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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): May 21, 1999
NCO GROUP, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 0-21639 23-2858652
- ----------------------------- ----------------- ----------------------
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or Number) Identification Number)
organization)
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
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 21, 1999, Co-Source Funding, Inc., a Delaware corporation
("Buyer"), a wholly-owned subsidiary of NCO Group, Inc. ("NCO"), purchased all
of the outstanding capital stock of Co-Source Corporation, including its
wholly-owned subsidiaries, Milliken & Michaels, Inc., Metropolitan Consumer
Collection Services, Inc. and International Account Systems, Inc., for
approximately $121 million in cash, subject to adjustments, and warrants to
purchase an aggregate of 250,000 shares of NCO's common stock. Co-Source
Corporation together with its subsidiaries ("Co-Source") is the leading provider
of commercial collection services in the United States.
Co-Source's revenue for the year ended December 31, 1998 was $57.6
million. Management believes that the acquisition of Co-Source will
significantly enhance NCO's market position as a leading provider in the
commercial collection service business.
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 Compass International Services Corporation
On May 13, 1999, NCO signed a definitive agreement to acquire Compass
International Services Corporation ("Compass"), a leading provider of accounts
receivable management services and other complementary outsourced services.
NCO will issue approximately 3.4 million shares of NCO common stock for
all outstanding shares of Compass. Compass' revenue for the year ended December
31, 1998, exclusive of the revenue attributable to the Print and Mail Division,
was approximately $105.5 million on a pro forma basis. The transaction is
expected to be accounted for using the purchase method and is expected to be
treated as a tax free reorganization.
The acquisition is contingent upon completion of the sale of Compass'
Print and Mail Division and is also subject to regulatory and Compass
stockholder approval. The acquisition is scheduled to close during the third
quarter of 1999.
Amendment to Credit Agreement
On May 20, 1999, NCO's credit agreement with Mellon Bank, N.A., for
itself and as administrative agent for the other financial institutions named
therein, was amended to, among other things, increase NCO's credit facility to
provide for borrowings up to $350 million, structured as a revolving credit
facility, at an interest rate equal to, at the option of NCO, Mellon Bank's
prime rate plus an applicable margin ranging from .25% to .50% or the LIBO Rate
plus an applicable margin ranging from .75% to 2.25%. The applicable margin is
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determined by NCO's consolidated funded debt to consolidated EBITDA ratio and
NCO's capital structure. The revolving credit line is collateralized by
substantially all of the assets of NCO and includes certain financial covenants
such as maintaining net worth and funded debt to EBITDA requirements and
includes restrictions on, among other things, capital expenditures and
distributions to shareholders.
Risks Associated with Pending and Recent Acquisition
The businesses acquired by NCO in the fourth quarter of 1998 and in
1999 and to be acquired in the Compass acquisition had combined revenues of
$280.8 million in 1998 which was 156.9% of NCO's revenue of $179.0 million in
1998. If NCO is unable to successfully integrate these new businesses into NCO's
operations, NCO may not be able to realize expected operating efficiencies,
eliminate redundant costs or operate the businesses profitably. The integration
of these businesses is subject to a number of risks, including risks that the
conversion of the acquired companies computer and operating systems into NCO's
systems may take longer or cost more than expected NCO may be unable to retain
clients or key employees of the acquired companies and the acquired companies
might have additional liabilities that NCO did not anticipate at the time of the
acquisitions.
Forward Looking Statements
Statements included in this Current Report on Form 8-K, other than
historical facts, are forward-looking statements, as such term is defined in
federal securities laws and regulations, which are intended to be covered by the
safe harbors created in those laws and regulations. Forward-looking statements
include, among others, statements as to the Company's objective to grow through
strategic acquisitions and internal growth, the impact of acquisitions on the
Company's earnings, the Company's ability to realize operating efficiencies in
the integration of its acquisitions, trends in the Company's future operating
performance, Year 2000 compliance, the effects of legal or governmental
proceedings, the effects of changes in accounting pronouncements and statements
as to the Company's or management's beliefs, expectations and opinions. Forward-
looking statements are subject to risks and uncertainties and may be affected by
various factors which may cause actual results to differ materially from those
in the forward-looking statements. In addition to the factors discussed in this
report, risks, uncertainties and other factors, including, without limitation,
the risk that the Company will not be able to realize operating efficiencies in
the integration of its acquisitions, risks associated with growth and future
acquisitions, fluctuations in quarterly operating results, risks relating to
Year 2000 compliance and the other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 filed
on March 31, 1999, can cause actual results and developments to be materially
different from those expressed or implied by such forward-looking statements.
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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 Co-Source 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 August 4, 1999.
(b) Pro Forma Financial Information.
It is impracticable to provide any pro forma
financial information which may be required for
Co-Source 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 August 4, 1999.
(c) Exhibits
Number Title
2.1 Stock Purchase Agreement among Co-Source
Corporation, its Shareholders and Optionholders,
H.I.G. - DCI Investments, L.P. and NCO. NCO will
furnish to the Securities and Exchange Commission
a copy of any omitted schedule upon request.
4.1 Form of Warrant to purchase NCO common stock.
10.1 Fourth Amended and Restated Credit Agreement dated
as of May 20, 1999 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.
10.2 Employment Agreement dated as of April 16, 1999, by
and between NCO and Thomas V. Cefalu, III
(management contract or compensatory plan, contract
or arrangement).
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NCO GROUP, INC.
By: /s/ Steven L. Winokur
----------------------------------------------
Steven L. Winokur, Executive Vice President,
Finance, Chief Financial Officer and Treasurer
Date: June 4, 1999
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EXHIBIT 2.1
-----------
================================================================================
STOCK PURCHASE AGREEMENT
Among
CO-SOURCE CORPORATION,
its SHAREHOLDERS and OPTIONHOLDERS,
H.I.G.-DCI INVESTMENTS, L.P.
and
NCO GROUP, INC.
April 17, 1999
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
PURCHASE AND SALE OF SHARES AND OPTIONS..................................................................1
1.01 Purchase Price..................................................................................1
1.02 Sale Transactions...............................................................................1
1.03 Purchase Price Adjustment.......................................................................2
1.04 The Closing.....................................................................................4
ARTICLE II
CONDITIONS TO CLOSING....................................................................................5
2.01 Conditions to Buyer's Obligations...............................................................5
2.02 Conditions to the Shareholders', HIG Cayman's and the Optionholders'
Obligations.....................................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
EACH SHAREHOLDER, HIG CAYMAN AND EACH OPTIONHOLDER......................................................8
3.01 Authority.......................................................................................8
3.02 Execution and Delivery; Valid and Binding Agreement.............................................8
3.03 Ownership of Capital Stock......................................................................9
3.04 Ownership of DCI Shares.........................................................................9
3.05 DCI.............................................................................................9
3.06 HIG Cayman......................................................................................9
3.07 Brokerage.......................................................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................9
4.01 Organization and Corporate Power...............................................................10
4.02 Subsidiaries...................................................................................10
4.03 Authorization; No Breach; Valid and Binding Agreement..........................................10
4.04 Capital Stock..................................................................................11
4.05 Financial Statements...........................................................................11
4.06 Absence of Certain Developments................................................................12
4.07 Title to Properties............................................................................13
4.08 Tax Matters....................................................................................13
4.09 Contracts and Commitments......................................................................14
4.10 Intellectual Property..........................................................................15
</TABLE>
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<TABLE>
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<S> <C>
4.11 Litigation.....................................................................................16
4.12 Governmental Consents, etc.....................................................................16
4.13 Employee Benefit Plans.........................................................................16
4.14 Insurance......................................................................................17
4.15 Compliance with Laws...........................................................................17
4.16 Environmental Compliance and Conditions........................................................18
4.17 Affiliated Transactions........................................................................18
4.18 Absence of Undisclosed Liabilities.............................................................18
4.19 Employee Relations.............................................................................19
4.20 Questionable Payments..........................................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................19
5.01 Organization and Power.........................................................................19
5.02 Authorization; Valid and Binding Agreement.....................................................20
5.03 No Breach......................................................................................20
5.04 Governmental Consents, etc.....................................................................20
5.05 Litigation.....................................................................................20
5.06 Brokerage......................................................................................20
5.07 Investment Representation......................................................................20
5.08 Financing......................................................................................20
ARTICLE VI
PRE-CLOSING COVENANTS...................................................................................21
6.01 Conduct of the Business........................................................................21
6.02 Access to Books and Records....................................................................22
6.03 Regulatory Filings.............................................................................22
6.04 Conditions.....................................................................................23
6.05 Exclusive Dealing..............................................................................23
6.06 Consulting Agreement...........................................................................23
6.07 Code Section 280G Consents.....................................................................23
ARTICLE VII
COVENANTS OF BUYER......................................................................................23
7.01 Access to Books and Records....................................................................23
7.02 Notification...................................................................................24
7.03 Director and Officer Liability and Indemnification.............................................24
7.04 Regulatory Filings.............................................................................24
7.05 Conditions.....................................................................................24
7.06 Contact with Customers and Suppliers...........................................................24
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE VIII
TERMINATION.............................................................................................24
8.01 Termination....................................................................................24
8.02 Effect of Termination..........................................................................25
ARTICLE IX
SURVIVAL................................................................................................25
9.01 Survival of Representations and Warranties.....................................................26
ARTICLE X
SHAREHOLDER REPRESENTATIVE..............................................................................26
10.01 Designation; Reliance..........................................................................26
10.02 Authority......................................................................................26
10.03 Exculpation....................................................................................27
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS.....................................................................27
11.01 Disclosure Generally...........................................................................27
11.02 Acknowledgment by Parties......................................................................27
11.03 Tax Matters....................................................................................28
11.04 Further Assurances.............................................................................30
11.05 Restrictive Covenants of HIG...................................................................30
11.06 Indemnification................................................................................32
11.07 Cefalu Non-Competition.........................................................................32
ARTICLE XII
DEFINITIONS.............................................................................................34
12.01 Definitions....................................................................................34
12.02 Cross-Reference of Other Definitions...........................................................36
ARTICLE XIII
MISCELLANEOUS...........................................................................................37
13.01 Press Releases and Communications..............................................................37
13.02 Expenses.......................................................................................37
13.03 Knowledge Defined..............................................................................37
13.04 Waiver of Certain Transfer Restrictions........................................................37
13.05 Notices........................................................................................38
13.06 Assignment.....................................................................................39
13.07 Severability...................................................................................39
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
13.08 No Strict Construction.........................................................................39
13.09 Amendment and Waiver...........................................................................39
13.10 Complete Agreement.............................................................................39
13.11 Counterparts...................................................................................39
13.12 Governing Law..................................................................................39
13.13 No Third Party Beneficiaries...................................................................39
13.14 Section Headings...............................................................................40
13.15 Specific Performance...........................................................................40
</TABLE>
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EXHIBITS
Exhibit A Form of Warrants
Exhibit B Closing Certificate of the Company
Exhibit C Closing Certificate of the Shareholder Representative
Exhibit D-1 Opinion of the Company's Counsel
Exhibit D-2 Opinion of the Shareholders' and Optionholders' Counsel
Exhibit E Opinion of Buyer's Counsel
Exhibit F Closing Certificate of the Buyer
Exhibit G Form of Registration Rights Agreement
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SCHEDULES
Affiliated Transactions Schedule
Authorization Schedule
Capital Stock Schedule
Contracts Schedule
Developments Schedule
Employee Benefits Schedule
Employee Relations Schedule
Environmental Compliance Schedule
Financial Statements Schedule
Indebtedness Schedule
Insurance Schedule
Intellectual Property Schedule
Liabilities Schedule
Lien Schedule
Litigation Schedule
Optionholders Schedule
Permits Notification Schedule
Real Property Schedule
Regulatory Permits Schedule
Shareholders Schedule
Subsidiary Schedule
Taxes Schedule
Third-Party Consents Schedule
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
April 17, 1999, among NCO Group, Inc., a Pennsylvania corporation ("Buyer"),
Co-Source Corporation, a Delaware corporation (the "Company"), the Persons
listed on the attached Shareholders Schedule (the "Shareholders"), the Persons
listed on the attached Optionholders Schedule (the "Optionholders"), H.I.G.-DCI
Investments, L.P., a Cayman Islands limited partnership ("HIG Cayman"), DCI
Holding, Inc., a Delaware corporation ("DCI") and, for the purposes of Section
11.05 only, H.I.G. Investment Group, L.P., a Cayman Islands limited partnership.
Capitalized terms used and not otherwise defined herein have the meanings set
forth in Article XII below.
The Shareholders own all of the issued and outstanding shares
of capital stock of the Company (the "Shares"). The Optionholders own all of the
issued and outstanding options to acquire Shares (the "Options").
As of the date hereof, HIG Cayman owns all the issued and
outstanding shares of DCI, a Shareholder.
Subject to the terms and conditions set forth herein, the
parties hereto desire to consummate the Sale Transactions (as described below in
Section 1.02).
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND OPTIONS
---------------------------------------
1.01 Purchase Price. The aggregate consideration to be
delivered by Buyer to the Shareholders (other than DCI) and Optionholders and
HIG Cayman (the "Purchase Price") on the Closing Date shall be (a) an amount in
cash equal to $121 million plus the total amount of Cash on Hand as of the
Closing minus the outstanding amount of the Indebtedness as of the Closing minus
the SAR Payments plus the aggregate exercise price of the Options plus the
amount, if any, by which the Estimated Net Working Capital (as defined in
Section 1.03(a) below) exceeds $-1,200,888 minus the amount, if any, by which
Estimated Net Working Capital is less than $-1,200,888, and (b) warrants to
purchase 250,000 shares of Buyer's common stock (the "Buyer Common Stock") in
substantially the form set forth as Exhibit A hereto (the "Warrants").
1.02 Sale Transactions. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the terms and conditions set forth herein, each of the Shareholders (other
than DCI), HIG Cayman and each of the Optionholders agrees to and will
consummate, at the Closing, the following transactions (the "Sale
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Transactions"): (A) each Shareholder (other than DCI) shall sell, assign,
transfer and convey to Buyer, and Buyer shall purchase and acquire from the
Shareholders (other than DCI), good and valid legal title to all of the Shares
held by such Shareholders against payment at the Closing in an amount equal to
the portion of the aggregate Purchase Price which such Shareholder would be
entitled to in the event the Purchase Price was distributed to the Shareholders
and Optionholders (as provided in the following clause (C)) in a complete
liquidation of the Company pursuant to the Company's Certificate of
Incorporation (the "Closing Shareholder Consideration"), (B) HIG Cayman shall
sell, transfer and convey to Buyer, and Buyer shall purchase and acquire from
HIG Cayman all of the outstanding shares of DCI (the "DCI Shares") against
payment at the Closing in an amount equal to the portion of the Closing
Shareholder Consideration which DCI would be entitled to receive for its Shares
pursuant to clause (A) (the "HIG Consideration") and (C) each Optionholder shall
sell, assign, transfer and convey to Buyer, and Buyer shall purchase and acquire
from each Optionholder, all of the Options against payment at the Closing in an
amount equal to (i) the portion of the aggregate Purchase Price which such
Optionholder would be entitled (if such Optionholder had exercised his Options)
in the event the Purchase Price was distributed to the Shareholders and
Optionholders in a complete liquidation of the Company pursuant to the Company's
Certificate of Incorporation minus (ii) the aggregate exercise price of such
Optionholder's Options (the "Closing Optionholder Consideration"). Buyer shall
be entitled to withhold from the Closing Optionholder Consideration, and shall
remit to the proper governmental authority, any amounts required to be withheld
by the Company or the Optionholders under applicable law.
1.03 Purchase Price Adjustment.
(a) At least three days prior to the Closing Date, the
Shareholder Representative shall deliver to Buyer its good faith
calculation of its estimate of the Net Working Capital as of the
Closing Date (the "Estimated Net Working Capital").
(b) Within 60 days after the Closing Date, Buyer will deliver
to the Shareholder Representative its calculation of the Net Working
Capital as of the Closing Date (the "Preliminary Net Working Capital
Statement"). If the Shareholder Representative has any objections to
the Preliminary Net Working Capital Statement, the Shareholder
Representative shall deliver to Buyer a statement setting forth its
objections thereto (an "Objections Statement"). If an Objections
Statement is not delivered to Buyer within 30 days, the Preliminary Net
Working Capital Statement shall be final, binding and non-appealable by
the parties hereto. The Shareholder Representative and Buyer shall
negotiate in good faith to resolve any such objections, but if they do
not reach a final resolution within 30 days after the delivery of the
Objections Statement, the Shareholder Representative and Buyer shall
submit such dispute to Arthur Andersen LLP (the "Independent Auditor").
The Shareholder Representative and Buyer shall use their commercially
reasonable efforts to cause the Independent Auditor to resolve all
disagreements as soon as practicable, but in any event within 30 days
after the submission of the dispute to the Independent Auditor. The
resolution of the dispute by the Independent Auditor shall be final,
binding and non-appealable on the parties hereto. The costs and
expenses of the Independent Auditor shall be paid equally by Buyer and
the Shareholder Representative.
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(c) If the Net Working Capital as finally determined pursuant
to clause (b) above is greater than the Estimated Net Working Capital,
Buyer shall pay to the Shareholders (other than DCI), the Optionholders
and HIG Cayman the difference between the Net Working Capital as
finally determined pursuant to clause (b) above and the Estimated Net
Working Capital. If the Net Working Capital as finally determined
pursuant to clause (b) above is less than the Estimated Net Working
Capital, the Shareholder Representative (on behalf of the Shareholders,
HIG Cayman and the Optionholders) shall pay to Buyer from the Holdback
Amount the amount of the difference between the Net Working Capital as
finally determined pursuant to clause (b) above and the Estimated Net
Working Capital. Buyer shall promptly deliver to each Shareholder
(other than DCI), HIG Cayman and Optionholder its portion (determined
in accordance with the last sentence of this clause (c)) of any amounts
determined pursuant to this clause (c) to be due by Buyer by wire
transfer of immediately available funds to one or more accounts
designated by the Shareholder Representative to Buyer. The Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders) shall promptly deliver to Buyer from the Holdback Amount
any amounts determined pursuant to this clause (c) to be due by the
Shareholder Representative (on behalf of the Shareholders, HIG Cayman
and the Optionholders) by wire transfer of immediately available funds
to one or more accounts designated by Buyer to the Shareholder
Representative. Any amounts to be received by any Shareholder, HIG
Cayman or any Optionholder pursuant to this clause (c) shall be such
additional amount that such Shareholder, HIG Cayman or Optionholder
would have received at the Closing if the amount of any payment made
pursuant to this clause (c) was added to the Purchase Price in
calculating the Closing Shareholder Consideration, the HIG
Consideration and the Closing Optionholder Consideration.
(d) In the calculation of the Estimated Net Working Capital
and Preliminary and/or Final Net Working Capital as provided in this
Section 1.03, a liability shall be accrued with respect to the
potential state and local sales and use tax liability of Milliken &
Michaels, Inc. (1) for the state of Texas pursuant to the audit
referenced in that certain letter, dated February 8, 1999, to Milliken
& Michaels, Inc. (the "Texas Audit") and (2) for the Commonwealth of
Pennsylvania pursuant to an audit, if any, which may arise from the
date hereof until the date which is six months after the Closing Date
(the "Possible Pennsylvania Audit"), which accrual (the "Accrual")
shall be deemed a Working Capital Liability; the Accrual shall be
determined in the good faith judgment of the Shareholder
Representative, as reasonably agreed to by Buyer. If the Accrual cannot
be agreed upon by the Shareholder Representative and Buyer, the
Shareholder Representative's determination of the Accrual shall be used
in the determination of Estimated Net Working Capital. Upon the
resolution of the Texas Audit or any Possible Pennsylvania Audit or on
the date which is six months after the Closing Date if no Possible
Pennsylvania Audit has been commenced on such date, if it is finally
determined that the Accrual exceeded the actual amount of liability
which the Company may have in connection with the Audit, such excess,
if any, shall be paid (without interest) by the Buyer to the
Shareholder Representative who shall allocate such excess as provided
in the last sentence of Section 1.03 (c) above. Buyer additionally
agrees that neither it nor any of its agents, employees, shareholders,
or other affiliates shall communicate with or otherwise take any action
with respect to any state or local authority in such a manner as would
induce or incite such authority to assess any state or local tax
liability.
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1.04 The Closing.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Kirkland &
Ellis located at 200 East Randolph Drive, Chicago, Illinois at 10:00
a.m. on the date which is the third business day following satisfaction
or waiver of all of the closing conditions set forth in Article II
hereof (other than those to be satisfied at the Closing) or on such
other date or at such other location as is mutually agreeable to Buyer
and the Shareholder Representative. The date and time of the Closing
are herein referred to as the "Closing Date." If acceptable to the
Shareholder Representative and Buyer, the Closing may be effected by
facsimile transmission of the executed closing documents identified in
Section 1.04(b) and Article II, by payment of the Purchase Price in the
manner set forth in Section 1.04(b), and by sending original copies of
the closing documents by reputable overnight delivery service, postage
or delivery charges prepaid, for delivery to the parties at the
addresses set forth in Section 13.05 on the first business day
following the Closing Date.
(b) Subject to the terms and conditions set forth in this
Agreement, the parties hereto shall consummate the following
transactions (the "Closing Transactions") on the Closing Date:
(i) Buyer shall deliver to each Optionholder the
amount of its Closing Optionholder Consideration, by wire transfer of
immediately available funds to one or more accounts designated by the
Shareholder Representative to Buyer prior to the Closing;
(ii) the Shareholder Representative (on behalf of
the Optionholders) shall deliver to the Company the instruments (if
any) evidencing all of the Options duly endorsed for transfer or
accompanied by appropriate transfer documents and executed releases
from each Optionholder releasing the Company and its Subsidiaries from
any claims which such Optionholder may have against the Company and its
Subsidiaries (other than claims related to such Optionholder's
employment with the Company);
(iii) Buyer shall deliver to each Shareholder (other
than DCI) and HIG Cayman the amount of its Closing Shareholder
Consideration and HIG Consideration, respectively, by wire transfer of
immediately available funds to one or more accounts designated by the
Shareholder Representative to Buyer prior to the Closing;
(iv) the Shareholder Representative (on behalf of
the Shareholders (other than DCI) and HIG Cayman) shall deliver to
Buyer stock certificates representing the Shares and the DCI Shares
duly endorsed for transfer or accompanied by duly executed stock powers
and executed releases from each Shareholder and HIG Cayman releasing
the Company and its Subsidiaries from any claims which such Shareholder
may have against the Company and its Subsidiaries (other than claims
related to such Shareholder's employment with the Company);
4
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(v) Buyer shall repay, or cause to be repaid, on
behalf of the Company and its Subsidiaries, all amounts necessary to
discharge fully the then outstanding balance of the Indebtedness by
wire transfer of immediately available funds as directed by the holders
of the Indebtedness set forth on the Indebtedness Schedule at or prior
to the Closing, and the Shareholder Representative (on behalf of the
Shareholders, HIG Cayman and the Optionholders) shall deliver to Buyer
all appropriate payoff letters and releases and shall make arrangements
reasonably satisfactory to Buyer for such holders to deliver lien
releases and canceled notes at the Closing;
(vi) Buyer shall pay, or cause to be paid, on behalf
of the Company, all amounts necessary to discharge fully all of the
Company's then outstanding obligations under those certain Stock
Appreciation Rights Agreements, dated April 15, 1997, by and between
the Company and each of Michael Sanderson, Thomas V. Cefalu, III and
David Israel (the "SAR Payments") by wire transfer of immediately
available funds as directed by Michael Sanderson, Thomas V. Cefalu, III
and David Israel at or prior to the Closing, and the Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders) shall deliver to Buyer all appropriate termination
letters and releases at the Closing;
(vii) Buyer shall deliver the Warrants to the
Shareholders (other than DCI), HIG Cayman and the Optionholders; and
(viii) Buyer, the Company and the Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders) shall make such other deliveries in accordance with
Article II hereof.
ARTICLE II
CONDITIONS TO CLOSING
---------------------
2.01 Conditions to Buyer's Obligations. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Articles
III and IV hereof shall be true and correct in all material respects
except that, with respect to the representations and warranties set
forth in Section 3.03 and Section 3.04 and those representations and
warranties which are modified by the terms "material," "Material
Adverse Effect" or similar qualifications, such representations and
warranties shall be true and correct in all respects, 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;
5
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(b) The Company, the Shareholders, HIG Cayman and the
Optionholders shall have performed in all material respects all of the
covenants and agreements required to be performed by them under this
Agreement at or prior to the Closing;
(c) All of the consents which are set forth on the Third-Party
Consents Schedule attached hereto shall have been obtained;
(d) The applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated;
(e) On or before the Closing Date, no action or proceeding
shall have been commenced that prohibits or restrains or attempts to
prohibit or restrain, and no order or judgment shall have been issued
and no new law shall have been enacted, that prohibits or restrains or
retroactively attempts to prohibit or restrain the consummation of the
transactions contemplated by this Agreement;
(f) There shall not have been any material adverse change or
material casualty loss (which is not substantially covered by
insurance) affecting the Company and its Subsidiaries taken as a whole
or their business, assets or financial condition taken as a whole,
between the date of this Agreement and the Closing Date;
(g) The Company or the Shareholder Representative (on behalf
of the Shareholders, HIG Cayman and the Optionholders), as the case may
be, shall have delivered to Buyer each of the following:
(i) a certificate of the Company in the form set forth
in Exhibit B attached hereto, dated the Closing Date, stating that the
preconditions specified in subsections (a) through (e) hereof,
inclusive, as they relate to the Company have been satisfied;
(ii) a certificate of the Shareholder Representative
(on behalf of the Shareholders, HIG Cayman and the Optionholders) in
the form of Exhibit C attached hereto, dated the Closing Date, stating
that the preconditions specified in subsections (a), (b), (c) and (f)
as they relate to the Shareholders, HIG Cayman and the Optionholders
have been satisfied;
(iii) evidence of the third party and governmental
consents described in subsections (c) and (d) above;
(iv) the instruments (if any) evidencing the Options
the stock certificates representing the Shares and the stock
certificates representing the DCI Shares, in each case duly endorsed
for transfer or accompanied by duly executed stock powers or transfer
documents;
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(v) all minute books, stock books, ledgers and
registers, corporate seals and other corporate records relating to the
organization, ownership and maintenance of the Company, its
Subsidiaries and DCI;
(vi) resignations effective as of the Closing Date from
such officers and directors of the Company or its Subsidiaries as Buyer
shall have requested in writing and delivered to the Shareholder
Representative not less than five days prior to the Closing Date;
(vii) a copy of the Certificate of Incorporation or
Articles of Incorporation of each of the Company, its Subsidiaries and
DCI, certified by the Secretary of State of the state in which each is
incorporated and a Certificate of Good Standing or equivalent
certificate from the state in which each is incorporated and each state
in which each is duly qualified to transact business;
(viii) a certificate signed by each of the Shareholders
(other than DCI), HIG Cayman and Optionholders acknowledging (A) the
respective amounts of the Purchase Price to be paid to them at Closing,
as determined pursuant to Sections 1.02(A), (B) and (C) which amounts
shall be set forth in an annex to such certificate and shall
additionally be provided to Buyer on or before the Closing Date, and
(B) their respective percentage interests for determining their
interest in any adjustment to the Purchase Price determined pursuant to
Section 1.03;
(ix) opinions of counsel from Kirkland & Ellis as to
the matters concerning the Company set forth as Exhibit D-1 attached
hereto and from Kirkland & Ellis or other firm reasonably acceptable to
Buyer as to the matters concerning the Shareholders, HIG Cayman and the
Optionholders set forth as Exhibit D-2 attached hereto;
(x) certified copies of the resolutions duly adopted
by the board of directors (or its equivalent governing body) of the
Company and HIG Cayman, and of any Shareholder or Optionholder which is
not a natural person, authorizing the execution, delivery and
performance of this Agreement;
(xi) the documents, instruments, stock certificates
required to be delivered to Buyer pursuant to Section 1.04(b); and
(xii) all other documents, certificates, instruments and
writings reasonably requested to be delivered by the Company at or
prior to the Closing pursuant to this Agreement or otherwise required
in connection herewith.
2.02 Conditions to the Shareholders', HIG Cayman's and the
Optionholders' Obligations. The obligations of the Shareholders, HIG Cayman and
the Optionholders to consummate the transactions contemplated by this Agreement
are subject to the satisfaction of the following conditions as of the Closing
Date:
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(a) The representations and warranties set forth in Article V
hereof shall be true and correct in all material respects except that,
with respect to the representations and warranties which are modified
by the term "material" or similar qualifications, such representations
and warranties shall be true and correct in all respects, 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;
(b) Buyer shall have performed in all material respects all
the covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing;
(c) The applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated;
(d) On or before the Closing Date, no action or proceeding
shall have been commenced that prohibits or restrains or attempts to
prohibit or restrain, and no order or judgment shall have been issued
and no new law shall have been enacted, that prohibits or restrains or
retroactively attempts to prohibit or restrain the consummation of the
transactions contemplated by this Agreement;
(e) Buyer shall have delivered to the Shareholder
Representative, an opinion of counsel from Blank Rome Comisky &
McCauley LLP as to the matters concerning the Buyer set forth as
Exhibit E attached hereto;
(f) Buyer shall have delivered to the Shareholder
Representative certified copies of the resolutions duly adopted by
Buyer's board of directors (or its equivalent governing body)
authorizing the execution, delivery and performance of this Agreement;
(g) Buyer shall have executed and delivered to the Shareholder
Representative the Registration Rights Agreement attached hereto as
Exhibit G;
(h) Buyer shall have delivered to the Shareholder
Representative (on behalf of the Shareholders and the Optionholders) a
certificate in the form set forth as Exhibit F attached hereto, dated
the Closing Date, stating that the preconditions specified in
subsections (a) through (d) hereof, inclusive, have been satisfied; and
(i) The Closing Transactions set forth in Section 1.04(b)(i),
(iii), (vi) and (vii) shall have been completed.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
EACH SHAREHOLDER, HIG CAYMAN AND EACH OPTIONHOLDER
--------------------------------------------------
Each Shareholder, HIG Cayman and each Optionholder, solely for
himself or itself (on a several, and not joint basis), represents and warrants
to Buyer as follows:
3.01 Authority. Such Shareholder, HIG Cayman or such
Optionholder (as the case may be) has all requisite power and authority and full
legal capacity to execute and deliver this Agreement and to perform his or its
obligations hereunder.
3.02 Execution and Delivery; Valid and Binding Agreement. This
Agreement has been duly executed and delivered by such Shareholder, HIG Cayman
or such Optionholder (as the case may be), and assuming that this Agreement is
the valid and binding agreement of Buyer, this Agreement constitutes the valid
and binding obligation of such Shareholder or such Optionholder (as the case may
be), enforceable in accordance with its terms.
3.03 Ownership of Capital Stock. Such Shareholder or such
Optionholder, as the case may be, is the record and beneficial owner of the
number of Shares or Options, as applicable, as set forth opposite his or its
name on the attached Shareholders Schedule or Optionholders Schedule, as the
case may be. On the Closing Date, such Shareholder shall transfer to Buyer good
title to such Shares and such Optionholder shall transfer to the Buyer such
Options, in either case free and clear of all claims, pledges, security
interests, liens, charges, encumbrances, options, proxies, voting trusts or
agreements and other restrictions and limitations of any kind, other than
applicable federal and state securities law restrictions.
3.04 Ownership of DCI Shares. HIG Cayman is the record and
beneficial owner of the DCI Shares. The DCI Shares represent 100% of the issued
and outstanding stock of DCI. On the Closing Date, HIG Cayman shall transfer to
Buyer good title to such DCI Shares, free and clear of all claims, pledges,
security interests, liens, charges, encumbrances, options, proxies, voting
trusts or agreements and other restrictions and limitations of any kind, other
than applicable federal and state securities law restrictions.
3.05 DCI. HIG Cayman and DCI hereby represent and warrant to
Buyer that (i) DCI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to enter into this Agreement and perform its obligations hereunder;
(ii) the execution, delivery and performance of this Agreement by DCI and the
consummation of the transactions contemplated hereby have been approved by all
requisite corporate action; (iii) DCI is not subject to or obligated under its
Certificate of Incorporation, its Bylaws, any law, or rule statute, regulation
or order, judgment or decree, or any material agreement or instrument, or any
license, franchise or permit, which would be breached or violated in any
material respect by DCI's execution, delivery or performance of this Agreement;
(iv) DCI's sole asset is the Shares; and (v) since its formation, the only
activities DCI has conducted are to hold the Shares and to enter into the
transactions contemplated by this Agreement.
3.06 HIG Cayman. HIG Cayman hereby represents and warrants
that its sole asset is the DCI Shares and that since its formation, the only
activities HIG Cayman has conducted are to hold the DCI Shares and to enter into
the transactions contemplated by this Agreement.
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3.07 Brokerage. Except for the fees and expenses of Merrill
Lynch & Co. and the fees of H.I.G. Capital Management, Inc. (both of which shall
be paid by the Shareholders and the Optionholders), there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of any Shareholder, any Optionholder or the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Buyer that:
4.01 Organization and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and the Company has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own and
operate its properties and to carry on its businesses as now conducted, except
where the failure to hold such authorizations, licenses and permits would not
have a material adverse effect upon the business, assets, financial condition or
operating results of the Company and its Subsidiaries, taken as a whole (a
"Material Adverse Effect"). The Company is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of business as
now conducted requires it to qualify, which jurisdictions are listed on the
Regulatory Permits Schedule, except where the failure to be so qualified would
not have a Material Adverse Effect. The Company and its Subsidiaries hold all
permits, licenses, approvals, certificates and registrations of any governmental
or regulatory authority whether within or outside the United States
(collectively, "Permits") which are necessary for the conduct of their
operations except those Permits the failure to hold which would not have a
Material Adverse Effect. All such Permits are in full force and effect, no
violations which have not been remedied have been recorded in respect of any
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 relating to any such Permit. The
Regulatory Permits Schedule sets forth each of the Permits held by the Company
and the Subsidiaries.
4.02 Subsidiaries. Except as set forth on the attached
Subsidiary Schedule, neither the Company nor any of its Subsidiaries owns or
holds the right to acquire any stock, partnership interest, joint venture
interest or other equity ownership or participation interest in any other
Person. Each of the Subsidiaries identified on the Subsidiary Schedule is
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority and all
authorizations, licenses and permits necessary to own its properties and to
carry on its businesses as now conducted and is qualified to do business in
every jurisdiction in which its ownership of property or the conduct of
businesses as now conducted requires it to qualify, except in each such case
where the failure to hold such authorizations, licenses and permits or to be so
qualified would not have a Material Adverse Effect. All of the capital stock of
each of the Subsidiaries is owned by the Company of record and beneficially, and
the Company has good and valid legal title to all of the capital stock of the
Subsidiaries, free and clear of any liens other than as disclosed on the Lien
Schedule.
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4.03 Authorization; No Breach; Valid and Binding Agreement.
Except as set forth on the attached Authorization Schedule, the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby have been approved by all corporate
actions required by Company's board of directors and its shareholders and do not
conflict with or result in any breach of, constitute a default under, result in
a violation of, result in the creation of any lien, security interest, charge or
encumbrance upon any assets of the Company or any of its Subsidiaries, or
require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body, under the provisions of the
Company's or any of its Subsidiary's certificate or articles of incorporation or
bylaws or any material indenture, mortgage, lease, loan agreement or other
agreement or instrument to which the Company or any of its Subsidiaries is
bound, or any law, statute, rule or regulation or order, judgment or decree to
which the Company or any of its Subsidiaries is subject. Assuming that this
Agreement is a valid and binding obligation of Buyer, this Agreement constitutes
a valid and binding obligation of the Company, enforceable in accordance with
its terms. The Permits Notification Schedule sets forth each of the Permits
listed on the Regulatory Permits Schedule which will or may require notification
and/or approval by a governmental authority for its continued use in connection
with the business of the Company and the Subsidiaries after the consummation of
the transactions contemplated hereby.
4.04 Capital Stock. The authorized number of shares of capital
stock of the Company ("Common Stock") consists of 150,000 shares of the
Company's Class A Common Stock, par value $.01 per share and 14,000 shares of
the Company's Class B Common Stock, par value $.01 per share, 10,000 shares of
Class C Common Stock, par value $.01 per share, 25,000 shares of Class D Common
Stock, par value $.01 per share. As of the date hereof, 100,000 shares of Common
Stock are issued and outstanding and are owned of record and beneficially by the
Shareholders in the amounts as set forth on the attached Shareholders Schedule.
All of the outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and nonassessable. Except as set
forth on the Capital Stock Schedule, the Company does not have any other capital
stock, equity securities, securities or rights containing any equity features
authorized, issued or outstanding, and there are no agreements, options,
warrants, stock appreciation rights, phantom stock plans or other rights or
arrangements existing or outstanding which provide for the sale or issuance of
any of the foregoing by the Company. Except as set forth on the attached Capital
Stock Schedule, there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or otherwise
acquire any shares of capital stock or other equity securities of the Company of
any kind. Except as set forth on the Capital Stock Schedule, there are no
agreements or other obligations (contingent or otherwise) which require the
Company to repurchase or otherwise acquire any shares of the Company's capital
stock or other equity securities.
4.05 Financial Statements. The Company has furnished Buyer
with copies of its (i) unaudited balance sheet with respect to the Company as of
February 28, 1999, and the related statement of income for the two-month period
then ended (such balance sheet referred to herein as the "Latest Balance Sheet")
and (ii) audited balance sheets and statements of income with respect to the
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Company as of and for the fiscal year ended December 31, 1998 and the period
from April 15, 1997 through December 31, 1997. Except as set forth on the
attached Financial Statements Schedule, such financial statements have been
based upon the information concerning the Company contained in the Company's
books and records, and present fairly in all material respects the financial
condition and results of operations of the Company as of the times and for the
periods referred to therein in accordance with GAAP (subject, in the case of the
unaudited financial statements, to normal year-end audit adjustments). All funds
collected on behalf of customers by the Company or the Subsidiaries have been
properly remitted to customers or are properly reflected on the financial
statements of the Company and its Subsidiaries. The books and records of the
Company and its Subsidiaries fairly reflect in all material respects the
transactions to which it is a party or by which its properties are subject or
bound. Such books and records have been properly kept maintained and are in
compliance in all material respects with all applicable legal and accounting
requirements. The minute books of the Company, its Subsidiaries and DCI contain
records which are accurate in all material respects of all corporate actions of
the respective shareholders and board of directors of the Company, its
Subsidiaries and DCI.
4.06 Absence of Certain Developments. Since the date of the
Latest Balance Sheet, there has not been any material casualty loss (which is
not substantially covered by insurance) or any material adverse change in the
business, assets, financial condition or results of operations of the Company
and its Subsidiaries, taken as a whole. Except as set forth on the attached
Developments Schedule and except as expressly contemplated by this Agreement,
since the date of the Latest Balance Sheet, neither the Company nor any
Subsidiary has individually or in the aggregate:
(a) borrowed any amount (other than pursuant to the Company's
and its Subsidiaries' existing credit facilities) or incurred or become
subject to any material liabilities (other than liabilities incurred in
the ordinary course of business and consistent with past practice,
liabilities under contracts entered into in the ordinary course of
business and consistent with past practice and borrowings from banks
(or similar financial institutions) necessary to meet ordinary course
working capital requirements and which in any event will not exceed an
aggregate of $250,000);
(b) mortgaged, pledged or subjected to any lien, charge or
other encumbrance, any material portion of its assets, except Permitted
Liens;
(c) sold, assigned, leased, licensed or transferred any
material portion of its tangible assets, except in the ordinary course
of business and consistent with past practice;
(d) sold, assigned or transferred any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets,
except in the ordinary course of business and consistent with past
practice;
(e) suffered any material extraordinary losses or waived any
rights of material value;
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(f) issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock
or other equity securities or warrants, options or other rights to
acquire its capital stock or other equity securities, or any bonds or
debt securities;
(g) made any material capital expenditures or commitments
therefor in excess of the allotted capital expenditure budget of the
Company and its Subsidiaries copies of which have been delivered to
Buyer; or
(h) entered into any other material transaction or contract,
except in the ordinary course of business and consistent with past
practice; or
(i) has taken any of the actions or done any of the things
described in clause (b) of Section 6.01.
For the purpose of this Section 4.06, "material" means the sum of $250,000 with
respect to any transaction or series of related transactions.
4.07 Title to Properties.
(a) Except as set forth on the Lien Schedule, the Company owns
good and marketable title to all of the personal property shown on the
Latest Balance Sheet, free and clear of all liens, security interests
and other encumbrances, except for Permitted Liens.
(b) Neither the Company nor any Subsidiary owns any real
property. The real property demised by the leases (the "Leased Real
Property") described on the attached Real Property Schedule constitutes
all of the real property leased by the Company and its Subsidiaries.
The Leased Real Property leases are in full force and effect, and the
Company or a Subsidiary holds a valid and existing leasehold interest
under each of the leases. The Company has delivered or made available
to Buyer complete and accurate copies of each of the leases described
on the Real Property Schedule, and none of the leases have been
modified in any material respect, except to the extent that such
modifications are disclosed by the copies delivered or made available
to Buyer. Neither the Company nor any Subsidiary is in default in any
material respect under any of such leases and, to the knowledge of the
Company, the other party to such leases is not in default in any
material respect. No notice from any lessor, governmental body or other
Person has been received by Company or any Subsidiary claiming any
material violation of, or breach or default under, any lease or law.
(c) To the Company's knowledge, the Company and each of its
Subsidiaries possess all of their respective material assets and
property that are leased from other persons under valid and enforceable
contracts. The Company and its Subsidiaries have all assets necessary
to operate, or which are material to the operation of, its respective
businesses. The property and assets of the Company and its
Subsidiaries, wherever located, are generally in good condition,
ordinary wear and tear excepted.
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4.08 Tax Matters. (a) Except as set forth on the Taxes
Schedule,
(i) Each of the Company and its Subsidiaries has
filed all Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all material respects. All Taxes
owed by any of the Company and its Subsidiaries (whether or not shown
on any Tax Return) have been paid or properly accrued. None of the
Company and its Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return which has not
been timely filed. There are no liens for Taxes on any of the assets of
any of the Company and its Subsidiaries other than Taxes not yet due
and payable.
(ii) To the Company's knowledge, 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.
(iii) There is no dispute or claim concerning any Tax
Liability of any of the Company and its Subsidiaries either claimed or
raised by any authority in writing.
(iv) None of the Company and its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(v) 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 under certain circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G, and
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). None of the Company and its Subsidiaries is a party
to any Tax allocation or sharing agreement. None of the Company and its
Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Company) or (B) has any liability for the Taxes
of any Person (other than any of the Company and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(vi) The unpaid Taxes of the Company and its
Subsidiaries (A) did not, as of the date of the Latest Balance Sheet,
exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the Latest Balance Sheet
(rather than in any notes thereto) and (B) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
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(b) The Taxes Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to any of the Company and
its Subsidiaries for taxable periods ended on or after April 15, 1997,
indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Company has
made available to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and its
Subsidiaries since April 15, 1997.
4.09 Contracts and Commitments.
(a) Except as set forth on the attached Contracts Schedule,
neither the Company nor any Subsidiary is party to any: (i) collective
bargaining agreement or contract with any labor union; (ii) written
bonus, pension, profit sharing, retirement or other form of deferred
compensation plan, other than as described in Section 4.13 or the
schedules relating thereto; (iii) stock purchase, stock option or
similar plan; (iv) written contract for the employment or engagement of
any officer, individual employee or other person on a full-time or
consulting basis; (v) agreement or indenture relating to the borrowing
of money or to mortgaging, pledging or otherwise placing a lien on any
material portion of the Company's or any Subsidiary's assets; (vi)
guaranty of any obligation for borrowed money or other material
guaranty; (vii) lease, license, or agreement under which it is lessee
or licensee of, or holds or operates any personal property owned by any
other party, for which the annual rental exceeds $25,000; (viii) lease
or license agreement under which it is lessor or licensor of or permits
any third party to hold or operate any property, real or personal, for
which the annual rental exceeds $25,000; (ix) contract or group of
related contracts with the same party for the purchase of products or
services, under which the undelivered balance of such products and
services has a selling price in excess of $25,000; (x) contract or
group of related contracts with the same party for the sale of products
or services under which the undelivered balance of such products or
services has a sales price in excess of $25,000; or (xi) contract which
prohibits the Company or any Subsidiary from freely engaging in
business anywhere in the world; (xii) any software license or contract
(excluding licenses for "off the shelf" software which is generally
commercially available), (xiii) contracts under which any rights in
and/or ownership of any material part of the customer base, business or
assets of any of the Company or any of its Subsidiaries, or any shares
or other ownership interests in any of the Company or any of its
Subsidiaries was acquired; and (xiv) any other agreement, arrangement
or contract under which the Company or any of its Subsidiaries has any
ongoing obligations that contemplates or involves the payment or
delivery of cash or other consideration in an amount or having a value
in excess of $25,000 in the aggregate, or contemplates or involves the
performance of services having a value in excess of $25,000 in the
aggregate under which the Company or any of its Subsidiaries has any
ongoing obligations, including without limitation, any escrow
agreements or indemnification agreements.
(b) Buyer either has been supplied with, or has been given
access to, true and correct copies of all written contracts which are
referred to on the Contracts Schedule, together with all amendments,
waivers or other changes thereto.
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(c) Other than under Section 10.15 of the Stock Purchase
Agreement, dated July 17, 1998, by and among the Company, International
Account Systems, Inc., Robert P. Kouwe, Richard L. Kouwe and Milliken &
Michaels, Inc. (the "IAS Purchase Agreement"), neither the Company nor
any Subsidiary is in default under any contract listed on the Contracts
Schedule, except where such default would not have a Material Adverse
Effect. To the knowledge of the Company, each such contract is in full
force and effect in accordance with its terms and in accordance with
any amendments to such contract which have been disclosed or made
available to Buyer. Except as set forth in Contracts Schedule, neither
the Company nor any Subsidiary has given or received written notice of
a material default or notice of termination with respect to any
contract listed in the Contracts Schedule.
4.10 Intellectual Property.
(a) All of the patents, registered trademarks, registered
service marks, registered copyrights, application for any of the
foregoing and material unregistered trademarks, service marks,
copyrights, trade names and corporate names used in the conduct of the
Company's and its Subsidiaries' respective businesses (collectively,
"Intellectual Property") are set forth on the attached Intellectual
Property Schedule. Except as set forth on the Intellectual Property
Schedule (i) the Company or its Subsidiaries owns and possesses all
right, title and interest in and to, or possesses the valid right to
use, any material Intellectual Property; (ii) neither the Company nor
any Subsidiary has received any written notices of infringement or
misappropriation from any third party with respect to any material
Intellectual Property; and (iii) to the Company's knowledge, neither
the Company nor any Subsidiary is currently infringing on intellectual
property rights of any other Person. Neither the Company nor any
Subsidiaries is in violation of any material provisions of any "off the
shelf" software license to which it is a party.
(b) The Company or a Subsidiary owns free and clear of any
liens or has valid licenses or other rights to use all computer
software programs necessary to permit the Company and its Subsidiaries
to conduct their operations as currently conducted. With respect to the
software owned or used by the Company or any Subsidiary, to the
Company's knowledge, 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 do so accurately,
without operating defects, using dates in the 20th and 21st centuries,
and will not be materially adversely affected 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.
4.11 Litigation. Except as set forth on the attached
Litigation Schedule, there are no actions, suits, proceedings or investigations
pending or, to the Company's knowledge, overtly threatened against the Company
or any Subsidiary, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would result in liability to the
Company or any Subsidiary in excess of $50,000 individually or $250,000 in the
aggregate, and neither the Company nor any Subsidiary is subject to any
outstanding judgment, order or decree of any court or governmental body. As to
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each matter described on the Litigation Schedule, accurate and complete copies
of all pertinent pleadings, judgments, orders, correspondence and other legal
documents requested by Buyer have been made available to Buyer. If prior to the
Closing, the Company or any Subsidiary is served with process or receives notice
that an action, suit, proceeding or investigation may be commenced against it,
the Company shall promptly notify Buyer.
4.12 Governmental Consents, etc. Except for the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), no material permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with any of the execution, delivery or performance of
this Agreement by the Company or the consummation by the Company of any other
transaction contemplated hereby.
4.13 Employee Benefit Plans.
(a) Except as listed on the attached Employee Benefits
Schedule, with respect to employees and former employees of the Company
or any of its Subsidiaries, neither the Company nor any Subsidiary
maintains or contributes or has an obligation to contribute to (i) any
nonqualified deferred compensation or retirement plans, (ii) any
qualified defined contribution retirement plans, (iii) any qualified
defined benefit pension plans (the plans described in (ii) and (iii)
are collectively referred to as the "Pension Plans"), and (iv) any
welfare benefit plans and other material fringe benefit plans (the
"Welfare Plans"). The Pension Plans and the Welfare Plans are
collectively referred to as the "Plans." Each of the Pension Plans has
received a favorable determination letter from the Internal Revenue
Service that such Plan is a "qualified plan" under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), the related
trusts are exempt from tax under Section 501(a) of the Code, and the
Company is not aware of any facts or circumstances that would
jeopardize the qualification of such Pension Plan. The Plans comply in
form and in operation in all material respects with the requirements of
the Code and the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) With respect to the Plans, (i) all required contributions
have been made or properly accrued, (ii) other than with respect to any
multiemployer Pension Plans, there are no actions, suits or claims
pending, other than routine claims for benefits, and (iii) other than
with respect to any multiemployer Pension Plans, there have been no
"prohibited transactions" (as that term is defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) The Company has furnished to Buyer true and complete
copies of (i) the most recent determination letter received from the
Internal Revenue Service regarding the Plans, (ii) the latest financial
statements for the Plans and latest prepared actuarial reports and
(iii) copies of all of the documents described in paragraph (a) of this
Section.
(d) None of the Company, its Subsidiaries or, to the Company's
knowledge, any of its directors, officers, employees or any other
"fiduciary," as such term is defined in Section 3 of ERISA, has
committed any material breach of fiduciary responsibility imposed
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by ERISA or any other applicable law with respect to the Plans which
would subject Buyer, its subsidiaries or any of their respective
directors, officers or employees to any material liability under ERISA
or any applicable law.
(e) Neither the Company nor any Subsidiary has incurred any
material liability for any tax or civil penalty imposed by Section 4975
of the Code or Section 502 of ERISA.
4.14 Insurance. The attached Insurance Schedule lists each
material insurance policy maintained by the Company and its Subsidiaries. All of
such insurance policies are in full force and effect, neither the Company nor
any Subsidiary is in material default with respect to its obligations under any
of such insurance policies and all premiums due thereon have been paid (other
than such amounts as are disputed in good faith by the Company or any
Subsidiary). Set forth on the Insurance Schedule is a list of all pending claims
under such policies. The Company has not within the twelve months prior to the
date of this Agreement received any written notice from or on behalf of any
insurance carrier issuing policies or binders relating to or covering the
Company and its Subsidiaries that there will be a cancellation or non-renewal of
existing policies or binders.
4.15 Compliance with Laws. The Company and each Subsidiary is
and has been in compliance in all material respects with all applicable laws,
regulations, orders and judgments of foreign, federal, state and local
governments and all agencies thereof.
4.16 Environmental Compliance and Conditions.
(a) To the Company's knowledge, the Company and its
Subsidiaries have obtained and possesses all material permits, licenses
and other authorizations required under federal, state and local laws
and regulations concerning public health and safety, worker health and
safety, and pollution or protection of the environment in effect on or
prior to the Closing Date, including all such laws and regulations
relating to the emission, discharge, release or threatened release of
any chemicals, petroleum, pollutants, contaminants or hazardous or
toxic materials, substances or wastes into ambient air, surface water,
groundwater or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of any chemicals, petroleum, pollutants, contaminants or
hazardous or toxic materials, substances or waste ("Environmental and
Safety Requirements"), except where the failure to possess such
licenses, permits and authorizations would not have a Material Adverse
Effect.
(b) Except as set forth on the attached Environmental
Compliance Schedule, to the Company's knowledge, the Company and its
Subsidiaries are in compliance with all terms and conditions of all
permits, licenses and authorizations described in 4.16(a) and are also
in compliance with all other Environmental and Safety Requirements and
all written notices or demand letters issued, entered, promulgated or
approved thereunder, except where the failure to comply would not have
a Material Adverse Effect.
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(c) To the Company's knowledge, neither the Company nor any
Subsidiary has received any written notice of violations or liabilities
arising under Environmental and Safety Requirements, including any
investigatory, remedial or corrective obligation, relating to the
Company, its Subsidiaries or their facilities and arising under
Environmental and Safety Requirements.
(d) This Section 4.16 constitutes the sole and exclusive
representations and warranties of the Company with respect to
Environmental Safety Requirements and all other environmental matters.
4.17 Affiliated Transactions. Except as set forth on the
attached Affiliated Transactions Schedule, no officer, director, shareholder or
Affiliate (including, without limitation, DCI) of the Company, any Subsidiary or
any individual in such officer's, director's or shareholder's immediate family
is a party to any material agreement, contract, commitment or transaction with
the Company or its Subsidiaries or has any material interest in any material
property used by the Company or its Subsidiaries.
4.18 Absence of Undisclosed Liabilities. Except (a) for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the Latest Balance Sheet, and (b) as
otherwise disclosed on the Latest Balance Sheet or in the Liabilities Schedule,
since December 31, 1998, neither the Company nor any Subsidiary has incurred any
debt, liabilities or obligations of any nature, whether absolute, accrued,
unmatured, contingent, known or unknown or otherwise, or any unsatisfied
judgments or any leases of personalty or realty or unusual or extraordinary
commitments liabilities or obligations (whether direct, indirect, accrued or
contingent) required to be presented on the Company's balance sheet in
accordance with GAAP.
4.19 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 the Company or any Subsidiary. Except as set forth in the Employee
Relations Schedule, 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 Company,
threatened walkouts, strikes, union organizing efforts or labor disturbances or
any pending arbitration, unfair labor practice, grievance, or other proceeding
of any kind 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 will by reason of any action taken or agreement, contract,
arrangement or plan be liable to any of its employees for severance pay or any
other payments, except as and to the extent set forth in the Employee Relations
Schedule. Since April 15, 1997, the Company and its Subsidiaries have not had an
"employment loss" within the meaning of the Workers' Adjustment and Retraining
Notification Act ("WARN Act") and the regulations thereunder.
4.20 Questionable Payments. To the knowledge of the Company,
within the last two years no current or former director, executive, officer,
representative, agent or employee of the Company or any of its Subsidiaries
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(when acting in such capacity or otherwise on behalf of the Company or any of
its Subsidiaries), (a) has used or is using any corporate funds for any illegal
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) has used or is using any corporate funds for any direct
or indirect unlawful payments to any foreign or domestic government officials or
employees; (c) has violated or is violating any provision of the Foreign Corrupt
Practices Act of 1977, (d) has established or maintained, or is maintaining, any
unlawful or unrecorded fund of corporate monies or other properties; (e) has
made at any time since April 15, 1997, any false or fictitious entries on the
books and records of any of the Company or any of its Subsidiaries; (f) has made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
of any nature using corporate funds or otherwise on behalf of the Company or any
of its Subsidiaries; or (g) made any material favor or gift that is not
deductible for federal income tax purposes using corporate funds or otherwise on
behalf of the Company or any of its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to the Shareholders, HIG Cayman,
the Optionholders and the Company that:
5.01 Organization and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with full corporate power and authority to enter
into this Agreement and perform its obligations hereunder.
5.02 Authorization; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby, including the issuance of
the Warrants, have been duly and validly authorized by all requisite corporate
action, and no other corporate proceedings on its part are necessary to
authorize the execution, delivery or performance of this Agreement. Assuming
that this Agreement is a valid and binding obligation of the Shareholders, HIG
Cayman, the Optionholders and the Company, this Agreement and the Warrants
constitute valid and binding obligations of Buyer, enforceable in accordance
with their terms.
5.03 No Breach. Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws, any applicable law, or rule or
regulation of any governmental authority, or any material agreement or
instrument, or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated in any material
respect by Buyer's execution, delivery or performance of this Agreement,
including the issuance of the Warrants.
5.04 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act, Buyer is not required to submit any material
notice, report or other filing with any governmental authority in connection
with the execution, delivery or performance by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
Person is required to be obtained by Buyer in connection with its execution,
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delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. The issuance of the Warrants by Buyer does not
require registration under the Securities Act of 1933, as amended (the "Act"),
and is otherwise in compliance with all applicable federal, state or local laws.
5.05 Litigation. There are no actions, suits or proceedings
pending or, to the Buyer's knowledge, overtly threatened against or affecting
Buyer at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would materially adversely affect
Buyer's performance under this Agreement or the consummation of the transactions
contemplated hereby.
5.06 Brokerage. Except for the fees and expenses of Donaldson,
Lufkin & Jenrette (which shall be paid by Buyer), there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Buyer.
5.07 Investment Representation. Buyer is purchasing the
Shares, the DCI Shares and the Options for its own account with the present
intention of holding such securities for investment purposes and not with a view
to or for sale in connection with any public distribution of such securities in
violation of any federal or state securities laws. Buyer is an "accredited
investor" as defined in Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
5.08 Financing. Buyer has and shall have at the Closing
sufficient cash and available credit facilities (and has provided evidence
thereof satisfactory to the Shareholder Representative) to pay the full
consideration payable to the Shareholders and the Optionholders hereunder, to
make all other necessary payments by it in connection with the purchase of the
Shares, the DCI Shares and the Options and to pay all of its related fees and
expenses.
ARTICLE VI
PRE-CLOSING COVENANTS
---------------------
6.01 Conduct of the Business.
(a) From the date hereof until the Closing Date, the Company
shall use its, and the Shareholders, HIG Cayman and the Optionholders
shall cause the Company and its Subsidiaries to use their, commercially
reasonable efforts to carry on its and their businesses according to
their ordinary course of business and substantially in the same manner
as heretofore conducted. The Company and its Subsidiaries will use all
commercially reasonable efforts to preserve intact their business
organization, to keep available the services of their officers and
employees and to maintain satisfactory relationships with customers,
suppliers and others having business relationships with them and will
take no action which would materially adversely affect the ability of
the parties to consummate the transactions contemplated by this
Agreement, or the timing thereof; provided that, the foregoing
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notwithstanding, the Company may use all available cash in excess of
working capital requirements to repay any Indebtedness and satisfy its
obligations under those Stock Appreciation Rights Agreements described
in Section 1.04(b)(vi) hereof prior to the Closing. The Company shall
consult with Buyer as to the management of business and affairs of the
Company and its Subsidiaries at such reasonable times as Buyer may
reasonably request.
(b) From the date hereof until the Closing Date, except as
otherwise provided for by this Agreement or consented to in writing by
Buyer, the Company shall not and shall not permit any Subsidiary to,
and the Shareholders, HIG Cayman, and the Optionholders shall not
permit the Company or any Subsidiary to, (i) issue, sell or transfer
any shares of its or any Subsidiary's capital stock or other equity
securities, (ii) issue, sell or transfer any securities convertible
into, or options with respect to, warrants to purchase or rights to
subscribe for any shares of its or any Subsidiary's capital stock or
other equity securities; (iii) effect any recapitalization,
reclassification, stock dividend, stock split or like change in its
capitalization; (iv) amend its or any Subsidiary's certificate or
articles of incorporation or bylaws; (v) make any redemption or
purchase of any shares of its or any Subsidiary's capital stock; (vi)
borrow any amount (other than pursuant to the Company's and its
Subsidiaries' existing credit facilities) or incur or become subject to
any material liabilities (other than liabilities incurred in the
ordinary course of business and consistent with past practice,
liabilities under contracts entered into in the ordinary course of
business and consistent with past practice and borrowings from banks
(or similar financial institutions) necessary to meet ordinary course
working capital requirements and which in any event do not exceed an
aggregate of $250,000); (vii) mortgage, pledge or subject to any lien,
charge or other encumbrance, any material portion of its assets, except
Permitted Liens; (viii) sell, assign, lease, license or transfer any
material portion of its tangible assets, except in the ordinary course
of business and consistent with past practice; (ix) sell, assign,
lease, license or transfer any patents, trademarks, trade names,
copyrights, trade secrets or other intangible assets, except in the
ordinary course of business and consistent with past practice; (x)
waive any rights of material value; (xi) issue, sell or transfer any
bonds or debt securities;(xii) make any material capital expenditures
or commitments in excess of amounts previously budgeted therefor;
(xiii) enter into any material transaction or contract, except in the
ordinary course of business and consistent with past practice; (xiv)
assume, guarantee, endorse or otherwise become liable or responsible
for the obligations of any Person except in the ordinary course of
business and consistent with past practice; (xv) increase in any manner
the compensation of any of its directors, officers or employees except
in the ordinary course of business, consistent with past practice as
part of their regularly scheduled review; (xvi) pay or agree to pay any
pension, retirement allowance or other employee benefit not required,
or enter into or amend or agree to enter into or amend any agreement or
arrangement with any of its directors, officers or employees, whether
past or present, relating to any such pension, retirement allowance or
other employee benefit, except as required under currently existing
agreements, plans or arrangements; (xvii) grant any severance or
termination pay to, or enter into or amend any employment, severance or
change in control agreement with, any of its directors, officers or
employees; or (xviii) enter into or become obligated under any
collective bargaining agreement or any agreement with any labor union
or association representing employees, pension plan, welfare plan,
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multiemployer plan, employee benefit plan, benefit arrangement, or
similar plan or arrangement, which was not in existence on the date
hereof, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay, retirement or other benefit plan, agreement or
arrangement, or employment or consulting agreement with or for the
benefit of any Person, or amend any of such plans or any of such
agreements in existence on the date hereof; (xix) make any change in
the accounting methods or accounting practices followed by the Company
and its Subsidiaries, except as required by GAAP; (xx) settle any
action, suit, claim, investigation or proceeding (whether legal,
administrative or arbitrative) in excess of $100,000 other than any
action, suit, claim, investigation or proceeding involving claim
against a predecessor of the Company or any Subsidiary; (xxi) merge
with or into or consolidate with any other Person (other than between
Subsidiaries) or make any acquisition of all or any part of the assets
or capital stock or business of any other Person except for tangible
property acquired in the ordinary course of business and consistent
with past practice; or (xxii) agree or become legally bound to do any
of the foregoing.
6.02 Access to Books and Records. From the date hereof until
the Closing Date, the Company shall provide Buyer and its authorized
representatives ("Buyer's Representatives") with full access at all reasonable
times and upon reasonable notice to the offices, properties, personnel, books
and records of the Company and its Subsidiaries in order for Buyer to have the
opportunity to make such investigation as it shall reasonably desire to make of
the affairs of the Company and its Subsidiaries. Buyer acknowledges that it
remains bound by the Confidentiality Agreement, dated January 28, 1999, with the
Company (the "Confidentiality Agreement").
6.03 Regulatory Filings. Promptly after the date hereof, the
Company and its appropriate Affiliates shall make or cause to be made all
filings and submissions (which shall be complete in all respects) under the HSR
Act and any other material laws or regulations applicable to the Company and its
Subsidiaries for the consummation of the transactions contemplated herein. The
Company and its appropriate Affiliates shall use their reasonable best efforts
to obtain termination of the waiting period or any review under the HSR Act. The
Company shall coordinate and cooperate with Buyer in exchanging such information
and assistance as Buyer may reasonably request in connection with all of the
foregoing.
6.04 Conditions. The Company, HIG Cayman, each Shareholder and
each Optionholder shall use commercially reasonable efforts to cause the
conditions set forth in Section 2.01 to be satisfied and to consummate the
transactions contemplated herein; provided that none of the Company, any
Subsidiary, any Shareholder, HIG Cayman or any Optionholder shall be required to
expend any funds to obtain any third-party or governmental consents described in
Section 2.01(c) or (d).
6.05 Exclusive Dealing. During the period from the date of
this Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 8.01, each Shareholder shall not take or permit any other
Person on its behalf to take, and the Company shall not take, any action to
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any Person (other than Buyer and Buyer's Representatives)
concerning any purchase of the Shares, any merger involving the Company, any
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sale of substantially all of the assets of the Company or similar transaction
involving the Company (other than assets sold in the ordinary course of
business) except to the extent not prohibited by Section 6.01(b).
6.06 Consulting Agreement. On or before the Closing Date, the
Company (a) shall pay all of its obligations under that certain Consulting and
Noncompetition Agreement dated April 15, 1997 (the "Consulting Agreement") by
and between the Company and Michael G. Sanderson and shall have received a
release signed by Michael G. Sanderson acknowledging the satisfaction in full of
all of such obligations or (b) shall deliver to Buyer evidence that HIG Cayman
or one of its Affiliates has assumed such obligations in full and a release
signed by Michael G. Sanderson releasing the Company (as operated by Buyer after
the Closing) and Buyer from liability thereunder. On or before the Closing Date,
the Company shall have terminated the Consulting Agreement, dated April 15,
1997, by and between Milliken & Michaels, Inc. and H.I.G. Capital Management,
Inc. and shall have received a release signed by H.I.G. Capital Management, Inc.
acknowledging such termination.
6.07 Code Section 280G Consents. As of or prior to the
Closing, the Company shall have received the consent of the Shareholders and
such other documentation necessary to avoid the application of Code Section
280G.
ARTICLE VII
COVENANTS OF BUYER
------------------
7.01 Access to Books and Records. From and after the Closing,
Buyer shall, and shall cause the Company to, provide the Shareholder
Representative, the Shareholders and their authorized representatives with
reasonable access (for the purpose of examining and copying), during normal
business hours, to the books and records of the Company and its Subsidiaries
with respect to periods prior to the Closing Date in connection with any matter
whether or not relating to or arising out of this Agreement or the transactions
contemplated hereby. Unless otherwise consented to in writing by the Shareholder
Representative, the Company shall not, for a period of five years following the
Closing Date, destroy, alter or otherwise dispose of any books and records of
the Company, or any portions thereof, relating to periods prior to the Closing
Date without first offering to surrender to the Shareholder Representative (on
behalf of the Shareholders) such books and records or such portions thereof.
7.02 Notification. From the date hereof until the Closing
Date, Buyer shall disclose to the Company and the Shareholder Representative in
writing any material variances from Buyer's representations and warranties
contained in Article V promptly upon discovery thereof.
7.03 Director and Officer Liability and Indemnification. For a
period of five years after the Closing, Buyer shall not, and shall not permit
the Company or any of its Subsidiaries, or their respective successors, to
amend, repeal or modify any provision in the Company's or any of its
Subsidiaries' certificate or articles of incorporation or bylaws as in existence
on the date hereof relating to the exculpation or indemnification of any
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officers and directors (unless required by law), it being the intent of the
parties that the officers and directors of the Company and its Subsidiaries
shall continue to be entitled to such exculpation and indemnification to the
full extent of the law.
7.04 Regulatory Filings. Promptly after the date hereof, Buyer
shall make or cause to be made all filings and submissions (which shall be
complete in all respects) under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated herein, and Buyer shall be responsible for all filing
fees under the HSR Act. Buyer shall use its reasonable best efforts to obtain
termination of the waiting period or any review under the HSR Act. Buyer shall
coordinate and cooperate with the Company in exchanging such information and
assistance as the Company may reasonably request in connection with all of the
foregoing.
7.05 Conditions. Buyer shall use commercially reasonable
efforts to cause the conditions set forth in Section 2.02 to be satisfied and to
consummate the transactions contemplated herein.
7.06 Contact with Customers and Suppliers. Prior to the
Closing, Buyer and Buyer's Representatives shall contact and communicate with
the employees, customers and suppliers of the Company and its Subsidiaries in
connection with the transactions contemplated hereby only with the prior written
consent of the Company or the Shareholder Representative; provided, however,
that Buyer and Buyer's Representatives may contact any of the Key Employees at
reasonable times and upon reasonable notice.
ARTICLE VIII
TERMINATION
-----------
8.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Buyer and the Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders);
(b) by Buyer, if there has been a material violation or breach
by the Company, the Shareholders, HIG Cayman or the Optionholders of
any covenant, representation or warranty contained in this Agreement
which has prevented the satisfaction of any condition to the
obligations of Buyer at the Closing and such violation or breach has
not been waived by Buyer or, in the case of a covenant breach, cured by
the Company, the Shareholders, HIG Cayman or the Optionholders within
ten days after written notice thereof from Buyer;
(c) by the Shareholder Representative, if there has been a
material violation or breach by Buyer of any covenant, representation
or warranty contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of the Shareholders,
HIG Cayman or the Optionholders at the Closing and such violation or
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breach has not been waived by the Shareholder Representative or, with
respect to a covenant breach, cured by Buyer within ten days after
written notice thereof by the Shareholder Representative, any
Shareholder, HIG Cayman or any Optionholder (provided that the failure
to deliver the Purchase Price at the Closing as required hereunder
shall be subject to cure hereunder unless otherwise agreed to in
writing by the Shareholder Representative); or
(d) by either Buyer or the Shareholder Representative if the
transactions contemplated hereby have not been consummated by May 31,
1999 (or in the event that the Federal Trade Commission or the
Department of Justice issues a second request for information based on
the Buyer's or the Company's and its Affiliates' filings under the HSR
Act, June 30, 1999); provided that (i) neither Buyer nor the
Shareholder Representative shall be entitled to terminate this
Agreement pursuant to this Section 8.01(d) if such Person's (or the
Company's, any Shareholder's, HIG Cayman's or any Optionholder's, in
the case of the Shareholder Representative) knowing or willful breach
of this Agreement has prevented the consummation of the transactions
contemplated hereby.
Notwithstanding the foregoing, no party shall be entitled to terminate this
Agreement pursuant to Sections 8.01(b), (c) or (d) above if such party is in
breach in any material respect of any covenant, representation or warranty made
by it in this Agreement.
8.02 Effect of Termination. In the event of termination of
this Agreement by either Buyer or the Shareholder Representative as provided
above, the provisions of this Agreement shall immediately become void and of no
further force and effect (other than this Section 8.02, Article XII and Article
XIII hereof which shall survive the termination of this Agreement), and there
shall be no liability on the part of any of Buyer, the Company, the
Shareholders, HIG Cayman or the Optionholders to one another, except for knowing
or willful breaches of this Agreement prior to the time of such termination.
ARTICLE IX
SURVIVAL
--------
9.01 Survival of Representations and Warranties. The
representations and warranties set forth in this Agreement and in any
certificates delivered at the Closing in connection with this Agreement shall
terminate at the Closing and shall be of no further force or effect.
ARTICLE X
SHAREHOLDER REPRESENTATIVE
--------------------------
10.01 Designation; Reliance. HIG Cayman (the "Shareholder
Representative") is hereby designated by each of the Shareholders and each of
the Optionholders to serve as the representative of the Shareholders and the
Optionholders with respect to the matters expressly set forth in this Agreement
to be performed by the Shareholder Representative. Buyer shall be entitled
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to rely on its communications with or documents signed by the Shareholder's
Representative (on behalf of the Shareholders, HIG Cayman and the Optionholders)
as if such communications were made by or such documents were signed by the
Shareholders, HIG Cayman and the Optionholders, and the Shareholders, HIG Cayman
and the Optionholders shall hold Buyer harmless from any liability it incurs due
to such reliance.
10.02 Authority. Each of the Shareholders, HIG Cayman and the
Optionholders, by the execution of this Agreement, hereby irrevocably appoints
the Shareholder Representative as the agent, proxy and attorney-in-fact for such
Shareholders and such Optionholders for all purposes of this Agreement
(including the full power and authority on such Shareholder's, HIG Cayman's and
such Optionholder's behalf (i) to consummate the transactions contemplated
herein; (ii) to withhold $250,000 of the Purchase Price (the "Holdback Amount")
on behalf of the Shareholders (other than DCI), the Optionholders and HIG Cayman
in order to satisfy any obligations owing under Section 1.03 and to withhold
such greater amounts necessary to pay such Shareholder's HIG Cayman and such
Optionholder's expenses incurred in connection with the negotiation and
performance of this Agreement (whether incurred on or after the date hereof);
(iii) to disburse any funds received hereunder to such Shareholder, HIG Cayman
or Optionholder and each other Shareholder or Optionholder; (iv) to endorse and
deliver any certificates or instruments representing the Shares and the Options
and execute such further instruments of assignment as Buyer shall reasonably
request; (v) to execute and deliver on behalf of such Shareholder, HIG Cayman
and such Optionholder any amendment or waiver hereto; (vi) to take all other
actions to be taken by or on behalf of such Shareholder, HIG Cayman or such
Optionholder in connection herewith; and (vii) to do each and every act and
exercise any and all rights which HIG Cayman, such Shareholder or the
Shareholders or such Optionholder or the Optionholders collectively are
permitted or required to do or exercise under this Agreement). Each of the
Shareholders, HIG Cayman and each of the Optionholders agrees that such agency
and proxy are coupled with an interest, are therefore irrevocable without the
consent of the Shareholder Representative and shall survive the death,
incapacity, bankruptcy, dissolution or liquidation of any Shareholder or
Optionholder. After the obligations, if any, of the Shareholders, HIG Cayman and
the Optionholders have been satisfied under Section 1.03 and the expenses and
amounts referred to in (ii) above have been paid in full, the excess of the
Holdback Amount over the amounts, if any, paid by the Shareholder Representative
pursuant to clause (ii) above (the "Excess Amount") shall be promptly paid by
the Shareholder Representative to the Shareholders (other than DCI), HIG Cayman
and the Optionholders in such amounts as such Shareholder, HIG Cayman or
Optionholder would have received at the Closing if the Excess Amount was added
to the Purchase Price in calculating the Closing Shareholder Consideration, the
HIG Consideration and the Closing Optionholder Consideration
10.03 Exculpation. Neither the Shareholder Representative nor
any agent employed by it shall incur any liability to any Shareholder or
Optionholder by virtue of the failure or refusal of the Shareholder
Representative for any reason to consummate the transactions contemplated hereby
or relating to the performance of its other duties hereunder, except for actions
or omissions constituting fraud or bad faith.
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ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS
-----------------------------------
11.01 Disclosure Generally. If and to the extent any
information required to be furnished in any Schedule is contained in this
Agreement or in any other Schedule attached hereto, such information shall be
deemed to be included in all Schedules in which the information is required to
be included provided that such information is relevant and responsive to such
other Schedules. The inclusion of any information in any Schedule attached
hereto shall not be deemed to be an admission or acknowledgment by the Company,
the Shareholders, HIG Cayman or the Optionholders, in and of itself, that such
information is material to or outside the ordinary course of the business of the
Company.
11.02 Acknowledgment by Parties.
(a) Buyer acknowledges that it has conducted to its
satisfaction, an independent investigation and verification of the
financial condition, results of operations, assets, liabilities,
properties and projected operations of the Company and, in making its
determination to proceed with the transactions contemplated by this
Agreement, Buyer has relied on the results of its own independent
investigation and verification and the representations and warranties
of the Company and the Shareholders, HIG Cayman and the Optionholders
expressly and specifically set forth in this Agreement, including the
Schedules attached hereto. SUCH REPRESENTATIONS AND WARRANTIES BY THE
COMPANY, THE SHAREHOLDERS, HIG CAYMAN AND THE OPTIONHOLDERS CONSTITUTE
THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
THE SHAREHOLDERS, HIG CAYMAN AND THE OPTIONHOLDERS TO BUYER IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND BUYER
UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT
LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL
CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY)
ARE SPECIFICALLY DISCLAIMED BY THE COMPANY, THE SHAREHOLDERS, HIG
CAYMAN AND THE OPTIONHOLDERS.
(b) The Company, the Shareholders, HIG Cayman and the
Optionholders acknowledge that notwithstanding the right of Buyer to
investigate the business, assets and financial condition of the Company
and its Subsidiaries, and notwithstanding any knowledge obtained or
obtainable by Buyer as a result of such investigation, Buyer has the
unqualified right to rely upon, and has relied upon, each of the
representations and warranties made by the Company, the Shareholders,
HIG Cayman and the Optionholders in this Agreement or pursuant hereto.
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(c) The parties acknowledge that each representation and
warranty made in this Agreement or pursuant hereto is independent of
all other representations and warranties made by the same parties,
whether or not covering related or similar matters, and must be
independently and separately satisfied. Exceptions or qualifications to
any such representation or warranty shall not be construed as
exceptions or qualifications to any other representation or warranty.
11.03 Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and the Shareholders, HIG Cayman
and the Optionholders for certain tax matters following the Closing Date:
(a) Responsibility for Filing Tax Returns. Buyer shall prepare
or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiaries for all periods ending prior to or
including the Closing Date which have not yet been filed as of the
Closing Date. At least 15 days prior to the date on which each such Tax
Return relating to the period from January 1, 1999 until the Closing is
filed, Buyer shall submit such Tax Return to the Shareholder
Representative for the Shareholder Representative's review and
approval, which approval may be withheld if the filing of such Tax
Return, as prepared by Buyer, is reasonably expected by the Shareholder
Representative to adversely affect the Tax liability of any
Shareholder, HIG Cayman or any Optionholder.
(b) Cooperation on Tax Matters.
(i) Buyer, the Company, its Subsidiaries, the
Shareholders, HIG Cayman and the Optionholders shall cooperate fully,
as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon any other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. The Company, its Subsidiaries, the Shareholders, HIG Cayman
and the Optionholders agree (A) to retain all books and records with
respect to Tax matters pertinent to the Company and its Subsidiaries
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Buyer or the Company, any extensions of the respective
taxable periods), and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, the Company and its Subsidiaries or the Company, as the case
may be, shall allow the other party to take possession of such books
and records.
(ii) Buyer, the Shareholders, HIG Cayman and the
Optionholders further agree, upon request, to use their best efforts to
obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce
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or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(iii) Buyer, the Shareholders, HIG Cayman and the
Optionholders further agree, upon request, to provide the other party
with all information that either party may be required to report
pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(c) Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving the Company, its
Subsidiaries and DCI shall be terminated as of the Closing Date and,
after the Closing Date, the Company and its Subsidiaries shall not be
bound thereby or have any liability thereunder.
(d) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) ("Transfer Taxes") incurred in connection with
this Agreement (including any realty transfer or similar tax imposed in
any states or subdivisions), shall be paid by Buyer when due, and Buyer
will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees. The Shareholders,
HIG Cayman and the Optionholders shall reimburse Buyer for 50% of any
such Transfer Taxes.
(e) Tax Benefits Associated with Sale Transactions. The
parties hereto agree that any Tax refunds attributable to the sale of
the Options pursuant to Section 1.02 hereof and attributable to the
satisfaction of its obligations under the Consulting Agreement pursuant
to Section 6.06 shall be for the benefit of the Shareholders and the
Optionholders. Buyer shall prepare, or shall cause the Company to
prepare, all Tax Returns in a manner that maximizes the present value
of such Tax refunds (including, without limitation, (i) claiming
deductions attributable to the Sale Transactions in the Company's Tax
Return for the taxable year that includes or, if applicable, ends on
the Closing Date, (ii) carrying back any net operating losses resulting
from such deductions to prior taxable years to the extent permitted by
applicable Tax law, and (iii) filing as soon as is practicable any
claims for Tax refunds attributable to such deductions to which the
Company is entitled with respect to (A) estimated Taxes paid for the
taxable period including or ending on the Closing Date and/or (B) Taxes
paid for any period to which any net operating losses referred to in
preceding clause (ii) are carried back), and shall permit the
Shareholder Representative to review the portion of any such Tax Return
which relates to such carrybacks and Tax refund claims prior to the
filing of such Tax Return. Buyer shall pay over to each Shareholder and
Optionholder, within fifteen (15) days after receipt or entitlement
thereto, the additional amount which such Shareholder or Optionholder
would have received at the Closing if the aggregate amount of such Tax
refunds had been added to the Purchase Price in the calculation of the
Closing Shareholder Consideration and the Closing Optionholder
Consideration.
11.04 Further Assurances. From time to time, as and when requested by
any party hereto and at such party's expense, any other party shall execute and
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deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as the requesting party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
11.05 Restrictive Covenants of HIG.
(a) HIG-DCI Investments, L.P. and H.I.G. Investment Group,
L.P. (collectively, "HIG"), expressly acknowledge that:
(i) NCO Business. The accounts receivable collection
business conducted by the Company and any of its Subsidiaries (after the
Closing, referred to as the "NCO Companies") involve the provision of accounts
receivable collection business services using proprietary and confidential
systems and information.
(ii) Competitive Nature of Business. The business of
the Company and any of its Subsidiaries is highly competitive, is marketed
throughout the United States, Canada and the United Kingdom and requires long
sales "lead times" often exceeding one year. The NCO Companies expend
substantial time and money, on an ongoing basis, to train their employees,
maintain and expand their customer base, and improve and develop their products
and services.
(iii) Access to Information. During the period that
HIG Cayman was a shareholder of the Company, it had access to proprietary and
confidential property, knowledge and information of the Business of the Company
and any of its Subsidiaries which, after Closing, shall be proprietary and
confidential property, knowledge and information of the NCO Companies. Such
property, knowledge and information must be kept in strict confidence to protect
NCO's business and maintain the NCO Companies' competitive positions in the
marketplace, and such property, knowledge and information would be useful to
competitors of the NCO Companies for indefinite periods of time.
(iv) Basis for Covenants. The covenants of Section
11.05 (the "Covenants") are a material part of this Agreement and are an
integral part of the obligations of HIG hereunder; the Covenants are supported
by good and adequate consideration; and the Covenants are reasonable and
necessary to protect the legitimate business interests of the NCO Companies.
(v) Nondisclosure Covenants. At all times after the
Closing Date, except with NCO's prior written consent, HIG 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 Company or any of its
Subsidiaries, no matter when or how such knowledge or information was obtained,
including without limitation (a) any information concerning the conduct and
details of the business; (b) the identity of customers and prospects for which
proposals have been submitted as of the Closing Date, 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)
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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.
(b) Noncompetition and Noninterference Covenants.
(i) Competing Business Restrictions. During the
period beginning on the Closing Date and ending on the first
anniversary of the Closing Date (the "Noncompetition Term") of the
Closing Date, HIG shall not directly or indirectly 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 engages in
the collection of commercial accounts receivable
(ii) Noninterference. During the period beginning on
the Closing Date and ending on the second anniversary of the Closing
Date (the "Noninterference Term"), HIG shall not directly or indirectly
solicit for employment as salesman, agent, representative or
consultant, any employee of the NCO Companies employed by the Company
or any of its Subsidiaries in any management or supervisory capacity as
of the Closing Date or direct any of its affiliates to state any
disparaging information regarding the NCO Companies to any of the
Company's or its Subsidiaries' customers, business prospects or
suppliers; provided however, that this clause (ii) shall not apply to
any portfolio companies in which HIG has invested and, provided
further, that HIG shall not be precluded from hiring any person who (a)
initiates discussions regarding employment with HIG without any direct
solicitation by HIG, (b) responds to any public advertisement placed by
HIG or (c) has been terminated by or resigned from the NCO Companies
prior to the commencement of employment discussions between HIG and
such person.
(c) Nonsolicitation. During the Noninterference Term, HIG
shall not directly or indirectly solicit any employee of the Company or
any of its Subsidiaries who becomes an employee of the NCO Companies on
the Closing Date to become employees or independent contractors of HIG
or any of its affiliates; provided however, that this clause (d) shall
not apply to any portfolio companies in which HIG has invested and,
provided further, that HIG shall not be precluded from hiring any
person who (a) initiates discussions regarding employment with HIG
without any direct solicitation by HIG, (b) responds to any public
advertisement placed by HIG or (c) has been terminated by or resigned
from the NCO Companies prior to the commencement of employment
discussions between HIG and such person.
(d) Certain Exclusions. Confidential and proprietary property,
knowledge and information of the NCO Companies shall not include any
information that is now known by or readily available to the general
public, nor shall it include any information that in the future becomes
known by or readily available to the general public other than as a
result of any breach of the Covenants of this Agreement. The ownership
by HIG of not more than five percent (5%) of the outstanding securities
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of any public company shall not, by itself, constitute a breach of the
Covenants of this Section 11.05, even if such public company competes
with the NCO Companies.
(e) Enforcement of Covenants. HIG expressly acknowledges that
it would be extremely difficult to measure the damages that might
result from any breach of the Covenants, and that any breach of the
Covenants will result in irreparable injury to the NCO Companies for
which money damages could not adequately compensate. If a breach of the
Covenants occurs, then the NCO Companies shall be entitled, in addition
to all other rights and remedies that they may have at law or in
equity, to have an injunction issued by any competent court enjoining
and restraining HIG and all other Persons involved therein from
continuing such breach. The existence of any claim or cause of action
that HIG or any such other Person may have against any of the NCO
Companies shall not constitute a defense or bar to the enforcement of
any of the Covenants. If the NCO Companies must resort to litigation to
enforce any of the Covenants that has a fixed term, then such term
shall be extended for a period of time equal to the period during which
a breach of such Covenant was occurring, beginning on the date of a
final court order (without further right of appeal) holding that such a
breach occurred or, if later, the last day of the original fixed term
of such Covenant.
(f) Scope of Covenants. If any Covenant, or any part thereof,
or the application thereof, is construed to be invalid, illegal or
unenforceable, then the other Covenants, or the other portions of such
Covenant, or the application thereof, shall not be affected thereby and
shall be enforceable without regard thereto. If any of the Covenants is
determined to be unenforceable because of its scope, duration,
geographical area or other factor, then the court making such
determination shall have the power to reduce or limit such scope,
duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
11.06 Indemnification. Buyer shall indemnify the Shareholders,
HIG Cayman, the Optionholders and the Shareholders' and HIG Cayman's direct and
indirect shareholders, partners, officers, directors, employees, agents,
representatives, successors and permitted assigns and save and hold each of them
harmless against and pay on behalf of or reimburse such Persons as and when
incurred for any loss, liability, demand, claim, action, cause of action, cost,
damage, fine or expense (including reasonable attorneys' fees), which any such
Person may suffer, sustain or become subject to, as a result of, in connection
with, relating to the disclosure of the IAS Purchase Agreement and related
documentation to the Buyer.
11.07 Cefalu Non-Competition. Thomas V. Cefalu, III ("Cefalu")
hereby acknowledges that, during and solely as a result of his past employment
with the Company and his continued employment by NCO Financial Systems, Inc.
("NCO"), he will have access to confidential information and business and
professional contacts. In consideration of such special and unique opportunities
afforded by NCO to Cefalu as a result of Cefalu's employment, the other benefits
referred to in that certain Employment Agreement, dated April 16, 1999, between
NCO Financial Systems, Inc. and Thomas V. Cefalu, III (the "Employment
Agreement") and the benefits conferred on Cefalu hereunder, Cefalu hereby
agrees, except as agreed to in writing by NCO to the contrary, as follows:
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(a) For the duration of the Restricted Period (as defined in the
Employment Agreement), Cefalu shall not directly or indirectly (A) engage in (as
a principal, shareholder, partner, director, officer, agent, employee,
consultant or otherwise) or be financially interested in any business operating
within the United States (the "Restricted Area")which is involved in or any
other business activities which are the same as, similar to or in competition
with the business or with any business activities carried on by NCO, or being
definitely planned by NCO, at the time of the termination of Cefalu's
employment; provided however, that nothing contained in this Section 11.07 shall
prevent Cefalu from holding for investment no more than three percent (3%) of
any class of equity securities of a company whose securities are publicly traded
on a national securities exchange or in a national market system; or (B) induce
or attempt to influence any employee, customer, independent contractor or
supplier of NCO to terminate employment or any other relationship with NCO.
(b) Cefalu shall not use for Cefalu's personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than NCO, any "Confidential
Information" which term shall mean any information regarding the business
methods, business policies, policies, procedures, techniques, research or
development projects or results, historical or projected financial information,
budgets, trade secrets, or other knowledge or processes of or developed by NCO
or any names and addresses of customers or clients or any data on or relating to
past, present or prospective NCO customers or clients or any other confidential
information relating to or dealing with the business operations, or activities
of NCO as such relate specifically to commercial collection services, made known
to Cefalu or learned or acquired by Cefalu while in the employ of NCO, but
Confidential Information shall not include information otherwise lawfully known
generally by or readily accessible to the trade or the general public. All
memoranda, notes, lists, records, files, documents and other papers and other
like items (and all copies, extracts and summaries thereof) made or compiled by
Cefalu or made available to Cefalu concerning the business of NCO shall be NCO's
property and shall be delivered to NCO promptly upon the termination of Cefalu's
employment with NCO or at any other time on request. The foregoing provisions of
this Section11.07(b) shall apply during and after the period when Cefalu is an
employee of NCO and shall be in addition to (and not a limitation of) any
legally applicable protections of NCO's interest in confidential information,
trade secrets and the like. At the termination of Cefalu's employment with NCO,
Cefalu shall return to NCO all copies of Confidential Information in any medium,
including computer tapes and other forms of data storage. Notwithstanding the
foregoing, Cefalu may retain records relevant to the filing of Cefalu's personal
income taxes and NCO shall grant Cefalu reasonable access during normal business
hours, to business records of NCO relevant to Cefalu's discharge of Cefalu's
duties as an officer of NCO or other legitimate non-competitive business
purpose. Notwithstanding the requirements of this Section 11.07(b), should
Cefalu leave his employment and work in a position that does not violate any of
the restrictions contained in this Section, then Cefalu shall have the right to
use Confidential Information, provided, however, that such right shall not
permit Cefalu to remove any documents or materials from NCO that are deemed
Confidential Information.
(c) Cefalu acknowledges that the restrictions contained in the
foregoing clauses (a) and (b) above, in view of the nature of the business in
which NCO is engaged, are reasonable and necessary in order to protect the
legitimate interests of NCO, that their enforcement will not impose a hardship
on Cefalu or significantly impair Cefalu's ability to earn a livelihood, and
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that any violation thereof would result in irreparable injuries to NCO. Cefalu
therefore acknowledges that, in the event of Cefalu's violation of any of these
restrictions, NCO shall be entitled to obtain from any court of competent
jurisdiction preliminary and permanent injunctive relief as well as damages and
an equitable accounting of all earnings, profits and other benefits arising from
such violation, which rights shall be cumulative and in addition to any other
rights or remedies to which NCO may be entitled.
(d) If the Restricted Period or the Restricted Area specified in
Subsections (a) and (b) above should be adjudged unreasonable in any proceeding,
then the period of time shall be reduced by such amount or the area shall be
reduced by the elimination of such portion or both such reductions shall be made
so that such restrictions may be enforced for such time and in such area as is
adjudged to be reasonable. If Cefalu violates any of the restrictions contained
in the foregoing clauses (a) or (b), the Restricted Period shall be extended by
a period equal to the length of time from the commencement of any such violation
until such time as such violation shall be cured by Cefalu to the satisfaction
of NCO. NCO shall have the right and remedy to require Cefalu to account for and
pay over to NCO all compensation, profits, monies, accruals, increments or other
benefits derived or received by Cefalu as the result of any transactions
constituting a breach of this Section 11.07, and Cefalu shall account for and
pay over such amounts to NCO upon NCO's request therefor. Cefalu hereby
expressly consents to the jurisdiction of any court within the Commonwealth of
Pennsylvania to enforce the provisions of this Section 11.07, and agrees to
accept service of process by mail relating to any such proceeding. NCO may
supply a copy of Section 11.07 of this Section to any future or prospective
employer of Cefalu or to any person to whom Cefalu has supplied information if
NCO determines in good faith that there is a reasonable likelihood that Cefalu
has violated or will violate such Section.
ARTICLE XII
DEFINITIONS
-----------
12.01 Definitions. For purposes hereof, the following terms,
when used herein with initial capital letters, shall have the respective
meanings set forth herein:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person.
For the purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.
"Cash On Hand" means all cash and cash equivalents of the
Company and its Subsidiaries minus all cash and cash equivalents owed by the
Company and its Subsidiaries to their customers (whether held in trust or
otherwise).
"GAAP" means United States generally accepted accounting
principles consistently applied.
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"Indebtedness" means, without duplication, all obligations of
the Company for borrowed money set forth on the Indebtedness Schedule and any
accrued interest, prepayment premiums or penalties related thereto.
"Net Working Capital" means (i) Working Capital Assets minus
(ii) Working Capital Liabilities.
"Permitted Liens" means (i) statutory liens for current Taxes
or other governmental charges not yet due and payable or the amount or validity
of which is being contested in good faith by appropriate proceedings by the
Company and for which appropriate reserves have been established in accordance
with GAAP; (ii) mechanics', carriers', workers', repairers' and similar
statutory liens arising or incurred in the ordinary course of business for
amounts which are not delinquent and which are not, individually or in the
aggregate, significant; (iii) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Leased
Real Property which are not violated by the current use and operation of the
Leased Real Property; and (iv) covenants, conditions, restrictions, easements
and other similar matters of record affecting title to the Leased Real Property
which do not materially impair the occupancy or use of the Leased Real Property
for the purposes for which it is currently used or proposed to be used in
connection with the Company's business.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiaries" means Milliken & Michaels, Inc., a Delaware
corporation, Metropolitan Consumer Collection Services, Inc., a Delaware
corporation, and International Account Systems, Inc., a Florida corporation.
"Tax" or "Taxes" means any federal, state, local or foreign
income, gross receipts, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, ad valorem/personal property,
stamp, excise, occupation, sales, use, transfer, value added, alternative
minimum, estimated or other tax, including any interest, penalty or addition
thereto, whether disputed or not.
"Tax Returns" means any return, report, information return or
other document (including schedules or any related or supporting information)
filed or required to be filed with any governmental entity or other authority in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
"Working Capital Assets" means all current assets, excluding
Cash On Hand, deferred taxes and any entitlement to Tax refunds which are
required to be paid over to the Shareholders and Optionholders pursuant to
Section 11.03(e) hereof, of the Company and the Subsidiaries as of the Closing
Date determined in accordance with GAAP.
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"Working Capital Liabilities" means all current liabilities of
the Company and the Subsidiaries as of the Closing Date determined by the
Company in accordance with GAAP; provided, however, that Working Capital
Liabilities shall not include the Indebtedness or any current maturities of the
Indebtedness.
12.02 Cross-Reference of Other Definitions. Each capitalized
term listed below is defined in the corresponding Section of this Agreement:
Term Section No.
---- -----------
Accrual 1.03(d)
Agreement Preamble
Buyer Preamble
Buyer Stock 1.01
Buyer's Representatives 6.02
Cefalu 11.07
Closing 1.04(a)
Closing Date 1.04(a)
Closing Optionholder Consideration 1.02
Closing Shareholder Consideration 1.02
Closing Transactions 1.04(b)
Code 4.13(a)
Common Stock 4.04
Company Preamble
Consulting Agreement 6.06
Confidentiality Agreement 6.02
Covenants 11.05(a)(iv)
DCI Preamble
DCI Shares 1.02
Employment Agreement 11.07
Environmental and Safety Requirements 4.16(a)
ERISA 4.13(a)
Estimated Net Working Capital 1.03(a)
HIG 11.05
HIG Cayman Preamble
HIG Consideration 1.02
Holdback Amount 10.02
Independent Auditor 1.03(b)
HSR Act 4.12
Intellectual Property 4.10
Key Employees 13.03
Latest Balance Sheet 4.05
Leased Real Property 4.07(b)
Material Adverse Effect 4.01
NCO 11.07
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NCO Companies 11.05
Noncompetition Term 11.05(b)(i)
Noninterference Term 11.05(b)(ii)
Objections Statement 1.03(b)
Optionholders Preamble
Options Preamble
Pension Plans 4.13(a)
Permits 4.01
Plans 4.13(a)
Possible Pennsylvania Audit 1.03(d)
Preliminary Net Working Capital 1.03(b)
Purchase Price 1.01
Restricted Area 11.07(a)
Sale Transactions 1.02
SAR Payments 1.04(b)(vi)
Shareholder Representative 10.01
Shareholders Preamble
Shares Preamble
Texas Audit 1.03(d)
Transfer Taxes 11.03(d)
WARN Act 4.19
Warrants 1.01
Welfare Plans 4.13(a)
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Press Releases and Communications. No press release or
public announcement related to this Agreement or the transactions contemplated
herein, or prior to the Closing, any other announcement or communication to the
employees, customers or suppliers of the Company, shall be issued or made by any
party except by Buyer with the approval of the Shareholder Representative (which
shall not unreasonably be withheld), unless required by law (in the reasonable
opinion of counsel) in which case Buyer and the Shareholder Representative shall
have the right to review such press release, announcement or communication prior
to its issuance, distribution or publication.
13.02 Expenses. Except as otherwise expressly provided herein,
each party shall pay all of its own respective expenses (including attorneys'
and accountants' fees and expenses) in connection with the negotiation of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not).
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13.03 Knowledge Defined. For purposes of this Agreement, the
term "the Company's knowledge" as used herein shall mean the actual knowledge
after reasonable investigation of Thomas V. Cefalu, III, Edward Trahan, Louis
Molettiere and Phil Weaver (collectively, the "Key Employees").
13.04 Waiver of Certain Transfer Restrictions. Concurrently
with the Closing, the Company expressly waives the restrictions on transfer of
the Options contained in those certain Stock Option Agreements, dated as of
February 10, 1998, by and between the Company and each of Edward Trahan and
Louis Molettiere.
13.05 Notices. All notices, demands and other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when personally
delivered, one day after deposit with Federal Express or similar overnight
courier service or three days after being mailed by first class mail, return
receipt requested. Notices, demands and communications to Buyer, the Company,
the Shareholders, the Optionholders and the Shareholder Representative shall,
unless another address is specified in writing, be sent to the addresses
indicated below:
Notices to Buyer:
-----------------
NCO Group, Inc.
515 Pennsylvania Avenue
Fort Washington, PA 19034
Attn: Michael Barrist, President
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Attn: Lawrence Wiseman
Notices to Shareholders, to Optionholders or to the
Shareholder Representative:
---------------------------------------------------
H.I.G.-DCI Investments, L.P.
c/o H.I.G. Capital Management, Inc.
1001 Brickell Bay Drive, Suite 2708
Miami, Florida 33131
Attn: Charles Hanemann
39
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with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: James L. Learner
Notices to Company:
-------------------
Co-Source Corporation
c/o H.I.G. Capital Management, Inc.
1001 Brickell Bay Drive, Suite 2708
Miami, Florida 33131
Attn: Charles Hanemann
13.06 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, and neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned or
delegated by any party without the prior written consent of the Shareholder
Representative in the case of assignment by Buyer or by Buyer in the case of
assignment by any other party. Notwithstanding the foregoing, Buyer shall have
the right to assign its right to purchase the Shares and the Options to any
subsidiary of Buyer provided that such assignment shall not limit Buyer's
obligations hereunder.
13.07 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
13.08 No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any Person.
13.09 Amendment and Waiver. Any provision of this Agreement or
the schedules or exhibits hereto may be amended or waived only in a writing
signed by Buyer, the Company and the Shareholder Representative. No waiver of
any provision hereunder or any breach or default thereof shall extend to or
affect in any way any other provision or prior or subsequent breach or default.
13.10 Complete Agreement. This Agreement and the documents
referred to herein (including the Confidentiality Agreement) contain the
complete agreement between the parties hereto and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
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13.11 Counterparts. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
13.12 Governing Law. All matters relating to the
interpretation, construction, validity and enforcement of this Agreement shall
be governed by and construed in accordance with the domestic laws of the State
of New York without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of laws of any jurisdiction other than the State of New
York.
13.13 No Third Party Beneficiaries. This Agreement is solely
for the benefit of the parties hereto, and their respective successors and
permitted assigns, and this Agreement shall not be deemed to confer upon or give
to any other Person or third party any remedy, claim liability, reimbursement,
cause of action or other right.
13.14 Section Headings. 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.
13.15 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.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
CO-SOURCE CORPORATION
By: /s/ Charles Hanemann
------------------------------------------
Its
-------------------------------------------
SHAREHOLDERS:
DCI HOLDING, INC.
By: /s/ John Bolduc
------------------------------------------
Its
-------------------------------------------
ANTARES CAPITAL CORPORATION (f/k/a
ANTARES LEVERAGED CAPITAL CORP.)
By: /s/ David Swanson
------------------------------------------
Its: Director
/s/ Thomas V. Cefalu, III
----------------------------------------------
Thomas V. Cefalu, III
OPTIONHOLDERS:
/s/ Louis A. Molettiere
----------------------------------------------
Louis A. Molettiere
/s/ Edward J. Trahan
----------------------------------------------
Edward J. Trahan
42
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BUYER:
-----
NCO GROUP, INC.
By: /s/ Paul Weitzel
------------------------------------------
Its Executive Vice President
H.I.G.-DCI INVESTMENTS, L.P.
By: /s/ Anthony Tamer
------------------------------------------
Its
-------------------------------------------
Solely with respect to the provisions of
Section 11.05:
H.I.G. INVESTMENT GROUP, L.P.
By: /s/ Anthony Tamer
------------------------------------------
Its
-------------------------------------------
43
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EXHIBIT 4.1
FORM OF WARRANT
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED HEREUNDER (COLLECTIVELY, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND APPLICABLE
STATE SECURITIES LAWS AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER THEREOF SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO THE
SECURITIES SHALL HAVE BECOME EFFECTIVE.
THIS WARRANT MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT
OF THE COMPANY WHICH MAY BE WITHHELD IN ITS SOLE AND ABSOLUTE DISCRETION.
NON-TRANSFERABLE
COMMON STOCK PURCHASE WARRANT
To subscribe for and purchase shares
of Common Stock, no par value, of
NCO GROUP, INC.
THIS CERTIFIES that, for value received, [ ] (the "Holder"),
subject to the terms and conditions hereof, shall be entitled to purchase from
NCO GROUP, INC., a Pennsylvania corporation (the "Company"), at any time during
the period from 9:00 A.M. (Philadelphia Time) on May 21, 1999, through 5:00 P.M.
(Philadelphia Time) on May 20, 2009, [ ] ( ) shares of
Common Stock (as hereinafter defined) of the Company (individually, a "Warrant
Share" and collectively, the "Warrant Shares"), at an initial exercise price of
$32.97 per share, subject to adjustment from time to time pursuant to the
provisions of Section 3, and further subject to the Company's right to pay cash
in lieu of issuing Warrant Shares as provided in Section 1.2. For purposes of
this Warrant, the term "Common Stock" shall mean the class of capital stock of
the Company designated common stock, no par value per share, as constituted on
the date hereof, and any other class of capital stock of the Company resulting
from successive changes or reclassifications of the Common Stock.
<PAGE>
1. Exercise of Warrants.
1.1 Method of Exercise. The Warrant evidenced hereby may be
exercised by the Holder, in whole but not in part, by the delivery at the
principal office of the Company (or at such other office or agency of the
Company as it may designate by notice in writing to the Holder), during normal
business hours, of this Warrant and the Form of Exercise attached hereto as
Exhibit "A", duly completed and executed, and payment of the Purchase Price (as
defined in Section 2) of the Warrant Shares by (i) wire transfer of immediately
available United States federal funds or by bank certified, treasurer's or
cashier's check payable to the order of the Company or (ii) a written notice to
the Company that the Warrantholder is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number of shares
of Common Stock issuable upon such exercise of the Warrant which when multiplied
by the Market Price of the Common Stock is equal to the aggregate Purchase Price
(and such withheld shares shall no longer be issuable under this Warrant). The
business day on which the last of such documents and payment of the Purchase
Price is received by the Company as provided above shall be the "Exercise Date"
for the purposes of this Warrant.
1.2 Cash Payment in Lieu of Issuing Warrant Shares. Anything
in this Warrant to the contrary notwithstanding, upon any exercise of this
Warrant by the Holder, in lieu of issuing all or any part of the Warrant Shares
which are the subject of such exercise, the Company shall have the option (the
"Cash Payment Option"), to pay the Holder an amount (the "Cash Payment Amount")
equal to such number of Warrant Shares for which the Company has elected to
exercise the Cash Payment Option multiplied by the difference between (a) the
Market Price (as defined in Section 13) per share of Common Stock as of the
Exercise Date less (b) the Exercise Price (as defined in Section 2) as of the
Exercise Date. The Company may exercise its Cash Payment Option hereunder at any
time prior to the Effective Date (as defined in Section 1.3) by notification to
the Holder and by payment of the Cash Payment Amount by wire transfer of
immediately available United States federal funds or by bank certified,
treasurer's or cashier's check payable to the order of the Holder.
1.3 Effective Date. The Warrant Shares purchased by the Holder
pursuant to Section 1.1, less any Warrant Shares as to which the Company has
exercised its Cash Payment Option pursuant to Section 1.2, shall be deemed to be
issued to the Holder effective as of the opening of business on the third
business day following the Exercise Date (the "Effective Date") so that the
Holder shall be deemed the record holder for such Warrant Shares for all
purposes immediately after the opening of business on the Effective Date.
1.4 Delivery of Certificates. The certificate for the Warrant
Shares purchased by the Holder pursuant to Section 1.1, less any Warrant Shares
as to which the Company has exercised its Cash Payment Option pursuant to
Section 1.2, shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) business days, after the Exercise Date. The certificate
evidencing the Warrant Shares shall bear a restrictive legend substantially in
the form set forth on Exhibit "B".
2
<PAGE>
1.5 No Fractional Shares. No fractional Warrant Shares, or
scrips for any such fractional Warrant Shares, shall be issued upon the exercise
of this Warrant.
1.6 Status of Warrant Shares. The Company represents and
warrants to the Holder that all Warrant Shares which may be issued upon the
exercise of this Warrant, when issued in accordance with the terms hereof, shall
be duly authorized, validly issued, fully paid and nonassessable.
2. Exercise Price.
The initial exercise price shall be $32.97 per share, subject to
adjustment from time to time as hereinafter provided (such price, as last
adjusted, being hereinafter referred to as the "Exercise Price"). The Exercise
Price multiplied by the number of Warrant Shares being purchased shall be the
"Purchase Price" therefor.
3. Adjustments to Exercise Price and Warrant Shares.
The Exercise Price and the number of Warrant Shares issuable
upon the exercise of the Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 3.
3.1 Adjustment for Change in Capital Stock. (a) If on or after
April 19, 1999, the Company: (1) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock or in shares of its capital stock
other than Common Stock; (2) subdivides its outstanding shares of Common Stock
into a greater number of shares; (3) combines its outstanding shares of Common
Stock into a smaller number of shares; or (4) issues by reclassification of its
Common Stock any shares of its capital stock; then, (i) the number of shares of
Common Stock for which this Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the number of shares of
Common Stock which a record holder of the same number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the occurrence of
such event would own or be entitled to receive after the happening of such
event, and (ii) the Exercise Price shall be adjusted to equal (A) the Exercise
Price multiplied by the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
(b) The adjustment provided for in this Section 3.1 shall
be made successively whenever any event listed above shall occur and shall
become effective immediately after the record date, in the case of a dividend or
distribution, and immediately after the effective date, in the case of a
subdivision, combination or reclassification.
(c) If, as a result of an adjustment pursuant to this
Section 3.1, the Holder shall be entitled to receive shares of two or more
classes of capital stock of the Company upon
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<PAGE>
exercise of the Warrant, the Company shall determine the allocation of the
adjusted Exercise Price between the classes of capital stock. After such
allocation, the exercise privilege and the Exercise Price of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Section 3.
(d) This Section 3.1 shall not apply to any transaction to
which Section 3.2 is applicable.
3.2 Certain Transactions. If the Company consolidates or
merges with or into, or sells, transfers or leases all or substantially all its
assets to, any Person, upon consummation of such transaction this Warrant shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the Holder of a Warrant would have owned immediately after
the consolidation, merger, sale, transfer or lease if the Holder had exercised
the Warrant immediately before the effective date of such transaction.
Concurrently with the consummation of such transaction, the Person formed by or
surviving any such consolidation or merger (if other than the Company), or the
Person to which such sale, transfer or lease shall have been made, shall enter
into a supplemental Warrant so providing and further providing for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
provided for in Section 3. The successor Person shall send to the Holder a
notice describing the supplemental Warrant. If the issuer of securities
deliverable upon exercise of the supplemental Warrant is an Affiliate (as
defined in Section 13) of the formed, surviving, transferee or lessee Person,
that issuer shall join in the supplemental Warrant Agreement.
3.3 Company Determination Final. Any determination that the
Company or the Board of Directors of the Company must make pursuant this Section
3 shall be evidenced in a Board resolution, a copy of which shall be sent to the
Holder. All such determinations shall be final and binding.
3.4 Notices to Holder. (a) Upon any adjustment of the Exercise
Price pursuant to this Section 3, the Company shall promptly thereafter (i)
cause a certificate to be executed by the President, or any Vice President, and
by the Chief Financial Officer (or his functional equivalent, however titled)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares issuable
after such adjustment in the Exercise Price, upon exercise of the Warrant in
full and payment of the adjusted Exercise Price, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein, and
(ii) notify the Holder of such adjustments by sending him a copy of the
certificate referenced in the preceding clause (i). Where appropriate, such
notice may be given in advance.
(b) The failure to give the notice required by this
Section 3.4 or any defect therein shall not affect the legality or validity of
the transaction to which it relates.
4
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4. Payment of Taxes. The Company shall pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Shares upon exercise of
the Warrant. The Company shall not, however, be required to pay any tax or taxes
which may be payable in respect of any transfer involved in the issuance and
delivery of this Warrant, or any supplemental or replacement Warrant, or any
certificate for Warrant Shares or other securities in a name other than set
forth on page 1 hereof,, and the Company shall not be required to issue or
deliver any such supplemental or replacement Warrants or certificates unless and
until the Person(s) requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the reasonable
satisfaction of the Company that such tax has been paid.
5. Certain Covenants. (a) The Company shall at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its authorized and issued Common Stock
held in its treasury, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon exercise of this Warrant, the maximum number of
Warrant Shares which may then be deliverable upon the exercise in full of this
Warrant.
(b) The Company shall cause all Warrant Shares to be listed on each
national securities exchange or securities quotation system, if any, on which
the other outstanding shares of Common Stock of the Company are then listed or
quoted.
(c) The Company shall (i) use its best efforts to comply with the
current public information requirements of Rule 144 ("Rule 144") under the 1933
Act and (ii) at all times Rule 144 is available for use by Holder, furnish the
Holder upon request with all information within the possession of the Company,
required for the preparation and filing of Rule 144.
6. Representations and Warranties.
(a) The Company hereby represents and warrants to the Holder as
follows:
(i) This Warrant has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed by a duly
authorized officer of the Company and constitutes a valid and binding obligation
of the Company.
(ii) Neither the execution and delivery of this Warrant, nor the
consummation of the transactions contemplated hereby, will violate or result in
any material violation of or be in material conflict with or constitute a
material default under any term of the charter or bylaws of the Company or of
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to the Company.
(iii) Upon exercise of this Warrant and payment of the Purchase
Price by the Holder in the manner set forth in Section 1.1, (i) the Warrant
Shares will be duly issued, fully paid and nonassessable shares of Common Stock
and free from all transfer or documentary taxes,
5
<PAGE>
liens and charges with respect to the issuance thereof and (ii) the Holder shall
receive valid title to all of the Warrant Shares.
(b) The Holder hereby represents and warrants to the Company as
follows (which shall be affirmed by the Holder on the Exercise Date): this
Warrant and the Warrant Shares issuable upon exercise of the Warrant
(collectively, the "NCO Securities") are being acquired for Holder's own account
and not on behalf of any other person, for investment purposes only and not with
a view to, or for sale in connection with, any resale or distribution of the NCO
Securities. Holder has received and examined the Company's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission ("SEC")
on March 1, 1999, and all amendments thereto, and NCO's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, and reports and statements
filed since such date with the SEC. Holder has had the opportunity to ask
questions and receive answers from the Company concerning the Company, and has
been furnished with all other information about the Company which it has
requested. Holder believes that it has been fully apprised of all facts and
circumstances necessary to permit it to make an informed decision about
acquiring the NCO Securities, that it has sufficient knowledge and experience in
business and financial matters, that it is capable of evaluating the merits and
risks of an investment in the NCO Securities, and that it has the capacity to
protect its own interests in connection with the transactions contemplated
hereby. Holder has been advised by the Company and understands that (a) the NCO
Securities have not been registered under any securities Laws, including without
limitation, the securities Laws of the United States or the Commonwealth of
Pennsylvania, (b) the NCO Securities must be held indefinitely unless and until
they are subsequently registered or an exemption from registration becomes
available, (c) the NCO Securities shall bear appropriate restrictive legends and
(d) the Company shall have the right to place a stop order against the NCO
Securities.
7. Holder; No Rights as Shareholder. The Holder shall be deemed the
owner of this Warrant for all purposes. The Holder shall not be entitled by
virtue of ownership of this Warrant to any rights whatsoever as a shareholder of
the Company with respect to the Common Stock issuable upon exercise of this
Warrant, either at law or in equity, including, without limitation, the right to
vote and to receive dividends and other distributions.
8. Restrictions on Transfer. (a) The Holder may not Transfer this
Warrant (as defined in Section 13) without the express prior written consent of
the Company which may be withheld in its sole and absolute discretion, and any
Transfer in violation of this Section 8(a) shall be void and of no force or
effect; provided, however, that the Company shall not unreasonably withhold its
consent to the transfer of this Warrant to an Affiliate of the Holder as of the
date hereof. In the event that the Company consents to any Transfer requested by
the Holder to any Person (a "Proposed Transferee"), such Transfer shall be
further conditioned upon the receipt of: (a) an opinion of counsel reasonably
satisfactory to the Company that such Transfer to a Proposed Transferee would
not result in a violation of the provisions of the Securities Act of 1933, as
amended (the "Securities Act") and applicable state securities laws and
(b) the Proposed Transferee executes a Standstill Agreement with the Company in
form acceptable to the Company.
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(b) The legend as set forth on Exhibit "B"shall be placed on the
Warrant Shares and such Warrant Shares shall be freely transferable subject to
applicable securities laws.
(c) Each Holder of this Warrant and any Warrant Shares issued upon
exercise of this Warrant, by taking or holding the same, consents to and agrees
to be bound by the provisions of this Section 8.
9. Lost Warrant. Upon receipt by the Company at its principal office of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and in the case of any such loss, theft, or
destruction, upon delivery of indemnity reasonably satisfactory to the Company
or, in case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company will issue a new Warrant of like tenor in lieu of this
Warrant.
10. Expiration. This Warrant, in all events, shall be wholly void and
have no effect after 5:00 P.M. (Philadelphia Time) on May 20, 2009.
11. Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, or (b) one
business day after being sent by a reputable overnight delivery service, postage
or delivery charges prepaid (provided that confirmation of delivery is obtained
from such service), to the parties at their respective addresses set forth
below:
If to the Company:
NCO Group, Inc.
515 Pennsylvania Avenue
Fort Washington, PA 19034
Attention: Michael J. Barrist, President
If to the Holder:
[ ]
Attention: [ ]
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided above. Any party may change its
address for notice and the address to which copies must be sent by giving notice
of the new addresses to the other parties in accordance with this Section 11,
except that any such change of address notice shall not be effective unless and
until received.
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<PAGE>
12. Severability. In the event that one or more of the provisions of
this Warrant shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Warrant, but this Warrant shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be entirely performed within such Commonwealth without
giving effect to principles of conflicts of laws.
14. Definitions. As used in this Agreement:
(a) "Affiliate" means any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified. The terms "control," "controlled by"
and "under common control with" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, as general partner,
as a limited partner with a right to receive 50% or more of the income or assets
of a limited partnership, by contract or otherwise and with respect to HIG-DCI
Investments L.P. shall include its limited partner and any of the limited
partners of any partnership or shareholders of any corporation which is its
direct or indirect parent.
(b) "Market Price" means, (a) the last sale price for the Common
Stock on the principal securities exchange on which the Common Stock is listed
or admitted to trading, or (b) if not so listed or admitted to trading on any
securities exchange, the last sale price, or in the absence of a last sale
price, the closing bid price, for the Common Stock on The Nasdaq Stock Market,
or (c) if the Common Shares shall not be listed on Nasdaq, the closing bid price
in the over-the-counter market, in each such case averaged over a period of 20
consecutive trading days ending on the trading day prior to the Exercise Date.
If at any time the Common Stock is not listed on any such exchange or such
System or quoted in the over-the-counter market, the Market Price of the Common
Stock shall be deemed to be the higher of (1) the book value thereof, as
determined in accordance with generally accepted accounting principles
consistent with those then being applied by the Company by any firm of
independent certified public accountants (which may be the regular auditors of
the Company) of recognized national standing selected by the Board of Directors
of the Company, as of the last day of the month ending within 31 days
preceding the Exercise Date, and (ii) the fair market value thereof, as
determined in good faith by an independent brokerage firm, Standard & Poor's
Corporation or Moody's Investors Service, as of a date which is within 15 days
preceding the Exercise Date.
(c) "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, association, cooperative, trust, estate,
governmental body, administrative agency, regulatory authority or other entity
of any nature.
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(d) "Transfer" means the disposing of or parting with all or any
portion of an interest (legal or equitable) by any means, direct or indirect,
absolute or conditional, voluntary or involuntary, including, but not limited
to, by sale, assignment, disposition, court order, operation of law,
dissolution, merger, consolidation, division, spin-off, dividend, distribution,
equitable or other distribution after divorce or separation, settlement,
exchange, waiver, abandonment, gift, alienation, bequest, pledge, hypothecation,
encumbrance or disposal.
15. Neutral Construction. The parties have negotiated this Warrant and
all of the terms and conditions contained in this Warrant in good faith and at
arms' length, and each party has been represented by counsel during such
negotiations. No term, condition, or provision contained in this Agreement shall
be construed against any party or in favor of any party (i) because such party
or such party's counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (ii) because of any presumption as
to any inequality of bargaining power
9
<PAGE>
between or among the parties. Furthermore, all terms, conditions, and provisions
contained in this Warrant shall be construed and interpreted in a manner which
is consistent with all other terms, conditions, and provisions contained in this
Warrant.
IN WITNESS WHEREOF, NCO GROUP, INC., has caused this Warrant to be
signed by its duly authorized officer and dated as of May 21, 1999.
NCO GROUP, INC.
By: _____________________________
Michael J. Barrist,
President
10
<PAGE>
EXHIBIT "A"
-----------
FORM OF EXERCISE
----------------
(to be executed by the Holder)
The Holder hereby exercises its rights to subscribe for and
purchase ________ shares of common stock, no par value, ("Common Stock"), of NCO
GROUP, INC. evidenced by the attached Warrant, hereby affirms that the
representations and warranties set forth in Section 6(b) are true and correct on
the date hereof as if made on and as of the date hereof, and herewith makes
payment of the Purchase Price of $ _______________ therefor in full. Please
issue a certificate in the name of the Holder for the Common Stock in accordance
with the instructions given below.
Dated: __________________ _____________________________
Signature of Holder
Instructions for registration of shares
Social Security or Employer Identification
Number of Holder: _________________________
Address of Holder:
___________________________________
Street
___________________________________
City, State and Zip Code
<PAGE>
EXHIBIT "B"
-----------
Form of Restrictive Legend
To Be Imprinted On Warrant Shares
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER
THEREOF SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT WITH RESPECT TO SUCH SHARES SHALL HAVE BECOME EFFECTIVE."
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON "TRANSFER" AS DEFINED IN AND SET FORTH IN A
REGISTRATION RIGHTS AGREEMENT, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY."
<PAGE>
EXHIBIT 10.1
================================================================================
FOURTH AMENDED AND RESTATED CREDIT
AGREEMENT
DATED AS OF MAY 20, 1999
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
================================================================================
1
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TABLE OF CONTENTS
<TABLE>
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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
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
</TABLE>
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<TABLE>
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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
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
</TABLE>
ii
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<TABLE>
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<S> <C> <C> <C>
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
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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<PAGE>
Exhibits
- --------
A-1 RC Note
B Borrowing Notice
C Prepayment Notice
D LIBO Rate Selection Notice
E Form of Security Agreement
F Form of Stock Pledge
G Intentionally Omitted
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 Lender's RC Commitments
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(u) Intellectual Property
4.1(w) Environmental Matters
4.1(x) Employee Benefits
4.1(z) Names
5.16 Excluded Subsidiaries
6.2 Liens
6.3 Indebtedness
6.5 Loans and Investments
6.12 Affiliate Transactions
<PAGE>
CREDIT AGREEMENT
THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 20,
1999, 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 "March 1998 Credit
Agreement") and further clarified by those certain Closing Memoranda dated May
5, 1998 and May 29, 1998. The March 1998 Credit Agreement was amended and
restated as of November 30, 1998 (the "Existing Credit Agreement") pursuant to
which all U.S. subsidiaries (other than the then Excluded Subsidiaries) of NCO
Group (as of that date) became parties to the Credit Agreement. The Existing
Credit Agreement was modified by a Closing Memorandum dated November 30, 1998, a
Global Amendment dated as of January 11, 1999 and a First Amendment dated
February 11, 1999.
B. The Borrowers have requested that the existing credit
facilities be increased and restructured as a $350,000,000 reducing revolving
credit facility. 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
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<PAGE>
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:
ARTICLE I
CREDIT FACILITY
1.1 Commitment To Lend. 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
$350,000,000.00.
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) the requested date for
the making of such Loans which date shall be a Business Day, (ii) the Type or
Types of Loans requested and (iii) 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 1:00 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
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<PAGE>
Agent's Domestic Lending Office or in such other manner as may be agreed to by
NCO Group and the Administrative Agent.
1.4 Repayments. 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. Borrowers shall also repay immediately the
amount by which the outstanding RC Loans exceed the RC Commitment at any time
following a reduction in the RC Commitment.
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 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) 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 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.
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<PAGE>
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, 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
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<PAGE>
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 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.
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(a) Mandatory Reductions.
(i) Quarterly Reductions. Beginning March 31, 2001, the RC
Commitment shall be reduced quarterly by $6,250,000 on the last day of each
calendar quarter until the Maturity Date.
(ii) Debt or Equity Offerings. After March 31, 2000, Borrowers
shall apply at least fifty percent (50%) of the net proceeds received from any
offering of debt or equity by NCO Group to reduce the RC Commitment permanently.
(b) 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 (fifth Business day for termination of the RC Commitment) 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.
(c) 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.
(d) Payment. On each date ("Reduction Date") on which the RC
Commitment is reduced (either voluntarily or involuntarily) 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.
(e) Application of Reductions. Each mandatory reduction made pursuant
to Section 1.7(a)(ii) and each optional reduction under Section 1.7(b) shall be
applied pro-rata across the remaining quarterly reductions required under
Section 1.7(a)(i).
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 plus the
Applicable Margin or (ii) the applicable LIBO Rate for a specified Interest
Period plus the Applicable Margin.
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(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.
(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, and (D) 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 ten (10) Interest Periods for LIBO
Rate Loans in effect.
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(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 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:
GRID A (pre-offering)
Consolidated Funded Debt/
Consolidated EBITDA Ratio Unused Fee
------------------------- ----------
below 2.0 1/8%
> 2.0 < 3.0 1/4%
> 3.0 3/8%
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GRID B (post-offering)
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%
> 3.5 1/2%
The Unused Fee will be initially calculated based on Grid A. In the event NCO
Group successfully completes by March 31, 2000 (i ) a convertible subordinated
debt issuance in the minimum amount of $150,000,000 and/or (ii) a common stock
issuance in the minimum amount of $100,000,000 and/or (iii) a convertible
subordinated debt issuance in the minimum amount of $100,000,000 in conjunction
with a common stock issuance in the minimum amount of $25,000,000, the Unused
Fee shall be calculated on Grid B beginning on the first day of the quarter
following such event. Notwithstanding anything above to the contrary, (a) if the
RC Loans outstanding are less than $150,000,000 the Unused Fee shall not be less
than 1/4%, and (b) Grid B shall not be effective prior to October 1, 1999.
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 third fiscal quarter of 1999, the
Unused Fee shall be 3/8%. 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 or in the event of any Permitted Acquisition, on
the first Business day of the month after closing and delivery of the Proforma
Covenant Compliance Certificate required for the acquisition.
(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 Administrative Agent in connection with this
Agreement and the transactions contemplated by
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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 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 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, 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
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
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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
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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 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) Survival. 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
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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 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
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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.
(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
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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 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.
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(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 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
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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;
(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
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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 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
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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, 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
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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 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.
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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 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.
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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.
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
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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, 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),
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Advantage Financial Services Funding, Inc., MSC Funding, Inc., Medaphis Services
Corporation and JDR Holdings, 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.
(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 acceptance
does not limit the obligations of the Borrowers with respect to the priority of
the
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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) Co-Source Acquisition. The Administrative Agent shall have
received the following documents evidencing the Co-Source 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 Co-Source Acquisition and
any document requested by Administrative Agent in its sole discretion from such
closing checklist (all documents listed in such closing checklist, the
"Co-Source 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 Co-Source
Acquisition Agreements. The Co-Source 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 Co-Source Acquisition but for the payment of the purchase price
including evidence that NCO Group has not waived any conditions precedent under
the Co-Source 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 Co-Source Acquisition (including without limitation consents
and approvals required under or referred to in the Co-Source 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 Co-Source 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
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the Administrative Agent (on behalf of the Lenders) all of its equity interests
in any acquired company.
(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. 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 will be
substantially the same as the opinion issued in connection with the
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Existing 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 Co-Source concerning the Co-Source 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 Administrative Agent may request, including a pro forma
certificate of covenant compliance in the form of Exhibit "H" attached hereto,
reflecting the Co-Source 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 May 10, 1999.
(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, 1998 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) Keyman Life Insurance. The Administrative Agent shall have received
evidence that the Borrowers have in place at least $2,000,000 in keyman life
insurance on the life of Michael J. Barrist.
(o) 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.
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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.
(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
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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.
(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
Co-Source 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
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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, 1998 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
PriceWaterhouseCoopers, independent certified public accountants for the
Borrowers, who delivered an unqualified opinion in respect thereof. The
financial statements present fairly the financial condition of the Borrowers and
the Excluded Subsidiaries, 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.
(g) Interim Financial Statements. The Borrowers have heretofore
furnished to the Administrative Agent interim company prepared balance sheets of
the Borrowers and the Excluded Subsidiaries, dated March 31, 1999, 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 and
the Excluded Subsidiaries, 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, 1998 in the
ordinary course of business and consistent with past practices.
(i) Absence of Changes. Since March 31, 1999, there has been no change
in the business, operations, or condition (financial or otherwise) of the
Borrowers.
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(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 and the Excluded Subsidiaries, 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 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
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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 which would 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,
(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
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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.
(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
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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 any Lender. For the purposes hereof the terms "director" (when
used with reference to any Lender), "executive officer" and "principal
shareholder" have the respective meanings assigned thereto in Regulation O
issued by the Board of Governors of the Federal Reserve System.
(bb) Year 2000 Compliance. As described more fully in NCO Group's Form
10-K for 1998, NCO Group and NCO Financial Systems, Inc. have (a) reviewed the
areas within their
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business and operations which could be adversely affected by a computer failure
to recognize the change in the century at the year 2000 ("Year 2000 Problem")
and (b) developed and are implementing plans, which to the best of their
knowledge (based on testing to date) will be effective, to avoid any adverse
impact as a consequence of a Year 2000 Problem.
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 and the Excluded Subsidiaries for such fiscal year and a
consolidated balance sheet of the Borrowers and the Excluded Subsidiaries 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.
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(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 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 $25,000,000, 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
$25,000,000.
(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
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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.
(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.
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(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 covering the
properties (including tangible Collateral) and business against fire, flood,
casualty and such other hazards and risks (including the risk of business
interruption from a casualty event) 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. In
addition:
(a) Administrative Agent as Loss Payee and Additional Insured. All
casualty insurance policies covering tangible Collateral shall contain standard
Loss Payable Clauses issued in favor of the Administrative 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. All other
insurance policies shall name the Administrative Agent as an additional insured
on behalf of 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.
(b) Administrative Agent's Right to Purchase Insurance. 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.
(c) Disposition of Insurance Proceeds. 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. In the absence of a
Default or Event of Default, the Administrative Agent shall turn over to the
Borrowers all insurance proceeds the Administrative Agent receives. The
Borrowers may use the proceeds for the repair, reconstruction or replacement of
Collateral, toward the replacement of lost revenues, for working capital, or for
any other proper business purpose; provided that any proceeds that remain unused
(i) more than 12 months after the Borrowers receive them or (ii) at the time a
Default or Event of Default occurs shall be applied immediately as the Majority
Lenders may in their discretion direct, including against the Obligations and as
a permanent reduction of the RC Commitment.
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(d) Evidence of Insurance. Each Borrower shall furnish to the
Administrative Agent from time to time upon request the policies under which the
required insurance is issued, certificates of insurance, loss payable
endorsements, 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.
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
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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.
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
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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.
5.18 Compliance With Laws. Each Borrower shall comply with all Laws
governing such Borrower in the operation of its business, including
Environmental Laws and any Laws relating to employment practices and pension
benefits and occupational and health standards and
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controls, but excluding any Laws whose violation would not cause a Material
Adverse Effect.
5.19 Keyman Life Insurance Borrowers will at all times maintain at least
$2,000,000 in keyman life insurance on the life of Michael J. Barrist.
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 April 1, 1999 through
December 31, 2000; or
1.35 to 1.00 for any quarter thereafter.
(b) Consolidated Net Worth. As of the last day of each fiscal quarter
Consolidated Net Worth shall not be less than (i) $193,397,400.00 plus (ii) 50%
of Consolidated Net Income for that quarter and, on a cumulative basis without
deductions for net losses, all other quarters ending after the Closing Date plus
(iii) the net proceeds of any offering of equity after the Closing Date that are
not applied to the reduction of the RC Commitment plus (iv) 90% of the book
value of any equity issued after the Closing Date in consideration for any
acquisition.
(c) Consolidated Funded Debt to Consolidated EBITDA. The ratio of
Consolidated Funded Debt to annualized Consolidated EBITDA shall not be more
than
4.5 to 1.00 for any quarter ending during the period from Closing through
December 31, 1999;
4.0 to 1.00 for any quarter ending during the period from January 1, 2000
through December 31, 2000;
3.5 to 1.00 for any quarter ending during the period from January 1, 2001
through December 31, 2001; or
3.25 to 1.00 for any quarter ending during the period ending after January 1,
2002.
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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 shall not be less than 2.25 to 1.00 for any quarter.
(e) Consolidated Senior Debt to Consolidated EBITDA. The ratio of
Consolidated Senior Debt to annualized Consolidated EBITDA shall not be more
than
3.75 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
2.25 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.
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
Administrative Agent (on behalf of the Lenders) 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;
(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;
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"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 which is permitted as a Capital
Expenditure;
(d) Accounts payable to trade creditors arising out of purchases of
goods or services in the ordinary course of business;
(e) Indebtedness, not to exceed $10,000,000 in the aggregate over the
term of this Agreement among all Borrowers, under Capitalized Leases which are
permitted as Capital Expenditures;
(f) Permitted Acquisitions Indebtedness;
(g) Inter-Borrower Indebtedness permitted under Section 6.5(e); and
(h) Indebtedness under Interest Rate Hedging Agreements.
(i) Indebtedness of NCO Group under unsecured, convertible,
subordinated notes issued on terms acceptable to the Administrative Agent in its
sole discretion. Acceptable terms of subordination shall include a prohibition
on principal payments while any Obligations to the Lenders are outstanding;
provision for the payment of regularly scheduled interest on the notes until an
Event of Default; and a 180 "standstill" period following a default under the
notes during which the noteholders shall be prohibited from exercising their
remedies. If the notes are issued after March 31, 2000, 50% of the net proceeds
from the issuance shall be applied as a permanent reduction of the RC Commitment
under Section 1.7(a)(ii)..
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
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(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.
(d) Guaranties by Borrowers of Permitted Indebtedness of other
Borrowers.
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
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together with Guaranties and Guaranty Equivalents issued by Borrowers for such
third parties, do not exceed $785,000 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 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 (a) except for Permitted
Acquisitions, merge with or into or consolidate with any other Person, (b)
liquidate, wind-up, dissolve or divide, (c) except for Permitted Acquisitions,
acquire all or any substantial portion of the properties of any going concern or
going line of business, (d) except for Permitted Acquisitions, acquire all or
any substantial portion of the properties of any other Person, or (e) 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.
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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.
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 and except options
issued to employees of the Borrowers. The Borrowers shall use 50% of the net
proceeds of any issuance of equity in NCO Group after March 31, 2000 to reduce
the RC Commitment as required by Section 1.7(a)(ii).
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
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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 $25,000,000, 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 $25,000,000.
6.14 Capital Expenditures. No Borrower shall make any Capital Expenditure
that would cause the aggregate amount of Capital Expenditures made by all
Borrowers to exceed the sum of (a) (i) in 1999, three percent (3%) of
Consolidated Pro-Forma Revenue for 1998 or (ii) in any year after 1999, two
percent (2%) of Consolidated Pro-Forma Revenue for the previous year plus (b)
the amount of money, not to exceed $1,000,000, Borrowers could have used, but
did not use, for Capital Expenditures in 1999 or any year thereafter. 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
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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.
(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
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(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); provided, however that the
foregoing notice and grace periods shall not apply to the defaults described in
subsections (a), (b) or (c) of Section 7.1.
(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 (1) Indebtedness or
Guaranty Equivalent of any Borrower in which the principal obligation of such
Borrower exceeds $500,000, or (2) any Indebtedness under any Interest Rate
Hedging Agreement 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 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
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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
(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,
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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.
(r) An event of default shall occur under an Interest Rate Hedging
Agreement.
7.2 Consequences Of An Event Of Default.
(a) Events of Default in General. If an Event of Default (other than
one specified in paragraphs (o) and (p) 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 (other than obligations incurred under
an Interest Rate Hedging Agreement) 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.
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(iii) Exercise such other remedies as may be available to the
Lenders under applicable Law.
(b) Automatic Acceleration; Certain Bankruptcy-Related Events. If an
Event of Default specified in paragraphs (o) and (p) 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
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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.
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.
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(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 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
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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 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
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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 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
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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.
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
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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 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.
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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.
(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
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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.
"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
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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 or Prime Rate to determine the effective rate of interest on LIBO
Rate Loans or the Prime Rate Loans, as the case may be. The Applicable Margin
shall be determined in the following manner:
For any LIBO Rate Loan or Prime Rate Loan, the Applicable Margin shall be the
percentage amount set forth below under the caption "Applicable Margin" for such
Loan opposite the relevant Consolidated Funded Debt/Consolidated EBITDA Ratio:
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<TABLE>
<CAPTION>
Grid A (pre-offering)
Consolidated Funded Debt/ Applicable Margin Applicable Margin
Level Consolidated EBITDA Ratio LIBO Rate Loans Prime Rate Loans
---------------------------------- ----------------- ------------------
<S> <C> <C> <C>
1 below 1.50 1.00% -
2 > 1.50 < 2.00 1.25% -
- -
3 > 2.00 < 2.50 1.50% -
-
4 > 2.50 < 3.00 1.75% -
-
5 > 3.00 2.00% .25%
</TABLE>
From the Closing Date until the first day of the month following delivery of the
Officer's Compliance Certificate required under Section 5.1 for the third
quarter of 1999, the Applicable Margin shall be at Level 5 of Grid A. Beginning
with receipt of the Officer's Compliance Certificate for the third quarter of
1999, the Applicable Margin shall be adjusted on the first Business Day of the
month after delivery of each Officer's Compliance Certificate under Section 5.1
or in the event of any Permitted Acquisition, on the first Business day of the
month after closing and delivery of the Proforma Covenant Compliance Certificate
required for the acquisition. 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.
In the event NCO Group successfully completes by March 31, 2000 (i) a
convertible subordinated debt issuance in the minimum amount of $150,000,000
and/or (ii) a common stock issuance in the minimum amount of $100,000,000 and/or
(iii) a convertible subordinated debt issuance in the minimum amount of
$100,000,000 in conjunction with a common stock issuance in the minimum amount
of $25,000,000, then the Applicable Margin shall be based on Grid B, but in no
event shall Grid B become effective prior to October 1, 1999:
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<TABLE>
<CAPTION>
Grid B (post-offering)
Consolidated Funded Debt/ Applicable Margin Applicable Margin
Level Consolidated EBITDA Ratio LIBO Rate Loans Prime Rate Loans
---------------------------------- ------------------ ------------------
<S> <C> <C> <C>
1 below 1.50 .75% -
2 > 1.50 < 2.00 1.00% -
- -
3 > 2.00 < 2.50 1.25% -
-
4 > 2.50 < 3.00 1.50% -
-
5 > 3.00 < 3.50 1.75% -
-
6 > 3.50 < 4.00 2.00% .25%
-
7 > 4.00 2.25% .50%
</TABLE>
"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 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
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(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 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 Stuart Wolf; 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
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"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.
"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 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.
"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, all as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Funded Debt" shall mean all Indebtedness of NCO Group and
its consolidated Subsidiaries for borrowed money, including without limitation
the Obligations, Capitalized Leases and Subordinated Debt.
"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
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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.
"Consolidated Pro-Forma Revenue" for any period shall mean (a) all
revenue reported on the financial statements provided pursuant to Section 3.2 of
the Borrowers for the period plus (b) to the extent not included in such
reported revenue, revenues during the period generated by properties or
businesses Borrowers acquire in Permitted Acquisitions during the period minus
(c) to the extent not already excluded from the revenue numbers under clauses
(a) and (b), any revenues generated by properties or businesses that a Borrower
or an acquired company has divested during the period.
"Consolidated Senior Debt" shall mean all Indebtedness of NCO Group and
its consolidated Subsidiaries for borrowed money, including without limitation
the Obligations and Capitalized Leases, but excluding Subordinated Debt.
"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
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<PAGE>
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.
"Co-Source Acquisition" means the proposed acquisition by NCO Group of
all of the stock of Co-Source Corporation under a stock purchase agreement.
"Co-Source Acquisition Agreements" has the meaning set forth in Section
3.1(c)(i) hereof.
"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
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<PAGE>
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 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.
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"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.
"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.
"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.
"Event of Default" shall mean any of the Events of Default described in
Article 7 hereof.
"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
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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 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
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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.
"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
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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.
"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
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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 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.
"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.
"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
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secured by or under color of this Agreement, any other Loan Document, or any
Interest Rate Hedging Agreement, together with 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 H 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) compliance with the financial covenants set forth in Article 6.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"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
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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 ("Pro-Forma Covenant Compliance
Certificate"), (3) with respect to 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 5.17 and (6) the cash
consideration to be paid by such Borrower for the acquisition must not exceed
$25,000,000 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
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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.
"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.
"Pro-Forma Covenant Compliance Certificate" has the meaning ascribed to
such term in the definition of "Permitted Acquisition."
"Prohibited Transaction" has the meaning given to such term in Section
406 of ERISA or
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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 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
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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, Bernard R. Miller
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.
"Subordinated Debt" means Indebtedness of Borrowers that has been
subordinated to the Obligations in writing on terms satisfactory to the
Administrative Agent.
"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.
"Third Party Claims" has the meaning set forth in Section 11.12 hereof.
"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
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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 1.9
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
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
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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, 1998 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).
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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 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
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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 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.
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(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
(i) amend the definition of "Majority Lenders" or "Super-Majority
Lenders";
(ii) release any Borrower from its Obligations;
(iii) change the principal amount of the Loans;
(iv) change the maturity of any Loan or the time of any scheduled
principal payment of any Loan or any Reduction Date;
(v) decrease the rates of interest or amount of fees payable hereunder
or extend the time for payment of interest or fees hereunder; or
(vi) release any Collateral, except in connection with a disposition of
stock or assets permitted under this Agreement.
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
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(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 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 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.
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(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 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
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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 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
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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 syndication of
the credit facilities this Agreement establishes, (3)the administration and
performance of this Agreement and the other Loan Documents, and (4) any
requested amendments, modifications, supplements, waivers or consents (whether
or not ultimately entered into or granted) to this Agreement or any other Loan
Document;
(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
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preservation of rights under, or administration of, or syndication 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.
11.16 Certain Waivers By Borrowers. Each Borrower hereby waives promptness,
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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.
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11.19 Other Loan Documents. Each Lender acknowledges that on signing this
Agreement it is bound by the terms of the Loan Documents.
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
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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) 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 FUNDING, INC.
FCA FUNDING, INC.
MSC FUNDING, INC.
ASSETCARE, INC.
MEDAPHIS SERVICES CORPORATION
JDR HOLDINGS, INC.
JDR MARKETING, INC.
JDR RECOVERY CORPORATION
NATIONWIDE COMMUNICATIONS, INC.
By: /s/ Michael J. Barrist
----------------------
MICHAEL J. BARRIST,
as President and Chief Executive Officer
of each
[Corporate Seals]
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FINANCIAL COLLECTION AGENCIES, INC.
FCA LEASING, INC.
By: /s/ Steven L. Winokur
----------------------
STEVEN L. WINOKUR
as Treasurer of each
[Corporate Seals]
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
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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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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 16th day of April 1999, by and
between NCO Financial Systems, Inc., a Pennsylvania corporation, (hereinafter
called "Company"), and Thomas V. Cefalu, III, an individual (hereinafter called
"Employee").
W I T N E S S E T H:
WHEREAS, Employee's present employer, Co-Source Corporation,
as successor to M&M Acquisition, Inc. ("CSC"), is being acquired by NCO Group,
Inc. ("NCO"), the parent company of Company (the "Acquisition");
WHEREAS, Company wishes to continue to employ Employee and
Employee wishes to continue in the employ of Company on the terms and conditions
contained in this Agreement.
NOW, THEREFORE, subject to the closing of the Acquisition, and
in consideration of the facts, mutual promises and covenants contained herein,
intending to be legally bound hereby, Company and Employee agree as follows:
1. Definitions. As used herein, the following terms shall have
the meanings set forth below unless the context otherwise requires.
"Affiliate" shall mean a person who with respect to any
entity, directly or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such entity;
"Annual Bonus" shall mean the bonus payments set forth in
Section 5(b), as such amount may be adjusted from time to time.
"Base Compensation" shall mean the annual rate of
compensation set forth in Section 5(a), as such amount may be adjusted from time
to time.
"Board" shall mean the Board of Directors of NCO and/or
Company.
"Business" shall mean the business conducted by Company or
CSC in the past and on the date of execution of this Agreement, including
without limitation any business in the collection of commercial accounts
receivable and including business activities in developmental stages, business
activities which may be developed by Company, or any Subsidiary or corporate
parent thereof or entity sharing a common corporate parent with Company, during
the period of Employee's
<PAGE>
employment by Company, and all other business activities which flow from a
reasonable expansion of any of the foregoing, including any business engaged in
by Company subsequent to the execution of this Agreement in which Employee
participates.
"Cause" shall mean any one or more of the following:
(a) if Employee is convicted of a felony involving
fraud, theft or embezzlement or has entered a plea of
nolo contendere (or similar plea) to a charge of such
an offense; or
(b) if Employee commits any act of fraud or
deliberate misappropriation relating to or involving
Company; or
(c) habitual intoxication or drug addiction; or
(d) if Employee commits a material breach of this
Agreement which breach, after 20 days' prior written
notice, is not cured.
"Commencement Date" shall have the meaning specified in
Section 4 hereof.
"Confidential Information" shall have the meaning specified
in Section 14(c) hereof.
"Disability" shall mean Employee's inability, for a period
of 120 consecutive days, or more than 210 days in the aggregate over a
consecutive period of eighteen months, to perform the essential duties of
Employee's position, with or without any reasonable accommodation required by
law, due to a mental or physical impairment which substantially limits one or
more major life activities.
"Restricted Area" shall have the meaning specified in
Section 14(a) hereof.
"Restricted Period" shall mean:
(a) For purposes of Section 14(a)(A), from the
date hereof until three (3) years after Employee's
employment with Company is either terminated by
Employee or by Company for Cause, or for the remaining
term of this
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Agreement, but in no event less than two (2) years, if Employee's employment
with Company is terminated by Company without Cause;
(b) For purposes of Section 14(a)(B) and 14(c), from
the date hereof until five (5) years after Employee's employment is either
terminated by Employee or by Company for Cause, or for the remaining term of
this Agreement, but in no event less than two (2) years, if Employee's
employment with Company is terminated by Company without Cause;
"Subsidiary" shall mean any corporation in which Company
owns directly or indirectly 50% or more of the Voting Stock or 50% or more of
the equity; or any other venture in which it owns either 50% or more of the
voting rights or 50% or more of the equity.
"Term of Employment" shall mean the period specified in
Section 4 hereof as the same may be modified in accordance with this Agreement.
2. Employment. Company hereby employs Employee and Employee
hereby accepts employment by Company for the period and upon the terms and
conditions specified in this Agreement.
3. Office and Duties.
(a) Employee initially shall serve as Executive Vice
President of NCO and Divisional Chief Executive Officer of Company's Commercial
Services Division (the "Division"). In such capacity, Employee shall render such
services as are necessary and desirable to protect and advance the best
interests of NCO and Company, acting, in all instances, under the supervision of
and in accordance with the policies set by the Board. Employee will be
responsible for and provide senior management services relating to the
commercial accounts collection and professional financial services and related
marketing of the services of Company and ongoing senior management services
relating to all aspects of Company's general administration. In addition,
Employee will render such other executive services and perform such other
executive duties for Company and NCO and its direct and indirect wholly owned
Subsidiaries thereof as the Boards of Directors of NCO and/or Company may from
time to time reasonably request of Employee. Employee may, in addition, hold
such offices with NCO or Company which may from time to time be offered to
Employee. Employee's authority shall be subject at all times to the direction
and control of the Chief Executive Officer and the Boards of Directors of
Company and NCO and to the Boards' discretion to determine the policies of
Company and NCO.
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(b) For as long as Employee shall remain an employee of
Company, Employee's entire working time, energy, skill and best efforts shall be
devoted to the performance of Employee's duties hereunder in a manner which will
faithfully and diligently further the business and interests of Company.
Employee may engage in charitable, civic, fraternal, trade and professional
association activities that do not interfere with Employee's obligations to
Company, but Employee shall not be employed by any other for-profit business
without prior written consent of Board, which shall not be unreasonably
withheld.
(c) Employee's services will be conducted at Company's
headquarters in New Orleans, Louisiana area and at such other places as
Employee's duties may require; provided however, that Employee shall not be
required by Company to relocate his principal residence without his consent, and
shall not be required to perform services in any location that is greater than
fifty (50) miles from his principal residence, except in the course of normal
daily business travel.
4. Term. Employee shall be employed by Company for an initial
Term of Employment (the "Initial Term"), commencing on the effective date of the
Acquisition (the "Commencement Date"), and ending on May 31, 2002, unless sooner
terminated as hereinafter provided. Unless either party elects to terminate this
Agreement at the end of the Initial Term by giving the other party written
notice of such election at least one hundred twenty (120) days before the
expiration of the Initial Term, the Term of Employment shall be deemed to have
been extended for an additional term of one (1) year (the "Additional Term")
commencing on the day after the expiration of the Initial Term. At any time
during the Additional Term, either party may terminate this Agreement by giving
the other party written notice of such election at least sixty (60) days prior
to such termination.
5. Compensation and Benefits.
(a) For all of the service rendered by Employee to
Company, Employee shall receive Base Compensation at the gross annual rate of
Two Hundred Fifty Thousand Dollars ($250,000.00) payable in installments in
accordance with Company's regular payroll practices in effect from time to time.
The amount of Base Compensation payable hereunder may, but shall not be
required, to be further increased by such other amounts as may be determined in
the discretion of the Board.
(b) In addition to the foregoing compensation, the
Employee shall be entitled to an annual bonus in an amount up to One Hundred
Thirty Thousand Dollars ($130,000.00) based upon certain EBITDA goals for the
Division (but not including EBITDA earned non-CSC business of the Division)
established by mutual agreement of Company and Employee. This bonus may be
increased based on the
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actual financial performance of the Division based upon mutual agreement of
Company and Employee.
(c) As additional compensation, the Employee shall receive
an option to purchase up to 40,000 shares of the common stock of NCO in
accordance with the terms of NCO's Stock Option Plan at the closing price of
such stock on the effective day of the closing of the Acquisition. NCO may, at
its election, issue additional shares to the Employee from time to time.
6. Fringe Benefits. As an inducement to Employee to commence
employment hereunder, and in consideration of Employee's covenants under this
Agreement, Employee shall be entitled to the benefits set forth below (the
"Fringe Benefits") during the Term of Employment:
(a) Employee shall be eligible to participate in any
health, life, accident or disability insurance, sick leave or other benefit
plans or programs made available to other similarly situated employees of
Company as long as they are kept in force by Company and provided that Employee
meets the eligibility requirements and other terms, conditions and restrictions
of the respective plans and programs.
(b) Employee shall be entitled to four (4) weeks paid
vacation and personal days during each year, subject to Company's generally
applicable policies. All vacation and personal days must be used within the year
in which available and may not be carried over into subsequent years. Employee
shall give oral or written notice prior to the commencement of any vacation in
excess of five (5) business days.
(c) Company will reimburse Employee for all reasonable
expenses incurred by Employee in connection with the performance of Employee's
duties hereunder upon receipt of documentation therefor in accordance with
Company's regular reimbursement procedures and practices in effect from time to
time. Payment to Employee will be made upon presentation of expense vouchers in
such detail as Company may from time to time require.
7. Disability. If Employee suffers a Disability, Company may
terminate Employee's employment relationship with Company at any time thereafter
by giving Employee ten (10) days written notice of termination. Thereafter,
Company shall have no obligation to Employee for Base Compensation, Annual
Bonus, Fringe Benefits or any other form of compensation or benefit to Employee,
except as otherwise required by law or by benefit plans provided at Company
expense, other than (a) amounts of Base Compensation accrued through the date of
termination, (b) a pro rata portion of the Annual Bonus to the date of
termination of employment, to the extent payable hereunder, and (c)
reimbursement of appropriately documented expenses
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incurred by Employee before the termination of employment, to the extent that
Employee would have been entitled to such reimbursement but for the termination
of employment.
8. Death. If Employee dies during the Term of Employment, the
Term of Employment and Employee's employment with Company shall terminate as of
the date of Employee's death. Company shall have no obligation to Employee or
Employee's estate for Base Compensation, Annual Bonus, Fringe Benefits or any
other form of compensation or benefit, except as otherwise required by law or by
benefit plans provided at Company expense, other than (a) amounts of Base
Compensation that have accrued through the date of Employee's death, (b) a pro
rata portion of the Annual Bonus to the date of Employee's death, to the extent
payable hereunder, and (c) reimbursement of appropriately documented expenses
incurred by Employee before Employee's death, to the extent that Employee would
have been entitled to such reimbursement but for his death.
9. Termination for Cause. Company may terminate Employee's
employment relationship with Company at any time for Cause. Upon termination of
Employee under this Section 9, Company shall have no obligation to Employee for
Base Compensation, Annual Bonus, Fringe Benefits or other form of compensation
or benefits other than (a) amounts of Base Compensation accrued through the date
of termination, and (b) reimbursement of appropriately documented expenses
incurred by Employee before the termination of employment, to the extent that
Employee would have been entitled to such reimbursement but for the termination
of employment.
10. Termination without Cause. Company may terminate
Employee's employment relationship with Company at any time without Cause.
Notwithstanding termination of Employee' employment under this Section 10,
Employee shall continue to be eligible to receive and Company shall continue to
pay Employee's Base Compensation in accordance with standard payroll practices,
a prorated portion of the Annual Bonus and all other compensation and benefits
as such amounts would have accrued through the end of the Initial Term or, if
such termination occurs during the Additional Term, through the end of the
Additional Term.
11. Termination by Employee. Employee may terminate his
employment at any time upon at least 120 days' prior written notice to Company.
If Employee terminates his employment, Company shall have no obligation to
Employee for Base Compensation, Annual Bonus, Fringe Benefits or other form of
compensation or benefits other than (a) amounts of Base Compensation accrued
through the date of termination, and (b) reimbursement of appropriately
documented expenses incurred by Employee before the termination of employment,
to the extent that Employee would have been entitled to such reimbursement but
for the termination of employment.
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12. Consideration. Employee agrees and acknowledges that
Employee is agreeing to be bound by the terms of this Agreement, including
without limitation the provisions of Sections 13 and 14, in consideration of
Company's agreement to pay in full all amounts due as Base Compensation and
other amounts due after Employee's termination without Cause in accordance with
Section 10 of this Agreement; and Employee further agrees and acknowledges that
the Fringe Benefits described above constitute full, complete and adequate
consideration for Employee's obligations hereunder.
13. Company Property. All advertising, sales, manufacturers'
and other materials or articles or information, including without limitation
data processing reports, computer programs, software, customer information and
records, business records, price lists or information, samples, or any other
materials or data of any kind furnished to Employee by Company or developed by
Employee on behalf of Company or at Company's direction or for Company's use or
otherwise in connection with Employee's employment hereunder, are and shall
remain the sole property of Company, including in each case all copies thereof
in any medium, including computer tapes and other forms of information storage.
If Company requests the return of such materials at any time during or at or
after the termination of Employee's employment, Employee shall deliver all
copies of the same to Company immediately. Notwithstanding the foregoing,
Employee may retain records relevant to the filing of Employee's personal income
taxes and Company shall grant Employee reasonable access during normal business
hours, to business records of Company relevant to the discharge of Employee's
duties as an officer of Company or any other legitimate noncompetitive business
purpose.
14. Noncompetition, Trade Secrets, Etc. Employee hereby
acknowledges that, during and solely as a result of his employment by Company,
Employee will have access to confidential information and business and
professional contacts. In consideration of such special and unique opportunities
afforded by Company to Employee as a result of Employee's employment and the
other benefits referred to in Section 12 of this Agreement, Employee hereby
agrees as follows:
(a) For the duration of the Restricted Period, Employee
shall not directly or indirectly (A) engage in (as a principal, shareholder,
partner, director, officer, agent, employee, consultant or otherwise) or be
financially interested in any business operating within the United States (the
"Restricted Area"), which is involved in or any other business activities which
are the same as, similar to or in competition with the Business, or with any
business activities carried on by Company, or being definitely planned by
Company, at the time of the termination of Employee's employment; provided
however, that nothing contained in this Section 14 shall prevent Employee
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from holding for investment no more than three percent (3%) of any class of
equity securities of a company whose securities are publicly traded on a
national securities exchange or in a national market system; or (B) induce or
attempt to influence any employee, customer, independent contractor or supplier
of Company to terminate employment or any other relationship with Company.
(b) During the Term of Employment, Employee shall not,
directly or indirectly, disclose or otherwise communicate to any of the clients,
customers or accounts of Company, its Affiliates or any Subsidiary thereof that
he is considering terminating, or has decided to terminate, employment with
Company. Following the termination of Employee's employment, Company shall have
sole discretion to determine who may notify the clients, customers or accounts
of Company of the termination of Employee's employment, and the form, substance
and timing of such notification; provided, however, that Company shall not
disseminate any notice of Employee's termination for any reason other than Cause
which is unfavorable to Employee's professional or personal reputation or
career. Company shall inform Employee of the identity of all persons or entities
to be so notified and provide to Employee a copy of any written notice to such
persons or entities at least ten business days prior to its dissemination to
allow Employee to object to or otherwise challenge the content of the written
notice and/or its dissemination.
(c) Employee shall not use for Employee's personal benefit,
or disclose, communicate or divulge to, or use for the direct or indirect
benefit of any person, firm, association or company other than Company, any
"Confidential Information" which term shall mean any information regarding the
business methods, business policies, policies, procedures, techniques, research
or development projects or results, historical or projected financial
information, budgets, trade secrets, or other knowledge or processes of or
developed by Company or any names and addresses of customers or clients or any
data on or relating to past, present or prospective Company customers or clients
or any other confidential information relating to or dealing with the business
operations, or activities of Company as such relate specifically to commercial
collection services, made known to Employee or learned or acquired by Employee
while in the employ of Company, but Confidential Information shall not include
information otherwise lawfully known generally by or readily accessible to the
trade or the general public. All memoranda, notes, lists, records, files,
documents and other papers and other like items (and all copies, extracts and
summaries thereof) made or compiled by Employee or made available to Employee
concerning the business of Company shall be Company's property and shall be
delivered to Company promptly upon the termination of Employee's employment with
Company or at any other time on request. The foregoing provisions of this
Subsection 14(c) shall apply during and after the period when Employee is an
employee of Company and shall be in addition to (and not a limitation of) any
legally applicable protections of Company's interest in confidential
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<PAGE>
information, trade secrets and the like. At the termination of Employee's
employment with Company, Employee shall return to Company all copies of
Confidential Information in any medium, including computer tapes and other forms
of data storage. Notwithstanding the foregoing, Employee may retain records
relevant to the filing of Employee's personal income taxes and Company shall
grant Employee reasonable access during normal business hours, to business
records of Company relevant to Employee's discharge of Employee's duties as an
officer of Company or other legitimate non-competitive business purpose.
Notwithstanding the requirements of this paragraph 14(c), should Employee leave
his employment and work in a position that does not violate any of the
restrictions contained in this Agreement, then Employee shall have the right to
use Confidential Information, provided, however, that such right shall not
permit Employee to remove any documents or materials from Company that are
deemed Confidential Information.
(d) Any and all writings, inventions, improvements,
processes, procedures and/or techniques which Employee may make, conceive,
discover or develop, either solely or jointly with any other person or persons,
at any time when Employee is an employee of Company, whether or not during
working hours and whether or not at the request or upon the suggestion of
Company, which relate to or are useful in connection with the Business or with
any business now or hereafter during the time of Employee's employment hereunder
carried on or known by Employee to be contemplated by Company, including
developments or expansions of its present fields of operations, shall be the
sole and exclusive property of Company. Employee shall make full disclosure to
Company of all such writings, inventions, improvements, processes, procedures
and techniques, and shall do everything necessary or desirable to vest the
absolute title thereto in Company. Employee shall write and prepare all
specifications and procedures regarding such inventions, improvements,
processes, procedures and techniques and otherwise aid and assist Company so
that Company can prepare and present applications for copyright or Letters
Patent therefor and can secure such copyright or Letters Patent wherever
possible, as well as reissues, renewals, and extensions thereof, and can obtain
the record title to such copyright or patents so that Company shall be the sole
and absolute owner thereof in all countries in which it may desire to have
copyright or patent protection. Employee shall not be entitled to any additional
or special compensation or reimbursement regarding any and all such writings,
inventions, improvements, processes, procedures and techniques.
(e) Employee acknowledges that the restrictions contained in
the foregoing Subsections (a), (b), (c) and (d), in view of the nature of the
business in which Company is engaged, are reasonable and necessary in order to
protect the legitimate interests of Company, that their enforcement will not
impose a hardship on Employee or significantly impair Employee's ability to earn
a livelihood, and that any violation thereof would result in irreparable
injuries to Company. Employee therefore
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<PAGE>
acknowledges that, in the event of Employee's violation of any of these
restrictions, Company shall be entitled to obtain from any court of competent
jurisdiction preliminary and permanent injunctive relief as well as damages and
an equitable accounting of all earnings, profits and other benefits arising from
such violation, which rights shall be cumulative and in addition to any other
rights or remedies to which Company may be entitled.
(f) If the Restricted Period or the Restricted Area
specified in Subsections (a) and (b) above should be adjudged unreasonable in
any proceeding, then the period of time shall be reduced by such amount or the
area shall be reduced by the elimination of such portion or both such reductions
shall be made so that such restrictions may be enforced for such time and in
such area as is adjudged to be reasonable. If Employee violates any of the
restrictions contained in the foregoing Subsections (a) or (b), the Restricted
Period shall be extended by a period equal to the length of time from the
commencement of any such violation until such time as such violation shall be
cured by Employee to the satisfaction of Company. Company shall have the right
and remedy to require Employee to account for and pay over to Company all
compensation, profits, monies, accruals, increments or other benefits derived or
received by Employee as the result of any transactions constituting a breach of
this Section 14, and Employee shall account for and pay over such amounts to
Company upon Company's request therefor. Employee hereby expressly consents to
the jurisdiction of any court within the Commonwealth of Pennsylvania to enforce
the provisions of this Section 14, and agrees to accept service of process by
mail relating to any such proceeding. Company may supply a copy of Section 14 of
this Agreement to any future or prospective employer of Employee or to any
person to whom Employee has supplied information if Company determines in good
faith that there is a reasonable likelihood that Employee has violated or will
violate such Section.
15. Prior Agreements. Employee represents to Company that there
are no restrictions, agreements or understandings, oral or written, to which
Employee is a party or by which Employee is bound that prevent or make unlawful
Employee's execution or performance of this Agreement. Upon this Agreement
becoming effective as a result of the Acquisition being completed, any
employment agreement between Employee and CSC or any of its affiliates and any
rights of Employee therein contained shall automatically terminate.
16. Consent to Jurisdiction/Arbitration.
(a) Any legal suit, action, claim, proceeding or
investigation arising out of or relating to this Agreement may be instituted in
the Montgomery County Court of Common Pleas of the Commonwealth of Pennsylvania,
and each of the parties hereto waives any objection which party may now or
hereafter have to such venue of
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any such suit, action, claim, proceeding or investigation, and irrevocably
submits to the jurisdiction of any such court. Any and all service of process
and any other notice in any such suit, action, claim, proceeding or
investigation shall be effective against any party if given by registered or
certified mail, return receipt requested, or by any other means of mail which
requires a signed receipt, postage prepaid, mailed to such party as herein
provided. Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by law or to commence legal
proceedings or otherwise proceed against any other party in any jurisdiction
other than Pennsylvania.
(b) With the exception of Company's right to injunctive or
equitable relief described in paragraph 14(e) above, any dispute, controversy or
claim arising out of or relating to this Agreement or the breach or alleged
breach of this Agreement shall be settled by arbitration in Montgomery County,
Pennsylvania in accordance with the commercial arbitration rules, then
obtaining, of the American Arbitration Association, and judgment upon any such
arbitration award rendered by the arbitrators may be entered in any state or
federal court sitting in Pennsylvania. If the parties to any such dispute,
controversy or claim are unable to agree upon an arbitrator or arbitrators, then
three arbitrators shall be appointed by the American Arbitration Association, as
it may determine, in accordance with the commercial arbitration rules and
practices, then obtaining, of such Association. If the parties to any such
dispute, controversy or claim shall agree upon two arbitrators, but such parties
or such arbitrators shall be unable to agree upon a third arbitrator, then only
such third arbitrator shall be appointed as aforesaid by the American
Arbitration Association. Each of the parties and the arbitrators shall use its
best efforts to keep confidential the existence of any dispute and arbitration
proceedings and all information relating thereto or submitted in connection
therewith and, in the event of judicial proceedings for the enforcement of this
paragraph or any award pursuant thereto, shall cooperate to seal the record of
any such arbitration or judicial proceedings.
(c) In the event judicial proceedings or arbitration
proceedings are commenced, the prevailing party shall be entitled to an award
for its reasonable legal fees and costs incurred in relation to such
proceedings.
17. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay on
the part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of
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such right, remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.
(b) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of
such jurisdiction to the contrary, and without the aid of any canon, custom or
rule of law requiring construction against the draftsman.
(c) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
personally delivered, on the day specified for delivery when deposited with a
recognized national or regional courier service for delivery to the intended
addressee or five (5) days following the day when deposited in the United States
mails, first class postage prepaid, addressed as set forth below:
If to Employee:
Mr. Thomas V. Cefalu, III
3844 Lakeshore Drive
Metairie, Louisiana 70002
with a copy, given in the manner prescribed above, to:
______________________________________________
______________________________________________
If to Company:
Michael Barrist
Chief Executive Officer
NCO Financial Systems, Inc.
515 Pennsylvania Avenue
Fort Washington, PA 19034
with a copy, given in the manner prescribed above, to:
Joshua Gindin
Executive Vice-President and General Counsel
NCO Group, Inc.
515 Pennsylvania Avenue
Fort Washington, PA 19034
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In addition, notice by mail shall be by air mail if
posted outside of the continental United States. Any party may alter the address
to which communications or copies are to be sent by giving notice of such change
of address in conformity with the provisions of this Section for the giving of
notice.
(d) Binding Nature of Agreement. This Agreement shall be
binding upon Company and shall inure to the benefit of Company, its present and
future Subsidiaries, Affiliates, successors and assigns including any transferee
of the business operation, as a going concern, in which Employee is employed and
shall be binding upon Employee, Employee's heirs and personal representatives.
None of the rights or obligations of Employee hereunder may be assigned or
delegated, except that in the event of Employee's death or Disability, any
rights of Employee hereunder shall be transferred to Employee's estate or
personal representative, as the case may be. Company may assign its rights and
obligations under this Agreement in whole or in part to any one or more
Affiliates or successors, but no such assignment shall relieve Company of its
obligations to Employee if any such assignee fails to perform such obligations.
(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when such number of counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
(f) Provisions Separable. The provisions of this Agreement
are independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
(g) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the employment of
Employee by Company, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing. Notwithstanding the foregoing, nothing herein shall limit
the application of any generally applicable Company policy, practice, plan or
the terms of any manual or handbook
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applicable to Company's employees generally, except to the extent the foregoing
directly conflict with this Agreement, in which case the terms of this Agreement
shall prevail.
(h) Section Headings. The Section headings in this Agreement
are for convenience only; they form no part of this Agreement and shall not
affect its interpretation.
(i) Number of Days. Except as otherwise provided herein, in
computing the number of days for purposes of this Agreement, all days shall be
counted, including Saturdays, Sundays and holidays; provided, however, that if
the final day of any time period falls on a Saturday, Sunday or holiday on which
federal banks are or may elect to be closed, then the final day shall be deemed
to be the next day which is not a Saturday, Sunday or such holiday.
(j) Gender, Etc. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
(k) Survival. All provisions of this Agreement which by
their terms survive the termination of Employee's employment with Company,
including without limitation the covenants of Employee set forth in Sections 13
and 14 and the obligations of Company to make any post-termination payments
under this Agreement, shall survive termination of Employee's employment by
Company and shall remain in full force and effect thereafter in accordance with
their terms.
[signature lines are on the following page]
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IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the date first above written.
NCO FINANCIAL SYSTEMS, INC.
By: /s/ Joshua Gindin
------------------------------------
Name: Joshua Gindin
Title: Executive Vice President
/s/ Thomas V. Cefaulu, III
-------------------------------------
THOMAS V. CEFALU, III
COMPANY AND EMPLOYEE AGREE AND ACKNOWLEDGE THAT THIS EMPLOYMENT AGREEMENT AND
THE COMPANY'S OBLIGATION TO HIRE THE EMPLOYEE, ARE CONDITIONED UPON COMPANY
COMPLETING THE ACQUISITION.
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