Exhibit 2
FINAL
ASSET ACQUISITION AGREEMENT 020297:7
PARTIES: CRW FINANCIAL, INC.
a Delaware corporation ("CRW")
000 X. Xxxxx Xxxx
Xxxx xx Xxxxxxx, XX 00000
XXXXXX & XXXXXX, INC.
a Delaware corporation ("Kaplan")
000 X. Xxxxx Xxxx
Xxxx xx Xxxxxxx, XX 00000
NCO GROUP, INC.
a Pennsylvania corporation ("NCO")
0000 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
CRWF ACQUISITION, INC.
a Pennsylvania corporation ("CRWF")
0000 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
K&K ACQUISITION, INC.
a Pennsylvania corporation ("K&K")
0000 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
DATE: February 2, 1997
BACKGROUND: CRW, Kaplan (collectively, "Sellers") and the CRW Subsidiaries (as
defined in Section ) (collectively, "Selling Companies") are in the business of,
among other things, accounts receivable collection and related services (the
"Accounts Receivable Collection Business"). Kaplan and the CRW Subsidiaries are
wholly owned subsidiaries of CRW. CRWF and K&K (collectively, "Buyers") are
wholly owned subsidiaries of NCO (Buyers and NCO are sometimes collectively
referred to herein as the "Buying Companies"). CRWF is buying substantially all
of the business and assets of the Accounts Receivable Collection Business owned
by CRW and K&K is buying substantially all of the business and assets of the
Accounts Receivable Collection Business owned by Kaplan. The parties desire that
Sellers sell and Buyers buy substantially all of the business and assets of
Sellers' Accounts Receivable Collection Business, and Buyers assume certain
liabilities of Sellers' Accounts Receivable Collection Business all on and
subject to the terms and conditions of this Agreement.
INTENDING TO BE LEGALLY BOUND, in consideration of the mutual
agreements contained herein, and subject to the satisfaction of the terms and
conditions set forth herein, the parties agree as follows:
1. DEFINED TERMS Certain defined terms used in this Agreement and not
specifically defined in context are defined in this Section , as follows:
1.1. "Accounts Receivable" means (a) any right to payment for goods
sold, leased or licensed or for services rendered, whether or not it has been
earned by performance, whether billed or unbilled, and whether or not it is
evidenced by any Contract (as defined in Section 1.5); (b) any note receivable;
or (c) any other receivable or right to payment of any nature.
1.2. "Asset" means any real, personal, mixed, tangible or intangible
property of any nature, including, but not limited to, Cash Assets (as defined
in Section 1.3), prepayments, deposits, escrows, Accounts Receivable (as defined
in Section 1.1), Tangible Property (as defined in Section 1.23), Real Property
(as defined in Section 1.21), Software (as defined in Section 1.22), Contract
Rights (as defined in Section 1.6), Intangibles (as defined in Section 1.12) and
goodwill, and claims, causes of action and other legal rights and remedies.
1.3. "Cash Asset" means any cash on hand, cash in bank or other
accounts, readily marketable securities, and other cash-equivalent liquid assets
of any nature.
1.4. "Consent" means any consent, approval, order or authorization
of, or any declaration, filing or registration with, or any application or
report to, or any waiver by, or any other action (whether similar or dissimilar
to any of the foregoing) of, by or with, any Person (as defined in Section
1.19), which is necessary in order to take a specified action or actions in a
specified manner and/or to achieve a specified result.
1.5. "Contract" means any written or oral contract, agreement,
instrument, order, arrangement, commitment or understanding of any nature,
including, but not limited to, sales orders, purchase orders, leases, subleases,
data processing agreements, maintenance agreements, license agreements,
sublicense agreements, loan agreements, promissory notes, security agreements,
pledge agreements, deeds, mortgages, guaranties, indemnities, warranties,
employment agreements, consulting agreements, sales representative agreements,
joint venture agreements, buy-sell agreements, options or warrants.
1.6. "Contract Right" means any right, power or remedy of any nature
under any Contract (as defined in Section 1.5) including, but not limited to,
rights to receive property or services or otherwise derive benefits from the
payment, satisfaction or performance of another party's Obligations (as defined
in Section 1.7), rights to demand that another party accept property or services
or take any other actions, and rights to pursue or exercise remedies or options.
1.7. "Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any other plan, program, policy or arrangement for or
regarding bonuses, commissions, incentive compensation, severance, vacation,
deferred compensation, pensions, profit sharing, retirement, payroll savings,
stock options, stock purchases, stock awards, stock ownership, phantom stock,
stock appreciation rights, medical/dental expense payment or reimbursement,
disability income or protection, sick pay, group insurance, self insurance,
death benefits, employee welfare or fringe benefits of any nature; but not
including employment Contracts with individual employees.
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1.8. "Encumbrance" means any lien, security interest, pledge,
mortgage, easement, covenant, restriction, reservation, conditional sale, prior
assignment, or other encumbrance, claim, burden or charge of any nature.
1.9. "GAAP" means generally accepted accounting principles under
United States accounting rules and regulations, consistently applied, provided
that, in cases where such generally accepted accounting principles permit the
use of two or more accounting policies ("Accepted Policies") yielding different
results, the following Accepted Policy shall be used, regardless of materiality:
(a) the historical Accepted Policy used by Sellers, if one is applicable; (b) if
none of the historical Accepted Policies used by Sellers is applicable, the
historical Accepted Policy used by NCO, if one is applicable; or (c) if none of
the historical Accepted Policies used by Sellers or by NCO is applicable, the
preferred Accepted Policy under United States accounting rules and regulations.
In no event shall the consistent application of the historical accounting
policies used by Sellers have priority over GAAP, regardless of materiality.
1.10. "Hazardous Substances" means any substance, waste,
contaminant, pollutant or material that has been determined by any United States
federal government authority, or any state or local government authority having
jurisdiction over Sellers' Real Property, to be capable of posing a risk of
injury or damage to health, safety, property or the environment, including, but
not limited to, (a) all substances, wastes, contaminants, pollutants and
materials defined or designated as hazardous, dangerous or toxic pursuant to any
Law of any state in which any of Sellers' leased or owned Real Property is
located or any United States Law, and (b) asbestos, polychlorinated biphenyls
("PCBs") and petroleum.
1.11. "Insurance Policy" means any public liability, product
liability, general liability, comprehensive, property damage, vehicle, life,
hospital, medical, dental, disability, worker's compensation, key man, fidelity
bond, theft, forgery, errors and omissions, directors' and officers' liability,
or other insurance policy of any nature.
1.12. "Intangible" means any name, corporate name, fictitious name,
trademark, trademark application, service xxxx, service xxxx application, trade
name, brand name, product name, slogan, trade secret, know-how, patent, patent
application, copyright, copyright application, design, logo, formula, invention,
product right or other intangible asset of any nature, whether in use, under
development or design, or inactive and goodwill associated therewith.
1.13. "Judgment" means any order, writ, injunction, citation, award,
decree or other judgment of any nature of any foreign, federal, state or local
court, governmental body, administrative agency, regulatory authority or
arbitration tribunal.
1.14. "Knowledge" with reference to the phrases "to Selling
Companies' Knowledge" or "to the best of Selling Companies' Knowledge" or
similar phrases means that none of the officers or directors of any of the
Selling Companies have any actual knowledge or actual belief that the statement
made is incorrect.
1.15. "Law" means any provision of any foreign, federal, state or
local law, statute, ordinance, charter, constitution, treaty, rule or
regulation.
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1.16. "Material Adverse Effect" means any adverse effect on (a) the
financial condition, financial performance or business prospects of (a) the
Accounts Receivable Collection Business, or (b) any of the Specified Assets or
Specified Liabilities of the Accounts Receivable Collection Business, or (c) any
of the Assets of third parties which are used in the Accounts Receivable
Collection Business and are not readily replaceable; which adverse effect is or
will be material, under either GAAP or applicable legal principles, to the
Accounts Receivable Collection Business (as defined under the "Background
Section" on page one) taken as a whole or the Specified Assets taken as a whole
(as defined in Section 2.1.1).
1.17. "Obligation" means any debt, liability or obligation of any
nature, whether secured, unsecured, recourse, nonrecourse, liquidated,
unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained,
known, unknown or otherwise.
1.18. "Permit" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature, granted, issued, approved or
allowed by any foreign, federal, state or local governmental body,
administrative agency or regulatory authority.
1.19. "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, association, cooperative, trust, estate,
governmental body, administrative agency, regulatory authority or other entity
of any nature.
1.20. "Proceeding" means any demand, claim, suit, action,
litigation, investigation, arbitration, administrative hearing or other
proceeding of any nature.
1.21. "Real Property" means any real estate, land, building,
condominium, town house, structure or other real property of any nature, all
shares of stock or other ownership interests in cooperative or condominium
associations or other forms of ownership interest through which interests in
real estate may be held, and all appurtenant and ancillary rights thereto,
including, but not limited to, easements, covenants, water rights, sewer rights
and utility rights.
1.22. "Software" means any computer program, operating system,
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation therefor, whether in
machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature.
1.23. "Tangible Property" means any furniture, fixtures, leasehold
improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies or other tangible personal property of any
nature.
1.24. "Tax" means (a) any foreign, federal, state or local income,
earnings, profits, gross receipts, franchise, capital stock, net worth, sales,
use, occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature; (b) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee,
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assessment, sewer rent or other fee or charge of any nature; or (c) any
deficiency, interest or penalty imposed with respect to any of the foregoing.
2. THE TRANSACTION
2.1. Sale and Purchase of Specified Assets. On the Closing Date (as
defined in Section 6.1), effective to the fullest extent possible at 5:00 p.m.
EST on the Effective Date (as defined in Section 6.1), and subject to the other
terms and conditions of this Agreement, the Sellers shall sell, transfer, assign
and convey to Buyers, and Buyers shall purchase, all right, title and interest
in and to all of the Specified Assets (as defined in Section 2.1.1), and Sellers
shall assign to Buyers, and Buyers shall assume, the Specified Liabilities of
Sellers (as defined in Section 2.1.2).
2.1.1 Specified Assets of Sellers. The "Specified Assets
of Sellers" means all Assets of Sellers (as defined in Section 1.2) used in or
for Sellers' Accounts Receivable Collection Business as of the Effective Date,
wherever located and whether or not reflected on Sellers' books and records,
including, but not limited to, the following Assets, but in each case excluding
the Assets specifically excepted below:
(A) All of Sellers' Cash Assets (as defined
in Section 1.3), Accounts Receivable (as defined in Section 1.1) and all other
current assets arising in connection with or relating to Sellers' Accounts
Receivable Collection Business including, but not limited to, prepaid expenses,
security deposits, rent escrows, and other prepayments, deposits and escrows.
(B) All of Sellers' Tangible Property (as
defined in Section 1.23), Software (as defined in Section 1.22) and Intangibles
(as defined in Section 1.12) used in or for Sellers' Accounts Receivable
Collection Business including, but not limited to, all rights in and to the name
"Kaplan & Kaplan", and the right to use the name "CRW Financial" as provided in
Section 8.2.
(C) All of Sellers' Contract Rights (as
defined in Section 1.6) under the Specified Contracts (as defined in Section
4.13), but excluding Contract Rights under (1) this Agreement and any other
Contracts entered into by Sellers with Buyers in connection with the
transactions contemplated by this Agreement; (2) Contracts that constitute or
evidence Employee Benefit Plans (as defined in Section 1.7) of Sellers; (3) all
Contracts relating to the acquisition by Sellers' (or their predecessors) of
Sellers' Accounts Receivable Collection Business provided that the Specified
Assets shall include the rights of Sellers with respect to all noncompetition,
nondisclosure and other restrictive covenants made for the benefit of Sellers or
their affiliates (or their predecessors) in any such Contract; and (4) all
Contract Rights under any Specified Contracts requiring a material Consent that
is not obtained on or before the Closing Date ("Non-Assigned Contracts"),
provided that the Specified Assets shall include the rights of Sellers with
respect to all noncompetition, nondisclosure and other restrictive covenants
made for the benefit of Sellers or their affiliates (or any of their respective
predecessors) in any such Contract; and provided further that, once such
material Consent is obtained, the Contract Rights under such Specified Contract
shall be deemed, automatically and without further action by the parties, to be
included in the Specified Assets as of the Effective Date.
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(D) All of Sellers' Contract Rights (as
defined in Section 1.6) under any noncompetition, nondisclosure or other
restrictive covenant made for the benefit of Sellers or their affiliates (or any
of their respective predecessors) in any Contract with current or former
employees of Sellers' Accounts Receivable Collection Business, regardless of
whether any such current employee accepts Buyers's offer pursuant to
Section 2.3.
(E) All rights under all Insurance Policies
(as defined in Section 1.11) owned, held or maintained by Sellers (including any
of Sellers' rights under any such Insurance Policies owned, held or maintained
by any of their predecessors) at any time since July 17, 1992 in connection with
or for the benefit of the business, assets or employees of Sellers' Accounts
Receivable Collection Business (including a certain health insurance contract
for the benefit of employees of Sellers' Accounts Receivable Collection Business
in Hawaii) (the "Hawaii Plan"), but excluding (1) all rights under Insurance
Policies that constitute group medical, dental, hospitalization, health,
disability and related Employee Benefit Plans of Sellers and all rights under
self-insured Employee Welfare Benefit Plans (as defined in ERISA) of Sellers
(collectively "Sellers' Group Plans") (other than the Hawaii Plan); and (2) the
rights of Sellers under its Insurance Policies pertaining exclusively to actual
or potential claims or losses that remain Sellers' responsibility after the
Effective Date.
(F) All transferable rights under all Permits
(as defined in Section [1.18]) granted or issued to Sellers or otherwise held by
Sellers relating to or for the benefit of Sellers' Accounts Receivable
Collection Business.
(G) All of Sellers' rights with respect to
telephone numbers, telephone directory listings and advertisements used in
Sellers' Accounts Receivable Collection Business, and all of Sellers' goodwill
relating to or arising in connection with Sellers' Accounts Receivable
Collection Business.
(H) All of Sellers' customer lists, prospect
lists, supplier lists, data bases, computer media, sales and marketing
materials, invoices, correspondence, files, books and records relating to or
arising in connection with Sellers' Accounts Receivable Collection Business, and
the corporate minute books and stock books of the CRW Subsidiaries but excluding
(1) Sellers' corporate minute books and stock books; and (2) Sellers' files,
books and records relating exclusively to Sellers' Assets not included in the
Specified Assets or to Sellers' liabilities not included in the Specified
Liabilities.
(I) All of Sellers' claims, causes of action
and other legal rights and remedies, whether or not known as of the Effective
Date, relating to Sellers' ownership of the Specified Assets and/or the
operation of Sellers' Accounts Receivable Collection Business, but excluding
causes of action and other legal rights and remedies of Sellers (1) against the
Buying Companies with respect to the transactions contemplated by this
Agreement; or (2) relating exclusively to Sellers' Assets not included in the
Specified Assets or to Sellers' liabilities not included in the Specified
Liabilities.
(J) All of the outstanding capital stock of
the CRW Subsidiaries.
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2.1.2 Specified Liabilities of Sellers. The "Specified
Liabilities of Sellers" means the following specifically described liabilities
of Sellers as of the Effective Date incurred or arising in connection with
Sellers' Accounts Receivable Collection Business:
(A) The current liabilities of Sellers
incurred or arising in connection with Sellers' Accounts Receivable Collection
Business, notes payable in the aggregate principal amount of $210,000 payable to
CNF California, L.P. and CNF Texas, L.P. and the long term debt in the
approximate amount of $80,000 payable to Ontario Systems Corporation for a
software license agreement, all of which shall be included on the Closing
Balance Sheet (as defined in, and to be prepared in accordance with, Section
3.2.1), but only to the extent that the incurrence or existence of any such
liability does not constitute a breach or failure of, or a default under, any
representation, warranty, covenant or other provision of this Agreement
(including, but not limited to, those of Section 4.8). Except as set forth above
in this Section 2.12(A), the Specified Liabilities shall not include (1) any
liabilities for any Taxes; (2) any long-term debt; (3) any notes payable; (4)
any liabilities for overdrafts or any other liabilities with respect to bank
accounts; or (5) any intercompany payables or any guarantees of indebtedness of
any of the Selling Companies or any subsidiary or affiliate.
(B) The liabilities of Sellers under those
Specified Contracts (as defined in Section 4.13) to which a Seller is a party
(excluding the lease for the Mall Boulevard facility), but only to the extent
that such liabilities are not due to any breach or default by any of the Selling
Companies under any such Specified Contract. Notwithstanding the foregoing, the
Specified Liabilities of Sellers shall not include the liabilities of the
Selling Companies under (1) this Agreement or any other Contracts entered into
by the Selling Companies with the Buying Companies in connection with the
transactions contemplated by this Agreement; (2) any Contracts that constitute
or evidence Employee Benefit Plans of Sellers; and (3) any Contracts relating to
the formation or acquisition of Sellers or any of the predecessors of Sellers'
Accounts Receivable Collection Business, except as set forth in Section
2.1.2(C).
(C) Sellers' Obligation to pay an earn-out,
if any, pursuant to the agreement with respect to the acquisition of the assets
of PCC Credit, Inc., which Obligation shall not exceed $200,000 and any
Obligations in excess of such amount shall remain the Obligations of Sellers.
2.2. No Other Liabilities. Notwithstanding any other provisions of
this Agreement, Buyers shall not purchase the Specified Assets subject to, and
Buyers shall not in any manner assume or be liable or responsible for any
Obligations (as defined in Section 1.17) of Sellers other than the Specified
Liabilities, and all Obligations of Sellers other than the Specified Liabilities
shall remain the sole responsibility of Sellers. Without limiting the generality
of the foregoing, and in addition to the liabilities excluded from the Specified
Liabilities under Section 2.1.2, Buyers shall not in any manner assume or be
liable or responsible for any of the following Obligations of Sellers, whether
or not reflected on the Closing Balance Sheet:
2.2.1 Affiliates. Any Obligation to any of the Selling
Companies or any current or former shareholder, partner, director or controlling
Person (as defined in Section 1.19) of any of the Selling Companies, or to any
other Person affiliated with any of the Selling Companies, or their respective
affiliates and predecessors.
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2.2.2 Taxes. Any Obligation for any Tax, including but
not limited to, (a) any Tax payable by any of the Selling Companies with respect
to Sellers' business operations, including without limitation, the Sellers'
Accounts Receivable Collection Business; (b) any Tax payable by any of the
Selling Companies with respect to the ownership, possession, purchase, lease,
sale, disposition or use of any of the Selling Company's Assets at any time,
including without limitation, the Specified Assets; (c) any Tax resulting from
the sale of the Specified Assets to Buyers or otherwise resulting from the
transactions contemplated by this Agreement; (d) any Obligation for any Tax of
any Person under Treasury Regulation Section 1.1502-6 (or any similar provisions
of Law), as a transferee or successor, by Contract or otherwise, incurred or
attributable to any period ending prior to or including, the Closing Date; and
(e) any Obligation for any Tax incurred by either of the CRW Subsidiaries which
is properly attributable to any period ending on or prior to the Closing Date,
or with respect to which the Sellers are otherwise liable under Section 7.8.1
hereof.
2.2.3 Post-Closing. Any Obligation that is incurred or
arises after the Effective Date, or that relates to any Proceeding (as defined
in Section 1.20) or other event that occurs or circumstances that exist after
the Effective Date.
2.2.4 Transaction Related. Any Obligation that was or is
incurred in connection with the negotiation, execution or performance of this
Agreement, including without limitation broker fees, legal fees and accounting
fees (except as provided in Section 3.3), and any other Contracts entered into
between or among Buying Companies and the Selling Companies, or among the Buying
Companies, Selling Companies and other parties, in connection with the
transactions contemplated by this Agreement.
2.2.5 Defaults. Any Obligation (other than Obligations
under Specified Contracts which are governed by Section 2.1.2(B)), the
incurrence or existence of which constitutes or will constitute a breach or
failure of, or a default under, any representation, warranty, covenant or other
provision of this Agreement, including, but not limited to, any Obligation,
whether or not known to the Selling Companies, that has not been disclosed to
the Buying Companies in writing in this Agreement or the Schedules and Exhibits
hereto.
2.2.6 Employees. Except for the Employment Contracts
listed on Schedule 4.13, any Obligation to any or all employees of Selling
Companies, including, but not limited to, Obligations under Selling Companies'
payroll savings, profit sharing and/or other retirement plans ("Sellers'
Retirement Plans'"), Obligations under Sellers' Group Plans (as defined in
Section 2.1.1), and Obligations for severance pay and other termination
benefits.
2.2.7 Infringement. Any Obligation arising in connection
with or related to Selling Companies' infringement or alleged infringement of
any Software or Intangible of any Person.
2.2.8 Encumbrances. Any Encumbrance (excluding leases
which are Specified Contracts, excluding use restrictions on commercially
available Software and Encumbrances set forth on Schedule 4.6) on or affecting
Selling Companies' Assets including, without limitation, the Specified Assets.
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2.2.9 Proceedings. Any Proceeding or Judgment listed or
required to be listed on Schedule 4.18.
2.3. Sellers' Employees. Subject to the condition that the Closing
hereunder occurs, Buyers shall offer to employ, as of the Effective Date, all of
the employees of Sellers engaged in Sellers' Accounts Receivable Collection
Business set forth on lists previously delivered to Buyers by Sellers. Such
employment will be on an "at will" basis for comparable salaries or wages and
(to the extent possible) with vacation and severance benefits, if any,
comparable to those provided by Buyers to employees at comparable levels and
with comparable responsibilities, based on the date each such employee,
respectively, was first employed by Sellers' Accounts Receivable Collection
Business or its predecessor. Any such employment by Buyers may, at some time,
require relocation by the employee to Buyers's currently occupied facilities.
Buyers does not assume, and Sellers shall be fully responsible for the payment
of, any severance or other benefits related to or payable upon the termination
of any of its employees, including, without limitation, any employees not
offered employment by Buyers and any employees offered employment by Buyers who
fail to accept such employment offer. Sellers shall cooperate with Buyers's
efforts to employ and retain any such employees. Within at least thirty (30)
days of the Closing Date, Sellers shall provide to Buyers accurate and complete
copies of the personnel records of Sellers' employees engaged in Sellers'
Accounts Receivable Collection Business. Sellers shall be responsible for
compliance with all Laws related to the termination by Sellers of Sellers'
employees.
3. PURCHASE PRICE AND CLOSING FINANCIAL STATEMENT
3.1. Purchase Price and Allocation. The total purchase price for the
Specified Assets, subject to the adjustment described in Section 3.4, ("Purchase
Price") shall consist of: (a) a cash payment ("Closing Payment") in the amount
of Three Million Seven Hundred and Fifty Thousand Dollars ($3,750,000) payable
at Closing by Buyers; (b) 345,178 shares (the "Closing Stock") of the common
stock, no par value of NCO ("NCO Common Stock") deliverable at Closing by Buyers
to Sellers; (c) a warrant in the form of Exhibit 6.2.10 attached hereto (the
"Warrant") to purchase 250,000 shares of NCO Common Stock at a purchase price of
$27.625 per share deliverable at Closing by Buyers to Sellers; and (d) the
assumption of the Specified Liabilities by Buyers in accordance with Section
2.1. As soon as practicable following the Closing Date, the Purchase Price shall
be valued based upon an appraisal of the Warrant and Closing Stock prepared by
Xxxxxx Xxxxxxxxxx Xxxxx Inc. (the "Janney Appraisal") and allocated among each
Seller's Specified Assets, Specified Liabilities and the noncompetition
covenants set forth in Section 8.3 by the mutual good faith agreement of the
parties and evidenced in Exhibit 3.1 to be attached hereto. Sellers shall not
disclose or report a value for the Warrant and Closing Stock until the Janney
Appraisal is obtained and thereafter, shall not disclose or report a value for
the Warrant and Closing Stock as of the Effective Date in excess of that shown
in the Janney Appraisal.
3.2. Closing Financial Statements. The Sellers shall prepare or
cause to be prepared certain financial statements of Sellers' Accounts
Receivable Collection Business ("Closing Financial Statements"), and shall
engage Xxxxxx Xxxxxxxx & Co., Philadelphia, Pennsylvania ("Sellers'
Accountants") to conduct an audit ("Closing Audit") of the Closing Financial
Statements, in accordance with the following provisions:
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3.2.1 Type of Statements. The Closing Financial
Statements shall include balance sheets of the Sellers' Accounts Receivable
Collection Business as of December 31, 1994, 1995 and 1996 and as of the
Effective Date ("Closing Balance Sheet") and a statement of income and
divisional equity and statement of cash flows of the Accounts Receivable
Collection Business for the years ended December 31, 1994, 1995 and 1996 and for
the period from January 1, 1997 to the Effective Date (the "Interim Period"),
and shall (a) be prepared in accordance with GAAP (as defined in Section 1.9);
(b) fairly present the financial condition and results of operations of the
Accounts Receivable Collection Business as of the dates and for the periods
indicated; and (c) be audited by Sellers' Accountants whose reports thereon
shall be without qualification.
3.2.2 Audit Requirements. All of the Closing Financial
Statements shall be prepared and audited in accordance with GAAP (as defined in
Section 1.9). The Sellers shall fully cooperate with Sellers' Accountants in
connection with the Closing Audit including, but not limited to, agreeing to any
required adjustments and taking any other necessary actions to enable the audit
report issued by Sellers' Accountants with respect to the Closing Financial
Statements ("Audit Report") to be completely unqualified without any explanatory
paragraphs. At the request of NCO, the Sellers shall instruct Sellers'
Accountants to review with NCO's employees or representatives and/or the
Philadelphia office of Coopers & Xxxxxxx ("Buying Companies' Accountants") the
workpapers prepared by Sellers' Accountants in connection with the Closing Audit
("Audit Workpapers") before Sellers' Accountants finalize the Closing Financial
Statements and Audit Report.
3.2.3 Delivery of Documents. The Sellers shall instruct
Sellers' Accountants to deliver to Buying Companies, within forty five (45) days
after the Effective Date, the Closing Financial Statements, including at least
one original signed copy of the Audit Report and to allow Buying Companies to
examine and copy the Audit Workpapers. On or before the date that Sellers'
Accountants deliver the Closing Financial Statements and accompanying documents
to Buying Companies, the Sellers shall deliver to Buying Companies detailed
lists ("Closing Balance Sheet Lists") of all of the Assets (as defined in
Section 1.2) and Obligations (as defined in Section 1.17) of Selling Companies
reflected on the Closing Balance Sheet (including those Assets which have been
fully depreciated or fully amortized, and the related, accumulated depreciation
and amortization), by balance sheet account, and with aggregate net balances
equal to the balances on the Closing Balance Sheet. The Closing Balance Sheet
Lists shall include, but not necessarily be limited to, detailed lists of (a)
Cash Assets (as defined in Section 1.3), itemized by bank or other account,
showing cost and market value if different from cost; (b) Accounts Receivable
(as defined in Section 1.1), showing customer names, individual invoice dates,
individual invoice amounts and allowances for doubtful accounts, or, in the case
of earned but not billed receivables, customer names and individual dates on
which the receivables are billable ("Receivables Lists"); (c) other current
assets, itemized by category and with appropriate explanation; (d) Tangible
Property (as defined in Section 1.23), grouped as to type, showing cost,
accumulated depreciation and net book value; (e) Software (as defined in Section
1.22) and Intangibles (as defined in Section 1.12), showing cost or amount
capitalized, accumulated amortization and net book value; (f) accounts payable,
itemized by payee; (g) accrued expenses and reserves, itemized by category and
with appropriate explanation; (h) deferred revenues, itemized by customer and
time periods; and (i) other current and long-term liabilities, itemized by
payee. The Closing Financial Statements shall be accompanied by a certificate
("CFO Certificate") signed by the Chief Financial Officer of the Sellers in
which they represent and warrant to the Buying Companies that (v) the Closing
Financial Statements were prepared in
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accordance with GAAP and fairly present the financial condition and results of
operations of Sellers' Accounts Receivable Collection Business as of and for the
years ended December 31, 1994, 1995 and 1996 and as of the Effective Date and
for the Interim Period; and (w) the Closing Balance Sheet Lists are accurate and
complete.
3.3. Payment for Provision of Closing Financial Statements. The
Sellers shall bear and pay all of the cost charged by Sellers' Accountants for
providing the Closing Financial Statements (other than the Closing Balance
Sheet), except that Buying Companies shall pay the cost charged by Sellers'
Accountants for preparing the financial statements for the Interim Period and
the Closing Balance Sheet.
3.4. Purchase Price Adjustment. The Purchase Price shall be subject
to adjustment as follows:
3.4.1 Balance Sheet Adjustment. If the Actual TNW (as
defined below) is less than the Minimum TNW (as defined below), then the
Purchase Price shall be decreased by the amount by which Actual TNW is less than
the Minimum TNW, and if the Actual TNW is greater than the Minimum TNW, then the
Purchase Price shall be increased by the amount by which Actual TNW is greater
than the Minimum TNW (the adjustment provided for by this Section is referred to
as the "TNW Adjustment"); provided, however, that no TNW Adjustment shall be
made with respect to the first Fifty Thousand Dollars ($50,000) of any TNW
Adjustment otherwise required by this Section 3.4.1. The "Actual TNW" shall
equal (a) the net book value of the Specified Assets as of the Effective Date
(including for the purpose, the net book value of any purchased software and
purchased programming as of the Effective Date), as reflected on the Closing
Balance Sheet (excluding the book value of equipment purchased since December
31, 1996 not in the ordinary course of business), minus the net book value of
Intangibles (including for this purpose, the net book value of any internally
developed Software) of Sellers' Accounts Receivable Collection Business as of
the Effective Date, as reflected on the Closing Balance Sheet minus (b) the
Specified Liabilities as of the Effective Date, as reflected on the Closing
Balance Sheet. The "Minimum TNW" shall equal Three Million Six Hundred Thousand
Dollars ($3,600,000).
3.4.2 Statement of Adjustments. The Sellers shall
instruct Sellers' Accountants to (a) prepare a statement ("Statement of
Adjustments") showing a clear and detailed calculation of the Actual TNW and the
TNW Adjustment to the Purchase Price described in this Section 3.4; and (b)
deliver the Statement of Adjustments to Buying Companies at the same time as the
Closing Financial Statements and related documents are delivered to Buying
Companies under Section 3.2.3. Buying Companies shall notify the Sellers, in
reasonable detail, of any objections to the Statement of Adjustments (which may
include objections to the Closing Financial Statements and objections due to
Obligations of Sellers which were not reflected on the Closing Balance Sheet or
the Statement of Adjustments) within sixty (60) days after Buying Companies
receive the Statement of Adjustments and all of the documents required to be
delivered to Buying Companies under Section 3.2.3. If Buying Companies do not
notify the Sellers of any such objections by the end of that sixty-day period,
then the Statement of Adjustments, as prepared by the Sellers' Accountants,
shall be considered final on the last day of that sixty-day period. If Buying
Companies do notify the Sellers of any such objections by the end of that
sixty-day period, and Buying Companies and the Sellers are unable to resolve
their differences within fifteen (15) days thereafter, then the disputed items
on the Statement of
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Adjustments shall be reviewed, as soon as possible, at Buying Companies'
expense, by the Buying Companies' Accountants. The Sellers and Buying Companies
shall instruct their respective Accountants to, in good faith, use their best
efforts to resolve such disputed items to their mutual satisfaction and to
deliver a final Statement of Adjustments to the Sellers and Buying Companies as
soon as possible. If Sellers' Accountants and the Buying Companies' Accountants
are unable to resolve any such disputed items within thirty (30) days after
receiving such instructions, then the remaining disputed items shall be
submitted to another of the "Big Six" certified public accounting firms selected
by the mutual agreement by Sellers' Accountants and Buying Companies'
Accountants ("Arbiter"), for resolution, with the costs thereof paid fifty
percent (50%) by the Selling Parties and fifty percent (50%) by Buying
Companies, and the Arbiter shall be instructed to deliver a final Statement of
Adjustments to the Selling Parties and Buying Companies as soon as possible.
3.4.3 Payment of TNW Adjustment. If the TNW Adjustment to
the Purchase Price constitutes a decrease in the Purchase Price, the Selling
Companies, jointly and severally, shall pay to Buyers an amount equal to the TNW
Adjustment. If the TNW Adjustment to the Purchase Price constitutes an increase
in the Purchase Price, the Buyers shall pay to Sellers an amount equal to the
TNW Adjustment. Any payment under this Section shall be made within fifteen (15)
business days after the Statement of Adjustments is finalized in accordance with
Section 3.4.2.
3.5. Currency and Method of Payment. All dollar amounts stated in
this Agreement are stated in United States currency, and all payments required
under this Agreement shall be paid in United States currency. All payments
required under this Agreement shall be made as follows: (a) any payment may be
made by wire transfer of immediately available United States federal funds; (b)
any payment exceeding $100,000 shall be made by wire transfer of immediately
available United States federal funds; (c) any payment exceeding $10,000, but
not exceeding $100,000, may be made by bank certified, treasurer's or cashier's
check; and (d) any payment not exceeding $10,000 may be made by ordinary check.
4. REPRESENTATIONS OF THE SELLERS
Knowing that the Buying Companies rely thereon, the Sellers, jointly
and severally, represent and warrant to the Buying Companies, and covenant with
the Buying Companies, as follows:
4.1. Organization. Each of the Selling Companies is a corporation
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. Each of the Selling Companies possesses the full
corporate power and authority to own its Assets, conduct its business as and
where presently conducted, and enter into and perform this Agreement. Each
Selling Company is duly qualified to do business in each jurisdiction listed on
Schedule 4.1, and no Selling Company is required to be qualified in any other
jurisdiction except where the failure to be so qualified would not have, and
could not be reasonably be expected to have, a Material Adverse Effect (as
defined in Section 1.16). Schedule 4.1 states, for each Selling Company (a) its
exact legal name; (b) all foreign jurisdictions in which it is qualified or
registered to do business and has an office; and (c) all fictitious, assumed or
other names of any type that are registered or used by it or under which it has
done business at any time since July 17, 1992. Accurate and complete copies of
each Selling Company's articles or certificate
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of incorporation, bylaws and other organization and related documents, each as
amended to date, and all Contracts relating to the acquisition of Sellers'
Accounts Receivable Collection Business (or its affiliates or predecessors) have
been delivered to Buyers. CRW owns all of the issued and outstanding capital
stock of each of CRW Texas, Inc., a Texas corporation, and CRW California, Inc.,
a California corporation (collectively, the "CRW Subsidiaries"), and Xxxxxx.
Schedule 4.1 is an accurate and complete list of the authorized, issued and
outstanding shares of stock of each CRW Subsidiary and the names of all of the
directors and officers of each CRW Subsidiary. CRW is the legal and beneficial
owner of, and has good and valid title to, all of the outstanding capital stock
of each of the CRW Subsidiaries, free and clear of any Encumbrances. Except for
the shares of capital stock listed on Schedule 4.1, there are no other issued or
outstanding shares of capital stock of any CRW Subsidiary. All of the issued and
outstanding shares of capital stock of the CRW Subsidiaries have been duly
authorized and validly issued, and are fully paid and nonassessable, with no
liability attaching to the ownership thereof. There are no outstanding options,
puts, calls, warrants, subscriptions, stock appreciation rights, phantom stock,
or other Contracts or Contract Rights relating to the offering, sale, issuance,
redemption or disposition of any shares of capital stock or other securities in
any of the CRW Subsidiaries. No Selling Company owns any securities of any
corporation or any other interest in any Person engaged in the Accounts
Receivable Collection Business, except as set forth on Schedule 4.1. Selling
Companies do not have any predecessors other than as set forth on Schedule 4.1.
For the purposes of determining the applicability of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and regulations promulgated
thereunder (collectively, "HSR Act"), CRW is an "ultimate parent entity" within
the meaning of the HSR Act and the Selling Companies are not a "$100,000,000
person" within the meaning of the HSR Act.
4.2. Effect of Agreement. The execution, delivery and performance of
this Agreement by each of the Sellers and the consummation by each of the
Sellers of the transactions contemplated hereby, (a) have been, or shall have
been by the Closing Date, duly authorized by all necessary corporate actions by
their respective shareholders and boards of directors; (b) do not constitute a
violation of, a default under, or termination of the articles or certificate of
incorporation or other organizational documents of any Selling Company or; (c)
except as set forth on Schedule 4.2, do not constitute a default or breach of
(immediately after the giving of notice, passage of time or both), or
termination of any material Contract to which any of the Selling Companies is a
party or by which any of the Selling Companies is bound; (d) do not constitute a
violation of any Law applicable to any of the Selling Companies or to Sellers'
Accounts Receivable Collection Business or Assets except where the failure to
comply would not have a Material Adverse Effect (as defined in Section 1.16);
(e) except as stated on Schedule 4.2, do not require the Consent (as defined in
Section 1.4) of any Person (as defined in Section 1.19); (f) do not accelerate
or otherwise modify any Obligation (as defined in Section 1.17) of any Selling
Company; and (g) do not result in the creation of any Encumbrance (as defined in
Section 1.18) upon, or give to any other Person any interest in, any of Sellers'
Accounts Receivable Collection Business or Assets. There exists no rights of
first refusal or other preemptive rights with respect to Sellers' Accounts
Receivable Collection Business or Assets. This Agreement constitutes the valid
and legally binding agreement of each of the Sellers, enforceable against each
of the Sellers in accordance with its terms.
4.3. Financial and Corporate Records. Selling Companies' books and
records pertaining to the Sellers' Accounts Receivable Collection Business are
and have been properly prepared and maintained in form and substance adequate
for preparing audited financial
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statements in accordance with GAAP (as defined in Section 1.9), and fairly and
accurately reflect all Assets and Obligations of Sellers' Accounts Receivable
Collection Business and all Contracts and transactions to which any Selling
Company is or was a party or by which any Selling Company or any of its business
or Assets is or were affected and which relate or pertain to Sellers' Accounts
Receivable Collection Business. Selling Companies' corporate minute books that
have been made available to Buyers are accurate in all material respects.
4.4. Compliance with Law. The operation of Sellers' Accounts
Receivable Collection Business, the conduct of Sellers' Accounts Receivable
Collection Business as and where such business has been or presently is
conducted, and the ownership, possession and use of the Assets used in or for
the Sellers' Accounts Receivable Collection Business comply with all Laws (as
defined in Section 1.15) applicable to Selling Companies, their operations,
business, Assets or Obligations except where the failure to comply would not
have a Material Adverse Effect (as defined in Section 1.16). Except as set forth
on Schedule 4.4, Selling Companies have obtained and hold all Permits (as
defined in Section 1.18) required for the lawful operation of Sellers' Accounts
Receivable Collection Business as and where such business is presently conducted
except where the failure to obtain and maintain such Permits would not have a
Material Adverse Effect. All Permits relating to the Sellers' Accounts
Receivable Collection Business held by any Selling Company are listed on
Schedule 4.4, and copies of such Permits have been delivered to Buyers.
4.5. Financial Statements. Schedule 4.5 includes accurate and
complete copies of the following financial statements ("Financial Statements"):
(a) the unaudited consolidated balance sheets and statements of income, equity,
and notes thereto of Sellers' Accounts Receivable Collection Business as of and
for the fiscal year ended December 31, 1995; and (b) unaudited consolidated
balance sheets and statements of income (the "Interim Financial Statements") of
Sellers' Accounts Receivable Collection Business as of and for the twelve months
ended December 31, 1996. All of the Financial Statements (a) were prepared in
accordance with GAAP provided, however, that the Interim Financial Statements
are subject to normal year-end adjustments and lack footnotes and other
presentation terms; (b) present fairly the financial condition of and result of
operation of the Sellers' Accounts Receivable Collection Business as of such
dates and for such periods; and (c) all adjustment that are necessary for a fair
presentation thereof (consisting only of normal recurring adjustments) have been
made.
4.6. Assets. Sellers have provided to Buyers detailed lists of all
Assets used in or for Sellers' Accounts Receivable Collection Business. Except
as set forth on Schedule 4.6, each Selling Company has good and marketable title
to all of its Assets used in Sellers' Accounts Receivable Collection Business
and has the right to transfer all right, title and interest in such Assets to
Buyers, free and clear of any Encumbrance (as defined in Section 1.8). Except
for the Specified Assets, no other Assets are necessary to operate the Sellers'
Accounts Receivable Collection Business.
4.7. Sellers' Obligations. All amounts due to customers for
collections made by Sellers as of the date hereof have either been remitted to
the proper customers or have been deposited in escrow accounts maintained by
Sellers and which are being transferred to Buyers on the date hereof. Selling
Companies have no Obligations to National Westminster Bank of New Jersey and any
Obligations to National WestMinster Bank of New Jersey which were secured by
UCC-1 financing statements which currently appear of record against any
Specified
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Assets have been paid in full. Any UCC-1 financing statements which appear of
record against any Specified Assets evidence security interests held by vendors
of equipment for indebtedness which is set forth in Sellers' Interim Financial
Statements for the twelve months ended December 31, 1996 or evidence leases of
leased Tangible Property.
4.8. Operations Since December 31, 1996. Except as set forth on
Schedule 4.8, from December 31, 1996 to the date of this Agreement:
4.8.1 Except in the ordinary course of its business
consistent with its past practices, no Selling Company has (a) created or
assumed any Encumbrance upon any of the Sellers' Accounts Receivable Collection
Business or Assets, (b) incurred any Obligation on behalf of or relating to
Sellers' Accounts Receivable Collection Business, (c) made any loan or advance
to any Person on behalf of or relating to Sellers' Accounts Receivable
Collection Business; (d) assumed, guaranteed or otherwise become liable for any
Obligation of any Person on behalf of or relating to Sellers' Accounts
Receivable Collection Business; (e) committed for any capital expenditure on
behalf of or relating to Sellers' Accounts Receivable Collection Business; (f)
purchased, leased, sold, abandoned or otherwise acquired or disposed of any part
of the Sellers' Accounts Receivable Collection Business or Assets; (g) waived
any right or canceled any debt or claim on behalf of or relating to Sellers'
Accounts Receivable Collection Business; (h) assumed or entered into any
Contract on behalf of or relating to Sellers' Accounts Receivable Collection
Business other than this Agreement; (i) increased, or authorized an increase in,
the compensation or benefits paid or provided to any of its directors, officers,
employees, salesmen, agents or representatives engaged in the Sellers' Accounts
Receivable Collection Business; or (j) done anything else outside the ordinary
course of business on behalf of or relating to Sellers' Accounts Receivable
Collection Business, whether or not specifically described in any of the
foregoing clauses.
4.8.2 Even in the ordinary course of its business
consistent with its past practices, no Selling Company has incurred any
Obligation on behalf of or relating to Sellers' Accounts Receivable Collection
Business, made any loan to any Person on behalf of or relating to Sellers'
Accounts Receivable Collection Business, acquired or disposed of any part of the
Sellers' Accounts Receivable Collection Business or Assets, entered into any
Contract (other than customer Contracts), or done any of the other things
described in Section 4.8.1, involving an amount exceeding $50,000 in any single
case or $250,000 in the aggregate.
4.8.3 There has been no material adverse change or
material casualty loss affecting the Selling Companies, the Sellers' Accounts
Receivable Collection Business or Assets, the financial condition of Selling
Companies or Sellers' Accounts Receivable Collection Business, and there has
been no material adverse change in the financial performance of Selling
Companies or the Sellers' Accounts Receivable Collection Business.
4.9. Accounts Receivable. All Accounts Receivable arose in the
ordinary course of business and are proper and valid accounts receivable. There
are no refunds, discounts, rights of setoff or assignment affecting any such
Accounts Receivable. Proper amounts of deferred revenues appear on Selling
Companies' books and records, in accordance with generally accepted accounting
principles, with respect to all of Selling Companies' (a) billed but unearned
Accounts Receivable; (b) previously billed and collected Accounts Receivable
still unearned; and (c) unearned customer deposits.
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4.10. Tangible Property. Except as set forth on Schedule 4.6, each
Selling Company has good and valid title to all of its Tangible Property used in
or for the Sellers' Accounts Receivable Collection Business, free and clear of
any Encumbrances. All of Selling Companies' Tangible Property used in or for the
Sellers' Accounts Receivable Collection Business is located at Sellers' Accounts
Receivable Collection Facilities (as defined in Section 4.11), and each Selling
Company has the full and unqualified right to require the immediate return of
any of its Tangible Property which is not located at Sellers' Accounts
Receivable Collection Facilities. All Tangible Property used by each Selling
Company or its customers in the Sellers' Accounts Receivable Collection Business
is in good condition, ordinary wear and tear excepted, and is sufficient for the
operation of Sellers' Accounts Receivable Collection Business as presently
conducted.
4.11. Real Property. No Selling Company owns any Real Property (as
defined in Section 1.21) used in or for the Sellers' Accounts Receivable
Collection Business. Schedule 4.11 is a detailed list of all Real Property
leased by any Selling Company used in or for Sellers' Accounts Receivable
Collection Business (the "Accounts Receivable Collection Facilities"), showing
location, rental cost and landlord. All Accounts Receivable Collection
Facilities under lease to or otherwise used by any Selling Company are in good
condition, ordinary wear and tear excepted, and are sufficient for the current
operations of Sellers' Accounts Receivable Collection Business. No Accounts
Receivable Collection Facilities, nor the occupancy, maintenance or use thereof,
is in violation of, or breach or default under, any Contract or Law, and no
notice from any lessor, governmental body or other Person has been received by
any of the Selling Companies or served upon any such Accounts Receivable
Collection Facilities claiming any violation of, or breach or default under, any
Contract or Law, or requiring or calling attention to the need for any work,
repairs, construction, alternation or installations. None of the Selling
Companies has placed or caused to be placed, and none of the Selling Companies
has any knowledge or belief that there were or are, any Hazardous Substances on
or under any of Sellers' Accounts Receivable Collection Facilities.
4.12. Software and Intangibles. Schedule 4.12 is an accurate and
complete list and description of all Intangibles (as defined in Section 1.12)
owned, marketed, licensed, used or under development by any Selling Company and
used in or for Sellers' Accounts Receivable Collection Business. Except as
explained on Schedule 4.12, each Selling Company has good and valid title to all
of the Intangibles listed on Schedule 4.12, and has the full right to use and
transfer to Buyers all of the Software used in the Accounts Receivable
Collection Business and all of the Intangibles listed on Schedule 4.12, free and
clear of any Encumbrance (as defined in Section 1.8) (except for use
restrictions contained in licensed commercially available Software). To the
Knowledge of each of the Selling Companies, none of the Software used in the
Accounts Receivable Collection Business and none of the Intangibles listed on
Schedule 4.12, or their respective past or current uses, has violated or
infringed upon, or is violating or infringing upon, any Software, patent,
copyright, trade secret or other Intangible of any Person. To the Knowledge of
each of the Selling Companies, no Person is violating or infringing upon, or has
violated or infringed upon at any time, any of the Software used in the Accounts
Receivable Collection Business or any of the Intangibles listed on Schedule
4.12. None of the Software used in the Accounts Receivable Collection Business
and none of the Intangibles listed on Schedule 4.12 is owned by or registered in
the name of any current or former shareholder, partner, director, executive,
officer, employee, salesman, agent, customer, representative or contractor of
any of
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the Selling Companies nor does any such Person have any interest therein or
right thereto, including but not limited to the right to royalty payments.
4.13. Contracts. For the purposes of this Agreement, "Specified
Contracts" means all of the Contracts to which any Selling Company is a party or
by which any Selling Company is bound relating to the Sellers' Accounts
Receivable Collection Business, excluding Contracts which constitute Employee
Benefit Plans listed on Schedule 4.15, oral Contracts with employees for "at
will" employment, Contracts which constitute Insurance Policies listed on
Schedule 4.19, this Agreement and all other Contracts entered into between
Sellers and Buying Companies, or among Sellers, Buying Companies and other
parties in connection herewith. Set forth on Schedule 4.13 is an accurate and
complete list of all Specified Contracts which involve future Obligations of
$10,000 or more. Except as set forth on Schedule 4.13, with respect to each of
the Specified Contracts, no Selling Company is in default thereunder in any
material respect nor would be in default thereunder in any material respect with
the passage of time, the giving of notice or both. Except as set forth on
Schedule 4.13, to the Knowledge of each Selling Company, none of the other
parties to any Specified Contract is in default thereunder in any material
respect or would be in default thereunder with the passage of time, the giving
of notice or both. Except as set forth on Schedule 4.13, no Selling Company has
given or received any notice of default or notice of termination with respect to
any Specified Contract, and each Specified Contract is in full force and effect
in accordance with its terms in all material respects. The Specified Contracts
are all the Contracts necessary and sufficient to operate Sellers' Accounts
Receivable Collection Business. Except as set forth on Schedule 4.13, there are
no currently outstanding proposals or offers submitted by any Selling Company to
any customer, prospect, supplier or other Person with respect to Sellers'
Accounts Receivable Collection Business which, if accepted, would result in a
legally binding Contract of such Selling Company involving an amount or
commitment exceeding $50,000 in any single case or an aggregate amount or
commitment exceeding $250,000 in the aggregate.
4.14. Employees and Independent Contractors. Except as limited by
any employment Contracts listed on Schedule 4.13 and except for any limitations
of general application which may be imposed under applicable employment Laws,
each Selling Company has the right to terminate the employment of each of its
employees engaged in the Sellers' Accounts Receivable Collection Business at
will and to terminate the engagement of any of its independent contractors
engaged in the Sellers' Accounts Receivable Collection Business without payment
to such employee or independent contractor other than for services rendered
through termination and without incurring any penalty or liability other than
liability for severance pay in accordance with Sellers' disclosed severance pay
policy. Each Selling Company is in full compliance with all Laws respecting
employment practices, except where the failure to so comply would not have a
Material Adverse Effect. No Selling Company has been a party to or bound by any
union or collective bargaining Contract, nor is any such Contract currently in
effect or being negotiated by or on behalf of any Selling Company. No Selling
Company has experienced any labor problem that was or is material to Sellers'
Accounts Receivable Collection Business. To the Selling Companies' Knowledge (as
defined in Section 1.14), each Selling Company's relations with its employees
engaged in the Sellers' Accounts Receivable Collection Business are currently on
a good and normal basis. Except as indicated on Schedule 4.14A, since January 1,
1996, no officer or manager of any Selling Company engaged in the Sellers'
Accounts Receivable Collection Business has indicated an intention to terminate
his or her employment with such Selling Company. To the Selling Companies'
Knowledge (as defined in Section 1.14), the
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transactions contemplated by this Agreement will not adversely affect relations
with Selling Companies' officers or managers engaged in the Sellers' Accounts
Receivable Collection Business. Since November 1, 1996, Sellers have not had an
"employment loss" within the meaning of the Workers' Adjustment and Retraining
Notification Act ("WARN Act") and the regulations thereunder.
4.15. Employee Benefit Plans. Except as set forth on Schedule 4.15,
Selling Companies do not sponsor, maintain or contribute to, or have any ongoing
Obligations with respect to, any Employee Benefit Plan (as defined in Section
1.17), including, but not limited to, any employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to employees of the Sellers' Accounts Receivable
Collection Business. Schedule 4.15 includes a list of each of the Selling
Companies' Employee Benefit Plans covering employees of the Sellers' Accounts
Receivable Collection Business that is currently in effect or as to which any of
the Selling Companies have any ongoing Obligation. Copies of all Employee
Benefit Plans described on Schedule 4.15 and all written materials used by the
Selling Companies to describe its Employee Benefit Plans to employees of the
Securities Products Business have been delivered to Buying Companies. With
respect to each Employee Benefit Plan described on Schedule 4.15, the Selling
Companies have operated and currently operate such plan in compliance with the
plan documents and all applicable Laws, including without limitation ERISA and
the Internal Revenue Code of 1986, as amended (the "Code") (including, but not
limited to, Section 4980B thereof) and the regulations thereunder.
4.16. Customers, Prospects and Suppliers. Each of the ten largest
customers (measured by volume of placements) of Sellers' Accounts Receivable
Collection Business (the "Ten Largest Customers") have signed a Contract and are
listed in the list of customers previously delivered to Buying Companies.
Sellers have previously delivered to Buying Companies a list of prospects and
proposals of Sellers' Accounts Receivable Collection Business. All of the
proposals made to the prospects listed on Schedule 4.16 are still pending and
have not been rejected. Except as set forth on Schedule 4.16, since January 1,
1996, none of the Ten Largest Customers of Sellers' Accounts Receivable
Collection Business has given notice or otherwise indicated to any of the
Selling Companies that it will or intends to terminate or not renew its Contract
with any of the Selling Companies before the scheduled expiration date or
otherwise terminate its relationship with any of the Selling Companies. To the
Selling Companies' Knowledge, the relationship of each Selling Company with
customers and suppliers of Sellers' Accounts Receivable Collection Business are
currently on a good and normal basis. No Selling Company has received notice of
any threat of termination of the Contract with any of the Ten Largest Customers
since January 1, 1996. To the Selling Companies' Knowledge, the transactions
contemplated by this Agreement will not adversely affect relations with any of
the Ten Largest Customers. The President of CRW has had communication with the
California Student Aid Council ("CSAC"), and based on such communication,
Sellers understand that CSAC does not intend to terminate its contracts with
Sellers solely by reason of the consummation of the transactions contemplated
hereby but will consider consenting to the assignment of its Contract after it
has had the opportunity to evaluate Buyers.
4.17. Taxes. Each of the Selling Companies has timely filed all Tax
returns and reports required to be filed by it (including, without limitation,
all declarations, reports, estimates, information returns and statements
(referred to herein as "Tax Returns"), all of which were accurately prepared,
and, except as set forth in Schedule 4.17, each of the Selling Companies
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has timely paid all Taxes or withholdings required to be paid by it with respect
to such Tax Returns. Each of the Selling Companies has properly withheld from
payments to its employees, contractors, salesmen, agents, representatives,
vendors and other Persons engaged in the Sellers' Accounts Receivable Collection
Business all amounts required by Law to be withheld, and each of the Selling
Companies has timely filed all Tax Returns to be filed by it with respect to
such withholdings. Except as indicated on Schedule 4.17, (i) no audit or other
Proceeding is pending or threatened against any of the Selling Companies, (ii)
no notice of deficiency or adjustment has been received by any of the Selling
Companies, by or from any governmental taxing authority, with respect to sales,
use, excise, real property, payroll, withholding or similar Taxes, (iii) there
are no agreements or waivers in effect which provide for an extension of time
for the assessment of any such Tax against any of the Selling Companies, (iv)
each of the CRW Subsidiaries have established on their books and records
reserves in accordance with generally accepted accounting principles that are
adequate for the payment of all Taxes not yet due and payable, and (v) there are
no liens for Taxes upon the Specified Assets (including for these purposes the
both the stock and underlying assets of the CRW Subsidiaries) other than any
liens for Taxes not yet due and payable.
4.18. Proceedings and Judgments. Except as described on Schedule
4.18, (a) no Proceeding (as defined in Section 1.20) involving or related to the
Sellers' Accounts Receivable Collection Business or Assets is currently pending
or to the Selling Companies' Knowledge threatened, nor has any Proceeding
occurred at any time since July 17, 1992, to which any Selling Company is or was
a party, or by which any Selling Company or the Sellers' Accounts Receivable
Collection Business or Assets is or was affected in any material respect; (b) no
Judgment (as defined in Section 1.13) involving or related to the Sellers'
Accounts Receivable Collection Business or Assets is currently outstanding, nor
has any Judgment been outstanding at any time since July 17, 1992, against any
Selling Company, or by which any Selling Company or the Sellers' Accounts
Receivable Collection Business or Assets is or was affected; and (c) no breach
of contract, material breach of warranty, tort, negligence, infringement,
product liability, discrimination, wrongful discharge or other material claim of
any nature involving or related to the Sellers' Accounts Receivable Collection
Business or Assets has been asserted or, to the Selling Companies' Knowledge,
threatened by or against any Selling Company at any time since July 17, 1992,
and there is no basis for any such claim. As to each matter described on
Schedule 4.18, accurate and complete copies of all pertinent pleadings,
judgments, orders, correspondence and other legal documents have been delivered
to Buyers.
4.19. Insurance. Schedule 4.19 is an accurate and complete list and
description of all Insurance Policies (as defined in Section 1.11) currently
owned or maintained by any of the Selling Companies (excluding Insurance
Policies that constitute Employee Benefit Plans described on Schedule 4.15) in
connection with or for the benefit of Sellers' Accounts Receivable Collection
Business and all liability and errors and omissions Insurance Policies owned or
maintained by any of the Selling Companies and/or any of their predecessors at
any time since July 17, 1992 in connection with or for the benefit of Sellers'
Accounts Receivable Collection Business. No Selling Company has received notice
of cancellation with respect to any such current Insurance Policy, and, to the
Knowledge of the Selling Companies, there is no basis for the insurer thereunder
to terminate any such current Insurance Policy. Each such Insurance Policy is or
was in full force and effect during the period(s) of coverage indicated on
Schedule 1.11. Except as described on Schedule 4.19, there are no claims that
are pending under any of the Insurance Policies described on Schedule 4.19.
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4.20. Questionable Payments. To the Knowledge of the Selling
Companies, none of the Selling Companies, nor any of the current or former
partners, shareholders, directors, executives, officers, representatives, agents
or employees of any of the Selling Companies (when acting in such capacity or
otherwise on behalf of any of the Selling Companies or any of their
predecessors), (a) has used or is using any corporate funds for any illegal
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) has used or is using any corporate funds for any direct
or indirect unlawful payments to any foreign or domestic government officials or
employees; (c) has violated or is violating any provision of the Foreign Corrupt
Practices Act of 1977, except for violations which, individually and in the
aggregate, would not have, and could not be reasonably be expected to have, a
Material Adverse Effect (as defined in Section 1.16); (d) has established or
maintained, or is maintaining, any unlawful or unrecorded fund of corporate
monies or other properties; (e) has made, at any time since July 17, 1992, any
false or fictitious entries on the books and records of any Selling Company; (f)
has made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment of any nature using corporate funds or otherwise on behalf of
any of the Selling Companies; or (g) made any material favor or gift that is not
deductible for federal income tax purposes using corporate funds or otherwise on
behalf of any of the Selling Companies.
4.21. Related Party Transactions. Except as described on Schedule
4.21 and except for any employment Contracts listed on Schedule 4.13, there are
no real estate leases, personal property leases, loans, guarantees, Contracts or
transactions of any nature between any of the Selling Companies and any current
or former partners, shareholder, director, executive, officer or controlling
Person of any of the Selling Companies (or any of their respective predecessors)
or any other Person affiliated with any of the Selling Companies (or any of
their respective predecessors) with respect to the Sellers' Accounts Receivable
Collection Business or Assets.
4.22. Brokerage Fees. Except as set forth on Schedule 4.22, no
Person acting on behalf of any of the Selling Companies is or shall be entitled
to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement.
4.23. Investment Matters. The Closing Stock and Warrant to be issued
to Sellers hereunder and the shares of NCO Common Stock issuable upon exercise
of the Warrant (collectively, the "NCO Securities") are being acquired for
Sellers' own account and not on behalf of any other Person, for investment
purposes only and not with a view to, or for sale in connection with, any resale
or distribution of the NCO Securities. Sellers have received and examined NCO's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on September 11, 1996, and all amendments thereto, and NCO's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1996. Sellers
have had the opportunity to ask questions and receive answers from NCO
concerning NCO, and have been furnished with all other information about NCO
which they have requested. Sellers believe that they have been fully apprised of
all facts and circumstances necessary to permit them to make an informed
decision about acquiring the NCO Securities, that they have sufficient knowledge
and experience in business and financial matters, that they are capable of
evaluating the merits and risks of an investment in the NCO Securities, and that
they have the capacity to protect their own interests in connection with the
transactions contemplated hereby. Sellers have been advised by NCO and
understand that (a) the NCO Securities to be issued hereunder and under the
Warrant will not be registered under any securities Laws, including without
limitation, the securities Laws of
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the United States or the State of Pennsylvania, (b) the NCO Securities must be
held indefinitely unless and until they are subsequently registered or an
exemption from registration becomes available, (c) the NCO Securities shall bear
appropriate restrictive legends and (d) NCO shall have the right to place a stop
order against the NCO Securities.
4.24. Full Disclosure. No representation or warranty made by the
Sellers in this Agreement or pursuant hereto (a) contains any untrue statement
of any material fact; or (b) omits to state any fact that is necessary to make
the statements made, in the context in which made, not false or misleading in
any material respect. The copies of documents attached as Schedules to this
Agreement or otherwise delivered to Buyers in connection with the transactions
contemplated by this Agreement, are accurate and complete, and are not missing
any amendments, modifications, correspondence or other related papers which
would be pertinent to Buyers's understanding thereof in any respect.
5. REPRESENTATIONS OF BUYING COMPANIES
Knowing that the Sellers rely thereon, the Buying Companies, jointly
and severally, represent and warrant to the Sellers, and covenant with the
Sellers, as follows:
5.1. Organization. Each of the Buying Companies is a corporation
that is duly organized, validly existing and in good standing under the Law (as
defined in Section 1.15) of its jurisdiction of incorporation. Each of the
Buying Companies has the full corporate power and authority to own its Assets,
conduct its business as and where such business is presently conducted, and
enter into this Agreement. Buyers is a wholly owned subsidiary of NCO.
5.2. Agreement. For each of the Buying Companies, its execution,
delivery and performance of this Agreement, and its consummation of the
transactions contemplated by this Agreement, (a) have been duly authorized by
all necessary corporate actions by its board of directors; (b) do not constitute
a violation of or default under its charter or bylaws; (c) do not constitute a
default or breach (immediately or after the giving of notice, passage of time or
both) under any Contract to which it is a party or by which it is bound; (d) do
not constitute a violation of any Law (as defined in Section 1.15) or Judgment
(as defined in Section 1.13) that is applicable to it or to the business or
Assets of any of the Buying Companies, or to the transactions contemplated by
this Agreement; and (e) except as stated on Schedule 5.2, do not require the
Consent (as defined in Section 1.4) of any Person (as defined in Section 1.19).
This Agreement constitutes the valid and legally binding agreement of each of
the Buying Companies, enforceable against each of them in accordance with its
terms.
5.3. NCO Common Stock. The shares of NCO Common Stock to be issued
as the Closing Stock and the shares of NCO Common Stock to be issued upon
exercise of the Warrant: (a) are validly authorized, and when issued, shall be
validly issued, fully paid and nonassessable; and (b) constitute part of the
class of securities that has been registered under the Securities Exchange Act
of 1934, as amended.
5.4. Brokerage Fees. No Person acting on behalf of any of the Buying
Companies is entitled to any brokerage, finder's or investment banking fee in
connection with the transactions contemplated by this Agreement.
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6. CLOSING
6.1. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at 10:00 a.m. local time on the date
hereof (the "Closing Date"), at the offices of Blank Rome Xxxxxxx & XxXxxxxx,
Philadelphia, Pennsylvania or such other location as is mutually agreeable.
Except to the extent prohibited by Law, and regardless of the actual Closing
Date, the Closing shall be considered to have been effective at 5:00 p.m. (local
time) on the Closing Date ("Effective Date").
6.2. Obligations of Sellers at Closing. At the Closing, Sellers
shall deliver to the Buyers the following:
6.2.1 Specified Assets. Possession and control of the
Accounts Receivable Collection Business, the Accounts Receivable Collection
Facilities (as defined in Section 4.11), all of the Specified Assets and all of
the leased Tangible Property used in the Accounts Receivable Collection
Business.
6.2.2 Documents of Transfer. Such bills of sale,
assignments, deeds, endorsements, affidavits, and other instruments and
documents of sale, transfer, assignment and conveyance as Buyers may reasonably
require, in order to lawfully and effectively sell, transfer, assign and convey
to Buyers all right, title and interest in and to all of the Specified Assets,
in each case in form acceptable to Sellers and Buyers, dated as of the Effective
Date, and duly executed and, if necessary, acknowledged by the Sellers.
6.2.3 CRW Subsidiaries Stock. Stock certificates
representing all of the outstanding stock of each CRW Subsidiary, together with
assignments separate from certificate in blank, dated the Effective Date and
duly executed by the appropriate Seller, and any stamps or other proper evidence
of the payment of any stock transfer or any similar Taxes due as a result of the
transfer of the stock of each CRW Subsidiary.
6.2.4 Incumbency Certificate. A certificate of the
Secretary of each of the Sellers as to the incumbency and signatures of the
officers of the Sellers executing this Agreement.
6.2.5 Resolutions. Copies of the resolutions duly adopted
by the respective boards of directors and, if applicable, shareholders of each
of the Sellers, authorizing the Sellers to enter into and perform this
Agreement, certified by proper officers as in full force and effect on and as of
the Closing Date.
6.2.6 Good Standing. Good standing certificates for each
of the Selling Companies from its jurisdiction of incorporation, and good
standing certificates for each Selling Company from every foreign jurisdiction
where each Selling Company is registered to do business, all dated no earlier
than 15 days before the Closing Date, except that Sellers may deliver any good
standing certificates with respect to foreign qualifications not received as of
the Closing Date by the close of business on February 7, 1997.
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6.2.7 Registration Rights Agreement. A Registration
Rights Agreement, in the form set forth on Exhibit 6.2.7 ("Registration Rights
Agreement"), between NCO and CRW, dated the Closing Date and duly executed by
CRW.
6.2.8 Noncompetition and Standstill Agreement. A
Nondisclosure, Nonsolicitation, Noncompetition and Standstill Agreement in the
form set forth on Exhibit 6.2.8 ("Noncompetition and Standstill Agreement"),
between Buying Companies and each of J. Xxxxx X'Xxxxx and Xxx Xxxxxxxx (the
"Restricted Group"), dated the Closing Date and duly executed by the Restricted
Group.
6.2.9 Name Change. A proper Amendment to the Xxxxxx
Articles or Certificate of Incorporation, dated the Closing Date and duly
executed by the Owners, in form acceptable for immediate filing with the
Delaware Secretary of State, changing Xxxxxx'x corporate name to a name that is
not similar to Xxxxxx'x current corporate name or any product or other name used
by Selling Companies and included in the Specified Assets, provided, however,
that Sellers may deliver such Amendment by the close of business on February 3,
1997.
6.2.10 Warrant. The Warrant in the form set forth on
Exhibit 6.2.10, dated the Closing Date and duly executed by CRW.
6.2.11 Corporate Records and Resignations. All of the
original minute books and stock books of each CRW Subsidiary and duly executed
resignations, dated the Effective Date, of all directors and officers of each
CRW Subsidiary.
6.2.12 Consents. Consents to the assignment to Buyers of
the leases for the Accounts Receivable Collection Facilities dated as of the
Effective Date and duly executed by the lessors thereof together with such
lessor and lender estoppel certificates, non-disturbance agreements and related
agreements (collectively, "Lease Consent Documents") as Buyers may reasonably
request, in form acceptable to Buyers, duly executed by the other parties
thereto, and the other original signed copies of all Consents listed on Schedule
4.2. Any Consents and Lease Consent Documents not obtained by the Closing Date
shall be delivered by Sellers to Buyer as soon as practicable after Closing.
6.2.13 Opinion of Counsel. The opinion of Xxxxxx Xxxxx &
Xxxxxxx, LLP addressed to Buying Companies and dated the Closing Date, in form
acceptable to Buying Companies.
6.2.14 Lien Release. Payoff letters from holders of any
debt of Selling Companies with respect to which there are any Encumbrances upon
any of the Specified Assets; together with all documents reasonably requested by
Buyers to remove all such Encumbrances on the Specified Assets, including, but
not limited to, UCC-3 termination forms duly executed by the secured parties and
mortgage satisfaction and release forms duly executed by the mortgagees, and
UCC-3 termination forms duly executed by former secured parties for which UCC-1
financing statements remain of record, in each case in form acceptable for
immediate filing with the appropriate state or local governmental office.
6.2.15 Other Documents. All other agreements,
certificates, instruments and documents reasonably requested by the Buying
Companies in order to fully consummate the
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transactions contemplated by this Agreement and carry out the purposes and
intent of this Agreement.
6.3. Obligations of Buying Companies at Closing. At the Closing, the
Buying Companies shall deliver to the Sellers the following:
6.3.1 Closing Payment. A wire transfer of immediately
available United States federal funds or a bank certified, treasurer's or
cashier's check in the amount of the Closing Payment (as defined in Section
3.1), in accordance with Sellers' proper instructions as to payment.
6.3.2 Closing Stock. Duly issued certificates for the
Closing Stock.
6.3.3 Warrant. The Warrant in the form set forth on
Exhibit 6.2.10, dated the Closing Date and duly executed by NCO.
6.3.4 Registration Rights Agreement. The Registration
Rights Agreement (in the form set forth as Exhibit 6.2.7), dated the Closing
Date and duly executed by NCO.
6.3.5 Assumption of Liabilities. An assumption of the
Specified Liabilities, in form acceptable to Buyers and Sellers, dated as of the
Effective Date, and duly executed by Buyers.
6.3.6 Incumbency Certificate. A certificate of Secretary
of each of the Buying Companies as to the incumbency and signatures of the
officers of the Buying Companies executing this Agreement.
6.3.7 Resolutions. Copies of the resolutions duly adopted
by the respective boards of directors of the Buying Companies, authorizing the
Buying Companies to enter into and perform this Agreement, certified by proper
officers as in full force and effect on and as of the Closing Date.
6.3.8 Good Standing. Good standing certificates for each
of the Buying Companies from its jurisdiction of incorporation, dated no earlier
than 15 days before the Closing Date, except that Buying Companies may deliver
any certificates not received as of the Closing Date by the close of business on
February 7, 1997.
6.3.9 Other Documents. All other agreements,
certificates, instruments and documents reasonably requested by the Sellers in
order to fully consummate the transactions contemplated by this Agreement and
carry out the purposes and intent of this Agreement.
7. CERTAIN POST-CLOSING OBLIGATIONS
7.1. Transition and Cooperation. From and after the Closing Date,
(a) the Sellers shall fully cooperate to transfer to the Buyers the control and
enjoyment of the Accounts Receivable Collection Business and the Specified
Assets; (b) the Sellers shall not take any action, directly or indirectly, alone
or together with others, which obstructs or impairs the smooth assumption by
Buyers of the Accounts Receivable Collection Business and the Specified Assets;
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(c) the Sellers shall promptly deliver to Buyers all correspondence, papers,
documents and other items and materials received by any of the Sellers or found
to be in the possession of any of the Sellers which pertain to the Accounts
Receivable Collection Business or the Specified Assets; and (d) Sellers shall
provide Buyers access to Sellers' payroll records and systems.
7.2. Use of Names. Beginning immediately after the Closing Date, the
Sellers shall cease all use of all corporate names, fictitious names, product
names and other names used by Sellers in the Accounts Receivable Collection
Business at any time on or before the Closing Date and included in the Specified
Assets, except as may be necessary to perform their obligations hereunder and
except that CRW may continue to use the name "CRW Financial, Inc." as its
corporate name in its capacity as a holding company and in its communications
with securities and financial analysts and institutional investors provided that
CRW does not use or refer to such name (or any similar or derivative name) in
any operational capacity. Upon Buyers's request, Sellers shall promptly sign all
Consents and other documents that may be necessary to allow Buyers to use or
appropriate the use of any name used by any Selling Company in the Accounts
Receivable Collection Business at any time on or before the Closing Date. At all
times from and after the Closing Date, the NCO Companies (as defined in Section
8.1) shall have the full right to use the name "CRW Financial" or any similar or
derivative name in the Accounts Receivable Collection Business, including,
without limitation to (a) advise customers and prospects of the Accounts
Receivable Collection Business that the NCO Companies are the
successor-in-interest to Sellers' Accounts Receivable Collection Business and
that such business was formerly known as, or conducted by, "CRW Financial", (b)
use or refer to such name in sales, marketing or other publications to disclose
from whom the Specified Assets were purchased, and (c) use such name where
reasonably required to insure the orderly transition of the Accounts Receivable
Collection Business.
7.3. Contract Matters. After the Closing, each Contract
("Transferred Contract") as to which (a) the Contract Rights of any Seller are
included in the Specified Assets, and (b) Consent to the assignment thereof from
any Seller to Buyers may be required under such Transferred Contract or
applicable Law but was not obtained on or before the Closing Date, shall be
handled in accordance with the following provisions:
7.3.1 Consent. The Sellers shall fully cooperate with
Buyers in the Buyers' efforts to obtain Consent to the assignment of such
Transferred Contract. If and when Consent to assignment of such Transferred
Contract is obtained, such Transferred Contract shall no longer be subject to
the provisions of this Section 7.3.
7.3.2 Subcontracting. Each Seller shall make available to
Buyers all Contract Rights and other benefits of such Transferred Contract, on a
subcontract or sublease basis or in some other appropriate manner to the fullest
extent possible, and Buyers shall be considered an independent subcontractor or
sublessee of such Seller, or an agent of such Seller, with respect to all
matters concerning such Transferred Contract. Without limiting the foregoing,
Buyers shall be considered such Sellers' agent for purposes of (a) collecting
all amounts that may be due from the other party or parties to such Transferred
Contract; and (b) negotiating or otherwise handling all disputes and issues that
may arise in connection with such Transferred Contract. Without Buyers' prior
written consent, no Seller shall agree to any amendment, modification,
extension, renewal, termination or other change in the terms of such Transferred
Contract, nor shall any Seller exercise any Contract Right under such
Transferred Contract.
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7.3.3 Buyers' Instructions. At Buyers' direction, each
Seller shall (a) notify the other party or parties to such Transferred Contract
that Buyers is such Seller's subcontractor, sublessee or agent with respect
thereto and that all further payments, notices and other communications with
respect thereto shall be directed to Buyers; (b) agree to such amendments,
modifications, extensions, renewals, terminations or other changes in the terms
of such Transferred Contract as Buyers determines, in its sole discretion, are
advisable; and (c) exercise any Contract Right under such Transferred Contract
at such time and in such manner as Buyers determines, in its sole discretion, to
be advisable.
7.3.4 Collateral Assignment. Effective as of the Closing
Date, each Seller hereby collaterally assigns to Buyers (except and only to the
extent that such collateral assignment is expressly prohibited by the terms of
such Transferred Contract), and grants to Buyers a security interest in, all of
such Seller's contract rights under such Transferred Contract and all cash and
non-cash proceeds thereof, as security for the prompt and timely satisfaction
and performance of such Seller's obligations under this Section 7.3. Buyers
shall have, and each Seller shall deliver to Buyers at the Closing, possession
of the original executed copy of such Transferred Contract. Effective as of the
Closing Date, each Seller hereby appoints Buyers as such Seller's attorney to
take such actions, in such Seller's name and on its behalf, as such attorney
determines, in its sole discretion, to be necessary or advisable to protect,
perfect and continue perfected the security interest granted hereunder,
including, but not limited to, the execution and filing of such financing
statements and other instruments and documents as such attorney determines, in
its sole discretion, to be necessary or advisable for such purposes.
7.4. Retirement and Group Plans. For as long as is required by Law
or the applicable plan after the Closing Date, each Seller shall maintain
Sellers' Group Plans in effect, with proper funding, for the purpose of covering
all claims of employees of the Accounts Receivable Collection Business
("Continuing Claims") (a) that were incurred but not paid before the Effective
Date; (b) for hospitalizations that began before the Effective Date and
continued after the Effective Date; (c) by employees of Sellers that were not
hired by Buyers; and (d) for all medical expenses incurred before or after the
Closing Date with respect to a certain bone marrow condition of a certain
employee of the Accounts Receivable Collection Business. Sellers shall be
responsible for any Obligations under Section 4980(B) of the Internal Revenue
Code of 1986, as amended, and Sections 601-609 of ERISA with respect to Sellers'
Group Plans (collectively, "COBRA Obligations"). Each Seller may terminate its
health plans after expiration of all Continuing Claims and COBRA Obligations.
Buyers shall have no responsibility for the Continuing Claims or COBRA
Obligations, but Buyers shall be responsible for providing coverage, under the
standard group insurance plans of Buyers, for all medical, dental, disability
and related claims incurred after the Effective Date by employees of Sellers who
are hired by Buyers. As soon as practicable following the Closing Date, Sellers
shall take all necessary actions to cause their 401(k) retirement plan
("Sellers' Plan") to transfer an amount of cash equal to the aggregate value of
all of the assets, whether or not vested, which are attributable to former
employees of the Accounts Receivable Collection Business who become employees of
Buyers as of the Closing Date to the 401(k) Retirement Plan sponsored by Buyers
("Buyers' Plan"). The amount transferred shall be based upon the most recent
valuation of the assets of Sellers' Plan which shall not precede the actual date
of transfer by more than thirty (30) days. Sellers shall provide Buyers with all
of the information requested by Buyers, in the format requested by Buyers, which
is necessary to determine the correct aggregate amount that should be
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transferred, the amount attributable to each participant as well as all other
relevant participant data including vesting information.
7.5. Access to Accounting Information. For a period of five (5)
years after the Closing Date, the Sellers shall permit the Buying Companies and
their authorized representatives to have full access to, and use of, Selling
Companies' books and records, financial statements, opinions of independent
public accountants, and accounting information, workpapers, notes and related
materials, prepared, reviewed or compiled with respect to, or including, the
Accounts Receivable Collection Business (whether in the possession of the
Sellers or the Sellers' accountants) for the years ended December 31, 1994, 1995
and 1996 and for the period from January 1, 1997 through and including the
Effective Date, and any interim periods therein, for review, duplication,
analysis and any other legal use, including but not limited to, the preparation
of audited financial statements for the Accounts Receivable Collection Business
for use in connection with any public offering of securities pursuant to the
Securities Act of 1933, as amended or any reports filed pursuant to the
Securities Exchange Act of 1934, as amended or applicable state "blue sky" laws.
Sellers shall instruct their accountants to cooperate with and assist Buying
Companies and their authorized representatives to the extent reasonably
requested by them. All confidential business information disclosed to the Buying
Companies pursuant to this Section shall be treated as confidential information
of the Sellers (excluding any information pertaining to the Accounts Receivable
Collection Business and Assets which shall be considered the Buying Companies'
confidential information) unless it is or later becomes publicly available
through no fault of the Buying Companies or it was or later is rightfully
developed or obtained by the Buying Companies from independent sources free from
any duty of confidentiality. Such confidential information shall be held in
confidence by the Buying Companies and shall not be used or disclosed by the
Buying Companies for any purpose except as necessary to implement or perform
this Agreement, or except as required by Law provided that the Sellers are given
a reasonable opportunity to obtain a protective order.
7.6. Further Assurances. At any time and from time to time after the
Closing Date, at Buyers' request and expense, and without further consideration,
the Sellers shall promptly execute and deliver all such further agreements,
certificates, instruments and documents, and perform such further actions, as
Buyers may reasonably request in order to fully consummate the transactions
contemplated hereby and carry out the purposes and intent of this Agreement.
Without limiting the generality of the foregoing, each Seller shall timely file
all Tax returns and reports required to be filed with respect to the Accounts
Receivable Collection Business and Assets and operations for all periods ending
on or before the Closing Date.
7.7. Reconciliations and Allocations. At and after the Closing, all
payments received by Sellers on account of Accounts Receivable in existence as
of the Effective Date or arising after the Effective Date under any Specified
Contracts or Non-Assigned Contracts, and all other payments received by Sellers
which are properly allocable to the conduct of the Accounts Receivable
Collection Business with respect to periods after the Effective Date, shall be
held in trust for Buyers and shall be promptly paid to Buyers.
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7.8. Tax Matters.
7.8.1 Liability for Taxes.
(A) Taxable Periods Ending On or Before the
Closing Date. The Sellers shall be responsible for filing all Tax Returns
required to be filed by or with respect to each of the CRW Subsidiaries (and the
other Specified Assets) for any taxable year or taxable period ending on or
before the Closing Date and shall be liable for and shall jointly and severally
indemnify and hold the Buying Companies harmless against all Taxes for any
taxable year or period ending on or before the Closing Date which are due and
payable by either of the CRW Subsidiaries or with respect to the other Specified
Assets.
(B) Taxable Periods Commencing On or After
the Closing Date. The Buying Companies shall be responsible for filing all Tax
Returns required to be filed by or with respect to the CRW Subsidiaries (and the
other Specified Assets) for any taxable year or period commencing after the
Closing Date and shall be jointly and severally liable for, and shall indemnify
and hold the Sellers harmless against, any and all Taxes for any taxable year or
period commencing on or after the Closing Date due or payable by CRW
Subsidiaries or the Buying Companies with respect to either of the CRW
Subsidiaries (or with respect to the other Specified Assets).
(C) Taxable Periods Commencing Before the
Closing Date and Ending After the Closing Date. In the case of any taxable year
or period which commences before and would otherwise end after the Closing Date
(the "Closing Period"), the Buying Companies and/or the Sellers shall, to the
extent required or permitted under applicable Law, cause the CRW Subsidiaries to
end their taxable year or period on the Closing Date. Any such taxable year or
period shall be governed by Paragraph (A) of this Section 7.8.1. With respect to
such taxable year or period which commences before and ends after the Closing
Date for which such an election is not required or permitted to be made under
applicable Law, the Buyers shall cause each of the CRW Subsidiaries to file all
Tax Returns and to pay all Taxes (hereinafter referred to as "Full Year Taxes")
due for any taxable year or taxable period commencing before and ending after
the Closing Date (the "Closing Period"). No later than 20 days before the due
date for the filing of any Tax Return for the Closing Period (including
extensions thereof) the Buying Companies shall notify the Sellers and within 15
days of receiving such notice, but in no event later than five days before the
due date of the Tax Return for the Closing Period (including extensions
thereof)(the "Due Date"), the Sellers shall pay to the Buying Companies an
amount equal to the amount of Taxes owed to the relevant taxing authority
attributable to the Closing Period (calculated as if the relevant taxable period
ended on the Closing Date), if any. For these purposes, the amount of Taxes for
the Closing Period allocable to the Sellers shall be equal to: (i) the total
amount of Taxes for the Closing Period multiplied by (ii) the fraction that the
number of days in the Closing Period up to and including the Closing Date is of
the total number of days in the Closing Period. The Sellers shall be jointly and
severally liable for any Taxes with respect to which such Sellers are
responsible or liable pursuant to this Section 7.8.1(C). Notwithstanding the
foregoing, Sellers shall include the CRW Subsidiaries in their consolidated
federal income tax return for the period from the beginning of their taxable
year in which the Closing Date occurs through the Closing Date, and Sellers
shall be responsible for all Taxes of the CRW Subsidiaries properly includible
on such consolidated federal income tax return.
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7.8.2 Mutual Cooperation. As soon as practicable, but in
any event within 30 days after a request by the either the Sellers or the Buying
Companies, the party to which such request is made shall deliver to the
requesting party such information and other data relating the Tax Returns and
Taxes of the CRW Subsidiaries and shall make available such knowledgeable
employees of the Sellers, Buying Companies, or CRW Subsidiaries, as may be
appropriate, as the requesting party may reasonably request, including providing
the information and other data customarily required by the requesting party to
cause the completion and filing of all Tax Returns for which the requesting
party has responsibility or liability under this Agreement, or to respond to
audits by any taxing authorities with respect to any Tax Returns or taxable
periods for which the requesting party has any responsibility or liability under
this Agreement or to otherwise enable the requesting party to satisfy its
accounting or tax requirements.
7.8.3 Resolution of Disagreements Among the Sellers and
the Buying Companies. If the Sellers and the Buying Companies disagree as to the
amount of Taxes for which each is liable under this Agreement, the Sellers and
the Buying Companies shall promptly consult each other in an effort to resolve
such dispute. If any such point of disagreement cannot be resolved within 15
days of the initial date of consultation, the Sellers and the Buying Companies
shall consult an independent certified accounting firm which is acceptable to
both parties to act as an arbitrator to resolve all points of disagreement
concerning tax accounting matters with respect to this Agreement.
7.8.4 Section 338(h)(10) Election. Upon the mutual
agreement of Buyers and Sellers, Sellers will join with the Buyers in making an
election under Section 338(h)(10) of the Code (and any corresponding elections
under state, local, or foreign tax law) (collectively a "Section 338(h)(10)
Election") with respect to the purchase and sale of the stock of the CRW
Subsidiaries hereunder. The Sellers will pay any Tax attributable to them with
respect to the transactions contemplated by this Agreement and their Section
338(h)(10) Election.
7.9. Bank Accounts. From and after the Closing Date, Sellers shall
cooperate with and assist Buyers in preparing all instruments or documents
requested by Buyers to change the names of the individuals who have access to or
are authorized to make withdrawals from or dispositions of all bank accounts,
other accounts, certificates of deposits, marketable securities, other
investments, safe deposit boxes, lock boxes and safes of the Sellers' Accounts
Receivable Collection Business and all keys and combinations to all safe deposit
boxes, lock boxes and safes of the Selling Companies and other depositories.
7.10. Sellers' Obligations. By the close of business on February 7,
1997, Sellers shall provided Buyers a detailed list, as of December 31, 1996, of
all of each Selling Company's accounts payable, accrued expenses, deferred
income, and other current and long-term liabilities incurred or arising in
Sellers' Accounts Receivable Collection Business, grouped by balance sheet
account, excluding liabilities for Taxes, intercompany liabilities and notes
payable.
7.11. UCC-3 Releases. Sellers shall fully cooperate with and assist
Buying Companies in obtaining UCC-3 termination statements from National
WestMinster Bank as soon as practicable following Closing.
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7.12. Sublease. Selling Companies shall sublease the Mall Boulevard
facility to Buyers on the same terms and conditions pursuant to which Sellers
are leasing such facility except that Buyers shall have the option of
terminating such sublease after August 1, 1997 by payment of an amount equal to
the then book value of the lessor's unamortized leasehold improvements
(originally $140,000) (the "Mall Boulevard Sublease"). By the close of business
on February 7, 1997, Sellers shall obtain the Consent of the lessor to the Mall
Boulevard Sublease.
8. RESTRICTIVE COVENANTS OF THE SELLERS
8.1. Certain Acknowledgements. Each of the Sellers expressly
acknowledges that:
8.1.1 NCO Business. The accounts receivable collection
business (collectively, "NCO's Business") conducted by NCO and certain
subsidiaries of NCO which now or in the future conduct any accounts receivable
collection business (Buying Companies and all such existing and future
subsidiaries of NCO, including the Accounts Receivable Collection Business and
the CRW Subsidiaries (after Closing), are referred to as the "NCO Companies")
involve the provision of accounts receivable collection business services using
proprietary and confidential systems and information.
8.1.2 Competitive Nature of Business. NCO's Business is
highly competitive, is marketed throughout the United States and requires long
sales "lead times" often exceeding one year. The NCO Companies expend
substantial time and money, on an ongoing basis, to train their employees,
maintain and expand their customer base, and improve and develop their products
and services.
8.1.3 Access to Information. During the period that
Sellers owned the Accounts Receivable Collection Business, Sellers have had
access to proprietary and confidential property, knowledge and information of
the Accounts Receivable Collection Business which, after Closing, shall be
proprietary and confidential property, knowledge and information of the NCO
Companies; such property, knowledge and information must be kept in strict
confidence to protect NCO's Business and maintain the NCO Companies' competitive
positions in the marketplace; and such property, knowledge and information would
be useful to competitors of the NCO Companies for indefinite periods of time.
8.1.4 Basis for Covenants. The covenants of Sections 8.2,
8.3, 8.4 and 8.5 (the "Covenants") are a material part of this Agreement and are
an integral part of the obligations of the Sellers hereunder; the Covenants are
supported by good and adequate consideration; and the Covenants are reasonable
and necessary to protect the legitimate business interests of the NCO Companies.
8.2. Nondisclosure Covenants. At all times after the date of this
Agreement, for an indefinite period of time, except with NCO's prior written
consent, none of the Sellers shall, directly or indirectly, in any capacity,
communicate, publish or otherwise disclose to any Person, or use for the benefit
of any Person, any confidential or proprietary property, knowledge or
information of the NCO Companies, no matter when or how such knowledge or
information was obtained, including without limitation (a) any information
concerning the Specified Assets or the conduct and details of the Accounts
Receivable Collection Business; (b) the identity of customers and prospects,
their specific requirements, and the names, addresses and telephone numbers
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of individual contacts at customers and prospects; (c) prices, renewal dates and
other detailed terms of customer and supplier Contracts and proposals; (d)
pricing policies, marketing and sales strategies, methods of delivering products
and services, and products and service development projects and strategies; (e)
employment and payroll records; (f) forecasts, budgets and other nonpublic
financial information; and (g) expansion plans, management policies, methods of
operation, and other business strategies and policies.
8.3. Noncompetition Covenants. During the period beginning on the
date of this Agreement and ending on the third (3) anniversary of the Closing
Date, except with NCO's prior written consent, none of the Sellers shall,
directly or indirectly, in any capacity, at any location worldwide:
8.3.1 Solicitation Restrictions. Communicate with or
solicit any Person who is or during such period becomes a customer, prospect,
supplier, employee, salesman, agent or representative of, or a consultant to,
the NCO Companies, in any manner which interferes with such Person's
relationship with the NCO Companies, or in an effort to obtain any such Person
as a customer, employee, salesman, agent or representative of, or a consultant
to, any other Person that conducts a business competitive with or similar to all
or any part of NCO's Business.
8.3.2 Competing Business Restrictions. Establish, own,
manage, operate, finance or control, or participate in the establishment,
ownership, management, operation, financing or control of, or be a director,
officer, employee, salesman, agent or representative of, or be a consultant to,
any Person that conducts a business competitive with or similar to all or any
part of NCO's Business.
8.4. Standstill. At all times after the date of this Agreement and
for so long as the Restricted Group and their respective affiliates or
associates (as such terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the"Exchange Act")) individually or
collectively have beneficial ownership (determined in accordance with Rule 13d-3
under the Exchange Act) of at least one percent (1%) of the outstanding
securities of NCO entitled to vote generally in the election of directors:
8.4.1 No Acquisition or Solicitation. Except with NCO's
prior written consent, no Seller shall: (a) purchase, offer to purchase,
acquire, offer to acquire, or agree to acquire by purchase, by joining a
partnership, limited partnership, syndicate or other "group" (as such term is
used in Section 13(d)(3) of the Exchange Act) or otherwise (any such act, to
"acquire"), any securities of NCO entitled to vote generally in the election of
directors, or securities convertible into or exercisable or exchangeable for
such securities (collectively, "Restricted Securities") except upon exercise of
the Warrant by CRW or as a result of a stock split, stock dividend or similar
recapitalization by NCO; (b) participate in the formation, or encourage the
formation, of any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), which owns or seeks to acquire beneficial ownership or otherwise
acts in respect of Restricted Securities; (c) make, or in any way participate
in, directly or indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Exchange Act) or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 under the Exchange Act) with respect to NCO, or execute any written
consent in lieu of a meeting of holders of Restricted Securities or any class
thereof; (d) initiate,
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propose or otherwise solicit shareholders of NCO for the approval of one or more
shareholder proposals with respect to NCO or induce or attempt to induce any
other person to initiate any shareholder proposal; (e) seek election to or seek
to place a representative on the Board of Directors of NCO or seek the removal
of any member of the Board of Directors of NCO; (f) call or seek to have called
any meeting of the shareholders of NCO; (g) deposit any Restricted Securities in
a voting trust or subject them to a voting agreement or other agreement or
arrangement with respect to the voting of such Restricted Securities; (h)
otherwise act, directly or indirectly, alone or in concert with others, to seek
to control the management, Board of Directors, policies or affairs of NCO, or
solicit, propose, seek to effect or negotiate with any other person with respect
to any form of business combination transaction with NCO or any affiliate
thereof, or any restructuring, recapitalization or similar transaction with
respect to NCO or any affiliate thereof (solicit, make or propose or encourage
or negotiate with any other person with respect to, or announce an intent to
make, any tender offer or exchange offer for any Restricted Securities, or
disclose an intent, purpose, plan or proposal with respect to NCO or any
Restricted Securities inconsistent with the provisions of this Agreement,
including an intent, purpose, plan or proposal that is conditioned on or would
require NCO to waive the benefit of or amend any provision of this Section 8.4.
or assist, participate in, facilitate, encourage or solicit any effort or
attempt by any person to do or seek to do any of the foregoing; (i) request NCO
(or its directors, officers, employees or agents), directly or indirectly, to
amend or waive any provision of this Section 8.4 (including this clause 8.4(i))
or otherwise seek any modification to or waiver of any of the agreements or
obligations under this Section 8.4; and (j) encourage or render advice to or
make any recommendation or proposal to any person or other entity to engage in
any of the actions covered by this Section 8.4 (including this clause (j)).
8.4.2 Voting. Each Seller shall vote all Restricted
Securities beneficially owned by such Seller in connection with any action to be
taken by the shareholders of NCO in accordance with the recommendation of the
Board of Directors of NCO.
8.5. Nonsolicitation. During the period beginning on the date of
this Agreement and ending on August 1, 1997, no Seller or any of its
subsidiaries shall solicit or hire any of the employees of the NCO Companies or
any of the employees of the Accounts Receivable Collection Business who were
employed by such entities prior to the Closing Date to become employees or
independent contractors of any Seller or any of its subsidiaries.
8.6. Certain Exclusions. Confidential and proprietary property,
knowledge and information of the NCO Companies shall not include any information
that is now known by or readily available to the general public, nor shall it
include any information that in the future becomes known by or readily available
to the general public other than as a result of any breach of the Covenants of
this Agreement. The ownership by any of the Sellers of not more than one percent
(1%) of the outstanding securities of any public company shall not, by itself,
constitute a breach of the Covenants of Section 8.3, even if such public company
competes with the NCO Companies. Except as provided in Section 8.9, none of the
provisions of Section 8.3 or Section 8.4 shall apply to TeleSpectrum Worldwide
Inc.; provided nothing in this sentence shall limit the rights of the NCO
Companies pursuant to Section 8.7.
8.7. Enforcement of Covenants. Each of the Sellers expressly
acknowledges that it would be extremely difficult to measure the damages that
might result from any breach of the Covenants, and that any breach of the
Covenants will result in irreparable injury to the NCO
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Companies for which money damages could not adequately compensate. If a breach
of the Covenants occurs, then the NCO Companies shall be entitled, in addition
to all other rights and remedies that they may have at law or in equity, to have
an injunction issued by any competent court enjoining and restraining the
Sellers and all other Persons involved therein from continuing such breach. The
existence of any claim or cause of action that any of the Sellers or any such
other Person may have against any member of the NCO Companies shall not
constitute a defense or bar to the enforcement of any of the Covenants. If the
NCO Companies must resort to litigation to enforce any of the Covenants that has
a fixed term, then such term shall be extended for a period of time equal to the
period during which a breach of such Covenant was occurring, beginning on the
date of a final court order (without further right of appeal) holding that such
a breach occurred or, if later, the last day of the original fixed term of such
Covenant.
8.8. Scope of Covenants. If any Covenant, or any part thereof, or
the application thereof, is construed to be invalid, illegal or unenforceable,
then the other Covenants, or the other portions of such Covenant, or the
application thereof, shall not be affected thereby and shall be enforceable
without regard thereto. If any of the Covenants is determined to be
unenforceable because of its scope, duration, geographical area or other factor,
then the court making such determination shall have the power to reduce or limit
such scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
8.9. Successors. The provisions of this Section 8 shall bind and be
enforceable against any Person which (i) acquires all or substantially all of
the Assets of any Selling Company, or (ii) merges or consolidates with any
Selling Company, or (iii) any Person which beneficially owns (within the meaning
of Rule 13d-3 under the Exchange Act) a majority of the outstanding stock
entitled to vote generally in the election of directors of any Selling Company
or any Person described in the preceding clauses (i) or (ii); provided, however,
that in no such event shall TeleSpectrum be bound by the provisions of Section
8.3.2.
9. INDEMNIFICATION
9.1. Sellers' Indemnification. From and after the Closing Date, the
Sellers, jointly and severally, shall indemnify and hold harmless the NCO
Companies, and their respective successors and assigns, and their respective
directors, officers, employees, agents and representatives, from and against any
and all actions, suits, claims, demands, debts, liabilities, obligations,
losses, damages, costs and expenses, including without limitation reasonable
attorney's fees and court costs, arising out of or caused by, directly or
indirectly, any of all of the following:
9.1.1 Misrepresentation. Any misrepresentation, breach or
failure of any warranty or representation made by any of the Sellers in or
pursuant to this Agreement.
9.1.2 Nonperformance. Any failure or refusal by any of
the Sellers to satisfy or perform any covenant, term or condition of this
Agreement required to be satisfied or performed by any or all of them.
9.1.3 Non-Assumed Obligations. Any Obligation (as defined
in Section 1.17) of any of the Selling Companies (other than those expressly
included in the Specified Liabilities) including, but not limited to, (a) any of
the types of Obligations specifically excluded
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from the Specified Liabilities under Section 2.2; (b) any such Obligation that
may be imposed upon the NCO Companies as a result of the failure by any of the
Selling Companies to comply with any bulk sales, bulk transfer, fraudulent
conveyance or similar Law of any jurisdiction that may be applicable to some or
all of the transactions contemplated by this Agreement; and (c) any such
Obligation that may be imposed upon any of the NCO Companies or their affiliates
as a result of any Law under which any of the NCO Companies or their affiliates
may have successor liability for any Tax or other Obligations of any of the
Selling Companies (collectively, the "Non-Assumed Obligations").
9.1.4 Unasserted Claims. Any action, suit or claim
arising out of, caused by or based upon any act or omission of any of the
Selling Companies or any of their respective shareholders, partners, directors,
executives, officers, employees, agents or representatives at any time before
the Closing.
9.1.5 Proceedings by Employees. Any Proceeding against
any of the NCO Companies by or on behalf of any employee of any Seller who is
not hired by Buyers.
9.1.6 Failure to Obtain Consents. Any Proceeding against
any Buyer due to the failure of Sellers to obtain any Consent to any Transferred
Contract or to the Mall Boulevard Sublease.
9.1.7 CRW Subsidiaries. Any breach of a representation or
warranty as to ownership of the stock of the CRW Subsidiaries.
9.1.8 HSR Act. Any Obligation of or Proceeding (including
fines and penalties) against the NCO Companies from any breach of a
representation or warranty of Selling Companies as to the HSR Act.
9.2. Buying Companies' Indemnification. From and after the Closing
Date, the Buying Companies, jointly and severally, shall indemnify and hold
harmless the Sellers and their respective successors and assigns, and their
respective directors, officers, employees, agents and representatives, from and
against any and all actions, suits, claims, demands, debts, liabilities,
obligations, losses, damages, costs and expenses, including without limitation
reasonable attorney's fees and court costs, arising out of or caused by,
directly or indirectly, any of the following:
9.2.1 Misrepresentation. Any misrepresentation, breach or
failure of any warranty or representation made by any of the Buying Companies in
or pursuant to this Agreement.
9.2.2 Nonperformance. Any failure or refusal by any of
the Buying Companies to satisfy or perform any covenant, term or condition of
this Agreement required to be satisfied or performed by either or both of them.
9.2.3 Specific Liabilities. Any failure or refusal of the
Buyers to satisfy or perform any of the Specific Liabilities; provided, however,
that Buyers shall have the right to negotiate the amount and terms of repayment
of any accounts payable constituting Specific Liabilities and pay and discharge
such accounts payable in accordance with the mutual agreement of Buyers and such
payees.
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9.2.4 Unasserted Claim. Any action, suit or claim arising
out of, caused by or based upon any act or omission of any of the Buying
Companies or any of their respective shareholders, partners, directors,
executives, officers, employees, agents, or representatives at any time after
the Closing Date.
9.2.5 WARN. Any Obligation resulting from a violation of
the WARN Act to the extent due to the actions or omissions of Buyers.
9.3. Indemnification Procedures. With respect to each event,
occurrence or matter ("Indemnification Matter") as to which any member of the
NCO Companies or any of the Sellers (in either case, referred to collectively
as, the "Indemnitee") is entitled to indemnification from Sellers or the Buying
Companies, as the case may be (referred to collectively as, the "Indemnitor")
under this Section 9:
9.3.1 Notice. Within ten (10) days after the Indemnitee
receives written documents underlying the Indemnification Matter or, if the
Indemnification Matter does not involve a third-party action, suit, claim or
demand, promptly after the Indemnitee first has actual knowledge of the
Indemnification Matter, the Indemnitee shall give notice to the Indemnitor of
the nature of the Indemnification Matter and the amount demanded or claimed in
connection therewith ("Indemnification Notice"), together with copies of any
such written documents.
9.3.2 Defense. If a third-party action, suit, claim or
demand is involved, then, upon receipt of the Indemnification Notice, the
Indemnitor shall, at its expense and through counsel of its choice, promptly
assume and have sole control over the litigation, defense or settlement (the
"Defense") of the Indemnification Matter, except that (a) the Indemnitee may, at
its option and expense and through counsel of its choice, participate in (but
not control) the Defense; (b) if the Indemnitee reasonably believes that the
handling of the Defense by the Indemnitor may have a material adverse affect on
the Indemnitee, its business or financial condition, or its relationship with
any customer, prospect, supplier, employee, salesman, consultant, agent or
representative, then the Indemnitee may, at its option and expense and through
counsel of its choice, assume control of the Defense, provided that the
Indemnitor shall be entitled to participate in the Defense at its expense and
through counsel of its choice; (c) the Indemnitor shall not consent to any
Judgment, or agree to any settlement, without the Indemnitee's prior written
consent; and (d) if the Indemnitor does not promptly assume control over the
Defense or, after doing so, does not continue to prosecute the Defense in good
faith, the Indemnitee may, at its option and through counsel of its choice, but
at the Indemnitor's expense, assume control over the Defense. In any event, the
Indemnitor and the Indemnitee shall fully cooperate with each other in
connection with the Defense, including without limitation by furnishing all
available documentary or other evidence as is reasonably requested by the other.
9.3.3 Payments. All amounts owed by the Indemnitor to the
Indemnitee (if any) shall be paid in full within fifteen (15) business days
after a final Judgment (without further right of appeal) determining the amount
owed is rendered, or after a final settlement or agreement as to the amount owed
is executed.
9.4. Limits on Indemnification. Indemnitor's liability under this
Section 9 shall be limited as follows:
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9.4.1 Deductible. No amount shall be payable by the
Indemnitor under this Section 9 unless and until the aggregate amount otherwise
payable by the Indemnitor under this Section 9 exceeds One Hundred Thousand
Dollars ($100,000), in which event the Indemnitor shall pay such excess amount
and all future amounts payable by the Indemnitor under this Section 9.
9.4.2 Ceiling. The Indemnitor's total liability under
this Section 9 shall not exceed Five Million Dollars ($5,000,000).
9.4.3 Time Periods. The Indemnitor shall have no
liability with respect to any Indemnification Matter unless the Indemnitee gives
an Indemnification Notice with respect thereto within six (6) months after the
Closing Date.
9.5. Exceptions. None of the foregoing limitations in Section 9.4
shall apply in the case of any Indemnification Matter involving (i) intentional
misrepresentation, fraud or criminal matters; (ii) title to the Specified
Assets; (iii) Taxes; (iv) covenants, agreements or Obligations to be performed
after Closing including, without limitation, the covenants, agreements and
Obligations set forth in Section 7, Section 8 and Section 9, (v) the Non-Assumed
Obligations, and (vi) the Indemnification Matters set forth in Section 9.1.6,
Section 9.1.7 or Section 9.1.8. In addition, none of the foregoing limitations
shall apply in the case of any Indemnification Matter as to which any Seller is
the Indemnitor if, and only to the extent that, Sellers are entitled to coverage
under any Insurance Policy maintained by or for the benefit of any of the
Sellers.
9.6. Setoff and Holdback. In addition to all other rights and
remedies that the Indemnitee may have, the Indemnitee shall have the right to
setoff, against any amounts due to the Indemnitor, whether due under this
Agreement, any of the other Contracts contemplated by this Agreement or
otherwise, any sums for which the Indemnitee is entitled to indemnification
under this Section 9; provided, however, that Buyers shall not have right of
setoff with respect to the Cash Payment Amount if NCO elects to exercise the
Cash Payment Option (as such terms are defined in the Warrant) pursuant to
Section 1.2 of the Warrant. The Indemnitee's rights to indemnification under
this Section 9 shall not be in any manner limited by or to this right of setoff.
If any Indemnification Matters are pending at a time when the Indemnitee is
required to pay any amount due to the Indemnitor, then the Indemnitee shall have
the right, upon notice to the Indemnitor, to withhold from such payment, until
final determination of such pending Indemnification Matters, the total amount
for which the Indemnitor may become liable as a result thereof, as determined by
the Indemnitee reasonably and in good faith.
9.7. No Consequential or Punitive Damages. Indemnitor shall not be
liable under this Section 9 to the Indemnitee for the Indemnitee's special or
consequential damages (including damages for a multiple of profits) or for
punitive damages; provided, however, that any special, consequential (including
damages for a multiple of profits) or punitive damages awarded to a third party
against Indemnitee shall be considered Indemnitee's actual damages for the
purpose of this Section 9.
9.8. Specified Liabilities on Closing Balance Sheet. Buying
Companies shall pay, and shall not be indemnified for, any Specified Liability
if and to the extent that such Specified Liability was set forth on the Closing
Balance Sheet and taken into consideration in determining the Actual TNW of
Sellers' Accounts Receivable Collection Business.
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9.9. Shareholder Suits. No party shall have any liability under this
Section 9 or otherwise for suits bought by the other party's shareholders.
10. OTHER PROVISIONS
10.1. Fees and Expenses. The Buying Companies shall pay all of the
fees and expenses incurred by them, and the Sellers shall pay all of the fees
and expenses incurred by Selling Companies, in negotiating and preparing this
Agreement (and all other Contracts executed in connection herewith or therewith)
and in consummating the transactions contemplated by this Agreement.
10.2. Notice. All notices, consents or other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three business
days after being mailed by first class certified mail, return receipt requested,
postage prepaid, or (c) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the first page of this Agreement.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. Notice to
CRW at the address specified on page one of this Agreement to the attention of
J. Xxxxx X'Xxxxx, Chief Executive Officer, shall suffice as notice to all of the
Sellers, provided that a copy thereof is simultaneously sent to Xxxxxx Xxxxx &
Bockius LLP, 0000 Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, attention: Xxxxxxx
X. Xxxxxxx, Esquire. Notice to NCO at the address specified on page one of this
Agreement to the attention of Xxxxxxx X. Xxxxxxx, President, shall suffice as
notice to all of the NCO Companies, provided that a copy thereof is
simultaneously sent to Blank Rome Xxxxxxx & XxXxxxxx, Four Xxxx Xxxxxx Xxxxx,
Xxxxxxxxxxxx XX 00000, attention Xxxx X. Xxxxxxx, Esquire. Any party may change
its address for notice and the address to which copies must be sent by giving
notice of the new addresses to the other parties in accordance with this Section
10.2, except that any such change of address notice shall not be effective
unless and until received.
10.3. Survival of Representations. All representations and
warranties made in this Agreement or pursuant hereto shall survive the date of
this Agreement, the Effective Date, the Closing Date and the consummation of the
transactions contemplated by this Agreement for a period of six (6) months after
the Closing Date (except as provided in Section 9.5). Buying Companies shall not
bring an action in law or equity pursuant to Section 9 or otherwise for breaches
of representations and warranties after August 1, 1997 except for any breaches
of representations or warranties as to which any of the exceptions of Section
9.5 applies.
10.4. Interpretation of Representations. Each representation and
warranty made in this Agreement or pursuant hereto is independent of all other
representations and warranties made by the same parties, whether or not covering
related or similar matters, and must be independently and separately satisfied.
Exceptions or qualifications to any such representation or warranty shall not be
construed as exceptions or qualifications to any other representation or
warranty.
10.5. Reliance by Buying Companies. Notwithstanding the right of the
Buying Companies to investigate the Accounts Receivable Collection Business and
Assets and financial
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condition of the Selling Companies, and notwithstanding any knowledge determined
or determinable by the Buying Companies as a result of such investigation, the
Buying Companies have the unqualified right to rely upon, and have relied upon,
each of the representations and warranties made by the Selling Companies in this
Agreement or pursuant hereto.
10.6. Entire Understanding. This Agreement, together with the
Exhibits and Schedules hereto, states the entire understanding among the parties
with respect to the subject matter hereof, and supersedes all prior oral and
written communications and agreements, and all contemporaneous oral
communications and agreements, with respect to the subject matter hereof,
including without limitation all confidentiality letter agreements and letters
of intent previously entered into among some or all of the parties hereto. No
amendment or modification of this Agreement shall be effective unless in writing
and signed by the party against whom enforcement is sought.
10.7. Publicity. All voluntary public announcements concerning the
transactions contemplated by this Agreement shall be mutually acceptable to both
Buyers and Sellers. Unless required by Law, the parties shall not make any
public announcement or issue any press release concerning the transactions
contemplated by this Agreement without the prior written consent of the other
parties. With respect to any announcement that any of the parties is required by
Law or stock exchange or The Nasdaq Stock Market regulation to issue, such party
shall, to the extent possible under the circumstances, review the necessity for
and the contents of the announcement with the other parties before issuing the
announcement.
10.8. Parties in Interest. None of the parties may assign this
Agreement or any rights or obligations under this Agreement without the prior
written consent of the other parties. This Agreement shall bind, benefit, and be
enforceable by and against the parties hereto, and their respective successors
and consented-to assigns.
10.9. Waivers. Except as otherwise expressly provided herein, no
waiver with respect to this Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought. Except as otherwise
expressly provided herein, no failure to exercise, delay in exercising, or
single or partial exercise of any right, power or remedy by any party, and no
course of dealing between or among any of the parties, shall constitute a waiver
of, or shall preclude any other or further exercise of, any right, power or
remedy.
10.10. Severability. If any provision of this Agreement is construed
to be invalid, illegal or unenforceable, then the remaining provisions hereof
shall not be affected thereby and shall be enforceable without regard thereto.
10.11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
10.12. Section Headings. The section and subsection headings in this
Agreement are used solely for convenience of reference, do not constitute a part
of this Agreement, and shall not affect its interpretation.
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10.13. References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
Unless a particular context clearly requires otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection of this Agreement.
10.14. Controlling Law. THIS AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
10.15. Jurisdiction and Process. In any action between or among any
of the parties, whether arising out of this Agreement or otherwise, (a) each of
the parties irrevocably consents to the exclusive jurisdiction and venue of the
federal and state courts located in the Commonwealth of Pennsylvania; (b) if any
such action is commenced in a state court, then, subject to applicable law, no
party shall object to the removal of such action to any federal court located in
the Commonwealth of Pennsylvania; (c) each of the parties irrevocably waives the
right to trial by jury; (d) each of the parties irrevocably consents to service
of process by first class certified mail, return receipt requested, postage
prepaid, to the address at which such party is to receive notice in accordance
with Section 10.2; and (e) the prevailing parties shall be entitled to recover
their reasonable attorney's fees (including, if applicable, charges for in-house
counsel) and court costs from the other parties.
10.16. No Third-Party Beneficiaries. No provision of this Agreement
is intended to or shall be construed to grant or confer any right to enforce
this Agreement, or any remedy for breach of this Agreement, to or upon any
Person other than the parties hereto, including, but not limited to, any
customer, prospect, supplier, employee, contractor, salesman, agent or
representative of Sellers.
10.17. Neutral Construction. The parties have negotiated this
Agreement and all of the terms and conditions contained in this Agreement in
good faith and at arms' length, and each party has been represented by counsel
during such negotiations. No term, condition, or provision contained in this
Agreement shall be construed against any party or in favor of any party (i)
because such party or such party's counsel drafted, revised, commented upon, or
did not comment upon, such term, condition, or provision; or (ii) because of any
presumption as to any inequality of bargaining power between or among the
parties. Furthermore, all terms, conditions, and provisions contained in this
Agreement shall be construed and interpreted in a manner which is consistent
with all other terms, conditions, and provisions contained in this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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EACH PARTY HAS CAUSED THIS AGREEMENT TO BE EXECUTED ON ITS BEHALF BY A DULY
AUTHORIZED OFFICER, AS OF THE DATE FIRST STATED ABOVE.
SELLERS:
CRW Financial, Inc.
By: /s/ Xxxxxxxx X. Xxxxxxxx
----------------------------------
Title: CFO
----------------------------
KAPLAN & XXXXXX, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
-----------------------------------
Title: CFO
-----------------------------
BUYING COMPANIES
CRWF ACQUISITION, INC. K&K ACQUISITION, INC.
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------ ---------------------------------
Title: President Title: President
------------------------------ ---------------------------
NCO GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Title: President
------------------------------
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