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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
==================================
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
==================================
Date of Report (Date of earliest event reported): November 30, 1998
NCO GROUP, INC.
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(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Pennsylvania 0-21639 23-2858652
- ------------------------------------- --------------------------------- --------------------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
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515 Pennsylvania Avenue
Fort Washington, Pennsylvania 19034
-----------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (215) 793-9300
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Item 2. Acquisition or Disposition of Assets.
On November 30, 1998, MSC Funding, Inc., a Delaware corporation
("Buyer"), a wholly-owned subsidiary of NCO Group, Inc. ("NCO"), purchased all
of the outstanding stock of Medaphis Services Corporation, a wholly owned
subsidiary of Medaphis Corporation, for $107.5 million in cash, plus an earn-out
of up to $10.0 million based on the acquired company achieving certain
operational targets during 1999. Medaphis Services Corporation, together with
its subsidiary AssetCare, Inc. ("MSC"), is one of the largest providers of
accounts receivable management services and business cosourcing services to
hospitals in the United States. MSC has 31 locations and provides services to
approximately 2,500 clients.
MSC's revenues for the fiscal year ended December 31, 1997 and the nine
months ended September 30, 1998 were $96.7 million and $78.1 million,
respectively. Management believes that the acquisition of MSC will significantly
enhance NCO's market position as a leading provider of accounts receivable
management services to the healthcare sector.
The purchase price was determined by negotiations between the parties.
The cash purchase price was paid using borrowings under NCO's credit agreement
with Mellon Bank. See Item 5.
Item 5. Other Events.
Agreement to acquire JDR Holdings, Inc.
- ---------------------------------------
On November 2, 1998, NCO signed a definitive agreement to acquire JDR
Holdings, Inc. ("JDR"), a leading provider of technology-based outsourcing and
accounts receivable management services.
NCO will issue approximately 3.7 million shares of NCO common stock for
all outstanding shares of JDR. After the transaction is completed, JDR
shareholders will own approximately 17% of the combined company. JDR's revenues
for the fiscal year ended December 31, 1997 and the nine months ended September
30, 1998 were $33.3 million and $38.2 million, respectively. The transaction is
expected to be accounted for as a pooling of interests and treated as a tax
free-reorganization.
The acquisition, which is subject to shareholder approval of both
companies, is expected to close in the first quarter of 1999.
Amendment to Credit Agreement
- -----------------------------
On November 30, 1998, NCO's credit agreement with Mellon Bank, N.A.,
for itself and as administrative agent for other participating lenders, was
amended to, among other things, increase NCO's credit facility to provide for
borrowings up to $200 million consisting of a term loan of $125 million and a
revolving credit facility of up to $75 million. Borrowings bear interest at a
rate equal to, at the option of NCO, Mellon Bank's prime rate (7.75% at November
30, 1998) or LIBOR plus a margin ranging from 1.25% to 2.25% depending on NCO's
consolidated funded debt to EBITDA ratio (LIBOR was 5.28 % at November 30,
1998). Borrowings are collateralized by substantially all the assets of NCO and
are payable upon the expiration of the five year term, except that certain
quarterly payments on the term loan are payable beginning on September 30,
1999. The credit agreement contains certain financial covenants such as
maintaining minimum working capital and net worth requirements and includes
restrictions on, among other things, capital expenditures and distributions to
shareholders.
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Risks Associated with Pending and Recent Acquisitions.
- ------------------------------------------------------
The businesses acquired by NCO in 1998 and to be acquired in the
pending JDR merger had combined revenues of $224.5 million in 1997 compared to
NCO's revenue of $85.3 million in 1997. NCO is currently in the process of
completing the integration of the acquisitions made in 1998. There can be no
assurance that NCO will successfully consummate the JDR merger. The integration
of MSC and JDR could divert management's attention from the daily operation of
NCO, require additional management, operational and financial resources, and
place significant demands on NCO's management and infrastructure. There can be
no assurance that the recently acquired businesses, the MSC acquisition and the
pending JDR merger will be successfully integrated with NCO, that NCO will be
able to realize operating efficiencies or eliminate redundant costs, or that any
or all of such businesses will be operated profitably. Further, there can be no
assurance that clients of the acquired companies will continue to do business
with NCO, or that NCO will be able to retain key employees of the acquired
companies. In addition, there can be no assurance that the acquired companies
will not have additional liabilities or contingencies that were unanticipated by
NCO at the time of the acquisitions.
Item 7. Financial Statements and Exhibits.
The following exhibits are being filed as part of this report:
(a) Financial Statements of Businesses Acquired
It is impracticable to provide any financial
statements which may be required for MSC at
this time. Any required financial statements
will be filed as an amendment to this Form
8-K as soon as practicable, but not later
than February 13, 1999.
(b) Pro Forma Financial Information.
It is impracticable to provide any pro forma
financial information which may be required
for MSC at this time. Any required pro forma
financial information will be filed as an
amendment to this Form 8-K as soon as
practicable, but not later than February 13,
1999.
(c) Exhibits
Number Title
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1. Amended and Restated Stock Purchase Agreement by and
between NCO and Medaphis Corporation dated as of
October 15, 1998 as amended and restated on November
30, 1998. NCO will furnish to the Securities and
Exchange Commission a copy of any omitted schedule
upon request.
-2-
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2. Third Amended and Restated Credit Agreement dated as
of November 30, 1998 by and among NCO, its U.S.
Subsidiaries, the Financial Institutions listed
therein as Lenders and Mellon Bank, N.A. as
administrative agent. NCO will furnish to the
Securities and Exchange Commission a copy of any
omitted schedule upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NCO GROUP, INC.
By: /s/ Steven L. Winokur
---------------------------
Vice President, Finance
and Chief Financial Officer
Date: December 15, 1998
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AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and between
MEDAPHIS CORPORATION
and
NCO GROUP, INC.
dated as of October 15, 1998
as amended and restated on November 30, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I
PURCHASE AND SALE OF THE SHARES ......................................1
Section 1.1 Purchase and Sale ...................................1
Section 1.2 Consideration .......................................1
Section 1.3 Closing .............................................2
Section 1.4 Deliveries by Seller ................................2
Section 1.5 Deliveries by Buyer .................................3
Section 1.6 Closing Balance Sheet ...............................3
Section 1.7 Post Closing Adjustment .............................3
Section 1.8 Earn-Out Payment ....................................4
ARTICLE II
RELATED MATTERS ......................................................6
Section 2.1 Use of Seller's Name and Logo .......................6
Section 2.2 Books and Records of the Company ....................7
Section 2.3 No Ongoing or Transition Services ...................7
Section 2.4 Intercompany Accounts ...............................8
Section 2.5 Distributions .......................................8
Section 2.6 Service Contracts ...................................8
Section 2.7 Long Distance Telephone Service .....................8
Section 2.8 Certain Insurance Matters ...........................8
Section 2.9 Certain Accounts Receivable .........................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER .............................9
Section 3.1 Organization ........................................9
Section 3.2 Authorization .......................................9
Section 3.3 Common Stock .......................................10
Section 3.4 Ownership of the Common Stock ......................10
Section 3.5 Consents and Approvals: No Violations ..............10
Section 3.6 Financial Statements ...............................11
Section 3.7 Absence of Undisclosed Liabilities .................11
Section 3.8 Absence of Material Adverse and Other Changes ......11
Section 3.9 Title, Ownership and Related Matters ...............11
Section 3.10 Leases .............................................12
Section 3.11 Intellectual Property ..............................13
Section 3.12 Computer Software ..................................13
Section 3.13 Litigation .........................................13
Section 3.14 Compliance with Applicable Law .....................14
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Section 3.15 Certain Contracts and Arrangements .................14
Section 3.16 Employee Benefit Plans: ERISA ......................14
Section 3.17 Taxes ..............................................15
Section 3.18 Certain Fees .......................................16
Section 3.19 Operations Prior to and Including the Closing ......16
Section 3.20 Debt Collection Licenses ...........................18
Section 3.21 Employee Relations .................................18
Section 3.22 Accounts Receivable ................................18
Section 3.23 Suppliers and Customers ............................19
Section 3.24 Insurance ..........................................19
Section 3.25 Questionable Payments ..............................19
Section 3.26 Full Disclosure ....................................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER .............................19
Section 4.1 Organization and Authority of Buyer ................19
Section 4.2 Consents and Approvals; No Violations ..............20
Section 4.3 Availability of Funds ..............................20
Section 4.4 Litigation .........................................20
Section 4.5 Certain Fees .......................................21
ARTICLE V
COVENANTS ...........................................................21
Section 5.1 Conduct of the Company's Business..................21
Section 5.2 Access to Information ..............................21
Section 5.3 Consents ...........................................22
Section 5.4 Best Efforts .......................................22
Section 5.5 Public Announcements ...............................22
Section 5.6 Covenant to Satisfy Conditions .....................22
Section 5.7 Employees; Employee Benefits .......................23
Section 5.8 Certain Tax Matters ................................24
Section 5.9 Proceedings ........................................29
Section 5.10 Continued Effectiveness of Representations and
Warranties of Corporation ..........................29
Section 5.11 No Shopping ........................................29
Section 5.12 Hart-Scott-Rodino Filings ..........................29
Section 5.13 Releases ...........................................29
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES ............................30
Section 6.1 Conditions to Each Party's Obligation ..............30
Section 6.2 Conditions to Obligations of Seller ................30
Section 6.3 Conditions to Obligations of Buyer .................31
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ARTICLE VII
TERMINATION, AMENDMENT; WAIVER ......................................32
Section 7.1 Termination ........................................32
Section 7.2 Procedure and Effect of Termination.................33
Section 7.3 Amendment, Modification and Waiver .................33
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS: INDEMNIFICATION ........................33
Section 8.1 Survival of Representations and Warranties .........33
Section 8.2 Seller's Agreement to Indemnify ....................34
Section 8.3 Buyer's Agreement to Indemnify .....................34
Section 8.4 General Provisions .................................35
Section 8.5 Third Party Indemnification ........................36
ARTICLE IX
RESTRICTIVE COVENANTS OF THE SELLERS ................................36
Section 9.1 Certain Acknowledgments ............................36
Section 9.2 Nondisclosure Covenants ............................37
Section 9.3 Noncompetition Covenants ...........................38
Section 9.4 Nonsolicitation ....................................38
Section 9.5 Certain Exclusions .................................38
Section 9.6 Enforcement of Covenants ...........................39
Section 9.7 Scope of Covenants .................................39
ARTICLE X
MISCELLANEOUS .......................................................39
Section 10.1 Fees and Expenses...................................39
Section 10.2 Further Assurances .................................39
Section 10.3 Notices ............................................39
Section 10.4 Severability .......................................41
Section 10.5 Binding Effect; Assignment .........................41
Section 10.6 No Third Party Beneficiaries .......................41
Section 10.7 Interpretation .....................................41
Section 10.8 Jurisdiction and Consent to Service ................42
Section 10.9 Entire Agreement ...................................42
Section 10.10 Governing Law ......................................42
Section 10.11 Specific Performance ...............................42
Section 10.12 Counterparts .......................................42
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AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
------------------------
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT is made and dated as
of October 15, 1998 and is amended and restated on November 30, 1998 (the
"Agreement"), by and between Medaphis Corporation, a Delaware corporation
("Seller"), and NCO Group, Inc., a Pennsylvania corporation ("Buyer").
WHEREAS, pursuant to the terms and conditions of this Agreement, Seller
desires to sell to Buyer, and Buyer desires to purchase from Seller, 100 shares
(the "Shares") of common stock, par value $1.00 per share (the "Common Stock"),
of Medaphis Services Corporation, a Georgia corporation and a wholly-owned
subsidiary of Seller (the "Company"), representing all of the issued and
outstanding capital stock of the Company.
WHEREAS, Seller and Buyer wish to make an election under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended, (the "Code"), to
treat the transaction for federal income tax purposes (and for state and local
tax purposes, where a comparable election is allowable) as the deemed sale of
the Company's assets in connection with a complete liquidation of the Company
pursuant to Section 332 of the Code.
WHEREAS, immediately before the sale of the Shares to Buyer, the
Company will adopt a plan of complete liquidation within the meaning of Section
332 of the Code and, pursuant to such plan of complete liquidation, will
distribute to Seller (a) the stock of National Healthcare Technologies, Inc.
("NHTI") that is owned by the Company, which stock represents all of the issued
and outstanding stock of NHTI, and (b) all assets related solely to the
operation of the print and mail operation of the Company (the "Laser Center").
WHEREAS, the parties have entered into a Stock Purchase Agreement dated
as of October 15, 1998 and desire to amend and restate such agreement in its
entirety as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
below, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
Section 1.1 Purchase and Sale. Subject to the terms and conditions of
this Agreement, at the Closing provided for in Section 1.3 hereof (the
"Closing"), Seller will sell, transfer and deliver to Buyer, and Buyer will
purchase, acquire and accept from Seller, the Shares.
Section 1.2 Consideration. Subject to the terms and conditions of this
Agreement, in consideration of the aforesaid sale, transfer and delivery of the
Shares, Buyer shall pay to Seller a
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total purchase price equal to (a) One Hundred and Seven Million Five Hundred
Thousand Dollars ($107,500,000) (the "Base Purchase Price"), plus or minus (as
applicable) (b) the amount of the Post-Closing Adjustment (as defined in Section
1.7), if any, plus (c) the amount of the Earn-Out Payment (as defined in Section
1.8), if any, (the Base Purchase Price, plus or minus (as applicable) any
Post-Closing Adjustment, plus any Earn-Out Payment is referred to as the
"Purchase Price"). The Base Purchase Price shall be paid to Seller in cash by
wire transfer of immediately available funds to such bank account as shall be
designated by Seller in writing not less than two business days prior to the
Closing.
Section 1.3 Closing . The Closing of the transactions contemplated by
this Agreement shall take place on November 30, 1998, provided that all of the
conditions to Closing set forth in Article VI hereof are satisfied or waived,
or, in the event that such conditions are not then satisfied or waived, the
third business day following the satisfaction or waiver of all of such
conditions, at 9:00 a.m., local time, at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, New York, or on such other date
and at such other time or place as the parties may agree. The date of the
Closing is sometimes referred to herein as the "Closing Date". The transactions
contemplated by this Agreement shall be effective as of the close of business on
the Closing Date.
Section 1.4 Deliveries by Seller . At the Closing, Seller will deliver
or cause to be delivered to Buyer (unless delivered previously) the following:
(a) The stock certificate or certificates representing the
Shares, accompanied by stock powers duly executed in blank or duly executed
stock transfer forms or instruments of transfer which validly transfer title of
the Shares;
(b) The resignations of all members of the Board of Directors
of the Company;
(c) The stock books, ledger books and corporate seal of the
Company and each Subsidiary (as hereinafter defined);
(d) The books and records of the Company and each Subsidiary
to the extent provided in Section 2.2 hereof;
(e) An opinion of counsel, in form reasonably acceptable to
Buyer, from Skadden, Arps, Slate, Meagher & Flom LLP as to the matters
reasonably agreed to by the parties;
(f) All Releases (as defined in Section 5.13); and
(g) All other documents, certificates, instruments and
writings required or reasonably requested to be delivered by Seller at or prior
to the Closing pursuant to this Agreement or otherwise required in connection
herewith.
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Section 1.5 Deliveries by Buyer. At the Closing, Buyer will deliver or
cause to be delivered to Seller (unless previously delivered) the following:
(a) The Base Purchase Price referred to in Section 1.2 hereof,
and, if applicable, the Earn-Out Payment pursuant to Section 1.8(a);
(b) An opinion of counsel, in form reasonably acceptable to
Seller, from Blank Rome Comisky & McCauley LLP as to the matters reasonably
agreed to by the parties; and
(c) All other documents, certificates, instruments or writings
required or reasonably requested to be delivered by the Buyer at or prior to the
Closing pursuant to this Agreement or otherwise required in connection herewith.
Section 1.6 Closing Balance Sheet . Buyer shall cause the Company to
close the books and accounts of the Company as of the Closing Date. Buyer will
deliver to Seller as soon as reasonably practicable, but in no event later than
forty-five (45) business days after Closing, a balance sheet of the Company and
Subsidiaries as of the Closing Date (the "Closing Balance Sheet"), which has
been audited by PricewaterhouseCoopers LLP (the "Accountants"). The Closing
Balance Sheet will be prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP") and consistent with the presentation of
the balance sheet contained in the Unaudited Financial Statements (as
hereinafter defined) as of and for the period ended June 30, 1998. The Closing
Balance Sheet shall include accruals for all obligations of the Company and its
Subsidiaries including, but not limited to, for federal, state and local taxes
(including income taxes) as well as accruals including, but not limited to, for
payroll taxes, employee benefits, workers' compensation insurance premiums and
deposits, wages, bonuses, vacation pay, sick pay and "comp" time, in all cases
as if there had been a closing of the books on the Closing Date. Buyer shall
give the representatives of the Seller reasonable access to the Company's books
and records for the purpose of examining the Closing Balance Sheet.
Section 1.7 Post Closing Adjustment. If the Tangible Net Worth (as
hereinafter defined) of the Company and its Subsidiaries as reflected on the
Closing Balance Sheet is less than the Target TNW (as hereinafter defined), the
amount of such difference shall be the Post Closing Adjustment payable by Seller
to Buyer. If the Tangible Net Worth of the Company and its Subsidiaries as
reflected on the Closing Balance Sheet is greater than the Target TNW, the
amount of such difference shall be the Post Closing Adjustment payable by Buyer
to Seller. If any Post Closing Adjustment is required, the adjustment shall be
paid on a date (the "Payment Date") within three (3) business days after the
Closing Balance Sheet is finally determined pursuant to Section 1.6. The amount
of any Post Closing Adjustment shall be paid by wire transfer in immediately
available funds to an account or accounts designated by Buyer if the Post
Closing Adjustment is payable by Seller to Buyer, or by Seller if the Post
Closing Adjustment is payable by Buyer to Seller. "Tangible Net Worth" means the
total shareholders equity of the Company and its Subsidiaries on a consolidated
basis as reflected on the Closing Balance Sheet:
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(i) less intangibles (including goodwill, deferred
financing acquisition costs, the book value of
internally developed software and deferred loan costs)
of the Company and its Subsidiaries reflected on the
Company's Closing Balance Sheet;
(ii) plus any amounts for deferred or current tax
liabilities reflected on the Company's Closing Balance
Sheet;
(iii) less any balance due from Seller reflected on the
Company's Closing Balance Sheet;
(iv) less non-restricted/non-client cash and
non-restricted/non-client cash equivalents reflected
on the Company's Closing Balance Sheet;
(v) less an amount equal to the total accounts receivable
net of applicable bad debt reserve reflected on the
Company's Closing Balance Sheet in connection with
Allegheny Health, Education and Research Foundation;
(vi) plus any balance due to the Seller reflected on the
Company's Closing Balance Sheet; and
(vii) less amounts for deferred or current tax assets
reflected on the Company's Closing Balance Sheet.
"Target TNW" means the sum of $32,426,000 subject to adjustment to reflect the
additional amounts of: (i) unbilled accounts receivable as of June 30, 1998,
(ii) if required by GAAP to be accrued, any accrued sick time as of June 30,
1998, and (iii) any accrued bonus receivable under the Columbia Contract (as
defined in Section 1.8) as of June 30, 1998, which would have appeared for such
items in the balance sheet contained in the Unaudited Financial Statements as of
and for the period ended June 30, 1998 if such balance sheet had been prepared
consistent with the presentation of such items in the Closing Balance Sheet and
using the same methodologies and assumptions used in the Closing Balance Sheet.
The amount of any increase to the Target TNW shall be determined by the
Accountants and shall accompany the Closing Balance Sheet.
Section 1.8 Earn-Out Payment . The "Earn-Out Payment" means that
amount, if any, payable by Buyer to Seller pursuant to Section 1.8(a) or
Section 1.8(b) below.
(a) In the event that prior to six months after the Closing Date, the
Company renews the Agreement for Collection Services between Galen Health Care,
Inc. and AssetCare, Inc. dated March 28, 1996 (the "Columbia Contract") on
substantially the same terms and conditions, including a guarantee period of not
less than two (2) years (the "Renewal") and provides written evidence of the
Renewal to Buyer reasonably satisfactory to Buyer, Buyer shall pay Seller an
Earn-Out Payment of Ten Million Dollars ($10,000,000) with Interest, as defined
below, if applicable, in cash by wire
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transfer of immediately available funds to such bank account as shall be
designated by Seller in writing. Such payment shall occur upon the later of the
Closing Date or three (3) business days after the receipt of written evidence of
the Renewal. In the event that Buyer pays the Earn-Out Payment pursuant to
Section 1.8(a), no Earn-Out Payment shall be payable pursuant to Section 1.8(b).
(b) In the event that the Company does not obtain the Renewal of the
Columbia Contract on or before six months after the Closing Date (as provided in
Section 1.8(a)), Buyer shall pay Seller an Earn-Out Payment, together with
accrued interest thereon from the Closing Date at 5.5% per annum ("Interest"),
equal to the sum of (i) the Retained Hospital Accounts Amount (as hereinafter
defined), if any, plus (ii) one-half of the Lost Hospital Accounts Net Income
(as hereinafter defined), if any. Any Earn-Out Payment payable pursuant to this
Section 1.8(b) shall not exceed Ten Million Dollars ($10,000,000) plus Interest
(the "Maximum Earn-Out Payment"). The Earn-Out Payment shall be paid by Buyer to
Seller within three (3) business days after the Earn-Out Statement is finalized
pursuant to Section 1.8(e) in cash by wire transfer of immediately available
funds to such bank account as shall be designated by Seller in writing.
(c) The "Retained Hospital Account Amount" shall equal the result of
the following formula:
[ Test Period Net Revenues
------------------------ x $15,000,000 ] - $5,000,000
Base Period
"Base Period Net Revenues" shall equal the net revenues received by the
Company during the twelve (12) calendar months ending on the Closing Date (the
"Base Period") from the Closing Date Columbia Hospital Accounts (as hereinafter
defined). "Closing Date Columbia Hospital Accounts" means those accounts from
all Columbia/HCA hospitals placing such accounts with the Company for collection
under the Columbia Contract prior to the expiration of the Columbia Contract.
For the purpose of the Base Period Net Revenues calculation, the net revenues
from any Closing Date Columbia Hospital Account from any Columbia/HCA hospital
which began placing accounts with the Company for collection after the beginning
of the Base Period shall be annualized by multiplying the net revenues for such
new Closing Date Columbia Hospital Account by a fraction equal to 365 divided by
the number of days from the starting date of such new Closing Date Columbia
Hospital Account to the Closing Date. "Test Period Net Revenues" shall equal the
net revenues received by the Company during the twelve (12) calendar months
ending on the first anniversary (the "Anniversary Date") of the Closing Date
(the "Test Period") from the Anniversary Date Columbia Hospital Accounts (as
hereinafter defined). "Anniversary Date Columbia Hospital Accounts" means those
accounts from all Columbia/HCA hospitals which have placed new accounts with the
Company for collection within the forty-five (45) day period prior to the first
Anniversary of the Closing Date and which have not notified the Company of their
intent to terminate their
5
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relationship with the Company. For the purpose of the Test Period Net Revenues
calculation, the net revenues from any Anniversary Date Columbia Hospital
Account from any Columbia/HCA hospital which began placing accounts with the
Company after the beginning of the Test Period shall be annualized by
multiplying the net revenues for such new Anniversary Date Columbia Hospital
Account by a fraction equal to 365 divided by the number of days from the
starting date of such new Closing Date Columbia Hospital Account to the
Anniversary Date.
(d) The "Lost Hospital Accounts Net Income" shall equal the Company's
net income arising from Lost Hospital Accounts (as hereinafter defined) during
the Test Period, calculated in accordance with GAAP. "Lost Hospital Accounts"
means those accounts from Columbia/HCA hospitals for which the Company is
performing accounts receivable services during the Test Period but which are not
placing or have not placed new accounts with the Company within the period of 45
days prior to the Anniversary Date or which have notified the Company of their
intent to terminate their relationship with the Company; provided, however, that
if the Company's recovery rate for such hospital's accounts during the Test
Period is lower by 10% than the Company's recovery rate for such hospital during
the Base Period and such hospital did not have a material change in the
composition of its placements, such accounts shall not be Lost Hospital Accounts
but shall be included in Anniversary Date Columbia Hospital Accounts.
(e) Within thirty (30) business days after the Anniversary Date, Buyer
shall prepare a statement (the "Earn-Out Statement") showing a clear and
detailed calculation of the Earn-Out Payment described in Section 1.8(b) and
deliver the Earn-Out Statement to Seller. Seller shall notify the Buyer, in
reasonable detail, of any objections to the Earn-Out Statement within thirty
(30) business days after Seller receives the Earn-Out Statement and shall be
provided reasonable access to the Company's books and records for the purpose of
examining the Earn-Out Statement. If Seller does not notify Buyer of any such
objections by the end of such thirty (30) business day period, then the Earn-Out
Statement, as prepared by Buyer, shall be considered final on the last day of
such thirty (30) business day period or on such earlier date as Seller notifies
Buyer that it has no objection. If Seller does notify Buyer of any such
objections by the end of such thirty (30) business day period, and Buyer and
Seller are unable to resolve their differences within thirty (30) business days
thereafter, then the dispute shall be submitted to the Accountant for
resolution, with the costs thereof being shared equally, and the Accountant
shall be instructed to deliver a final Earn-Out Statement to the Buyer and
Seller as soon as possible.
ARTICLE II
RELATED MATTERS
Section 2.1 Use of Sellers Name and Logo. It is expressly agreed that
Buyer is not purchasing, acquiring or otherwise obtaining any right, title or
interest in the names, "Medaphis", "Medaphis Corporation", or "Medaphis Services
Corporation", or any trade names, trademarks, identifying logos or service marks
related thereto or employing the words "Medaphis" or any part or variation of
any of the foregoing or any confusingly similar trade name, trademark or logo
(collectively, the "Seller's Trademarks and Logos"). Buyer agrees that within
thirty (30) days after
6
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the Closing Date, it will file an amendment to the Company's Certificate of
Incorporation amending the Company's name so as to remove the name "Medaphis"
therefrom and that none of Buyer, the Company nor any of its affiliates shall
make any use of the Seller's Trademarks and Logos from and after the Closing
Date and will remove and destroy as quickly as is practicable all items,
including, without limitation, all signage, stationery, invoices or other
letterhead, bearing Seller's Trademarks and Logos. Notwithstanding the
foregoing, Buyer, the Company and their affiliates shall have the right to use
Seller's Trademarks and Logos used in the business of the Company prior to
Closing for a period of six (6) months following the Closing Date including,
without limitation, the right to use signage, all pre-Closing Date inventories
of stationery, invoices, or other letterhead bearing Seller's Trademarks and
Logos and the right to use "Medaphis Services Corporation" on Company's licenses
and permits. For a period of twelve (12) months following the Closing Date,
Buyer, the Company and their affiliates shall have the right to state orally
that they were "formerly known as Medaphis Services Corporation" or
substantially similar phrases and if required by law in continued collection
efforts, to use such phrases on stationery, invoices or other letterhead.
Section 2.2 Books and Records of the Company . Seller agrees to deliver
to Buyer at or as soon as practicable after the Closing, as requested by Buyer,
all books and records of the Company and Subsidiaries (including, but not
limited to, correspondence, memoranda, books of account, personnel and payroll
records and the like), except for the Tax Returns (as defined in Section 3.17(c)
hereof) relating to the Company. Any information which would be required to
compute the Tax obligations ("Tax Information") of the Company and its
Subsidiaries which is not delivered to Buyer pursuant hereto will be preserved
by Seller for a period of at least seven (7) years following the Closing and
Seller will provide Buyer and its authorized representatives to have reasonable
access to, and examine and make copies of, in each case, during normal business
hours, all such Tax Information as reasonably requested by Buyer. All books and
records delivered by Seller to Buyer will be preserved by Buyer for a period of
at least seven (7) years following the Closing and Buyer will permit Seller and
its authorized representatives to have reasonable access to, and examine and
make copies of, all such books and records as reasonably requested by Seller.
Section 2.3 No Ongoing or Transition Services. For a period not to
exceed 120 days after Closing (60 days in the case of employee benefits), Seller
shall provide Company, its Subsidiaries and their respective clients such
transition services as reasonably requested by Buyer no later than three (3)
business days prior to the Closing Date, including without limitation,
accounting, general ledger, payroll and employee benefits, computer systems and
support, that was provided to the Company, the Subsidiaries and their respective
clients when the Company was owned by Seller prior to the Closing Date. The fees
and charges for the services provided by the Seller shall be based on Seller's
actual out-of-pocket costs to provide such services, without markup. Except as
provided in this Section 2.3, or as otherwise agreed to in writing by Seller and
Buyer, at the Closing, all data processing, accounting, insurance, banking,
personnel, legal, communications and other products or services provided to the
Company or any subsidiary of the Company by Seller or any affiliate of the
Seller, including any agreements or understandings (written or oral) with
respect thereto, will terminate.
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Section 2.4 Intercompany Accounts. On or prior to the Closing Date,
all intercompany accounts between the Company, on the one hand, and Seller and
its affiliates, on the other hand, shall, at Seller's option, be cancelled or
settled. Except as provided in Section 1.7, no adjustment shall be made to the
Purchase Price as a result of any such cancellation or settlement.
Section 2.5 Distributions. The parties agree that Seller shall have the
right, at or prior to the Closing, to cause the Company to distribute cash to
the Seller or its affiliates, by one or more cash dividends, repurchase of
existing stock and/or other distributions provided, however, that Seller shall
not distribute any amounts which represent funds collected by the Company or any
Subsidiary on behalf of and belonging to customers. Except as provided in
Section 1.7, no adjustment shall be made to the Purchase Price as a result of
any such dividends, repurchases or other distributions paid by Seller.
Section 2.6 Service Contracts. Prior to Closing, the Company shall
enter into Service Contracts with Seller or subsidiaries of Seller in form
reasonably satisfactory to Buyer providing for the provision of services and
other terms and conditions, all as summarized on Exhibit 2.6 attached hereto
(collectively, the "Service Contracts"). The Service Contracts shall contain,
among other things, a right of audit permitting Company or Buyer to audit the
costs charged by Seller.
Section 2.7 Long Distance Telephone and Data Service.
Section 2.7.1 Until January 31, 2000, the Company shall use
the long-distance telephone service provider currently used by the Seller and
Company provided that such service is adequate for the needs of the Company and
provided that Seller shall reimburse Buyer for an amount equal to the difference
between (i) the amount paid by Buyer and Company to the provider or the Seller
in reimbursement for such services and (ii) the amount Company and Buyer would
have paid under Buyer's long-distance telephone service provider agreement as
from time to time in effect taking into consideration the additional volume and
applicable pricing (including any volume discounts) resulting under such
agreement if Buyer and Company had placed such long-distance telephone calls
under such agreement. Company shall arrange for the long-distance telephone
service provider to bill Company separately for such long-distance telephone
service. Buyer shall cause the Company to pay all such bills in the ordinary
course.
Section 2.7.2 Leased Data Lines Company currently utilizes 87
frame relay circuits to connect with remote offices and clients as follows:
Sixty (60) circuits are currently online (live) with MCI/Worldcom; Seller shall
cause these circuits to be transferred to the Buyer's MCI/Worldcom contract as
soon as practicable. Twenty-seven (27) circuits are currently online (live) with
AT&T; Seller shall cause these circuits to continue to be made available for
usage by Company until Buyer can complete a conversion plan migrating them to
MCI/Worldcom by June 30, 1999. Management for both the MCI/Worldcom and AT&T
circuits will be provided by Seller until such time as they are transferred to
Company technical staff no later than June 30, 1999. Seller will provide all
necessary documentation on these existing circuits (both AT&T and MCI/Worldcom)
to enable a smooth transition to Buyer and Company. If any old MCI/Worldcom
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circuits are still in place where new AT&T data service has been installed,
these circuits should not be cancelled to speed the migration of the AT&T
circuits back to the Worldcom network. In the event Seller or Company sustain a
penalty from the cancellation of these data circuits, Buyer or Seller, as
applicable, will reimburse Seller or Company, respectively, up to one-half of
such penalty but in no event shall Buyer or Company be liable for more than than
$70,000.
Section 2.8 Certain Insurance Matters. Seller shall maintain for the
benefit of Company and Subsidiary its current errors and omissions insurance
policy covering acts or omissions of Company and Subsidiary prior to the Closing
Date in full force and effect through March 31, 1999 with the same level of
coverage as of October 15, 1998. Seller shall provide prompt written notice to
Buyer in the event that Seller receives notice that such policy has been or will
be canceled or terminated prior to March 31, 1999. Seller shall maintain for the
benefit of Company and Subsidiary its current workers' compensation stop-loss
insurance policy covering workers' compensation claims against Company and
Subsidiary resulting from events occurring prior to the Closing Date in full
force and effect and with the same level of coverage through the date that all
such claims are resolved without further right of appeal.
Section 2.9 Certain Accounts Receivable. Buyer shall cause Company and
Subsidiary to remit to Seller any amounts received by Company or Subsidiary
after the Closing Date in payment of accounts receivable owed as of the Closing
Date by Allegheny Health, Education and Research Foundation to Company or
Subsidiary with respect to services provided after the date Allegheny Health,
Education and Research Foundation filed its petition for relief under Chapter 11
of the United States Bankruptcy Code to the extent such post-petition accounts
receivable are reflected on the Closing Balance Sheet. Buyer, Company and
Subsidiary shall not be required to take any actions to collect any such
amounts.
Section 2.10 Software Licenses As soon as practicable following
Closing, Seller shall provide to Buyer evidence reasonably satisfactory to Buyer
of software licensing compliance and transferability and/or make compliant and
transfer licenses of software that are used to conduct the business of Company
or AssetCare as identified by the parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
Section 3.1 Organization. Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate and
other power and corporate authority to own, lease and operate its properties and
to carry on its operations as and where now being conducted. Each of the Company
and its Subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by
the Company or such Subsidiary or the nature of the business conducted by the
Company or such Subsidiary makes such qualification necessary, which
jurisdictions are listed on Schedule 3.1, except in any such
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jurisdictions where the failure to be so duly qualified or licensed and in good
standing, individually and in the aggregate, would not have a material adverse
effect on the business, results of operations or financial condition of the
Company and its Subsidiaries taken as a whole (a "Material Adverse Effect").
Seller has previously made available to Buyer complete and correct copies of the
Company's and each of the Subsidiaries' Certificate of Incorporation and
By-laws, as currently in effect. Set forth on Section 3.1 of the Disclosure
Schedule being delivered to Buyer by Seller herewith (the "Disclosure Schedule")
is a list of the Company's subsidiaries (the "Subsidiaries"). The Company has no
direct or indirect equity interest in or control of any person other than the
Subsidiaries.
Section 3.2 Authorization. Seller has the corporate power and authority
to execute and deliver this Agreement and consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Seller and no other corporate
proceedings on the part of Seller are necessary to authorize the execution,
delivery and performance of this Agreement or the consummation of the
transactions so contemplated. This Agreement has been duly executed and
delivered by Seller and constitutes, and, when executed and delivered, each of
the other agreements, documents and instruments to be executed and delivered by
Seller pursuant hereto will constitute (assuming in each case the valid
authorization, execution and delivery of such agreement by Buyer), a valid and
binding agreement of Seller, enforceable against Seller in accordance with its
terms, except that (a) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally, and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 3.3 Common Stock. Set forth on Section 3.3 of the Disclosure
Schedule is the number of authorized shares of Common Stock of the Company, par
value $1.00 per share, and, of each of the Subsidiaries and the number of such
shares which are issued and outstanding. All of such shares are validly issued,
fully paid and non-assessable. No other class of capital stock of the Company or
of any Subsidiary is authorized, issued or outstanding. Except as set forth on
Schedule 3.3, the Company owns of record and beneficially all outstanding
capital stock of each of the Subsidiaries free and clear of all liens, claims,
charges, options, security interests or other encumbrances (collectively,
"Encumbrances"). There are no outstanding securities convertible into,
exchangeable for, or carrying the right to acquire, equity or other securities
of the Company or any Subsidiary, nor are there any subscriptions, warrants,
options, rights, contracts, or other arrangements or commitments (other than
this Agreement) which could obligate the Company or any Subsidiary to issue or
Seller to sell any shares of Common Stock or any equity or other securities of
the Company or any Subsidiary.
Section 3.4 Ownership of the Common Stock. Seller is the record and
beneficial owner of the Shares, which comprise all of the issued and outstanding
shares of all classes of capital Stock of the Company. Except as set forth on
Section 3.4 of the Disclosure Schedule, Seller has good title
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to the Shares, free and clear of all Encumbrances.
Section 3.5 Consents and Approvals: No Violations. Except for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended (the "H-S-R Act"), or as set forth in Section 3.5 of the
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation by Seller of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws of the Company, Seller or any Subsidiary; (b) require
any filing with, or the obtaining of any permit, license, authorization, consent
or approval of, any governmental or regulatory authority whether within or
outside the United States (collectively, "Permits"); (c) violate, conflict with
or result in a default (or any event that, with notice or lapse of time or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under, any of the terms, conditions or provisions
of any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement, lease, or other contract or instrument or obligation (collectively,
"Contract") to which the Company, Seller or any Subsidiary is a party or by
which the Company, Seller or any Subsidiary or any of their assets may be bound;
(d) result in the creation or imposition of any Encumbrance upon the assets of
the Company or any Subsidiary, or give to any person any interest or right in
any of the assets or business of the Company or any Subsidiary; or (e) violate
any law, order, injunction, decree, statute, rule or regulation of any
governmental or regulatory authority whether within or outside of the United
States (collectively, "Laws") or any Judgment (as defined in Section 3.13)
applicable to the Company, Seller or any Subsidiary; excluding from the
foregoing clause (c) such violations, conflicts, defaults or rights which would
not have a Material Adverse Effect and would not adversely affect the ability of
Seller to consummate the transactions contemplated by this Agreement.
Section 3.6 Financial Statements. Attached as Schedule 3.6 of the
Disclosure Schedule are copies of the Company's (a) audited (i) balance sheets
as of December 31, 1996 and 1997; (ii) statements of operations for each of the
three years in the period ended December 31, 1997; (iii) statements of
stockholders' equity for each of the three years in the period ended December
31, 1997; and (iv) statements of cash flows for each of the three years in the
period ended December 31, 1997 (the financial statements referred to in clauses
(a)(i)-(iv) and the accompanying notes thereto are referred to herein
collectively as the "Audited Financial Statements"), and (b) unaudited balance
sheet as of June 30, 1998 and statements of operations, stockholders equity and
cash flows for the six months ended June 30, 1997 and 1998 (the financial
statements referred to in clause (b) and the accompanying notes thereto are
referred to herein collectively as the "Unaudited Financial Statements"). The
Audited Financial Statements and the Unaudited Financial Statements
(collectively, the "Financial Statements") present fairly, in all material
respects, the financial position of the Company and the Subsidiaries as of the
respective dates thereof, and the results of operations and cash flows of the
Company and the Subsidiaries for the respective periods indicated, all in
conformity with GAAP, subject, in the case of the Unaudited Financial
Statements, to normal recurring year-end adjustments, the absence of notes, the
exclusion of NHTI and the Laser Center, and exclusive of parent company
allocations as listed in Note 11 to the Company's Financial Statements required
pursuant to Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended. With respect to the Unaudited Financial Statements, in the
opinion of
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management of the Seller, all adjustments, consisting of normal recurring
adjustments considered necessary for a fair presentation of results for the
interim period, have been included.
Section 3.7 Absence of Undisclosed Liabilities. Except (a) for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice, and (b) as otherwise disclosed herein or in
Section 3.7(b) of the Disclosure Schedule, since June 30, 1998 the Company and
its Subsidiaries have not incurred any liabilities or obligations (whether
direct, indirect, accrued or contingent) in excess of $500,000 individually or
in the aggregate.
Section 3.8 Absence of Material Adverse and Other Changes. Except as
set forth in Section 3.8 of the Disclosure Schedule or as otherwise contemplated
by this Agreement, since June 30, 1998 there has been no change in the business,
results of operations or financial condition of the Company or its Subsidiaries
that, individually or in the aggregate, would have a Material Adverse Effect.
Section 3.9 Title, Ownership and Related Matters.
(a) As of the date hereof, neither the Company nor any
Subsidiary owns or holds any option to acquire any real property.
(b) The Company and each Subsidiary has, or will as of the
Closing have, good title to, free and clear of any Encumbrance, or rights by
license, lease or other Contract to use, all properties and assets (or rights
thereto), other than cash, cash equivalents and securities (except for the
Shares) and except as contemplated in Article II of this Agreement, necessary to
permit the Company and each Subsidiary to conduct its business as substantially
currently conducted, except as set forth in Section 3.9(b) of the Disclosure
Schedule. Without limiting the generality of the foregoing, Company has good
title, free and clear of any Encumbrance, to all data and transmission line
equipment used by or necessary to permit the Company or Subsidiary to conduct
its business as substantially currently conducted. All such property and assets
material to the conduct of the business of the Company and each Subsidiary are
in good operating condition and repair, ordinary wear and tear excepted.
Section 3.10 Leases
(a) Section 3.10(a) of the Disclosure Schedule lists, as of
the date hereof, all real property. leases and subleases for space occupied by
the Company or any Subsidiary (collectively, the "Leases"). The Company is the
lessee under all the Leases. True and complete copies of the Leases and all
written amendments and agreements relating thereto have been made available to
Buyer. All of the Leases are valid, binding and enforceable in accordance with
their terms, and neither the Company, nor any Subsidiary (including, without
limitation, with respect to their respective occupancy, maintenance and use of
the property) nor, to the best knowledge of Seller and Company, the other party
to any Lease is in default under such Lease or any applicable Law relating to
the occupancy, maintenance and use of the property, except for defaults, if any,
which would not,
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individually or in the aggregate, have a Material Adverse Effect. No written
notice from any lessor, governmental body or other person has been received by
the Seller, the Company or any Subsidiary of the Company claiming any violation
of, or breach or default under, any lease or Law, or requiring or calling
attention to the need for any work, repairs, construction, alternation or
installations. Except as disclosed in Section 3.10 of the Disclosure Schedule,
neither the Company nor any Subsidiary of the Company has placed or caused to be
placed, and to the best knowledge of the Seller and the Company there were not
and are not any Hazardous Substances (as hereinafter defined) on or under any of
such real property under lease except for Hazardous Substances on or under any
such real property in an amount that would create a liability for clean-up of
such Hazardous Substances of less than $5,000 per property, but in the aggregate
not more than $100,000 for all such real property. "Hazardous Substance" means
(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 real property leased or occupied by Company is located or any United
States Law, and (b) asbestos, polychlorinated biphenyls ("PCBs") and petroleum.
(b) Section 3.10(b) of the Disclosure Schedule lists, as of
the date hereof, all leases or other agreements or rights under which the
Company or any Subsidiary is the lessee of, or holds or operates, any machinery,
equipment, vehicles or other tangible personal property owned by a third party,
except those that are terminable by the Company without penalty on 60 or fewer
days notice or that provide for annual rental payments of less than $25,000.
Section 3.11 Intellectual Property.
(a) Except as set forth in Section 3.11(a) of the Disclosure
Schedule (i) the conduct of the business of the Company does not infringe upon
any Intellectual Property (as defined below) right of any third party, and (ii)
there are no pending or, to the best knowledge of Seller and Company, threatened
proceedings or litigation or other adverse claims by any person against the use
by the Company of any name, corporate name, fictitious name, software,
trademarks, trade names, service marks, service names, logos, assumed names,
copyrights, trade secrets, patents and all registrations, and applications
therefor, which are owned by the Company or used in the operation of the
Company's business as currently conducted (collectively, the "Intellectual
Property"). "Asset Care" is a registered trademark of the Company. All of the
Intellectual Property owned or used by the Company or any Subsidiary and
material to the operation of the Company's business is listed on Section 3.11 of
the Disclosure Schedule.
(b) Except as set forth in Section 3.11(b) of the Disclosure
Schedule, the Company owns free and clear of any Encumbrances or has valid
licenses or other rights to use the Intellectual Property necessary to permit
the Company and its Subsidiaries to conduct their operations as currently
conducted.
Section 3.12 Computer Software. Except as set forth in Section 3.12 of
the Disclosure Schedule, the Company owns free and clear of any Encumbrances or
has valid licenses or other rights to use all computer software programs
necessary to permit the Company and its Subsidiaries
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to conduct their operations as currently conducted, all as indicated in Section
3.12 of the Disclosure Schedule (provided, however, Seller shall not be required
to list any commercially available software under license). Without limiting the
generality of the foregoing, the Company owns, free and clear of any
Encumbrances, the software known as "N-Sure" and the related object code and
source code. With respect to the software developed by the Company or any
Subsidiary, including without limitation N-Sure, and without taking into effect
the impact of data supplied by third parties, and provided that the Company
complies with its internal Year 2000 Compliance Program, each component of such
software that creates, accepts, displays, stores, retrieves, accesses,
recognizes, distinguishes, compares, sorts, manipulates, processes, calculates
or otherwise uses dates or date-related data will not be materially adversely
affected by the impact on dating caused by advent of the year 2000, the advent
of the 21st century, or the transition from the 20th century through the year
2000 and into the 21st century. Seller and the Company have no reason to believe
that any software owned or licensed by the Company which was developed by third
parties will be materially adversely affected by the impact on dating caused by
the advent of the year 2000, the advent of the 21st century, or the transition
from the 20th century through the year 2000 and into the 21st century.
Section 3.13 Litigation. Except as set forth in Section 3.13 of the
Disclosure Schedule, (a) there is no action, suit, litigation proceeding,
arbitration or governmental or regulatory investigation (collectively,
"Proceeding") pending or, to the best knowledge of Seller and Company,
threatened against Seller, the Company or any Subsidiary; (b) there is no
outstanding judgment, order, writ, injunction, fine, citation, award, decree or
other judgment (collectively, "Judgment") of any nature of any court, government
authority or regulatory authority or arbitration tribunal against the Company or
any Subsidiary, or their respective businesses or assets; and (c) no breach of
contract, tort or other claim (whether arising from the operations of the
business or otherwise) by any third party seeking damages in excess of $25,000
has been asserted and is outstanding against the Company or any Subsidiary.
Section 3.14 Compliance with Applicable Law. The Company and each
Subsidiary is in compliance with all Laws applicable to the Company and each
Subsidiary and their operations, except for violations, if any, which would not
have a Material Adverse Effect.
Section 3.15 Certain Contracts and Arrangements. Except as set forth
in Section 3.15 of the Disclosure Schedule, as of the date hereof, neither the
Company nor any Subsidiary is a party to or bound by any written (a) indenture,
mortgage, note, installment obligation, agreement or other instrument or
Contract relating to the borrowing of money by the Company (other than
intercompany accounts which shall be governed by Section 2.4 hereof), or the
guaranty by the Company of any obligation for the borrowing of money; or (b)
other Contracts, including without limitation, purchase orders, or any
enforceable oral Contracts, excluding Contracts that are terminable by the
Company without penalty on 60 or fewer days notice or that provide for annual
receipts or payments of less than $500,000 (which Disclosure Schedule shall be
updated prior to Closing to include such Contracts with annual receipts or
payments of between $200,000 and $500,000). A description of each such oral
Contract is set forth in Section 3.15 of the Disclosure Schedule. Except as set
forth in Section 3.15 of the Disclosure Schedule, all such Contracts (including
any Contracts listed on
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Section 3.19 of the Disclosure Schedule) are valid, binding and enforceable in
accordance with their terms and, to the best knowledge of Seller and Company,
neither the Company nor any other party thereto is in default under any of the
aforesaid Contracts other than such defaults, if any, which would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.16 Employee Benefit Plans: ERISA.
(a) Section 3.16(a) of the Disclosure Schedule lists each
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other material
employee benefit, bonus and fringe benefit plans maintained for the benefit of,
or to which there is an obligation to contribute to by the Company or any trade
or business, whether or not incorporated (an "ERISA Affiliate"), that, together
with the Company would be deemed a "single employer" within the meaning of
Section 4001 of ERISA or Section 414 of the Code, for the benefit of any
employee or former employee of the Company (a "Plan" and collectively, the
"Plans"). Seller has made available to Buyer copies of each of the Plans
including all amendments to date, and true and correct copies of the most
current IRS Form 5500s and any other form or filing required to be submitted to
any governmental agency with respect to such Plans.
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, (i) each of the Plans complies and has been operated in all material
respects with its terms and all applicable Laws including ERISA and the Code as
defined below (and the regulations and rulings thereunder), and (ii) each of the
Plans intended to be "qualified" within the meaning of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), has been determined by
the Internal Revenue Service (the "IRS") to be so qualified and Seller knows of
no fact or set of circumstances that would adversely affect such qualification
prior to the Closing. Seller has made available to Buyer copies of the most
recent determination letter issued by the Internal Revenue Service with respect
to each Plan. None of the Plans is subject to Title IV of ERISA. There are no
pending or, to the best knowledge of Seller or Company, threatened material
claims (other than routine claims for benefits) by, on behalf of or against any
of the Plans or any trusts related thereto. To the best knowledge of Seller and
Company, there are no audits or investigations by any governmental agency which
relate directly or indirectly to the Plans. The Company has made, or will have
made prior to Closing, any payments or contributions required with respect to
such Plans.
(c) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due from Company under any of Company's
Plans, (ii) increase any benefits otherwise payable under any of Company's
Plans, or (iii) result in the acceleration of the time of payment or vesting of
any such benefits to any extent. No event has occurred which will result in
material liability to Company in connection with any employee benefit plan
established, maintained, contributed to or to which there has been an obligation
to contribute (currently or previously) by Company, or an ERISA Affiliate.
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Section 3.17 Taxes.
(a) Except as set forth in Section 3.17 of the Disclosure
Schedule, Seller has (i) timely filed or caused to be filed on a timely basis
with the appropriate taxing authorities all Tax Returns (as defined below)
required to be, filed by or with respect to the Company (including, without
limitation, any income Tax Return required to be filed by any Affiliated Group
(as defined in Section 5.8) with respect to which the Seller and the Company or
any of its Subsidiaries was a member), and (ii) paid or made adequate provision
for the payment of all Taxes (as defined below) owed by Company and/or any other
member of an Affiliated Group (whether or not shown on any Tax Return) for each
taxable period during which Company and its Subsidiaries were members of such
group. Such Tax Returns are true, correct and complete in all material respects.
(b) Except as set forth in Section 3.17 of the Disclosure
Schedule, (i) there are no liens for Taxes with respect to the assets of the
Company or its Subsidiaries except for statutory liens for current Taxes not yet
delinquent and no claims with respect to Taxes are being asserted by any taxing
authority in writing, which individually or in the aggregate would have a
Material Adverse Effect; (ii) all deficiencies asserted in writing as a result
of any examinations by the Internal Revenue Service or any other taxing
authority have been paid and fully settled; (iii) none of the Tax Returns
applicable to the Company or any of its Subsidiaries is currently being audited
or examined by any taxing authority; (iv) there is no unpaid tax deficiency,
determination or assessment currently outstanding against the Company or any
Subsidiary; (v) there are no outstanding agreements or waivers extending the
statute of limitations relating to the assessment of Taxes applicable to the
Company or any Subsidiary; (vi) neither the Company nor any Subsidiary, nor the
Seller on behalf of the Company or any Subsidiary has filed a consent pursuant
to Section 341(f) of the Code; (vii) each of the Company and its Subsidiaries
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party; (viii) none of the Company and its
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that could obligate it to make any payments as a result
of the transactions contemplated by this Agreement that will not be deductible
under Section 280G of the Code; (ix) none of the Company and its Subsidiaries
has been a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii); (x) none of the Company and its Subsidiaries is a party to any
Tax allocation or sharing agreement; and (xi) neither Company nor any of its
Subsidiaries has (i) been a member of an Affiliated Group filing a consolidated
federal income Tax Returns other than the Seller Group (as defined in Section
5.8), or (ii) any liability for the Taxes of any person other than members of
the Seller Group (A) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), (B) as a transferee or successor, (C)
by Contract, or (D) otherwise.
(c) As used in this Agreement:
(i) "Taxes" shall mean all taxes, levies, charges or
fees including income, corporation, advance corporation, gross receipts,
transfer, excise, property, sales, use, value-added, license, payroll,
pay-as-you-earn, withholding, social security and franchise or other
governmental
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taxes or charges, imposed by the United States or any state, county, local or
foreign government, and such term shall include any interest, penalties or
additions to tax attributable to such taxes.
(ii) "Tax Return" shall mean any report, return or
statement required to be supplied to a taxing authority in connection with
Taxes.
Section 3.18 Certain Fees. Except for the engagement of Donaldson,
Lufkin & Jenrette, the fees and expenses of which shall be the sole
responsibility of Seller, none of Seller, the Company or any Subsidiary has
employed any financial advisor or finder or incurred any liability for any
financial advisory or finders or brokers fees in connection with this Agreement
or the transactions contemplated hereby.
Section 3.19 Operations Prior to and Including the Closing . Except as
set forth in Schedule 3.19, and except in connection with the transactions
contemplated by this Agreement, since June 30, 1998, neither the Company nor any
Subsidiary has:
(1) amended its Certificate of Incorporation or By-laws or
merged with or into or consolidated with any other person, or changed or agreed
to change in any manner the rights of its outstanding capital stock or the
character of its Business;
(2) except as permitted by Section 2.5, declared, set aside or
paid any dividend or other distribution in respect of the capital stock of the
Company or any Subsidiary; redeemed or acquired any of such stock; issued or
sold, or issued options or rights to subscribe to, or entered into any Contracts
to issue or sell, any shares of its capital stock; or subdivided or in any way
reclassified any shares of its capital stock;
(3) entered into or amended any employment agreements, entered
into any Contracts with any labor union or association representing any
employee, or entered into or amended any Employee Benefit Plans;
(4) settled any dispute (excluding disputes settled between
clients of the Company and account debtors in the ordinary course of the
Company's accounts receivable collection business) involving payment of any
amount in excess of $50,000 or waived any right of material value to its
business;
(5) made any change in its accounting methods, practices,
policies or principles;
(6) materially and adversely changed any of its business
policies, including, without limitation, pricing, purchasing, production,
personnel, sales, returns, budget or acquisition policies;
(7) made any wage or salary increase or bonus, or increase in
any other direct or indirect compensation, for or to any officer, director,
employee, consultant or agent of the Company
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or any Subsidiary, or any accrual for or commitment or agreement to make or pay
the same, except for such increases or bonuses as are granted in the ordinary
course of business in accordance with its customary practices (which shall
include normal periodic performance reviews and related compensation and benefit
increases), or loaned or advanced any funds to any Person;
(8) except in the ordinary course of business, entered into
any lease or sublease (as lessor or lessee) or abandoned or made any other
disposition of any assets involving more than $200,000 in the aggregate, granted
or suffered any Encumbrances on any of its assets having a value in excess of
$200,000 in the aggregate;
(9) except in the ordinary course of business consistent with
past practices, incurred or assumed any liabilities or obligations;
(10) except for tangible property acquired in the ordinary
course of business, made any acquisition of all or substantially all of the
Assets or capital stock or business of any other person;
(11) made any capital expenditure or commitment for any
property, plant or equipment in excess of $100,000 individually or $250,000 in
the aggregate;
(12) disposed of, leased or encumbered, or pledged or granted
a security interest in any assets, or increased any of the indebtedness of the
Company or any Subsidiary of the Company, other than in the normal and ordinary
course of business consistent with past practices;
(13) paid, discharged or satisfied any liabilities other than
by payment, discharge or satisfaction in the ordinary course of business
consistent with past practices;
(14) made any Contract to do any of the actions referred to
in paragraphs (1) through (13) above.
Section 3.20 Debt Collection Licenses. The Company and its
Subsidiaries hold all Permits which are necessary and material for the conduct
of their accounts receivable or debt collection business as currently conducted.
A list of the states in which the Company and Subsidiaries have debt collection
licenses is set forth on Schedule 3.2. All such Permits are in full force and
effect, no violations which have not been remedied have been recorded in respect
of any such Permit and neither the Company nor any Subsidiary is in default, nor
has received any notice of any claim of default, with respect to any such Permit
or of any notice of any other claim or Proceeding (or threatened Proceeding)
relating to any such Permit.
Section 3.21 Employee Relations. Neither the Company nor any Subsidiary
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
Company or any Subsidiary. Except as set forth in Section 3.15 of the Disclosure
Schedule and except for any limitations of general application under
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applicable employment Laws, neither the Company nor any Subsidiary is a party to
any written or oral employment agreement with any of its officers, directors,
employees, consultants, agents, or other persons which is not terminable by the
Company or its Subsidiaries at will without penalty or cost to the Company or
its Subsidiaries. There are no pending, nor, to the Knowledge of the Seller,
threatened walkouts, strikes, union organizing efforts or labor disturbances or
any pending arbitration, unfair labor practice or grievance, with respect to the
Company's or any Subsidiary's employees. Upon termination of the employment of
any of its employees, neither the Company nor any Subsidiary of the Company will
by reason of any Contract or Plan entered into prior to the Closing Date be
liable to any of its employees for severance pay or any other payments, except
as and to the extent set forth in Section 3.21 of the Disclosure Schedule. Since
December 31, 1997, Company and Subsidiaries have not had an "employment loss"
within the meaning of the Workers' Adjustment and Retraining Notification Act
("WARN Act") and the regulations thereunder.
Section 3.22 Accounts Receivable. All accounts receivable of the
Company or any Subsidiary arose in the ordinary course of business and are
proper and valid accounts receivable. To the best of the knowledge of the Seller
and the Company, there are no refunds, discounts, rights of setoff (excluding
statutory or common law rights of setoff) or assignment affecting any such
accounts receivable.
Section 3.23 Suppliers and Customers. Set forth on Section 3.23 of the
Disclosure Schedule is a list of the ten largest customers (measured by volume
of revenues in 1998) of the Company and its Subsidiaries (the "Ten Largest
Customers"). Except as set forth on Section 3.23 of the Disclosure Schedule,
none of the Ten Largest Customers has given notice to the Company or any
Subsidiary that it will or intends to terminate its relationship with the
Company or any Subsidiary. Neither the Seller, the Company nor any Subsidiary
has any reason to believe that the relationship of the Company and the Company's
Subsidiaries with the Ten Largest Customers are not satisfactory. All funds
collected by the Company or the Subsidiaries on behalf of and belonging to
customers have been properly remitted to customers or are properly reflected on
the financial statements of the Company and its Subsidiaries.
Section 3.24 Insurance. To the best knowledge of the Seller and the
Company, the Company and its Subsidiaries are insured against risks of the types
and amounts consistent with similarly situated businesses. None of Seller,
Company or any Subsidiary has received notice of cancellation with respect to
any such insurance. Except as described on Section 3.24 of the Disclosure
Schedule, there are no claims that are pending under any such insurance.
Section 3.25 Questionable Payments. Neither any Company or any
Subsidiary nor, to the best knowledge of the Seller and the Company, any
directors, officers, consultants, agents, employees or other persons associated
with or active on behalf of Company or any Subsidiary, has (1) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment of any
nature, or (2) made any material favor or gift which is not deductible for
Federal income tax purposes.
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Section 3.26 Full Disclosure . No representation or warranty made by
the Seller 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 4.1 Organization and Authority of Buyer.
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania. Buyer
has previously delivered to Seller complete and correct copies of its
Certificate of Incorporation and By-laws, as currently in effect. Buyer has the
corporate power and authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Buyer and no other
corporate proceedings on tile part of Buyer are necessary to authorize the
execution, delivery and performance of this Agreement or the consummation of the
transactions so contemplated.
(b) This Agreement has been duly executed and delivered by
Buyer and constitutes, and, when executed and delivered, each of the other
agreements, documents and instruments to be executed and delivered by Buyer,
pursuant hereto will constitute, a valid and binding agreement of Buyer (in each
case, assuming the valid authorization, execution and delivery of such agreement
by Seller), enforceable against Buyer in accordance with its terms, except that
(i) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and- to the discretion of the court
before which any proceeding therefor may be brought.
Section 4.2 Consents and Approvals; No Violations . Except for
applicable requirements of the H-S-R Act, neither the execution and delivery of
this Agreement nor the consummation by Buyer of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-Laws of Buyer; (b) require any filing with,
or the obtaining of any permit, authorization, consent or approval of, any
governmental or regulatory authority whether within or outside the United
States; (c) violate, conflict with or result in a default (or any event which,
with notice or lapse of time or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration under, any of the
terms, conditions or provisions of any note, mortgage, other evidence of
indebtedness, guarantee, license, agreement, lease or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its
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assets may be bound; or violate any order, injunction, decree, statute, rule or
regulation applicable to Buyer, excluding from the foregoing clauses (b), (c)
and (d), (i) such requirements, violations, conflicts, defaults, rights,
security interests, claims, liens, charges, other encumbrances or violations
which would not adversely affect the ability of Buyer to consummate the
transactions contemplated by this Agreement, or (ii) which become applicable as
a result of any acts or omissions by, or the status of or any facts pertaining
to, the Company or Seller.
Section 4.3 Availability of Funds. Buyer has, or will have at Closing,
sufficient immediately available funds, in cash, to pay the Purchase Price, to
provide the Company with sufficient working capital and to pay any other amounts
payable pursuant to this Agreement and to effect the transactions contemplated
hereby. Buyer has provided to Seller complete true and correct copies of Buyer's
audited financial statements for the year ended December 31, 1997 and Buyer's
unaudited financial statements for the six months ended June 30, 1998.
Section 4.4 Litigation. There is no claim, action, suit, proceeding or
governmental investigation pending or, to the best knowledge of Buyer,
threatened against the Buyer, by or before any court, governmental or regulatory
authority or by any third party which challenges the validity of this Agreement.
Section 4.5 Certain Fees. Except for the engagement of The Robinson
Humphrey Company, neither Buyer nor any of its affiliates has employed any
financial advisor or finder or incurred any liability for any financial advisory
or finders' fees in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Company's Business. Seller agrees that, during
the period from the date of this Agreement to the Closing, except as otherwise
contemplated by this Agreement or consented to by Buyer:
(a) Seller shall cause the Company and each of the
Subsidiaries to use its best efforts to conduct its business operations in the
ordinary course consistent with past practice; and
(b) Seller shall not, and shall cause the Company and each of
the Subsidiaries not to, breach any of the representations or warranties in
Section 3.19.
Section 5.2 Access to Information.
(a) Between the date of this Agreement and the Closing, Seller
shall (i) give Buyer and its authorized representatives reasonable access to all
books, records, offices and other facilities and properties of the Company and
its Subsidiaries; (ii) permit Buyer to make such
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inspections thereof as Buyer may reasonably request; and (iii) cause the
officers of Seller and the Company to furnish Buyer with such financial and
operating data and other information with respect to the business and properties
of the Company and its Subsidiaries as Buyer may from time to time reasonably
request; provided, however, that any such investigation shall be conducted
during normal business hours under the supervision of Seller's or the Company's
personnel and in such a manner as to maintain the confidentiality of this
Agreement and the transactions contemplated hereby and not interfere
unreasonably with the business operations of Seller or the Company.
(b) All information concerning Seller furnished or provided by
Seller or its affiliates to Buyer or its representatives (whether furnished
before or after the date of this Agreement) shall be held subject to a
confidentiality agreement between Seller and Buyer, dated as of August 5, 1998
(the "Confidentiality Agreement"). The Confidentiality Agreement shall expire at
Closing. Notwithstanding anything to the contrary contained in this Agreement,
neither Seller nor any affiliate of Seller shall have any obligation to make
available or provide to Buyer or their representatives a copy of any
consolidated, combined or unitary Tax Return filed by Seller, or any of its
affiliates, or any related materials.
Section 5.3 Consents.
(a) Each of Seller and Buyer shall cooperate, and use its best
efforts, to make all filings and obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties necessary to consummate the transactions contemplated by
this Agreement including, without limitation, obtaining the consents of the Ten
Largest Customers and the landlord of the Company's principal facility to the
consummation of the transactions contemplated hereby, if required under the
terms of the Contract with such Customer or the Lease for such facility, as the
case may be (collectively, the "Material Consents"). In addition to the
foregoing, Buyer agrees to provide such assurances as to financial capability,
resources and credit worthiness as may be reasonably requested by any third
party whose consent or approval is sought hereunder; provided, however, that
Buyer shall not be required to provide any guarantee or surety.
(b) With respect to any agreements for which any required
consent or approval is not obtained prior to the Closing, Seller and Buyer shall
each use its best efforts to obtain any such consent or approval after the
Closing Date until such consent or approval has been obtained and Seller shall
provide Buyer or the Company with the same benefits arising under such
agreements, including performance by Seller as agent, if legally and
commercially feasible, provided, that Buyer and the Company shall provide Seller
with such access to the premises, books and records and personnel as is
necessary to enable Seller to perform its obligations under such agreements and
Buyer or the Company shall pay or satisfy the corresponding liabilities for the
enjoyment of such benefits to the extent Buyer or the Company would have been
responsible therefor if such consent or approval had been obtained.
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Section 5.4 Best Efforts. Each of Seller and Buyer shall cooperate, and use
its best efforts to take, or cause to be taken, all action, and to do, or cause
to be done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
Section 5.5 Public Announcements. Except as otherwise agreed to by the
parties, the parties shall not issue any report, statement or press release or
otherwise make any public statements with respect to this Agreement and the
transactions contemplated hereby, except as in the reasonable judgment of the
party may be required by law or in connection with the obligations of a
publicly-held, exchange-listed company, in which case the parties will exercise
their best efforts to reach mutual agreement as to the language of any such
report, statement or press release. Upon the execution of this Agreement and
upon the Closing, Seller and Buyer will consult with each other with respect to
the issuance of a joint or individual report, statement or press release with
respect to this Agreement and the transactions contemplated hereby.
Section 5.6 Covenant to Satisfy Conditions. Seller will use its best
efforts to ensure that the conditions set forth in Article VI hereof are
satisfied, insofar as such matters are within the control of Seller, and Buyer
will use its best efforts to ensure that the conditions set forth in Article VI
hereof are satisfied, insofar as such matters are within the control of Buyer.
Seller and Buyer further covenant and agree, with respect to a threatened or
pending preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order that would adversely affect the
ability of the parties hereto to consummate the transactions contemplated
hereby, to use all reasonable efforts to prevent or lift the entry, enactment or
promulgation thereof, as the case may be.
Section 5.7 Employees; Employee Benefits.
(a) Following Closing, Buyer shall give full credit for all
service with the Company or any affiliate thereof ("Affiliate"), and any
predecessor thereto to the extent that service with such predecessor entity was
recognized under the applicable Plan of the Company or any Affiliate, to each
employee of the Company ("Employee") for purposes of waiting periods relating to
preexisting conditions under medical plans, eligibility to participate in,
vesting under, and eligibility for early retirement or any subsidized benefit
provided for under, any employee benefit plan (including, but not limited to,
any "employee benefit plan" as defined in Section 3(3) of ERISA) maintained by
Buyer or its subsidiaries (including, without limitation, any vacation or
accrued sick pay plan or policy) on or after the Closing Date. Prior to the
Closing Date, Seller shall furnish Buyer with a list of the length of service
with the Company or its Affiliates for each of the Employees. For purposes of
computing deductible amounts (or like adjustments or limitations on coverage)
under any employee welfare benefit plan (including, without limitation, any
"employee welfare benefit plan" as defined in Section 3(l) of ERISA), expenses
and claims previously recognized for similar purposes under the applicable
welfare benefit plan of the Company or any affiliate shall be credited or
recognized under the comparable plan maintained after the Closing Date by Buyer
or its subsidiaries.
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(b) Following the Closing Date, Company shall be responsible
and assume all liability for all notices or payments due to any Employee, and
all notices, payments, fines or assessments due to any government authority,
pursuant to any applicable Law, with respect to the employment, discharge or
layoff of employees by the Company after the Closing Date, including, but not
limited to, the WARN Act and any rules or regulations as have been issued, in
connection with the foregoing.
(c) After the Closing Date, Buyer shall be responsible for,
and shall indemnify and hold harmless Seller and its Affiliates and their
officers, directors, employees, affiliates and agents and the fiduciaries
(including plan administrators) of the Plans, from and against, any and all
claims, losses, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) and other liabilities and obligations
relating to or arising out of (i) all salaries, commissions, vacation
entitlements and bonuses due to any Employee accrued but unpaid as of the
Closing Date which are reflected on the Closing Balance Sheet, (ii) any failure
by Buyer to comply with the provisions of this Section 5.7 and (iii) any claims
of, or damages or penalties sought by, any Employee, or any governmental entity
on behalf of or concerning any Employee, with respect to any act or failure to
act by Buyer to the extent arising from the employment, discharge, layoff or
termination of any Employee after the Closing Date.
Section 5.8 Certain Tax Matters.
(a) Certain Definitions As used in this Agreement:
(i) "Affiliated Group" means any affiliated group within
the meaning of Section 1504(a) of the Code or any similar group defined under a
similar provision of state, local or foreign law.
(ii) "Buyer Tax Group" means the affiliated group, within
the meaning of Section 1504(a) of the Code, of which Buyer is the common parent
or any of Buyer's foreign subsidiaries.
(iii) "Election" means the election to be made by Buyer
and Seller pursuant to Section 338(h)(10) of the Code, 'as described in Section
5.8(b) hereof.
(iv) "Pre-Closing Period" means any taxable period,
including that portion of any Straddle Period, which ends on or before the
Closing Date.
(v) "Seller Group" means the affiliated group, within the
meaning of Section 1504(a) of the Code, of which Seller is the common parent.
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(vi) "Straddle Period" means any taxable period that
includes (but does not end on) the Closing Date.
(b) Section 338(h)(10) Election.
(i) With respect to the purchase by Buyer of the Shares
pursuant to this Agreement (A) Seller and Buyer shall jointly make the Election
on a timely basis (and any comparable election under state or local tax law),
(B) Seller and Buyer shall, as promptly as practicable following the Closing
Date, cooperate with each other to take all actions necessary and appropriate
(including filing such forms, returns, elections, schedules and other documents
as may be required) to effect and preserve a timely Election in accordance with
the provisions of Treasury Regulation Section 1.338(h)(10)-l (or any comparable
provisions of state or local tax law) or any successor provisions and (C) Seller
and Buyer shall report the purchase by Buyer of the Shares pursuant to this
Agreement consistent with the Election (and any comparable elections under state
or local tax laws) and shall take no position inconsistent therewith in any Tax
Return, any proceeding before any taxing authority or otherwise.
(ii) In connection with the Election, Buyer and Seller
shall agree to the determination of the "Aggregate Deemed Sales Price" (as
defined under applicable Treasury Regulations) of the Shares and the allocation
of such "Aggregate Deemed Sales Price" among the assets of the Company, which
determination and allocation shall be made by Buyer in its sole discretion and
will be attached hereto as Schedule 5.8(b). The determination of the amount of
the "Aggregate Deemed Sales Price" and the allocation thereof shall be made in
accordance with Section 338(b) of the Code and applicable Treasury Regulations.
Unless (x) otherwise required by a court of competent jurisdiction, (y)
otherwise required by the Internal Revenue Service following an audit, or (z)
Seller receives a written opinion from a nationally recognized law firm (which
opinion and law firm shall be reasonably acceptable to Buyer) that there is no
substantial authority (within the meaning of Section 662(d)(2)(B)(i) of the
Code) for such position. Each of Seller and Buyer shall (A) be bound by such
determination and such allocation for purposes of determining any Taxes, (B)
prepare and file, and cause its affiliates to prepare and file, all Tax Returns
on a basis consistent with such determination of the "Aggregate Deemed Sales
Price" and such allocation and (C) take no position, and cause its affiliates to
take no position, inconsistent with such determination and such allocation on
any applicable Tax Return, in any proceeding before any taxing authority or
otherwise. In the event that any such determination or allocation is disputed by
any taxing authority, the party receiving notice of the dispute shall promptly
notify the other party hereto concerning resolution of the dispute.
(c) Return Filings, Refunds, Credits and Transfer Taxes
(i) Except with regard to Tax Returns for Straddle
Periods, Seller shall prepare, or cause to be prepared, and file, or cause to be
filed, on a timely basis all Tax Returns of or including the Company and its
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Subsidiaries for all Pre-Closing Periods (the "Pre-Closing Period Returns").
Seller shall pay, or cause to be paid, all Taxes with respect to the Company and
its Subsidiaries shown to be due on the Pre-Closing Period Returns.
(ii) Buyer shall prepare, or cause to be prepared, and
shall file, or cause to be filed, on a timely basis all Tax Returns with respect
to the Company and its Subsidiaries for all periods ending after the Closing
Date, including Tax Returns, if any, for any Straddle Period (the "Straddle
Period Returns"). Buyer shall pay, or cause to be paid, all Taxes shown to be
due on such Tax Returns.
(iii) Buyer shall provide Seller with copies of any
Straddle Period Returns at least thirty (30) business days prior to the due date
thereof (giving effect to any extensions thereto), accompanied by a statement
calculating in reasonable detail Seller's indemnification obligation pursuant to
Section 5.8(e) hereof (the "Indemnification Statement"). Seller shall have the
right to review such Straddle Period Returns and Indemnification Statement prior
to the filing of such Straddle Period Returns. If Seller disputes any amounts
shown due on such Tax Returns or the amount calculated in the Indemnification
Statement, Seller and Buyer shall consult and resolve in good faith any issues
arising as a result of the review of such Straddle Period Return and
Indemnification Statement. If Seller agrees to the Indemnification Statement
amount, Seller shall pay to Buyer an amount equal to the Taxes shown on the
Indemnification Statement less any amounts paid by Seller or the Company on or
before the Closing Date with respect to estimated taxes not -later than three
(3) business days before the due date (including any extensions thereof) for
payment of Taxes with respect to such Straddle Period Return. If t he parties
are unable to resolve any dispute within fifteen (15) business days after
Seller's receipt of such Straddle Period Return and Indemnification Statement,
such dispute shall be resolved by the [Independent Accountants], which shall
resolve any issue in dispute as promptly as practicable. If the Independent
Accountants are unable to make a determination with respect to any disputed
issue prior to the due date (including any extensions) for the filing of the
Straddle Period Return in, question, (A) Buyer shall file, or shall cause to be
filed, such Straddle Period Return without such determination having been made
and (B) Seller shall pay to Buyer, not later than three days before the due date
(including any extensions thereof) for the payment of Taxes with respect to such
Straddle Period Return, an amount determined by Seller as the proper amount
chargeable to Seller pursuant to this Section 5.8(c). Upon delivery to Seller
and Buyer by the Independent Accountants of its determination, appropriate
adjustments shall be made to the amount paid by Seller in accordance with the
immediately preceding sentence in order to reflect the decision of the
Independent Accountants. The determination by the Independent Accountants shall
be final, conclusive and binding on the parties.
(iv) Seller and Buyer shall reasonably cooperate, and
shall cause their respective affiliates, officers, employees, agents, auditors
and representatives reasonably to cooperate, in preparing and filing all Tax
Returns (including amended returns and claims for refund), including maintaining
and making available to each other all records necessary in connection with
Taxes and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes. Buyer and Seller recognize that Seller will need
access, from time to time, after the Closing Date, to certain accounting and tax
records and information held by the Company to the extent such records and
information pertain to events occurring prior to the Closing Date; therefore,
Buyer
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agrees that from and after the Closing Date Buyer shall, and shall cause the
Company to, (A) retain and maintain such records until such time as Seller
determines that such retention and maintenance is no longer necessary and (B)
allow Seller and its agents and representatives (and agents and representatives
of its affiliates), to inspect, review and make copies of such records as Seller
may deem necessary or appropriate from time to time.
(v) For a period of seven (7) years from the Closing Date,
Buyer shall not, and shall cause the Company not to, dispose of or destroy any
of the business records and files of the Company relating to Taxes in existence
on the Closing Date without first offering to turn over possession thereof to
Seller by written notice to Seller at least thirty (30) days prior to the
proposed date of such disposition or destruction.
(vi) Any refunds and credits of Taxes of the Company and
its Subsidiaries or similar benefit (including any interest or similar benefit)
received from or credited thereon by the applicable tax authority with respect
to (A) any taxable period ending on or before the Closing Date or (B) Taxes for
which the Seller has indemnified the Buyer under the Agreement, shall be for the
account of Seller, and if received or utilized by Buyer or the Company, shall be
paid to Seller within five (5) business days after Buyer or the Company receives
such refund or utilizes such credit. Except as provided in the next sentence,
any refunds or credits of the Company with respect to any Straddle Period shall
be apportioned between Seller and Buyer on the basis of an interim closing of
the books. In the case of a refund or credit attributable to any Taxes that are
imposed on a periodic basis and are attributable to the Straddle Period, other
at than Taxes based upon or related to gross or net income or receipts, the
refund or credit of such Taxes of the Company for the Pre-Closing Period shall
be deemed to be the amount of such refund or credit for the Straddle Period
multiplied by a fraction the numerator of which is the number of days in the
Straddle Period ending on the Closing Date and the denominator of which is the
number of days in the Straddle Period. Buyer shall not carry back any tax
losses, credits or other tax benefits attributable to the operations of the
Company and its Subsidiaries after the Closing Date.
(vii) Notwithstanding any other provisions of this
Agreement to the contrary, all sales, use, transfer, stamp, duties, recording
and similar Taxes incurred in connection with the transactions contemplated by
this Agreement shall be shared equally by Seller and Buyer, and Seller shall, at
its own expense, accurately file or cause to be filed all necessary Tax Returns
and other documentation with respect to such Taxes and timely pay all, such
Taxes. If required by applicable law, Buyer will join in the execution of any
such Tax Returns or such other documentation.
(d) Elections. Buyer shall not, and shall cause the Company
not to, make, amend or revoke any Tax election if such action would adversely
affect Seller or any person (other than the Company and its Subsidiaries) as to
whom or with whom Seller has filed a consolidated return with respect to any,
taxable period ending on or before the Closing Date or for the Pre-Closing
Period or any Tax refund with respect thereto.
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(e) Tax Indemnification.
(i) Buyer shall indemnify, defend and hold harmless Seller
and its affiliates; at any time after the Closing, from and against (A) any
liability for Taxes of the Company and its Subsidiaries for any taxable period
ending after the Closing Date except for Straddle Periods, in which case Buyer's
indemnity will cover only that portion of any such Taxes that is not
attributable to the Pre-Closing Period; (B) all costs and expenses (including
reasonable attorneys and accountants fees) attributable to any contest or
dispute involving the foregoing; and (C) Taxes arising out of any action taken
by the Company or any of its Subsidiaries on the Closing Date after the Closing,
other than actions contemplated by this Agreement or actions taken in the
ordinary course of business.
(ii) Seller shall indemnify, defend and hold harmless
Buyer and its affiliates, at any time after the Closing, from and against any
liability for Taxes, regardless of whether any such liability or potential
liability has been disclosed to Buyer, of the Company and its Subsidiaries
(including, without limitation, liability for Taxes of any person other than any
of the Company and its Subsidiaries: (i) under Reg. Section 1. 1502-6 (or any
similar provision of Law), (ii) as a transferee or successor, (iii) by Contract,
or (iv) otherwise) except as provided in Section 5.8(c)(vii) hereof, for the
Pre-Closing Period, including any Straddle Period.
(iii) In determining the responsibility of Seller and
Buyer for Taxes attributable to any Straddle Period, Taxes based upon or related
to gross or net income or receipts shall be apportioned on the basis of an
interim closing of the Company's books as of the Closing Date, and all other
Taxes shall be prorated on a daily basis.
(iv) If a claim for Taxes shall be made by any taxing
authority in writing, which, if successful, might result in an indemnity payment
pursuant to this Section 5.8, the party seeking indemnification (the "Tax
Indemnified Party") shall promptly notify the other party (the "Tax Indemnifying
Party") in writing of such claim (a "Tax Claim") within a reasonably sufficient
period of time to allow the Tax Indemnifying Party effectively to contest such
Tax Claim, and. in reasonable detail to apprise the Tax Indemnifying Party of
the nature of the Tax Claim, and provide copies of all correspondence and
documents received by it from the relevant taxing authority. Failure to give
prompt notice of a Tax Claim hereunder shall affect the Tax Indemnifying Party's
obligation under this Section to the extent that the Tax Indemnifying Party is
prejudiced by such failure to give prompt notice.
(v) With respect to any Tax Claim which might result in an
indemnity payment to Buyer pursuant to this Section 5.8(e) (including, without
limitation, Taxes of the Company for a Straddle Period), Seller shall control
all proceedings taken in connection with such Tax Claim and, without limiting
the foregoing, may in its sole discretion and at its sole- expense pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with any taxing authority with respect thereto, and may, in its sole discretion,
either pay the Tax claimed and sue for a refund where applicable law permits
such refund suits or contest such Tax Claim. Buyer
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shall not under any circumstances settle or otherwise compromise any Tax Claim
referred to in the preceding sentence without Seller's prior written consent.
Notwithstanding anything in the foregoing to the contrary, Seller shall not
settle any Tax Claim in a manner which would adversely affect the Company and
its Subsidiaries after the Closing Date without the prior written consent of the
Buyer, which consent shall not unreasonably be withheld. In connection with any
proceeding taken in connection with such Tax Claim, (A) Seller shall keep Buyer
informed of all material developments and events relating to such Tax Claim if
involving a material liability for Taxes and (B) Buyer shall have the right, at
its sole expense, to participate in any such proceedings. Buyer shall cooperate
with Seller in contesting such Tax Claim (without charge to Seller), which
cooperation shall include, without limitation, the retention and the provision
to Seller of records and information which are reasonably relevant to such Tax
Claim, and making employees available to Seller to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim, provided that no charges shall be
incurred by Seller for the services of such employees.
(vi) With respect to any Tax Claim not described in
Section 5.8(e)(v) hereof which might result in an indemnity payment to Seller
pursuant hereto, Buyer shall control all proceedings in accordance with
provisions that are parallel to those in Section 5.8(e) hereof.
(f) Tax Sharing Agreements. Any tax sharing agreement between
Seller and any of the Company and its Subsidiaries is terminated as of the
Closing Date and will have no further effect for any taxable year (whether the
current year, a future year, or a past year).
Section 5.9 Proceedings. Seller shall promptly notify Buyer of any
Proceedings which, after the date hereof, are threatened or commenced against
the Seller, Company or any Subsidiary against any officer, director, employee,
consultant or agent with respect to the affairs of the Company or any
Subsidiary, which if adversely determined could reasonably be expected to have a
Material Adverse Effect.
Section 5.10 Continued Effectiveness of Representations and Warranties of
Corporation. Seller will use its commercially reasonable efforts to cause the
Company and its Subsidiaries to conduct the business of the Company and the
Subsidiaries in such a manner so that the representations and warranties
contained in Article III herein shall continue to be true and correct on and as
of the Closing Date as if made on and as of the Closing Date, and Buyer shall
promptly be given notice of any event, condition or circumstance occurring from
the date hereof through the Closing Date which would cause any of such
representations and warranties to become untrue in any material respect.
Section 5.11 No Shopping. The Seller shall not, nor shall any Seller
allow the Company or any Subsidiary to, directly or indirectly, through any
director, officer, employee, agent or otherwise, solicit, initiate or encourage
submission of proposals or offers from any person relating, directly or
indirectly, to any acquisition of all or substantially all of the assets or
capital stock of the Company or any Subsidiary or participate in any negotiation
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or
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participate in, facilitate or encourage, any effort or attempt by any other
person to or seek, directly or indirectly, to acquire all or substantially all
of the assets or capital stock of the Company or any Subsidiary of the Company.
The Seller shall promptly notify NCO if any such proposal or offer, or any
inquiry or contact with any Person with respect thereto, is made.
Section 5.12 Hart-Scott-Rodino Filings. As promptly as practicable after
the date of this Agreement, Buyer and Seller shall make all filings under the
H-S-R Act which are required in connection with the transactions contemplated by
this Agreement. Each party shall cooperate with the other party in connection
with the other party's filings under the H-S-R Act including, without
limitation, providing all information reasonably requested by each party to the
other and taking all reasonable actions to cause the early termination of all
applicable waiting periods.
Section 5.13 Releases. Seller shall, at its sole expense, use its
commercially reasonable efforts to obtain the release of the Company and each of
its Subsidiaries from all guarantees and sureties (other than those in the
ordinary course of the Company's business) listed on Section 3.15 of the
Disclosure Schedule, including without limitation, those arising under the
Credit Agreement dated February 13, 1998 among, inter alia, Seller, DLJ Capital
Funding and Wachovia Bank, N.A. ("Credit Agreement"), and the Indenture dated
February 20, 1998 by Seller and its subsidiaries ("Indenture"), and from all
Encumbrances including applicable UCC-3 Releases (collectively, the "Releases").
Seller shall take or cause to be taken such action, including without
limitation, providing such certificates, notices, agreements or instruments and
applying the proceeds of the sale of the Shares, as are required of the Seller
or the Company under the Credit Agreement and the Indenture to obtain the
applicable Releases thereunder. Buyer and Seller shall use their respective
commercially reasonable efforts to obtain the release of Seller from guarantees
under the Leases; provided, however, that Buyer shall not be required to provide
any guaranty or suretyship for any Leases.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to Each Party's Obligation. The respective
obligation of each party to consummate the transactions contemplated herein is
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No statute, rule or regulation shall have been enacted,
entered, promulgated or enforced by any court or governmental authority which
prohibits or restricts the consummation of the transactions contemplated hereby;
(b) There shall not be in effect any Judgment of any court of
competent jurisdiction enjoining the consummation of the transactions
contemplated hereby;
(c) There shall not be any Proceeding instituted, pending or
threatened by any governmental or other regulatory or administrative agency or
commission or any person which seeks
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to enjoin or otherwise prevent, or which seeks material monetary penalties as a
result of, consummation of the transactions contemplated hereby; and
(d) Any waiting periods applicable to the transactions
contemplated by this Agreement under applicable U.S. antitrust or trade
regulation laws and regulations, including, without limitation, under the H-S-R
Act shall have expired or been terminated.
Section 6.2 Conditions to Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated hereby are further subject to the
satisfaction (or waiver) at or prior to the Closing of the following conditions:
(a) Each representation and warranty made by Buyer in Article
IV of this Agreement shall be true and correct (a) in all material respects with
respect to representations and warranties which are not modified by materiality
and (b) in all respects with respect to representations and warranties which are
modified by materiality, in either case, on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date except for
those representations and warranties made as of a specified date which shall
continue to be true and correct as of such date and except for changes permitted
or contemplated hereby.
(b) Buyer shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof; and
(c) Buyer shall have delivered to Seller or its affiliates
those items set forth in Section 1.5 hereof.
Notwithstanding the failure of any one or more of the foregoing conditions,
the Seller may proceed with the Closing without satisfaction, in whole or in
part, of any one or more of such conditions. To the extent that on or before the
third day prior to the Closing Buyer delivers to Seller a written notice,
prepared in good faith, specifying in reasonable detail the failure of such
condition or the breach by Buyer of any of the representations or warranties of
Buyer herein and Seller nevertheless proceeds with the Closing, Seller shall be
deemed to have waived for all purposes any rights or remedies it may have
against Buyer by reason of the failure of any such condition or the breach of
any such representation or warranty to the extent described in such notice.
Section 6.3 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated hereby are further subject to the
satisfaction (or waiver) at or prior to the Closing of the following conditions:
(a) Each representation and warranty made by Seller in this
Agreement shall be true and correct (a) in all material respects with respect to
representations and warranties which are not modified by materiality and (b) in
all respects with respect to representations and warranties which are modified
by materiality, in either case, on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date except for those
representations and
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warranties made as of a specified date which shall continue to be true and
correct as of such date and except for changes permitted or contemplated hereby.
(b) Seller shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof;
(c) All Material Consents shall have been obtained and remain
in full force and effect;
(d) Since the date of the Agreement, there shall have been no
change in the business, results of operations or financial condition of the
Company that, individually or in the aggregate had or would have a Material
Adverse Effect;
(e) The Service Contracts shall have been entered into and
remain in full force and effect;
(f) The Shares and the capital stock of the Subsidiaries shall
be free and clear of any Encumbrance.
(g) Seller or its affiliates shall have delivered to Buyer
those items set forth in Section 1.4 hereof.
Notwithstanding the failure of any one or more of the foregoing conditions,
Buyer may proceed with the Closing without satisfaction, in whole or in part, of
any one or more of such conditions. To the extent that on or before the third
day prior to the Closing Seller delivers to Buyer a written notice, prepared in
good faith, specifying in reasonable detail the failure of such condition or the
breach by Seller of any of the representations or warranties of Seller herein
and Buyer nevertheless proceeds with the Closing, Buyer shall be deemed to have
waived for all purposes any rights or remedies it may have against Seller by
reason of the failure of any such condition or the breach of any such
representation or warranty to the extent described in such notice.
ARTICLE VII
TERMINATION, AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) At any time, by, mutual written consent of Seller and
Buyer;
(b) By Buyer or Seller if any court of competent jurisdiction
in the United States or any United States governmental body shall have issued a
final and non-appealable order, decree, or ruling permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby; provided that no party hereto affiliated with the person
who
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brought the action seeking the permanent enjoinment of the transactions
contemplated hereby may seek termination of this Agreement pursuant to this
Section 7.1(b);
(c) If the transactions contemplated hereby or any of the
conditions to Closing hereunder become impossible to perform or obtain, as
applicable, provided that no party hereto who caused such impossibility may seek
termination of this Agreement pursuant to this Section 7.1(c);
(d) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) results in the failure of a condition set forth in Article
VI and (ii) cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement);
(e) At any time on or after December 31, 1998, by either
Seller, on the one hand, or Buyer, on the other hand, if the Closing shall not
have occurred on or prior to such date (or such later date as Seller and Buyer
shall have agreed in writing), provided that no party hereto may seek
termination of this Agreement pursuant to this Section 7.1(e) if such party is
in material breach of the Agreement.
Section 7.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 7.1 hereof, written notice thereof shall
forthwith be given by the parties so terminating to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by Seller, on the one hand, or Buyer, on the
other hand. If this Agreement is terminated pursuant to Section 7.1 hereof:
(a) Each party shall redeliver all documents, work papers and
other materials of the other parties relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the other party shall be treated in accordance with the
Confidentiality Agreement and Section 5.2(b) hereof;
(b) All filings, applications and other submissions made
pursuant hereto shall, at the option of Seller, and to the extent practicable,
be withdrawn from the agency or other person to which made; and
(c) There shall be no liability or obligation hereunder on the
part of Seller or Buyer or any of their respective directors, officers,
employees, affiliates, controlling persons, agents or representatives, except
that Seller or Buyer, as the case may be, may have liability to the other party
if the basis of termination is a willful, material breach by Seller or Buyer, as
the case may be, of one or more of the provisions of this Agreement, and except
that the obligations provided for in Sections 7.2(a), 7.2(b) and 10.1 hereof
shall survive any such termination.
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Section 7.3 Amendment, Modification and Waiver. This Agreement may be
amended, modified or supplemented at any time by written agreement of Seller and
Buyer. Any failure of Seller or Buyer to comply with any term or provision of
this Agreement may be waived, with respect to Buyer, by Seller and, with respect
to Seller, by Buyer, by an instrument in writing signed by or on behalf of the
appropriate party, but such waiver or failure to insist upon strict compliance
with such term or provision shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure to comply.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS: INDEMNIFICATION
Section 8.1 Survival of Representations and Warranties. Unless otherwise
provided herein, the representations and warranties of Seller and Buyer, made in
Articles III and IV hereof, respectively, shall survive the Closing: (a) with
respect to claims for indemnification not based on the assertion of liability by
third parties, for a period of fifteen months after the Closing Date, or (b)
with respect to claims for indemnification based on the assertion of liability
by third parties, for a period of twenty-four months after the Closing Date (as
applicable, the "Indemnity Period"); but except as provided in Section 7.2(c)
hereof, shall not survive any termination of this Agreement pursuant to Section
7.1. The parties intend to shorten the statute of limitations and agree that no
claims or causes of action may be brought against Seller or Buyer based upon,
directly or indirectly, any of the representations or warranties contained in
Articles III and IV hereof after the Indemnity Period except as provided in
Section 8.4(b). This Article VIII shall not limit any covenant or agreement of
the parties, which contemplates performance after the Closing, including,
without limitation, the covenants and agreements set forth in Sections 5.7 and
5.8 hereof.
Section 8.2 Seller's Agreement to Indemnify. Subject to the terms and
conditions set forth herein, from and after the Closing, Seller shall indemnify
and hold harmless Buyer, Company and Subsidiaries and their respective
directors, officers, employees, affiliates, controlling persons, agents and
representatives and their successors and assigns (collectively, the "Buyer
Indemnitees") from and against all liability, demands, claims, actions or causes
of action, assessments, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) (collectively "Buyer
Damages") arising out of or caused by, directly or indirectly, any or all of the
following: (i) any misrepresentation, breach or failure of any warranty or
representation made by the Seller in or pursuant to this Agreement; (ii) any
failure or refusal by Seller to satisfy or perform in all material respects any
covenant, term or condition of this Agreement required to be satisfied or
performed by the Seller; (iii) any claim against Company under any guaranty or
surety by Company of the obligations or liabilities of Seller or its
subsidiaries; (iv) any claims asserted by Allegheny Health, Education and
Research Foundation, Allegheny University of the Health Sciences, Allegheny
University Medical Partners, Allegheny Hospitals, Centennial and Allegheny
University Hospital -- East, or its agents, trustees or assigns (collectively,
"Allegheny") against Buyer Indemnitees which arise from or relate to payments
received by the Company or Subsidiaries from Allegheny prior to the date when
Allegheny filed its petition for relief under Chapter 11 in the United States
Bankruptcy Court for the Western District of Pennsylvania, Case Nos. 98-25773
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through 98-25777, inclusive; and (v) any Proceeding against any Buyer Indemnitee
by any person arising out of the foregoing.
Section 8.3 Buyer's Agreement to Indemnify. Subject to the terms and
conditions set forth herein, from and after the Closing, Buyer shall indemnify
and hold harmless Seller, Company and Subsidiaries and their respective
directors, officers, employees, affiliates, controlling persons, agents and
representatives and their successors and assigns (collectively, the "Seller
Indemnitees") from and against all liability, demands, claims, actions or causes
of action, assessments, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) (collectively "Seller
Damages") arising out of or caused by, directly or indirectly, any or all of the
following: (i) any misrepresentation, breach or failure of any warranty or
representation made by the Buyer in or pursuant to this Agreement; (ii) any
failure or refusal by Buyer to satisfy or perform in all material respects any
covenant, term or condition of this Agreement required to be satisfied or
performed by the Buyer; (iii) any claim against the Seller under any guaranty of
the Leases by Seller with respect to obligations or liabilities arising on or
after the Closing Date; (iv) any Proceeding against any Seller Indemnitee by any
person arising out of the foregoing.
Section 8.4 General Provisions.
(a) Seller's obligations to indemnify the Buyer Indemnitees
pursuant to Section 8.2, and Buyer's obligation to indemnify the Seller
Indemnitees pursuant to Section 8.3, are subject to the following limitations:
(i) No indemnification shall be made by Seller or Buyer
(referred to as the "Indemnitor") unless the aggregate amount of all of Buyer
Damages or all of Seller Damages (Buyer Damages and Seller Damages are sometimes
referred to as "Damages"), as the case may be, exceeds $1,000,000 and, in such
event, indemnification shall be made by Indemnitor only to the extent Buyer
Damages or Seller Damages, as the case may be, exceed $1,000,000.
(ii) In no event shall an Indemnitor's aggregate
obligation to indemnify the Buyer Indemnitees or Seller Indemnitees, as the case
may be (Buyer Indemnitees and Seller Indemnitees are sometimes referred to as
"Indemnitees") exceed $15,000,000; provided, however, that any Damages arising
from any indemnification matter described in Section 8.4(b) shall not be taken
into account in calculating the amount of Damages for the purposes of the
limitation provided by this Section 8.4(a)(ii).
(iii) Indemnitor shall be obligated to indemnify the
Indemnitees only for those claims giving rise to Damages as to which the
Indemnitees have given Indemnitor written notice thereof prior to the end of the
Indemnity Period. Any written notice delivered by a Indemnitee to Indemnitor
with respect to Damages shall set forth with as much specificity as is
reasonably practicable the basis of the claim for Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof.
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(iv) Except for willful, knowing or intentional fraud,
remedies that cannot be waived as a matter of law and injunctive or provisional
relief, if the Closing occurs, this Article VIII shall be the exclusive remedy
for breaches of this Agreement (including any covenant, obligation,
representation or warranty contained in this Agreement or in any certificate
delivered pursuant to this Agreement) or otherwise in respect of the sale of the
Shares contemplated hereby.
(b) None of the foregoing limitations in Section 8.1 or
Section 8.4 shall apply in the case of any indemnification matter involving; (i)
title to the Shares; (ii) Taxes; or (iii) civil false claims act liabilities for
billing and coding under Medicare and Medicaid; or (iv) covenants, agreements or
obligations to be performed after Closing; (v) indemnification matters described
in Section 8.2(iii), Section 8.2(iv) or Section 8.3(iii) and any related
Proceeding; or (vi) Buyer's breach of the representations contained in Section
4.1.
(c) In determining the amount of Damages arising from breach
of representations or warranties qualified by materiality or Material Adverse
Effect, such qualification shall not be taken into account in determining the
amount of such damages.
(d) The right to indemnification, payment of damages or other
remedy based on representations, warranties, covenants and obligations of this
Agreement will not be affected by any investigation conducted with respect to,
or any knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation.
Section 8.5 Third Party Indemnification. The obligations of Indemnitor to
indemnify the Indemnitees under Section 8.2 or Section 8.3 hereof, as the case
may be, with respect to Damages resulting from the assertion of liability by
third parties (a "Claim"), will be subject to the following terms and
conditions:
(a) Any party against whom any Claim is asserted will give
Seller written notice of any such Claim promptly after learning of such Claim,
and Indemnitor may at its option undertake the defense thereof by
representatives of its own choosing. Failure to give prompt notice of a Claim
hereunder shall not affect Indemnitor's obligations under this Section 8.5,
except to the extent Indemnitor is materially prejudiced by such failure to give
prompt notice. If Indemnitor, within thirty (30) days after notice of any such
Claim, or such shorter period as is reasonably required, fails to assume the
defense of such Claim, or does not continue to defend the Claim in good faith,
the Indemnitee against whom such claim has been made will (upon further notice
to Indemnitor) have the right to undertake the defense, compromise or settlement
of such claim on behalf of and for the account and risk, and at the expense, of
Indemnitor, subject to the right of Indemnitor to assume the defense of such
Claim at any time prior to settlement, compromise or final determination
thereof. If Indemnitee reasonably believes that the handling of the Defense by
Indemnitor may have a material adverse affect on any Indemnitee, its business or
financial condition, or its relationship with any customer, prospect, supplier,
employee, salesman, consultant, agent or representative, then
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Indemnitee may, at its option and expense and through counsel of its choice,
assume control of the defense of such Claim, provided that Indemnitor shall be
entitled to participate in the defense of such Claim at its expense and through
counsel of its choice.
(b) Anything in this Section 8.5 to the contrary,
notwithstanding, Indemnitor shall not enter into any settlement or compromise of
any action, suit or proceeding or consent to the entry of any judgment (i) which
does not include as an unconditional term thereof the delivery by the claimant
or plaintiff to the Indemnitee of a written release from all liability in
respect of such action, suit or proceeding or (ii) for other than monetary
damages to be borne in full by Indemnitor, without the prior written consent of
the Indemnitee, which consent shall not be unreasonably withheld.
ARTICLE IX
RESTRICTIVE COVENANTS OF THE SELLERS
Section 9.1 Certain Acknowledgments. Seller expressly acknowledges that:
(a) Business. The accounts receivable management business
(collectively, the "Business") as currently conducted by Company and
Subsidiaries involve the provision of accounts receivable collection and
management services using proprietary and confidential systems and information.
Competitive Nature of Business. The Business is highly competitive, is
marketed throughout the United States and Europe and requires long sales "lead
times" often exceeding one year. The Company and Subsidiaries 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.
(b) Access to Information. During the period that Seller owned
the Company and Subsidiaries, Seller had access to proprietary and confidential
property, knowledge and information of the Company and Subsidiaries, which,
after Closing, shall be proprietary and confidential property, knowledge and
information of the Buyer; such property, knowledge and information must be kept
in strict confidence to protect the Business and maintain the competitive
position of the Business in the marketplace; and such property, knowledge and
information would be useful to competitors of the Business for indefinite
periods of time.
(c) Basis for Covenants. The covenants of Sections 9.2, 9.3
and 9.4 (the "Covenants") are a material part of this Agreement and are an
integral part of the obligations of the Seller 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 Company and
Buyer.
(d) Conduct of Business by Buyer. Buyer has informed Seller
that after Closing, the Business will be conducted by the Buyer through the
Company and the Subsidiaries and/or other
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subsidiaries of Buyer (collectively, the "NCO Companies").
Section 9.2 Nondisclosure Covenants. Except with Buyer's prior written
consent, Seller shall not, 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 Business, no matter when or how such knowledge or information was obtained,
including without limitation (a) any information concerning the conduct and
details of the Company's or the Subsidiaries' businesses; (b) the identity of
customers and prospects, their specific requirements, and the names, addresses
and telephone numbers 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.
Section 9.3 Noncompetition Covenants. During the period beginning on the
Closing Date and ending on the fifth (5th) anniversary of the Closing Date,
except with the Buyer's prior written consent, Seller shall not, directly or
indirectly, in any capacity, at any location worldwide:
(a) 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 Business,
in any manner which interferes with such person's relationship with the
Business, 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 the
Business.
(b) 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 the Business.
Section 9.4 Nonsolicitation. During the period beginning on the Closing
Date and ending on the fifth (5th) anniversary of the Closing Date, Seller shall
not, directly or indirectly, solicit (other than a general public solicitation)
any of the employees of the Business who were employed by the Business prior to
the Closing Date to become employees or independent contractors of Seller or any
of its subsidiaries.
Section 9.5 Certain Exclusions. Confidential and proprietary property,
knowledge and information of the Business 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. If Seller is required to disclose proprietary information to any
court, administrative agency or governmental authority or else stand liable for
contempt or other penalty and Seller
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notifies Buyer as soon as possible so that Buyer may seek a protective order or
other relief, then, in the absence of such protective order or other relief,
Seller may disclose such proprietary information without liability under this
Agreement. Nothing in Article IX shall prohibit Seller from conducting any
business (other than the Business) being conducted by Seller on the date hereof.
The ownership by Seller of not more than five percent (5%) of the outstanding
securities of any public company shall not, by itself, constitute a breach of
the Covenants of Section 9.3, even if such public company competes with the
Business. The acquisition by Seller of the stock or assets of any person or
entity (an "Acquired Business") which conducts a business competitive with the
Business shall not, by itself, constitute a breach of the Covenants of Section
9.3 (i) if less than 10% of the gross revenues of such Acquired Business are
derived from business competitive with the Business, or (ii) if 10% or more of
the gross revenues of such Acquired Business are derived from business
competitive with the Business and Seller disposes of such competitive business
as soon as practicable after the acquisition of the Acquired Business by Seller.
Seller hereby agrees to notify Buyer in a timely fashion so as to permit Buyer,
at its option, to bid on or offer to purchase any competitive business to be
disposed of by Seller pursuant to the preceding sentence. CDI is a wholly-owned
subsidiary of Seller. A division of CDI doing business as "Nationwide Credit" is
performing collection services in the State of Michigan as part of a physician
practice service management company. The continued ownership and operation of
CDI by the Seller, and the licensing of CDI as a collection agency in the State
of Michigan, will not constitute a breach of the Covenants of Section 9.3 if the
third party account collections activity engaged in by CDI is limited to the
State of Michigan and is offered only as an integrated part of CDI's practice
management services to physicians and practices within the State of Michigan who
are existing clients of CDI. Seller shall license CDI as a collection agency in
the State of Michigan as soon as reasonably practicable. Pending the granting of
such license, AssetCare shall provide collection services to the billing clients
of CDI under the Collection Services contract to be entered into pursuant to
Section 2.6. In the event that Seller desires to sell on a stand alone basis, or
have a third party provide, the third party collection services conducted by
CDI, Seller shall provide written notice thereof to Buyer and shall give Buyer
the right for a period of sixty (60) days after such notice to make an offer to
purchase such business and assets or provide such services.
Section 9.6 Enforcement of Covenants. Seller 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 Business 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 seek an injunction issued by any competent court enjoining and
restraining the Seller and all other persons involved therein from continuing
such breach.
Section 9.7 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
39
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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.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. Whether or not the transactions
contemplated herein are consummated pursuant hereto, except as otherwise
provided herein, each of Seller and Buyer shall pay all fees and expenses
incurred by, or on behalf of, such party, and Seller shall pay all fees and
expenses incurred by or on behalf of Company and Subsidiary in connection with,
or in anticipation of, this Agreement and the consummation of the transactions
contemplated hereby. Each of Seller and Buyer shall indemnify and hold harmless
the other party from and against any and all claims or liabilities for financial
advisory and finders' fees incurred by reason of any action taken by such party
or otherwise arising out of the transactions contemplated by this Agreement by
any person claiming to have been engaged by such party.
Section 10.2 Further Assurances. From time to time after the Closing Date,
at the request of another party hereto and at the expense of the party so
requesting, each of the parties hereto shall execute and deliver to such
requesting party such documents and take such other action as such requesting
party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
Section 10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery; (b) facsimile transmission; (c) registered or certified mail, postage
prepaid, return receipt requested; or (d) overnight delivery service. Notices
shall be sent to the appropriate party at its address or facsimile number given
below (or at such other address or facsimile number for such party as shall be
specified by notice given hereunder):
If to Buyer, to:
NCO Group, Inc.
515 Pennsylvania Avenue
Fort Washington, PA 19034
Telephone No.: 215-793-9300
Fax No.: 215-793-2929
Attention: Joshua Gindin, Esquire
40
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with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Telephone No.: 215-569-5500
Fax No.: 215-569-5555
Attention: Francis E. Dehel, Esquire
If to Seller, to:
Medaphis Corporation
2840 Mt. Wilkinson Parkway
Suite 300
Atlanta, GA 30339
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606-1285
Fax No.: (312) 407-0411
Attention: Lynn Hiestand, Esquire
All such notices, requests, demands, waivers and, communications shall be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address or (iii) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
Section 10.4 Severability. Should any provision of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any of the other provisions of this Agreement,
which remaining provisions shall remain in full force and effect and the
application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall be valid and enforced to the fullest extent permitted by law.
Section 10.5 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective
41
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successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, directly or indirectly,
including, without limitation, by operation of law, by any party hereto without
the prior written consent of the other parties hereto provided, however, that
Buyer shall have the right to assign its rights (but not its obligations) under
this Agreement to a wholly-owned subsidiary of Buyer.
Section 10.6 No Third Party Beneficiaries. This Agreement is solely for the
benefit of Seller, and its successors and permitted assigns, with respect to the
obligations of Buyer under this Agreement, and for the benefit of Buyer, and its
respective successors and permitted assigns, with respect to the obligations of
Seller, under this Agreement, and this Agreement shall not be deemed to confer
upon or give to any other third party any remedy, claim liability,
reimbursement, cause of action or other right.
Section 10.7 Interpretation.
(a) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
(b) As used in this Agreement, the term "person" shall mean
and include an individual, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
(c) As used in this Agreement, the term "affiliate" shall have
the meaning set forth in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
(d) In view of the fact that each of the parties hereto has
been represented by their own counsel and this Agreement has been fully
negotiated by all parties, the legal principle that ambiguities in a document
are construed against the draftsperson of that document shall not apply to this
Agreement.
Section 10.8 Jurisdiction and Consent to Service. Without limiting the
jurisdiction or venue of any other court, each of Seller and Buyer (a) agrees
that any suit, action or proceeding arising out of or relating to this Agreement
may be brought solely in the state or Federal courts of the District of
Delaware; (b) consents to the exclusive jurisdiction of each such court in any
suit, action or proceeding relating to or arising out of this Agreement; (c)
waives any objection which it may have to the laying of venue in -any such suit,
action or proceeding in any such court; and (d) agrees that service of any court
paper may be made in such manner as may be provided under applicable laws or
court rules governing service of process.
Section 10.9 Entire Agreement. Except for this Agreement, the
Confidentiality Agreement, the Disclosure Schedule, and the Exhibits and other
documents referred to herein or delivered
42
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pursuant hereto which form a part hereof constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, between the parties
or any of them with respect to the subject matter hereof, including without
limitation the Stock Purchase Agreement between the parties dated as of October
15, 1998.
Section 10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
Section 10.11 Specific Performance. The parties agree that any breach of
the terms of this Agreement would give rise to irreparable harm for which money
damages would not be an adequate remedy and accordingly the parties agree that,
in addition to any other remedies, each shall be entitled to enforce the terms
of this Agreement by a decree of specific performance without the necessity of
proving the inadequacy of money damages as a remedy.
Section 10.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
* * * * * * * * * *
(signatures appear on next page)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MEDAPHIS CORPORATION
By: /s/ RANDOLPH L.M. HUTTO
------------------------------
Name: RANDOLPH L.M. HUTTO
Title: EXECUTIVE VICE PRESIDENT
NCO GROUP, INC.
By: /s/ MICHAEL J. BARRIST
------------------------------
Name: MICHAEL J. BARRIST
Title: PRESIDENT AND CEO
44
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================================================================================
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF NOVEMBER 30, 1998
by and among
NCO GROUP, INC.
AND ITS SUBSIDIARIES IDENTIFIED HEREIN
AS BORROWERS
and
THE FINANCIAL INSTITUTIONS identified herein as Lenders
and
MELLON BANK, N.A., as Administrative Agent
and
SUCH CO-AGENTS AS MAY BE APPOINTED
FROM TIME TO TIME HEREAFTER
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Page
ARTICLE I
CREDIT FACILITY ............................................................................................1
1.1 COMMITMENT TO LEND.............................................................................1
1.2 JOINT AND SEVERAL OBLIGATIONS..................................................................2
1.3 MANNER OF BORROWING............................................................................2
1.4 SCHEDULED REPAYMENTS...........................................................................3
1.5 VOLUNTARY PREPAYMENTS..........................................................................4
1.6 PAYMENTS BY THE BORROWERS IN GENERAL...........................................................5
1.7 REDUCTIONS OF RC COMMITMENT....................................................................7
1.8 INTEREST.......................................................................................7
1.9 FEES ......................................................................................9
1.10 COMPUTATION OF INTEREST AND FEES...............................................................9
1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT..........................................................10
1.12 PRO RATA TREATMENT............................................................................10
1.13 TAXES ON PAYMENTS.............................................................................10
1.14 REGISTERED NOTES AND LOANS....................................................................12
1.15 ISSUANCE OF LETTERS OF CREDIT................................................................13
ARTICLE II
YIELD PROTECTION AND BREAKAGE INDEMNITY....................................................................18
2.1 MANDATORY SUSPENSION AND CONVERSION OF LIBO RATE LOANS........................................18
2.2 REGULATORY CHANGES............................................................................19
2.3 CAPITAL AND RESERVE REQUIREMENTS..............................................................20
2.4 BREAKAGE......................................................................................20
2.5 DETERMINATIONS................................................................................20
2.6 REPLACEMENT OF LENDERS........................................................................20
2.7 CHANGE OF LENDING OFFICE......................................................................21
ARTICLE III
CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS......................................................22
3.1 CONDITIONS TO INITIAL LOANS...................................................................22
3.2 CONDITIONS TO ALL LOANS.......................................................................26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.............................................................................27
4.1 REPRESENTATIONS AND WARRANTIES................................................................27
4.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE.......................................................32
ARTICLE V
AFFIRMATIVE COVENANTS .....................................................................................33
5.1 BASIC REPORTING REQUIREMENTS..................................................................33
5.2 INSURANCE.....................................................................................35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5.3 PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES AND PRIORITY CLAIMS..............................36
5.4 PRESERVATION OF CORPORATE STATUS..............................................................36
5.5 GOVERNMENTAL APPROVALS AND FILINGS............................................................36
5.6 MAINTENANCE OF PROPERTIES.....................................................................36
5.7 AVOIDANCE OF OTHER CONFLICTS..................................................................37
5.8 FINANCIAL ACCOUNTING PRACTICES................................................................37
5.9 USE OF PROCEEDS...............................................................................37
5.10 CONTINUATION OF OR CHANGE IN BUSINESS.........................................................37
5.11 CONSOLIDATED TAX RETURN.......................................................................37
5.12 FISCAL YEAR...................................................................................37
5.13 BANK ACCOUNTS.................................................................................37
5.14 SUBMISSION OF COLLATERAL DOCUMENTS............................................................38
5.15 COLLECTION OF ACCOUNTS........................................................................38
5.16 SUBSIDIARIES AS BORROWERS.....................................................................38
5.17 UPDATE OF SCHEDULES...........................................................................38
ARTICLE VI
NEGATIVE COVENANTS ........................................................................................38
6.1 FINANCIAL COVENANTS...........................................................................38
6.2 LIENS ........................................................................................39
6.3 INDEBTEDNESS..................................................................................39
6.4 GUARANTIES, INDEMNITIES, ETC..................................................................40
6.5 LOANS, ADVANCES AND INVESTMENTS...............................................................40
6.6 DIVIDENDS AND RELATED DISTRIBUTIONS...........................................................41
6.7 SALE-LEASEBACKS...............................................................................41
6.8 LEASES .......................................................................................41
6.9 MERGERS, ACQUISITIONS, ETC....................................................................42
6.10 DISPOSITIONS OF PROPERTIES....................................................................42
6.11 ISSUANCE OF STOCK.............................................................................42
6.12 DEALINGS WITH AFFILIATES......................................................................42
6.13 ACQUIRED DELINQUENT POOLS OF ACCOUNTS.........................................................43
6.14 CAPITAL EXPENDITURES..........................................................................43
6.15 LIMITATIONS ON MODIFICATION OF CERTAIN AGREEMENTS AND INSTRUMENTS.............................43
6.16 LIMITATION ON PAYMENTS OF PURCHASE MONEY INDEBTEDNESS.........................................44
6.17 LIMITATION ON OTHER RESTRICTIONS ON LIENS.....................................................44
6.18 LIMITATION ON OTHER RESTRICTIONS ON AMENDMENT OF THE LOAN DOCUMENTS, ETC......................44
ARTICLE VII
DEFAULTS
7.1 EVENTS OF DEFAULT.............................................................................44
7.2 CONSEQUENCES OF AN EVENT OF DEFAULT...........................................................47
7.3 APPLICATION OF PROCEEDS.......................................................................48
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VIII
THE ADMINISTRATIVE AGENT ..................................................................................48
8.1 APPOINTMENT...................................................................................48
8.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES...............................................49
8.3 EXERCISE OF POWERS............................................................................49
8.4 GENERAL EXCULPATORY PROVISIONS................................................................50
8.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT....................................................50
8.6 LENDERS NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS..................................51
8.7 INDEMNIFICATION...............................................................................51
8.8 REGISTER......................................................................................52
8.9 SUCCESSOR ADMINISTRATIVE AGENT................................................................52
8.10 ADDITIONAL AGENTS............................................................................53
8.11 CALCULATIONS..................................................................................53
8.12 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY...............................................53
ARTICLE IX
SPECIAL INTER-BORROWER PROVISIONS..........................................................................54
9.1 CERTAIN BORROWER ACKNOWLEDGEMENTS.............................................................54
9.2 CERTAIN INTER-BORROWER AGREEMENTS.............................................................54
9.3 RECORDS.......................................................................................55
ARTICLE X
DEFINITIONS; CONSTRUCTION..................................................................................55
10.1 CERTAIN DEFINITIONS...........................................................................55
10.2 CONSTRUCTION..................................................................................71
10.3 ACCOUNTING PRINCIPLES.........................................................................72
ARTICLE XI
MISCELLANEOUS .............................................................................................73
11.1 NOTICES.......................................................................................73
11.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT........................................................73
11.3 SEVERABILITY..................................................................................73
11.4 DESCRIPTIVE HEADINGS..........................................................................74
11.5 GOVERNING LAW.................................................................................74
11.6 NON-MERGER OF REMEDIES........................................................................74
11.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES........................................................74
11.8 AMENDMENTS; WAIVERS...........................................................................74
11.9 SUCCESSORS AND ASSIGNS........................................................................75
11.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES.......................................77
11.11 MAXIMUM LAWFUL INTEREST RATE..................................................................77
11.12 INDEMNIFICATION...............................................................................77
11.13 EXPENSES......................................................................................79
11.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY.................................................79
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
11.15 AUTHORIZATION OF NCO GROUP BY OTHER BORROWERS.................................................80
11.16 CERTAIN WAIVERS BY BORROWERS..................................................................80
11.17 SET-OFF.......................................................................................80
11.18 SHARING OF COLLECTIONS........................................................................81
11.19 OTHER LOAN DOCUMENTS..........................................................................81
11.20 CERTAIN BORROWER ACKNOWLEDGEMENTS.............................................................81
11.21 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL..............................81
11.22 MOST FAVORED BORROWER.........................................................................82
</TABLE>
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Exhibits
- --------
A-1 RC Note
A-2 Term Note
B Borrowing Notice
C Prepayment Notice
D LIBO Rate Selection Notice
E Form of Security Agreement
F Form of Stock Pledge
G Insurance Assignment
H Certificate of Pro Forma Covenant Compliance
I Quarterly Compliance Certificate
J Form of Seller Subordination Agreement
K Form of Seller Subordination Agreement (for seller notes aggregating
less than $2,000,000 in original principal amount)
K-1 Form of Seller Subordination Agreement (for seller notes aggregating
less than $10,000,000 in original principal amount)
L Assignment and Acceptance
M Joinder Agreement
Schedules
- ---------
1.1(a) Lender's Commitments
1.1(b) Lender's Participation in The Term Loan
4.1(a) Jurisdictions
4.1(h) Undisclosed Liabilities
4.1(k) Projections
4.1(n) Partnerships
4.1(o) Ownership
4.1(s) Insurance
4.1(v) Intellectual Property
4.1(x) Environmental Matters
4.1(w) Employee Benefits
4.1(z) Names
5.15 Excluded Subsidiaries
6.2 Liens
6.3 Indebtedness
6.5 Loans and Investments
6.12 Affiliate Transactions
v
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CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November
30, 1998, by and between NCO GROUP, INC., a Pennsylvania corporation ("NCO
Group"), AND ITS SUBSIDIARIES LISTED ON THE SIGNATURE PAGE HERETO (NCO Group and
such Subsidiaries are each individually a "Borrower" and collectively the
"Borrowers") and the Lenders referred to on the signature page hereto (together
with other lender parties hereto from time to time pursuant to Section 11.9
below, and their successors and assigns, the "Lenders"), MELLON BANK, N.A., a
national banking association ("Mellon") for itself and as Administrative Agent
for the other Lenders (in such capacity, together with its successors and
assigns in such capacity, the "Administrative Agent") and MELLON BANK, N.A., a
national banking association, as issuer of Letters of Credit hereunder (in such
capacity, together with its successors and assigns in such capacity, the
"Issuer").
Recitals:
A. NCO Financial Systems, Inc. ("NCO Financial") and Mellon
entered into that certain Credit Agreement dated as of July 28, 1995 ("Original
Credit Agreement"), pursuant to which Mellon made available to NCO Financial
certain credit facilities. The Original Credit Agreement was amended and
restated on September 5, 1996 (the "1996 Credit Agreement") pursuant to which
NCO Financial, NCO Group, NCO Funding, Inc., and NCO of New York, Inc. each
became parties to the 1996 Credit Agreement, and further amended on September
11, 1996, December 13, 1996, and February 11, 1998. The 1996 Credit Agreement
was amended and restated as of March 23, 1998 (the "Existing Credit Agreement")
and further clarified by those certain Closing Memoranda dated May 5, 1998 and
May 29, 1998 pursuant to which all U.S. subsidiaries of NCO Group (as of that
date) each became parties to the Credit Agreement.
B. The Borrowers have requested that the credit facilities be
increased and restructured as a $75,000,000 revolving credit loan and a
$125,000,000 term loan. Mellon has agreed to do so, with the understanding that
the credit will be syndicated and portions of Mellon's commitment will be sold
and assigned to other lenders.
C. In connection with the foregoing modifications, all Loans
outstanding under the Existing Credit Agreement shall be repaid in full on the
date hereof from the proceeds of the new Loans and all Commitments, other than
Mellon's, shall be terminated.
D. In furtherance of their goals, the parties have agreed to
amend and restate the Credit Agreement on the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and intending to be legally bound hereby, the
Borrowers and the Lenders agree that the Credit Agreement is hereby amended and
restated in its entirety as follows:
<PAGE>
CREDIT FACILITY
1.1 COMMITMENT TO LEND.
(a) Term Loan. Upon the terms and subject to the conditions of
this Agreement (including all conditions precedent in Section 3.1), each Lender
agrees to make, on the Closing Date, a Loan ("Term Loan") to the Borrowers in
the amount of such Lender's Term Loan Commitment. The total amount of the Term
Loan Commitment of all Lenders on the Closing Date is $125,000,000.00.
(b) RC Loans. Upon the terms and subject to the conditions of
this Agreement (including all conditions precedent in Section 3.1), each Lender
agrees to make, from time to time during the period from and including the
Closing Date to but excluding the Maturity Date, one or more RC Loans ("RC
Loans") to the Borrowers in an aggregate unpaid principal amount not exceeding
at any time such Lender's RC Commitment at such time; provided, however, that
the Borrowers shall not request, and the Lenders shall have no obligation to
make, any Loans at any time in excess of the Available RC Commitment. The total
amount of the RC Commitment of all Lenders on the Closing Date is
$75,000,000.00.
1.2 JOINT AND SEVERAL OBLIGATIONS.
WHETHER OR NOT EXPRESSLY STATED HEREIN OR IN ANY OTHER LOAN
DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS (OR OF ANY BORROWER) HEREUNDER AND
UNDER EACH OTHER LOAN DOCUMENT (WHETHER IN CONNECTION WITH LOANS OR OTHER
OBLIGATIONS) ARE JOINT AND SEVERAL OBLIGATIONS OF ALL BORROWERS.
1.3 MANNER OF BORROWING.
(a) Notice of Borrowing. NCO Group (on behalf of the
Borrowers) shall give the Administrative Agent notice (which shall be
irrevocable), in the case of Prime Rate Loans, no later than 12:00 p.m.
(Philadelphia, Pennsylvania time) on the Business Day for the making of such RC
Loans and, in the case of LIBO Rate Loans, 12:00 p.m. (Philadelphia,
Pennsylvania, time) three Business Days before the requested date for the making
of such Loans. Each such notice shall be in the form of Exhibit B hereto and
shall specify (i) whether the requested Loans are to be a Term Loan or RC Loans,
(ii) the requested date for the making of such Loans which date shall be a
Business Day, (iii) the Type or Types of Loans requested and (iv) the amount of
each such Type of Loan, which amount shall be $1,000,000.00 or any integral
multiple of $500,000.00 in excess thereof (except that the amount of the
requested RC Loan may be less if the amount requested is equal to the total
Available RC Commitment). Upon receipt of any such notice, the Administrative
Agent shall promptly notify each applicable Lender of the contents thereof and
of the amount and Type of each Loan to be made by such Lender on the requested
date specified therein.
(b) Funding by Lenders. Not later than 3:00 p.m.
(Philadelphia, Pennsylvania time) on each requested date for the making of
Loans, each Lender shall make available to the
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Administrative Agent, in Dollars and in funds immediately available to the
Administrative Agent at the office designated by the Administrative Agent, the
Loans to be made by such Lender on such date, provided however that if a Lender
does not receive timely notice from the Administrative Agent as set forth in
paragraph (a) above, such Lender shall fund the required amount promptly upon
receipt of such notice. The obligations of the Lenders hereunder are several;
accordingly, any Lender's failure to make any Loan to be made by it on the
requested date therefor shall not relieve any other Lender of its obligation to
make any Loan to be made by it on such date, but the latter shall not be liable
for the former's failure.
(c) Permitted Assumption as to Funding. Unless the
Administrative Agent shall have received notice from a Lender prior to 12:00
p.m. (Philadelphia, Pennsylvania time) on the requested date for the making of
any Loan that such Lender will not make available to the Administrative Agent
the Loan requested to be made by it on such date, the Administrative Agent may
assume that such Lender has made such Loan available. The Administrative Agent
in its sole discretion and in reliance upon such assumption, may make available
to the Borrowers on the requested date a corresponding amount on behalf of such
Lender. If and to the extent such Lender shall not have made available to the
Administrative Agent the Loans requested to be made by such Lender on such date
and the Administrative Agent shall have so made available to the Borrowers a
corresponding amount on behalf of such Lender, (i) such Lender shall, on demand,
pay to the Administrative Agent such corresponding amount together with interest
thereon, for each day from the date such amount shall have been so made
available by the Administrative Agent to the Borrowers until the date such
amount shall have been paid in full to the Administrative Agent, at the Federal
Funds Rate until (and including) the third Business Day after demand is made and
thereafter at the Prime Rate, and (ii) the Administrative Agent shall be
entitled to all interest payable by Borrowers on such amount for the period
commencing on the date such amount was advanced by the Administrative Agent to
but not including the date on which such amount is received by the
Administrative Agent from such Lender. Moreover, any Lender that shall have
failed to make available the required amount shall not be entitled to vote on
such matters as Lenders or Majority Lenders are otherwise entitled to vote on or
consent to or approve under this Agreement and the other Loan Documents until
such amount with interest is paid in full to the Administrative Agent by such
Lender. Without limiting any obligations of any Lender pursuant to this
paragraph (c), if such Lender does not pay such corresponding amount promptly
upon the Administrative Agent's demand therefor, the Administrative Agent shall
notify NCO Group (on behalf of the Borrowers) and the Borrowers shall promptly
repay such corresponding amount to the Administrative Agent together with
accrued interest thereon at the applicable rate or rates on such Loans.
(d) Disbursements of Funds to Borrowers. All amounts made
available to the Administrative Agent in accordance with paragraph (b) above
shall be disbursed by the Administrative Agent promptly but in any event not
later than 4:00 p.m. (Philadelphia, Pennsylvania time) on the requested date
therefor in Dollars, in funds immediately available to the Borrowers by
crediting such amount to an account of NCO Group at the Administrative Agent's
Domestic Lending Office or in such other manner as may be agreed to by NCO Group
and the Administrative Agent.
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1.4 SCHEDULED REPAYMENTS.
(a) Term Loan. The Term Loan shall mature and become due and
payable and shall be repaid by the Borrowers in quarterly installments, payable
on successive Quarterly Payment Dates commencing on September 30, 1999 and
ending on the Maturity Date (whether or not such date would otherwise be a
Quarterly Payment Date). Each such installment shall be in the amount set forth
below for the applicable period), provided that the final installment shall be
in an amount equal to the aggregate amount of the Term Loan then outstanding.
<TABLE>
<CAPTION>
<S> <C>
Payment Due Each Quarterly Payment Date Amount (Assuming Full $125,000,000.00 is Borrowed
--------------------------------------- -------------------------------------------------
during the Following Period and Not Otherwise Prepaid)
--------------------------- --------------------------
9/30/99 through 12/31/00 $3,000,000.00
3/31/01 through 12/31/01 $3,750,000.00
3/31/02 through 12/31/02 $4,500,000.00
3/31/03 through Maturity Date $5,250,000.00
</TABLE>
(b) RC Loans. The aggregate outstanding principal amount of
the RC Loans shall mature and become due and payable, and shall be repaid by the
Borrowers, on the Maturity Date.
1.5 VOLUNTARY PREPAYMENTS.
(a) Optional Prepayments. The Borrowers may, at any time and
from time to time, prepay the Loans in whole or in part, without premium or
penalty (but with any payment required under Section 2.4 (Breakage)), except
that any optional partial prepayment (other than a prepayment of all outstanding
Loans) shall be in an aggregate principal amount of $500,000.00 or any integral
multiple of $250,000.00 in excess thereof. Amounts to be so prepaid shall
irrevocably be due and payable on the date specified in the applicable notice of
prepayment delivered pursuant to paragraph (b) of this Section 1.5 together with
interest thereon as provided in Section 1.8 (Interest) and together with any
payment required under Section 2.4 (Breakage).
(b) Application and Timing of Prepayments.
(i) Notice. The Borrowers shall give the Administrative
Agent notice of each prepayment of RC Loans, which notice, in the case of a
prepayment of Prime Rate Loans, shall be given no later than 1:00 p.m.
(Philadelphia, Pennsylvania time) one (1) Business Day before and, in the case
of a prepayment of LIBO Rate Loans, no later than 12:00 P.M. (Philadelphia,
Pennsylvania, time) three (3) Business Days before, the date of such prepayment.
Each such notice of prepayment shall be in the form of Exhibit C hereto and
shall specify (i) the date such prepayment is to be made, and (ii) whether the
Loans to be prepaid are a Term Loan or RC Loans (consistent with the provisions
of this Agreement), (iii) the amount and Type and, in the case of any LIBO Rate
Loan, the last day of the applicable Interest Period for the RC Loan to
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be prepaid. Upon receipt of any such notice, the Administrative Agent shall
promptly notify each applicable Lender of the contents thereof.
(ii) Timing and Application of Voluntary Prepayments. Any
voluntary prepayments pursuant to paragraph (a) of this Section 1.5 shall be
applied in the following order unless otherwise directed by the Borrowers:
(1) First, prepayments shall be applied against any
interest, fees, charges and expenses due and payable in
respect of the Obligations.
(2) Second, prepayments shall be applied against the
RC Loans but with no corresponding reduction in the
amount of the Commitment unless otherwise specified by
NCO Group (on behalf of the Borrowers) in accordance with
Section 1.7 hereof.
(3) Third, prepayments shall be applied against the
Term Loan. Prepayment of the Term Loan shall be applied
to reduce the remaining installments thereof set forth in
Section 1.4 (Scheduled Repayment) on a pro rata basis.
Any excess shall be applied to any other amounts owing in respect of the
Obligations and, if all such Obligations have been then paid in full, then any
excess amount shall be returned to NCO Group (on behalf of the Borrowers) or as
otherwise required by applicable Law.
(c) Certain Provisions Respecting Prepayments Generally.
Prepayments shall be subject to the interest payment provisions, as applicable,
set forth in Section 1.8 and the breakage indemnity provisions, as applicable,
set forth in Section 2.4 below.
1.6 PAYMENTS BY THE BORROWERS IN GENERAL.
(a) Time, Place and Manner. All payments due to the
Administrative Agent and the Lenders under the Loan Documents shall be made to
the Administrative Agent at the office designated by the Administrative Agent on
the signature pages hereto or to such other Person or at such other address as
the Administrative Agent may designate by written notice to NCO Group on behalf
of the Borrowers. Until further notice from the Administrative Agent and except
as otherwise provided herein, all such payments shall be made by charging the
Borrower's deposit account with the Administrative Agent as provided in Section
1.6(c). Except as otherwise set forth in this Agreement, a payment shall not be
deemed to have been made on any day unless such payment has been received by the
required Person, at the required place of payment, in Dollars in funds
immediately available to such Person, no later than 1:00 p.m. (Philadelphia,
Pennsylvania time) on such day; provided, however, that the failure of the
Borrowers to make any such payment by such time shall not constitute a Default
hereunder so long as such payment is received no later than 3:00 p.m.
(Philadelphia, Pennsylvania time) on such day, but any such payment received
later than 1:00 p.m. (Philadelphia, Pennsylvania time) on such day shall be
deemed to have been made on the next Business Day for the purpose of calculating
interest on the amount paid, provided further, that any such payment made with
the proceeds of Loans shall be deemed to have been made on the date of the
making of such Loans,
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so long as such proceeds are immediately so applied and are not otherwise
disbursed to the Borrowers.
(b) No Reductions. All payments due to the Administrative
Agent or any Lender under this Agreement and the other Loan Documents, shall be
made by the Borrowers without any reduction or deduction whatsoever, including
any reduction or deduction for any charge, set-off, holdback, recoupment or
counterclaim (whether sounding in tort, contract or otherwise).
(c) Authorization to Charge Accounts. The Borrowers hereby
authorize the Administrative Agent to charge any amounts due under this
Agreement against any or all of the demand deposit or other accounts (other than
accounts containing escrow funds) of NCO Group or any Borrower with the
Administrative Agent (whether maintained at a branch or office located within or
without the United States), with the Borrowers remaining jointly and severally
liable for any deficiency. The Administrative Agent shall give the relevant
Borrower one day prior notice of the amount to be charged provided, however,
that advance notice shall not be required to charge any amount due for interest
or the Unused Fee, and the Administrative Agent shall only advise of such charge
after such charge has been made.
(d) Extension of Payment Dates if Not a Business Day. Whenever
any payment to the Administrative Agent or any Lender under the Loan Documents
would otherwise be due (except by reason of acceleration) on a day that is not a
Business Day, such payment shall instead be due on the next succeeding Business
Day unless, in the case of a payment of the principal of LIBO Rate Loans, such
extension would cause payment to be due in the next succeeding calendar month,
in which case such due date shall be advanced to the next preceding Eurodollar
Business Day. If the due date for any payment under the Loan Documents is
extended (whether by operation of any Loan Document, applicable Law or
otherwise), such payment shall bear interest for such extended time at the rate
of interest applicable hereunder.
(e) Disbursement of Payments to Lenders. The Administrative
Agent shall promptly distribute to each applicable Lender its ratable share of
each payment received by the Administrative Agent under the Loan Documents for
the account of such Lender by crediting an account of such Lender at the
Administrative Agent's office or by wire transfer to an account of such Lender
at an office of any other commercial bank located in the United States or at any
Federal Reserve Bank designated by such Person. Unless the Administrative Agent
shall have received notice from NCO Group (on behalf of the Borrowers) prior to
the date on which any payment is due to any Lenders under the Loan Documents
that the Borrowers will not make such payment in full, the Administrative Agent
may assume that the Borrowers have made such payment in full to the
Administrative Agent on such date and the Administrative Agent, in its sole
discretion may, in reliance upon such assumption, cause to be distributed to
each applicable Lender on such due date, a corresponding amount with respect to
the amount then due to such Person. If and to the extent that the Borrowers
shall not have so made such payment in full to the Administrative Agent, and the
Administrative Agent shall have so distributed to such Lender or Lenders a
corresponding amount, such Lender shall, on demand, repay to the Administrative
Agent the amount so distributed together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date such
Person repays such amount to the Administrative Agent, at the Federal Funds Rate
until (and including) the third Business Day after demand is made and thereafter
at the Prime Rate. Moreover, any Lender that shall have
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failed to make available the required amount shall not be entitled to vote on
such matters as Lenders or Majority Lenders are otherwise entitled to vote on or
consent to or approve under this Agreement and the other Loan Documents until
such amount with interest is paid in full to the Administrative Agent by such
Lender. Nothing in this Section 1.6 shall relieve the Borrowers from any payment
obligations.
(f) Breakage Costs on LIBO Rate Loans. Any repayment or
prepayment of a LIBO Rate Loan made on a day other than the last day of the
applicable Interest Period therefor shall be subject to payments in respect of
breakage costs as required to be paid in respect thereof pursuant to Section 2.4
below.
1.7 REDUCTIONS OF RC COMMITMENT.
(a) Optional Reductions. The Borrowers may reduce the RC
Commitment by giving the Administrative Agent notice (which shall be
irrevocable) thereof no later than 11:00 a.m. (Philadelphia, Pennsylvania, time)
on the third Business Day before the requested date of such reduction, provided,
that each partial reduction thereof (other than the elimination of the RC Loan)
shall be in an amount equal to $5,000,000.00 or any integral multiple of
$1,000,000.00 in excess thereof and, provided, further, that no reduction shall
reduce the Commitment to an amount less than the aggregate of the principal
amount of all Loans outstanding on such date (after giving effect to any
repayment or prepayment of RC Loans made on or prior to such date). Upon receipt
of any such notice, the Administrative Agent shall promptly notify each Lender
of the contents thereof and the amount (based on a pro rata reduction to each
Lender's RC Commitment) to which such Lender's RC Commitment is to be reduced.
(b) No Reinstatement of RC Commitment. All reductions of the
RC Commitment are permanent and the RC Commitment cannot be restored without the
written consent of all Lenders.
(c) On each date ("Reduction Date") on which the RC Commitment
is reduced the Borrowers shall pay to the Administrative Agent the amount, if
any, by which the outstanding principal balance of the RC Loans exceeds the
amount of the RC Commitment as reduced on such Reduction Date.
1.8 INTEREST.
(a) Interest Rates in General. Subject to the terms and
conditions of this Agreement, each Loan, at the option of the Borrowers, shall
bear interest on the outstanding principal amount thereof until paid in full at
a rate per annum equal to (i) the Prime Rate as in effect from time to time or
(ii) the applicable LIBO Rate for a specified Interest Period plus the
Applicable Margin.
(b) Election of LIBO Rate. Unless otherwise designated by the
Borrowers as a LIBO Rate Loan in accordance with this paragraph (b), each Loan
shall be deemed to be a Prime Rate Loan as more fully set forth below.
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<PAGE>
(i) Prime Rate Unless Otherwise Designated. Prime Rate
Loans shall continue as Prime Rate Loans unless and until such Loans are
converted into Loans of another Type. LIBO Rate Loans for any Interest Period
shall continue as Loans of such Type until the end of the then current Interest
Period therefor, at which time they shall be automatically converted into Prime
Rate Loans unless NCO Group (on behalf of the Borrowers) shall have given the
Administrative Agent notice in accordance with clause (ii) below requesting that
such Loans continue as LIBO Rate Loans for another Interest Period of a
specified duration.
(ii) Election of LIBO Rate. To elect a LIBO Rate, NCO
Group (on behalf of the Borrowers) shall give the Administrative Agent notice
(which shall be irrevocable) no later than 12:00 p.m. (Philadelphia,
Pennsylvania, time) three (3) Eurodollar Business Days before the requested date
of the funding, conversion or continuation which date shall be a Eurodollar
Business Day. Each such notice shall be in the form of Exhibit D hereto and
shall specify (A) the requested date of such funding, conversion or
continuation, (B) whether the subject Loan is a new advance or an existing Loan
that is to be converted or continued, (C) in the case of any LIBO Rate Loan
being continued, the last day of the current Interest Period, (D) whether such
Loan is to be a Term Loan or RC Loan, and (E) the amount of, and the desired
Interest Period for, the Loan subject to such LIBO Rate election, provided that
the Borrowers shall not be entitled to select an Interest Period for any Loan
which shall end on a date later than the Maturity Date applicable to such Loan.
Upon receipt of any such notice, the Administrative Agent shall promptly notify
each applicable Lender of the contents thereof.
(iii) LIBO Rate Suspended During Event of Default.
Notwithstanding anything to the contrary contained in clauses (i) or (ii) of
this paragraph (b), so long as an Event of Default shall have occurred and be
continuing, the Administrative Agent may (and, at the request of the Majority
Lenders, shall) notify NCO Group (on behalf of the Borrowers) that Loans may
only be converted into or continued upon the expiration of the applicable
current Interest Period therefor as Prime Rate Loans or Loans of such specified
Types as shall be acceptable to the Majority Lenders. Thereafter, until no Event
of Default shall continue to exist, Loans may not be converted into or continued
as Loans of any Type other than Prime Rate Loans or one or more of such
specified Types.
(iv) Limitation on Types of Loans. Notwithstanding
anything to the contrary contained in this Agreement, the Borrowers shall
borrow, prepay, convert and continue Loans in a manner such that (A) unless
otherwise agreed to by the Administrative Agent, the aggregate principal amount
of LIBO Rate Loans of the same Type shall, at all times, be not less than
$1,000,000.00 and (B) there shall be, at any one time, no more than seven (7)
Interest Periods for LIBO Rate Loans in effect.
(v) Flexibility as to Source. Each Lender may fund LIBO
Rate Loans from any source that such Lender deems (in its sole discretion)
appropriate without loss of any rights hereunder.
(c) Interest Payment Dates. Interest shall be payable, (i) in
the case of Prime Rate Loans, monthly in arrears on each Monthly Payment Date,
(ii) in the case of LIBO Rate Loans, on the last day of each applicable Interest
Period (and, in the case of any LIBO Rate Loan having an Interest Period longer
than three months, on each three month anniversary of the first day of
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such Interest Period) and (iii) in the case of any Loan, when such Loan shall be
due (whether at maturity, upon mandatory prepayment, by reason of notice of
prepayment or acceleration or otherwise) or converted, but only to the extent
then accrued on the amount then so due or converted.
(d) Default Rate. At any time that an Event of Default shall
have occurred and shall be continuing, any amount payable hereunder and under
each other Loan Document shall bear interest (whether before or after judgment),
payable on demand, at a rate per annum equal to the applicable Default Rate.
1.9 FEES.
(a) Unused Fee. The Borrowers shall pay to the Administrative
Agent, for the account of each Lender, an unused fee ("Unused Fee") calculated
at a rate per annum equal to the percentage amount set forth below, under the
caption "Unused Fee" opposite the relevant Consolidated Funded Debt/Consolidated
EBITDA Ratio, on the daily unused amount of such Lender's RC Commitment for each
day from and including the Closing Date to but excluding the Maturity Date:
Consolidated Funded Debt/
Consolidated EBITDA Ratio Unused Fee
------------------------- ----------
below 2.0 1/8%
> 2.0 < 3.0 1/4%
> 3.0 < 3.5 3/8%
The Unused Fee shall be payable in arrears (i) on successive Monthly Payment
Dates beginning with the first Monthly Payment Date after the Closing Date (ii)
on the date of any reduction of the Commitment (to the extent accrued and unpaid
on the amount of such reduction) and (iii) on the Maturity Date. From the
Closing Date until the first day of the month following delivery of the first
Officer's Compliance Certificate for the first fiscal quarter of 1999, the
Unused Fee shall be 3/8% regardless of the actual ratio. Thereafter, the Unused
Fee shall be adjusted on the first Business Day of the month after delivery of
each Officer's Compliance Certificate under Section 5.1.
(b) Letter of Credit Fees. The Borrowers shall pay to the
Issuer for the ratable benefit of the Lenders, a "Letter of Credit Fee" on the
face amount of each Letter of Credit at a rate per annum equal to 1 1/2%. Such
fee shall be payable upon issuance of each Letter of Credit and, if the Letter
of Credit is "evergreen" on each anniversary of such issuance for so long as the
Letter of Credit remains outstanding. The Borrowers shall also pay to the Issuer
for the Issuer's sole account the Issuer's then in effect standard document
preparation fees and reasonable administrative expenses payable with respect to
Letters of Credit.
(c) Other Fees. The Borrowers shall pay to the Administrative
Agent for the sole account of the Administrative Agent, such fees, including an
annual Administrative Agent's fee, as have been or may be agreed to in writing
by the Borrowers or any of them and the
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Administrative Agent in connection with this Agreement and the transactions
contemplated by this Agreement.
1.10 COMPUTATION OF INTEREST AND FEES. Interest and commitment fees shall
be computed on the basis of a year of 360 days and paid for the actual number of
days elapsed. Interest and commitment fees for any period shall be calculated
from and including the first day thereof to but excluding the last day thereof.
1.11 PROMISSORY NOTES; RECORDS OF ACCOUNT. Each Lender's Loans and the
Borrowers' joint and several obligations to repay such Loans with interest in
accordance with the terms of this Agreement shall be evidenced by this
Agreement, the Register and other records of the Administrative Agent and such
Lender and, in the case of a Term Loan, a single Term Note payable to the order
of such Lender, and in the case of RC Loans, a single RC Note payable to the
order of such Lender. The records of each Lender shall be prima facie evidence
of such Lender's Loans and, in each case, of accrued interest thereon and all
payments made in respect thereto. In the event that there is any dispute
concerning the amount of any such obligations, the amount of each Lender's RC
Commitment with respect to RC Loans and the Term Loan and the amount of
outstanding Obligations of each and every Type shall at all times be ascertained
from the records of the Administrative Agent, including, without limitation, the
Register, all of which shall be conclusive absent manifest error.
1.12 PRO RATA TREATMENT. Except to the extent otherwise provided herein,
(a) the Term Loan shall be made by, and principal interest and fees in respect
thereof shall be paid or repaid to, the Lenders pro rata in accordance with
their respective Term Loan Commitments and interest in the Term Loan; and (b) RC
Loans shall be made by, and principal, interest and fees in respect thereof
shall be paid or repaid to, the Lenders pro rata in accordance with their
respective RC Commitments and interest in RC Loans.
1.13 TAXES ON PAYMENTS.
(a) Taxes Payable by the Borrowers. If any Tax is required to
be withheld or deducted from, or is otherwise payable by the Borrowers in
connection with, any payment due to the Administrative Agent or any Lender that
is not a "United States Person" (as such term is defined in Section 7701(a)(30)
of the Code), the Borrowers (i) shall, if required, withhold or deduct the
amount of such Tax from such payment and, in any case, pay such Tax to the
appropriate taxing authority in accordance with applicable Law and (ii) except
in the case of any Bank Tax, shall pay to such Lender or the Administrative
Agent such additional amounts as may be necessary so that the net amount
received by such Person with respect to such payment, after withholding or
deducting all Taxes required to be withheld or deducted, is equal to the full
amount payable hereunder. If any Tax is withheld or deducted from, or is
otherwise payable by the Borrowers in connection with, any payment due to any
Lender or the Administrative Agent hereunder, the Borrowers shall furnish to
such Person the original or a certified copy of a receipt (if any) for such Tax
from the applicable taxing authority or other evidence of payment thereof
satisfactory to such Person within 30 days after the date of such payment (or,
if such receipt shall not have been made available by such taxing authority
within such time, the Borrowers shall use reasonable efforts to promptly obtain
and furnish such receipt). If the Borrowers fail to pay any such Taxes when due
to the appropriate taxing authority or fail to remit to any Lender or the
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Administrative Agent the required receipts or other evidence of payment thereof
satisfactory to such Person, the Borrowers shall indemnify such Person for any
Taxes, interest, penalties or additions to Tax that may become payable by such
Person as a result of any such failure.
(b) Taxes Payable by any Lender or the Administrative Agent.
The Borrowers shall, promptly upon request by any Lender or the Administrative
Agent that is not a United States Person, pay to such Person an amount equal to
(i) all Taxes (other than Bank Taxes and without duplication of amounts paid
pursuant to the preceding paragraph (a)) payable by such Person with respect to
any payment due to such Person hereunder and (ii) all Taxes (other than Bank
Taxes) payable by such Person as a result of payments made by the Borrowers
(whether made to a taxing authority or to such Person pursuant to the preceding
paragraph (a) or this paragraph (b)).
(c) Credits and Deductions. If any Lender or the
Administrative Agent is, in its sole opinion, able to apply for any refund,
offset, credit, deduction or other reduction in Taxes by reason of any payment
made by the Borrowers under the preceding paragraphs (a) or (b), such Lender or
the Administrative Agent, as the case may be, shall use reasonable efforts to
obtain such refund, offset, credit, deduction or other reduction and, upon
receipt thereof, will pay to the Borrowers such amount, not exceeding the
increased amount paid by the Borrowers, as is equal to the net after-tax value
to such Lender or the Administrative Agent, in its sole opinion, of such part of
such refund, offset, credit, deduction or other reduction as it considers to be
allocable to such payment by the Borrowers, having regard to all of such
Person's dealings giving rise to similar refunds, offsets, credits, deductions
or other reductions in relation to the same tax period and to the cost of
obtaining the same; provided, however, that if such Person has made a payment to
the Borrowers pursuant to this paragraph (c) and the applicable refund, offset,
credit, deduction or other reduction in Tax is subsequently disallowed, the
Borrowers shall, promptly upon request by the Administrative Agent or such
Lender refund to such Person that portion of such payment determined by such
Person, in its sole opinion, relating to such disallowance; and provided,
further that (i) the Administrative Agent or such Lender, as the case may be,
shall not be obligated to disclose to the Borrowers any information regarding
its Tax affairs or computations and (ii) nothing in this paragraph (c) shall
interfere with the right of such Person to arrange its Tax affairs as it deems
appropriate.
(d) Exemption from U.S. Withholding Taxes. Each Lender that is
not a United States Person shall submit to the Borrowers and the Administrative
Agent, on or before the fifth day prior to the first Monthly Payment Date
occurring after the Initial Funding Date (or, in the case of a Person that is
not a United States Person and that became a Lender by assignment, promptly upon
such assignment), two duly completed and signed copies of either (A) Form 1001
of the United States Internal Revenue Service entitling such Lender to a
complete exemption from withholding on all amounts to be received by such Lender
pursuant to this Agreement and the Loans, (B) Form 4224 of the United States
Internal Revenue Service relating to all amounts to be received by such Lender
pursuant to this Agreement and the Loans or (C) in the case of a Lender that is
claiming an exemption from United States withholding tax under Section 871(h) or
881(c) of the Internal Revenue Code with respect to payments of "portfolio
interest" two accurate and complete signed original Forms W-8 (or any successor
form prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from or is entitled to a reduced
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rate of United States withholding tax on payments under this Agreement or the
Notes) and, if such Lender delivers such Forms W-8 (or successor form), two
signed certificates that such Lender is not (1) a "bank" for purposes of Section
881(c) of the Internal Revenue Code, (2) is not a 10% shareholder (within the
meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of any Borrower
and (3) is not a controlled foreign corporation related to any Borrower (within
the meaning of Section 864(d)(4) of the Internal Revenue Code), as appropriate,
Each such Lender shall, from time to time after submitting either such form,
submit to the Borrowers and the Administrative Agent such additional duly
completed and signed copies of one or the other such forms (or any successor
forms as shall be adopted from time to time by the relevant United States taxing
authorities) as may be (A) requested in writing by the Borrowers or the
Administrative Agent and (B) appropriate under the circumstances and under then
current United States law or regulations to avoid or reduce United States
withholding taxes on payments in respect of all amounts to be received by such
Lender pursuant to this Agreement or the Loans. Upon the request of the
Borrowers or the Administrative Agent, each Lender that is a United States
Person shall submit to the Borrowers and the Administrative Agent a certificate
to the effect that it is a United States Person.
(e) Obligations under this Section 1.13 shall survive payment
of the Loans.
1.14 REGISTERED NOTES AND LOANS.
(a) Request for Registration. Any Lender may request the
Borrowers (through the Administrative Agent), and the Borrowers agree thereupon,
to register such Loans as provided in Section 1.14(c) and to issue such Lender's
Note(s), evidencing such Loans, or to exchange such Note(s) for new Note(s),
registered as provided in Section 1.14(c) (each, a "Registered Note"). A
Registered Note may not be exchanged for a Note that is not in registered form.
A Registered Note shall be deemed to be and shall be a Note for all purposes of
this Agreement and the other Loan Documents.
(b) Delivery of Tax Forms. Each Non-U.S. Lender that requests
or holds a Registered Note pursuant to Section 1.14(a) or registers its Loans
pursuant to Section 1.14(a) (a "Registered Lender") (or, if such Registered
Lender is not the beneficial owner thereof, such beneficial owner) shall deliver
to NCO Group (on behalf of the Borrowers) (with a copy to the Administrative
Agent) prior to or at the time such Non-U.S. Lender becomes a Registered Lender,
the applicable form described in Section 1.13(d) (or such successor and related
forms as may from time to time be adopted by the relevant taxing authorities of
the United States) together with an annual certificate stating that such
Registered Lender or beneficial owner, as the case may be, is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code and is not otherwise
described in Section 881(c)(3) of the Code. Each Registered Lender or beneficial
owner, as the case may be, shall promptly notify NCO Group (on behalf of the
Borrowers) (with a copy to the Administrative Agent) if at any time such
Registered Lender or beneficial owner, as the case may be, determines that it is
no longer in a position to provide such previously delivered certificate to the
Borrowers (or any other form of certification adopted by the relevant taxing
authorities of the United States for such purposes).
(c) Registration of Loans. The Administrative Agent, acting,
for this purpose, as agent of the Borrowers, shall, upon request of any
Registered Lender, enter in the Register the
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name, address and taxpayer identification number (if provided) of the Registered
Lender or beneficial owner, as the case may be. In addition to the requirements
of Section 11.9 (Successors and Assigns), a Registered Note and the Loans
evidenced thereby (or such Loans pending delivery of such Registered Note) or
any other Loans registered pursuant to Section 1.14(a) above may be assigned or
otherwise transferred in whole or in part only by registration of such
assignment or transfer of such Registered Note and/or the Loans so registered on
the Register (and each such Registered Note shall expressly so provide). Any
assignment or transfer of all or part of such Loans and such Registered Note
shall be registered on the Register only upon compliance with the provisions of
Section 11.9 and, in the case of Registered Notes, surrender for registration of
assignment or transfer of the Registered Note evidencing such Loans, duly
endorsed by (or accompanied by a written instrument of assignment or transfer
fully executed by) the Registered Lender thereof, and thereupon one or more new
Registered Notes in the same aggregate principal amount shall be issued to the
designated assignee(s) or transferee(s) and, if less than all of such Registered
Notes is thereby being assigned or transferred, the assignor or transferor.
1.15 ISSUANCE OF LETTERS OF CREDIT.
(a) In General. Upon the terms and subject to the conditions
of this Agreement, the Issuer shall, from time to time, from the Closing Date to
the date which is 90 days prior to the Maturity Date, issue one or more Letters
of Credit for the account of any Borrower, provided that (i) the sum of the
Contingent Reimbursement Obligations (after giving effect to the requested
Letter of Credit) plus the aggregate unpaid amount of all Drawings under Letters
of Credit shall not exceed $10,000,000 and provided, further, that the face
amount of the Letter of Credit so requested shall not exceed the Lenders'
Commitments at such time. Each Letter of Credit shall be in a form and shall
contain such terms as shall be reasonably satisfactory to the Issuer. Letters of
Credit shall be issued only on a Business Day and shall be used for the general
corporate purposes of the Borrowers or for such other purposes as shall be
acceptable to the Issuer in its sole discretion.
(b) Terms. Each Letter of Credit shall be denominated only in
Dollars and shall expire on or before the first anniversary of the issuance
thereof and in any event not later than the fifth Business Day preceding the
Maturity Date. No Letter of Credit shall have an expiration date which is
extendable under an "evergreen" or similar provision unless the Issuer expressly
agrees to the same in its sole discretion in any particular case. All other
extensions and renewals are also at the sole discretion of the Issuer. For
purposes of Section 3.2 only, any extension of the expiry date of a Letter of
Credit to a date beyond the first anniversary of the issuance thereof shall
constitute an "issuance" of such Letter of Credit for all purposes hereof.
(c) Form of Request. The Borrowers shall request the issuance
of a Letter of Credit by furnishing to the Agent and the Issuer, at least five
Business Days before the requested date of such issuance (or at such later time
as shall be acceptable to the Issuer), such notice thereof as shall be
reasonably satisfactory to the Issuer to which shall be attached a certificate
of the chief financial officer representing that the Borrower is not, and after
giving effect to the additional Indebtedness will not be, in Default hereunder.
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(d) Participation by Lenders. Upon the date of issuance of a
Letter of Credit, the Issuer shall be deemed to have granted to each Lender
(other than the Issuer), and each Lender (other than the Issuer) shall be deemed
to have acquired from the Issuer without further action by any party hereto, a
participation in such Letter of Credit and any Drawings that may at any time be
made thereunder, to the extent of such Lender's pro rata share of the
Commitment.
(e) Notice of Drawings. The Issuer shall promptly notify NCO
Group (on behalf of the Borrowers) of its receipt of each Drawing request with
respect to a Letter of Credit, stating the date and amount of the Drawing
requested thereby and the date and amount of each Drawing disbursed pursuant to
such request. The failure of the Issuer to give, or delay in giving, any such
notice shall not release or diminish the obligations hereunder of the Borrowers
in respect of such Drawing.
(f) Reimbursement of Drawings by Borrowers. If at any time NCO
Group (on the behalf of the Borrowers) receives notice of a Drawing, the
Borrowers shall reimburse such Drawing by paying to the Issuer in immediately
available funds the amount of the payment made by the Issuer with respect to
such Drawing, together with interest thereon at a rate per annum equal to the
Prime Rate from the day that the Drawing is made until the day such
reimbursement is made if such Drawing is not reimbursed on the day the Drawing
is made. Such reimbursement shall be made by the Borrowers to the Issuer no
later than one (1) Business Day following the Business Day that NCO Group (on
behalf of Borrowers) receives the relevant notice of Drawing if such notice is
received on or prior to 10:00 a.m. (Philadelphia, Pennsylvania time) and no
later than two (2) Business Days following the date that NCO Group receives the
relevant notice of Drawing if such notice is received after 10:00 a.m.
(Philadelphia, Pennsylvania time). If the Borrowers shall fail to make any
payment required by this paragraph (f) at the time specified, and if at such
time, there shall be any Commitment, the Administrative Agent may (but is not
obligated to) assume that the Borrowers intend to use the proceeds of Loans to
make such payment. In reliance on such assumption, the Administrative Agent may
(but is not obligated to) notify the Lenders (and NCO Group (on behalf of the
Borrowers)) that notwithstanding the Borrowers' failure to provide notice
pursuant to paragraph (e) above, such notice is deemed given pursuant to this
paragraph (f) requesting a Loan bearing interest at the Prime Rate in an amount
sufficient to make the payments required by this paragraph. Such notice from the
Administrative Agent shall be treated by the Lenders in the same manner as a
notice from the Borrowers under paragraph (e) above. The Administrative Agent
may, at the direction of the Issuer, apply the proceeds of such Loans to satisfy
the requirements of this paragraph.
(g) Obligations of Lenders to Issuer. In the event that the
Borrowers shall fail to make any payment when due pursuant to the preceding
paragraph (f) and for so long as such failure shall be continuing, the Issuer
may give notice of such failure to the Administrative Agent and each Lender,
which notice shall include, in the case of a Lender, the amount of such Lender's
interest in such Drawing, whereupon each such Lender (other than the Issuer)
shall promptly remit such amount to the Administrative Agent for the account of
the Issuer as provided in this paragraph (g). Each Lender (other than the
Issuer) shall, in the event it receives such notice from the Issuer at or before
12:00 noon (Philadelphia, Pennsylvania time) on any Business Day, fund its
participation in any unreimbursed Drawing by remitting to the Administrative
Agent, no later than 2:00 p.m. (Philadelphia, Pennsylvania time) on such day, in
immediately available funds its
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share of the reimbursement obligations in respect of each Drawing. In the event
that the Administrative Agent receives such funds from a Lender at or before
2:00 p.m. (Philadelphia, Pennsylvania time) on any day, the Administrative Agent
shall make available the amount thereof to the Issuer, in immediately available
funds no later than 4:00 p.m. (Philadelphia, Pennsylvania time) on that same
day. Any amount payable by a Lender to the Administrative Agent for the account
of the Issuer under this paragraph (g), and any amount payable by the
Administrative Agent to the Issuer under this paragraph (g), shall bear interest
for each day from the date due (and including such day if paid after 2:00 p.m.
(Philadelphia, Pennsylvania time) in the case of any such payment by a Lender to
the Administrative Agent, or 4:00 p.m. (Philadelphia, Pennsylvania time), in the
case of any such payment by the Administrative Agent to the Issuer, on such day)
until the date it is received by the Issuer at a rate equal to the Federal Funds
Rate until (and including) the third Business Day after the date due and
thereafter at the Prime Rate. Moreover, any Lender that shall have failed to
make available the required amount shall not be entitled to vote on such
matters, other than those set forth in Section 11.8, as Lenders or Majority
Lenders or Super Majority Lenders are otherwise entitled to vote on or consent
to or approve under this Agreement and the other Loan Documents until such
amount with interest is paid in full to the Administrative Agent by such Lender.
Each Lender shall, upon the demand of the Issuer, reimburse the Issuer, through
the Administrative Agent to the extent that the Issuer has not been reimbursed
by the Borrowers after demand therefor, for the reasonable costs and expenses
(including reasonable legal fees) incurred by it (other than as a result of its
willful misconduct or gross negligence as finally determined by a court of
competent jurisdiction) in connection with the collection of amounts due under,
the administration of, and the preservation and enforcement of any rights
conferred by, the Letters of Credit or the performance of the Issuer's
obligations under this Agreement in respect thereof on a pro rata basis relative
to such Lender's pro rata share of the Commitment (as of the time such costs and
expenses are incurred). The Issuer shall refund through the Administrative Agent
any costs and expenses reimbursed by such Lender that are subsequently recovered
from the Borrowers in an amount equal to such Lender's ratable share thereof.
(h) Cash Collateral. It is intended that at all times that the
Borrowers shall have contingent or other obligations (including obligations in
respect of fees) relating to Letters of Credit, there shall be sufficient
availability under the Commitment to reimburse the Issuer (and the Lenders) out
of proceeds of Loans. Accordingly, in the event that there shall, at any time,
be insufficient availability under the Commitment (after giving effect to all
outstanding Loans) to do so (whether because the amount of the Commitment is
reduced pursuant to a mandatory reduction or is terminated at maturity, upon
acceleration or otherwise or because the amount of outstanding Loans and such
Letter of Credit obligations exceeds the amount of the Commitment for any other
reason), the Borrowers shall forthwith pay to the Administrative Agent an amount
equal to the aggregate face value of all outstanding Letters of Credit plus the
aggregate amount of all unreimbursed Drawings plus the amount of all fees or
other obligations in respect of Letters of Credit to the extent of such excess.
Such amount shall be maintained by the Administrative Agent in an
interest-bearing cash collateral account in the name of and for the benefit of
the Issuer and the Lenders to secure such payment obligations of the Borrowers.
Upon receipt of a notice from the Issuer that there are unreimbursed Drawings or
other amounts due in respect of such Letters of Credit (which notice shall set
forth the amount of such unreimbursed Drawings or other obligations) the
Administrative Agent shall promptly disburse
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from the cash collateral account the amount specified in the notice and shall
pay such amount to the Issuer and Lenders ratably in accordance with the
respective amounts owing to each such Person, first, for fees and indemnities
until the same are paid in full and, second, for unreimbursed Drawings. The
Administrative Agent and the Issuer may rely on their records as to any amounts
so owing and shall be fully protected in doing so. Such records shall be
conclusive, absent manifest error. At any time that the Commitment again becomes
available for reimbursement of Drawings under outstanding Letters of Credit such
that (i) the sum of the Commitment at that time and the amount in the cash
collateral account exceeds (ii) the sum of all outstanding Loans, the face
amount of all outstanding Letters of Credit and the amount of all unreimbursed
Drawings, then, upon written request of NCO Group (on behalf of the Borrowers)
(which request shall (A) represent that there exists no Default or Event of
Default and (B) specify the amount of such excess), the Administrative Agent
shall release such excess amount to the Borrowers from the cash collateral
account. If all Obligations (other than Obligations constituting contingent
obligations under indemnification provisions which survive indefinitely, so long
as no unsatisfied claim has been made under any such indemnification provision)
have been indefeasibly paid in full in cash, all Commitments have terminated and
all Letters of Credit have expired, promptly following demand by NCO Group (on
behalf of the Borrowers) the Administrative Agent shall release to the Borrowers
all remaining funds in the Letter of Credit cash collateral account.
(i) Obligations Absolute. The obligation of each Borrower and
each Lender to make available to the Issuer the amounts set forth in this
Section 1.15 shall be absolute, unconditional and irrevocable under any and all
circumstances without reduction for any set-off or counterclaim of any nature
whatsoever, and may not be terminated, suspended or delayed for any reason
whatsoever, shall not be subject to any qualification or exception and shall be
made in accordance with the terms and conditions of this Agreement under all
circumstances, including any of the following circumstances:
(1) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(2) the existence of any claim, setoff, defense or
other right which any Borrower may have at any time
against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the
Administrative Agent, the Issuer, any Lender or any other
Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying
transaction between such Borrower and the beneficiary
named in any such Letter of Credit);
(3) any draft, certificate or any other document
presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or
inaccurate in any respect;
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(4) the surrender or impairment of any security for the
performance or observance of any of the terms of any of
the Loan Documents; or
(5) the occurrence of any Default or Event of Default.
(j) Limitations on Liability; Protection of Issuer,
Administrative Agent and Lenders.
(1) Limitation on Liability of Lenders. Without
affecting any rights any Lenders may have under
applicable Law, each of the Borrowers agrees that none of
the Lenders, the Issuer, the Administrative Agent or
their respective officers or directors shall be liable or
responsible for, and the obligations of the Borrowers to
the Lenders, the Issuer and the Administrative Agent
hereunder shall not in any manner be affected by: (A) the
use that may be made of any Letter of Credit or the
proceeds thereof by the beneficiary thereof or any other
Person or any acts or omissions of such beneficiary or
any other Person; (B) the validity, sufficiency or
genuineness of documents presented in connection with any
Drawing, or of any endorsements thereon, even if such
documents should, in fact, prove to be in any or all
respects, invalid, insufficient, fraudulent or forged; or
(C) any other circumstances whatsoever in making or
failing to make payment under any Letter of Credit or any
other action taken or omitted to be taken by any Person
under or in connection with any Letter of Credit, except
that the Borrowers shall have a claim against the Issuer
and the Issuer shall be liable to the Borrowers, in each
case to the extent and only to the extent of any damages
suffered by the Borrowers that they prove are caused by
the Issuer's willful misconduct or gross negligence. In
furtherance and not in limitation of the foregoing, in
determining whether to pay under any Letter of Credit,
the Issuer shall not have any obligation relative to the
other Lenders other than to determine that any documents
required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to
comply on their face with the requirements of such Letter
of Credit, regardless of any notice or information to the
contrary. Any action taken or omitted to be taken by the
Issuer under or in connection with any Letter of Credit
(if taken or omitted in the absence of gross negligence
or willful misconduct, as finally determined by a court
of competent jurisdiction) shall not create for the
Issuer any resulting liability to any Borrower or any
Lender.
(2) Indemnification and Expenses. In addition to any
other amounts payable under this Agreement, the Borrowers
agree jointly and severally to protect, indemnify, pay
and hold the Issuer and each Lender harmless from and
against any and all claims, costs, charges and expenses
(including reasonable attorneys' fees) which the Issuer
may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of, or payment of any
drawing under, any Letter of Credit, other than as a
result
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of the gross negligence or willful misconduct of the
Issuer and/or such Lender as finally determined by a
court of competent jurisdiction or (B) the failure of the
Issuer to honor a Drawing under any Letter of Credit as a
result of any act or omission of any present or future
government or Governmental Authority.
(3) Issuer Not Responsible. In furtherance of the
foregoing limitations on liability, the Issuer shall not
be responsible for: (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document
submitted by any party in connection with the issuance of
Letters of Credit; (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or
benefits thereunder or proceeds thereof in whole or in
part; (C) errors, omissions, interruptions, or delays in
transmissions or delivery of any messages, by mail,
cable, telecopy, telex or otherwise, whether or not in
cipher; (D) the misapplication by the beneficiary of any
Letter of Credit or the proceeds of any drawing under
such Letter of Credit; or (E) any consequence arising
from causes beyond the control of the Issuer, including
any governmental acts except for damages proven to be
caused by the Issuer's gross negligence or willful
misconduct.
ARTICLE II
YIELD PROTECTION AND BREAKAGE INDEMNITY
2.1 MANDATORY SUSPENSION AND CONVERSION OF LIBO RATE LOANS. Each Lender's
obligations to make, continue or convert into LIBO Rate Loans of any Type shall
be suspended, all such Lender's outstanding Loans of such Type shall be
converted into Prime Rate Loans on the last day of their applicable Interest
Periods (or, in the case of clause (c) below, on the last day such Lender may
lawfully continue to maintain Loans of such Type if earlier, or, in the case of
clause (d) below, on the day determined by such Lender to be the last Business
Day before the effective date of the applicable restriction), and all pending
requests for the making or continuation of or conversion into Loans of such Type
by such Lender shall be deemed requests for Prime Rate Loans, if:
(a) on or prior to the date required for the determination of
a LIBO Rate for any Interest Period, the Administrative Agent determines that
for any reason appropriate information is not available to it for purposes of
determining the LIBO Rate for such Interest Period;
(b) on or prior to the first day of any Interest Period for a
LIBO Rate Loan, the Majority Lenders have informed the Administrative Agent of
their determination that the LIBO Rate as determined by the Administrative Agent
for such Interest Period would not accurately reflect the cost to such Lenders
of making, continuing or converting into a LIBO Rate Loan for such Interest
Period;
(c) at any time such Lender determines that any Regulatory
Change makes it unlawful or impracticable for such Lender or its applicable
Eurodollar Lending Office to make,
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continue or convert into a LIBO Rate Loan of such Type, or to comply with its
obligations hereunder in respect thereof; or
(d) such Lender notifies the Administrative Agent of its
determination that (i) by reason of any Regulatory Change, such Lender or its
applicable Eurodollar Lending Office is restricted, directly or indirectly, in
the amount that it may hold of (A) a category of liabilities that includes
deposits by reference to which, or on the basis of which, the interest rate
applicable to LIBO Rate Loans of such Type is directly or indirectly determined
or (B) the category of assets that includes LIBO Rate Loans of such Type and
(ii) in connection therewith, such Lender has elected not to make available
hereunder LIBO Rate Loans of such Type.
If, as a result of this Section 2.1, any Loan of any Lender that would otherwise
be made or maintained as or converted into a LIBO Rate Loan for any Interest
Period is instead made or maintained as or converted into a Prime Rate Loan,
then, unless the corresponding Loan of each of the other Lenders is also to be
made or maintained as or converted into a Prime Rate Loan, such Loan shall be
treated as being a LIBO Rate Loan of such Type for such Interest Period for all
purposes of this Agreement (including the timing, application and proration
among the Lenders of interest payments, conversions and prepayments) except for
the calculation of the interest rate borne by such Loan. The Administrative
Agent shall promptly notify NCO Group (on behalf of the Borrowers) and each
Lender of the existence or occurrence of any condition or circumstance specified
in clause (a) or (b) above, and each Lender shall promptly notify NCO Group (on
behalf of the Borrowers) and the Administrative Agent of the existence,
occurrence or termination of any condition or circumstance specified in clause
(c) or (d) above applicable to such Lender's Loans, but the failure by the
Administrative Agent or such Lender to give any such notice shall not affect
such Lender's rights hereunder.
2.2 REGULATORY CHANGES. If in the determination of any Lender (a) any
Regulatory Change shall actually directly or indirectly
(i) reduce the amount of any sum received or receivable by
such Lender with respect to any LIBO Rate Loan or the return to be earned by
such Lender on any LIBO Rate Loan,
(ii) impose a cost on such Lender or any Affiliate of such
Lender that is attributable to the making or maintaining of, or such Lender's
commitment to make or acquire, any LIBO Rate Loan,
(iii) require such Lender or any Affiliate of such Lender to
make any payment on or calculated by reference to any amount received by such
Lender in respect of its LIBO Rate Loans or its obligations to make LIBO Rate
Loans or
(iv) reduce, or have the effect of reducing, the rate of
return on any capital such Lender or any Affiliate of such Lender is required to
maintain on account of any LIBO Rate Loan or such Lender's commitment to make
any LIBO Rate Loan.
and (b) such reduction, increased cost or payment shall not be fully compensated
for by an adjustment in the applicable rates of interest payable under the Loan
Documents, then the
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Borrowers shall pay to such Lender such additional amounts as such Lender
determines will fully compensate it for such reduction, increased cost or
payment. Such additional amounts shall be payable, in the case of those
applicable to prior periods, within 15 Business Days after request for such
payment by such Lender, accompanied by the certificate described in Section 2.5
and, in the case of those applicable to future periods, on the dates specified,
or determined in accordance with a method specified, by such Lender, provided
that the Borrowers shall not be liable for any amount payable with respect to
any period more than 90 days before the date of such request or certificate, or,
if earlier the retroactive effective date of the Regulatory Change if such
Regulatory Change occurs during such 90-day period.
2.3 CAPITAL AND RESERVE REQUIREMENTS. If, in the determination of any
Lender, such Lender or any Affiliate thereof is required, under applicable Law
(including Regulation D), or interpretations, directives, requests and
governmental or regulatory guidelines (whether or not having the force of law),
to maintain capital or deposit any reserve on account of any Loan, or any
commitment to make any Loan then, upon request by such Lender, the Borrowers
shall pay to such Lender such additional amounts as such Person determines will
fully compensate it for any actual reduction in the rate of return on the
capital that such Lender or such Affiliate thereof is so required to maintain.
Such additional amounts shall be payable, in the case of those applicable to
prior periods, within 15 Business Days after request by such Lender for such
payment accompanied by the certificate described in Section 2.5 (provided that
the Borrowers shall not be liable for any amount payable with respect to any
period more than 90 days before the date of such request or certificate, or, if
earlier, the retroactive effective date of such determination if made during
such 90-day period), and, in the case of those relating to future periods, on
the dates specified, or determined in accordance with a method specified, by
such Lender.
2.4 BREAKAGE. The Borrowers shall pay to each Lender, upon request, such
amount as such Lender reasonably determines is necessary to compensate it for
any actual loss, cost or expense incurred by it as a result of (a) any payment,
prepayment or conversion of a LIBO Rate Loan on a date other than the last day
of an Interest Period for such LIBO Rate Loan or (b) a LIBO Rate Loan for any
reason not being made or converted, or any payment of principal thereof or
interest thereon not being made, on the date therefor determined in accordance
with the applicable provisions of this Agreement. At the election of such
Lender, and without limiting the generality of the foregoing, but without
duplication, such compensation on account of losses may include an amount equal
to the excess of (i) the interest that would have been received from the
Borrowers under this Agreement during the remainder of the applicable Interest
Period over (ii) the interest component of the return that such Lender
determines it could have obtained had it placed such amount on deposit in the
interbank Dollar market for a period equal to such remaining portion of the
Interest Period.
2.5 DETERMINATIONS. In making the determinations contemplated by this
Article 2, each Lender shall make such estimates, assumptions, allocations and
the like that such Person in good faith determines to be appropriate, and such
Person's selection thereof in accordance with this Section 2.5, and the
determinations made by such Person on the basis thereof, shall be final, binding
and conclusive upon the Borrowers, except, in the case of such determinations,
for manifest errors. Each Lender shall furnish to the Borrowers, at the time of
any request for
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compensation under Section 2.2 or 2.3, a certificate outlining in reasonable
detail the computation of any amounts claimed by it under this Article 2 and the
assumptions underlying such computations, which shall include a statement of an
officer of such Person certifying that such request for compensation is being
made pursuant to a policy adopted by such Person to seek such compensation
generally from customers similar to the Borrowers and having similar provisions
in agreements with such Person.
2.6 REPLACEMENT OF LENDERS. If any Lender requests compensation pursuant to
Sections 1.13 (Taxes on Payments), 2.2 (Regulatory Changes) or 2.3 (Capital and
Reserve Requirements), or such Lender's obligation to make or continue Loans as
LIBO Rate Loans shall be suspended pursuant to Section 2.1 (Mandatory Suspension
and Conversion of LIBO Rate Loans) or such Lender has defaulted on its
obligations to make or participate in Loans pursuant to Section 1.3 (Manner of
Borrowing), NCO Group (on behalf of the Borrowers), upon three Business Days'
notice, may require that such Lender transfer all of its right, title and
interest under this Agreement, such Lender's Notes, if any, and the other Loan
Documents to any Eligible Institution identified by NCO Group (on behalf of the
Borrowers) subject to
(a) the consent of the Administrative Agent (which consent
shall not be unreasonably withheld),
(b) satisfaction of the other conditions specified in Section
11.9 below (Successors and Assigns),
(c) the agreement of the proposed transferee to assume all of
the obligations of such Lender hereunder and under the other Loan Documents for
consideration equal to the outstanding principal amount of such Lender's Loans,
interest thereon to the date of such transfer, and all other amounts payable
hereunder to such Lender to the date of transfer,
(d) such transferor Lender shall have been paid on or prior to
the date of such transfer all fees and other amounts payable to such transferor
hereunder including those amounts payable under said Sections 1.13, 2.2 or 2.3,
as applicable (and including any fees accrued hereunder and any amounts that
would be payable under Section 2.4 (Breakage) as if all of such Lender's Loans
were being prepaid in full on such date) or arrangements satisfactory to the
transferor Lender shall have been made for such payments, and
(e) satisfaction of the condition that if the Lender being
replaced has requested compensation pursuant to Sections 1.13, 2.2 or 2.3, the
proposed transferee's aggregate requested compensation, if any, pursuant to
Sections 1.13, 2.2 or 2.3 with respect to such replaced Lender's Loans is lower
than that of the Lender replaced.
Without prejudice to the survival of any other agreement of the Borrowers
hereunder, the agreements of the Borrowers contained in Sections 1.13 (Taxes on
Payments), 2.2 (Regulatory Changes), 2.3 (Capital and Reserve Requirements), 2.4
(Breakage), 11.12 (Indemnification) and 11.12 (Expenses) (without duplication of
any payments made to such Lender by the Borrowers or the proposed transferee)
shall survive for the benefit of any Lender replaced under this Section 2.6 with
respect to the time prior to such replacement.
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2.7 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the occurrence
of any event giving rise to the operation of Sections 1.13 (Taxes on Payments),
2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans), 2.2 (Regulatory
Changes) or 2.3 (Capital and Reserve Requirements) with respect to such Lender,
it will, if requested by the Borrowers, use reasonable efforts (subject to
overall policy considerations of such Lender) to designate another lending
office for any Loans affected by such event, provided that such designation is
made on such terms that such Lender and its lending office suffer no material
economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of any such Section.
Nothing in this Section 2.7 shall affect or postpone any of the obligations of
the Borrowers or the right of any Lender provided in Section 1.12 (Taxes on
Payments), 2.1 (Mandatory Suspension and Conversion of LIBO Rate Loans), 2.2
(Regulatory Changes) or 2.3 (Capital and Reserve Requirements).
ARTICLE III
CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND FUNDINGS
3.1 CONDITIONS TO INITIAL LOANS. The effectiveness of this Agreement (other
than this Article 3) and the obligation of the Lenders to make Loans and of the
Issuer to issue Letters of Credit on the Closing Date are subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan
or the issuance of such Letter of Credit, of the following conditions precedent
in each case to the satisfaction of the Administrative Agent, in addition to the
conditions precedent set forth in Section 3.2 hereof:
(a) Agreement; Note. The Administrative Agent shall have
received this Agreement, duly executed by each Borrower, and executed RC Notes,
in the form of Exhibit "A-1" hereto and executed Term Notes, in the form of
Exhibit "A-2" hereto, each duly executed on behalf of each Borrower.
(b) Certain Security Documents Pertaining to Personal
Property. The Administrative Agent shall have received the following documents
(as amended, modified or supplemented from time to time, each a "Security
Document" and collectively the "Security Documents"), each of which shall be in
form and substance satisfactory to the Administrative Agent, (except for the
certificates representing the stock certificates and other instruments pledged
pursuant to such Security Documents and the stock powers delivered in connection
therewith):
(i) Executed copies of each of the following:
(A) A Second Amended and Restated Security Agreement,
duly executed on behalf of each Borrower, in substantially the form of Exhibit
"E" hereto (such agreement as it may be further amended, modified or
supplemented from time to time, the "Security Agreement").
(B) An Amended and Restated Stock Pledge Agreement,
duly executed on behalf of NCO Group, and Stock Pledge Agreements, duly executed
on behalf of FCA Funding, Inc., CRWF Acquisition, Inc., Financial Collection
Agencies, Inc. (Puerto Rico), Advantage Financial Services Funding, Inc.,
Medsource, Inc. and Management Financial
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Services, Inc. each in substantially the form of Exhibit "F" hereto (such
agreements as it may be further amended, modified or supplemented from time to
time, the "Stock Pledge Agreements").
(C) A Global Amendment to Security Documents duly
executed on behalf of each of the Borrowers confirming that the Collateral
continues to secure the Obligations hereunder.
(D) Insurance Assignments, duly executed by the
Borrower, in substantially the form of Exhibit "G" hereto (as amended, modified
or supplemented from time to time, the "Insurance Assignments"), in order to
assign to the Administrative Agent as agent and representative of the Lenders at
least $2,000,000 in keyman life insurance policies on the life of Michael
Barrist.
(ii) Certificates and instruments representing the stock
certificates and other instruments pledged pursuant to such Security Documents,
accompanied by duly executed instruments of transfer or assignment in blank,
and, to the extent required by the Security Documents, duly endorsed to the
order of the Administrative Agent, in form and substance satisfactory to the
Administrative Agent.
(iii) Evidence of the completion of all recordings and
filings of or with respect to, and of all other actions with respect to, the
above Security Documents as may be necessary or, in the opinion of the
Administrative Agent, desirable to create or perfect the Liens created or
purported to be created by such Security Documents as valid, continuing and
perfected Liens in favor of the Administrative Agent securing the Obligations,
prior to all other Liens other than Permitted Liens; and evidence of the payment
of any necessary fee, tax or expense relating to such recording or filing.
Without limitation of the foregoing, the Administrative Agent shall receive:
(A) Proper financing statements duly executed by the
Borrowers necessary or desirable by Administrative Agent to create or perfect
such Liens in favor of the Administrative Agent as Administrative Agent and
representative of the Lenders.
(iv) Evidence of the insurance required by the terms of
the above Security Documents, containing the endorsements required by such
Security Documents and this Agreement.
(v) Waivers of landlord's liens, warehouseman's liens and
like rights.
(vi) Evidence that all other actions necessary or, in the
opinion of the Administrative Agent, desirable to create, perfect or protect the
Liens created or purported to be created by the above Security Documents have
been taken.
(vii) A contemporaneous search of UCC, tax, judgment and
litigation dockets and records and other appropriate registers shall have
revealed no filings or recordings in effect with respect to the Collateral
purported to be covered by the above Security Documents, except such as are
acceptable to the Administrative Agent (it being understood that such
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acceptance does not limit the obligations of the Borrowers with respect to the
priority of the Liens in favor of the Lenders), and the Administrative Agent
shall have received a copy of the search reports received as a result of the
search and of the acknowledgment copies of the financing statements or other
instruments required to be filed or recorded pursuant to this subsection bearing
evidence of the recording of such statements or instruments at each of such
filing or recording places.
(c) Medaphis Acquisition. The Administrative Agent shall have
received the following documents evidencing the Medaphis Acquisition, each of
which shall be in form and substance satisfactory to the Administrative Agent:
(i) Copies of the stock purchase agreement, the closing
checklist listing all material documents in connection with the Medaphis
Acquisition and any document requested by Administrative Agent in its sole
discretion from such closing checklist (all documents listed in such closing
checklist, the "Medaphis Acquisition Agreements"). The closing checklist shall
be revised by NCO Group and sent to the Administrative Agent as documents are
added or deleted. The Administrative Agent shall be satisfied with all Medaphis
Acquisition Agreements. The Medaphis Acquisition Agreements accepted by
Administrative Agent may not be amended, modified or supplemented, nor may any
of their terms or conditions in favor of NCO Group be waived, and the stock
purchase, merger and other transactions contemplated thereunder shall take place
in strict compliance therewith.
(ii) Satisfactory evidence of completion of the conditions
precedent to the Medaphis Acquisition but for the payment of the purchase price
including evidence that NCO Group has not waived any conditions precedent under
the Medaphis Acquisition Agreements without the prior written consent of the
Administrative Agent.
(iii) Satisfactory evidence that all corporate
governmental, judicial and third party consents and approvals necessary in
connection with the consummation of the Medaphis Acquisition (including without
limitation consents and approvals required under or referred to in the Medaphis
Acquisition Agreements) shall have been obtained and, as applicable, become
final orders (without imposition of any conditions that are not satisfactory to
the Lenders) and shall remain in full force and effect. Without limiting the
generality of the foregoing, all appropriate filings shall have been made under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
applicable waiting periods relating thereto shall have expired or been
terminated without requests for additional information from the reviewing
agencies.
(iv) In connection with the Medaphis Acquisition for each
acquired US company, an executed Security Agreement from the appropriate Person
pursuant to which each grants to the Administrative Agent (on behalf of the
Lenders) a blanket lien on all business assets (excluding cash held for
clients), including but not limited to accounts receivable, inventory, general
intangibles and equipment, now owned or hereafter acquired and/or an executed
Stock Pledge Agreement from the appropriate Person pursuant to which each
pledges to the Administrative Agent (on behalf of the Lenders) all of its equity
interests in any acquired company.
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(d) Capitalization, Etc. The corporate and capital structure
of each Borrower, the articles of incorporation and by-laws (or other
constituent documents) of each Borrower, and the terms, conditions, amounts and
holders of all equity (except for NCO Group), debt and other indebtedness,
obligations and liabilities of each Borrower, shall be reasonably satisfactory
to the Administrative Agent.
(e) Corporate Proceedings. The Administrative Agent shall have
received certificates by the Secretary or Assistant Secretary of each Borrower
dated as of the Closing Date as to (i) true copies of the articles of
incorporation and by-laws (or other constituent documents) of each Borrower in
effect on such date (which, in the case of articles of incorporation or other
constituent documents filed or required to be filed with the Secretary of State
or other Governmental Authority in its jurisdiction of incorporation, shall be
certified to be true, correct and complete by such Secretary of State or other
Governmental Authority not more than 30 days before the Closing Date) or
certificates from a Responsible Officer of each Borrower stating that the
articles of incorporation and bylaws of each Borrower have not been amended or
modified since furnished to the Administrative Agent in connection with the
Credit Agreement, (ii) true copies of all corporate action taken by each
Borrower relative to this Agreement and the other Loan Documents and (iii) the
incumbency and signature of the respective officers of each Borrower executing
this Agreement and the other Loan Documents, together with satisfactory evidence
of the incumbency of such Secretary or Assistant Secretary. The Administrative
Agent shall have received certificates from the appropriate Secretaries of State
or other applicable Governmental Authorities dated not more than 30 days before
the Closing Date showing the good standing of each Borrower in its state of
incorporation and each state in which each Borrower does business.
(f) Insurance. The Administrative Agent shall have received a
report from each Borrower's insurance broker, addressed to the Administrative
Agent, satisfactory in form and substance to the Administrative Agent, as to
insurance matters pertaining to such Borrower. The Administrative Agent shall
have received evidence satisfactory to it that the insurance policies required
by this Agreement and the other Loan Documents have been obtained, containing
the endorsements required hereby and thereby.
(g) Financial Statements, Projections. The Administrative
Agent shall have received copies of the financial statements, combining
financial statements, pro forma financial statements and projections referred to
in Section 4.1 hereof.
(h) Legal Opinions of Counsel to the Lenders. The
Administrative Agent shall have received an opinion addressed to the Lenders,
dated the Closing Date, of Blank Rome Comisky & McCauley LLP, counsel to the
Borrowers, in form and substance satisfactory to the Administrative Agent and
its counsel (which are substantially the same as the opinions issued in
connection with the Credit Agreement, with appropriate additional provisions
which address the transactions described herein). Borrowers shall also have
delivered copies of favorable opinions, on which the Administrative Agent and
Lenders may rely, from counsel to Medaphis concerning the Medaphis Acquisition.
(i) Responsible Officer Certificates. The Administrative Agent
shall have received certificates from a Responsible Officer of each Borrower as
to such matters as the
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Administrative Agent may request, including a pro forma certificate of covenant
compliance in the form of Exhibit "H" attached hereto, reflecting the Medaphis
Acquisition.
(j) Fees, Expenses, etc. All fees and other compensation
required to be paid to the Administrative Agent on behalf of the Lenders
pursuant hereto or pursuant to any other written agreement on or prior to the
Closing Date shall have been paid or received, including but not limited to
those referred to in the commitment letter from Mellon to Borrowers dated
November 9, 1998.
(k) Interest Rate Hedging Agreement. The Borrowers shall
deliver to the Administrative Agent within 120 days of the Initial Funding Date
evidence satisfactory to the Administrative Agent that the Borrowers have
purchased an Interest Rate Hedging Agreement with a financial institution
acceptable to the Administrative Agent pursuant to which the Borrowers have
reduced their risk of exposure to a level reasonably satisfactory to the
Administrative Agent in its sole discretion. This interest rate cap agreement
shall be in force for at least three (3) years following the Initial Funding
Date and shall apply to a minimum of 40% of the Commitment.
(l) Management Letters. The Administrative Agent shall have
received copies of the management letters issued by NCO Group's certified public
accountants in connection with its audited financial statements dated December
31, 1997 or a letter from such accountants that no such management letters were
issued.
(m) No Material Adverse Effect. The Responsible Officer of NCO
Group (on behalf of the Borrowers) shall provide the Administrative Agent with a
certificate stating that there has not occurred, or been threatened, any event,
act or condition which could have a Material Adverse Effect.
(n) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to the Administrative Agent.
3.2 CONDITIONS TO ALL LOANS. The obligation of the Lenders to make any Loan
and of the Issuer to issue any Letter of Credit is subject to performance by
each Borrower of its obligations to be performed hereunder or under the other
Loan Documents on or before the date of such Loan or Letter of Credit,
satisfaction of the conditions precedent set forth herein and in the other Loan
Documents and to satisfaction of the following further conditions precedent:
(a) Notice. Appropriate notice of such Loan shall have been
given by the Borrowers as provided in Article 1 hereof.
(b) Representations and Warranties. Each of the
representations and warranties made by each Borrower in Article 4 hereof shall
be true and correct in all material respects on and as of such date as if made
on and as of such date, both before and after giving effect to the Loans
requested to be made on such date.
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(c) No Defaults. No Event of Default or Default shall have
occurred and be continuing on such date or after giving effect to the Loans
requested to be made on such date.
(d) No Violations of Law, etc. Neither the making nor use of
the Loans shall cause the Lenders to violate or conflict with any Law.
(e) No Material Adverse Effect. There shall not have occurred,
or be threatened, any other event, act or condition which could have a Material
Adverse Effect since the last Loan. Each request by a Borrower for any Loan
shall constitute a representation and warranty by such Borrower that the
conditions set forth in this Section 3.2 have been satisfied as of the date of
such request. Failure of the Administrative Agent to receive notice from the
Borrower to the contrary before such Loan is made shall constitute a further
representation and warranty by the Borrower that the conditions referred to in
this Section 3.2 have been satisfied as of the date such Loan is made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and
warrants to the Lenders as follows:
(a) Corporate Status. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Borrower has corporate power and authority
to own its property and transact the business in which it is engaged or
presently proposes to engage. Each Borrower is duly qualified to do business as
a foreign corporation and is in good standing in all jurisdictions in which the
ownership of its properties or the nature of its activities or both makes such
qualification necessary or advisable. Schedule 4.1(a) hereof states as of the
date hereof the jurisdiction of incorporation of each Borrower and the
jurisdictions in which each Borrower is qualified to do business as a foreign
corporation.
(b) Corporate Power and Authorization. Each Borrower has
corporate power and authority to execute, deliver, perform, and take all actions
contemplated by each Loan Document to which it is a party, and all such action
has been duly and validly authorized by all necessary corporate proceedings on
its part. Without limitation of the foregoing, each Borrower has the corporate
power and authority to borrow pursuant to the Loan Documents to the fullest
extent permitted hereby and thereby from time to time, and has taken all
necessary corporate action to authorize such borrowings.
(c) Execution and Binding Effect. This Agreement and each
other Loan Document to which any Borrower is a party and which is required to be
delivered on or before the Closing Date pursuant to Section 3.1 hereof has been
duly and validly executed and delivered by such Borrower. This Agreement and
each other Loan Document constitutes, the legal, valid and binding obligation of
each Borrower, enforceable against each Borrower in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
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(d) Governmental Approvals and Filings. No approval, order,
consent, authorization, certificate, license, permit or validation of, or
exemption or other action by, or filing, recording or registration with, or
notice to, any Governmental Authority (collectively, "Governmental Action") is
or will be necessary or advisable in connection with the execution and delivery
of any Loan Document, consummation of the transactions herein or therein
contemplated, performance of or compliance with the terms and conditions hereof
or thereof or to ensure the legality, validity, binding effect, enforceability
or admissibility in evidence hereof or thereof, provided that Borrower may be
required to file the Loan Documents with the Securities and Exchange Commission
and Borrowers may be required to obtain certain consents in connection with the
Medaphis Acquisition.
(e) Absence of Conflicts. Neither the execution and delivery
of any Loan Document, nor consummation of the transactions herein or therein
contemplated, nor performance of or compliance with the terms and conditions
hereof or thereof does or will
(i) violate or conflict with any Law, or
(ii) violate, conflict with or result in a breach of any
term or condition of, or constitute a default under, or result in (or give rise
to any right, contingent or otherwise, of any Person to cause) any termination,
cancellation, prepayment or acceleration of performance of, or result in the
creation or imposition of (or give rise to any obligation, contingent or
otherwise, to create or impose) any Lien upon any property of the Borrower
(except for any Lien in favor of the Lender securing the Obligations) pursuant
to, or otherwise result in (or give rise to any right, contingent or otherwise,
of any Person to cause) any change in any right, power, privilege, duty or
obligation of the Borrower under or in connection with,
(A) the articles of incorporation or by-laws (or other
constituent documents) of any Borrower,
(B) any agreement or instrument creating, evidencing
or securing any Indebtedness to which any Borrower is a party or by which any of
them or any of their respective properties (now owned or hereafter acquired) may
be subject or bound, or
(C) any other material agreement or instrument to
which any Borrower is a party or any of its properties (now owned or hereafter
acquired) may be subject or bound.
(f) Audited Financial Statements. The Borrowers have
heretofore furnished to the Administrative Agent balance sheets as of December
31, 1997 and the related statements of income, cash flows and changes in
stockholders' equity for the fiscal year then ended, as examined and reported on
by Coopers & Lybrand, independent certified public accountants for the
Borrowers, who delivered an unqualified opinion in respect thereof. The
Borrowers' financial statements present fairly the financial condition of the
Borrowers, as of the end of such fiscal year, and the results of its operations
and its cash flows for the fiscal year then ended, all in conformity with GAAP.
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(g) Interim Financial Statements. The Borrowers have
heretofore furnished to the Administrative Agent interim company prepared
balance sheets of the Borrowers, dated September 30, 1998, together with the
related consolidated statements of income, cash flows and changes in
stockholders' equity for the fiscal quarter ending on such date. The Borrowers'
financial statements present fairly the financial condition of the Borrowers, as
of the end of such fiscal quarter and the results of its operations and its cash
flows for such fiscal quarter, all in conformity with GAAP, subject to normal
and recurring year-end audit adjustments.
(h) Absence of Undisclosed Liabilities. No Borrower has any
liability or obligation of any nature whatever (whether absolute, accrued,
contingent or otherwise, whether or not due), forward or long-term commitments
or unrealized or anticipated losses from unfavorable commitments, except (w) as
disclosed in the financial statements referred to in Sections 4.1(f) and (g)
hereof, (x) matters that, individually or in the aggregate, could not have a
Material Adverse Effect, (y) as disclosed in Schedule 4.1(h) hereof, and (z)
liabilities, obligations, commitments and losses incurred after December 31,
1997 in the ordinary course of business and consistent with past practices.
(i) Absence of Changes. Since September 30, 1998, there has
been no change in the business, operations, or condition (financial or
otherwise) of the Borrowers.
(j) Accurate and Complete Disclosure. All information (taken
as a whole) heretofore, contemporaneously or hereafter provided (orally or in
writing) by any Borrower to the Administrative Agent pursuant to or in
connection with any Loan Document or any transaction contemplated hereby or
thereby is or will be (as the case may be) true and accurate in all material
respects on the date as of which such information is dated (or, if not dated,
when received by the Administrative Agent as the case may be) and does not or
will not (as the case may be) omit to state any material fact necessary to make
such information (taken as a whole) not misleading at such time in light of the
circumstances in which it was provided. Each Borrower has disclosed to the
Administrative Agent in writing every fact or circumstance which has, or which
could have, a Material Adverse Effect.
(k) Projections. Attached hereto as Schedule 4.1(k) are
projections prepared by the Borrowers demonstrating the projected financial
condition and results of operations of the Borrowers, for the period commencing
on January 1, 1999 and ending on December 31, 2003, which projections are
accompanied by a written statement of the assumptions and estimates underlying
such projections. Such projections were prepared on the basis of such
assumptions and estimates. Such projections, assumptions and estimates, as of
the date of preparation thereof and as of the date hereof, are reasonable, are
made in good faith, are consistent with the Loan Documents, and represent each
Borrower's best judgment as to such matters. Nothing has come to the attention
of the Borrowers which would lead the Borrowers to believe that such projections
will not be attained or exceeded. Nothing contained in this Section shall
constitute a representation or warranty that such future financial performance
or results of operations will in fact be achieved.
(l) Solvency. On and as of the Closing Date, and after giving
effect to all Loans and other obligations and liabilities being incurred on such
date in connection therewith, and on the date of each subsequent Loan or other
extension of credit hereunder and after giving effect to
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application of the proceeds thereof in accordance with the terms of the Loan
Documents, the Borrowers on a consolidated basis are and will be Solvent.
(m) Margin Regulations. No part of the proceeds of any Loan
hereunder will be used for the purpose of buying or carrying any "margin stock,"
as such term is used in Regulation U of the Board of Governors of the Federal
Reserve System, as amended from time to time, or to extend credit to others for
the purpose of buying or carrying any "margin stock". No Borrower is engaged in
the business of extending credit to others for the purpose of buying or carrying
"margin stock". No Borrower owns any "margin stock". Neither the making of any
Loan nor any use of proceeds of any such Loan will violate or conflict with the
provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System, as amended from time to time.
(n) Partnerships, Etc. Except as set forth on Schedule 4.1(n),
no Borrower is a partner (general or limited) of any partnership, is a party to
any joint venture, or owns (beneficially or of record) any equity or similar
interest in any such Person (including but not limited to any interest pursuant
to which the Borrower has or may in any circumstance have an obligation to make
capital contributions to, or be generally liable for or on account of the
liabilities, acts or omissions of such other Person).
(o) Ownership and Control. Schedule 4.1(o) hereof states as of
the date hereof the authorized capitalization of each Borrower, the number of
shares of each class of capital stock issued and outstanding of each Borrower
and the number and percentage of outstanding shares of each such class of
capital stock and the names of the record owners of such shares and the direct
or indirect beneficial owners of such shares (except that for NCO Group the
listing shall include only the names of any parties beneficially owning,
individually or through affiliates, more than 5% of NCO Group stock). The
outstanding shares of capital stock of each Borrower have been duly authorized
and validly issued and are fully paid and nonassessable. Except as described in
Schedule 4.1(o), there are no options, warrants, calls, subscriptions,
conversion rights, exchange rights, preemptive rights or other rights,
agreements or arrangements (contingent or otherwise) which may in any
circumstances now or hereafter obligate any Borrower to issue any shares of its
capital stock or any other securities.
(p) Litigation. To the best of each Borrower's knowledge,
there is no pending or (to such Borrower's knowledge after due inquiry)
threatened action, suit, proceeding or investigation by or before any
Governmental Authority against any Borrower, other than alleged violations of
the Fair Debt Collection Practices Act which would not cause a Material Adverse
Effect.
(q) Absence of Events of Default. No event has occurred and is
continuing and no condition exists which constitutes an Event of Default or
Default.
(r) Absence of Other Conflicts. No Borrower is in violation of
or conflict with, or is subject to any contingent liability on account of any
violation of or conflict with:
(i) any Law to the best of its knowledge, after due
inquiry,
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(ii) its articles of incorporation or by-laws (or other
constituent documents), or
(iii) any material agreement or instrument or arrangement
to which it is party or by which it or any of its properties (now owned or
hereafter acquired) may be subject or bound.
(s) Insurance. Each Borrower maintains with financially sound
and reputable insurers insurance with respect to its properties and business and
against at least such liabilities, casualties and contingencies and in at least
such types and amounts as is customary in the case of corporations engaged in
the same or a similar business or having similar properties similarly situated.
Schedule 4.1(s) hereof sets forth a list of all insurances currently maintained
by each Borrower, setting forth the identity of the insurance carrier, the type
of coverage, the amount of coverage and the deductible. There are no claims,
actions, suits, or proceedings against, arising under or based upon any of such
insurance policies except as set forth in such Schedule 4.1(s).
(t) Title to Property. Each Borrower has good and marketable
title in fee simple to all real property owned or purported to be owned by it
and good title to all other property of whatever nature owned or purported to be
owned by it, including but not limited to all property reflected in the most
recent audited balance sheet referred to in Section 4.1(f) hereof or submitted
pursuant to Section 5.1(a) hereof, as the case may be (except as sold or
otherwise disposed of in the ordinary course of business after the date of such
balance sheet), in each case free and clear of all Liens, other than Permitted
Liens.
(u) Intellectual Property. Each Borrower owns, or is licensed
or otherwise has the right to use, all the patents, trademarks, service marks,
names (trade, service, fictitious or otherwise), copyrights, technology
(including but not limited to computer programs and software), processes, data
bases and other rights, free from burdensome restrictions, necessary to own and
operate its properties and to carry on its business as presently conducted and
presently planned to be conducted without conflict with the rights of others.
Except as described in Schedule 4.1(u), no Borrower owns any patents, trademarks
or copyrights.
(v) Taxes. All tax and information returns required to be
filed by or on behalf of any Borrower have been properly prepared, executed and
filed. All taxes, assessments, fees and other governmental charges upon any
Borrower or upon any of its properties, incomes, sales or franchises which are
due and payable have been paid other than those not yet delinquent and payable
without premium or penalty, and except for those being diligently contested in
good faith by appropriate proceedings, and in each case adequate reserves and
provisions for taxes have been made on the books of such Borrower. The reserves
and provisions for taxes on the books of each Borrower are adequate for all open
years and for its current fiscal period. No Borrower has knowledge of any
proposed additional assessment or basis for any material assessment for
additional taxes (whether or not reserved against).
(w) Employee Benefits. Except as set forth on Schedule 4.1(w),
no Borrower has a Plan or Plans.
(x) Environmental Matters.
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(i) Each Borrower, and each of its respective Environmental
Affiliates, is and has been in full compliance with all applicable Environmental
Laws, except for (x) matters set forth in Schedule 4.1(x) hereof and (y) matters
which, individually or in the aggregate, could not have a Material Adverse
Effect. There are to each Borrower's knowledge after due inquiry no
circumstances that may prevent or interfere with such full compliance in the
future.
(ii) Each Borrower and its respective Environmental Affiliates
has all Environmental Approvals necessary or desirable for the ownership and
operation of their respective properties, facilities and businesses as presently
owned and operated and as presently proposed to be owned and operated, except
for (x) matters set forth in Schedule 4.1(x) hereof and (y) matters which,
individually or in the aggregate, could not have a Material Adverse Effect.
(iii) There is no Environmental Claim pending or to the
knowledge of any Borrower after due inquiry threatened, and there are no past or
present acts, omissions, events or circumstances that could form the basis of
any Environmental Claim, against any Borrower or any of its respective
Environmental Affiliates, except for (x) matters set forth in Schedule 4.1(x)
hereof, and (y) matters which, if adversely decided, individually or in the
aggregate, could not have a Material Adverse Effect.
(iv) No facility or property now or previously owned, operated
or leased by any Borrower or any of its respective Environmental Affiliates is
an Environmental Cleanup Site. No Borrower nor any respective Environmental
Affiliate has directly transported or directly arranged for the transportation
of any Environmental Concern Materials to any Environmental Cleanup Site. No
Lien exists, and to Borrower's knowledge no condition exists which could result
in the filing of a Lien, against any property of any Borrower or any of its
respective Environmental Affiliates under any Environmental Law.
(y) Business Interruptions. Within two (2) years prior to the
Closing Date, neither the business, property nor operations of any Borrower have
been materially and adversely affected in any way by any casualty, strike,
lockout, combination of workers, order of the United States of America, or any
state or local government, or any political subdivision or agency thereof,
directed against any Borrower. To the best of each Borrower's knowledge, there
are no pending or threatened labor disputes, strikes, lockouts or similar
occurrences or grievances against the business being operated by any Borrower.
(z) Names. In the five (5) years prior to the Closing Date, no
Borrower has conducted business under or used any names (whether corporate or
assumed) except for its present corporate name and those names listed in
Schedule 4.1(z) attached hereto and made a part hereof. Each Borrower is the
sole owner of its name and any and all business done and all invoices using such
name or any names listed in Schedule 4.1(z) represent sales and business of such
Borrower and are owned solely by such Borrower.
(aa) Regulation O. No director, executive officer or principal
shareholder of any Borrower is a director, executive officer or principal
shareholder of the Lender. For the purposes hereof the terms "director" (when
used with reference to the Lender), "executive
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officer" and "principal shareholder" have the respective meanings assigned
thereto in Regulation O issued by the Board of Governors of the Federal Reserve
System.
4.2 REPRESENTATIONS AND WARRANTIES ABSOLUTE. The representations and
warranties of the Borrowers set forth in this Article 4 are unaffected by any
prior or subsequent investigation by, or knowledge of, the Administrative Agent
or any Lender.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Loan shall remain unpaid, any Letter of Credit
is outstanding or any Lender shall have any Commitment under this Agreement,
each of the Borrowers shall comply with the following covenants.
5.1 BASIC REPORTING REQUIREMENTS.
(a) Annual Audit Reports. As soon as practicable, and in any
event within 90 days after the close of each fiscal year of the Borrowers, the
Borrowers shall furnish to the Administrative Agent and each of the Lenders
consolidated statements of income, cash flows and changes in stockholders'
equity of the Borrowers for such fiscal year and a consolidated balance sheet of
the Borrowers as of the close of such fiscal year, and notes to each, all in
reasonable detail, setting forth in comparative form the corresponding figures
for the preceding fiscal year, together with all management letters issued, or
letters stating that no management letters are being issued, in connection
therewith. Such financial statements shall be accompanied by an opinion of
independent certified public accountants of recognized national standing
selected by the Borrowers and reasonably satisfactory to the Administrative
Agent. A copy of the opinion of such accountants shall be delivered to the
Administrative Agent and each of the Lenders and signed by such accountants.
Such opinion shall be free of exceptions or qualifications not acceptable to the
Administrative Agent in its reasonable discretion and in any event shall be free
of any exception or qualification which is of "going concern" or like nature or
which relates to a limited scope of examination. Such opinion in any event shall
contain a written statement of such accountants substantially to the effect that
(i) such accountants examined such financial statements in accordance with
generally accepted auditing standards and accordingly made such tests of
accounting records and such other auditing procedures as such accountants
considered necessary under the circumstances and (ii) in the opinion of such
accountants such financial statements present fairly the financial position of
the Borrowers as of the end of such fiscal year and the results of their
operations and their cash flows and changes in stockholders' equity for such
fiscal year, in conformity with GAAP.
(b) Quarterly Financial Statements. As soon as practicable but
in any event within 45 days after the end of each quarter, the Borrowers shall
furnish to the Administrative Agent and each of the Lenders financial statements
in the form filed with NCO Group's Form 10-Q filing with the Securities Exchange
Commission.
(c) Quarterly Compliance Certificates. The Borrowers shall
deliver to the Administrative Agent and each of the Lenders a Quarterly
Compliance Certificate in substantially the form set forth as Exhibit "I"
hereto, duly completed and signed by the Chief
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Financial Officer of NCO Group concurrently with the delivery of the financial
statements referred to in subsection (a) and (b). The Quarterly Compliance
Certificate shall confirm that the unamortized remaining invested balance of all
acquired delinquent pools of Accounts does not exceed $10,000,000, in the
aggregate among all Borrowers, at any point in time. From time to time the
Borrowers may seek the prior written consent of the Administrative Agent (in its
sole discretion) so that the unamortized remaining invested balance of all
acquired delinquent pools of accounts may exceed $10,000,000.
(d) Annual Budget. As soon as practicable, and in any event
within 45 days after the start of each fiscal year, the Borrowers shall deliver
to the Administrative Agent a consolidated annual budget, which shall include
the annual projections of profit and loss statements, balance sheets and cash
flow reports (prepared on an annual basis) for the succeeding fiscal year,
together with a statement of the assumptions and estimates upon which such
projections are based in form and substance consistent with past practice. The
projections shall be accompanied by a cover letter stating that such
projections, estimates and assumptions, as of the date of preparation thereof,
are reasonable, made in good faith, consistent with the Loan Documents, and
represent the Borrowers' best judgment as to such matters.
(e) Commercial Finance Reports. Within 30 days of a request by
the Administrative Agent, the Borrowers shall furnish to the Administrative
Agent a report of a Responsible Officer of the Borrowers setting forth
information as to (i) receivables, and (ii) payables (which may include, among
other things, a breakout of aging and payments).
(f) Certain Other Reports and Information. Promptly upon their
becoming available to the Borrowers, the Borrowers shall deliver to the
Administrative Agent a copy of (i) all regular or special reports, registration
statements and amendments to the foregoing which the Borrowers shall file with
the Securities and Exchange Commission (or any successor thereto) or any
securities exchange, (ii) all reports, proxy statements, financial statements
and other information distributed by the Borrowers to its stockholders,
bondholders or the financial community generally, and (iii) all accountants'
management letters pertaining to, all other reports submitted by accountants in
connection with any audit of, and all other material reports from outside
accountants with respect to, the Borrowers.
(g) Further Information. The Borrowers will promptly furnish
to the Administrative Agent or any Lender such other information and in such
form as the Administrative Agent or any Lender may reasonably request from time
to time.
(h) Notice of Certain Events. Promptly upon becoming aware of
any of the following, the Borrowers shall give the Administrative Agent notice
thereof, together with a written statement of a Responsible Officer of the
Borrowers setting forth the details thereof and any action with respect thereto
taken or proposed to be taken by the Borrowers:
(i) Any Event of Default or Default.
(ii) Any material adverse change in the business,
operations or condition (financial or otherwise) of any Borrower.
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(iii) Any pending or threatened action, suit, proceeding
or investigation by or before any Governmental Authority against or affecting
any Borrower, except for matters that if adversely decided, individually or in
the aggregate, could not have a Material Adverse Effect.
(iv) Any material violation, breach or default by any
Borrower under any agreement or instrument which could have a Material Adverse
Effect.
(v) Any material amendment or supplement to, or extension,
renewal, refinancing, or refunding of, or waiver by any other party thereto of
any right under or conditions of, any agreement or instrument creating,
evidencing or securing any Indebtedness of any Borrower; any agreement or
instrument material to the business, operations or condition (financial or
otherwise) of any Borrower, and any negotiations pertaining to any of the
foregoing.
(vi) Any Pension-Related Event. Such notice shall be
accompanied by: (A) a copy of any notice, request, return, petition or other
document received by any Borrower or any Controlled Group Member from any
Person, or which has been or is to be filed with or provided to any Person
(including without limitation the Internal Revenue Service, PBGC or any Plan
participant, beneficiary, alternate payee or employer representative), in
connection with such Pension-Related Event, and (B) in the case of any
Pension-Related Event with respect to a Plan, the most recent Annual Report
(5500 Series), with attachments thereto, and the most recent actuarial valuation
report, for such Plan, if not previously provided.
(vii) Any Environmental Claim pending or threatened
against any Borrower, or any past or present acts, omissions, events or
circumstances (including but not limited to any dumping, leaching, deposition,
removal, abandonment, escape, emission, discharge or release of any
Environmental Concern Material at, on or under any facility or property now or
previously owned, operated or leased by any Borrower that could form the basis
of such Environmental Claim, which Environmental Claim, if adversely resolved,
individually or in the aggregate, could have a Material Adverse Effect.
(i) Visitation; Verification. Each Borrower shall permit such
Persons as the Administrative Agent or any Lender may designate from time to
time to visit and inspect any of the properties of such Borrower, to examine its
books and records and take copies and extracts therefrom and to discuss its
affairs with its directors, officers, employees and independent accountants at
such times and as often as the Administrative Agent may reasonably request. Each
Borrower hereby authorizes such officers, employees and independent accountants
to discuss with the Administrative Agent the affairs of such Borrower. The
Administrative Agent shall have the right to examine accounts, inventory and
other properties and liabilities of each Borrower from time to time, and each
Borrower shall cooperate with the Administrative Agent in such examination.
5.2 INSURANCE. Each Borrower shall maintain insurance on all insurable
tangible Collateral against fire, flood, casualty and such other hazards as may
be reasonably acceptable to the Administrative Agent in such amounts, with such
deductibles and with such insurers as may be reasonably acceptable to the
Administrative Agent. The policies of all such casualty insurance shall contain
standard Loss Payable Clauses issued in favor of the Administrative
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Agent for the benefit of the Lenders under which all losses thereunder shall be
paid to the Administrative Agent for the Lenders as their interests may appear.
Such policies shall expressly provide that the requisite insurance cannot be
altered or canceled without thirty (30) days prior written notice to the
Administrative Agent and shall insure the Lenders notwithstanding the act or
neglect of the insured. In the event any Borrower fails to procure or cause to
be procured any such insurance or to timely pay or cause to be paid the
premium(s) on any such insurance, the Administrative Agent may do so for such
Borrower but such Borrower shall continue to be liable for the cost of such
insurance. Each Borrower hereby appoints the Administrative Agent as its
attorney-in-fact, exercisable at the Administrative Agent's option, to endorse
any check which may be payable to such Borrower in order to collect the proceeds
of such insurance. Any and all amount or amounts received or collected by the
Administrative Agent pursuant to the provisions of this paragraph, in excess of
$100,000 per year in the aggregate, may be applied by the Lenders to any
Obligations or to repair, reconstruct or replace the loss of or damage to
Collateral as the Majority Lenders in their judgment may from time to time
determine. Each Borrower shall furnish to the Administrative Agent from time to
time upon request the policies under which such insurance is issued,
certificates of insurance and such other information relating to such insurance
as the Administrative Agent may request, and provide such other insurance and
endorsements as are required by this Agreement and the other Loan Documents.
5.3 PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES AND PRIORITY CLAIMS. Each
Borrower shall pay or discharge
(a) on or prior to the date on which penalties attach thereto,
all taxes, assessments and other governmental charges imposed upon it or any of
its properties;
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like Persons
which, if unpaid, might result in the creation of a Lien upon any such property;
and
(c) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such property
or which, if unpaid, might give rise to a claim entitled to priority over
general creditors of such Borrower or such Subsidiary in a case under Title 11
(Bankruptcy) of the United States Code, as amended;
provided, that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced such Borrower need not pay or discharge
any such tax, assessment, charge or claim so long as (x) the validity thereof is
contested in good faith and by appropriate proceedings diligently conducted, and
(y) such reserves or other appropriate provisions as may be required by GAAP
shall have been made therefor.
5.4 PRESERVATION OF CORPORATE STATUS. Each Borrower shall maintain its
status as a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and to be duly qualified to
do business as a foreign corporation and in good standing in all jurisdictions
in which the ownership of its properties or the nature of its business or both
make such qualification necessary.
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5.5 GOVERNMENTAL APPROVALS AND FILINGS. Each Borrower shall keep and
maintain in full force and effect all Governmental Actions necessary or
advisable in connection with execution and delivery of any Loan Document,
consummation of the transactions herein or therein contemplated, performance of
or compliance with the terms and conditions hereof or thereof or to ensure the
legality, validity, binding effect, enforceability or admissibility in evidence
hereof or thereof.
5.6 MAINTENANCE OF PROPERTIES. Each Borrower shall maintain or cause to be
maintained in good repair, working order and condition the properties now or
hereafter owned, leased or otherwise possessed by it and shall make or cause to
be made all needful and proper repairs, renewals, replacements and improvements
thereto so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
5.7 AVOIDANCE OF OTHER CONFLICTS. Each Borrower shall not violate or
conflict with, be in violation of or conflict with, or be or remain subject to
any liability (contingent or otherwise) on account of any violation or conflict
with
(a) any Law in a manner which could cause a Material Adverse
Effect,
(b) its articles of incorporation or by-laws (or other
constituent documents), or
(c) any material agreement or instrument to which it is a
party or by which any of them or any of their respective Subsidiaries is a party
or by which any of them or any of their respective properties (now owned or
hereafter acquired) may be subject or bound.
5.8 FINANCIAL ACCOUNTING PRACTICES. Each Borrower shall make and keep
books, records and accounts which, in reasonable detail, accurately and fairly
reflect its transactions and dispositions of its assets and maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization, (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP and (ii) to maintain
accountability for assets, (c) access to assets is permitted only in accordance
with management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
5.9 USE OF PROCEEDS. Subject to the terms and conditions of this Agreement,
the Borrowers shall apply the proceeds of all Loans hereunder only for working
capital and acquisition financing. The Borrowers shall not use the proceeds of
any Loans hereunder directly or indirectly for any unlawful purpose or
inconsistent with any other provision of any Loan Document.
5.10 CONTINUATION OF OR CHANGE IN BUSINESS. Each Borrower shall continue to
engage in its business substantially as conducted and operated during the
present and preceding fiscal year, and no Borrower shall engage in any other
business not substantially similar to the business as presently conducted.
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5.11 CONSOLIDATED TAX RETURN. No Borrower shall file or consent to the
filing of any consolidated income tax return with any Person other than another
Borrower, except as required by the Code.
5.12 FISCAL YEAR. No Borrower shall change its fiscal year or fiscal
quarter.
5.13 BANK ACCOUNTS. As additional consideration for the establishment of
the credit facilities hereunder, each Borrower shall maintain its primary
depository and disbursement accounts with the Administrative Agent. If the
Administrative Agent fails to service the Borrower's depository and disbursement
accounts in a commercially-reasonable manner, Borrower may move the accounts to
another financial institution of its choice.
5.14 SUBMISSION OF COLLATERAL DOCUMENTS. Each Borrower shall promptly, but
in no event later than twenty (20) days following the conversion of an Account
to an instrument or chattel paper, notify the Administrative Agent if an Account
becomes evidenced or secured by an instrument or chattel paper and, upon request
of the Administrative Agent, promptly deliver any such instrument or chattel
paper to the Lender.
5.15 COLLECTION OF ACCOUNTS. Each Borrower shall continue to collect its
Accounts in the ordinary course of its business.
5.16 SUBSIDIARIES AS BORROWERS.
(a) Each Borrower shall cause all of its Subsidiaries, other
than (i) foreign Subsidiaries listed on Schedule 5.16 if doing so would cause an
adverse tax consequence under Section 956 of the Internal Revenue Code as
amended ("IRC") or under any similar law, and (ii) other Excluded Subsidiaries,
to be or become Borrowers hereunder by signing this Agreement or, in the case of
new Subsidiaries formed or acquired after the Closing Date, a Joinder Agreement
in the form of Exhibit M attached hereto. Under the Security Documents,
Borrowers shall pledge all the capital stock or other equity interests in each
such Subsidiary and cause each such Subsidiary to grant a security interest in
all of its property meeting the definition of "Collateral" under the Security
Documents.
(b) Notwithstanding the exclusion of certain foreign
Subsidiaries as Borrowers, Borrowers shall cause each such foreign Subsidiary to
comply with the terms and conditions of this Agreement and Borrowers shall grant
to the Administrative Agent (on behalf of the Lenders) a first priority security
interest in and lien on 65% of the capital stock or other equity interests in
each such foreign Subsidiary so long as such pledge shall not trigger adverse
tax consequences under Section 956 of the IRC or similar law.
5.17 UPDATE OF SCHEDULES. Each Borrower shall promptly, but in no event
later than thirty (30) days, following a Permitted Acquisition or other event
which would result in a material change to any of the information on the
disclosure schedules hereto, provide the Administrative Agent with revised
schedule(s). The revised schedules must be acceptable in all respects to the
Administrative Agent; they will not be acceptable if they disclose actual or
potential Events of Default.
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ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligations shall remain unpaid or any Lender shall have
any Commitment under this Agreement, each of the Borrowers shall comply with the
following covenants.
6.1 FINANCIAL COVENANTS.
(a) Consolidated Fixed Charge Coverage Ratio. The Consolidated
Fixed Charge Coverage Ratio shall not at any time be less than 1.15 to 1.00 for
any quarter during the period from January 1, 1999 through December 31, 2000, or
1.25 to 1.00 during any quarter thereafter.
(b) Consolidated Net Worth. As of the last day of each fiscal
quarter Consolidated Net Worth shall not be less than $80,400,910.00 plus 90% of
quarterly Consolidated Net Income on a cumulative basis for each quarter
beginning with the quarter ending December 31, 1998, but without deductions for
net losses plus the net proceeds of any offering of equity after the Closing
Date.
(c) Consolidated Funded Debt to Consolidated EBITDA. The ratio
of Consolidated Funded Debt to annualized Consolidated EBITDA shall not be more
than 3.5 to 1.00 for any quarter ending during the period from Closing through
December 31, 1999; 3.0 to 1.00 for any quarter ending during the period from
January 1, 2000 through December 31, 2000; 2.5 to 1.00 for any quarter ending
during the period from January 1, 2001 through December 31, 2001; or 2.0 to 1.00
for any quarter ending during the period ending after January 1, 2002.
Consolidated EBITDA shall be annualized by multiplying Consolidated EBITDA for
the fiscal quarter being tested by four. For purposes of calculating pro forma
compliance with this provision in analyzing a proposed acquisition, Consolidated
EBITDA shall include the pre-acquisition EBITDA of the target for the
immediately preceding 12 month period after adjustment for unusual expense
items.
(d) Consolidated Interest Coverage Ratio. The Consolidated
Interest Coverage Ratio as of the last day of each fiscal quarter shall not be
less than 3.00 to 1.00 for the quarter ending December 31, 1998 or less than
3.50 to 1.00 for any quarter ending thereafter.
6.2 LIENS. No Borrower shall at any time create, incur, assume or suffer to
exist any Lien on any of its property (now owned or hereafter acquired), or
agree, become or remain liable (contingently or otherwise) to do any of the
foregoing, except for the following ("Permitted Liens"):
(a) Liens pursuant to the Security Documents in favor of the
Lender to secure the Obligations;
(b) Liens existing on the date hereof securing obligations
existing on the date hereof, as such Liens and obligations are listed in
Schedule 6.2 hereto or Liens relating to Purchase Money Indebtedness for Capital
Expenditures permitted by Section 6.14;
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(c) Liens arising from taxes, assessments, charges or claims
described in Section 5.3 hereof that are not yet due or that remain payable
without penalty or to the extent permitted to remain unpaid under the proviso to
such Section 5.3 , provided that the aggregate amount secured by all Liens
described in this Section 6.2(c) shall not at any time exceed $300,000;
"Permitted Lien" shall in no event include any Lien imposed by, or required to
be granted pursuant to, ERISA or any Environmental Law. Nothing in this Section
6.2 shall be construed to limit any other restriction on Liens imposed by the
Security Documents or otherwise in the Loan Documents.
6.3 INDEBTEDNESS. No Borrower shall at any time create, incur, assume or
suffer to exist any Indebtedness, or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, except:
(a) Indebtedness to the Lenders pursuant to this Agreement and
the other Loan Documents;
(b) Indebtedness of such Borrower existing on the date hereof
and listed in Schedule 6.3 hereof (but not any extensions, renewals or
refinancings thereof);
(c) Purchase Money Indebtedness;
(d) Accounts payable to trade creditors arising out of
purchases of goods or services in the ordinary course of business;
(e) Capitalized Leases which are permitted as Capital
Expenditures not exceeding in the aggregate $10,000,000;
(f) Permitted Acquisitions Indebtedness; and
(g) Inter-Borrower Indebtedness permitted under Section
6.5(e).
6.4 GUARANTIES, INDEMNITIES, ETC. No Borrower shall be or become subject to
or bound by any Guaranty or Guaranty Equivalent, or agree, become or remain
liable (contingently or otherwise) to do any of the foregoing, except:
(a) Guaranties and Guaranty Equivalents of the obligations of
third parties (including unconsolidated subsidiaries but excluding consolidated
subsidiaries) which, together with loans and advances by Borrowers to such third
parties, in the aggregate do not exceed $500,000 at any one time for all
Borrowers;
(b) Contingent liabilities arising from the endorsement of
negotiable or other instruments for deposit or collection or similar
transactions in the ordinary course of business; and
(c) Indemnities by a Borrower of the liabilities of its
directors or officers in their capacities as such pursuant to provisions
presently contained in their articles of incorporation or by-laws (or other
constituent documents) or as permitted by Law.
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6.5 LOANS, ADVANCES AND INVESTMENTS. No Borrower shall at any time make or
suffer to exist or remain outstanding any loan or advance to, or purchase,
acquire or own (beneficially or of record) any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) in, or any other
interest in, or make any capital contribution to or other investment in, any
other Person, or agree, become or remain liable (contingently or otherwise) to
do any of the foregoing, except:
(a) Loans and investments existing on the date hereof and
listed in Schedule 6.5 hereof; but not any amendments, extensions or
refinancings thereof;
(b) Receivables owing to such Borrower arising from sales of
inventory under usual and customary terms in the ordinary course of business;
(c) Demand advances to officers and employees of a Borrower to
meet expenses incurred by such officers and employees in the ordinary course of
business and in amounts at any time outstanding not exceeding $5,000 to any one
officer or employee and $10,000 in the aggregate among all Borrowers;
(d) Cash Equivalent Investments;
(e) Loans from a Borrower to another Borrower, provided that
the Borrowers shall cause any such loans to be evidenced by a promissory note,
which shall immediately be delivered to the Lender as Collateral;
(f) Permitted Acquisitions;
(g) investments in a Borrower by another Borrower;
(h) Other loans and advances to third parties (including
unconsolidated subsidiaries but excluding consolidated subsidiaries), the
aggregate principal amount of which together with Guaranties and Guaranty
Equivalents issued by Borrowers for such third parties, do not exceed $500,000
at any time for all Borrowers; and
(i) investments in entities purchasing delinquent pools of
Accounts in accordance with Section 6.13 so long as the Borrowers cause such
entities to comply with the other applicable provisions of this Agreement.
6.6 DIVIDENDS AND RELATED DISTRIBUTIONS.
No Borrower shall declare or make any Stock Payment, or agree, become or remain
liable (contingently or otherwise) to do any of the foregoing, except that a
Borrower may make a Stock Payment to another Borrower.
6.7 SALE-LEASEBACKS. No Borrower shall at any time enter into or suffer to
remain in effect any transaction to which such Borrower is a party involving the
sale, transfer or other disposition by such Borrower of any property (now owned
or hereafter acquired), with a view directly or indirectly to the leasing back
of any part of the same property or any other property
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used for the same or a similar purpose or purposes, or agree, become or remain
liable (contingently or otherwise) to do any of the foregoing.
6.8 LEASES. No Borrower shall at any time enter into or suffer to remain in
effect any lease, as lessee, of any property, or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, except:
(a) Operating leases of equipment or office space used by the
lessee in the ordinary course of business;
(b) Leases cancelable by the lessee without penalty on not
more than 90 days' notice; and
(c) Capitalized Leases permitted under Section 6.3 hereof.
6.9 MERGERS, ACQUISITIONS, ETC. No Borrower shall (v) except for Permitted
Acquisitions, merge with or into or consolidate with any other Person, (w)
liquidate, wind-up, dissolve or divide, (x) except for Permitted Acquisitions,
acquire all or any substantial portion of the properties of any going concern or
going line of business, (y) except for Permitted Acquisitions, acquire all or
any substantial portion of the properties of any other Person, or (z) agree,
become or remain liable (contingently or otherwise) to do any of the foregoing;
provided, however, that the Borrowers may seek the prior written consent of the
Super Majority Lenders for an acquisition which is not a Permitted Acquisition.
In connection with considering the Borrowers' request, the Lenders, via the
Administrative Agent may conduct their own due diligence or require appropriate
third party due diligence regarding the proposed acquisition. The results of all
such due diligence must be satisfactory to the Super Majority Lenders. Borrowers
shall bear the cost of all such due diligence.
6.10 DISPOSITIONS OF PROPERTIES. No Borrower shall sell, convey, assign,
lease, transfer, abandon or otherwise dispose of, voluntarily or involuntarily,
any of its properties, or agree, become or remain liable (contingently or
otherwise) to do any of the foregoing, except:
(a) The Borrowers may sell inventory in the ordinary course of
business;
(b) The Borrowers may dispose of equipment which is obsolete
or no longer useful in the business of such Borrower;
(c) The Cash Equivalent Investments described in Section
6.5(d); and
(d) The Borrowers may dispose of any division or Subsidiary
with an enterprise value on an arms length basis per transaction of $500,000 or
less.
By way of illustration, and without limitation, it is understood that the
following are dispositions of property prohibited under this Section 6.10: any
disposition of accounts, chattel paper or general intangibles, with or without
recourse, and any disposition of any leasehold interest. Nothing in this Section
6.10 shall be construed to limit any other restriction on dispositions of
property imposed by the Security Documents or otherwise in the Loan Documents.
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6.11 ISSUANCE OF STOCK. No Borrower, other than NCO Group, shall issue,
sell, otherwise dispose or suffer to remain outstanding, voluntarily or
involuntarily, any additional shares of capital stock, or any options, warrants,
calls, subscriptions, conversion rights, exchange rights, preemptive rights or
other rights, agreements or arrangements (contingent or otherwise) which may in
any circumstances now or hereafter obligate such Borrower to issue any shares of
its capital stock, except to NCO Group or another Borrower, except options
issued to employees of the Borrowers.
6.12 DEALINGS WITH AFFILIATES. No Borrower shall enter into or carry out
any transaction with (including, without limitation, purchase or lease property
or services from, sell or lease property or services to, loan or advance to, or
enter into, suffer to remain in existence or amend any contract, agreement or
arrangement with) any Affiliate of such Borrower, directly or indirectly, or
agree, become or remain liable (contingently or otherwise) to do any of the
foregoing, except:
(a) Existence and performance of contracts, agreements and
arrangements in existence as of the date hereof and set forth in Schedule 6.12
hereof; and
(b) Directors, officers and employees of a Borrower may be
compensated for services rendered in such capacity to such Borrower, provided
that such compensation is in good faith and on terms no less favorable to such
Borrower than those that could have been obtained in a comparable transaction on
an arm's-length basis from an unrelated Person, and the board of directors of
such Borrower (including a majority of the directors having no direct or
indirect interest in such transaction) approve the same.
(c) Transactions in the ordinary course of business and
consistent with past practices between one Borrower and another Borrower, in
good faith and on terms no less favorable to either Borrower than those that
could have been obtained in a comparable transaction on an arm's-length basis
from an unrelated Person; and
(d) Other transactions with Affiliates in good faith and on
terms no less favorable to a Borrower than those that could have been obtained
in a comparable transaction on an arm's-length basis from an unrelated Person.
6.13 ACQUIRED DELINQUENT POOLS OF ACCOUNTS. The Borrowers shall not acquire
delinquent pools of Accounts or make investments in entities purchasing
delinquent pools of Accounts if such acquisition would cause the unamortized
remaining invested balance for all such pools as reflected on the Borrowers'
consolidated balance sheet to exceed $10,000,000, in the aggregate among all
Borrowers, at any given point in time. From time to time the Borrowers may seek
the prior written consent of the Majority Lenders (in their sole discretion) so
that the unamortized remaining invested balance of all acquired delinquent pools
of accounts or investments in entities purchasing delinquent pools of Accounts
may exceed $10,000,000.
6.14 CAPITAL EXPENDITURES. No Borrower shall make any Capital Expenditures
on or after the date hereof, except for Capital Expenditures in the aggregate
among all Borrowers not in excess of $8,000,000, for the rolling four quarter
period ending December 31, 1999;
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$7,000,000 in the rolling four quarter period ending December 31, 2000; and
$6,000,000 in any rolling four quarter period thereafter; provided, however,
that the Borrowers may carry forward into the future, on a non-cumulative basis,
up to $1,000,000 in unspent Capital Expenditures per rolling four quarter
period. For purposes of this provision, (a) all leases, except for real estate
leases and automobile leases, shall be deemed to be Capitalized Leases (which
under Section 6.3 are limited to $10,000,000 in the aggregate during the term of
this Agreement) and therefore shall be accounted for as a Capital Expenditure,
and (b) Purchase Money Indebtedness shall be accounted for as a Capital
Expenditure.
6.15 LIMITATIONS ON MODIFICATION OF CERTAIN AGREEMENTS AND INSTRUMENTS. No
Borrower shall materially amend, modify or supplement materially its articles of
incorporation or by-laws (or similar constituent documents), if so doing would
adversely affect the Lenders' rights or benefits under the Loan Documents.
6.16 LIMITATION ON PAYMENTS OF PURCHASE MONEY INDEBTEDNESS. No Borrower
shall directly or indirectly pay, prepay, purchase, redeem, retire, defease or
acquire, or make any payment (on account of principal, interest, premium or
otherwise) of, or grant or suffer the existence of any Lien on any of its
property (now owned or hereafter acquired) to secure any indebtedness,
obligation or liability with respect to, or amend, modify or supplement any of
the terms and conditions of, any Purchase Money Indebtedness, or agree, become
or remain liable (contingently or otherwise) to do any of the foregoing, except
that so long as no Event of Default or Default has occurred, the Borrowers may
pay principal and interest on Purchase Money Indebtedness when due, to the
extent consistent with the subordination provisions of such Purchase Money
Indebtedness.
6.17 LIMITATION ON OTHER RESTRICTIONS ON LIENS. No Borrower shall enter
into, become or remain subject to any agreement or instrument to which such
Borrower is a party or by which its properties (now owned or hereafter acquired)
may be subject or bound that would prohibit the grant of any Lien upon any of
its properties (now owed or hereafter required), except Permitted Liens.
6.18 LIMITATION ON OTHER RESTRICTIONS ON AMENDMENT OF THE LOAN DOCUMENTS,
ETC. No Borrower shall enter into, become or remain subject to any agreement or
instrument to which such Borrower is a party or by which any Borrower or any of
their respective properties (now owned or hereafter acquired) may be subject or
bound that would prohibit or require the consent of any Person to any amendment,
modification or supplement to any of the Loan Documents, except for the Loan
Documents.
ARTICLE VII
DEFAULTS
7.1 "EVENTS OF DEFAULT." An Event of Default shall mean the occurrence or
existence of one or more of the following events or conditions (for any reason,
whether voluntary, involuntary or effected or required by Law):
(a) Any Borrower shall fail to pay when due principal of any
Loan.
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(b) Any Borrower shall fail to pay when due interest on any
Loan, any fees, indemnity or expenses, or any other amount due hereunder or
under any other Loan Document.
(c) Any representation or warranty made or deemed made by any
Borrower in or pursuant to or in connection with any Loan Document, or any
statement made by any Borrower in any financial statement, certificate, report,
exhibit or document furnished by any Borrower to the Lenders pursuant to or in
connection with any Loan Document, shall prove to have been false or misleading
in any material adverse respect as of the time when made or deemed made
(including by omission of material information necessary to make such
representation, warranty or statement not misleading).
(d) Any Borrower shall default in the performance or
observance of any covenant, agreement or duty under this Agreement or any other
Loan Document and (i) in the case of a default under Section 5.1 hereof such
default shall have continued for a period of ten days and (ii) in the case of
any other default such default shall have continued for a period of ten (10)
days after the Administrative Agent has sent notice of such default (as long as
such ten (10) day period does not extend more than thirty (30) days beyond the
date of occurrence of such default) provided that such default is capable of
being cured (which shall be determined in the sole and absolute discretion of
the Administrative Agent).
(e) Any Cross-Default Event shall occur with respect to any
Cross-Default Obligation; provided, that if a Cross-Default Event would have
occurred with respect to a Cross-Default Obligation but for the grant of a
waiver or similar indulgence, a Cross-Default Event shall nevertheless be deemed
to have occurred if any Borrower directly or indirectly gave or agreed to give
any consideration for such waiver or indulgence (including but not limited to a
reduction in maturity, an increase in rates or the granting of collateral). As
used herein, "Cross-Default Obligation" shall mean any Indebtedness or Guaranty
Equivalent of any Borrower in which the principal obligation of such Borrower
exceeds $500,000, or any agreement or instrument creating, evidencing or
securing such Indebtedness or Guaranty Equivalent. As used herein,
"Cross-Default Event" with respect to a Cross-Default Obligation shall mean the
occurrence of any default, event or condition which causes any Person or Persons
to cause all or any part of such Cross-Default Obligation to become due (by
acceleration, mandatory prepayment or repurchase, or otherwise) before its
otherwise stated maturity, or failure to pay all or any part of such
Cross-Default Obligation at its stated maturity.
(f) One or more judgments for the payment of money shall have
been entered against any Borrower, which judgment or judgments exceed $250,000
in the aggregate, and such judgment or judgments shall have remained
undischarged and unstayed for a period of thirty consecutive days.
(g) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process exceeding in value the aggregate amount
of $250,000 shall have been issued against any Borrower or any of their
properties and shall have remained undischarged and unstayed for a period of
thirty consecutive days.
(h) Any Governmental Action now or hereafter made by or with
any Governmental Authority required in connection with any Loan Document is not
obtained or shall
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have ceased to be in full force and effect or shall have been materially
modified or amended or shall have been held to be illegal or invalid, and the
Administrative Agent shall have determined in good faith (which determination
shall be conclusive) that such event or condition could have a Material Adverse
Effect.
(i) Any Security Document shall cease to be in full force and
effect, or any Lien created or purported to be created in any Collateral
pursuant to any Security Document shall fail to be a valid, enforceable and
perfected Lien in favor of the Lenders securing the Obligations, prior to all
other Liens, except Permitted Liens, or any Borrower or any Governmental
Authority shall assert any of the foregoing.
(j) Any Loan Document or term or provision thereof shall cease
to be in full force and effect, or any Borrower shall, or shall purport to,
terminate, repudiate, declare voidable or void or otherwise contest, any Loan
Document or term or provision thereof or any obligation or liability of any
Borrower thereunder, and the result of which is a material effect on the rights
and remedies of the Lenders under the Loan Documents.
(k) The Administrative Agent shall have determined in good
faith that an event or condition has occurred which will have a Material Adverse
Effect.
(l) Any one or more Pension-Related Events referred to in
subsection (a)(ii), (b) or (e) of the definition of "Pension-Related Event"
shall have occurred; or any one or more other Pension-Related Events shall have
occurred and the Majority Lenders shall determine in good faith (which
determination shall be conclusive) that such other Pension-Related Events,
individually or in the aggregate, could have a Material Adverse Effect.
(m) Any one or more of the events or conditions set forth in
the following clauses (i) or (ii) shall have occurred in respect of any
Borrower, and the Administrative Agent shall determine in good faith (which
determination shall be conclusive) that such events or conditions, individually
or in the aggregate, could have a Material Adverse Effect: (i) any past or
present violation of any Environmental Law by such Person, (ii) the existence of
any pending or threatened Environmental Claim against any such Person, or the
existence of any past or present acts, omissions, events or circumstances that
could form the basis of any Environmental Claim against any such Person.
(n) A Change of Management shall have occurred.
(o) A proceeding shall have been instituted in respect of any
Borrower:
(i) subject to clause (p)(4) below, seeking to have an
order for relief entered in respect of any Borrower, or seeking a declaration or
entailing a finding that any Borrower is insolvent or a similar declaration or
finding, or seeking dissolution, winding-up, charter revocation or forfeiture,
liquidation, reorganization, arrangement, adjustment, composition or other
similar relief with respect to any Borrower, its assets or its debts under any
Law relating to bankruptcy, insolvency, relief of debtors or protection of
creditors, termination of legal entities or any other similar Law now or
hereafter in effect, or
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(ii) seeking appointment of a receiver, trustee,
liquidator, assignee, sequestrator or other custodian for such Person or for all
or any substantial part of its property, and such proceeding shall result in the
entry, making or grant of any such order for relief, declaration, finding,
relief or appointment, or such proceeding shall remain undismissed and unstayed
for a period of sixty consecutive days.
(p) Borrowers on a consolidated basis shall (1) become
insolvent; (2) fail to pay or (3) become unable to pay, or any Borrower shall
(1) state that it is or will be unable to pay, its debts as they become due; (2)
voluntarily suspend transaction of its business; (3) make a general assignment
for the benefit of creditors; (4) institute (or fail to controvert in a timely
and appropriate manner) a proceeding described in Section 7.1(o)(i) hereof, or
(whether or not any such proceeding has been instituted) shall consent to or
acquiesce in any such order for relief, declaration, finding or relief described
therein; (5) institute (or fail to controvert for a period of sixty consecutive
days in a timely and appropriate manner) a proceeding described in Section
7.1(o)(ii) hereof, or (whether or not any such proceeding has been instituted)
shall consent to or acquiesce in any such appointment or to the taking of
possession by any such custodian of all or any substantial part of its property;
shall dissolve, wind-up, revoke or forfeit its charter (or other constituent
documents) or liquidate itself or any substantial part of its property; or (6)
take any action in furtherance of any of the foregoing.
(q) Any person or any affiliated group of persons, other than
present management, obtains control of a majority of the voting stock of NCO
Group.
7.2 CONSEQUENCES OF AN EVENT OF DEFAULT.
(a) Events of Default in General. If an Event of Default
(other than one specified in paragraph (j) of Section 7.1 (Insolvency,
Bankruptcy, Etc.) hereof) shall occur and be continuing or shall exist, then, in
addition to all other rights and remedies which the Administrative Agent or any
other Lender may have hereunder or under any other Loan Document, at law, in
equity or otherwise, the Lenders shall be under no further obligation to make
Loans and the Administrative Agent may, (and upon the written request of the
Majority Lenders, shall), by notice to NCO Group (on behalf of the Borrowers),
from time to time do any or all of the following:
(i) Declare the Commitments terminated, whereupon the
Commitments will terminate and any fees hereunder shall be immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby waived, and an action therefor shall immediately accrue.
(ii) Declare the unpaid principal amount of the Loans,
interest accrued thereon and all other Obligations to be immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby waived, and an action therefor shall immediately accrue.
(iii) Exercise such other remedies as may be available
to the Lenders under applicable Law.
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(b) Automatic Acceleration; Certain Bankruptcy-Related Events.
If an Event of Default specified in paragraph (j) of Section 7.1 (Insolvency,
Bankruptcy, Etc.) hereof shall occur or exist, then, in addition to all other
rights and remedies which any Lender may have hereunder or under any other Loan
Document, at law, in equity or otherwise, the Commitments shall automatically
terminate and the Lenders shall be under no further obligation to make Loans,
and the unpaid principal amount of the Loans, interest accrued thereon and all
other Obligations shall become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived, and an
action therefor shall immediately accrue, and in addition, the Administrative
Agent may, and upon the written request of the Majority Lenders, shall exercise
such other remedies as may be available to the Lenders under applicable Law.
(c) Equitable Remedies. It is agreed that, in addition to all
other rights hereunder or under Law, the Administrative Agent shall have the
right to institute proceedings in equity or other appropriate proceedings for
the specific performance of any covenant or agreement made in any of the Loan
Documents or for an injunction against the violation of any of the terms of any
of the Loan Documents or in aid of the exercise of any power granted in any of
the Loan Documents or by Law or otherwise.
7.3 APPLICATION OF PROCEEDS. After the occurrence of an Event of Default
and acceleration of the Loans, any amounts received on account of Obligations
shall be applied by the Administrative Agent in the following order:
First, to payment of that portion of the Obligations
constituting fees, indemnities, expenses and other amounts due to the
Administrative Agent in its capacity as such;
Second, to payment of that portion of the Obligations
constituting fees, indemnities due to the Lenders, ratably among them
in proportion to the amounts described in this clause Second due to
them;
Third, to payment of that portion of the Obligations
constituting accrued and unpaid interest on Loans, ratably among the
Lenders in proportion to the respective amounts described in this
clause Third due to them;
Fourth, to payment of that portion of the Obligations
constituting unpaid principal of the Loans ratably among the Lenders in
proportion to the respective amounts described in this clause Fourth
due to them;
Fifth, to payment of all other Obligations, ratably among the
Lenders in proportion to the respective amounts described in this
clause Fifth due to them; and
Finally, the balance, if any, after all of the Obligations
have been indefeasibly paid in full, to NCO Group (on behalf of the
Borrowers) or as otherwise required by Law.
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ARTICLE VIII
THE ADMINISTRATIVE AGENT
8.1 APPOINTMENT. Subject to the provisions of the second sentence of
Section 8.9 below, each Lender hereby irrevocably appoints Mellon to act as
Administrative Agent for such Lender under this Agreement and the other Loan
Documents. Each Lender hereby irrevocably authorizes the Administrative Agent to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Loan Documents, and to exercise such powers and to perform such
duties, as are expressly delegated to or required of the Administrative Agent by
the terms hereof or thereof, together with such powers as are reasonably
incidental thereto. Mellon hereby agrees to act as Administrative Agent on
behalf of the Lenders on the terms and conditions set forth in this Agreement
and the other Loan Documents, subject to its right to resign as provided in
Section 8.9 hereof. Each Lender hereby irrevocably authorizes the Administrative
Agent to execute and deliver each of the Loan Documents and to accept delivery
of such of the other Loan Documents as may not require execution by the
Administrative Agent. Each Lender agrees that the rights and remedies granted to
the Administrative Agent under the Loan Documents shall be exercised exclusively
by the Administrative Agent (or a Person designated by the Administrative
Agent), and that no Lender shall have any right individually to exercise any
such right or remedy, except to the extent, if any, expressly provided herein or
therein.
8.2 GENERAL NATURE OF ADMINISTRATIVE AGENT'S DUTIES. Notwithstanding
anything to the contrary elsewhere in this Agreement or in any other Loan
Document:
(a) The Administrative Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Loan Documents, and no implied duties or responsibilities on the part of
the Administrative Agent shall be read into this Agreement or any other Loan
Document or shall otherwise exist.
(b) The duties and responsibilities of the Administrative
Agent under this Agreement and the other Loan Documents shall be mechanical and
administrative in nature, and the Administrative Agent shall not have a
fiduciary relationship with respect to any Lender.
(c) The Administrative Agent's relationship with and to the
Lenders is governed exclusively by the terms of this Agreement and the other
Loan Documents. The Administrative Agent does not assume, and shall not at any
time be deemed to have, any relationship of agency or trust with or for, any
Lender or any other Person or (except only as expressly provided in this
Agreement and the other Loan Documents) any other duty or responsibility to such
Lender or other Person.
(d) The Administrative Agent shall be under no obligation to
take any action hereunder or under any other Loan Document if the Administrative
Agent believes in good faith that taking such action may conflict with any Law
or any provision of this Agreement or any
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other Loan Document, or may require the Administrative Agent to qualify to do
business in any jurisdiction where it is not then so qualified.
(e) The authority of the Administrative Agent to request
information from the Borrowers or take any other voluntary action hereunder
shall impose no duty of any kind on the Administrative Agent to make such
request or take any such action.
8.3 EXERCISE OF POWERS. The Administrative Agent shall take any action of
the type specified in this Agreement or any other Loan Document as being within
the Administrative Agent's rights, powers or discretion in accordance with
directions from the Majority Lenders (or if expressly required herein the Super
Majority Lenders) (or as otherwise provided in the Loan Documents). In the
absence of such direction, the Administrative Agent shall have the authority
(but under no circumstances shall be obligated), in its sole discretion, to take
any such action, except to the extent that this Agreement or such other Loan
Document expressly requires the direction or consent of the Majority Lenders (or
the Super Majority Lenders, all of the Lenders, or some other Person or group of
Persons), in which case the Administrative Agent shall not take such action
absent such direction or consent. Any action or inaction pursuant to such
direction, discretion or consent shall be binding on each Lender (whether or not
it so consented). The Administrative Agent shall not have any liability to any
Person as a result of any action or inaction in conformity with this Section
8.3.
8.4 GENERAL EXCULPATORY PROVISIONS. Notwithstanding anything to the
contrary elsewhere in this Agreement or any other Loan Document:
(a) The Administrative Agent shall not be liable for any
action taken or omitted to be taken by it under or in connection with this
Agreement or any other Loan Document, except only for direct (as opposed to
consequential or other) damages suffered by a Person and only to the extent that
such Person proves that such damages were caused by the Administrative Agent's
own gross negligence or willful misconduct.
(b) The Administrative Agent shall not be responsible for (i)
the execution, delivery, effectiveness, enforceability, genuineness, validity or
adequacy of any Loan Document, (ii) any recital, representation, warranty,
document, certificate, report or statement in, provided for in, or received
under or in connection with, any Loan Document, or (iii) any failure of any
Borrower or, any Lender to perform any of their respective obligations under any
Loan Document.
(c) The Administrative Agent shall not be under any obligation
to ascertain, inquire or give any notice relating to (i) the performance or
observance of any of the terms or conditions of this Agreement or any other Loan
Document on the part of any Borrower, (ii) the business, operations, condition
(financial or otherwise) or prospects of any Borrower or any other Person (even
if the Administrative Agent knows or should know that some event or condition
exists or fails to exist), or (iii) except to the extent set forth in Section
8.5(f) below, the existence of any Event of Default or Default.
(d) The Administrative Agent shall not be under any
obligation, either initially or on a continuing basis, to provide any Lender
with any notices, reports or information of any
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nature, whether in its possession presently or hereafter, whether obtained under
or in connection with this Agreement or otherwise, except for such notices,
reports and other information expressly required by this Agreement or any other
Loan Document to be furnished by the Administrative Agent to such Lender.
8.5 ADMINISTRATION BY THE ADMINISTRATIVE AGENT.
(a) The Administrative Agent may rely upon any notice or other
communication of any nature (written or oral, including but not limited to
telephone conversations, whether or not such notice or other communication is
made in a manner permitted or required by this Agreement or any other Loan
Document) purportedly made by or on behalf of the proper party or parties, and
the Administrative Agent shall not have any duty to verify the identity or
authority of any Person giving such notice or other communication.
(b) The Administrative Agent may consult with legal counsel
(including in-house counsel for the Administrative Agent or in-house or other
counsel for any Borrower), independent public accountants and any other experts
selected by it from time to time, and the Administrative Agent shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts.
(c) The Administrative Agent may conclusively rely upon the
truth of the statements and the correctness of the opinions expressed in any
certificates or opinions furnished to the Administrative Agent in accordance
with the requirements of this Agreement or any other Loan Document. Whenever the
Administrative Agent shall deem it necessary or desirable that a matter be
proved or established with respect to any Borrower or Lender, such matter may be
established by a certificate of such Borrower or Lender, as the case may be, and
the Administrative Agent may conclusively rely upon such certificate (unless
other evidence with respect to such matter is specifically prescribed in this
Agreement or another Loan Document).
(d) The Administrative Agent may fail or refuse to take any
action unless it shall be directed by the Majority Lenders (or the Super
Majority Lenders, all of the Lenders, or some other Person or group of Persons,
if this Agreement or another Loan Document so expressly requires) to take such
action and it shall be indemnified to its satisfaction from time to time against
any and all amounts, liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature which may be imposed on, incurred by or asserted against the
Administrative Agent by reason of taking or continuing to take any such action.
(e) The Administrative Agent may perform any of its duties
under this Agreement or any other Loan Document by or through agents or
attorneys-in-fact. The Administrative Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
(f) The Administrative Agent shall not be deemed to have any
knowledge or notice of the occurrence of any Event of Default or Default unless
the Administrative Agent has received notice from a Lender or a Borrower
referring to this Agreement, describing such Event of Default or Default, and
stating that such notice is a "notice of default." If the Administrative
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Agent receives such a notice, the Administrative Agent shall give prompt notice
thereof to each Lender.
8.6 LENDERS NOT RELYING ON ADMINISTRATIVE AGENT OR OTHER LENDERS. Each
Lender acknowledges as follows: (a) neither the Administrative Agent nor any
other Lender has made any representations or warranties to it, and no act taken
hereafter by the Administrative Agent or any other Lender shall be deemed to
constitute any representation or warranty by the Administrative Agent or such
other Lender to it; (b) it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based upon such documents and
information as it has deemed appropriate, made its own credit and legal analysis
and decision to enter into this Agreement and the other Loan Documents; and (c)
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based upon such documents and information as it shall deem
appropriate at the time, make its own decisions to take or not take action under
or in connection with this Agreement and the other Loan Documents.
8.7 INDEMNIFICATION. Each Lender agrees to reimburse and indemnify the
Administrative Agent and its directors, officers, employees and agents (to the
extent not reimbursed by a Borrower and without limitation of the obligations of
the Borrowers to do so), in proportion to the Lenders' respective pro rata share
of (without duplication) the Commitment and the Loans, from and against any and
all amounts, losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements of any kind or
nature (including the fees and disbursements of counsel for the Administrative
Agent or such other Person in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not the
Administrative Agent or such other Person shall be designated a party thereto)
that may at any time be imposed on, incurred by or asserted against the
Administrative Agent or such other Person as a result of, or arising out of, or
in any way related to or by reason of, this Agreement, any other Loan Document,
any Acquisition or any other transaction from time to time contemplated hereby
or thereby, or any transaction actually or proposed to be financed in whole or
in part, directly or indirectly, with the proceeds of any Loan, provided that no
Lender shall be liable for any portion of such amounts, losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements that such Lender proves were the result of the gross
negligence or willful misconduct of the Administrative Agent or such other
Person. Payments under this Section 8.7 shall be due and payable on demand.
8.8 REGISTER. The Administrative Agent shall maintain at its address
referred to in Section 11.1 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the
Loans and stated interest thereon owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrowers, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by NCO Group on behalf of the Borrowers or any Lender
at any reasonable time and from time to time upon reasonable prior notice.
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8.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at
any time by giving 30 days' prior written notice thereof to the other Lenders
and NCO Group on behalf of the Borrowers. The Administrative Agent may be
removed by the Majority Lenders at any time for cause by such Majority Lenders
giving 30 days' prior written notice thereof to the Administrative Agent, the
other Lenders and NCO Group on behalf of the Borrowers. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent with (so long as no Default or Event of Default
shall have occurred and then be continuing) the consent of NCO Group on behalf
of the Borrowers whose consent shall not be unreasonably withheld or delayed. If
no successor Administrative Agent shall have been so appointed and consented to,
and shall have accepted such appointment, within 30 days after such notice of
resignation or removal, then another Lender shall have the right to become the
successor Administrative Agent by giving written notice thereof to NCO Group and
the Lenders and if no Lender volunteers to become successor Administrative Agent
or fails to give such notice within thirty five (35) days after the retiring
Administrative Agent's notice of resignation or removal, then the retiring
Administrative Agent may (but shall not be required to) appoint a successor
Administrative Agent. Each successor Administrative Agent shall be a Lender if
any Lender shall at the time be willing to become the successor Administrative
Agent, and if no Lender shall then be so willing, then such successor
Administrative Agent shall be an Eligible Institution. Upon the acceptance by a
successor Administrative Agent of its appointment as Administrative Agent
hereunder, such successor Administrative Agent shall thereupon succeed to and
become vested with all the properties, rights, powers, privileges and duties of
the former Administrative Agent in its capacity as such, without further act,
deed or conveyance. Upon the effective date of resignation or removal of a
retiring Administrative Agent, such Administrative Agent shall be discharged
from its duties under this Agreement and the other Loan Documents, but the
provisions of this Agreement shall inure to its benefit as to any actions taken
or omitted by it while it was Administrative Agent under this Agreement. If and
so long as no successor Administrative Agent shall have been appointed, then any
notice or other communication required or permitted to be given by the
Administrative Agent shall be sufficiently given if given by the Majority
Lenders, all notices or other communications required or permitted to be given
to the Administrative Agent shall be given to each Lender, and all payments to
be made to the Administrative Agent shall be made directly to the Borrowers or
Lender for whose account such payment is made.
8.10 ADDITIONAL AGENTS. If the Administrative Agent shall from time to time
deem it necessary or advisable, for its own protection in the performance of its
duties hereunder or in the interest of the Lenders, the Administrative Agent and
the Borrowers shall execute and deliver a supplemental agreement and all other
instruments and agreements necessary or advisable, in the opinion of the
Administrative Agent, to constitute one or more other Persons designated by the
Administrative Agent, to act as co-Agent, with such powers of the Administrative
Agent as may be provided in such supplemental agreement, and to vest in such
other Person as such co-agent or separate agent, as the case may be, any
properties, rights, powers, privileges and duties of the Administrative Agent
under this Agreement or any other Loan Document.
8.11 CALCULATIONS. The Administrative Agent shall not be liable for any
calculation, apportionment or distribution of payments made by it in good faith
and without
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gross negligence or willful misconduct. If such calculation, apportionment or
distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made shall be to recover
from the other Lenders any payment in excess of the amount to which they are
determined to be entitled or, if the amount due was not paid by the appropriate
Borrower, to recover such amount from the appropriate Borrower.
8.12 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
Commitment hereunder and the Obligations owing to it, the Administrative Agent
shall have the same rights and powers under this Agreement and each other Loan
Document as any other Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender", "Holder of Notes" and like terms
shall include the Administrative Agent in its individual capacity as such. The
Administrative Agent and its Affiliates may, without liability to account, make
loans to, accept deposits from, acquire debt or equity interests in, act as
trustee under indentures of, enter into Interest Rate Hedging Agreements with,
serve as "Administrative Agent" for other financing vehicles, issue letters of
credit on behalf of, and engage in any other business with, (a) any Borrower or
any stockholder, Subsidiary or Affiliate of any Borrower, or (b) any other
Person, whether such other Person may be engaged in any conflict or dispute with
any Borrower or any Lender or otherwise, as though the Administrative Agent were
not the Administrative Agent hereunder.
ARTICLE IX
SPECIAL INTER-BORROWER PROVISIONS
9.1 CERTAIN BORROWER ACKNOWLEDGEMENTS.
(a) Each Borrower acknowledges that it will enjoy significant
benefits from the business conducted by the other Borrowers because of, inter
alia, their combined ability to bargain with other Persons including without
limitation their ability to receive the credit facilities on favorable terms
granted by this Agreement and other Loan Documents which would not have been
available to an individual Borrower acting alone. Each Borrower has determined
that it is in its best interest to procure credit facilities which each Borrower
may utilize directly and which receive the credit support of the other Borrowers
as contemplated by this Agreement and the other Loan Documents.
(b) The Lenders have advised the Borrowers that they are
unwilling to enter into this Agreement and the other Loan Documents and make
available the credit facilities extended hereby to any Borrower unless each
Borrower agrees, among other things, to be jointly and severally liable for the
due and proper payment of the obligations of each other Borrower under this
Agreement and other Loan Documents. Each Borrower has determined that it is in
its best interest and in pursuit of its purposes that it so induce the Lenders
to extend credit pursuant to this Agreement and the other documents executed in
connection herewith (i) because of the desirability to each Borrower of the
credit facilities, the interest rates and the modes of borrowing available
hereunder, (ii) because each Borrower may engage in transactions jointly with
other Borrowers and (iii) because each Borrower may require, from time to time,
access to funds under this Agreement for the purposes herein set forth.
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(c) Each Borrower has determined that it has and, after giving
effect to the transactions contemplated by this Agreement and the other Loan
Documents (including, without limitation, the inter-Borrower arrangement set
forth in this Article 9 will have, assets having a fair saleable value in excess
of the amount required to pay its probable liability on its existing debts as
they fall due for payment and that the sum of its debts is not and will not then
be greater than all of its property at a fair valuation, that such Borrower has,
and will have, access to adequate capital for the conduct of its business and
the ability to pay its debts from time to time incurred in connection therewith
as such debts mature and that the value of the benefits to be derived by such
Borrower from the access to funds under this Agreement (including, without
limitation, the inter-Borrower arrangement set forth in this Article 9) is
reasonably equivalent to the obligations undertaken pursuant hereto.
9.2 CERTAIN INTER-BORROWER AGREEMENTS.
(a) Subject to paragraph (b) below, each Borrower as
indemnitor shall indemnify the other Borrowers as indemnitees for all
Obligations incurred by the indemnitee Borrowers for Loans advanced to the
indemnitor Borrower.
(b) The rights and obligations of the Borrowers pursuant to
paragraph (a) above shall be subordinated in all respects to the rights of the
Administrative Agent and the other Lenders with respect to the Obligations and,
accordingly, each Borrower agrees that it shall not make any payment or receive
any payment pursuant to the preceding paragraph (a) at any time a Default has
occurred and is continuing or would be caused thereby. Each Borrower agrees that
in the event it receives any payment described by or in violation of this
paragraph (b), it shall accept such payment as agent of the Administrative
Agent, for the benefit of the Lenders, and hold the same in trust on behalf of
and for the benefit of the Administrative Agent, for the benefit of the Lenders.
9.3 RECORDS. NCO Group (on behalf of each Borrower) shall
maintain records specifying (a) all Obligations incurred by each Borrower, (b)
the date of such incurrence, (c) the date and amount of any payments made in
respect of such Obligations and (d) all inter-Borrower obligations pursuant to
paragraph 9.2 above. NCO Group shall make copies of such records available to
the Administrative Agent, upon request.
ARTICLE X
DEFINITIONS; CONSTRUCTION
10.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the following meanings, (terms defined in the singular to have a
correlative meaning when used in the plural) unless the context hereof otherwise
clearly requires:
"Accumulated Funding Deficiency" has the meaning given to such term in
Section 4001(a)(18) of ERISA.
"Administrative Agent" has the meaning ascribed to such term in the
preamble of this Agreement.
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"Affiliate" of a Person (the "Specified Person") shall mean (a) any Person
which directly or indirectly controls, or is controlled by, or is under common
control with, the Specified Person, (b) any director or officer (or, in the case
of a Person which is not a corporation, any individual having analogous powers)
of the Specified Person or of a Person who is an Affiliate of the Specified
Person within the meaning of the preceding clause (a), and (c) for each
individual who is an Affiliate of the Specified Person within the meaning of the
foregoing clauses (a) or (b), any other individual related to such Affiliate by
consanguinity within the third degree or in a step or adoptive relationship
within such third degree or related by affinity with such Affiliate or any such
individual. For purposes of the preceding sentence, "control" of a Person means
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement as the same may be amended,
modified, restated or supplemented from time to time in accordance with its
terms.
"Applicable Margin" means a marginal rate of interest which is added to the
LIBO Rate to determine the effective rate of interest on LIBO Rate Loans. The
Applicable Margin shall be determined in the following manner:
For any LIBO Rate Loan, the Applicable Margin shall be the percentage
amount set forth below under the caption "Applicable Margin" opposite the
relevant Consolidated Funded Debt/Consolidated EBITDA Ratio:
Consolidated Funded Debt/ Applicable Margin
Consolidated EBITDA Ratio LIBO Rate Loans
------------------------- ---------------
below 1.50 1.25%
> 1.50 < 2.00 1.50%
- -
> 2.00 < 2.50 1.75%
-
> 2.50 < 3.00 2.00%
-
> 3.00 < 3.50 2.25%
-
From the Closing Date until the first day of the month following delivery of the
first Officer's Compliance Certificate for under Section 5.1 for the first
quarter of 1999, the Applicable Margin shall be 2.25%. Beginning with receipt of
such first Officer's Compliance Certificate, the Applicable Margin shall be
adjusted on the first Business Day of the month after delivery of each Officer's
Compliance Certificate delivered pursuant to Section 5.1. If an Officer's
Compliance Certificate is required to be delivered pursuant to Section 5.1 and
is not so delivered, then the Applicable Margin shall be the highest rate
specified above until the Officer's Compliance Certificate is so delivered.
"Assignment and Acceptance Agreement" shall have the meaning ascribed to
such term in Section 11.9.
"Available RC Commitment" means, as of any date, the difference obtained by
subtracting (a) minus (b) where (a) is the amount of the RC Commitment on such
date and (b) is
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the aggregate outstanding principal amount of all Loans plus amounts available
to be drawn under Letters of Credit on such date.
"Bank Tax" means (i) any Tax based on or measured by net income of a
Lender, any franchise Tax and any doing business Tax imposed upon any Lender by
any jurisdiction (or any political subdivision thereof) in which such Lender or
any lending office of a Lender is located and (ii) for the purposes of Section
1.13, any other Tax imposed by a jurisdiction other than the United States or a
political subdivision thereof that would not have been imposed but for a present
or former connection between such Lender or lending office (as the case may be)
and such jurisdiction.
"Borrowers" has the meaning ascribed to such term in the preamble
hereto. Unless the Administrative Agent agrees otherwise, each Person which is
now or hereafter becomes a direct or indirect Subsidiary of NCO Group shall at
all times after becoming a Subsidiary of NCO Group be a "Borrower" pursuant to
the terms of this Agreement.
"Business Day" means any day other than a Saturday, Sunday, public
holiday under the laws of the Commonwealth of Pennsylvania, or other day on
which banking institutions are authorized or obligated to close in the city in
which the Administrative Agent's Domestic Lending Office is located provided,
however, that whether or not expressly stated in this Agreement or other Loan
Documents, when "Business Day" is used with respect to any LIBO Rate Loan, such
Business Day must also be a Eurodollar Business Day.
"Capital Expenditures", of any Person shall mean, for any period, all
expenditures (whether paid in cash or accrued as liabilities during such period)
of such Person during such period which would be classified as capital
expenditures in accordance with GAAP (including, without limitation,
expenditures for maintenance and repairs which are capitalized, Capitalized
Leases to the extent an asset is recorded in connection therewith in accordance
with GAAP, and Purchase Money Indebtedness), but excluding any capital assets
acquired as part of a Permitted Acquisition.
"Capitalized Lease" shall mean at any time any lease, other than a real
estate lease or automobile lease, which is, or is required under GAAP to be,
capitalized on the balance sheet of the lessee at such time, and "Capitalized
Lease Obligation" of any Person at any time shall mean the aggregate amount
which is, or is required under GAAP to be, reported as a liability on the
balance sheet of such Person at such time as lessee under a Capitalized Lease.
"Cash Equivalent Investments" shall mean any of the following, to the
extent acquired for investment and not with a view to achieving trading profits:
(a) obligations fully backed by the full faith and credit of the United States
of America maturing not in excess of nine months from the date of acquisition,
(b) commercial paper maturing not in excess of nine months from the date of
acquisition and rated "P-1" by Moody's Investors Service or "A-1" by Standard &
Poor's Corporation on the date of acquisition, and (c) the following obligations
of any domestic commercial bank having capital and surplus in excess of
$500,000,000, which has, or the holding company of which has, a commercial paper
rating meeting the requirements specified in clause (b) above: (i) time
deposits, certificates of deposit and acceptances maturing not in excess of
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nine months from the date of acquisition, or (ii) repurchase obligations with a
term of not more than seven days for underlying securities of the type referred
to in clause (a) above.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and any successor statute of similar
import, and regulations thereunder, in each case as in effect from time to time.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation and Liability Information System List, as the same may be amended
from time to time.
"Change of Management" shall mean (a) that a majority of the Board of
Directors of NCO Group shall be other than those who were directors on the date
hereof plus David D'Anna; or (b) Michael J. Barrist for any reason shall cease
to serve as chief executive officer of NCO Group; provided, however, that the
cessation of Michael Barrist's status as chief executive officer shall not fall
within the definition of a Change of Management so long as a replacement is
hired within ninety (90) calendar days of such cessation who is reasonably
satisfactory to the Super Majority Lenders.
"Closing Date" means the date of execution and delivery of this
Agreement.
"COBRA Violation" means any violation of the "continuation coverage
requirements" of "group health plans" of former Section 162(k) of the Code (as
in effect for tax years beginning on or before December 31, 1988) and of Section
4980B of the Code (as in effect for tax years beginning on or after January 1,
1989) and Part 6 of Subtitle B of Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time, and the Treasury regulations thereunder.
"Collateral" shall mean the property from time to time subject to the
Liens of the Security Documents.
"Commitment" shall mean the RC Commitment and Term Loan Commitment.
"Consolidated EBIT" for any period, with respect to NCO Group and its
consolidated Subsidiaries, shall mean the sum of (a) Consolidated Net Income for
such period, (b) Consolidated Interest Expense for such period, (c) charges
against income for foreign, federal, state and local income taxes for such
period, (d) extraordinary losses to the extent included in determining such
Consolidated Net Income, minus (e) extraordinary gains to the extent included in
determining such Consolidated Net Income, all as determined on a consolidated
basis in accordance with GAAP.
"Consolidated EBITDA" for any period, with respect to NCO Group and its
consolidated Subsidiaries, shall mean the sum of (a) Consolidated EBIT for such
period, (b) depreciation expense for such period, and (c) amortization expense
for such period, all as determined on a consolidated basis in accordance with
GAAP.
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"Consolidated Fixed Charge Coverage Ratio" for any period, with respect
to NCO Group and its consolidated Subsidiaries, shall mean the ratio of (i)
Consolidated EBITDA minus Capital Expenditures for such period to (ii) the sum
for such period of (a) Consolidated Interest Expense, (b) principal payments on
Indebtedness and (c) Taxes.
"Consolidated Funded Debt" shall mean all obligations of NCO Group and
its consolidated Subsidiaries incurred from time to time for Indebtedness,
including without limitation the Obligations and Purchase Money Indebtedness.
"Consolidated Interest Coverage Ratio" for any period shall mean the
ratio of Consolidated EBIT for such period to the Consolidated Interest Expense
for such period.
"Consolidated Interest Expense" for any period shall mean the total
Interest Expense of NCO Group and its consolidated Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" for any period shall mean the net earnings
(or loss) after taxes of NCO Group and its consolidated Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP; provided,
that there shall be deducted therefrom (a) the income (or deficit) of any Person
accrued prior to the date it becomes a consolidated Subsidiary or is merged into
or consolidated, acquired by or combined with NCO Group or any consolidated
Subsidiary in a business combination accounted for as a pooling of interests,
including, in the case of a successor to NCO Group or any consolidated
Subsidiary by consolidation or merger or transfer of assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets,
(b) income or loss accounted for by NCO Group on the equity method because of
the income (or deficit) during such period of any Person (other than a
consolidated Subsidiary) in which NCO Group or any consolidated Subsidiary has
an ownership interest, but the deduction for such equity income shall be
reversed to the extent that during such period or at any subsequent time an
amount not in excess of such income has been actually received by NCO Group or
such consolidated Subsidiary in the form of cash or property dividends or
similar distributions, (c) income or loss of a foreign Subsidiary, but the
deduction for such Subsidiary income shall be reversed to the extent that during
such period or at any subsequent time an amount not in excess of such income has
been actually received by NCO Group or such consolidated Subsidiary in the form
of cash or property dividends or similar distributions, not subject to foreign
currency translation, (d) the undistributed earnings of any consolidated
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such consolidated Subsidiary is restricted (whether such
restriction arises by operation of Law, by agreement, by its articles of
incorporation or by-laws (or other constituent documents), or otherwise), (e)
any restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made against income during such period, and (f)
any gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of NCO Group or any consolidated Subsidiary.
"Consolidated Net Worth" at any time shall mean the total amount of
stockholders' equity of NCO Group and its consolidated Subsidiaries at such time
determined on a consolidated basis in accordance with GAAP.
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"Contingent Reimbursement Obligation" shall mean the contingent
obligation of the Borrowers to reimburse the Issuer for any Drawings that may be
made under an outstanding Letter of Credit, whenever issued. Without limiting
the generality of the foregoing, the amount of all Contingent Reimbursement
Obligations at any time shall be the aggregate amount available to be drawn
under outstanding Letters of Credit at such time.
"Controlled Group Member" shall mean each trade or business (whether or
not incorporated) which together with any Borrower is treated as a single
employer under Sections 4001(a)(14) or 4001(b)(1) of ERISA or Sections 414(b),
(c), (m) or (o) of the Code.
"Credit Agreement" shall mean the Amended and Restated Credit Agreement
between the Borrowers and the Administrative Agent dated as of September 5,
1996, as amended.
"Default" means any event or condition which with notice, passage of
time or both, would constitute an Event of Default.
"Default Rate" means, with respect to any amounts payable hereunder or
under the other Loan Documents, a rate equal to the sum of (a) two percent (2%)
per annum plus (b) the interest rate otherwise in effect with respect to such
amounts or, if no such rate is otherwise in effect with respect to such amounts,
a rate equal to the sum of (i) the Prime Rate plus (ii) two percent (2%).
"Dollar," "Dollars" and the symbol "$" means lawful money of the United
States of America.
"Domestic Lending Office" means, with respect to any Lender (i) the
office designated as such on the signature page hereof, or (ii) the branch or
office of such Lender designated, from time to time, by such Lender in a notice
to the Administrative Agent and NCO Group.
"Drawing" shall mean (a) any amount disbursed by the Issuer pursuant to
the terms of a Letter of Credit or (b) as the context may require, the
obligation of the Borrowers to reimburse the Issuer for such disbursement.
"Eligible Institution" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United States,
or any State thereof, and having a combined capital and surplus of at least
$1,000,000,000.00; (iv) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having a combined
capital and surplus of at least $1,000,000,000.00; (v) a commercial bank
organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development or has concluded special
lending arrangements with the International Monetary Fund associated with its
General Arrangements to Borrow or under the laws of a political subdivision of
any such country, and having a combined capital and surplus of at least
$1,000,000,000.00, so long as such bank is acting through a branch or agency
located in the United States; and (vi) a finance company, insurance company or
other financial institution or fund (whether a corporation, partnership, trust
or other entity) that is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business and having a combined
capital and surplus or total assets of at least $500,000,000.00 and (vii) with
respect to any Lender that is a fund, any other fund with assets in excess of
$100,000,000.00 that
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invests in bank loans and is managed by the same investment advisor as such
Lender; provided, however, that neither any Borrower nor any Affiliate of a
Borrower shall qualify as an Eligible Institution under this definition.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability (contingent or otherwise) for any Environmental
Claim such Person has retained, assumed or otherwise is liable for (by Law,
agreement or otherwise).
"Environmental Approvals" shall mean any Governmental Action pursuant
to or required under any Environmental Law.
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, investigation, notice, claim, complaint, demand,
request for information or other communication (written or oral) by any other
Person (including but not limited to any Governmental Authority, citizens' group
or present or former employee of such Person) alleging, asserting or claiming
any actual or potential (a) violation of any Environmental Law, (b) liability
under any Environmental Law or (c) liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
the presence, or release into the environment, of any Environmental Concern
Materials at any location, whether or not owned by such Person.
"Environmental Cleanup Site" shall mean any location which is listed or
proposed for listing on the National Priorities List, on CERCLIS or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding or investigation
related to or arising from any alleged violation of any Environmental Law.
"Environmental Concern Materials" shall mean (a) any flammable
substance, explosive, radioactive material, hazardous material, hazardous waste,
toxic substance, solid waste, pollutant, contaminant or any related material,
raw material, substance, product or by-product of any substance specified in or
regulated or otherwise affected by any Environmental Law (including but not
limited to any "hazardous substance" as defined in CERCLA or any similar state
Law), (b) any toxic chemical or other substance from or related to industrial,
commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel,
motor oil, waste and used oil, heating oil and other petroleum products or
compounds, polychlorinated biphenyls, radon and urea formaldehyde.
"Environmental Law" shall mean any Law, whether now existing or
subsequently enacted or amended, relating to (a) pollution or protection of the
environment, including natural resources, (b) exposure of Persons, including but
not limited to employees, to Environmental Concern Materials, (c) protection of
the public health or welfare from the effects of products, by-products, wastes,
emissions, discharges or releases of Environmental Concern Materials or (d)
regulation of the manufacture, use or introduction into commerce of
Environmental Concern Materials including their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage or
disposal. Without limitation, "Environmental Law" shall also include any
Environmental Approval and the terms and conditions thereof.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"Event of Default" shall mean any of the Events of Default described in
Article 7 hereof.
"Eurodollar Business Day" means any Business Day on which dealings in
Dollar deposits are carried on in the London interbank market and on which
commercial banks are open for domestic and international business (including
dealings in Dollar deposits) in London, England.
"Eurodollar Lending Office" means, with respect to any Lender, the
branch or office of such Lender designated by such Person on the signature page
hereof or in a notice to the Administrative Agent and NCO Group.
"Excluded Subsidiaries" means those Subsidiaries listed on Schedule
5.16 hereof.
"Federal Funds Rate" for any day means the rate per annum determined by
the Administrative Agent (which determination shall be conclusive) to be the
rate per annum announced by the Federal Reserve Bank of New York on such day as
being the weighted average of the rates on overnight Federal funds transactions
arranged by federal funds brokers on the previous trading day, or, if such
Federal Reserve Bank does not announce such rate on any day, the rate for the
last day on which such rate was announced.
"GAAP" has the meaning set forth in Section 10.3 hereof.
"Governmental Action" has the meaning set forth in Section 4.1(d)
hereof.
"Governmental Authority" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Guaranty" means, with respect to any Person (a "Guarantor"), any
contractual or other obligation, contingent or otherwise, of such Person to pay
any Indebtedness or other obligation of any other Person or to otherwise protect
the holder of any such Indebtedness or other obligation against loss (whether
such obligation arises by agreement to pay, to keep well, to purchase assets,
goods, securities or services or otherwise) provided, however, that the term
"Guaranty" shall not include an endorsement for collection or deposit in the
ordinary course of business. The term, "Guaranty," when used as a verb has the
correlative meaning.
"Guaranty Equivalent" shall have the meaning set forth below: A Person
(the "Deemed Guarantor") shall be deemed to subject to a Guaranty Equivalent in
respect of any indebtedness, obligation or liability (the "Assured Obligation")
of another Person (the "Deemed Obligor") if the Deemed Guarantor directly or
indirectly guarantees, becomes surety for, endorses, assumes, agrees to
indemnify the Deemed Obligor against, or otherwise agrees, becomes or remains
liable (contingently or otherwise) for, such Assured Obligation. Without
limitation, a Guaranty
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Equivalent shall be deemed to exist if a Deemed Guarantor agrees, becomes or
remains liable (contingently or otherwise), directly or indirectly: (a) to
purchase or assume, or to supply funds for the payment, purchase or satisfaction
of, an Assured Obligation, (b) to make any loan, advance, capital contribution
or other investment in, or to purchase or lease any property or services from, a
Deemed Obligor (i) to maintain the solvency of the Deemed Obligor, (ii) to
enable the Deemed Obligor to meet any other financial condition, (iii) to enable
the Deemed Obligor to satisfy any Assured Obligation or to make any Stock
Payment or any other payment, or (iv) to assure the holder of such Assured
Obligation against loss, (c) to purchase or lease property or services from the
Deemed Obligor regardless of the non-delivery of or failure to furnish of such
property or services, (d) in a transaction having the characteristics of a
take-or-pay or throughput contract or as described in paragraph 6 of FASB
Statement of Financial Accounting Standards No. 47, or (e) in respect of any
other transaction the effect of which is to assure the payment or performance
(or payment of damages or other remedy in the event of nonpayment or
nonperformance) of any Assured Obligation.
"Indebtedness" of a Person shall mean:
(a) All obligations on account of money borrowed by, or credit
extended to or on behalf of, or for or on account of deposits with or
advances to, such Person;
(b) All obligations of such Person evidenced by bonds,
debentures, notes or similar instruments;
(c) All obligations of such Person for the deferred purchase
price of property or services, including without limitation, with
respect to the Borrower, all obligations incurred by the Borrower to a
seller in connection with any Permitted Acquisition;
(d) All obligations secured by a Lien on property owned by
such Person (whether or not assumed); and all obligations of such
Person under Capitalized Leases (without regard to any limitation of
the rights and remedies of the holder of such Lien or the lessor under
such Capitalized Lease to repossession or sale of such property);
(e) The face amount of all letters of credit issued for the
account of such Person and, without duplication, the unreimbursed
amount of all drafts drawn thereunder, and all other obligations of
such Person associated with such letters of credit or draws thereon;
(f) All obligations of such Person in respect of acceptances
or similar obligations issued for the account of such Person;
(g) All obligations of such Person under a product financing
or similar arrangement described in paragraph 8 of FASB Statement of
Accounting Standards No. 49 or any similar requirement of GAAP; and
(h) All obligations of such Person under any interest rate or
currency protection agreement, interest rate or currency future,
interest rate or currency option, interest rate or currency swap or cap
or other interest rate or currency hedge agreement.
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"Indemnified Parties" shall mean the Lender, its respective affiliates,
and the directors, officers, employees, attorneys and agents of each of the
foregoing.
"Interest Expense" means, for any Person, for any period, the sum
(without duplication) of (a) all interest accrued (or accreted) on Indebtedness
of such Person during such period whether or not actually paid plus (b) the net
amount accrued under any Interest Rate Hedging Agreements (or less the net
amount receivable thereunder) during such period.
"Interest Period" means with respect to any LIBO Rate Loan, (a)
initially, the period commencing on the borrowing or conversion date, as the
case may be, and ending one, two, three or six months thereafter as selected by
the Borrowers pursuant to Section 1.8 above and (b) thereafter, each period
commencing on the day after the last day of the preceding Interest Period and
ending one, two, three or six months thereafter, as selected by the Borrower
pursuant to Section 1.8 above provided, however, if any such Interest Period
would otherwise end on a day which is not a Eurodollar Business Day, such
Interest Period shall be extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall end on the
immediately preceding Eurodollar Business Day and provided, further, if any such
Interest Period begins on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period (as may be the case
with an Interest Period commencing at the end of a calendar month) the Interest
Period shall end on the last Eurodollar Business Day of the relevant calendar
month.
"Interest Rate Hedging Agreement" means any rate swap, cap or collar
agreement with a term as may be acceptable to the Lenders to which any or all of
the Borrowers are party and which is on terms and conditions satisfactory to the
Majority Lenders.
"Issuer" shall have the meaning set forth in the preamble.
"Law" means any law (including common law), constitution, statute,
treaty, convention, regulation, licensing requirement, rule, ordinance, order,
injunction, writ, decree or award of any Governmental Authority.
"Lender" has the meaning ascribed to such term in the preamble hereto.
"Letter of Credit" shall mean any letter of credit issued by Issuer
pursuant to Section 1.15 hereof.
"Letter of Credit Participation" shall mean, with respect to any
Lender, the participation interest of such Lender in any Letter of Credit
acquired pursuant to Section 1.15. The amount of the Letter of Credit
Participation of a Lender in any Letter of Credit shall be deemed to be the
amount equal to such Lender's pro rata share (determined on the basis of the
Commitment at such time) of the sum of (a) the aggregate unpaid amount of all
Drawings thereunder at such time and (b) the amount of any Contingent
Reimbursement Obligations with respect thereto at such time.
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"LIBO Rate" means the rate per annum determined by the Administrative
Agent by dividing (the resulting quotient to be rounded upward to the nearest
1/100 of 1%) (a) the rate of interest (which shall be the same for each day in
such Interest Period) determined in good faith by the Administrative Agent
(which determination shall be conclusive) to be the average of the rates per
annum for deposits in Dollars offered to major money center banks in the London
interbank market at approximately 11:00 a.m., London time, two Eurodollar
Business Days prior to the first day of the applicable Interest Period for
delivery on the first day of such Interest Period in similar amounts and
maturities as the proposed LIBO Rate Loan by (b) a number equal to 1.0 minus the
Reserve Percentage. "Reserve Percentage" for any day means the percentage
(expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as
determined in good faith by the Administrative Agent (which determination shall
be conclusive), which is in effect on such day as prescribed by the Board of
Governors of the Federal Reserve System representing the maximum reserve
requirement (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency liabilities") of a member bank in such System. The LIBO Rate shall
be adjusted automatically as of the effective date of each change in the Reserve
Percentage.
"LIBO Rate Loan" means a Loan bearing interest at the per annum rate of
the LIBO Rate plus Applicable Margin.
"Licenses" means any and all licenses, permits, franchises, rights to
conduct business, approvals by a Governmental Authority or otherwise, consents,
qualifications, operating authority, and/or any other authorizations.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
"Limitation" means a revocation, suspension, termination, impairment,
probation, limitation, non-renewal, forfeiture, declaration of ineligibility,
and/or loss of any other rights.
"Loan" shall mean any loan by the Lenders to any Borrower under this
Agreement, and "Loans" shall mean all Loans made by the Lenders under this
Agreement.
"Loan Documents" shall mean this Agreement, the Notes, the Security
Documents, and all other agreements and instruments extending, renewing,
refinancing or refunding any indebtedness, obligation or liability arising under
any of the foregoing, in each case as the same may be amended, modified or
supplemented from time to time hereafter.
"Majority Lenders" means, as of any date, Lenders otherwise eligible to
vote pursuant to the terms of this Agreement holding, in the aggregate, at least
51% of the aggregate outstanding Loans and available Commitments so eligible to
vote.
"Material Adverse Effect" shall mean: (a) a material adverse effect on
the business, operations or condition (financial or otherwise) of the Borrowers
taken as a whole, (b) a material adverse effect on the ability of any Borrowers,
taken as a whole, to perform or comply with any
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of the terms and conditions of any Loan Document, or (c) a material adverse
effect on the legality, validity, binding effect, enforceability or
admissibility into evidence of any Loan Document, or the ability of the Lender
to enforce any rights or remedies under or in connection with any Loan Document.
"Maturity Date" shall mean the fifth anniversary of the Closing Date.
"Medaphis Acquisition" means the proposed acquisition by NCO Group of
all of the stock of Medaphis Services Corporation under a stock purchase
agreement.
"Medaphis Acquisition Agreements" has the meaning set forth in Section
3.1(c)(i) hereof.
"Mellon" has the meaning ascribed to such term in the preamble hereof.
"Monthly Payment Date" means the last Business Day of each month.
"Multiemployer Plan" has the meaning ascribed to such term in
Section 4001(a)(3) of ERISA.
"Non-U.S. Lender" means any Lender that is not a United States Person.
"Note" means RC Notes and Term Notes.
"Obligations" shall mean all indebtedness, obligations and liabilities
of any Borrower to the Lenders from time to time arising under or in connection
with or related to or evidenced by or secured by or under color of this
Agreement or any other Loan Document, and all extensions, renewals or
refinancings thereof, whether such indebtedness, obligations or liabilities are
direct or indirect, otherwise secured or unsecured, joint or several, absolute
or contingent, due or to become due, whether for payment or performance, now
existing or hereafter arising. Without limitation of the foregoing, such
indebtedness, obligations and liabilities include the principal amount of all
Loans, Letters of Credit, interest, fees, indemnities or expenses under or in
connection with this Agreement or any other Loan Document, and all extensions,
renewals and refinancings thereof, whether or not such Loans were made, or such
Letters of Credit were issued, in compliance with the terms and conditions of
this Agreement or in excess of the obligation of the Lender to lend. Obligations
shall remain Obligations notwithstanding any assignment or transfer or any
subsequent assignment or transfer of any of the Obligations or any interest
therein.
"Officer's Compliance Certificate" means a certificate, as of a
specified date, of the chief financial officer or controller of NCO Group in
substantially the form of Exhibit E hereto as to each of the following: (a) the
absence of any Event of Default or Default on such date, (b) the truth of the
representations and warranties herein and in the other Loan Documents as of such
date, and (c) with the financial covenants set forth in Article 5.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA or subject
to Section 412 of the Code and maintained by any Borrower or any member of its
Controlled Group.
"Pension-Related Event" shall mean any of the following events or
conditions:
(a) Any action is taken by any Person (i) to terminate, or
which would result in the termination of, a Plan, either pursuant to
its terms or by operation of law (including, without limitation, any
amendment of a Plan which would result in a termination under Section
4041(e) of ERISA), or (ii) to have a trustee appointed for a Plan
pursuant to Section 4042 of ERISA;
(b) PBGC notifies any Person of its determination that an
event described in Section 4042 of ERISA has occurred with respect to a
Plan, that a Plan should be terminated, or that a trustee should be
appointed for a Plan;
(c) Any Reportable Event occurs with respect to a Plan;
(d) Any action occurs or is taken which could result in any
Borrower becoming subject to liability for a complete or partial
withdrawal by any Person from a Multiemployer Plan (including, without
limitation, seller liability incurred under Section 4204(a)(2) of
ERISA), or any Borrower or any Controlled Group Member receives from
any Person a notice or demand for payment on account of any such
alleged or asserted liability; or
(e) (i) There occurs any failure to meet the minimum funding
standard under Section 302 of ERISA or Section 412 of the Code with
respect to a Plan, or any tax return is filed showing any tax payable
under Section 4971(a) of the Code with respect to any such failure, or
any Borrower or any Controlled Group Member receives a notice of
deficiency from the Internal Revenue Service with respect to any
alleged or asserted such failure, or (ii) any request is made by any
Person for a variance from the minimum funding standard, or an
extension of the period for amortizing unfunded liabilities, with
respect to a Plan.
"Permitted Acquisition" shall mean any acquisition (by way of stock
purchase, merger, asset purchase or otherwise) by any Borrower of all of the
properties of any going concern or going line of business; provided, however,
that (1) each such business being acquired by such Borrower must (a) have a
positive EBITDA for the immediately preceding twelve months prior to the
acquisition, after adjustments for unusual expense items and (b) be in the same
or a similar line of business as such Borrower, (2) after recasting the
Borrowers' consolidated financial statements for the immediately preceding
twelve month period to include the results of operations from the target of the
acquisition, and preparing pro-forma financial statements for the immediately
succeeding twelve month period, the combined Borrower and target shall have met
the financial covenants described in Section 6.1 of this Agreement for the
immediately preceding twelve months prior to the acquisition and on a pro-forma
basis for the immediately following twelve month period after the acquisition
(such compliance to be evidenced by a pro forma covenant compliance certificate
in the form of Exhibit "H" attached hereto), (3) with respect to
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any merger, the Borrower shall be the surviving corporation, (4) after giving
effect to the acquisition, no Event of Default or Default shall exist, (5) the
disclosure schedules shall be updated to account for the acquisition as required
by Section 5.1 7 and (6) the cash consideration to be paid by such Borrower for
the acquisition must not exceed $10,000,000 in any rolling twelve month period.
An acquisition meeting the criteria set forth in this definition does not
require the consent of any Lender provided that the due diligence on such
acquisition, including a review of all acquisition documents shall be
satisfactory to the Super Majority Lenders. Any acquisition which does not meet
the criteria set forth in the provisos to this definition requires the prior
written consent of the Super Majority Lenders.
"Permitted Acquisition Indebtedness" means Indebtedness incurred by a
Borrower to the seller in connection with a Permitted Acquisition that is (1)
unsecured, (2) subordinated to the Obligations as provided in the next sentence,
and (3) without financial covenants binding on any Borrower. The terms of
subordination, which at the request of the Administrative Agent shall be
embodied in a separate subordination agreement in the form of Exhibit "J"
attached hereto, shall prohibit the Borrower from making any payments of
principal, interest, or other sums on the Indebtedness following an Event of
Default under this Agreement; prior to an Event of Default, the Borrower may
make regularly scheduled payments of principal and interest on the Indebtedness.
Despite the foregoing, (1) the Borrowers may incur up to an aggregate of
$2,000,000 (based on the original principal amount of notes outstanding at any
one time) in Indebtedness to sellers in connection with Permitted Acquisitions
on which Borrowers may make regularly scheduled payments of principal and
interest despite the existence of an Event of Default (other than a bankruptcy
or insolvency default, in which case such payments will be prohibited until the
Obligations have been repaid in full) so long as such Indebtedness otherwise
meets the above requirements (the subordination agreement shall take the form of
Exhibit "K" attached hereto) and (2) the Borrowers may incur up to an aggregate
of $10,000,000 (based on the original principal amount of notes outstanding at
any one time) in Indebtedness to sellers in connection with Permitted
Acquisitions on which Borrowers may make regularly scheduled payments of
principal and interest until the occurrence of an Event of Default and may
resume such payments six months after the occurrence of such default (unless the
default is a bankruptcy or insolvency default, or a default as to which the
Lenders are exercising remedies; in any such case such payments will be
prohibited until the Obligations have been repaid in full) so long as such
Indebtedness otherwise meets the above requirements (the subordination agreement
shall take the form of Exhibit "K-1" attached hereto)
"Permitted Liens" shall have the meaning set forth in Section 6.2
hereof.
"Person" means an individual, corporation, partnership, trust,
unincorporated association, limited liability company, joint venture,
joint-stock company, Governmental Authority or any other entity.
"Plan" means any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (other than a Multiemployer Plan) covered by Title IV of
ERISA by reason of Section 4021 of ERISA, of which any Borrower or any
Controlled Group Member is or has been within the preceding five years a
"contributing sponsor" within the meaning of Section 4001(a)(13) of ERISA, or
which is or has been within the preceding five years maintained for employees of
any Borrower or any Controlled Group Member.
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"Prime Rate" means the interest rate per annum announced from time to
time by the Administrative Agent as its prime rate. The Prime Rate may be
greater or less than other interest rates charged by the Administrative Agent to
other borrowers.
"Prime Rate Loan" means any Loan bearing interest at the Prime Rate.
"Prohibited Transaction" has the meaning given to such term in Section
406 of ERISA or Section 4975(c) of the Code.
"Purchase Money Indebtedness" shall mean at any time any (a)
Indebtedness incurred for the deferred purchase price in connection with a
Capital Expenditure and (b) Indebtedness for borrowed money of any Borrower
which is incurred in connection with a Permitted Acquisition, and which (i) is
unsecured, (ii) is fully and permanently subordinated, as to both principal and
interest, to any Obligations, (iii) contains no financial covenants, and (iv)
contains permanent "stand still" or forbearance provisions acceptable to the
Lender which apply upon the occurrence of an Event of Default or Default under
this Agreement.
"Quarterly Payment Dates" means the last Business Day of each December,
March, June and September.
"RC Commitment" means, with respect to any Lender, (a) the obligation
of such Lender to make Loans and participate in Letters of Credit in an amount
as set forth opposite such Lender's name under the heading "RC Commitment" on
Schedule 1.1 (as such Schedule may be amended from time to time) hereto or, in
the case of a Lender that becomes a Lender pursuant to an assignment, the amount
of the assignor's RC Commitment assigned to such Lender, in either case as the
same may be reduced from time to time pursuant to Section 1.7 above or increased
or reduced from time to time pursuant to assignments in accordance with Section
11.9 below, or (b) as the context may require, the obligation of such Lender to
make Loans in an aggregate unpaid principal amount not exceeding such amount;
and "RC Commitment" means with respect to all Lenders, the sum of each Lender's
RC Commitment.
"RC Loan" has the meaning ascribed to such term in Section 1.1 of this
Agreement.
"RC Note" means each promissory note of the Borrowers issued to an RC
Lender relating to such Lender's RC Loans and RC Commitments substantially in
the form of Exhibit A-1 hereto, together with any allonges thereto, from time to
time, and any promissory note issued in substitution therefor pursuant to the
terms hereof, together with all extensions, renewals, refinancings or refundings
thereof in whole or part, in each case as the same may be amended, modified,
restated or supplemented from time to time.
"Register" has the meaning ascribed to such term in Section 8.8 hereof.
"Registered Lender" has the meaning ascribed to such term in Section
1.14 hereof.
"Registered Note" has the meaning ascribed to such term in Section 1.14
hereof.
"Regulatory Change" means any applicable law, interpretation,
directive, request or guideline (whether or not having the force of law), or any
change therein or in the administration
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or enforcement thereof, that becomes effective or is implemented or first
required or expected to be complied with after the Closing Date (including any
applicable law that shall have become such as the result of any act or omission
of the Borrowers or any of their Affiliates, without regard to when such
applicable law shall have been enacted or implemented), whether the same is (a)
the result of an enactment by a government or any agency or political
subdivision thereof, a determination of a court or regulatory authority or
otherwise or (b) enacted, adopted, issued or proposed before or after the
Closing Date, including any such that imposes, increases or modifies any Tax,
reserve requirement, insurance charge, special deposit requirement, assessment
or capital adequacy requirement, but excluding any such that imposes, increases
or modifies any Bank Tax.
"Reorganization" has the meaning ascribed to such term in ERISA.
"Reportable Event" means (a) a reportable event described in Section
4043 of ERISA, (b) a withdrawal by a substantial employer from a Plan to which
more than one employer contributes, as referred to in Section 4063(b) of ERISA,
(c) a cessation of operations at a facility causing more than twenty percent
(20%) of Plan participants to be separated from employment, as referred to in
Section 4062(e) of ERISA, or (d) a failure to make a required installment or
other payment with respect to a Plan when due in accordance with Section 412 of
the Code or Section 302 of ERISA which causes the total unpaid balance of missed
installments and payments (including unpaid interest) to exceed $750,000.
"Responsible Officer" shall mean Michael J. Barrist, Charles Piola, Jr.
or Steven L. Winokur or such other person designated by the Borrowers and
reasonably acceptable to Administrative Agent.
"Security Agreement" shall have the meaning ascribed to such term in
Section 3.1(b) hereof.
"Security Documents" shall have the meaning set forth in Section 3.1(e)
hereof.
"Solvent" means, with respect to any Person at any time, that at such
time (a) the sum of the debts and liabilities (including, without limitation,
contingent liabilities) of such Person is not greater than all of the assets of
such Person at a fair valuation, (b) the present fair salable value of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become absolute and
matured, (c) such Person has not incurred, will not incur, does not intend to
incur, and does not believe that it will incur, debts or liabilities (including,
without limitation, contingent liabilities) beyond such person's ability to pay
as such debts and liabilities mature, (d) such Person is not engaged in, and is
not about to engage in, a business or a transaction for which such person's
property constitutes or would constitute unreasonably small capital, and (e)
such Person is not otherwise insolvent as defined in, or otherwise in a
condition which could in any circumstances then or subsequently render any
transfer, conveyance, obligation or act then made, incurred or performed by it
avoidable or fraudulent pursuant to, any Law that may be applicable to such
Person pertaining to bankruptcy, insolvency or creditors' rights (including but
not limited to the Bankruptcy Code of 1978, as amended, and, to the extent
applicable to such Person, the Uniform Fraudulent Conveyance Act,
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the Uniform Fraudulent Transfer Act, or any other applicable Law pertaining to
fraudulent conveyances or fraudulent transfers or preferences).
"Stock Payment" by any Person shall mean any dividend, distribution or
payment of any nature (whether in cash, securities, or other property) on
account of or in respect of any shares of the capital stock (or warrants,
options or rights therefor) of such Person, including but not limited to any
payment on account of the purchase, redemption, retirement, defeasance or
acquisition of any shares of the capital stock (or warrants, options or rights
therefor) of such Person, in each case regardless of whether required by the
terms of such capital stock (or warrants, options or rights) or any other
agreement or instrument.
"Subsidiary" of a Person means (i) a corporation (a) at least 50% of
the voting stock of which is at the time owned, directly or indirectly, by such
Person and (b) of which such Person, directly or indirectly, has the right to
elect a majority of the members of the board of directors either as a result of
the ownership of a majority of the voting stock of such corporation or pursuant
to a shareholders or other voting agreement or (ii) any partnership, joint
venture, limited liability company or similar entity at least 50% of the total
equity and voting interests of which (x) is at the time owned, directly or
indirectly, by such Person whether in the form of membership, general, special
or limited partnership, or otherwise and (y) such Person or any wholly owned
Subsidiary of such Person is a controlling general partner or otherwise controls
such entity.
"Super Majority Lenders" means, as of any date, Lenders otherwise
eligible to vote pursuant to the terms of this Agreement holding, in the
aggregate, at least 66 2/3% of the aggregate outstanding Loans and available
Commitments so eligible to vote.
"Tax" means any federal, state, local or foreign tax assessment or
other governmental charge or levy (including any withholding tax) upon a Person
or upon its assets, revenues, income or profits.
"Term Loan Commitment" shall mean, as to any Lender at any time, the
amount initially set forth opposite its name on Schedule 1.1(B) in the column
labeled "Amount of Commitment for Term Loan," and thereafter on Schedule I to
the most recent Assignment and Acceptance Agreement, and Term Loan Commitments
shall mean the aggregate Term Loan Commitments of all of the Lenders.
"Term Loan" shall mean collectively and "Term Loan" shall mean
separately all Term Loans or any Term Loan made by the Lenders to the Borrowers
pursuant to Section 1.1.
"Term Notes" shall mean collectively and "Term Note" shall mean
separately all of the Term Notes of the Borrowers in the form of Exhibit 1.1(B)
evidencing the Term Loan, together with any allonges thereto, from time to time,
and any promissory note issued in substitution therefor pursuant to the terms
hereof, together with all extensions, renewals, refinancings or refundings
thereof in whole or part, in each case as the same may be amended, modified,
restated or supplemented from time to time.
"Third Party Claims" has the meaning set forth in Section 11.12 hereof.
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"Transaction Documents" means each of the material documents as may
exist from time to time with such changes thereto as are permitted by the terms
of this Agreement.
"Type" means with respect to Loans, any of the following, each of which
shall be deemed to be a different "Type" of Loan: Prime Rate Loans, LIBO Rate
Loans having a one-month Interest Period commencing on a specified date, LIBO
Rate Loans having a two-month Interest Period commencing on a specified date,
LIBO Rate Loans having a three-month Interest Period commencing on a specified
date, and LIBO Rate Loans having a six-month Interest Period commencing on a
specified date.
"UCC" means the Uniform Commercial Code as adopted in the Commonwealth
of Pennsylvania.
"Unused Fee" has the meaning ascribed to such term in Section 1.8
hereof.
"United States Person" has the meaning ascribed to such term in Section
1.13 hereof.
"Withdrawal Liability" has the meaning given to such term in Section
4201 of ERISA.
10.2 CONSTRUCTION. In this Agreement and each other Loan Document,
unless the context otherwise clearly requires,
(a) references to the plural include the singular, the
singular the plural and the part the whole;
(b) "or" has the inclusive meaning represented by the phrase
"and/or;"
(c) the terms "property" and "assets" each include all
properties and assets of any kind or nature, tangible or intangible, real,
personal or mixed, now existing or hereafter acquired;
(d) the words "hereof," "herein" and "hereunder" (and similar
terms) in this Agreement or any other Loan Document refer to this Agreement or
such other Loan Document, as the case may be, as a whole and not to any
particular provision of this Agreement or such other Loan Document;
(e) the words "includes" and "including" (and similar terms)
in this Agreement or any other Loan Document mean "includes, without limitation"
and "including, without limitation," respectively whether or not stated; and
(f) references to "determination" (and similar terms) by any
Lender include good faith estimates by such Lender (in the case of quantitative
determinations) and good faith beliefs by such Lender (in the case of
qualitative determinations).
No doctrine of construction of ambiguities in agreements or instruments against
the interests of the party controlling the drafting thereof shall apply to this
Agreement or any other Loan Document. The section and other headings contained
in this Agreement and in each other Loan Document, and any tables of contents
contained herein or therein, are for reference purposes only and shall not
affect the construction or interpretation of this Agreement or such other Loan
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Document in any respect. Whenever this Agreement requires the delivery of
financial projections, it is understood that the projections shall be made in
good faith, consistent with the Loan Documents and based on NCO Group's
reasonable judgment as to the anticipated financial performance and results of
operations. However, any such financial projections shall not constitute a
representation or warranty that such future financial performance or results of
operations will in fact be achieved.
10.3 ACCOUNTING PRINCIPLES.
(a) As used herein, "GAAP" shall mean generally accepted
accounting principles (other than as set forth herein as to consolidation) in
the United States, applied on a basis consistent with the principles used in
preparing the financial statements of NCO Group and its consolidated
Subsidiaries as of December 31, 1997 and for the fiscal year then ended. When
the word "consolidated" is used in this Agreement, it shall be used in a manner
consistent with generally accepted accounting principles in the United States
except that such principles relating to what entities shall be consolidated
shall be superseded by any terms of this Agreement which designate what entities
shall be consolidated for purposes relating hereto.
(b) Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters shall be
made, and all financial statements to be delivered pursuant to this Agreement
shall be prepared, in accordance with GAAP and all accounting or financial terms
shall have the meanings ascribed to such terms by GAAP; provided that if because
of a change in GAAP after the date hereof Borrowers would be required to alter a
previously utilized accounting principle, method or policy in order to remain in
compliance with GAAP, such determination shall continue to be made in accordance
with Borrowers' previous accounting principles, methods and policies unless
otherwise agreed by the Administrative Agent (on behalf of the Lenders).
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. Unless otherwise expressly provided under this Agreement
all notices, requests, demands, directions and other communications
(collectively "notices") given to or made upon any party under the provisions of
this Agreement (and unless otherwise specified, in each other Loan Document)
shall be by telephone (immediately confirmed in writing) or in writing
(including facsimile communication) and if in writing shall be delivered by
hand, nationally recognized overnight courier or U.S. mail or sent by facsimile
to the respective parties at the addresses and numbers set forth under their
respective names on the signature pages of this Agreement or in accordance with
any subsequent unrevoked written direction from any party to the others. All
notices shall, except as otherwise expressly provided in this Agreement, be
effective (a) in the case of facsimile, when received, (b) in the case of
hand-delivered notice, when hand delivered, (c) in the case of telephone, when
telephoned, provided, however, that in order to be effective unless otherwise
expressly provided, telephonic notices must be confirmed in writing no later
than the next day by letter or facsimile, (d) if given by U.S. mail, the day
after such communication is deposited in the mails with overnight first class
postage prepaid, return receipt requested, and (e) if given by any other means
(including by
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air courier), when delivered; provided, further, that notices to the
Administrative Agent shall not be effective until received. Any Lender giving
any notice to the Borrowers shall simultaneously send a copy of such notice to
the Administrative Agent, and the Administrative Agent shall promptly notify the
other Lenders of the receipt by it of any such notice. Except as otherwise
provided in this Agreement, in the event of a discrepancy between any telephonic
or written notice, the written notice shall control.
11.2 PRIOR UNDERSTANDINGS; ENTIRE AGREEMENT. This Agreement and the
other Loan Documents supersede all prior and contemporaneous understandings and
agreements, whether written or oral, among the parties hereto relating to the
transactions provided for herein and therein except as expressly provided
otherwise (e.g., certain fee agreements and fee arrangements with the
Administrative Agent). This Agreement and the other Loan Documents represent the
entire agreement between the parties to this Agreement with respect to the
transactions contemplated hereby or thereby and, except as expressly provided
herein or in the other Loan Documents, shall not be affected by reference to any
other documents.
11.3 SEVERABILITY. Every provision of this Agreement and each of the
other Loan Documents is intended to be severable, and if any term or provision
of this Agreement or any of the other Loan Documents shall be invalid, illegal
or unenforceable for any reason, the validity, legality and enforceability of
the remaining provisions shall not be affected or impaired thereby, and any
invalidity, illegality or unenforceability in any jurisdiction shall not affect
the validity, legality or enforceability of any such term or provision in any
other jurisdiction. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, this Agreement shall, as
to such jurisdiction, be deemed amended to modify or delete, as necessary, the
offending provision or provisions and to alter the bounds thereof in order to
render it or them valid and enforceable to the maximum extent permitted by
applicable Law, without in any manner affecting the validity or enforceability
of such provision or provisions in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
11.4 DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
affect the meaning or construction of any of the provisions of this Agreement.
11.5 GOVERNING LAW. This Agreement and the rights and obligations of
the parties under this Agreement and under the other Loan Documents shall be
construed in accordance with and shall be governed by the laws of the
Commonwealth of Pennsylvania.
11.6 NON-MERGER OF REMEDIES. The covenants and obligations of the
Borrowers and the rights and remedies of the Administrative Agent and other
Lenders hereunder and under the other Loan Documents shall not merge with or be
extinguished by the entry of a judgment hereunder or thereunder, and such
covenants, obligations, rights and remedies shall survive any entry of a
judgment until payment in full of the Obligations and termination of the
Commitment. All obligations under the Loan Documents shall continue to apply
with respect to and during the collection of amounts due under the Loan
Documents or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and in any workout, restructuring or in
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connection with the protection, preservation, exercise or enforcement of any of
the terms of this Agreement or of any rights under this Agreement or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings. Without limiting the generality of the foregoing,
post-judgment interest rate shall be the interest rate provided in paragraph (d)
of Section 1.8 (Default Rate) above.
11.7 NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing and
no delay or failure of the Administrative Agent or any other Lender in
exercising any right, power or privilege under this Agreement or any other Loan
Document shall affect any other or future exercise thereof or exercise of any
other right, power or privilege; nor shall any single or partial exercise of any
such right, power or privilege or any abandonment or discontinuance of steps to
enforce such a right, power or privilege preclude any further exercise thereof
or of any other right, power or privilege. The rights and remedies of the
Administrative Agent and the other Lenders under this Agreement and any other
Loan Document are cumulative and not exclusive of any rights or remedies which
the Administrative Agent or any other Lender would otherwise have hereunder or
thereunder, at law, in equity or otherwise. Any waiver of a specific default
made in accordance with Section 11.8 below shall be effective only as to such
specific default and shall not apply to any subsequent default.
11.8 AMENDMENTS; WAIVERS.
(a) Any term, covenant, agreement or condition of any Loan
Document to which the Lenders (or the Administrative Agent) are party may be
amended, and any right under the Loan Documents may be waived, if, but only if,
such amendment or waiver is in writing and is signed by the Majority Lenders or,
as to any term requiring the consent or approval of the Super Majority Lenders,
by the Super Majority Lenders (or by the Administrative Agent at the direction
of the Majority Lenders or Super Majority Lenders, as appropriate); provided,
however, if the rights and duties of the Administrative Agent are affected
thereby, such amendment or waiver must be executed by the Administrative Agent;
and provided, always that no such amendment or waiver shall be effective unless
in writing and signed by all Lenders, if it would
(a) amend the definition of "Majority Lenders" or "Super-Majority
Lenders";
(b) release any Borrower from its Obligations;
(c) change the principal amount of the Loans;
(d) change the maturity of any Loan or the time of any scheduled
principal payment of any Loan or any Reduction Date;
(e) decrease the rates of interest or amount of fees payable
hereunder or extend the time for payment of interest or fees hereunder; or
(f) release any Collateral, except in connection with a
disposition of stock or assets permitted under this Agreement.
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In addition, the Administrative Agent may, without the consent
of any Person, release any Borrower as a court of competent jurisdiction may
direct.
For purposes of determining whether "all Lenders", "Super
Majority Lenders", "the Majority Lenders" or "any Lender" has consented to any
amendment or waiver, no effect shall be given to the determination of any Lender
who has lost its right to vote pursuant to Sections 1.3(c) or 1.6(e).
Further, the Administrative Agent and the Lenders may amend or
modify the provisions of Article 8 hereof (except for Section 8.9 (Successor
Administrative Agent) and Article 11 hereof) without the need for any consent or
approval from the Borrowers, it being acknowledged that the Borrowers are not
third party beneficiaries of the provisions of said Article 9 (except for
Section 9.9 (Successor Administrative Agent) and (y) without the consent of any
Lenders, the Administrative Agent may enter into amendments and modifications to
this Agreement and the other Loan Documents as necessary or desirable to cure
any ambiguities herein or therein or to add additional Borrowers or add
collateral.
11.9 SUCCESSORS AND ASSIGNS
(a) Assignments by the Borrowers. Without the prior written
consent of all of the Lenders, no Borrower may assign any of its rights or
delegate any of its duties or obligations under this Agreement or any other Loan
Document.
(b) Participations. Any Lender, with NCO Groups consent, may sell
participations to one or more Eligible Institutions of all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment); provided, however, that, with respect to any
Lender, (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
to this Agreement for the performance of such obligations, (iii) all amounts
payable by the Borrowers under this Agreement shall be determined as if such
transferor Lender had not sold such participation and no participant shall be
entitled to receive any greater amount pursuant to this Agreement than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such participant
had no such transfer occurred, (iv) such participant shall agree to be bound by
the provisions of this Agreement and the other Loan Documents, and (v) the
Borrowers, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such transferor Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole rights and responsibility vis-a-vis the Borrowers to enforce the
obligations of the Borrowers relating to the Loans including the right to
approve any amendment, modification or waiver of any provision of this Agreement
(except that such Lender may give its participants the right to direct such
Lender to approve or disapprove any amendment, modification or waiver which
would require such Lender's consent under clause (a) (b), (c), of the preceding
Section 11.8).
(c) Assignments by Lenders. Each Lender may assign to one or more
Eligible Institutions all or a portion of its interest, rights and obligations
under this Agreement (including all or a portion of its Commitment) and the
other Loan Documents; provided, however, that with
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respect to any assignment, (i) the aggregate principal amount of the interest,
rights and obligations so assigned to any assignee may not be less than
$5,000,000; (ii) unless the assignee is (prior to the effective time of the
assignment) an existing Lender or an Affiliate of an existing Lender, the
Administrative Agent and, if no Event of Default has occurred and is continuing,
NCO Group (on behalf of the Borrowers) must give their prior written consent to
such assignment (which consent shall not be unreasonably withheld), and (iii)
the parties to each such assignment shall execute and deliver to the
Administrative Agent and, unless an Event of Default has occurred and is
continuing, NCO Group (on behalf of the Borrowers), for their acceptance, an
Assignment and Acceptance Agreement in substantially the form attached hereto as
Exhibit "L" (an "Assignment and Acceptance Agreement"), together with (A) any
Note subject to such assignment, and (B) a processing and recordation fee of
$3,500.00. If the assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall, prior to the first date on which
interest or fees are payable hereunder for its account, deliver to NCO Group (on
behalf of the Borrowers) and the Administrative Agent certification as to
exemption from deduction or withholding of any United States federal income
taxes.
(d) Procedures Respecting Assignment. Upon their receipt of an
Assignment and Acceptance executed by the assignor and the assignee, subject to
the conditions set forth in the preceding paragraph (c), the Administrative
Agent and (unless an Event of Default shall have occurred and be continuing) NCO
Group (on behalf of the Borrowers) shall accept such Assignment and Acceptance.
Within thirty (30) days after such Assignment and Acceptance is signed and
accepted by all parties and made effective, the Borrowers, at their own expense,
shall execute and deliver to the Administrative Agent new Notes in exchange for
the surrendered Notes, each to the order of such assignee in an amount equal to
its portion of the Commitment and Loans, assigned to it pursuant to such
Assignment and Acceptance and new Notes to the order of the assigning Lender in
an amount equal to the Commitment and Loans retained by it. Such Notes shall be
in an aggregate principal amount equal to the aggregate principal amount of such
surrendered Notes, shall be dated the date of such surrendered Notes (each
assignee shall confirm in the Assignment and Acceptance that, notwithstanding
the date of the new Notes made in favor of such assignee, such assignee shall
have no right to, or interest in, any fees or interest which shall have accrued
on the Loans prior to the effective date of the Assignment and Acceptance).
Cancelled or replaced Notes shall be returned to the Borrowers upon the
execution of such new Notes.
(e) Assignments to Federal Reserve Bank. Notwithstanding any of
the terms of this Section 11.9, without the consent of the Administrative Agent
and the Borrowers, any Lender may assign all or any portion of its rights to
payments in connection with this Agreement to a Federal Reserve Bank as
collateral in accordance with Regulation A of the Board of Governors of the
Federal Reserve System. Such assignment shall not affect any other rights or any
obligations of the assigning Lender
11.10 COUNTERPARTS; PHOTOCOPIED OR TELECOPIED SIGNATURE PAGES. Any Loan
Document may be executed in one or more counterparts, each of which shall
constitute an original, but all of which together shall constitute one and the
same instrument. Delivery of a photocopy or telecopy of an executed counterpart
of a signature page to any Loan
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Document shall be as effective as delivery of a manually executed counterpart of
such Loan Document.
11.11 MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision
contained in this Agreement or the Notes or any other Loan Document, the total
liability of the Borrowers for payment of interest pursuant to this Agreement
and the Notes shall not exceed the maximum amount of such interest permitted by
Law to be charged, collected, or received from the Borrowers, and if any payment
by the Borrowers includes interest in excess of such a maximum amount, each
Lender shall apply such excess to the reduction of the unpaid principal amount
due pursuant to this Agreement and the Notes, or if none is due, to the other
Obligations, if any, and then such excess shall be refunded to NCO Group (on
behalf of the Borrowers).
11.12 INDEMNIFICATION.
(a) Whether or not any fundings are made under this Agreement, the
Borrowers jointly and severally shall unconditionally upon demand, pay or
reimburse the Administrative Agent and other Lenders for, and indemnify and save
the Administrative Agent, the other Lenders and their respective Affiliates,
officers, directors, employees, agents, attorneys, shareholders and consultants
(collectively, "Indemnitees") harmless from and against, any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for such Indemnitee
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may at any time be imposed on, asserted against or incurred
by such Indemnitee as a result of, or arising out of, or in any way related to
or by reason of, this Agreement or any other Loan Document, any acquisition or
transaction from time to time contemplated hereby or by any other Loan Document,
or any transaction actually or proposed to be financed in whole or in part or
directly or indirectly with the proceeds of any Loan, any transaction
contemplated by the Transaction Documents but excluding any such losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements that the Borrowers prove were the
result solely of the gross negligence or willful misconduct of such
Indemnitee(s), as finally determined by a court of competent jurisdiction. If
and to the extent that the foregoing obligations of the Borrowers under this
paragraph (a), or any other indemnification obligation of the Borrowers
hereunder or under any other Loan Document are unenforceable for any reason, the
Borrowers hereby agree, jointly and severally, to make the maximum contribution
to the payment and satisfaction of such obligations which is permissible under
applicable Law.
(b) Without limiting the generality of the foregoing, the
Borrowers jointly and severally hereby indemnify and agree to defend and hold
harmless each Indemnitee, from and against any and all claims, actions, causes
of action, liabilities, penalties, fines, damages, judgments, losses, suits,
expenses, legal or administrative proceedings, interest, costs and expenses
(including court costs and reasonable attorneys', consultants' and experts'
fees) arising out of or in any way relating to: (i) the use, handling,
management, production, treatment, processing, storage, transfer,
transportation, disposal, release or threat of release of any Environmental
Concern Material by or on behalf of, any Borrower or any of its Environmental
Affiliates; (ii) the presence of Environmental Concern Materials on, about,
beneath or arising
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from any premises owned or occupied by any Borrower or any of its Environmental
Affiliates (herein collectively, the "Premises"); (iii) the failure of any
Borrower or Environmental Affiliate of a Borrower or any occupant of any
Premises to comply with the Environmental Laws; (iv) any Borrower's breach of
any of the representations, warranties and covenants contained herein or in any
Loan Documents; (v) Regulatory Actions (as hereinafter defined) and Third Party
Claims (as hereinafter defined); or (vi) the imposition or recording of a Lien
against any Premises in connection with any release at, on or from any Premises
or any activities undertaken on or occurring at any Premises, or arising from
such Premises or pursuant to any Environmental Law. The Borrowers' indemnity and
defense obligations under this section shall include, whether foreseeable or
unforeseeable, any and all costs related to any remedial action. "Regulatory
Action" means any notice of violation, citation, complaint, request for
information, order, directive, compliance schedule, notice of claim, consent
decree, action, litigation or proceeding brought or instituted by any
governmental authority under or in connection with any Environmental Law
involving any Borrower or any occupant of any of the Premises or involving any
of the Premises or any activities undertaken on or occurring at any Premises.
"Third Party Claims" means claims by a party (other than a party to this
Agreement and other than Regulatory Actions) based on negligence, trespass,
strict liability, nuisance, toxic tort or detriment to human health or welfare
due to Environmental Concern Materials on, about, beneath or arising from any
Premises or in any way related to any alleged violation of any Environmental
Laws or any activities undertaken on or occurring at any Premises.
(c) The indemnities contained herein shall survive repayment of
the Obligations, termination of the Commitment and satisfaction, release, and
discharge of the Loan Documents, whether through full payment of the Loans,
foreclosure, deed in lieu of foreclosure or otherwise.
(d) The foregoing amounts are in addition to any other amounts
which may be due and payable to the Administrative Agent and/or the Lenders
under this Agreement. A certification by the Administrative Agent or a Lender
hereunder of the amount of liabilities, losses, costs, expenses, claims and/or
charges shall be conclusive, absent manifest error.
11.13 EXPENSES
Whether or not there shall be any funding hereunder, the Borrowers
agree, jointly and severally, to pay promptly or cause to be paid promptly and
to hold harmless
(i) the Administrative Agent (and after an Event of Default,
and for the period in which the same shall continue, each Lender) against
liability for the payment of all reasonable out-of-pocket costs and expenses
(including but not limited to reasonable fees and expenses of counsel, including
local counsel, auditors, consulting engineers, appraisers, and all other
professional, accounting, evaluation and consulting costs) incurred by it from
time to time arising from or relating to (1) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents, (2) the
administration and performance of this Agreement and the other Loan Documents,
and (3) any requested amendments, modifications, supplements, waivers or
consents (whether or not ultimately entered into or granted) to this Agreement
or any other Loan Document;
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(ii) the Administrative Agent (and, with respect to clause
(2) of this paragraph (ii) after an Event of Default, and for the period in
which the same shall continue, each Lender) against liability for the payment of
all reasonable out-of-pocket costs and expenses (including but not limited to
reasonable fees and expenses of counsel, including local counsel, auditors,
consulting engineers, appraisers, and all other professional, accounting,
evaluation and consulting costs) incurred by it from time to time arising from
or relating to the enforcement or preservation of rights under, or
administration of, this Agreement or any other Loan Document (including but not
limited to any such costs or expenses arising from or relating to (1) collection
or enforcement of an outstanding Loan, Obligation, and (2) any litigation,
proceeding, dispute, work-out, restructuring or rescheduling related in any way
to this Agreement or the other Loan Documents); and
(iii) each Lender against liability for all stamp, document,
transfer, recording, filing, registration, search, sales and excise fees and
taxes and all similar impositions now or hereafter determined by any Lender to
be payable in connection with this Agreement or any other Loan Documents.
11.14 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY. To the extent that
applicable Law otherwise would render the full amount of the joint and several
obligations of any Subsidiary of NCO Group hereunder and under the other Loan
Documents invalid or unenforceable, such Borrower's obligations hereunder and
under the other Loan Documents shall be limited to the maximum amount which does
not result in such invalidity or unenforceability, provided, however, that each
Borrower's obligations hereunder and under the other Loan Documents shall be
presumptively valid and enforceable to their fullest extent in accordance with
the terms hereof or thereof, as if this Section 11.14 were not a part of this
Agreement.
11.15 AUTHORIZATION OF NCO GROUP BY OTHER BORROWERS.
(a) Each of the Borrowers hereby irrevocably authorizes NCO Group
to give notices, make requests, make payments, receive payments and notices,
give receipts and execute agreements, make agreements or take any other action
whatever on behalf of such Borrower under and with respect to any Loan Document
and each Borrower shall be bound thereby. This authorization is coupled with an
interest and shall be irrevocable, and the Administrative Agent and each Lender
may rely on any notice, request, information supplied by NCO Group and every
document executed by NCO Group, agreement made by NCO Group or other action
taken by NCO Group in respect of the Borrowers or any thereof as if the same
were supplied, made or taken by any or all Borrowers. Without limiting the
generality of the foregoing, the failure of one or more Borrowers to join in the
execution of any writing in connection herewith shall not, unless the context
clearly requires, relieve any such Borrower from obligations in respect of such
writing.
(b) The Borrowers acknowledge that the credit provided hereunder
is on terms more favorable than any Borrower acting alone would receive and that
each Borrower benefits indirectly from all Loans and Letters of Credit
hereunder. NCO Group and, subject only to the terms of the preceding paragraph
(a), each of the other Borrowers, shall be jointly and severally liable for all
Obligations, regardless of, inter alia, which Borrower requested (or received
the proceeds of) a particular Loan.
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11.16 CERTAIN WAIVERS BY BORROWERS. Each Borrower hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Obligations and any requirement that any Lender exhaust any right or
take any action against any other Borrower or any other Person or any collateral
or other direct or indirect security for any of the Obligations. Without
limiting the generality of the foregoing, each Borrower acknowledges and agrees
that the Administrative Agent or other Lender may commence an action against
such Borrower whether or not any action is brought against any other Borrower or
against any collateral and it shall be no defense to any action brought against
any Borrower that the Lenders have failed to bring an action against any other
Borrower or any Collateral.
11.17 SET-OFF. The Borrowers hereby agree that, to the fullest extent
permitted by Law, if any Loan shall be due and payable (by acceleration or
otherwise), each Lender shall have the right, without notice to any Borrower, to
set-off against and to appropriate and apply to such Loan any indebtedness,
liability or obligation of any nature owing to any Borrower by such Lender,
including but not limited to all deposits now or hereafter maintained by any
Borrower with such Lender but not including any escrow account maintained by any
Borrower. Such right shall exist whether or not such Lender or any other Person
shall have given notice or made any demand to any Borrower or any other Person.
The Borrowers hereby agree that, to the fullest extent permitted by Law, any
participant and any Affiliate of any Lender or any participant shall have the
same rights of set-off as a Lender as provided in this Section 11.17. The rights
provided by this Section 11.17 are in addition to all other rights of set-off
and banker's lien and all other rights and remedies which any Lender (or any
such participant, or Affiliate) may otherwise have under this Agreement, any
other Loan Document, at law or in equity, or otherwise.
11.18 SHARING OF COLLECTIONS. The Lenders hereby agree among themselves
that if any Lender shall receive (by voluntary payment, realization upon
security, charging of accounts, set-off or from any other source) any amount on
account of the Obligations in greater proportion than any such amount received
by any other Lender (based on the relative amount of each such Lender's interest
in the Obligations), then the Lender receiving such proportionately greater
payment shall notify each other Lender and the Administrative Agent of such
receipt, and equitable adjustment will be made in the manner stated in this
Section 11.18 so that, in effect, all such excess amounts will be shared ratably
among all of the Lenders. The Lender receiving such excess amount shall purchase
(which it shall be deemed to have done simultaneously upon the receipt of such
excess amount) for cash from the other Lenders a participation in the applicable
Obligations owed to such other Lenders in such amount as shall result in a
ratable sharing by all Lenders of such excess amount (and to such extent the
receiving Lender shall be a participant). If all or any portion of such excess
amount is thereafter recovered from the Lender making such purchase, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, together with interest or other amounts, if any, required by Law
to be paid by the Lender making such purchase. The Borrowers hereby consent to
and confirm the foregoing arrangements. Each participant shall be bound by this
Section 11.18 as fully as if it were a Lender hereunder.
11.19 OTHER LOAN DOCUMENTS. Each Lender acknowledges that on signing
this Agreement it is bound by the terms of the Loan Documents.
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11.20 CERTAIN BORROWER ACKNOWLEDGEMENTS. Each Borrower hereby
acknowledges that neither the Administrative Agent nor any other Lender has any
fiduciary relationship with, or any fiduciary duty to any Borrower arising out
of or in connection with this Agreement or any of the other Loan Documents and
the relationship between the Administrative Agent and the other Lenders, on the
one hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor.
11.21 CONSENT TO JURISDICTION, SERVICE AND VENUE; WAIVER OF JURY TRIAL.
(a) Consent to Jurisdiction. For the purpose of enforcing payment
and performance of the Loan Documents, including, any payment under the Notes
and performance of other obligations under the Loan Documents, or in any other
matter relating to, or arising out of, the Loan Documents, each of the Borrowers
hereby consents to the jurisdiction and venue of the courts of the Commonwealth
of Pennsylvania or of any federal court located in such state, waive personal
service of any and all process upon it and consents that all such service of
process be made by certified or registered mail directed to NCO Group (on behalf
of the applicable Borrowers) at the address provided for in Section 11.1 and
service so made shall be deemed to be completed upon actual receipt or execution
of a receipt by any Person at such address. Each of the Borrowers hereby waives
the right to contest the jurisdiction and venue of the courts located in the
Commonwealth of Pennsylvania on the ground of inconvenience or otherwise and,
further, waives any right to bring any action or proceeding against (a) the
Administrative Agent in any court outside the Commonwealth of Pennsylvania, or
(b) any other Lender other than in a state within the United States designated
by such Lender. The provisions of this Section 11.21 shall not limit or
otherwise affect the right of the Administrative Agent or any other Lender to
institute and conduct an action in any other appropriate manner, jurisdiction or
court.
(b) WAIVER OF JURY TRIAL; DAMAGES. NEITHER ANY LENDER NOR ANY
BORROWER, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF THE
FOREGOING SHALL SEEK A JURY TRIAL IN ANY PROCEEDING BASED UPON OR ARISING OUT OF
THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, OR INVOLVING ANY COLLATERAL OR ANY
GUARANTY RELATING TO THE INDEBTEDNESS HEREUNDER OR THE RELATIONSHIP BETWEEN OR
AMONG SUCH PERSONS OR ANY OF THEM. NO SUCH PERSON WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, EACH PARTY TO THIS AGREEMENT WAIVES
ANY RIGHTS IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS
SECTION 11.21 ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY TO THIS
AGREEMENT (I) CERTIFIES THAT NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER NOR
ANY REPRESENTATIVE, OR ATTORNEY OF THE ADMINISTRATIVE AGENT OR ANY LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT OR SUCH
LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (II)
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ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH
OTHER LOAN DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS PARAGRAPH (B) OF SECTION 11.21. THE PROVISIONS OF THIS
SECTION 11.21 HAVE BEEN FULLY DISCLOSED TO THE PARTIES AND THE PROVISIONS SHALL
BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED
TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 11.21 WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
11.22 MOST FAVORED BORROWER. Notwithstanding anything in this Agreement
to the contrary, Borrowers are required to pay taxes, charges and other amounts
to Lender(s) and/or Administrative Agent under Sections 1.13, 2.2, 2.3 and 2.4
only if, and to the extent, such Lender(s) and/or Administrative Agent charge
similarly situated borrowers similar amounts under similar circumstances.
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IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed and delivered this Agreement as of the
date first above written.
NCO GROUP, INC.
NCO FINANCIAL SYSTEMS INC.
NCO TELESERVICES, INC.
CRWF ACQUISITION, INC.
K & K ACQUISITION, INC.
NCO FINANCIAL SYSTEMS OF MI, INC.
NCO FINANCIAL SYSTEMS OF NC, INC.
MANAGEMENT ADJUSTMENT BUREAU FUNDING, INC.
CREDIT ACCEPTANCE FUNDING, CORPORATION
ADVANTAGE FINANCIAL SERVICES FUNDING,INC.
AMERICAN TRANSPORT SERVICE BUREAU, INC.
ADVANTAGE SOUTHEAST, INC.
GOODYEAR & ASSOCIATES FUNDING, INC.
NCO FUNDING, INC.
CRW TEXAS, INC.
CRW CALIFORNIA, INC.
MEDSOURCE INC.
MAC/TCS, LTD.
ALL STATES CREDIT SERVICE, INC.
WORLD CREDIT, INC.
MANAGEMENT FINANCIAL SERVICES, INC.
FCA FUNDING, INC.
By /s/ MICHAEL J. BARRIST
------------------------------------
MICHAEL J. BARRIST,
as President and Chief Executive Officer
of each
[Corporate Seals]
FINANCIAL COLLECTION AGENCIES, INC.
FCA LEASING, INC.
By /s/ STEVEN L. WINOKUR
-------------------------------------
STEVEN L. WINOKUR
as Treasurer of each
[Corporate Seals]
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Address for Notices to each Borrower:
c/o NCO Group, Inc.
515 Pennsylvania Avenue
Fort Washington, PA 19034
Attn: MICHAEL J. BARRIST
Telephone: (215) 793-2101
Facsimile: (215) 793-2908
with copies to: BLANK ROME COMISKY & McCAULEY LLP
One Logan Square, 10th Floor
Philadelphia, PA 19103
Attn: Joel C. Shapiro, Esq.
Telephone: (215) 569-5476
Facsimile: (215) 569-5555
MELLON BANK, N.A.
By /s/ Liam M. Brickley
----------------------------------
Liam M. Brickley
Vice President
Address for Notices:
Plymouth Meeting Executive Campus
610 West Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Attn: Liam M. Brickley
Telephone: (610) 941-8401
Facsimile: (610) 941-4136
with a copy to: DRINKER BIDDLE & REATH LLP
1000 Westlakes Drive, Suite 300
Berwyn, PA 19312
Attn: George V. Strong, III, Esq.
Telephone: (610) 993-2218
Facsimile: (610) 993-8585
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