EXHIBIT 2.3
SECOND AMENDMENT AND ACKNOWLEDGMENT
TO PURCHASE AGREEMENT
This Second Amendment and Acknowledgment to Purchase Agreement ("Second
Amendment") is entered into this 31st day of August 2005 by and among Risk
Management Alternatives Parent Corp., Risk Management Alternatives Holdings,
Inc., Risk Management Alternatives International Limited, Resource Recovery
Consultants, Inc., RMA Intermediate Holdings Corporation, RMA Management
Services, Inc., Risk Management Alternatives International Corp. Canada,
National Revenue Corporation, Risk Management Alternatives, Inc., Risk
Management Alternatives Portfolio Services, LLC, RMA Holdings LLC, Purchased
Paper LLC, Risk Management Alternatives Solutions LLC (collectively "Seller
Parties") and NCOP Capital Resource LLC ("Purchaser").
WHEREAS, on July 6, 2005 Seller Parties and Purchaser executed a
certain Purchase Agreement which provides for the sale of substantially all of
the Seller Parties' assets to Purchaser (as amended by the First Amendment and
Acknowledgment to Purchase Agreement, dated August 23, 2005, the "Purchase
Agreement"). Capitalized terms used herein but not otherwise defined herein have
the meanings provided in the Purchase Agreement.
WHEREAS, in order to better reflect the intent of the parties, the
parties are desirous of amending certain provisions of the Purchase Agreement
and setting forth certain acknowledgments relating thereto, in each case as
provided herein.
NOW THEREFORE, with the foregoing background being incorporated by
reference herein and, intending to be legally bound hereby, the parties hereto
agree as follows:
A. Amendments
1. The reference to "September 2, 2005" in Section 2.1(b) of
the Purchase Agreement is deleted and replaced with a reference to "September 9,
2005".
2. Clause (iii) of Section 2.3(a) of the Purchase Agreement is
deleted and replaced with the following:
(iii) on the Closing Date, Purchaser shall pay by wire transfer of
immediately available funds to Parent, or as otherwise directed by
Parent (as agent for both Parent and the Subsidiaries), (A) the
remainder of the Base Amount (i.e., the Base Amount less the Deposit
Amount (and any interest accrued on the Deposit Amount)), (B) plus or
minus the Estimated WC Adjustment in accordance with the provisions set
forth in Section 2.4(b)(ii) hereof, (C) minus the Estimated Revenue
Adjustment Amount, if any, (D) minus the Portfolio Collections Amount,
if any and (E) minus the Estimated Cash Adjustment Amount (the
aggregate result of the foregoing, the "Closing Payment").
3. Section 2.4(a) of the Purchase Agreement is deleted and
replaced with the following:
(a) Portfolio Collections Adjustment.
The Purchase Price shall be reduced, dollar for dollar, for all
portfolio collections received in respect of the Accounts by any Seller
Parties on or after August 1, 2005 through August 31, 2005, net of (i)
related servicing fees charged by any Seller Parties pursuant to
agreements set forth on Schedule 2.4(a) to the Seller Disclosure Letter
and consistent with past practice and (ii) other administrative costs
incurred consistent with past practice (such result, the "Portfolio
Collections Amount"). In connection with the foregoing, the books and
records of the Seller Parties shall be closed as of July 31, 2005 in a
manner consistent with past practice.
4. Notwithstanding anything to the contrary in Section 2.4(b)
or otherwise of the Purchase Agreement, for purposes of determining the Closing
Payment and Purchase Price, Working Capital shall be measured as of the close of
business on August 31, 2005.
5. Section 2.4(d) of the Purchase Agreement is deleted and
replaced with the following:
(d) Cash Adjustment.
(i) Prior to Closing, Parent shall prepare and deliver to Purchaser a
good faith estimate of the Cash Adjustment Amount as of the Closing
Date (the "Estimated Cash Adjustment Amount").
(ii) Within sixty (60) Business Days after Closing, Parent shall
prepare and deliver to Purchaser a good faith calculation of the Cash
Adjustment Amount (the "Cash Calculation").
(iii) After Purchaser's receipt of the Cash Calculation, the Cash
Adjustment Amount shall be finalized by utilizing the same procedures
and mechanics used to finalize Working Capital pursuant to Sections
2.4(b)(iv) and (v) above.
(iv) If the Cash Adjustment Amount as finally determined pursuant to
Section 2.4(d)(iii) above is greater than the Estimated Cash Adjustment
Amount, then Purchaser shall submit a claim for such excess against the
PPA Amount, if any, then being held pursuant to the Escrow Agreement.
If the PPA Amount is insufficient to cover the amounts due under this
Section 2.4(d)(iv), then the Seller Parties shall pay to Purchaser such
amounts due under this Section 2.4(d)(iv) and not covered by the PPA
Amount. Any payment under this Section 2.4(d)(iv) shall be made within
two (2) Business Days after the claim therefor is delivered to Parent
in accordance with this Section 2.4(d)(iv).
(v) If the Cash Adjustment Amount as finally determined pursuant to
Section 2.4(d)(iii) above is less than the Estimated Cash Adjustment
Amount, then Parent shall submit a claim to Purchaser for the amount
equal to the amount by which the Estimated Cash Adjustment Amount is
more than the Cash Adjustment Amount. Any payment under this Section
2.4(d)(v) shall be made within two (2) Business Days after the claim
therefor is delivered to Purchaser in accordance with this Section
2.4(d)(v).
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(vi) During the preparation of the Cash Calculation and the period of
any review or dispute within the contemplation of this Section 2.4(d),
each of the Parties shall (i) provide the other and their authorized
representatives (including their respective auditors) with reasonable
access at reasonable times, and in a manner so as not to interfere in
any material respect with normal business operations, to all relevant
books, records, work papers, information and employees, and (ii)
cooperate fully for the preparation, calculation and reviews of the
Cash Calculation or for the resolution of any dispute relating thereto.
6. Each of Sections 3.1(a) and 3.2(a) of the Purchase
Agreement is deleted in its entirety and replaced, in each case, with the phrase
"Intentionally Omitted."
7. Section 3.1(b) of the Purchase Agreement is deleted and
replaced with the following:
(b) The Order of the Bankruptcy Court approving the terms and
conditions of this Agreement, entered August 30, 2005, shall be a Final
Order;
8. Section 4.1 of the Purchase Agreement is deleted and
replaced with the following:
4.1. Closing. The consummation of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Blank Rome LLP, One
▇▇▇▇▇ Square, Philadelphia, Pennsylvania at 10:00 a.m., Philadelphia
time, on September 12, 2005, or, if any of the conditions to Closing
set forth in Article III below (as amended by the Second Amendment)
have not been satisfied or waived by the party entitled to the benefit
thereof on or prior to such date, one (1) Business Day following the
satisfaction or waiver of such conditions (the "Closing Date").
Notwithstanding anything contained herein to the contrary, the Closing
shall be effective for all purposes as of 12:01 a.m. Philadelphia time,
on the Closing Date.
9. The phrase "Section 3.2(a) and" contained in Section 4.2(d)
of the Purchase Agreement is deleted.
10. Section 4.2(e) of the Purchase Agreement is deleted and
replaced with the following:
(e) all outstanding stock certificates of Risk Management Alternatives
International Limited and Risk Management Alternatives International
Corp. Canada (collectively, the "Foreign Subsidiaries") which are being
sold hereunder together with duly executed stock powers in blank;
provided, that a duly executed Certificate of Lost Instrument may be
provided in lieu of any stock certificate and its related stock power;
11. Section 5.19 of the Purchase Agreement is deleted and
replaced with the following:
5.19. Client Trust Accounts Sufficient. The cash assets held in Client
Trust Accounts are sufficient to satisfy the amounts due to clients
from the Client Trust Accounts and, as of the close of business on
August 31, 2005, all of Seller Parties' clients will have been paid in
full or the cash assets held in Client Trust Accounts will be
sufficient to satisfy all amounts due to clients from the Client Trust
Accounts as of such time.
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12. Section 9.1 of the Purchase Agreement shall be amended by
adding the following as the new subsection (c) thereof:
(c) Between the date of the Second Amendment and the Closing, Parent
and the Subsidiaries shall allow Purchaser and its authorized
representatives access to all levels of the Seller Parties'
organization and will assist Purchaser in commencing any required
programming related to the transition of letter production to PSC, the
implementation of SOUNDBYTE, the conversion of FACS and CUBS and other
similar projects; provided, however, that Purchaser agrees that (i) the
scope of any of the foregoing projects shall be limited to Purchaser's
preparation for the implementation of these projects following the
Closing, and shall not extend to the actual implementation of the same
prior to the Closing and (ii) these projects cannot unreasonably
interfere with the normal duties of the Seller Parties' personnel.
13. Section 9.2 of the Purchase Agreement shall be amended by
adding the following as the last sentence thereof:
From the date of the Second Amendment through the Closing, the Seller
Parties shall apply settlement practices and policies related to
portfolio collections in respect of the Accounts on a basis consistent
with past practice.
14. Section 9.10 of the Purchase Agreement shall be amended by
adding the following as the new subjection (k) thereof:
(k) On or prior to September 1, 2005, the Seller Parties will complete
their performance-based staffing rationalization with respect to their
collections operations (such rationalization will result in the
termination of 93 employees (such employees, the "Covered Employees"),
will be based on the Seller Parties' historical earned revenue
threshold of $4,000 or more per month per employee). The Seller Parties
shall incur all severance obligations related to the termination of the
Covered Employees. If, prior to effecting the terminations of the
Covered Employees, Purchaser desires to remove an employee from the
category of Covered Employees or, conversely, include further staff
reductions, then Purchaser will provide such information to the Seller
Parties for their consideration. If the Seller Parties agree to not
terminate any Covered Employee or, conversely, agree at Purchaser's
request to further staff reductions above and beyond the Covered
Employees, then Purchaser will pay the cost of any severance or related
liabilities incurred in connection therewith (including the funding of
any related administrative claim made against any Seller Party).
15. Section 9.14 of the Purchase Agreement shall be amended by
adding the following as the new subjection (c) thereof:
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(c) The Seller Parties will fund up to $100,000 toward any negotiated
settlement with Qwest relating to collection services provided by the
Seller Parties to Qwest and long-distance services provided by Qwest to
the Seller Parties (it being understood that Purchaser shall use best
efforts to minimize the actual amount of the Seller Parties' obligation
hereunder). To implement the foregoing, the Seller Parties shall
transfer the applicable amount to an account designated in a writing
delivered to the Seller Parties by Purchaser, such writing to be
delivered together with evidence of the effectiveness of the negotiated
settlement. The foregoing obligation of the Seller Parties shall expire
on September 30, 2005.
16. A new Section 9.15 shall be added to the Purchase
Agreement as follows:
9.15. Trust Accounts. Purchaser shall have available on or prior to
August 31, 2005 a parallel trust account for each trust account
utilized by the Seller Parties. Effective as of 12:01 a.m. on September
1, 2005, the Seller Parties shall thereafter and through the Closing
deposit all funds collected on behalf of any client into the applicable
parallel trust account established by Purchaser. Between 12:01 a.m. on
September 1, 2005 and the Closing, the Purchaser shall administer the
funds in the parallel trust accounts and, in connection therewith,
assist the Seller Parties as reasonably requested by such Seller
Parties in making any required remittances of any funds therein
(including the fronting by Purchaser of any necessary "float" payments
relating thereto). The parties have agreed to this Section 9.15 for the
purpose of simplifying the Closing procedures and otherwise ensuring a
successful transition to Purchaser of the business of the Seller
Parties. Purchaser expressly agrees that any funds deposited into any
parallel trust account by any Seller Party prior to the Closing Date
shall be deemed held in escrow by Purchaser for the benefit of the
Seller Parties, with full legal and economic ownership thereof
transferring to Purchaser only at the Closing. In addition, the Seller
Parties shall use Commercially Reasonable Efforts to support the
Purchaser's efforts to resolve any remittances from prior to 12:01 a.m.
on September 1, 2005 where checks have not cleared or wires have been
returned. Notwithstanding anything to the contrary herein or in any
schedule hereto, Purchaser shall not acquire any of the Seller Parties'
Client Trust Accounts (including any Excess Trust Cash therein) and
such Client Trust Accounts shall be Excluded Assets hereunder.
17. The following definitions shall be added to Annex B to the
Purchase Agreement in the appropriate alphabetical order:
"Cash Adjustment Amount" means the result (positive or negative) of (x)
all cash actually received by the Seller Parties during the period from
12:01 a.m. on September 1, 2005 until the Closing that is generated by
any Acquired Asset (including all collections on Accounts and trade
receivables collections) or related to items on the Closing Statement
(as such may be revised by the Final Closing Statement) minus (y) all
cash paid by the Seller Parties during the period from 12:01 a.m. on
September 1, 2005 until the Closing related to expenses incurred for
normal course operations of the business (including payroll, operating
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expenses and lease payments) from 12:01 a.m. on September 1, 2005 until
the Closing or related to items on the Closing Statement (as such may
be revised by the Final Closing Statement). For the avoidance of doubt,
the phrase "normal course operations" as used in clause (y) of the
preceding sentence does not relate to expenses incurred as a result of
(A) tort or personal injury actions, violations of Law or any failure
to make timely remittances of funds to clients, unless any such expense
is caused by, or incurred at the request or under the direction of,
Purchaser or its representatives or (B) the administration of the
Seller Parties' bankruptcy proceedings through the Bankruptcy Court.
Further, for purposes of both clauses (x) and (y) of the first sentence
of this definition, any cash collected on behalf of any client and
deposited by the Seller Parties into the applicable parallel trust
account established by Purchaser pursuant to Section 9.15 of the
Agreement shall be disregarded.
"Second Amendment" means the Second Amendment and Acknowledgment to
Purchase Agreement, dated August 31, 2005, by and among the Seller
Parties and Purchaser.
18. The definition of "Working Capital" contained in Annex B
to the Purchase Agreement shall be amended by adding the following as the last
sentence thereof:
For the avoidance of doubt, all information available up to the date of
the determination of Final WC shall be used in quantifying the reserves
for "NSF" and "Accounts Receivable" to be included in such
determination.
19. Schedule 2.2 to the Purchase Agreement shall be amended by
adding the following as item (E) thereof:
(E) All unpaid liabilities and obligations of the Seller Parties
arising out of, or accruing in connection with either (x) the normal
course operations of the business (including payroll, operating
expenses and lease payments) from and after 12:01 a.m. on September 1,
2005 through the Closing or (y) the items on the Closing Statement (as
such may be revised by the Final Closing Statement). For the avoidance
of doubt, the phrase "normal course operations" as used in clause (y)
of the preceding sentence does not relate to liabilities or obligations
arising out of, or accruing in connection with (A) tort or personal
injury actions, violations of Law or any failure to make timely
remittances of funds to clients, unless any such liability or
obligation is caused by, or incurred at the request or under the
direction of, Purchaser or its representatives or (B) the
administration of the Seller Parties' bankruptcy proceedings through
the Bankruptcy Court. Further, no prepaid asset created by an unpaid
liability or obligation of the type described in this item (E) shall be
taken into account for purposes of calculating Final WC.
B. Acknowledgments
1. The Seller Parties have provided satisfactory documentation
to Purchaser that their settlement practices and policies related to portfolio
collections in respect of the Accounts have, since July 1, 2005, been applied on
a basis consistent with past practice.
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2. The Seller Parties have represented to Purchaser that they
have maintained staffing in an effort to avoid further deterioration of their
assets and to otherwise comply with Section 9.2 of the Purchase Agreement. In
consideration of (1) the above representation and the other representations made
herein and (2) the benefits being provided to Purchaser pursuant to this Second
Amendment, including the Seller Parties' agreement to (A) provide the access
rights described under Section 9.1(c) of the Purchase Agreement, (B) provide the
funding to Qwest under Section 9.14(c) of the Purchase Agreement, (C) terminate
the Covered Employees on or prior to ▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇, (▇) pay all severance
costs related to the termination of such Covered Employees and (E) use all
information available up to the date of the determination of Final WC for
purposes of quantifying the reserves for "NSF" and "Accounts Receivable" to be
included in such determination, Purchaser agrees not to assert any breach by any
Seller Party of Section 9.2 or otherwise of the Purchase Agreement (and
therefore releases any claim or demand in respect of any such purported breach)
relating to, arising from or in connection with the Seller Parties' staffing
levels or settlement practices and policies related to portfolio collections in
respect of the Accounts. Irrespective of the foregoing, the Seller Parties make
no admission or acknowledgment whatsoever of any breach of the type described in
the preceding sentence and fully reserves its rights under the Purchase
Agreement in connection therewith.
3. Knowing that Purchaser is relying thereon, the Seller
Parties represent and warrant to Purchaser that, if the Closing Date were the
date of this Second Amendment, the conditions specified in Section 3.2(a) of the
Purchase Agreement (as such Section existed prior to the effectiveness of this
Second Amendment) would be fulfilled.
4. Knowing that Purchaser is relying thereon, the Seller
Parties represent and warrant to Purchaser that, if the Closing Date were the
date of this Second Amendment, the conditions specified in Section 3.2(e) of the
Purchase Agreement would be fulfilled.
5. Knowing that the Seller Parties are relying thereon,
Purchaser represents and warrants to the Seller Parties that, as of the date
hereof, none of the officers or directors of Purchaser or NCO has any actual
knowledge, after reasonable inquiry, of any basis pursuant to which Purchaser
could assert that Section 3.2(e) of the Purchase Agreement has not been
satisfied.
6. Knowing that the Seller Parties are relying thereon,
Purchaser represents and warrants to the Seller Parties that, as of the date
hereof, none of the officers or directors of Purchaser or NCO has any actual
knowledge, after reasonable inquiry, of any basis pursuant to which Purchaser
could assert on or prior to the Closing Date that Section 3.2(b) of the Purchase
Agreement has not been satisfied.
7. If any closing condition set forth in Section 3.1 or
Section 3.2 has not been fully satisfied as of the Closing, such condition shall
nonetheless be deemed to have been fully waived by Purchaser if the failure to
satisfy such condition is caused by, results from, or arises out of, any action
of any Seller Party or Purchaser contemplated by or in furtherance of this
Second Amendment, any other action of the Purchaser or its representatives
(whether occurring within a facility of a Seller Party or otherwise) or any
action of any Seller Party or its representatives undertaken at the request or
under the direction of Purchaser or its representatives.
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C. General Provisions
1. Except as expressly set forth herein, all of the remaining
terms and conditions of the Purchase Agreement shall remain in full force and
effect. To the extent of any inconsistency between this Second Amendment and
either the Purchase Agreement or the Escrow Agreement, the terms of this Second
Amendment shall control.
2. This Amendment may be executed and delivered in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
* * * * * *
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IN WITNESS WHEREOF, the parties, intending to be legally bound hereby
have caused this Second Amendment and Acknowledgment to Purchase Agreement to be
executed on their behalf by their officers thereunto duly authorized, as of the
date first above written.
RISK MANAGEMENT ALTERNATIVES NCOP CAPITAL RESOURCE, LLC
PARENT CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman & CEO Title: CEO
RISK MANAGEMENT ALTERNATIVES RISK MANAGEMENT ALTERNATIVES
HOLDINGS, INC. INTERNATIONAL LIMITED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO Title: Chairman & CEO
RESOURCE RECOVERY CONSULTANTS, RMA INTERMEDIATE HOLDINGS
INC. CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO Title: Chairman & CEO
RMA MANAGEMENT SERVICES, INC. RISK MANAGEMENT ALTERNATIVES
INTERNATIONAL CORP. CANADA
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO Title: Chairman & CEO
NATIONAL REVENUE CORPORATION RISK MANAGEMENT ALTERNATIVES,
INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO Title: Chairman & CEO
RISK MANAGEMENT ALTERNATIVES RMA HOLDINGS LLC
PORTFOLIO SERVICES, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO Title: Chairman & CEO
PURCHASED PAPER LLC RISK MANAGEMENT ALTERNATIVES
SOLUTIONS LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO Title: Chairman & CEO
[SIGNATURE PAGE TO SECOND AMENDMENT
AND ACKNOWLEDGMENT TO PURCHASE AGREEMENT]