit Plan have been
timely made, and all contributions for periods ending on the Closing
Date which are not then due have been accrued in accordance with GAAP.
(vi) The Company and each of its Subsidiaries has complied in all
material respects with the health care continuation requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA
("COBRA"); and the Company and its Subsidiaries have no obligation under
any Benefit Plan, Compensation Commitment or otherwise to provide health
or other welfare benefits to or with respect to former employees of the
Company or any of its Subsidiaries or any other person, except as
specifically required by COBRA.
(vii) With respect to each Benefit Plan and Compensation
Commitment, the Company has furnished or made available to the Purchaser
true and complete copies, as applicable, of (a) the plan documents,
summary plan descriptions and employee handbooks; (b) IRS Form 5500
Annual Report (including all attachments) for the most recent plan year;
(c) all related trust agreements, insurance contracts or other funding
arrangements; and (d) the most recent favorable determination letter
issued by the IRS.
(m) Employment Relations and Agreements. Except as set forth in
Section 3.01(m) and 3.01(l) of the Company's disclosure letter, (i) each
of the Company and its Subsidiaries is in compliance in all material
respects with all federal, state or other applicable laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours, and has not and is not engaged in any unfair labor
practice; (ii) no representation question exists respecting the
employees of the Company or any of its Subsidiaries; (iii) no collective
bargaining agreement is currently being negotiated by the Company or any
of its Subsidiaries and neither the Company nor any of its Subsidiaries
is a party to a collective bargaining agreement; and (iv) neither the
Company nor any of its Subsidiaries has experienced any labor difficulty
during the last year except (in the case of this clause (iv)) as would
not have a material adverse effect on the Condition of the Company and
its Subsidiaries taken as a whole. Except as disclosed in Section
3.01(m) of the Company's disclosure letter, there exist no employment,
consulting, severance, indemnification agreements or deferred
compensation agreements between the Company and any director, officer or
employee of the Company or any agreement that would give any Person the
right to receive any payment from the Company as a result of the
transactions pursuant to this Agreement.
(n) Taxes. (i) Tax Returns. The Company and each of its
Subsidiaries has filed or caused to be filed or will file or cause to be
filed with the appropriate taxing authorities on a timely basis all
material returns and reports ("Returns") relating to Taxes that are
required to be filed by, or with respect to, the Company and each of its
Subsidiaries on or prior to the Closing Date (taking into account any
extension of time to file granted to or on behalf of the Company or any
of its Subsidiaries). All such Returns have been prepared in compliance
with all applicable laws and regulations and are true and accurate in
all material respects. As used herein, "Tax" or "Taxes" shall mean all
taxes including, without limitation, all U.S. federal, state, local and
foreign income, franchise, profits, capital gains, capital stock, sales,
use, value added, occupation, property, excise, stamp, license, payroll,
social security, withholding and all other taxes of any kind whatsoever,
all estimated taxes, deficiency assessments, and additions to tax,
penalties and interest in respect of the foregoing.
(ii) Payment of Taxes. All material Tax liabilities of the
Company and its Subsidiaries due and payable with respect to all taxable
years or other taxable periods (including portions thereof) ending on or
prior to the Balance Sheet Date have been, or prior to the Closing Date
will be, paid or adequately disclosed as a liability on the Balance
Sheet. All material Tax liabilities of the Company and its Subsidiaries
due and payable with respect to all taxable years or taxable periods
(including portions thereof) which did not end prior to the day after
the Balance Sheet Date and which end on or prior to the Closing Date
have been, or prior to the Closing Date will be, paid.
(iii) Other Tax Matters. Section 3.01(n) of the Company's
disclosure letter sets forth (I) each taxable year or other taxable
period of the Company and its Subsidiaries for which an audit or other
examination of Taxes by any taxing authority is currently in progress
or, to the knowledge of the Company, threatened against or with respect
to the Company or any of its Subsidiaries that, if determined adversely
to the Company or its Subsidiaries, would result in a material Tax
liability of the Company or its Subsidiaries after the Closing Date, and
(II) the taxable years or other taxable periods of the Company and its
Subsidiaries which, for income tax purposes, will not be subject to the
normally applicable statute of limitations because of written waivers or
agreements given by the Company or its Subsidiaries.
(iv) Except as set forth in Section 3.01(n) of the Company's
disclosure letter attached hereto:
(1) Subject to Section 5.03(j), neither the Company nor
any of its Subsidiaries has made any payments, nor is or may
become obligated (under any contract or agreement entered into on
or before the Closing Date) to make any payments, that will be
non-deductible under Section 280G of the Code (or any analogous
provisions of state, local or foreign Tax law);
(2) the Company and each of its Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third
party other than such Taxes which in the aggregate, are not
material, and all material Forms W-2 and 1099 required with
respect thereto have been properly completed and timely filed;
(3) there are no liens for material Taxes (other than
current Taxes not yet due and payable) upon the assets or
properties of the Company or any of its Subsidiaries;
(4) the Company and its Subsidiaries are entitled to each
Tax refund claimed or received by the Company or any Subsidiary
on or prior to the Closing Date, except to the extent the
disallowance of which would not result in any material Tax
liability or loss of a pending material Tax refund claim;
(5) the Company and its Subsidiaries are not and will not
become liable for any material Taxes as a result of the
Reorganization and the Reorganization will not create any
material gains or income, the taxation of which is deferred under
Treasury Regulation ss. 1.1502-13 (or any similar provision of
state, local or foreign law);
(6) neither the Company nor any of its Subsidiaries is a
party to any Tax allocation, sharing, or similar agreement under
which the Company or such Subsidiaries has any current or
potential contractual obligation to indemnify any other Person
with respect to Taxes;
(7) the Company and each of its Subsidiaries has properly
accrued on its respective financial statements all material Tax
liabilities (determined in accordance with GAAP) and the amount
so accrued is at least equal to its respective liability for such
Taxes; and
(8) neither the Company nor any of its Subsidiaries has
any liability for material Taxes arising as a result of the
Company or any of its Subsidiaries at any time being a member of
an affiliated group (as defined in section 1504(a) of the Code
and any analogous combined, consolidated or unitary group defined
under state, local or foreign income Tax law) other than a group
the common parent of which is the Company or any of its
Subsidiaries.
(o) Liabilities. Except as set forth in Section 3.01(o) of the
Company's disclosure letter, neither the Company nor any of its
Subsidiaries has any material claims, liabilities or indebtedness,
contingent or otherwise, required to be set forth on the Balance Sheet
in accordance with generally accepted accounting principles except as
set forth in the Balance Sheet or referred to in the footnotes thereto,
and except for liabilities incurred subsequent to the Balance Sheet Date
in the ordinary course of business.
(p) Intellectual Properties. Section 3.01(p) of the Company's
disclosure letter accurately sets forth all of the following used or
held for use in connection with the business of the Company or its
Subsidiaries as currently conducted: (i) patents, patent rights, and
applications therefor; (ii) registered trademarks and registered service
marks, and applications therefor; and (iii) other registered
intellectual property rights of any kind or nature, including without
limitation registered copyrights, trade secrets, trade names, know how
and other proprietary rights and information (all of the foregoing
collectively the "OSI Intellectual Property"). The Company and its
Subsidiaries own or possess adequate licenses or other valid rights to
use all OSI Intellectual Property, all material computer software (other
than generally available mass market software) and material collections
of information (such as data bases) used in the Company's business and
the Company is unaware of any assertion or claim challenging the
validity of any of the foregoing which would have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a
whole. To the knowledge of the Company, the conduct of the business of
the Company and its Subsidiaries as currently conducted does not
conflict in any way with any patent, patent right, license, trademark,
trademark right, trade name, trade name right, service xxxx or copyright
of any third party that, individually or in the aggregate, would have a
material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole. Except as set forth in Section 3.01(p) of
the Company's disclosure letter, neither the Company nor any Subsidiary
has received any written notices of, and is not aware of any facts that
would be reasonably likely to result in, any infringement or
misappropriation by, or conflict with, any third party with respect to
such third party's intellectual property rights (including, without
limitation, any demand or request that the Company or any Subsidiary
license any rights from a third party). Except as set forth in Section
3.01(p) of the Company's disclosure letter neither the Company nor any
Subsidiary has received any written notice of termination or expiration
with respect to any OSI Intellectual Property, any material computer
software (other than generally available mass market software) and any
material collections of information (such as data bases) used in the
Company's business from the owner thereof and the Company is unaware of
any facts or circumstances that would be reasonably likely to result in
such a termination or expiration notice.
(q) Environmental Laws and Regulations. Except as set forth in
Section 3.01(q) of the Company's disclosure letter (a) Hazardous
Materials have not been (i) generated, used, treated or stored on, or
transported to or from, any Company Property or (ii) Released or
disposed of on or from any Company Property, except, in the case of
clauses (i) or (ii) in a manner which could not reasonably be expected
to give rise to material liabilities under Environmental Law, (b) the
Company and each of its Subsidiaries have complied and are in compliance
in all material respects with applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws, and
(c) there are no past, pending or, to the Company's knowledge,
threatened claims under Environmental Law against the Company or any of
its Subsidiaries.
For purposes of this Agreement, the following terms shall have
the following meanings: (A) "Company Property" means any real property
and improvements at any time owned, leased, or operated by the Company
or any of its affiliates, Subsidiaries or any of their respective
predecessors; (B) "Hazardous Materials" means (i) any petroleum or
petroleum products, radioactive materials or friable asbestos and (ii)
any chemicals, materials or substances defined as "hazardous
substances," under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601
et seq. ("CERCLA") and (iii) all other materials or substances the
Release of which is prohibited or regulated or as to which liability may
be imposed under Environmental Laws; (C) "Environmental Law" means any
federal, state or local statute, law, rule, regulation, ordinance or
code, contractual obligation or common law or other legal requirement,
in each case in effect and as amended as of the date hereof and the
Closing Date, relating to the environment or Hazardous Materials,
including, without limitation, CERCLA; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. ss. 6901 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean Air Act,
42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.
3808 et seq.; and (D) "Release" means disposing, discharging, injecting,
spilling, leaking, leaching, dumping, emitting, escaping, emptying,
seeping, placing and the like, into or upon any land or water or air, or
otherwise entering into the environment.
(r) Conduct of Business. Since the Balance Sheet Date, except (a)
as set forth in Section 3.01(r) of the Company's disclosure letter or
(b) as contemplated or expressly required or permitted by this
Agreement, the Company has not taken any action which, if taken
subsequent to the execution of this Agreement and on or prior to the
Closing Date, would constitute a material breach of the Company's
agreements set forth in Section 4.03 of this Agreement.
(s) Broker's or Finder's Fee. Except for Credit Suisse First
Boston Corporation and Bear, Xxxxxxx & Co. Inc. (whose fees and expenses
will be paid as contemplated by Section 1.01), no agent, broker, Person
or firm acting on behalf of the Company is, or will be, entitled to any
fee, commission or broker's or finder's fees from any of the parties
hereto, or from any Person controlling, controlled by, or under common
control with any of the parties hereto, in connection with this
Agreement or any of the transactions contemplated hereby.
(t) Collection and Portfolio Services Businesses. Since December
31, 1998, there has not been any change in the terms or conditions
(including, without limitation, pricing) under which the Company
performs either debt collection services or portfolio services that
would be reasonably likely to have a material adverse effect on the
condition of the Company and its Subsidiaries taken as a whole. The
Company is unaware of any facts that would be reasonably likely to cause
a material impairment in the expected realization value of the Company's
purchased portfolios taken as a whole.
(u) Affiliate Transactions. The Commission Filings disclose all
understandings, agreements or arrangements with any Stockholder or its
Affiliates which would be required to be disclosed pursuant to Item 404
of Regulation S-K promulgated under the Securities and Exchange Act of
1934, as amended, if an Annual Report on Form 10K were made on the date
hereof.
(v) Disclosure. Except as set forth in Section 3.01(v) of the
Company's disclosure letter, this Agreement, the certificates and other
instruments attached hereto or delivered pursuant to this Agreement, the
Financial Statements, the Commission Filings, the Company's disclosure
letter and to the extent listed or described on the Company's disclosure
letter, the documents and statements in writing which have been supplied
by or on behalf of the Company in connection with the transactions
contemplated by this Agreement, when considered in their entirety, do not
contain any untrue statement of a material fact, or omit a material fact
necessary to make the statements contained herein or therein not
misleading.
3.02 Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company and each of the Stockholders and each
Warrantholder as follows:
(a) Due Organization and Power. Purchaser is a limited
partnership duly organized and validly existing and (to the extent such
concept is applicable) in good standing under the laws of the State of
Delaware.
(b) Authorization and Validity of Agreement. Purchaser has all
requisite partnership power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Purchaser, and the consummation by
Purchaser of the transactions contemplated hereby, has been duly
authorized by Purchaser. No other action on the part of Purchaser (or
its partners) is necessary to authorize the execution, delivery and
performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Purchaser and, assuming the due execution and delivery
of this Agreement by the Company and each Stockholder, is a valid and
binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms.
(c) Consents and Approvals; No Violations. Assuming the filings
required under the HSR Act are made and the waiting period thereunder
has been terminated or has expired the execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby will not: (1) violate any provision of
the Partnership Agreement of Purchaser; (2) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any
governmental or regulatory body, agency or authority applicable to
Purchaser or by which its properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any
notice to any governmental or regulatory body, agency or authority; or
(4) result in a violation or breach of, conflict with, constitute (with
or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Purchaser or any of
its direct or indirect Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to
which Purchaser or its Subsidiaries is a party, or by which its
properties or assets may be bound except for in the case of clauses (3)
and (4) above for such as would not prevent or materially delay
consummation of the transactions contemplated by this Agreement.
(d) Litigation. There is no action, suit, proceeding at law or in
equity, or any arbitration or any administrative or other proceeding by
or before (or, to the knowledge of Purchaser, any investigation by) any
governmental or other instrumentality or agency, pending or, to the
knowledge of Purchaser, threatened, against or affecting Purchaser, or
any of its properties or rights, which would prevent or materially delay
consummation of the transactions contemplated by this Agreement.
(e) Broker's or Finder's Fee. No agent, broker, Person or firm
acting on behalf of Purchaser is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the Stockholders or
the Company in connection with this Agreement or any of the transactions
contemplated hereby.
(f) Financing. Purchaser has furnished to the Company true,
complete and correct copies of (i) that certain Senior Credit Facility
Commitment Letter, dated September 15, 1999, from DLJ Capital Funding,
Inc. to Purchaser (the "Senior Letter") and (ii) that certain letter
(the "Preferred Letter"), dated September 15, 1999 from Ares Leveraged
Investment Fund, L.P. and Ares Leveraged Investment Fund II, L.P. to
Purchaser (collectively, the "Commitment Letters"). The Commitment
Letters have been executed by Purchaser.
(g) Purchase for Investment. Upon the terms and conditions set
forth herein, Purchaser will acquire the Sale Stock for investment and
not with a view toward any distribution thereof in violation of the
Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder; provided, however, that the disposition of the
Purchaser's property shall at all times remain within the sole control
of Purchaser.
3.03 Representations of the Stockholders, Warrantholders and
Optionholders. Each Stockholder, Warrantholder or Optionholder, as the case may
be, represents, warrants and agrees, individually and not jointly and severally,
to the Company and Purchaser as follows:
(a) Ownership of Redemption Shares or Warrants. The Stockholder
or Warrantholder, as the case may be, is the lawful owner of the number
of shares of Voting Common Stock, Nonvoting Common Stock or Warrants
listed opposite the name of such Stockholder or Warrantholder as the
case may be, on Exhibit C attached hereto, free and clear of all liens,
encumbrances, restrictions and claims of every kind other than those
imposed by the federal securities laws and any applicable state
securities laws and pursuant to that certain Amended and Restated
Stockholders' Agreement, dated as of February 16, 1996 by and among the
Company and the Stockholders party thereto. Except as set forth on
Exhibit C and on Schedule 2.05 of the Company's disclosure letter, the
Stockholder, Warrantholder or Optionholder, as the case may be, does not
own any shares of capital stock of the Company or any options or
warrants providing for the purchase, issuance or sale of any shares of
capital stock of the Company. The Stockholder, Warrantholder or
Optionholder, as the case may be, has full legal right, power and
authority to enter into this Agreement and to perform its obligations
pursuant to this Agreement, and the delivery to the Company of the
Redemption Stock, Options or Warrants pursuant to the provisions of this
Agreement will transfer to the Company valid title thereto, free and
clear of all liens, encumbrances, restrictions and claims of every kind.
The Stockholder, Warrantholder or Optionholder, as the case may be, is a
resident at the address set forth opposite such Person's name on the
signature pages hereto.
(b) Authorization and Validity of Agreement. The Stockholder,
Warrantholder or Optionholder, as the case may be, is duly organized and
validly existing (to the extent such concepts are applicable), has full
legal right and authority to perform such Person's obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Stockholder, Warrantholder
or Optionholder, as the case may be, and is a valid and binding
obligation of the Stockholder, Warrantholder or Optionholder, as the
case may be, enforceable against such Stockholder, Warrantholder or
Optionholder, as the case may be, in accordance with its terms.
(c) Consents and Approvals; No Violations. Assuming (i) the
filings required under the HSR Act are made and the waiting period
thereunder has been terminated or has expired, the execution and
delivery of this Agreement by the Stockholder, Warrantholder or
Optionholder, as the case may be, and the consummation by each
Stockholder, Warrantholder or Optionholder, as the case may be, of the
transactions contemplated hereby will not: (1) violate any provision of
the Certificate of Incorporation or By-Laws or the comparable governing
documents of such Stockholder, Warrantholder or Optionholder, as the
case may be, as applicable; (2) violate any statute, ordinance, rule,
regulation, order or decree of any court or of any governmental or
regulatory body, agency or authority applicable to such Stockholder,
Warrantholder or Optionholder, as the case may be, or by which any of
its properties or assets may be bound; (3) require any filing with, or
permit, consent or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority; (4) result in a
violation or breach of, conflict with, constitute (with or without due
notice or lapse of time or both) a material default (or give rise to any
right of termination, cancellation, payment or acceleration) under, or
result in the creation of any Encumbrance upon any of the properties or
assets of such Stockholder, Warrantholder or Optionholder, as the case
may be, under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which such
Stockholder, Warrantholder or Optionholder, as the case may be, is a
party, or by which it or any of its properties or assets are bound or
subject, except for, in the case of clauses (3) and (4) above, such as
would not prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(d) Broker's or Finder's Fee. Except for Credit Suisse First
Boston Corporation and Bear, Xxxxxxx & Co. Inc. (whose fees and expenses
will be paid by the Company and treated as contemplated by Article II),
no agent, broker, Person or firm acting on behalf of the Stockholder,
Warrantholder or Optionholder is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the other parties
hereto, or from any Person controlling, controlled by, or under common
control with any of the parties hereto, in connection with this
Agreement or any of the transactions contemplated hereby.
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE
4.01 Access to Information Concerning Properties and Records.
During the period commencing on the date hereof and ending on the Closing Date,
the Company shall, and shall cause each of its Subsidiaries to, upon reasonable
notice, (i) afford Purchaser, and its counsel, accountants, funding sources,
consultants and other authorized representative (collectively, "Purchaser's
Representatives"), full access during normal business hours to the employees,
properties, books and records of the Company and its Subsidiaries in order that
they may have the opportunity to make such investigations as they shall desire
of the affairs of the Company and its Subsidiaries; (ii) furnish to the
Purchaser and the Purchaser's Representatives such financial, legal, technical,
personnel and operating data and other information as such Persons may
reasonably request; and (iii) instruct the Company's employees, counsel,
auditors and financial and industry advisors to cooperate with the Purchaser and
the Purchaser's Representatives in their preparation of any materials for
presentations or submissions to rating agencies, consent solicitations of bond
holders, syndication of replacement credit facilities in connection with the
Recapitalization or other activities reasonably related to consummating the
transactions contemplated hereby; provided, that such investigation and
assistance shall not unreasonably disrupt the personnel and operations of the
Company and its Subsidiaries. In addition, for each month, beginning July 31,
1999, the Company shall provide Purchaser with an unaudited consolidated balance
sheet and the related unaudited consolidated statement of operations, changes in
stockholders' equity and cash flows for the month then ended when and as such
statements are made available to the Company's senior management (the "Monthly
Financial Statements"). The Monthly Financial Statements, except as indicated
therein, shall be prepared in accordance with GAAP applied on a basis consistent
with the Financial Statements except that they need not contain footnotes and
will be subject to year end adjustments.
4.02 Confidentiality. Information obtained by Purchaser pursuant
to Section 4.01 hereof shall be subject to the provisions of the Confidentiality
Agreement between the Company and Purchaser (the "Confidentiality Agreement"),
except that the Company shall not unreasonably withhold or delay its consent to
the release of any information which the Purchaser wishes to use as contemplated
by Section 4.01 hereof or otherwise consistent with the terms of this Agreement.
The Confidentiality Agreement shall terminate and be of no further force or
effect as of the Closing Date. From and after the Closing Date, the Stockholders
will treat and hold confidential all information concerning the business and
affairs of the Company and its Subsidiaries that is not generally available to
the public ("Confidential Information"), refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Purchaser, or destroy, at the request and the option of the
Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in his or its possession.
4.03 Conduct of the Business of the Company Pending the Closing
Date. The Company agrees that, except as set forth in Section 4.03 of the
Company's disclosure letter and except as permitted, required or contemplated
by, or otherwise described in, this Agreement or otherwise consented to or
approved by Purchaser in writing, during the period commencing on the date
hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct their
respective operations in the ordinary and usual course of business and
will use their reasonably best efforts to preserve intact their
respective business organization, keep available the services of their
officers and employees and maintain satisfactory relationships with
licensors, suppliers, distributors, clients, joint venture partners, and
others having business relationships with them; and
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Certificate of Incorporation or
By-Laws (or comparable governing documents); (ii) issue or sell any
shares of its capital stock (other than in connection with the exercise
of Warrants or Options outstanding on the date hereof) or any of its
other securities, or issue any securities convertible into, or options,
warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of, any
shares of its capital stock or any of its other securities, or make any
other changes in its capital structure; (iii) sell or pledge or agree to
sell or pledge any stock owned by it in any of its Subsidiaries; (iv)
declare, pay, set aside or make any dividend or other distribution or
payment with respect to, or split, combine, redeem or reclassify, or
purchase or otherwise acquire any shares of its capital stock or its
other securities; (v) (A) enter into any contract or commitment with
respect to capital expenditures in excess of $250,000 individually or
$1,000,000 in the aggregate, (B) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other
business or division thereof, or (C) enter into, cancel or materially
amend, modify or supplement or cancel any other material contract; (vi)
acquire a material amount of assets or securities or release or
relinquish any material contract rights; (vii) except to the extent
required under existing employee and director benefit plans, agreements
or arrangements as in effect on the date of this Agreement that were
disclosed to Purchaser or applicable law, increase the compensation or
fringe benefits of any of its directors, officers or employees, (except
for increases in salary or wages of employees of the Company or its
Subsidiaries with an annual base salary of less than $100,000 in the
ordinary course of business) or make bonus, pension, retirement or
insurance payments or arrangements to or with any such Person, except,
in the case of employees with an annual base salary of less than
$100,000, in the ordinary course of business; (viii) transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of, encumber or
subject to any lien, any material assets or incur or modify any
indebtedness or other liability, enter into any employment agreements,
enter into new severance agreements, retention, bonus or similar
agreements or amend any such plans, enter into any indemnity agreement
indemnifying any Stockholder, incur any obligations to make any payments
that become due as a result of a change in control of the Company, other
than in the ordinary course of business, or issue any debt securities or
assume, guarantee or endorse or otherwise as an accommodation become
responsible for the obligations of any person or, other than in the
ordinary course of business, make any loan or other extension of credit;
(ix) make any material tax election or settle or compromise any material
tax liability; (x) make any change in its method of accounting other
than such changes as may be necessary or advisable to comply with
applicable law or regulation or with generally accepted accounting
principals after prior notice to the Purchaser; (xi) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company
or any of its Subsidiaries not constituting an inactive Subsidiary
(other than the transactions contemplated in this Agreement); or (xii)
agree, in writing or otherwise, to take any of the foregoing actions;
provided, however, the Company may take any action reasonably necessary
to effectuate the payment of payment-in-kind dividends to the holders of
the Preferred Stock, in accordance with the terms of the Preferred
Stock.
4.04 Reasonable Best Efforts. (a) Subject to the terms and
conditions provided herein, each of the Company, Purchaser and, as applicable,
the Stockholders shall, and the Company shall cause each of its Subsidiaries to,
cooperate and use their respective reasonable best efforts to take, or cause to
be taken, all appropriate action, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, the Company shall use its
reasonable best efforts to (x) obtain, prior to the Closing Date, all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company and its
Subsidiaries as are necessary for consummation of the transactions contemplated
by this Agreement and Purchaser shall cooperate with, and use its reasonable
best efforts to assist, the Company with respect thereto (y) cooperate with
Purchaser with respect to the Consent Solicitation and (z) obtain the waiver,
extension and modification as contemplated in items (1), (2) and (3) of Section
5.03(g) in the form reasonably requested by Purchaser and reasonably acceptable
to the Company. The Company shall submit to the stockholders of the Company for
approval an amended and restated Certificate of Incorporation to authorize the
Mezzanine Preferred and such other changes as Purchasers may reasonably request
and, on or prior to Closing, the Company shall cause such Amended and Restated
Certificate of Incorporation to be duly filed and recorded with the Secretary of
State of the State of Delaware and to be in full force and effect as of the
Closing Date. From and after the Closing, the Stockholders, Warrantholders and
Optionholders shall cooperate with Purchaser and the Company as Purchaser or the
Company may reasonably request in the taking of such actions as are necessary to
effect the purchase and redemption pursuant to this Agreement. Subject to the
terms and conditions provided herein, the MDC Entities shall cooperate and use
their reasonable best efforts (which shall include the voting of their shares of
Common Stock and Preferred Stock in favor of the approval of the purchase and
redemption contemplated by this Agreement) to take, or cause to be taken, all
such action as is required to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, their reasonable
best efforts to (x) amend the Company's Certificate of Incorporation to
authorize the Mezzanine Preferred, (y) obtain the vote of shareholders provided
for in Section 5.03(j) and (z) if necessary, to exercise and enforce the powers
granted to the MDC Entities pursuant to Section 2.4 of the Amended and Restated
Stockholders Agreement to effect the covenant in Section 7.16.
(b) Prior to the Closing the Company and each of its Subsidiaries
shall take all actions that are required to be taken prior to the Closing to
ensure that each License shall remain in effect in all material respects upon
consummation of the transactions contemplated hereby and will use their
reasonable best efforts to respond to requests and inquiries from regulatory
agencies regarding Licenses. Without limiting the foregoing, the Company and
each of its Subsidiaries shall use their reasonable best efforts to comply with
all notice, application, and change in control provisions associated with any
License that requires any action to be taken prior to Closing and to notify
Purchaser of any and all conditions of which the Company is aware with which
Purchaser and/or the Company must comply to maintain in all material respects
each License with no gap in the coverage of any License, and each of the Company
and the Purchaser shall cooperate fully with each other to ensure such
compliance. Such notice to Purchaser shall, to the extent practicable, be given
sufficiently in advance of Closing to permit compliance with all applicable
notice, application and change in control provisions associated with each
License.
4.05 Exclusive Dealing. During the period from the date of this
Agreement to the earlier of the termination of this Agreement and Closing,
neither the Company nor any Stockholder shall take, and they shall not permit
any of their respective affiliates, officers, directors, agents, advisors,
attorneys, or accountants or financing sources to take, any action to, directly
or indirectly, encourage, initiate, solicit or engage in discussions or
negotiations with, or provide any information to, any Person, other than
Purchaser and its representatives, concerning any purchase of any capital stock
of the Company or its Subsidiaries (other than in connection with the exercise
of Options or Warrants outstanding on the date hereof) or any merger, asset
sale, recapitalization or similar transaction involving the Company or its
Subsidiaries. None of the Stockholders or the Company will vote their capital
stock of the Company or its Subsidiaries in favor of any such purchase of any
capital stock of the Company, or any merger, asset sale or similar transaction.
The Stockholders and/or the Company will notify the Purchaser as soon as
practicable if any Person makes any proposal, offer, inquiry, or contact to such
Stockholder or the Company, as the case may be, with respect to the foregoing
and shall describe in reasonable detail the identity of such Person and, the
substance and material terms of any such contact and the material terms of any
such proposal.
4.06 Notification of Certain Matters. The Company and the
Stockholders shall give prompt notice to Purchaser, of the existence of any fact
or circumstance of which the Company or such Stockholder, as the case may be,
becomes aware which would cause any representation or warranty made by it
contained in this Agreement to be untrue in any material respect or would result
in the failure of any condition precedent set forth in Article V at any time
from the date of this Agreement to the Closing Date. Each of the Company, the
Stockholders and Purchaser shall give prompt notice to the other party of any
notice or other communication from, any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement.
4.07 Change of Control Payments. Simultaneously with the Closing,
the Company shall pay all amounts due and payable as a result of the change of
control contemplated by this Agreement under the agreements set forth on Section
1.02 of the Company's disclosure letter and such amounts shall be treated as set
forth in Article I.
4.08 Financing. Subject to the terms and conditions of this
Agreement, Purchaser shall, and shall cause its respective officers, directors,
employees, partners, affiliates, financial advisors and other representatives
to, use their commercially reasonable efforts to arrange as promptly as
practicable and to complete the financing contemplated by the Senior Letter and
the Preferred Letter.
ARTICLE V
CONDITIONS PRECEDENT TO SALE OF STOCK
5.01 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the fulfillment or waiver at or prior to the Closing of the
following conditions:
(a) No Injunction. No preliminary injunction, or decree, or other
order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of
the transactions contemplated by this Agreement which is in effect at
the Closing; provided, however, that, in the case of any such
injunction, decree or other order, each of the parties hereto shall have
used reasonable best efforts to prevent the entry of any such decree,
injunction or other order and to appeal as promptly as possible any such
decree, injunction or other order that may be entered.
(b) Statutes. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which
prohibits the consummation of the transactions contemplated hereby.
(c) HSR Act. Any waiting period applicable to the sale of the
Sale Stock under the HSR Act shall have expired, or earlier termination
thereof shall have been granted, and no action shall have been
instituted by either the United States Department of Justice or the
Federal Trade Commission to prevent the consummation of the transactions
contemplated by this Agreement or to modify or amend such transactions
in any material manner or, if any such action shall have been
instituted, it shall have been withdrawn or a final judgment shall have
been entered against such Department or Commission, as the case may be.
5.02 Conditions to Obligations of the Company and the
Stockholders. The obligation of the Company to effect the sale of the Sale Stock
and the obligation of the Company and the Stockholders to effect the redemption
of the Redemption Shares shall be subject to the fulfillment at or prior to
Closing of the following additional conditions, any one or more of which may be
waived by the Company or the Required Holders as the case may be:
(a) Purchaser Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement which are
qualified as to "materiality" or "Material Adverse Effect" shall be true
and correct in all respects and the representations and warranties of
Purchaser which are not so qualified shall be true and correct in all
material respects, in each case of Closing with the same effect as
though such representations and warranties had been made on and as of
such date.
(b) Performance by Purchaser. Purchaser shall have performed and
complied in all material respects with all of the covenants and
agreements and satisfied in all material respects all of the conditions
required by this Agreement to be performed or complied with or satisfied
by Purchaser at or prior to Closing.
(c) Certificate. Purchaser shall have delivered to the Company a
certificate executed on its behalf by its General Partner to the effect
that the conditions set forth in Subsections 5.02(a) and 5.02(b) above,
have been satisfied.
(d) Stockholders Agreement. Purchaser shall have executed and
delivered a stockholders agreement in the form of Exhibit D attached
hereto.
(e) Opinion of Counsel. The Company shall have received an
opinion of Xxxxxxxx & Xxxxx, counsel to Purchaser in substantially the
form of Exhibit E.
5.03 Conditions to Obligations of Purchaser. The obligations of
Purchaser to effect the purchase of the Sale Stock shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions,
any one or more of which may be waived by Purchaser:
(a) Representations and Warranties. The representations and
warranties of the Company, the Stockholders the Warrantholders and the
Optionholders contained in this Agreement which are qualified as to
"materiality" or "Material Adverse Effect" shall be true and correct in
all respects and the representations and warranties of the Company, the
Stockholders, Warrantholders and Optionholders which are not so
qualified shall be true and correct in all material respects as of the
Closing with the same effect as though such representations and
warranties had been made on and as of such date.
(b) Performance. The Company, the Stockholders, the
Warrantholders and the Optionholders (including, without limitation, the
MDC Entities) shall have performed and complied in all material respects
with all the covenants and agreements and satisfied in all material
respects all the conditions required by this Agreement to be performed
or complied with or satisfied by such parties at or prior to the
Closing.
(c) No Material Adverse Change. There shall have not occurred
after the date hereof any material adverse change in the Condition of
the Company and its Subsidiaries taken as a whole.
(d) Certificate. The Company shall have delivered, or caused to
be delivered, to Purchaser a certificate executed on its behalf by its
duly authorized officer in their corporate capacity to the effect that
(with respect to the Company) the conditions set forth in Subsections
5.03(a), 5.03(b) and 5.03(c), above, have been satisfied.
(e) Stockholders Agreement. The Amended and Restated Stockholders
Agreement dated February 16, 1996 by and among OSI Holdings Corp., the
MDC Entities, Rainbow Trust One, Rainbow Trust Two, Chemical Equity
Associates, L.P., the Clipper Entities, the Management Stockholders, the
Non-Management Stockholders and the Optionholders shall have been
terminated and a new stockholders agreement in the form of Exhibit D
(the "Amended and Restated Stockholders Agreement") attached hereto
executed and delivered by each Rollover Holder.
(f) Advisory Services Agreement. The Advisory Services Agreement
dated September 21, 1995 by and between OSI Holdings Corp. and MDC
Management Company III, L.P. shall have been assigned to Purchaser or
its designee.
(g) Material Consents. The Company and its Subsidiaries shall
have procured (subject always to Article I): (1) a waiver of any
"Wind-Down Event" which arises out of the transactions contemplated by
this Agreement under the Triple-A One Credit Agreement, dated October
28, 1998 (the "MBIA Agreement"), between OSI Funding Corp., Triple-A One
Funding Corporation and MBIA Insurance Corporation ("MBIA"), (2) an
extension of the "Liquidity Termination Date" under the Liquidity
Agreement by and among Triple-A One Funding Corporation, certain Banks
and Signatories (as such entities are defined in the Liquidity
Agreement) and Banco Santander, until the date which is 364 days
following the current Liquidity Termination Date (3), the modifications
to the covenants contained in the MBIA Agreement required so that (i)
they are no more restrictive than the covenants that are contained in
the senior credit facility contemplated by the Senior Letter; (ii) all
defaults under the MBIA Agreement and the documents and agreements
contemplated thereby that exist, have existed or that may exist as a
result of the transactions contemplated hereby are cured and any
conflicts between such agreements and the other agreements relating to
the on-going financing of the Company's operations are resolved and
(iii) there are no material adverse changes to the terms and conditions
of the MBIA Agreement and (4) all other third party consents necessary
to consummate the transactions contemplated hereby that, if not
obtained, would have a material adverse effect on the Condition of the
Company and its Subsidiaries, taken as a whole.
(h) Financing. Purchaser shall have obtained from the
Noteholders, and the Trustee shall have taken all necessary actions with
respect to, all waivers, consents and amendments necessary to (i) cure
all defaults under the Indenture, dated as of November 6, 1996, between
the Company and the trustee signatory thereto (the "Indenture") that
exist, have existed or that may be caused by the transactions
contemplated hereby, and (ii) have the Noteholders waive the Company's
obligation to make a Change of Control Offer or to make a Change of
Control Payment (each as defined in the Indenture), in each case on
terms and conditions Purchaser and the Company each deem satisfactory.
Purchaser shall have obtained the financing necessary to consummate the
Refinancing contemplated by the Senior Letter, it being understood that
the condition set forth in this Section 5.03(h) is not satisfied unless
each tranche of the loans contemplated by the Senior Letter are obtained
for the Company with an interest rate grid no higher than 75 basis
points higher than the interest rate spread actually set forth on page 5
for such tranche in Annex I to the Senior Letter. Purchaser shall have
obtained the financing contemplated by the Preferred Letter.
(i) Resignations. Purchaser shall have received the resignations,
effective as of the Closing, of each non-employee director and officer
of the Company and its Subsidiaries other than those whom the Purchaser
shall have specified in writing at least five business days prior to
Closing.
(j) 280G Approval. The Company shall have obtained the vote of
shareholders holding more than 75% of the voting power of all of the
outstanding stock of the Company approving payments (including the
acceleration of vesting with respect to options or stock) the Company
has made or is or may be obligated to make that would be "parachute
payments" (within the meaning of Code ss. 280G(b)) which vote shall be
in compliance with Code ss. 280G(b)(5)(B) and proposed Treasury
Regulation ss. 1.280G-1, Q&A 7, so that any such payments either will
not be excess parachute payments or will be exempt from treatment as
parachute payments under Code ss. 280G.
(k) Conversion and Exchange of Stock. The Preferred Stock of the
Company shall have been exchanged for Voting Common Stock of the Company
as set forth in Exhibit C without any payment and Nonvoting Common Stock
shall have been converted into Voting Common Stock in accordance with
Exhibit C.
(l) Opinion of Counsel. Purchaser shall have received an opinion
of White & Case LLP, counsel to the Company and the MDC Entities in
substantially the form of Exhibit F.
(m) Major Customers. Neither the Company nor any Subsidiary shall
have received any notification that the business relationship under any
of the following contracts would be terminated or would not be renewed
at the end of its current term and there shall not have been a material
adverse change in the following contracts, when considered as a whole:
(i) Agreement, dated January 19, 1996 by and between AT&T Corp. and
Interactive Performance, Inc.; (ii) Collection Services Agreement, dated
August __, 1999, by and among American Express Travel Related Services
Company, Inc., American Express Centurion Bank and OSI Collection
Services, Inc.; and (iii) Outsourcing Services Agreement, dated April 1,
1999, by and between Interactive Performance, Inc. and Universal Card
Services Corp.
(n) Delivery of Redemption Stock. Stockholders, Warrantholders
and Optionholders holding an aggregate of at least 99.5% of shares of
Common Stock held by all Stockholders, Warrantholders and Optionholders
(assuming exchange of all Preferred Stock and exercise of all Warrants
and Options) shall have executed and delivered this Agreement and all
Redemption Securityholders who have executed this Agreement and who, in
accordance with Exhibit C, are to sell and deliver to the Company any
shares of Redemption Stock shall have so sold and delivered such shares
of Redemption Stock.
(o) Escrow Agreement. The Company and Redemption Securityholders
shall have entered into the Escrow Agreement, and the Escrow Agreement
shall be in full force and effect as of the Closing and shall not have
been amended or modified.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time prior to the
Closing:
(a) by mutual consent of the Company and Purchaser;
(b) by the Company or Purchaser if the transactions contemplated
hereby shall not have been consummated on or before December 31, 1999
(or such later date as may be agreed to in writing by the Company and
Purchaser), by reason of the failure of any condition to the
consummation of the transactions contemplated hereby which must be
fulfilled to its satisfaction, provided, that, no party may terminate
this Agreement under this Section 6.01(b) if such failure has been
caused primarily by such party's material breach of this Agreement;
(c) by the Company if (a) there are any inaccuracies,
misrepresentations or breaches of any of Purchaser's representations or
warranties in this Agreement, such that the condition set forth in
Section 5.02(a) to the Company's obligation to effect the transactions
contemplated hereby cannot be met, or (b) Purchaser has breached or
failed to perform in all material respects any of its material covenants
or agreements contained herein as to which notice has been given to
Purchaser and Purchaser has failed to cure or otherwise resolve the same
to the reasonable satisfaction of the Company within fifteen (15) days
after receipt of such notice;
(d) by Purchaser if (a) there are any inaccuracies,
misrepresentations or breaches of any of the Company's or Stockholders'
representations or warranties in this Agreement, such that the condition
set forth in Section 5.03(a) to Purchaser's obligation to effect the
transactions contemplated hereby cannot be met, or (b) the Company or
the Stockholders have breached or failed to perform in all material
respects any of their material covenants or agreements contained herein
as to which notice has been given to the Company or the Stockholders, as
the case may be, and the Company has failed to cure or otherwise resolve
the same to the reasonable satisfaction of Purchaser within fifteen (15)
days after receipt of such notice;
(e) by the Company or Purchaser if a court of competent
jurisdiction or other governmental body shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such
order, decree, ruling or other action shall have become final and
nonappealable;
6.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.01 hereof by Purchaser or the Company,
written notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, and there shall be no
liability hereunder on the part of any party hereto, except that Sections 4.02,
7.01, 7.13 and this Section 6.02 hereof shall survive any termination of this
Agreement. Nothing in this Section 6.02 shall relieve any party to this
Agreement of liability for breach of this Agreement.
ARTICLE VII
MISCELLANEOUS
7.01 Fees and Expenses. Subject to Article I, all costs and
expenses incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses; provided, that effective as of the Closing, the Company shall
assume the obligation to pay all fees and expenses of third parties incurred by
the Purchaser in connection with the Recapitalization.
7.02 Representations and Warranties. Each and every
representation and warranty of the Company, Purchaser and the Stockholders
contained herein or in any certificates or other documents delivered prior to or
at the Closing (other than the representation and warranty contained in Section
3.03(a) which shall survive the Closing) shall expire with, and be terminated
and extinguished by, the Closing and thereafter none of the Company, Purchaser
or the Stockholders shall be under any liability whatsoever with respect to any
such representation or warranty. This Section 7.02 shall have no effect upon any
other obligation of the parties hereto, whether to be performed before or after
the Closing.
7.03 Transfer Taxes. Except as provided herein, all transfer,
sales and use, registration, stamp and similar Taxes imposed in connection with
any transaction that occurs pursuant to this Agreement shall be borne solely by
the Company.
7.04 Extension; Waiver. At any time prior to the Closing, the
Purchaser (on the one hand) and, the Company, and the Required Holders (on the
other hand) may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein by any other
applicable party or in any document, certificate or writing delivered pursuant
hereto by any other applicable party or (iii) waive compliance with any of the
agreements or conditions contained herein; provided, that no such extension or
waiver which adversely affects the rights and obligations of a Stockholder,
Warrantholder or Optionholder in a manner that does not equally affect all
similarly situated Stockholders, Warrantholders and Optionholders may be made
without the approval of each Stockholder, Warrantholder and Optionholder so
affected.
7.05 Public Announcements. The Company, on the one hand, and
Purchaser, on the other hand, agree to consult promptly with each other prior to
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated hereby, and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law. No Stockholder shall make or issue any such statement or release
without the prior approval of Purchaser and the Company.
7.06 Indemnification. From and after Closing, the Company shall
and Purchaser shall cause the Company to (i) maintain in effect in the
Certificate of Incorporation of the Company the provisions with respect to
indemnification set forth in Article Eighth of the Certificate of Incorporation
of the Company as in effect at the Closing, which provisions shall not be
amended, repealed or otherwise modified for a period of six (6) years from the
Closing in any manner that would adversely affect the rights thereunder of
individuals (or their estates) who at the date of this Agreement and/or as of
the Closing are or were directors, officers, employees or agents of the Company
or its Subsidiaries, unless such modification is required by law.
7.07 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
000 Xxxxx Xxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxx, Esq.
General Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
XxXxxx De Leeuw & Co., Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
(b) if to the Sellers' Representative, to it at:
XxXxxx De Leeuw & Co., Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
(c) if to Purchaser, to it at:
Madison Dearborn Capital Partners III, L.P.
Xxxxx 0000
Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, P.C.
Phone: (000) 000-0000
Fax: (000) 000-0000
(d) if to any of the Stockholders, to the address set forth
opposite each of their names on the signature pages hereto,
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
7.08 Entire Agreement. This Agreement and the Exhibits, the
Company's disclosure letter and other documents referred to herein or delivered
pursuant hereto and the Confidentiality Agreement collectively contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and supersede all prior agreements and understandings, oral and
written, with respect thereto.
7.09 Binding Effect; Benefit; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties;
except that Purchaser may assign without the prior consent of any other party
hereto its right to purchase all or a portion of the Sale Stock as provided in
Section 1.01(a)(ii); provided, that no such assignment shall relieve Purchaser
of its obligations hereunder. Nothing in this Agreement, expressed or implied,
is intended to confer on any Person other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement except for Sections 7.06 and
7.07 which shall inure to, and be enforceable by, the intended beneficiaries
thereof.
7.10 Amendment and Modification. This Agreement may not be
amended, modified and supplemented except in writing executed by the Company,
Purchaser and the Required Holders provided, however, that no such amendment,
modification or supplement of this Agreement which adversely affects the rights
and obligations of a Stockholder, Optionholder or Warrantholder in a manner that
does not equally affect all similarly situated Stockholders, Warrantholders and
Optionholders may be made without the approval such Stockholder, Warrantholder
or Optionholder.
7.11 Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
7.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
7.13 Applicable Law. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflict of laws rules
thereof. Each of the parties hereto hereby irrevocably acknowledges and consents
that any legal action or proceeding brought with respect to any of the
obligations arising under or relating to this Agreement shall be brought in the
United States District Court for the Southern District of New York, or, if such
courts do not have jurisdiction over such claims, in the courts of the State of
New York as the party bringing such action or proceeding may elect, and each of
the parties hereto hereby irrevocably submits to and accepts with regard to any
such action or proceeding, for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The foregoing
shall not limit the rights of any party to serve process in any other manner
permitted by law. The foregoing consents to jurisdiction shall not constitute
general consents to service of process in the State of New York for any purpose
except as provided above and shall not be deemed to confer rights on any Person
other than the respective parties to this Agreement. To the fullest extent
permitted by applicable law, each of the parties hereto hereby irrevocably
waives the objection which it may now or hereafter have to the laying of the
venue of any suit, action or proceeding arising out of or relating to this
Agreement in any of the courts referred to above and hereby further irrevocably
waives any claim that any such court is not a convenient forum for any such
suit, action or proceeding.
7.14 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
7.15 Certain Definitions. (a) "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) "Subsidiary," with respect to the Company, shall mean and
include (x) any partnership of which the Company or any Subsidiary is a general
partner or (y) any other entity in which the Company or any of its Subsidiaries
owns or has the power to vote 50% or more of the equity interests in such entity
having general voting power to participate in the election of the governing body
of such entity, in each case, including without limitation, the Subsidiaries set
forth on Schedule 3.01(c)(ii) of the Company's disclosure letter.
(c) "Knowledge" shall mean, with regard to any natural person,
the actual knowledge of such person, and with regard to any party hereto, the
actual knowledge of the executive officers of such party.
(d) A "business day" shall mean, any day, other than a Saturday,
Sunday or a day on which banks located in New York, New York shall be authorized
or required by law to close.
(e) A "Reorganization" shall mean, the corporate reorganization
of certain of the Company's Subsidiaries as described in Section 3.01(r) and
4.03 of the Company's disclosure letter.
(f) MDC Entities" shall mean XxXxxx De Leeuw & Co. III, L.P.,
XxXxxx De Leeuw & Co. Offshore (Europe) III, L.P., XxXxxx De Leeuw & Co.
Offshore (Asia), L.P. and Gamma Fund LLC.
(g) "Required Holders" shall mean the holders of a majority of
the aggregate number of shares of Voting Common Stock, Nonvoting Stock and
Preferred Stock outstanding at the time of such determination.
7.16 Effectiveness of Agreement. This Agreement shall become
effective with respect to any signatory hereto upon the occurrence of the
execution and delivery of this Agreement by each of Purchaser, the Company,
XxXxxx De Leeuw & Company, III, L.P., XxXxxx De Leeuw & Company III Offshore
(Europe), L.P., XxXxxx De Leeuw & Company III Offshore (Asia), L.P., Gamma Fund,
L.L.C., Rainbow Trust One, Rainbow Trust Two, Chase Equity Associates, L.P., The
Clipper Group, and MLQ Investors and any of the Affiliates of the foregoing that
are Stockholders. The Company shall use its commercially reasonable efforts to
cause any Stockholder, Warrantholder and Optionholder listed on Schedule 2.05
who has not executed and delivered this Agreement to execute and deliver this
Agreement prior to the Closing.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, each of Purchaser, the Company, the
Stockholders, the Optionholders and the Warrantholders have executed or have
caused this Agreement to be executed by duly authorized Persons, all as of the
date first above written.
000 Xxxxx Xxxxx Xxxx Xxxx OUTSOURCING SOLUTIONS INC.
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
By
-------------------------------
Attention: Xxxx Xxxxx, Esq. Name:
Tel.: (000) 000-0000 Title:
Fax: (000) 000-0000
with copies to White & Case
XxXxxx De Leeuw & Co., Inc.
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000 or (000) 000-0000
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Madison Dearborn Capital MADISON DEARBORN CAPITAL
Partners III, L.P. PARTNERS III, L.P.
Three First Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 By: Madison Dearborn Partners III, L.P.
Its General Partners
Attention: Xxxxxxx Xxxx
Phone: 000-000-0000
Fax: 000-000-0000 By: Madison Dearborn Partners, Inc.
Its General Partner
with a copy to:
By:
Xxxxxxxx & Xxxxx -------------------------------
000 Xxxx Xxxxxxxx Name:
XxxxxXxxxxxx, XX 00000 Title:
Attention: Xxxxxxx X. Xxxx, P.C.
Phone: 000-000-0000
Fax: 000-000-0000
c/x XxXxxx De Leeuw & Co., Inc. XxXXXX De LEEUW & CO. III, L.P.
Xxxx Xxxxxx Xxxxx
00 Xxxx 00xx Xxxxxx By: MDC Management Company III, L.P.
Xxx Xxxx, Xxx Xxxx 00000 its General Partner
By:
---------------------------------
Name: Xxxxx Xx Xxxxx
Title:
c/x XxXxxx De Leeuw & Co., Inc. XxXXXX De LEEUW & CO. III EUROPE, L.P.
Xxxx Xxxxxx Xxxxx
00 Xxxx 00xx Xxxxxx By: MDC Management Company IIIE, L.P.
Xxx Xxxx, Xxx Xxxx 00000 its General Partner
By:
---------------------------------
Name: Xxxxx Xx Xxxxx
Title:
c/x XxXxxx De Leeuw & Co., Inc. XxXXXX De LEEUW & CO. III (ASIA) L.P.
Xxxx Xxxxxx Xxxxx
00 Xxxx 00xx Xxxxxx MDC Management Company IIIA, L.P.
Xxx Xxxx, Xxx Xxxx 00000 its General Partner
By
-----------------------------------
Name: Xxxxx Xx Xxxxx
Title:
c/x XxXxxx De Leeuw & Co., Inc. GAMMA FUND, L.L.C.
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 By
-----------------------------------
Name: Xxxxx Xx Xxxxx
Title:
x/x XXX Xxxxxxx XXXXXXX TRUST XXX
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
By
-----------------------------------
Attention: Name:
Tel.: Title:
Fax:
x/x XXX Xxxxxxx XXXXXXX TRUST XXX
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
By
-----------------------------------
Attention: Name:
Tel.: Title:
Fax:
Address: MLQ INVESTORS, L.P.
c/o The Xxxxxxx Xxxxx Group, Inc.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 By
-----------------------------------
Attention: Xxxxx Xxxxxxx Name: Xxxxx Xxxxxxx
Tel.: (000) 000-0000 Title:
Fax: (000) 000-0000
Outsourcing Solutions Inc. By
000 Xxxxx Xxxxx Xxxx Xxxx -----------------------------------
Suite 350 Name: Xxxxxxx X. Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Outsourcing Solutions Inc. By
000 Xxxxx Xxxxx Xxxx Xxxx -----------------------------------
Suite 350 Name: Xxxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Outsourcing Solutions Inc. By
000 Xxxxx Xxxxx Xxxx Xxxx -----------------------------------
Suite 350 Name: Xxxxxxx Xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xx Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Account Portfolios, Inc. By
0000 Xxxxxxxxx Xxxxxxxxxx -----------------------------------
Building 1, Suite M Name: Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Outsourcing Solutions, Inc. By
000 Xxxxx Xxxxx Xxxx Xxxx -----------------------------------
Suite 350 Name: Xxxx X. Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Interactive Performance, Inc. By
0000 Xxxxxxxxxx Xxxxx -----------------------------------
X. Xxxxxxxxxx, XX 00000 Name: Xxxxxx Xxxxx
Attention: Xxxxxx Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Outsourcing Solutions Inc.
000 Xxxxx Xxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000 By
-----------------------------------
Attention: Xxxxxxx Xxxxx Name: Xxxxxxx Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Outsourcing Solutions Inc.
000 Xxxxx Xxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000 By
-----------------------------------
Attention: C. Xxxxxxxx XxXxxx Name: C. Xxxxxxxx XxXxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
c/o OSI Portfolio Acquisition Services
0000 Xxxxxx xx xxx Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000 By
-----------------------------------
Attention: Xxx Xxxxxxx Name: Xxx Xxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Outsourcing Solutions Inc.
000 Xxxxx Xxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000 By
-----------------------------------
Attention: Xxxxxxx Xxxxx Name: Xxxxxxx Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
00000 Xxxxxxx Xxxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000 By
-----------------------------------
Attention: Xxxx X. Xxxxxx Name: Xxxx X. Xxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
Resurgens OSI Partners RESURGENS OSI PARTNERS
Fifteen Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
By
-----------------------------------
Attn: Xxxxxxx X. Xxxxxx Name:
Tel.: 000-000-0000 Title:
Fax: 000-000-0000
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxx X. Xxxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: R. Xxxx Xxxxxxxxx
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Tel.:
Fax: By
-----------------------------------
Name: Xxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention:
Tel.: By
Fax: -----------------------------------
Name: Xxxxxxx X. Xxxxxxx
X.X. Xxx 00000
Xxxxxxxxx, XX 00000
Tel.:
Fax: By
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
c/o A.M. Xxxxxx & Associates, Inc.
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxxx, XX 00000
Tel.: By
Fax: -----------------------------------
Name: Xxxxxx Xxxxxxxx
00000 00xx Xxx. X.X.
Xxxxxxxx, XX 00000
Tel.:
Fax: By
-----------------------------------
Name: Xxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx, 00xx Floor XXXXXXX X. XXXXXXXXX AS CUSTODIAN FOR
Xxxxxxx, XX 00000-0000 XXXXXX X. XXXXXXX UNDER THE WASHINGTON
UNIFORM TRANSFERS TO MINORS ACT
Tel: (000) 000-0000
Fax: (000) 000-0000
By
-----------------------------------
Name:
Title:
0000 Xxxxx Xxxxxx, 00xx Floor XXXXXXX X. XXXXXXXXX AS CUSTODIAN FOR
Xxxxxxx, XX 00000-0000 XXXXX X. XXXXXXX UNDER THE WASHINGTON
UNIFORM TRANSFERS TO MINORS ACT
Tel: (000) 000-0000
Fax: (000) 000-0000
By
-----------------------------------
Name:
Title:
c/o A.M. Xxxxxx & Associates, Inc.
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxxx, XX 00000
Tel.: (000) 000-0000 By
Fax: (000) 000-0000 -----------------------------------
Name: Xxxx X. Xxxxxx
000 Xxxx Xxxxxx Xxxxxx XXXXXX FINANCIAL, INC.
Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
Tel.: (000) 000-0000 By
Fax: (000) 000-0000 -----------------------------------
Name: Xxxx Xxxxxxxxx
Title:
Attention: Xxxxxx Xxxxxx By
Tel.: (000) 000-0000 -----------------------------------
Fax: (000) 000-0000 Name: Xxxxxx Xxxxxx
Title:
0000 Xxxxxx Xxxxxx XXXXXX XXXXXXXX
Xxxxxxx, XX 00000
Attention: X.X. Xxxxxxx
Tel.: By
Fax: -----------------------------------
Name: X.X. Xxxxxxx
Title: President
c/o Chase Capital Partners CHASE EQUITY ASSOCIATES, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx By: CHASE CAPITAL PARTNERS, its
Tel.: (000) 000-0000 General Partner
Fax: (000) 000-0000
By
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: General Partner
Chase Capital Partners
The Clipper Group CLIPPER CAPITAL ASSOCIATES, L.P.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000 By
Attention: Xxxxxx Xxxxx -----------------------------------
Tel.: (000) 000-0000 Name: Xxxxxx X. Xxxxx
Fax: (000) 000-0000 Title:
The Clipper Group CLIPPER/MERCHANT PARTNERS, L.P.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000 By: CLIPPER CAPITAL ASSOCIATES, L.P.,
Attention: Xxxxxx Xxxxx its General Partner
Tel.: (000) 000-0000
Fax: (000) 000-0000
By
-----------------------------------
Name: Xxxxxx X. Xxxxx
The Clipper Group CLIPPER/MERBAN, L.P.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000 By: CLIPPER CAPITAL ASSOCIATES, L.P.,
Attention: Xxxxxx Xxxxx its General Partner
Tel.: (000) 000-0000
Fax: (000) 000-0000
By
-----------------------------------
Name: Xxxxxx X. Xxxxx
The Clipper Group CLIPPER EQUITY PARTNERS I, L.P.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000 By: CLIPPER CAPITAL ASSOCIATES, L.P.,
Attention: Xxxxxx Xxxxx its General Partner
Tel.: (000) 000-0000
Fax: (000) 000-0000
By
-----------------------------------
Name: Xxxxxx X. Xxxxx
The Clipper Group CLIPPER/EUROPEAN RE, L.P.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000 By: CLIPPER CAPITAL ASSOCIATES, L.P.,
Attention: Xxxxxx Xxxxx its General Partner
Tel.: (000) 000-0000
Fax: (000) 000-0000
By
-----------------------------------
Name: Xxxxxx X. Xxxxx
The Clipper Group CS FIRST BOSTON MERCHANT
000 Xxxxxxx Xxxxxx, 0xx Xxxxx INVESTMENTS 1995/96, L.P.
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx By: MERCHANT CAPITAL, INC.,
Tel: (000) 000-0000 its General Partner
Fax: (000) 000-0000
By:
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title:
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxxx Xxxxxxx
Address: 000 Xxxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Tel.: By
Fax: -----------------------------------
Name: X. Xxxx Xxxxxx
Address: 00000 Xxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Tel.: By
-----------------------------------
Fax: Name: Xxxxx X. Xxxxxxx
Address: 0000 Xxxxxx Xxxx
Xxxxx, XX 00000
Tel.: By
Fax: -----------------------------------
Name: Xxxxxxx X. Xxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxxx X. Xxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxx Xxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxxx Xxxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxx Xxxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxx Xxxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxx Xxxxxxx
Address:
Tel.:
Fax: By
-----------------------------------
Name: Xxxxx Xxxxx
EXHIBIT A
Terms of Mezzanine Preferred
EXHIBIT B
Escrow Agreement
EXHIBIT C
List of Stockholders
EXHIBIT D
Form of Stockholders Agreement
EXHIBIT E
Form of Opinion of Xxxxxxxx & Xxxxx
EXHIBIT F
Form of Opinion of White & Case LLP
TABLE OF CONTENTS
Page
ARTICLE I
ISSUANCE OF STOCK; PAYMENT OF SUBSCRIPTION PRICE; CLOSING .............. 2
1.01 Issuance of Stock................................................. 2
1.02 Price............................................................. 3
1.03 Escrow; Sellers'Representative.................................... 3
1.04 Closing........................................................... 4
1.05 Working Capital Adjustment........................................ 4
ARTICLE II
REDEMPTION OF THE REDEMPTION STOCK; OPTIONS; WARRANTS................... 6
2.01 Conversion........................................................ 6
2.02 Redemption of Redemption Securities............................... 6
2.03 Capital Stock..................................................... 7
2.04 Warrants.......................................................... 8
2.05 Options........................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES.......................................... 9
3.01 Representations and Warranties of the Company..................... 9
(a) Due Organization, Good Standing and Corporate Power......... 9
(b) Authorization and Validity of Agreement..................... 9
(c) Capitalization.............................................. 10
(d) Consents and Approvals; No Violations....................... 11
(e) Financial Statements; Commission Filings.................... 11
(f) Absence of Certain Changes.................................. 12
(g) Title to Properties; Encumbrances........................... 12
(h) Leases...................................................... 13
(i) Material Contracts.......................................... 13
(j) Compliance with Laws........................................ 13
(k) Litigation.................................................. 14
(l) Employee Benefit Plans...................................... 14
(m) Employment Relations and Agreements......................... 16
(n) Taxes....................................................... 16
(o) Liabilities................................................. 18
(p) Intellectual Properties..................................... 18
(q) Environmental Laws and Regulations.......................... 19
(r) Conduct of Business......................................... 20
(s) Broker's or Finder's Fee.................................... 20
(t) Collection and Portfolio Services Businesses................ 20
(u) Affiliate Transactions...................................... 20
(v) Disclosure.................................................. 20
3.02 Representations and Warranties of Purchaser....................... 20
(a) Due Organization and Power.................................. 21
(b) Authorization and Validity of Agreement..................... 21
(c) Consents and Approvals; No Violations....................... 21
(d) Litigation.................................................. 21
(e) Broker's or Finder's Fee.................................... 21
(f) Financing................................................... 22
(g) Purchase for Investment..................................... 22
3.03 Representations of the Stockholders, Warrantholders
and Optionholders................................................. 22
(a) Ownership of Redemption Shares or Warrants.................. 22
(b) Authorization and Validity of Agreement..................... 22
(c) Consents and Approvals; No Violations....................... 23
(d) Broker's or Finder's Fee.................................... 23
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE...................................... 23
4.01 Access to Information Concerning Properties and Records........... 23
4.02 Confidentiality................................................... 24
4.03 Conduct of the Business of the Company Pending the Closing Date... 24
4.04 Reasonable Best Efforts........................................... 26
4.05 Exclusive Dealing................................................. 27
4.06 Notification of Certain Matters................................... 27
4.07 Change of Control Payments........................................ 27
4.08 Financing; Consent Solicitation................................... 27
ARTICLE V
CONDITIONS PRECEDENT TO SALE OF STOCK................................... 28
5.01 Conditions to Each Party's Obligations............................ 28
(a) No Injunction............................................... 28
(b) Statutes.................................................... 28
(c) HSR Act..................................................... 28
5.02 Conditions to Obligations of the Company and the Stockholders..... 28
(a) Purchaser Representations and Warranties.................... 28
(b) Performance by Purchaser.................................... 28
(c) Certificate................................................. 29
(d) Stockholders Agreement...................................... 29
(e) Opinion of Counsel.......................................... 29
5.03 Conditions to Obligations of Purchaser............................ 29
(a) Representations and Warranties.............................. 29
(b) Performance................................................. 29
(c) No Material Adverse Change.................................. 29
(d) Certificate................................................. 29
(e) Stockholders Agreement...................................... 29
(f) Advisory Services Agreement................................. 30
(g) Material Consents........................................... 30
(h) Financing................................................... 30
(i) Resignations................................................ 30
(j) 280G Approval............................................... 30
(k) Conversion and Exchange of Stock............................ 30
(l) Opinion of Counsel.......................................... 30
(m) Major Customers............................................. 31
ARTICLE VI
TERMINATION AND ABANDONMENT............................................. 31
6.01 Termination....................................................... 31
6.02 Effect of Termination............................................. 32
ARTICLE VII
MISCELLANEOUS........................................................... 32
7.01 Fees and Expenses................................................. 32
7.02 Representations and Warranties.................................... 32
7.03 Transfer Taxes.................................................... 33
7.04 Extension; Waiver................................................. 33
7.05 Public Announcements.............................................. 33
7.06 Indemnification................................................... 33
7.07 Notices........................................................... 33
7.08 Entire Agreement.................................................. 35
7.09 Binding Effect; Benefit; Assignment............................... 35
7.10 Amendment and Modification........................................ 36
7.11 Headings.......................................................... 36
7.12 Counterparts...................................................... 36
7.13 Applicable Law.................................................... 36
7.14 Severability...................................................... 36
7.15 Certain Definitions............................................... 37
7.16 Effectiveness of Agreement........................................ 37
EXHIBITS
Exhibit A Terms of Mezzanine Preferred
Exhibit B Escrow Agreement
Exhibit C List of Stockholders, Optionholders
Exhibit D Form of Stockholders Agreement
Exhibit E Form of Opinion of Xxxxxxxx & Xxxxx
Exhibit F Form of Opinion of White & Case LLP
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000 By
Tel: (000) 000-0000 -----------------------------------
Fax: (000) 000-0000 Name: Xxxxxxx Xxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000 By
Tel: (000) 000-0000 -----------------------------------
Fax: (000) 000-0000 Name: Xxxxxx X. Xxxx
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000 By
Tel: (000) 000-0000 -----------------------------------
Fax: (000) 000-0000 Name: Xxxx X. Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000 By
Tel: (000) 000-0000 -----------------------------------
Fax: (000) 000-0000 Name: Xxxxx X. Xxxxxx
FIRST AMENDMENT TO
STOCK SUBSCRIPTION AND REDEMPTION AGREEMENT
FIRST AMENDMENT TO STOCK SUBSCRIPTION AND REDEMPTION AGREEMENT
(this "Amendment"), dated as of December 10, 1999, by and among MADISON DEARBORN
CAPITAL PARTNERS III, L.P. (the "Purchaser"), OUTSOURCING SOLUTIONS INC. (the
"Company") and THE STOCKHOLDERS, WARRANTHOLDERS AND OPTIONHOLDERS OF THE COMPANY
listed on the signature pages hereto. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Stock Subscription and Redemption Agreement.
W I T N E S S E T H :
WHEREAS, the Purchaser, the Company and the Stockholders,
Warrantholders and Optionholders of the Company are parties to that certain
Stock Subscription and Redemption Agreement, dated as of October 8, 1999 (the
"SS&R Agreement");
WHEREAS, pursuant to a certain securities purchase agreement (the
"Senior Preferred Purchase Agreement") to be entered into among the Company and
each of Ares Leveraged Investment Fund, L.P., Ares Leveraged Investment Fund II,
L.P., DB Capital Investors, L.P., First Union Investors, Inc., Xxxxxx Capital
1330 Investors II, L.P., Xxxxxx Capital Private Equity Fund III, L.P., BNY
Partners Fund, L.L.C., Xxxxxx Financial, Inc., and Magnetite Asset Investors
L.L.C., (each a "Preferred Purchaser," and collectively, the "Preferred
Purchasers"), the Preferred Purchasers will purchase 25,000 shares of the
Company's Class A 14% Senior Mandatorily Redeemable Preferred Stock ("Class A
Senior Preferred"), 75,000 shares of the Company's Class B 14% Senior
Mandatorily Redeemable Preferred Stock ("Class B Senior Preferred", and together
with the Class A Senior Preferred, the "Purchaser Preferred Stock") and
596,913.07 shares of the Company's Common Stock (collectively the "Preferred
Purchaser Stock"), for an aggregate purchase price of $100.0 million;
WHEREAS, pursuant to a certain assignment and purchase agreement
(the "Common Stock Assignment and Purchase Agreement") Purchaser, pursuant to
Section 7.09 of the SS&R Agreement, has assigned to the named assignees therefor
(each a "Co-Purchaser" and collectively, the "Co-Purchasers") the right to
purchase 889,647.97 shares of the Company's Voting Common Stock and Non-Voting
Common Stock which otherwise would have been included in the Sale Stock (the
"Co-Purchaser Stock");
WHEREAS, the Purchaser, the Company and the Stockholders,
Warrantholders and Optionholders of the Company signatory hereto desire to amend
the SS&R Agreement to reflect Purchaser's assignment of its right to purchase
certain stock as aforementioned as well as other amendments as herein provided.
NOW THEREFORE, it is agreed:
I. Amendment to Stock Subscription and Redemption Agreement.
1. Section 1.01 of the SS&R Agreement is hereby amended by
deleting Section 1.01 in its entirety and inserting in lieu thereof the
following new Section 1.01:
"1.01 Issuance of Stock. Subject to the terms and conditions set
forth in this Agreement, the Company agrees to issue and sell to
Purchaser, and Purchaser agrees to purchase, on the Closing Date (as
hereinafter defined) 5,136,744.96 shares of Common Stock (the "Sale
Stock"). The Company and the Redemption Securityholders and Rollover
Holders acknowledge and agree that Purchaser has assigned its right to
purchase the Preferred Purchaser Stock to the Preferred Purchasers and
the Co-Purchaser Stock to the Co-Purchasers; provided, that such
assignment shall not release Purchaser of its other obligations under
this Agreement."
2. Section 1.02 of the SS&R Agreement is hereby amended by
deleting Section 1.02 in its entirety and inserting in lieu thereof the
following new Section 1.02:
"1.02 Price. In full consideration for the purchase by the
Purchaser of the Sale Stock, Purchaser shall pay to the Company on the
Closing Date aggregate consideration of $159,160,517.73 (the "Purchase
Price"), which amount was determined based in part on the revolver
availability at the Closing under the Refinancing and the third party
fees and expenses of the Recapitalization payable by the Company or the
Purchaser. Such amount shall be payable by wire transfer of funds to an
account specified by the Company in writing to the Purchaser. This
paragraph shall be subject to the satisfaction of the conditions to
Purchaser's obligation to close set forth in Article V hereof."
3. Section 1.03 of the SS&R Agreement is hereby amended by (i)
changing the title thereof to "Sellers' Representative", (ii) deleting the last
sentence thereof and (iii) deleting the first four sentences thereof and
inserting in lieu of the first four sentences the following new sentence:
"None of Purchaser or the Company shall be responsible to the
Stockholders, Warrantholders or Optionholders for any loss, damage or
expense such holders may suffer as a result of any action of XxXxxx De
Leeuw & Co., Inc. as representative for the Redemption Securityholders
(the "Sellers' Representative")."
4. Section 1.05 of the SS&R Agreement is hereby amended by
deleting Section 1.05 in its entirety and inserting in lieu thereof the
following new Section 1.05:
"1.05 Working Capital. (a) The working capital of the Company
(the "Working Capital") as of November 30, 1999 is deemed to be
$12,367,699, which was determined in accordance with the following
formula: the sum of current assets other than purchased loans of the
Company and its Subsidiaries less current liabilities of the Company and
its Subsidiaries, in each case determined in accordance with GAAP on a
consolidated basis, consistently applied with the Financial Statements;
provided, that in determining Working Capital, there was no duplication
of amounts paid or payable that would have the effect of reducing
Aggregate Consideration more than once on account of such amounts so
paid or payable. The Working Capital is greater than $509,000 (being the
targeted working capital agreed upon by the parties) and, therefore, the
Aggregate Consideration shall be increased by $11,858,699, the amount of
such difference.
(b) No later than 30 days following the Closing, the Company
shall pay to each Redemption Securityholder an aggregate of
$2,351,812.50, in the percentages set forth opposite each Redemption
Securityholder's name on Exhibit G (net of any applicable federal state
or local employment taxes, in the case of Optionholders, to be withheld
and paid with respect to the compensation required to be reported by the
Company to the Optionholder which amounts will be reported and paid by
the Company to the relevant taxing authorities). The Company shall
disburse each such amount by check to the applicable address as set
forth on the signature pages hereto and to the applicable taxing
authorities from time to time in accordance with applicable law."
5. Section 2.02 of the SS&R Agreement is hereby amended by
deleting the last sentence thereof and inserting in lieu thereof the following
new sentence:
"Upon consummation of the Recapitalization, there shall be no
Preferred Stock (other than the Company's Purchaser Preferred Stock and
the Junior Preferred Stock) outstanding."
6. Section 2.03(a) of the SS&R is hereby amended by deleting
Section 2.03(a) in its entirety and inserting in lieu thereof the following new
Section 2.03(a):
"2.03 Capital Stock. (a) Upon the surrender to the Company of a
certificate or certificates (a "Certificate") evidencing Capital Stock
included in the Redemption Securities, the Company shall pay by wire
transfer of immediately available funds to the Person (as defined in
Section 7.17 hereof) entitled thereto the Redemption Consideration times
the number of shares of such Capital Stock as payment in full therefor.
The "Redemption Consideration" is deemed to be $37.47 and was
determined as follows: (i) the sum of (A) $258,636,716.69 being the
Aggregate Consideration plus (B) $8,933,873.38, being the aggregate
exercise price for all Warrants and Options outstanding immediately
prior to the Closing, divided by (ii) the sum of (A) 5,308,866.59, being
the total number of shares of Voting Common Stock and Nonvoting Common
Stock outstanding at Closing (assuming the actions described in Section
2.01 have occurred) and (B) 1,592,729.20, being the total number of
shares of Voting Common Stock into which Warrants, Options and Preferred
Stock (including accruals for payment-in-kind dividends as of Closing
whether or not then exchangeable) outstanding at Closing are
exercisable, convertible or exchangeable (whether or not presently
exercisable, convertible or exchangeable) (the sum of (A) and (B) in
clause (ii) being the "Fully Diluted Equity Number"). In calculating the
Redemption Consideration and Fully Diluted Equity Number, no Warrant or
Option is included that has an exercise price equal to or in excess of
the amount of Redemption Consideration if such Warrant or Option were
included in such calculation. It is understood and agreed that an
aggregate of $2,351,812.50 of Redemption Consideration shall be held
back at Closing and will be paid to Redemption Securityholders within 30
days after Closing in accordance with Section 1.05(b).
"Aggregate Consideration" shall mean (A) an aggregate of
$792,351,812.50, less (B) the sum of the following items: (i)
$543,240,189.16, being the amount of Debt at Closing; (ii)
$6,989,974.40, being the fees and expenses specified in Section 3.01(s)
of this Agreement along with other fees and expenses paid or payable by
the Company (including, without limitation, legal and other advisory
fees and expenses) in connection with this Agreement; (iii)
$4,183,377.12, being amounts paid or payable by the Company, arising
from the change in control of the Company resulting from this Agreement
including, without limitation, change of control payments to certain
employees of the Company pursuant to the agreements set forth on
Schedule 1.02 of the Company's disclosure letter (based on a gross
entitlement of $4,495,250 before deductions pursuant to such
agreements); (iv) $94,127.50, being fees, expenses or other amounts paid
or payable in connection with obtaining the consents or waivers of any
third party required to consummate the purchase and redemption
contemplated by this Agreement (including the fees, expenses or other
amounts paid in connection with the amendments to the agreements
contemplated by Section 5.03(g), but excluding consent and waiver fees,
expenses and other amounts paid or payable to holders of the Senior
Subordinated Notes and the expenses related to obtaining such consents
and waivers); and (v) $0.00, being the fees and expenses of the
Stockholders, Warrantholders or Optionholders paid or payable by the
Company, if any, in connection with this Agreement and the transactions
contemplated hereby, plus (C) $11,858,699, being the adjustment provided
for in Section 1.05(a) based on the Working Capital.
"Debt" shall mean (i) indebtedness of the Company and its
Subsidiaries determined in accordance with generally accepted accounting
principles ("GAAP") (including, without limitation, capital leases),
except for intercompany loans and advances between or among the Company
and its Subsidiaries and (ii) any prepayment penalties or redemption
premiums resulting from the transactions contemplated by this Agreement
(but excluding any amount contemplated by clause (B) (iii) of the
definition of Aggregate Consideration set forth in this Section
2.03(a))."
7. Section 3.01(c)(i) of the SS&R Agreement is hereby amended by
adding the following sentence at the end thereof:
"Notwithstanding the first sentence hereof, the parties
acknowledge and agree that, as of the Closing Date, the authorized
capital of the Corporation consists of 300,000 shares of Preferred
Stock, no par value, 15,000,000 shares of Voting Common Stock, par value
$.01 per share, and 2,000,000 shares of Non-Voting Stock, par value $.01
per share."
8. Section 5.02 is hereby amended by inserting the following new
clause (f) immediately after clause (e) thereof:
"(f) Preferred Purchasers. The Company shall have received gross
proceeds of $100,000,000 from the sale and issuance of the Preferred
Purchaser Stock to the Preferred Purchasers."
9. Section 5.03(h) is hereby amended by deleting the last
sentence thereof and by inserting the following sentence in lieu thereof:
"The Preferred Purchasers shall have purchased an aggregate of
$100,000,000 of Preferred Purchaser Stock."
10. Section 5.03 is hereby amended by deleting clause (o) thereof
in its entirety and inserting the following new clause (o) immediately after
clause (n) thereof:
"(o) Issuance of Preferred Stock. The Company shall have issued
and sold an aggregate of $7,000,000 of the Company's Junior Preferred
Stock, no par value (the "Junior Preferred Stock"), with the rights,
preferences and terms set forth in Exhibit H attached hereto, to XxXxxx
De Leeuw & Company, III, L.P., XxXxxx De Leeuw & Company III Offshore
Europe, L.P., XxXxxx De Leeuw & Company III Offshore (Asia), L.P., Gamma
Fund, L.L.C., Rainbow Trust One, Rainbow Trust Two, Xxxxx X. Xxxxxxx,
Xxxx X. Xxxxxx, Xxxxxx Financial, Inc., Chase Equity Associates, L.P.,
Clipper Capital Associates, L.P., Clipper/Merchant Partners, L.P.,
Clipper/Merban, L.P., Clipper Equity Partners I, L.P., Clipper/European
RE, L.P., CS First Boston Merchant Investments 1995/1996, L.P., MLQ
Investors, Xxxxxxx Xxxxx and Xxxxx Xxxxxxx."
11. Exhibit A to the SS&R Agreement is hereby amended by deleting
Exhibit A in its entirety and replacing it with the words "[Intentionally
Deleted]".
12. Exhibit B to the SS&R Agreement is hereby amended by deleting
Exhibit B is in its entirety and replacing it with the words "[Intentionally
Deleted]".
13. Exhibit C to the SS&R Agreement is hereby amended by deleting
Exhibit C in its entirety and a new Exhibit C attached hereto as Annex B is
hereby substituted in lieu thereof.
14. Exhibit D to the SS&R Agreement is hereby amended by deleting
Exhibit D in its entirety and a new Exhibit D attached hereto as Annex C is
hereby substituted in lieu thereof.
15. A new Exhibit G, attached hereto as Annex D, and a new
Exhibit H, attached hereto as Annex E, are hereby added to the SS&R Agreement.
II. Miscellaneous Provisions.
1. Except as herein expressly amended, the SS&R Agreement is in
all respects ratified and confirmed. This Amendment is limited as specified and
shall not constitute a modification, acceptance or waiver of any other provision
of the SS&R Agreement.
2. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
3. This Amendment shall be governed by, and construed and
enforced in accordance with the Laws of the State of New York without regard to
its principles of conflicts of law.
4. This Amendment shall become effective as of the date first set
forth above upon the execution and delivery hereof by the Company, Purchaser and
Required Holders.
5. From and after the date hereof, all references in the SS&R
Agreement shall be deemed to be references to the SS&R Agreement as amended
hereby.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
OUTSOURCING SOLUTIONS INC.
By:
----------------------------------------
Name:
Title:
MADISON DEARBORN CAPITAL PARTNERS III, L.P.
By: Madison Dearborn Partners III, L.P.
Its General Partners
By: Madison Dearborn Partners, Inc.
Its General Partner
By:
-------------------------------
Name:
Title:
XxXXXX De LEEUW & CO. III, L.P.
By: MDC Management Company III, L.P.
its General Partner
By
----------------------------------------
Name: Xxxxx Xx Xxxxx
Title:
XxXXXX De LEEUW & CO. III EUROPE, L.P.
By: MDC Management Company IIIE, L.P.
its General Partner
By
----------------------------------------
Name: Xxxxx Xx Xxxxx
Title:
XxXXXX De LEEUW & CO. III (ASIA), L.P.
By: MDC Management Company IIIA, L.P.
its General Partner
By
----------------------------------------
Name: Xxxxx Xx Xxxxx
Title:
GAMMA FUND, L.L.C.
By
----------------------------------------
Name: Xxxxx Xx Xxxxx
Title:
RAINBOW TRUST ONE
By
----------------------------------------
Name:
Title:
RAINBOW TRUST TWO
By
----------------------------------------
Name:
Title:
MLQ INVESTORS, L.P.
By
----------------------------------------
Name: Xxxxx Xxxxxxx
Title:
By
----------------------------------------
Name: Xxxxxxx X. Xxxxx
By
----------------------------------------
Name: Xxxxxxx Xxxxxxx
By
----------------------------------------
Name: Xxxxxxx Xx Xxxxx
By
----------------------------------------
Name: Xxxxx Xxxxxxx
By
----------------------------------------
Name: Xxxx X. Xxxxx
By
----------------------------------------
Name: Xxxxxx Xxxxx
By
----------------------------------------
Name: Xxxxxxx Xxxxx
By
----------------------------------------
Name: C. Xxxxxxxx XxXxxx
By
----------------------------------------
Name: Xxx Xxxxxxx
By
----------------------------------------
Name: Xxxxxxx Xxxxx
By
----------------------------------------
Name: Xxxx X. Xxxxxx
RESURGENS OSI PARTNERS
By
----------------------------------------
Name:
Title:
By
----------------------------------------
Name: Xxxx X. Xxxxxxx
By
----------------------------------------
Name: R. Xxxx Xxxxxxxxx
By
----------------------------------------
Name: Xxxxx X. Xxxxxx
By
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
By
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
By
----------------------------------------
Name: Xxxxxx Xxxxxxxx
By
----------------------------------------
Name: Xxxxx X. Xxxxxxx
XXXXXXX X. XXXXXXXXX AS CUSTODIAN FOR
XXXXXX X. XXXXXXX UNDER THE WASHINGTON
UNIFORM TRANSFERS TO MINORS ACT
By
----------------------------------------
Name:
Title:
XXXXXXX X. XXXXXXXXX AS CUSTODIAN FOR XXXXX
X. XXXXXXX UNDER THE WASHINGTON UNIFORM
TRANSFERS TO MINORS ACT
By
----------------------------------------
Name:
Title:
By
----------------------------------------
Name: Xxxx X. Xxxxxx
XXXXXX FINANCIAL, INC.
By
----------------------------------------
Name: Xxxx Xxxxxxxxx
Title:
By
----------------------------------------
Name: Xxxxxx Xxxxxx
Title:
By
----------------------------------------
Name: C.L. Xxxxxxx
XXXXX EQUITY ASSOCIATES, L.P.
By
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: General Partner
Chase Capital Partners
CLIPPER CAPITAL ASSOCIATES, L.P.
By
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title:
CLIPPER/MERCHANT PARTNERS, L.P.
By
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title:
CLIPPER/MERBAN, L.P.
By
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title:
CLIPPER EQUITY PARTNERS I, L.P.
By
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title:
CLIPPER/EUROPEAN RE, L.P.
By
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title:
CS FIRST BOSTON MERCHANT
INVESTMENTS 1995/96, L.P.
By:
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Name: Xxxxxx X. Xxxxx
Title:
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Name: Xxxxx X. Xxxxxx
