ASSET ACQUISITION AGREEMENT
PARTIES: TELESPECTRUM WORLDWIDE, INC.
a Delaware corporation ("Seller")
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NCO GROUP, INC.
a Pennsylvania corporation ("NCO") ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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NCO TELESERVICES, INC.
a Pennsylvania corporation ("Buyer")
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DATE: January 16, 1998
BACKGROUND: Seller is in the business of, among other things, telemarketing
which includes direct inbound and outbound marketing, customer care services,
direct mail, product fulfillment, market research, interactive voice response
and related services. Buyer is a wholly owned subsidiary of NCO. The parties
desire that Seller sells and Buyer buys substantially all of the business and
assets of Seller exclusively used in the operation of the market research
business ("the Division's business") conducted by its The Response Center
Division (the "Division") all on and subject to the terms and conditions of this
Agreement.
INTENDING TO BE LEGALLY BOUND, in consideration of the mutual
agreements contained herein, and subject to the satisfaction of the terms and
conditions set forth herein, the parties agree as follows:
1. DEFINED TERMS Certain defined terms used in this Agreement and not
specifically defined in context are defined in this Section 1, as follows:
1.1. "Accounts Receivable" means (a) any right to payment for goods
sold, leased or licensed or for services rendered, whether or not it has been
earned by performance, whether billed or unbilled, and whether or not it is
evidenced by any Contract; (b) any note receivable; or (c) any other receivable
or right to payment of any nature.
1.2. "Asset" means any real, personal, mixed, tangible or intangible
property of any nature, including, but not limited to, Accounts Receivable,
unbilled revenue, prepayments, deposits, escrows, Tangible Property, Real
Property (as defined in Section 1.20), Software, Contract Rights (as defined in
Section 1.6), Intangibles (as defined in
Section 1.13) and goodwill, and claims, causes of action and other legal rights
and remedies.
1.3. "Cash Asset" means any cash on hand, cash in bank or other
accounts, readily marketable securities, and other cash-equivalent liquid assets
of any nature.
1.4. "Consent" means any consent, approval, order or authorization
of, or any declaration, filing or registration with, or any application or
report to, or any waiver by, or any other action (whether similar or dissimilar
to any of the foregoing) of, by or with, any Person (as defined in Section
1.18), which is necessary in order to take a specified action or actions in a
specified manner.
1.5. "Contract" means any written or oral contract, agreement,
instrument, order, arrangement, commitment or understanding of any nature
exclusively related to the Division's business, including, but not limited to,
sales orders, purchase orders, leases, subleases, data processing agreements,
maintenance agreements, license agreements, sublicense agreements, employment
agreements, consulting agreements or sales representative agreements, provided,
however, that the purchase and related agreements among Seller and those persons
who sold the Division to Seller on August 13, 1996 shall not be included under
the term Contract.
1.6. "Contract Right" means any right, power or remedy of any nature
under any Contract including, but not limited to, rights to receive property or
services or otherwise derive benefits from the payment, satisfaction or
performance of another party's Obligations (as defined in Section 1.16), rights
to demand that another party accept property or services or take any other
actions, and rights to pursue or exercise remedies or options.
1.7 "Deferred Revenues" means such amount as shown on Seller's
Closing Balance Sheet (as defined in, and to be prepared in accordance with
Section 3.2), related to fees received or billed by the Division in advance of
work being preformed.
1.8. "Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any other plan, program, policy or arrangement for or
regarding bonuses, commissions, incentive compensation, severance, vacation,
deferred compensation, pensions, profit sharing, retirement, payroll savings,
stock options, stock purchases, stock awards, stock ownership, phantom stock,
stock appreciation rights, medical/dental expense payment or reimbursement,
disability income or protection, sick pay, group insurance, self insurance,
death benefits, employee welfare or fringe benefits of any nature; but not
including employment Contracts with individual employees.
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1.9. "Encumbrance" means any lien, security interest, pledge,
mortgage, easement, restriction, reservation, conditional sale, prior
assignment, or other encumbrance, or other adverse claim, burden or charge of
any nature.
1.10. "GAAP" means generally accepted accounting principles under
United States accounting rules and regulations, consistently applied, provided
that, in cases where such generally accepted accounting principles permit the
use of two or more accounting policies ("Accepted Policies") yielding different
results, the following Accepted Policy shall be used, regardless of materiality:
(a) the historical Accepted Policy used by Seller, if one is applicable; or (b)
if none of the historical Accepted Policies used by Seller is applicable, the
preferred Accepted Policy under United States accounting rules and regulations.
In no event shall the consistent application of the historical accounting
policies used by Seller have priority over GAAP, regardless of materiality.
1.11. "Hazardous Substances" means any substance, waste,
contaminant, pollutant or material that has been determined by any United States
federal government authority, or any state or local government authority having
jurisdiction over Seller's Real Property, to be capable of posing a risk of
injury or damage to health, safety, property or the environment, including, but
not limited to, (a) all substances, wastes, contaminants, pollutants and
materials defined or designated as hazardous, dangerous or toxic pursuant to any
Law of any state in which any of Seller's leased or owned Real Property is
located or any United States Law, and (b) asbestos, polychlorinated biphenyls
("PCBs") and petroleum.
1.12. "Insurance Policy" means any public liability, product
liability, general liability, comprehensive, property damage, vehicle, life,
hospital, medical, dental, disability, worker's compensation, key man, fidelity
bond, theft, forgery, errors and omissions, directors' and officers' liability,
or other insurance policy of any nature.
1.13. "Intangible" means the name of the Division or any corporate
name, fictitious name, trademark, trademark application, service ▇▇▇▇, service
▇▇▇▇ application, trade name, brand name, product name, slogan, trade secret,
know-how, patent, patent application, copyright, copyright application, design,
logo, formula, invention, product right client lists or other intangible asset
of any nature, whether in use, under development or design, or inactive and
goodwill associated therewith.
1.14. "Judgment" means any order, writ, injunction, citation, award,
decree or other judgment of any nature of any foreign, federal, state or local
court, governmental body, administrative agency, regulatory authority or
arbitration tribunal.
1.15. "Law" means any provision of any foreign, federal, state or
local law, statute, ordinance, charter, constitution, treaty, rule or
regulation.
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1.16. "Obligation" means any debt, liability or obligation of any
nature, whether secured, unsecured, recourse, nonrecourse, liquidated,
unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained,
known, unknown or otherwise.
1.17. "Permit" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature, granted, issued, approved or
allowed by any oreign, federal, state or local governmental body, administrative
agency or regulatory authority.
1.18. "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, association, cooperative, trust, estate,
governmental body, administrative agency, regulatory authority or other entity
of any nature.
1.19. "Proceeding" means any demand, claim, suit, action,
litigation, investigation, arbitration, administrative hearing or other
proceeding of any nature.
1.20. "Real Property" means any real estate, land, building,
condominium, town house, structure or other real property of any nature, all
shares of stock or other ownership interests in cooperative or condominium
associations or other forms of ownership interest through which interests in
real estate may be held, and all appurtenant and ancillary rights thereto,
including, but not limited to, easements, covenants, water rights, sewer rights
and utility rights.
1.21. "Required Consent" means a Consent which is required to
transfer Contracts, or any of them, to Buyer and which Consent is expressly
required by the terms of such Contracts and are listed on Schedule 1.21 as
required by Buyer to consummate the Closing.
1.22. "Software" means any computer program, operating system,
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation therefor, whether in
machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature.
1.23. "Tangible Property" means any furniture, fixtures, leasehold
im provements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies, fixed assets or other tangible personal
property of any nature.
1.24. "Tax" means (a) any foreign, federal, state or local income,
earnings, profits, gross receipts, franchise, capital stock, net worth, sales,
use, occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature;
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(b) any foreign, federal, state or local organization fee, qualification fee,
annual report fee, filing fee, occupation fee, assessment, sewer rent or other
fee or charge of any nature; or (c) any deficiency, interest or penalty imposed
with respect to any of the foregoing.
2. THE TRANSACTION
2.1. Sale and Purchase of Specified Assets. On the Closing Date,
effective to the fullest extent possible at 5:00 p.m. EST on the Effective Date
(as defined in Section 10.1), and subject to the other terms and conditions of
this Agreement, Seller shall sell, transfer, assign and convey to Buyer, and
Buyer shall purchase, all of Seller's right, title and interest in and to all of
the Specified Assets (as defined in Section 2.1.1), and Seller shall assign to
Buyer, and Buyer shall assume, the Specified Liabilities of Seller (as defined
in Section 2.1.2).
2.1.1 Specified Assets of Seller. The "Specified Assets
of Seller" means the business of, and all Assets exclusively used in the
operation of the Division's business as of the Effective Date, wherever located
and whether or not reflected on Seller's books and records, including, but not
limited to, the following Assets:
(A) All of Seller's Accounts Receivable and
other current assets arising exclusively in connection with or exclusively
relating to the Division including, but not limited to, prepaid expenses,
security deposits, rent escrows, and other prepayments, deposits and escrows;
(B) All of Seller's Tangible Property,
Software and Intangibles in each case, that is exclusively used in or for the
operation of the Division;
(C) All of Seller's Contract Rights under the
Specified Contracts (as defined in Section 4.13), but excluding Contract Rights
under this Agreement and any other Contracts entered into by Seller with Buyer
in connection with the transactions contemplated by this Agreement;
(D) All of Seller's Contract Rights under any
noncompetition, nondisclosure or other restrictive covenant made for the benefit
of Seller or its affiliates (or any of their respective predecessors) in any
Contract with current or former employees of the Division, regardless of whether
any such current employee accepts Buyer's offer pursuant to Section 2.3;
(E) All rights under all Insurance Policies
owned, held or maintained by Seller or any of its predecessors at any time since
January 1, 1991 in connection with or for the benefit of the business, assets or
employees of the Division, but excluding (1) all rights under Insurance Policies
that constitute group medical, dental, hospitalization, health, disability and
related Employee Benefit Plans of Seller ("Seller's
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Group Insurance Plans"); and (2) the rights of Seller under its Insurance
Policies pertaining exclusively to actual or potential claims or losses that
remain Seller's responsibility after the Effective Date.
(F) All transferable rights under all Permits
granted or issued to Seller or otherwise held by Seller exclusively relating to
or for the benefit of the Division;
(G) All of Seller's rights with respect to
telephone numbers, telephone directory listings and advertisements exclusively
used by the Division, and all of Seller's goodwill relating to or arising in
connection with the Division's business;
(H) All of Seller's customer lists, prospect
lists, supplier lists, data bases, computer media, sales and marketing
materials, invoices, correspondence, files, books and records, in each case
exclusively relating to or arising exclusively in connection with the Division's
business; and
(I) All of Seller's claims, causes of action
and other legal rights and remedies, whether or not known as of the Effective
Date, relating to Seller's ownership of the Specified Assets and/or the
operation of the Division, but excluding causes of action and other legal rights
and remedies of Seller (1) against Buyer with respect to the transactions
contemplated by this Agreement; or (2) relating exclusively to Seller's Assets
not included in the Specified Assets or to Seller's liabilities not included in
the Specified Liabilities.
2.1.2 Excluded Assets of Seller. The "Excluded Assets of
Seller" means the following specifically described assets of Seller: (1) Cash
Assets; and (2) Seller's Assets which are not Specified Assets of Seller.
2.1.3 Specified Liabilities of Seller. The "Specified
Liabilities of Seller" means the following specifically described liabilities of
Seller as of the Effective Date:
(A) The current liabilities, including
Deferred Revenues of Seller incurred or arising exclusively in connection with
the Division's business which shall be clearly reflected on the Closing Balance
Sheet and which are specifically set forth on Schedule 2.1.3. Notwithstanding
the foregoing, the Specified Liabilities shall not include (1) any liabilities
for any Taxes; (2) any long-term debt; (3) any notes payable; (4) any
liabilities for overdrafts or any other liabilities with respect to bank
accounts; or (5) any guarantees of indebtedness of Seller or any subsidiary or
affiliate.
(B) The liabilities of Seller under those
Specified Contracts but only to the extent that such liabilities are not due to
any breach or default by Seller under any such Specified Contract.
Notwithstanding the foregoing, the Specified Liabilities
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of Seller shall not include the liabilities of the Seller under (1) this
Agreement or any other Contracts entered into by the Seller with the Buyer in
connection with the transactions contemplated by this Agreement; (2) any
Contracts that constitute or evidence Employee Benefit Plans of Seller; (3) any
liabilities or Obligations to employees of the Division except as is otherwise
set forth in Section 2.3 and (4) any Contracts relating to the formation or
acquisition of Seller or any of the predecessors of the Division's business.
(C) The liabilities of Seller under Contracts
relating to the Division's business entered into in the ordinary course of
business consistent with past practices between the date of this Agreement and
the Effective Date, provided that the incurrence or existence of any such
liability or Contract does not constitute a breach or failure of, or a default
under, any representation, warranty, covenant or other provision of this
Agreement (including, but not limited to, those of Section 4.13 and Section
6.2), but only to the extent that such liabilities are not due to any breach or
default by Seller under any such Contract.
2.2. No Other Liabilities. Notwithstanding any other provisions of
this Agreement, Buyer shall not purchase the Specified Assets subject to, and
Buyer shall not in any manner assume or be liable or responsible for any
Obligation of Seller other than the Specified Liabilities, and each and every
Obligation of Seller other than the Specified Liabilities shall remain the sole
responsibility of Seller. Without limiting the generality of the foregoing, and
in addition to the liabilities excluded from the Specified Liabilities under
Section 2.1.2 and except as set forth in Section 11.3, Buyer shall not in any
manner assume or be liable or responsible for any of the following Obligations
of Seller:
2.2.1 Affiliates. Any Obligation to Seller or any current
or former shareholder, partner, director or controlling Person of Seller, or to
any other Person affiliated with Seller, or its affiliates and predecessors, if
any.
2.2.2 Taxes. Any Obligation for any Tax, including but not
limited to, (a) any Tax payable by Seller with respect to Seller's business
operations, including without limitation, the Division's business; (b) any Tax
payable by Seller with respect to the ownership, possession, purchase, lease,
sale, disposition or use of any of Seller's Assets at any time, including
without limitation, the Specified Assets; (c) any Tax resulting from the sale of
the Specified Assets to Buyer or otherwise resulting from the transactions
contemplated by this Agreement; and (d) any Obligation for any Tax of any Person
under Treasury Regulation Section 1.1502.6 (or any similar provisions of Law),
as a transferee or successor, by Contract or otherwise.
2.2.3 Post-Closing. Any Obligation that is incurred or
arises after the Effective Date, or that relates to any Proceeding or other
event that occurs or circumstances that exist after the Effective Date.
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2.2.4 Transaction Related. Any Obligation that was or is
incurred in connection with the negotiation, execution or performance of this
Agreement and any other Contracts entered into between or among Buyer and Seller
or Buyer and/or Seller and other parties in connection with the transactions
contemplated by this Agreement.
2.2.5 Defaults. Any Obligation (other than Obligations
under Specified Contracts which are governed by Section 2.1.2(B) or that have
been included in the Closing Balance Sheet) , the incurrence or existence of
which constitutes or will constitute a breach or failure of, or a default under,
any representation, warranty, covenant or other provision of this Agreement,
including, but not limited to, any Obligation, whether or not known to Seller,
that has not been disclosed to Buyer in writing in this Agreement or the
Schedules and Exhibits hereto.
2.2.6 Employees. Except as provided in Section 11.4, any
Obligation to any or all employees of Seller, including, but not limited to,
Obligations under Seller's payroll savings, profit sharing and/or other
retirement plans ("Seller's Retirement Plans"), Obligations under Seller's Group
Insurance Plans (as defined in Section 2.1.1), and Obligations for severance pay
and other termination benefits for those employees who do not accept Buyer's
offer of employment.
2.2.7 Infringement. Any Obligation arising in connection
with or related to Seller's infringement or alleged infringement of any Software
or Intangible of any Person.
2.2.8 Encumbrances. Any Encumbrance on or affecting
Seller's Assets including, without limitation, the Specified Assets.
2.2.9 Proceedings. Any Proceeding or Judgment listed or
required to be listed on Schedule 4.17.
2.3. Seller's Employees. Subject to the condition that the Closing
hereunder occurs, Buyer shall offer to employ, as of the Effective Date, all of
the employees of Seller engaged in the Division's business listed on Exhibit
2.3., including employees of Seller engaged in the Division's business then on
permitted leave from the employment of Seller. Such employment will be on an "at
will" or other basis, as Buyer determines, and at time of employment, for
salaries or wages reasonably determined by Buyer but in no event lower than
currently enjoyed by such employees. Buyer, however, following commencement of
employment of such employees, shall have the right to change or modify such
employees' compensation as it deems appropriate. Buyer does not assume, and
Seller shall be fully responsible for the payment of, any severance or other
benefits related to or payable upon the termination of any of the Division's
employees who fail to accept such employment offer, except that Buyer agrees to
assume Seller's Obligation for accrued but unused vacation and sick time of the
Division's employees accepting
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employment with Buyer immediately following Closing. Buyer shall assume
Obligations for severance pay and other termination benefit liabilities incurred
by Seller resulting from the termination of any such employee who is hired by
Buyer and then terminated by Buyer within six (6) months. Within at least thirty
(30) days of the Closing Date, Seller shall provide to Buyer accurate and
complete copies of the personnel records of the Division's employees engaged in
the Division's business. Seller shall be responsible for compliance with all
Laws related to the termination by Seller of Seller's employees. Seller shall
cooperate with Buyer's efforts to employ and retain any such employees.
3. PURCHASE PRICE AND CLOSING FINANCIAL STATEMENTS
3.1. Purchase Price and Allocation. The total purchase price for the
Specified Assets, subject to the adjustment described in Section 3.3, ("Purchase
Price") shall be Fifteen Million Dollars ($15,000,000) in cash payable at
Closing plus the assumption of the Specified Liabilities by Buyer in accordance
with Section 2.1. The Purchase Price shall be allocated amount the Specified
Assets and Specified Liabilities in the manner set forth on Exhibit 3.1.
3.2. Closing Balance Sheet. Seller shall, at Seller's cost and
expense, prepare or cause to be prepared a balance sheet of the Specified Assets
and the Specified Liabilities (to the extent required by GAAP to be disclosed on
a balance sheet) as of the Effective Date ("Closing Balance Sheet") in
accordance with GAAP which shall fairly present in all material respects the
Specified Assets and the Specified Liabilities. Seller shall deliver the Closing
Balance Sheet to NCO within thirty (30) days after the Effective Date. On or
before the date that Seller delivers the Closing Balance Sheet to NCO, Seller
shall deliver to NCO detailed lists ("Closing Balance Sheet Lists") of all of
the Specified Assets and Specified Liabilities by balance sheet account, and
with aggregate net balances equal to the balances on the Closing Balance Sheet.
The Closing Balance Sheet Lists shall include, but not necessarily be limited
to, lists of (a) Accounts Receivable, showing customer names, individual invoice
dates, individual invoice amounts and allowances for doubtful accounts, or, in
the case of earned but not billed receivables, customer names and individual
dates on which the receivables are billed (the "Receivable Lists"); (b) other
current assets included in the Specified Assets, itemized by category and with
appropriate explanation; (c) Tangible Property included in the Specified Assets,
grouped as to type, showing cost, accumulated depreciation and net book value;
(d) Software and Intangibles included in the Specified Assets, showing cost or
amount capitalized, accumulated amortization and net book value; (e) accounts
payable included in the Specified Liabilities, itemized by payee; (f) accrued
expenses and reserves included in the Assumed Liabilities, itemized by category
and with appropriate explanation; (g) deferred revenues included in the Assumed
Liabilities, itemized by customer and dates by which revenue will be recognized;
and (h) other current and long-term liabilities included in the Assumed
Liabilities, itemized by payee.
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3.3. Purchase Price Adjustment. The Purchase Price shall be subject
to adjustment as follows:
3.3.1 Balance Sheet Adjustment. The Purchase Price shall be
decreased by the amount (the "Negative Adjustment"), if any, by which the Actual
TNW (as defined below) is less than the Minimum TNW (as defined below) and shall
be increased by the amount (the "Positive Adjustment"), if any, by which the
Actual TNW is greater than the Minimum TNW. The "Actual TNW" shall equal the
Specified Assets as of the Effective Date, as reflected on the Closing Balance
Sheet minus (b) the Specified Liabilities as of the Effectiveness Date, as
reflected on the Closing Balance Sheet. The "Minimum TNW" shall equal One
Million Two Hundred Fifty Thousand Dollars ($1,250,000).
3.3.2 Statement of Adjustments. Seller shall (a) prepare a
statement ("Statement of Adjustments") showing a clear and detailed calculation
of the Negative Adjustment or Positive Adjustment to the Purchase Price
described in this Section 3.3; and (b) deliver the Statement of Adjustments to
NCO at the same time as the Closing Balance Sheet and related documents are
delivered to NCO under Section 3.2. NCO shall notify Seller, in reasonable
detail, of any objections to the Statement of Adjustments (which may include
objections to the Closing Balance Sheet) within thirty (30) days after NCO
receives the Statement of Adjustments and all of the documents required to be
delivered to NCO under Section 3.2. If NCO does not notify Seller of any such
objections by the end of that thirty-day period, then the Statement of
Adjustments, as prepared by Seller, shall be considered final on the last day of
that thirty-day period. If NCO does notify Seller of any such objections by the
end of that thirty-day period, and NCO and Seller are unable to resolve their
differences within fifteen (15) days thereafter, then the disputed items on the
Statement of Adjustments shall be the remaining disputed items shall be
submitted to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., Philadelphia, Pennsylvania (the "Arbiter"),
for resolution, with the costs thereof paid fifty percent (50%) by Seller and
fifty percent (50%) by NCO, and the Arbiter shall be instructed to deliver a
final Statement of Adjustments to Seller and NCO as soon as possible.
3.3.3 Payment of Adjustment. In the event that a Negative
Adjustment or a Positive Adjustment is required, then the required party shall
pay to the other party an amount equal to the adjustment within fifteen (15)
business days after the Statement of Adjustments is finalized in accordance with
Section 3.3.2.
3.4. Contingency Consideration. In addition to the Purchase Price,
Seller may be entitled to receive additional consideration (the "earnout"). The
earnout will be based on fifty percent (50%) of the differential between the
Initial Value and the Ending Value as defined below:
(a) Initial Value: $31,800,000
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(b) Ending Value: Either (i) if an initial public offering
of NTRC (defined as Buyer's market research business, the Division's business
and the business of any company acquired by Buyer which is involved in the
provision of market research) common stock occurs or if NTRC is sold prior to
December 31, 1998, the average market capitalization of NTRC over the first 30
days of trading adjusted for any dilution caused by such a public stock offering
or the aggregate consideration received for NTRC (including the assumption of
any funded debt), or (ii) if an initial public offering of NTRC common stock
does not occur and NTRC is not sold prior to December 31, 1998, the average
analyst estimate of NTRC's net income for the year ending December 31, 1999
multiplied by NCO's preceding 30 day average 1999 EPS multiple (based on analyst
estimates) at December 31, 1998.
At Seller's discretion, Seller may delay calculation of the Ending
Value as calculated in (b) (ii) above until January 31, 1999 or February 28,
1999 in order to obtain a more favorable preceding 30 day average multiple of
NCO's 1999 estimated EPS.
If an initial public offering of NTRC common stock does not occur or
if NTRC is not sold prior to December 31, 1998 and Seller elects at any time
prior to April 30, 1999 not to accept the Ending Value as calculated in (b) (ii)
above, Seller may elect to convert to an alternative earnout calculation as
follows: on March 31, 1999, Seller will be paid seven (7) times the amount by
which the Division's 1998 EBITDA exceeds 120% of the Division's 1997 EBITDA. For
purposes of this calculation, the Division's 1997 EBITDA will be $1,891,000 or
the Division's actual 1997 EBITDA, whichever is greater. In addition, on March
31, 2000, Seller will be paid seven (7) times the amount by which the Division's
1999 actual EBITDA exceeds 110% of the Division's actual 1998 EBITDA. In all
instances in which an earnout calculation involves the use of EBITDA, such
EBITDA shall be normalized by adding back any acquisition-related or other
extraordinary non-recurring expenses.
Seller may elect (at any time before April 30, 2000) to be paid the
earnout, if any, in either cash or in the form of a convertible note,
convertible into NCO common stock at a price equal to $3.00 above NCO's trailing
average 30 trading day per share price on the payment date. The principal sum of
the note shall be equal to the amount of the earnout less the value of the
conversion options as based on a Black-Scholes model, the assumptions of which
shall be mutually agreed upon by Buyer and Seller at the time the earnout is
being calculated. The interest rate on the convertible note shall be equal to
the rate paid by NCO under its prevailing line of credit, but shall not exceed
7.5%. Such note shall be for a term of five (5) years.
All dates in 1999 and 2000 shall be appropriately adjusted if NCO's
Form 10-K is filed after March 31, 1999 or 2000.
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In connection with the foregoing, Seller shall have ten (10)
business days to review and object, in a writing to be delivered within such
10-day period, to Buyer's calculation of the earnout unless an objection is
raised, Buyer's calculation of the earnout shall be final and binding on the
parties for all purposes. In the event of an objection, subject to the provision
of Section 15.19, for a period of thirty (30) calendar days, Seller may or at
its sole cost and expense, engage the Arbiter to audit the books and records
relative to the calculation of the earnout only. Upon completion of the audit
within the 30- day period, Seller shall deliver the written audit to Buyer. The
parties shall jointly review the audit and determine whether an adjustment is
required. If an agreement cannot be reached, the Arbiter shall be consulted and
it's determination shall be final.
3.5. Currency and Method of Payment. All dollar amounts stated in
this Agreement are stated in United States currency, and all payments required
under this Agreement shall be paid in United States currency. All payments
required under this Agreement shall be made as follows: (a) any payment may be
made by wire transfer of immediately available United States federal funds; (b)
any payment exceeding $100,000 shall be made by wire transfer of immediately
available United States federal funds; (c) any payment exceeding $10,000, but
not exceeding $100,000, may be made by bank certified, treasurer's or cashier's
check; and (d) any payment not exceeding $10,000 may be made by ordinary check.
3.6. Imputed Interest. If any Adjustment is not paid as herein
required, such Adjustment shall be deemed to include interest from the Closing
Date, calculated at the required, applicable rate for imputed interest under
federal income tax law.
4. REPRESENTATIONS OF SELLER
Knowing that Buyer is relying thereon, Seller represents and
warrants to Buyer and covenants with Buyer as follows:
4.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
incorporation. Seller possesses the full corporate power and authority to own
its Assets, conduct the business of the Division as and where presently
conducted, and enter into and perform this Agreement. Seller is duly qualified
to do business in each jurisdiction listed on Schedule 4.1, and Seller is not
required to be qualified in any other jurisdiction in connection with the
operation of the Division. Schedule 4.1 states, for the Division (a) its trade
name; (b) its headquarters address, telephone number and facsimile number; (c)
all foreign jurisdictions in which it is qualified or registered to do business,
and its registered agent and/or office in each such jurisdiction (if
applicable); and (d) all fictitious, assumed or other names of any type known to
Seller that are registered or used by it or under which it has done business at
any time since January 1, 1991.
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4.2. Effect of Agreement. The execution, delivery and performance of
this Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby, (a) have been, or shall have been by the Closing Date, duly
authorized by all necessary corporate action; (b) do not constitute a violation
of, a default under, or termination of the articles or certificate of
incorporation or other organizational documents or; (c) do not constitute a
default or breach of (immediately after the giving of notice, passage of time or
both), or termination of any Assumed Contract; (d) do not constitute a violation
of any Law applicable to Seller, the Division, the Division's business or the
Specified Assets; (e) except as stated on Schedule 4.2, do not require the
Consent of any Person; (f) do not accelerate or otherwise modify any Assumed
Obligation of Seller in connection with the Division; and (g) do not result in
the creation of any Encumbrance upon, or give to any other Person any interest
in, the Division, the Division's business or the Specified Assets. There exists
no rights of first refusal or other preemptive rights with respect to , the
Division, the Division's business or the Specified Assets. This Agreement
constitutes the valid and legally binding agreement of Seller, enforceable
against Seller in accordance with its terms.
4.3. Financial and Corporate Records. Seller's books and records
pertaining to the Division and its business are and have been properly prepared
and maintained in form and substance adequate for preparing audited financial
statements in accordance with GAAP, and fairly and accurately reflect in all
material respect all Assets and Obligations of the Division's business and all
Contracts and transactions to which Seller is or was a party that relate
exclusively to the Division or by which any of the Assumed Assets are or were
affected and which relate or pertain to the Division.
4.4. Compliance with Law. The operation by Seller of the Divsion,
the conduct by Seller of the Division's business, and the ownership, possession
and use of the Assets used in or for the Division comply in all material
respects with all Laws applicable to the Division's business. Except as set
forth on Schedule 4.4, Seller has obtained and holds all material Permits
required for the lawful operation of the Division's business as and where such
business is presently conducted. All Permits relating to the Division held by
Seller are listed on Schedule 4.4, and copies of such Permits have been
delivered to Buyer.
4.5. Financial Statements. Schedule 4.5 includes complete copies of
audited financial statements of the Division consisting of a balance sheet of
the Division for the year ending December 31, 1996 and for the year ending
December 31, 1997(the cost of the 1997 audit to be shared equally by Buyer and
Seller) and the related statement of income for the year ended December 31,
1997, all of which are audited and reported on by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
(collectively, the "Annual Financial Statements"). The Annual Financial
Statements shall also include complete copies of unaudited financial statements
of the Division consisting of a balance sheet of the Division as of January 31,
1998 and the related statement of income for the one (1) month period then ended
(the "Interim Financial
13
Statements," and together with the Annual Financial Statements, the "Financial
Statements"). Except as set forth on Schedule 4.5, the Financial Statements are
in all material respects consistent with the books and records of the Seller and
include all costs incurred in the operation of the Division, and there are no
transactions required by GAAP, applied on a consistent basis, to be recorded in
accounting records that have not been recorded in the accounting records
underlying such Financial Statements. Except as set forth on the Financial
Statements, the Financial Statements have been prepared in accordance with GAAP
consistently applied and present fairly the financial position and assets and
liabilities of the Division as of the dates thereof and the results of its
operations for the periods then ended, subject to normal recurring year-end
adjustments and the absence of notes in the case of the Interim Financial
Statements. Except as set forth in the Financial Statements and for the Excluded
Assets, the balance sheets included in the Financial Statements do not include
any material assets that are not intended to constitute part of the Division's
business or the Specified Assets after giving effect to the transactions
contemplated herein. The income statements included in the Financial Statements
do not reflect any operations that are not intended to constitute part of the
Division's business or the Specified Assets after giving effect to such
transactions and reflect all material costs that have been incurred by the
Division's business during these periods.
4.6. Assets. Schedule 4.6 includes lists of substantially all of the
Specified Assets. Seller has good title to all of the Specified Assets and has
the right to transfer all right, title and interest in such Specified Assets to
Buyer, free and clear of any Encumbrance.
4.7. Seller's Obligation. Schedule 4.7 includes a detailed list of
the Specified Liabilities, itemized by balance sheet account, including the
following: accounts payable, accrued employee expenses specifically assumed by
Buyer and, deferred revenue of the Division. Seller has no other Obligation
exclusively related to the Division's business other than (a) the Obligations
listed on Schedule 4.7; (b) Obligations under the Specified Contracts, any
Contracts not required by GAAP to be specifically disclosed on a balance sheet
and (c) Obligations incurred since November 30, 1997 arising in the ordinary
course of business.
4.8. Operations Since November 30, 1997. Except as set forth on
Schedule 4.8, from November 30, 1997 to the date of this Agreement:
4.8.1 Except in the ordinary course of its business
consistent with its past practices, Seller has not (a) created or assumed any
Encumbrance upon the Division's business or any of the Specified Assets, (b)
incurred any Obligation on behalf of or relating to the Division's business, (c)
made any loan or advance to any Person on behalf of or relating to the
Division's business; (d) assumed, guaranteed or otherwise become liable for any
Obligation of any Person exclusively on behalf of or relating to the Division's
business; (e) committed for any capital expenditure exclusively on behalf of or
relating to the Division's business; (f) purchased, leased, sold, abandoned or
otherwise
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acquired or disposed of any part of the Division's business or Specified Assets;
(g) waived any right or canceled any debt or claim on behalf of or exclusively
relating to the Division; (h) assumed or entered into any Contract on behalf of
or relating to the Division other than this Agreement; (i) increased, authorized
an increase in or in any way changed, modified or amended the compensation or
benefits paid or provided to any of its directors, officers, employees,
salesmen, agents or representatives engaged in the Division's business; or (j)
done anything else outside the ordinary course of business on behalf of or
exclusively relating to the Division or its business, whether or not
specifically described in any of the foregoing clauses.
4.8.2 There has been no material adverse change or material
casualty loss affecting Seller, the Division's business or Assets, the financial
condition of Seller, the Division or the Division's business, and there has been
no material adverse change in the financial performance of the Division or the
Division's business.
4.9. Tangible Property. Seller has good and marketable title to all
of its Tangible Property included in the Specified Assets free and clear of any
Encumbrances. All of Seller's Tangible Property used in or for the Division's
business is located at the Facilities (as defined in Section 4.10) and Seller
has the full and unqualified right to require the immediate return of any of its
Tangible Property which is not located at the Facilities. Except as set forth on
Schedule 4.9, all Tangible Property used by Seller or its customers in the
Division's business is in good condition, ordinary wear and tear excepted, and
is sufficient for the operation of the Division's business as presently
conducted.
4.10. Real Property. Seller does not own any Real Property used in
or for the Division's business. Schedule 4.10 is a detailed list of all Real
Property leased by Seller and which is exclusively used in or for the Division's
business (the "Facilities"), showing location, rental cost and landlord. All the
Facilities under lease to or otherwise used by Seller are in good condition,
ordinary wear and tear excepted, and are sufficient for the current operations
of the Division's business. None of the Facilities, nor the occupancy,
maintenance or use thereof, is in violation of, or breach or default under, any
Contract or Law, and no notice from any lessor, governmental body or other
Person has been received by Seller or served upon any of the Facilities claiming
any violation of, or breach or default under, any Contract or Law, or requiring
or calling attention to the need for any work, repairs, construction,
alternation or installations. Seller has neither placed or caused to be placed
nor has any knowledge or belief that there were or are, any Hazardous Substances
on or under any of the Facilities.
4.11. Software and Intangibles. Schedule 4.11 is an accurate and
complete list and description of all Software and Intangibles owned, marketed,
licensed, used or under development by Seller and exclusively used in or for the
Division's business, and, in the case of Software, a product description, the
language in which it is written and the type of hardware platform(s) on which it
runs. No other Software is required to operate the Division's business as it is
presently conducted. Except as explained on Schedule 4.11,
15
Seller has valid title to, and has the full right to use and transfer to Buyer,
all of the Software and Intangibles listed on Schedule 4.11, free and clear of
any Encumbrance. To the knowledge of Seller, none of the Software or Intangibles
listed on Schedule 4.11, or their respective past or current uses, has violated
or infringed upon, or is violating or infringing upon, any Software, patent,
copyright, trade secret or other Intangible of any Person. To the knowledge of
Seller, no Person is violating or infringing upon, or has violated or infringed
upon at any time, any of the Software or Intangibles listed on Schedule 4.11.
None of the Software or Intangibles listed on Schedule 4.11 is owned by or
registered in the name of any current or former shareholder, partner, director,
executive, officer, employee, salesman, agent, customer, representative or
contractor of Seller nor does any such Person have any interest therein or right
thereto, including but not limited to the right to royalty payments.
4.12. Contracts. Schedule 4.12 is an accurate and complete list of
all of the following types of Contracts included in the Specified Assets
(collectively, the "Specified Contracts"), grouped into the following categories
and, where applicable, subdivided by product line: (a) customer Contracts; (b)
Contracts for the purchase or lease of Real Property or otherwise concerning
Real Property owned or used by Seller including a description of the Real
Property; (c) Contracts for the purchase, lease and/or maintenance of computer
equipment and other equipment; (d) Contracts for the purchase, license, lease
and/or maintenance of Software, and other supplier Contracts; (e) employment,
consulting and sales representative Contracts (excluding Contracts which
constitute Employee Benefit Plans listed on Schedule 4.14, and excluding oral
Contracts with employees for "at will" employment); and (f) other Contracts
(excluding Contracts which constitute Insurance Policies listed on Schedule
4.18. A description of each oral Specified Contract is included on Schedule
4.12, and copies of each written Specified Contract have been delivered to
Buyer. Except as set forth on Schedule 4.12, each of Seller's customer Contracts
is substantially similar to the form service agreement therefor that is attached
as part of Schedule 4.12A. With respect to each applicable customer Contract,
Schedule 4.12 includes a reasonable description of all work remaining to be
performed under such Contracts as of January 31, 1998, and all credits granted
to, or other adjustments made for, the customer to be applied against future
payments or purchases. Except as set forth on Schedule 4.12, with respect to
each of the Specified Contracts, Seller neither is in default thereunder nor
would be in default thereunder with the passage of time, the giving of notice of
both. Except as set forth on Schedule 4.12, to the knowledge of Seller, none of
the other parties to any Specified Contract is in default thereunder or would be
in default thereunder with the passage of time, the giving of notice or both.
Except as set forth on Schedule 4.12, Seller has not given or received any
notice of default or notice of termination with respect to any Specified
Contract, and to the knowledge of Seller each Specified Contract is in full
force and effect in accordance with its terms. Except as set forth on Schedule
4.12, there are no currently outstanding proposals or offers submitted by Seller
to any customer, prospect, supplier or other Person with respect to the Division
which, if accepted, would result in a legally binding Contract of Seller
involving an amount
16
or commitment exceeding $50,000 in any single case or an aggregate amount or
commitment exceeding $250,000 in the aggregate.
4.13. Employees and Independent Contractors. Schedule 4.13A is a
list of all of Seller's employees engaged (full time or part time) in the
Division's business and (a) their titles or responsibilities; (b) their social
security numbers and principal residence address; (c) their dates of hire; (d)
their current salaries or wages; (e) their last compensation changes and the
dates on which such changes were made; (f) any specific bonus, commission or
incentive plans or agreements for or with them; and (g) any outstanding loans or
advances made to them. Schedule 4.13B is a list of all sales representatives and
independent contractors engaged in Division's business, their tax identification
numbers and states of residence, their payment arrangements (if not set forth in
a Contract listed or described on Schedule 4.12), and a brief description of
their jobs or projects currently in progress. Except as limited by any
employment Contracts listed on Schedule 4.12 and except for any limitations of
general application which may be imposed under applicable employment Laws,
Seller has the right to terminate the employment of each of its employees
engaged in the Division's business at will and to terminate the engagement of
any of its independent contractors engaged in the Division's business without
payment to such employee or independent contractor other than for services
rendered through termination and without incurring any penalty or liability
other than liability for severance pay in accordance with Seller's disclosed
severance pay policy. Seller is in compliance in all material respects with all
Laws respecting employment practices. Seller has never 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 Seller with respect
to the Division's business. Seller has not experienced any labor problem that
was or is material to the Division's business. Except as indicated on Schedule
4.13A, to the Seller's knowledge, since September 1, 1997, no key employee of
Seller engaged in the Division's business has indicated an intention to
terminate his or her employment with Seller.
4.14. Employee Benefit Plans. Except as set forth on Schedule 4.14,
Seller does not sponsor, maintain or contribute to, or has any ongoing
Obligation with respect to, any Employee Benefit Plan (as defined in Section 8),
including, but not limited to, any employee benefit plan as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Copies of all of Seller's Retirement Plans listed on Schedule 4.14
and all summary plan descriptions and other material documents used by Seller to
describe Seller's Retirement Plans to employees have been made available to
Buyer. Except as set forth on Schedule 4.14, Seller is not a party to any
Contract to create any additional Employee Benefit Plan or to continue, modify,
change or terminate any of its current Employee Benefit Plans. If permitted or
required by applicable Law, Seller has properly submitted, or intends to
properly submit Seller's Retirement Plans for the purpose of meeting the
applicable requirements of the Internal Revenue Code of 1986, as amended
("Code"), to the Internal Revenue Service ("IRS") for its approval within the
time prescribed therefor. Copies of all favorable determination letters from the
IRS, the
17
most recent annual returns on Form 5500 have been made available to Buyer. With
respect to Seller's Retirement Plans described on Schedule 4.14, (a) Seller has
made all payments required to be made by it to date, has accrued all payments
due but not yet payable as of the date of this Agreement in accordance with GAAP
(as defined in Section 1.9) and shall have made on or before the Effective Date
all payments due as of the Effective Date and (b) Seller has operated and
currently operates such plan in compliance with the plan documents and all
applicable Laws, including without limitation ERISA and the Code and the
regulations thereunder.
4.15. Customers, Prospects and Suppliers. Except as set forth on
Schedule 4.15, the top fifteen (15) customers of the Division's business have
signed a Contract and are listed in the list of customers included as part of
Schedule 4.12. Schedule 4.15 is a complete list of all current prospects and the
top five (5) suppliers of the Division's business. Except as set forth on
Schedule 4.15, since June 1, 1997, none of the customers (largest ten (10) by
revenue to the Division) or suppliers of the Division's business has given
notice or otherwise indicated to Seller that it will or intends to terminate or
not renew its Contract or business relationship with Seller before the scheduled
expiration date or otherwise terminate its relationship with Seller. To Seller's
knowledge, there exists no material matter which could jeopardize the
relationship of Seller with customers and suppliers of the Division's business.
Except as set forth on Schedule 4.15, to the Seller's knowledge, without any
obligation to investigate or inquire, the transactions contemplated by this
Agreement will not adversely affect relations with any of the customers or
suppliers of the Division's business.
4.16. Taxes. Seller has timely filed all Tax returns and reports
required to be filed by it, all of which were accurately prepared, and, except
as set forth in Schedule 4.16, Seller has timely paid all Taxes or withholdings
required to be paid by it with respect to such returns and reports. Seller has
properly withheld from payments to its employees, contractors, salesmen, agents,
representatives, vendors and other Persons engaged in the Division's business
all amounts required by Law to be withheld, and Seller has timely filed all
informational returns and reports required to be filed by it with respect to
such withholdings. Except as indicated on Schedule 4.16, no audit or other
Proceeding is pending or threatened against Seller, and no notice of deficiency
or adjustment has been received by Seller, by or from any governmental taxing
authority, with respect to sales, use, excise, real property, payroll,
withholding or similar Taxes, and there are no agreements or waivers in effect
which provide for an extension of time for the assessment of any such Tax
against Seller.
4.17. Proceedings and Judgments. Except as described on Schedule
4.17, (a) no Proceeding involving or related to the Division's business or
Specified Assets is currently pending or, to the knowledge of Seller,
threatened, nor has any Proceeding occurred at any time since August 13, 1996,
to which Seller is or was a party and by which the Division's business or
Specified Assets is or was directly affected; (b) no Judgment involving or
related to the Division's business or Specified Assets is currently outstanding,
18
nor has any Judgment been outstanding at any time since August 13, 1996, against
Seller and by which the Division's business or Specified Assets is or was
directly affected; and (c) no breach of contract, breach of warranty, tort,
negligence, infringement, product liability, discrimination, wrongful discharge
or other claim of any nature involving or related to the Division's business or
Specified Assets has been asserted or threatened, to the knowledge of Seller, by
or against Seller at any time since August 13, 1996. As to each matter described
on Schedule 4.17, accurate and complete copies of all pertinent pleadings,
judgments, orders, correspondence and other legal documents have been delivered
to Buyer.
4.18. Insurance. Schedule 4.18 is an accurate and complete list and
description of all Insurance Policies currently owned or maintained by Seller
(excluding Insurance Policies that constitute Employee Benefit Plans described
on Schedule 4.14) in connection with or for the benefit of The Division's
business and all liability and errors and omissions Insurance Policies owned or
maintained by Seller and/or any of its predecessors at any time since August 13,
1996 in connection with or for the benefit of the Division's business. Except as
indicated on Schedule 4.18, all such Insurance Policies are or were on an
"occurrence" rather than a "claims made" basis. Seller has not received notice
of cancellation with respect to any such current Insurance Policy, and there is
no basis for the insurer thereunder to terminate any such current Insurance
Policy. Each such Insurance Policy is or was in full force and effect during the
period(s) of coverage indicated on Schedule 1.11. Except as described on
Schedule 4.18, there are no claims related to the Division's business that are
pending under any of the Insurance Policies described on Schedule 4.18.
4.19. Questionable Payments. To the knowledge of Seller, neither
Seller nor any of Seller's current or former partners, shareholders, directors,
executives, officers, representatives, agents or employees (when acting in such
capacity or otherwise on behalf of Seller), in each case with respect to the
Division's business, (a) has used or is using any corporate funds for any
illegal contributions, gifts, entertainment or other unlawful expenses relating
to political activity; (b) has used or is using any corporate funds for any
direct or indirect unlawful payments to any foreign or domestic government
officials or employees; (c) has violated or is violating any provision of the
Foreign Corrupt Practices Act of 1977, except where such violation was not, is
not and will not be material to Seller; (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 August 13, 1996, any false or
fictitious entries on the books and records of Seller; (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 Seller; 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 Seller.
4.20. Related Party Transactions. Except as described on Schedule
4.20 and except for any employment Contracts listed on Schedule 4.12, there are
no real estate leases, personal property leases, loans, guarantees, Contracts,
transactions,
19
understandings or other arrangements of any nature between Seller and any
current or former partners, shareholder, director, executive, officer or
controlling Person of Seller (or any of its predecessors) or any other Person
affiliated with Seller (or any of its predecessors) with respect to the
Division's business or the Specified Assets.
4.21. Brokerage Fees. Except as set forth on Schedule 4.21, no
Person acting on behalf of Seller is or shall be entitled to any brokerage or
finder's fee in connection with the transactions contemplated by this Agreement.
4.22. Full Disclosure. No representation or warranty made or
Schedule delivered by Seller in this Agreement (a) contains any untrue statement
of any fact; or (b) omits to state any fact that is necessary to make the
statements made, in the context in which made, not false or misleading in any
respect.
5. REPRESENTATIONS OF BUYER
Knowing that Seller is relying thereon, Buyer represents and
warrants to Seller and covenant with Seller as follows:
5.1. Organization. Buyer is duly organized, validly existing and in
good standing under the Law (as defined in Section 1.14) of its jurisdiction of
incorporation. Buyer has the full corporate power and authority to own its
Assets, conduct its business as and where such business is presently conducted,
and enter into this Agreement. Buyer is a wholly owned subsidiary of NCO.
5.2. Agreement. Buyer's execution, delivery and performance of this
Agreement, and its consummation of the transactions contemplated by this
Agreement, (a) has been duly authorized by all necessary corporate actions by
its board of directors and NCO's board of directors; (b) does not constitute a
violation of or default under its charter or bylaws; (c) does not constitute a
default or breach (immediately or after the giving of notice, passage of time or
both) under any Contract to which it is a party or by which it is bound; (d) to
the knowledge of Buyer and NCO, does not constitute a violation of any Law (as
defined in Section 1.14) or Judgment (as defined in Section 1.13) that is
applicable to either of them or to the business or Assets of Buyer, or to the
transactions contemplated by this Agreement; and (e) except as stated on
Schedule 5.2, does not require the Consent (as defined in Section 1.4) of any
Person (as defined in Section 1.17). This Agreement constitutes the valid and
legally binding agreement of Buyer, enforceable against it in accordance with
its terms.
5.3. Brokerage Fees. Except as set forth on Schedule 5.3, no Person
acting on behalf of Buyer or NCO is entitled to any brokerage, finder's or
investment banking fee in connection with the transactions contemplated by this
Agreement.
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5.4. Securities Filings. NCO has heretofore delivered or made
available to Seller, in the form filed with the Securities and Exchange
Commission (the "Commission"), copies of all material reports and other
documents that NCO is required to file with the Commission (the "SEC Reports").
The SEC Reports were, to the knowledge of NCO, prepared substantially in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations promulgated thereunder.
5.5. Financial Statement of Buyer. Schedule 5.5 includes complete
copies of unaudited financial statements of the Buyer consisting of a balance
sheet of the Buyer as of November 30, 1997 and the related statement of income
for the nine month period then ended. Except as set forth on Schedule 5.5, such
financial statements are in all material respects consistent with the books and
records of the Buyer, and there are no transactions required by GAAP, applied on
a consistent basis, to be recorded in accounting records that have not been
recorded in the accounting records underlying such financial statements. Except
as set forth on Schedule 5.5, such financial statements have been prepared in
accordance with GAAP consistently applied and present fairly the financial
position and assets and liabilities of the Buyer as of the dates thereof and the
results of its operations for the periods then ended, subject to normal
recurring year-end adjustments and the absence of notes.
6. CERTAIN OBLIGATIONS OF SELLER PENDING CLOSING
6.1. Investigation. During the period from the date of this
Agreement to the Closing Date, (a) Seller shall permit Buyer and/or NCO and
their authorized representatives to have full access to the Facilities during
normal business hours, to observe the Division's business operations, to meet
with the Division's officers and employees engaged in the Division's business,
and to audit, examine and copy all of the Division's files, books and records,
and other documents and papers relating to the Division's business, and (b)
Seller shall provide to Buyer and/or NCO and their authorized representatives
all information concerning Seller and the Division's business and the Specified
Assets, and all information concerning the financial condition of the Division
and the Division's business, that is reasonably requested by NCO or Buyer.
6.2. Conduct of The Division's business. Between the date of this
Agreement and the Closing Date, except with the prior written consent of Buyer:
6.2.1 Seller shall (i) conduct the Division's business in
the ordinary course consistent with past practices, (ii) not make any material
change in its business practices, and (iii) use its reasonable commercial
efforts consistent with past practice to preserve the business organization of
the Division's business intact, keeping available the services of its current
officers, employees, salesmen, agents and representatives engaged in the
Division's business, and maintaining the good will of its customers, suppliers
and other Persons having business relations with the Division's business; and
21
6.2.2 Except in the ordinary course of its business
consistent with its past practices, Seller shall not (i) create or assume any
Encumbrance upon any of the Division's business or Specified Assets, (ii) incur
any Obligation on behalf of or relating to the Division's business, (iii) make
any loan or advance to any Person on behalf of or relating to the Division's
business, (iv) assume, guarantee or otherwise become liable for any Obligation
of any Person on behalf of or relating to the Division's business, (v) commit
for any capital expenditure on behalf of or relating to the Division's business,
(vi) purchase, lease, sell, abandon or otherwise acquire or dispose of any part
of the Division's business or the Specified Assets, (vii) waive any right or
cancel any debt or claim on behalf of or relating to the Division's business,
(viii) assume or enter into any Contract on behalf of or relating to the
Division's business other than this Agreement (and any other Contract
contemplated herein) or (ix) increase, or authorize an increase in, the
compensation or benefits paid or provided to any of its directors, officers,
employees, salesmen, agents or representatives engaged in the Division's
business.
6.3. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. As soon as is practical after the
date of this Agreement, (a) Seller shall make all filings under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
("▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act"), that are required to be made by it in connection with
the transactions contemplated by this Agreement, and (b) Seller shall cooperate
with Buyer and NCO in connection with the filings by them under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, including, but not limited to, providing all information
reasonably requested by Buyer and NCO and taking all actions reasonably
requested by them to cause the early termination of all applicable waiting
periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
6.4. Consents. Between the date of this Agreement and the Closing
Date, Seller shall in good faith use its reasonable commercial efforts to obtain
all Required Consents, and to give the notices and make the filings, described
on Schedule 4.2.
6.5. Acquisition Proposals. Between the date of this Agreement and
the Closing Date, neither Seller nor any of its officers, employees,
representatives or agents, or their respective affiliates, shall, directly or
indirectly, solicit, initiate, encourage or respond to other than to reject or
to advise the applicable third party as to the existence of this Agreement, but
without disclosing any details regarding the transaction, any inquiries or
proposals from, or participate in any discussions or negotiations with, or
provide any non-public information to, any Person or group (other than NCO or
Buyer and their respective officers, employees, representatives and agents)
concerning any sale of any of the Division's business or any of the Specified
Assets.
6.6. Advice of Changes. Between the date of this Agreement and the
Closing Date, Seller shall promptly advise Buyer and NCO, in writing, of any
fact of which Seller obtains knowledge and which, if existing or known as of the
date of this Agreement, would have been required to be set forth or disclosed in
or pursuant to this Agreement (it being understood that such advice without the
written consent of NCO shall not be deemed to
22
modify the representations, warranties and covenants of Seller contained in this
Agreement).
6.7. Access to Employees. During the period from the date of this
Agreement to the Closing Date, Seller shall permit Buyer and NCO and their
authorized representatives to have access to Seller's employees on a basis
coordinated with Seller for the purpose of soliciting such employees of the
Division to accept offers of employment from the Buyer upon the Effective Date.
7. CERTAIN OBLIGATIONS OF BUYER AND NCO PENDING CLOSING
7.1. Corporate Status. Between the date of this Agreement and the
Closing Date:
7.1.1 Each of Buyer and NCO shall maintain its corporate
existence and good standing in its jurisdiction of incorporation.
7.1.2 Neither Buyer nor NCO shall enter into any Contract
that commits it to take any action or omit to take any action that would be
inconsistent with any of the provisions of this Section 7.1 or any other
provisions of this Agreement.
7.2. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇-Filings. As soon as is practical after the
date of this Agreement, (a) Buyer and NCO shall make all filings under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act that are required to be filed by them in connection with
the transactions contemplated by this Agreement, and (b) Buyer and NCO shall
cooperate with Seller, in connection with the filings by Seller under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, including, but not limited to, taking all actions
reasonably requested by Seller to cause the early termination of all applicable
waiting periods.
7.3. Consents. Between the date of this Agreement and the Closing
Date, each of Buyer and NCO shall in good faith cooperate with Seller in its
reasonable commercial efforts to obtain the Required Consents and to give the
notices and make the filings, described in Section 4.2 provided that neither
Buyer nor NCO shall be required to guarantee to any Person any obligations of
Buyer under any Contract assigned by Seller to Buyer.
7.4. Advice of Changes. Between the date of this Agreement and the
Closing Date, Buyer shall promptly advise Seller, in writing, of any fact of
which it obtains knowledge and which, if existing or known as of the date of
this Agreement, would have been required to be set forth or disclosed in or
pursuant to this Agreement (it being understood that such advice without the
written consent shall not be deemed to modify the representations, warranties
and covenants of Buyer contained in this Agreement).
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8. CONDITIONS PRECEDENT TO SELLER'S CLOSING OBLIGATIONS
Each obligation of Seller to be performed on the Closing Date shall
be subject to the satisfaction of each of the conditions stated in this Section
8, except to the extent that such satisfaction is waived by Seller in writing.
8.1. Representations of the Buyer. All representations, warranties
and certifications made by Buyer in this Agreement or pursuant hereto shall be
true in all material respects on and as of the Closing Date, with the same force
and effect as though made on and as of the Closing Date.
8.2. Performance by the Buying Companies. All of the covenants,
terms and conditions of this Agreement to be satisfied or performed by Buyer on
or before the Closing Date shall have been substantially satisfied or performed.
8.3. Absence of Proceedings. No Proceeding shall have been
instituted or threatened (excluding any Proceeding instituted by or on behalf of
Seller), no Judgment shall have been issued, and no new Law shall have been
enacted, on or before the Closing Date, that seeks to or does prohibit or
restrain, or that seeks damages as a result of, the consummation of the
transactions contemplated by this Agreement.
8.4. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. All applicable waiting periods with respect
to the transactions contemplated by this Agreement shall have expired under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, and neither the Federal Trade Commission nor the
Antitrust Division of the Department of Justice shall have (a) required any
party to divest itself of any assets in order to consummate such transactions,
or (b) taken any actions to prohibit the consummation of such transactions.
8.5. Employment Agreements. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") have each resigned from their employment with Seller
without the need for any termination compensation under their respective
employment contracts with Seller
9. CONDITIONS PRECEDENT TO BUYER'S CLOSING OBLIGATIONS
Each obligation of Buyer to be performed on the Closing Date shall
be subject to the satisfaction of each of the conditions stated in this Section
9, except to the extent that such satisfaction is waived by Buyer in writing.
9.1. Representations of Seller. All representations, warranties and
certifications made by Seller in this Agreement or pursuant hereto shall be true
in all material respects on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date, and the Schedules to this
Agreement shall be complete, accurate and current in all material respects on
and as of the Closing Date, with
24
only such changes as are expressly permitted in and are consistent with the
terms of this Agreement.
9.2. Performance by Seller. All of the covenants, terms and
conditions of this Agreement to be substantially satisfied or performed by
Seller on or before the Closing Date shall have been satisfied or performed.
9.3. Absence of Proceedings. No Proceeding shall have been
instituted or threatened (excluding any Proceeding initiated by or on behalf of
Buyer or NCO any of their affiliates), no Judgment shall have been issued, and
no new Law shall have been enacted, on or before the Closing Date, that seeks to
or does prohibit or restrain, or that seeks damages as a result of, the
consummation of the transactions contemplated by this Agreement.
9.4. Seller's Adverse Changes. Between the date of that Agreement
and the Closing Date, there shall not have been (a) any material adverse change
or material casualty loss affecting the Division's business or the Specified
Assets, the financial condition of the Division's business; (b) any material
adverse change in the financial performance of the Division's business; or (c)
any material change affecting Seller's ability to complete this transaction and
deliver the Specified Assets in accordance with the terms of this Agreement.
9.5. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. All applicable waiting periods with respect
to the transactions contemplated by this Agreement shall have expired under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, and neither the Federal Trade Commission nor the
Antitrust Division of the Department of Justice shall have (a) required any
party to divest itself of any assets in order to consummate such transactions,
or (b) taken any actions to prohibit the consummation of such transactions.
9.6. Consents. All Required Consents set forth on Schedule [4.2]
shall have been obtained.
9.7 Employment Agreements. Buyer executing employment agreements
with ▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"), President of the Division and ▇▇▇▇▇▇▇ Requett
("Requett"), General Manager of the Division.
10. CLOSING
10.1. Closing. Unless this Agreement is terminated as provided in
Section 14, the closing of the transactions contemplated by this Agreement (the
"Closing") shall be held at 10:00 a.m. local time on next business day after the
satisfaction of the conditions set forth in Section 8.4 and Section 9.5 or such
other date and time as is mutually agreeable (the "Closing Date" or the
"Effective Date"), at Buyer's counsel offices or such other location as is
mutually agreeable.
25
10.2. Obligations of Seller at Closing. At the Closing, Seller shall
deliver to the Buyer the following:
10.2.1 Specified Assets. Possession and control of the
Division's business, the Facilities and all of the Specified Assets used in the
Division's business, including, but not limited to, all applicable keys, access
cards and other entry devices.
10.2.2 Documents of Transfer. Such bills of sale,
assignments, deeds, endorsements, affidavits, and other instruments and
documents of sale, transfer, assignment and conveyance as Buyer may reasonably
require, in order to lawfully and effectively sell, transfer, assign and convey
to Buyer all of Seller's right, title and interest in and to all of the
Specified Assets, in each case in form reasonably acceptable to Seller and
Buyer, dated as of the Effective Date, and duly executed and, if necessary,
acknowledged by Seller.
10.2.3 Closing Certificate. A certificate ("Selling Party's
Closing Certificate"), dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, signed by the President and Chief Financial Officer of
Seller, in which Seller represents and warrants to Buyer that: (a) all
representations, warranties and certifications made by Seller in this Agreement
or pursuant hereto are true in all material respects on and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date; (b) the Schedules to this Agreement are complete and accurate in all
material respects on and as of the Closing Date, with only such changes as are
expressly permitted in and are consistent with the terms of this Agreement (all
of which changes shall be set forth in an attachment to Selling Party's Closing
Certificate); (c) all of the covenants, terms and conditions of this Agreement
to be satisfied or performed by Seller on or before the Closing Date have been
substantially satisfied or performed; (d) as of the Closing Date, no Proceeding
has been instituted or threatened, no Judgment has been issued, and no new Law
has been enacted that seeks to or does prohibit or restrain, or that seeks
damages as a result of, the consummation of the transactions contemplated by
this Agreement; and (e) since the date of this Agreement, there has not been (i)
any material adverse change or material casualty loss affecting the Division's
business or the Specified Assets, the financial condition of the Division's
business or (ii) any material adverse change in the financial performance of the
the Division's business.
10.2.4 Incumbency Certificate. A certificate of the
Secretary of Seller as to the incumbency and signatures of the officers of
Seller executing this Agreement.
10.2.5 Resolutions. Copies of the resolutions duly adopted
by the board of directors and, if applicable, shareholders of Seller,
authorizing Seller to enter into and perform this Agreement, certified by proper
officers as in full force and effect on and as of the Closing Date.
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10.2.6 Good Standing. Good standing certificates for Seller
from its jurisdiction of incorporation and the Commonwealth of Pennsylvania, all
dated no earlier than 15 days before the Closing Date.
10.2.7 Opinion of Counsel. An opinion of counsel to Seller
addressed to Buyer and NCO and dated the Closing Date, in the form attached as
Exhibit 10.2.7 hereto.
10.2.8 Consents. The original signed copies of all Required
Consents listed on Schedule 4.2.
10.2.9 Debt Payoff. Proper documentary evidence of the full
payment and satisfaction of all debt of Seller with respect to which there are
any Encumbrances upon any of the Specified Assets; together with all documents
reasonably requested by Buyer to remove all such Encumbrances on the Specified
Assets, including, but not limited to, UCC-3 termination forms duly executed by
the secured parties and mortgage satisfaction and release forms duly executed by
the mortgagees, and UCC-3 termination forms duly executed by former secured
parties for which UCC-1 financing statements remain of record, in each case in
form acceptable for immediate filing with the appropriate state or local
governmental office.
10.3. Obligations of Buyer at Closing. At the Closing, Buyer shall
deliver to Seller the following:
10.3.1 Closing Payments. A wire transfer of immediately
available United States federal funds or a bank certified, treasurer's or
cashier's check in the amount of the Purchase Price, in accordance with Seller's
proper instructions as to payment.
10.3.2 Assumption of Liabilities. An assumption of the
Specified Liabilities, in form reasonably acceptable to Buyer and Seller, dated
as of the Effective Date, and duly executed by Buyer.
10.3.3 Closing Certificate. A certificate ("Buyer's Closing
Certificate"), dated the Closing Date, in form and substance reasonably
satisfactory to Seller, signed by the President and Chief Financial Officer of
Buyer, in which Buyer represents and warrants to Seller that: (a) all
representations, warranties and certifications made by Buyer in this Agreement
or pursuant hereto are true in all material respects on and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date; (b) all of the covenants, terms and conditions of this Agreement to be
satisfied or performed by Buyer on or before the Closing Date have been
substantially satisfied or performed; (c) as of the Closing Date, no Proceeding
has been instituted or threatened, no Judgment has been issued, and no new Law
has been enacted that seeks to or does prohibit or restrain, or that seeks
damages as a result of, the consummation of the transactions contemplated by
this Agreement; and (d) since the date of this Agreement, there has not been any
27
material adverse change or material casualty loss affecting the financial
condition of Buyer.
10.3.4 Incumbency Certificate. A certificate of Secretary
of each of Buyer and NCO as to the incumbency and signatures of the officers
executing this Agreement.
10.3.5 Resolutions. Copies of the resolutions duly adopted
by the respective boards of directors of Buyer and NCO, authorizing Buyer and
NCO to enter into and perform this Agreement, certified by proper officers as in
full force and effect on and as of the Closing Date.
10.3.6 Good Standing. Good standing certificates for Buyer
from its jurisdiction of incorporation, dated no earlier than 15 days before the
Closing Date.
10.3.7 Opinion of Counsel. An opinion of counsel to Buyer
addressed to Seller and dated the Closing Date, in the form attached as Exhibit
10.3.7 hereto.
11. CERTAIN POST-CLOSING OBLIGATIONS
11.1. Transition and Cooperation. From and after the Closing Date,
(a) Seller shall fully cooperate to transfer to the Buyer the control and
enjoyment of the Division's business and the Specified Assets; (b) Seller shall
not take any action, directly or indirectly, alone or together with others,
which obstructs or impairs the smooth assumption by Buyer of the Division's
business and the Specified Assets; and (c) Seller shall promptly deliver to
Buyer all correspondence, papers, documents and other items and materials
received by Seller or found to be in the possession of Seller which pertain
exclusively to the Division's business or the Specified Assets.
11.2. Use of Names. Beginning immediately after the Closing Date,
Seller shall cease all use of all the name "The Response Center," fictitious
names, product names and other names used by Seller exclusively in the
Division's business at any time on or before the Closing Date and included in
the Specified Assets, except as may be necessary to perform their obligations
hereunder. Upon Buyer's request, Seller shall promptly sign all Consents and
other documents that may be necessary to allow Buyer to use or appropriate the
use of any such name used by Seller at any time on or before the Closing Date.
11.3. Contract Matters. After the Closing, each Contract
("Transferred Contract") as to which (a) the Contract Rights of Seller are
included in the Specified Assets, and (b) Consent to the assignment thereof from
Seller to Buyer may be required under such Transferred Contract or applicable
Law but was not obtained on or before the Closing Date, shall be handled in
accordance with the following provisions:
28
11.3.1 Consent. Seller shall cooperate with Buyer in a
commercially reasonable manner in the Buyer's efforts to obtain Consent to the
assignment of such Transferred Contract. If and when Consent to assignment of
such Transferred Contract is obtained, such Transferred Contract shall no longer
be subject to the provisions of this Section 11.3.
11.3.2 Subcontracting. Seller shall make available to Buyer
all Contract Rights and other benefits of such Transferred Contract, on a
subcontract or sublease basis or in some other appropriate manner to the fullest
extent as is commercially reasonable and Buyer shall be considered an
independent subcontractor or sublessee of Seller, or an agent of Seller, with
respect to all matters concerning such Transferred Contract. Without limiting
the foregoing, Buyer shall be considered Seller's agent for purposes of (a)
collecting all amounts that may be due from the other party or parties to such
Transferred Contract; and (b) negotiating or otherwise handling all disputes and
issues that may arise in connection with such Transferred Contract. Without
Buyer's prior written consent, Seller shall not agree to any amendment,
modification, extension, renewal, termination or other change in the terms of
such Transferred Contract, nor shall Seller exercise any Contract Right under
such Transferred Contract.
11.3.3 Buyer's Instructions. At Buyer's direction, Seller
shall (a) notify the other party or parties to such Transferred Contract that
Buyer is Seller's subcontractor, sublessee or agent with respect thereto and
that all further payments, notices and other communications with respect thereto
shall be directed to Buyer; (b) agree to such amendments, modifications,
extensions, renewals, terminations or other changes in the terms of such
Transferred Contract as Buyer determines, in its sole discretion, are advisable,
provided that any such action does not impose any material financial commitment
or expense of Seller; and (c) exercise any Contract Right under such Transferred
Contract at such time and in such manner as Buyer determines, in its sole
discretion, to be advisable.
11.3.4 Collateral Assignment. Effective as of the Closing
Date, Seller hereby collaterally assigns to Buyer (except and only to the extent
that such collateral assignment is expressly prohibited by the terms of such
Transferred Contract), and grants to Buyer a security interest in, all of
Seller's contract rights under such Transferred Contract and all cash and
non-cash proceeds thereof, as security for the prompt and timely satisfaction
and performance of Seller's obligations under this Section 11.3. Buyer shall
have, and Seller shall deliver to Buyer at the Closing, possession of the
original executed copy of such Transferred Contract. Effective as of the Closing
Date, Seller hereby appoints Buyer as Seller's attorney to take such actions, in
Seller's name and on its behalf, as such attorney reasonably determines to be
necessary or advisable to protect, perfect and continue perfected the security
interest granted hereunder, including, but not limited to, the execution and
filing of such financing statements and other instruments and documents as such
attorney determines, in its sole discretion, to be necessary or advisable for
such purposes.
29
11.4. Employee Benefit Plans. As soon as is practical after
the Closing Date, Seller shall take all actions as are necessary or appropriate
to fully vest, as of the Effective Date, the interests under Seller's Retirement
Plans (as defined in Section 2.2.6) of all of Seller's employees who are hired
by Buyer, and to transfer, as soon as possible but not later than nine months
after the Closing Date, the full amount of such vested interests to the accounts
of such employees under Buyer's tax-qualified, individual account, defined
contribution retirement plan. Notwithstanding the foregoing, Seller shall not be
obligated to make any such transfer until Buyer delivers to Seller reasonable
evidence as to the tax-qualified status of the plan under sections 401(a) of the
Code. Buyer assumes the sole responsibility for providing benefits under such
plan, in accordance with applicable laws, including, but not limited to, Code
section 411(d)(6), to employees of Seller who are hired by Buyer. Seller's
employees who are hired by Buyer shall be given credit for all purposes under
Buyer's employee benefit plans for their service with Seller prior to the
Effective Date. Buyer shall have no responsibility for the continuing claims of
Seller's employees or COBRA Obligations (as defined in Section 2.1.1(E). Buyer
shall be responsible for providing coverage as of the Effective Date, under the
standard group insurance plans of Buyer, for all medical, dental, disability and
related claims incurred after the Effective Date by employees of Seller who are
hired by Buyer. Buyer shall, for those of Seller's employees hired by Buyer who
are otherwise eligible under NCO or Buyer's plans, waive any pre-existing
conditions, exclusions or waiting periods under its plans.
11.5. Access to Accounting Information. For a period of one (1) year
after the Closing Date, Seller shall permit Buyer and its authorized
representatives to have full access to, and use of, Seller's books and records,
financial statements, opinions of independent public accountants, and accounting
information, workpapers, notes and related materials, prepared, reviewed or
compiled with respect to, or including the Division's business (whether in the
possession of Seller or Seller's accountants) for the year ended December 31,
1995, December 31, 1996, December 31, 1997 and for the period from January 1,
1998 through and including the Effective Date, and any interim periods therein,
for review, duplication, analysis and any other legal use, including but not
limited to, the preparation of audited financial statements for the Division's
business for use in connection with any public offering of securities pursuant
to the Securities Act of 1933, as amended or any reports filed pursuant to the
Securities Exchange Act of 1934, as amended or applicable state "blue sky" laws.
11.6. Further Assurances. At any time and from time to time after
the Closing Date, at Buyer's request and expense, and without further
consideration, Seller shall promptly execute and deliver all such further
agreements, certificates, instruments and documents, and perform such further
actions, as Buyer may reasonably request in order to fully consummate the
transactions contemplated hereby and carry out the purposes and intent of this
Agreement.
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12. RESTRICTIVE COVENANTS OF SELLER
12.1. Access to Information. During the period that Seller owned the
Division's business, Seller had access to proprietary and confidential property,
knowledge and information of the Division's business which, after Closing, shall
be proprietary and confidential property, knowledge and information of Buyer;
such property, knowledge and information must be kept in strict confidence to
protect Buyer's business and maintain Buyer's competitive positions in the
marketplace; and such property, knowledge and information would be useful to
competitors of Buyer for indefinite periods of time.
12.1.1 Basis for Covenants. The covenants of Sections 12.2
and 12.3 (the "Covenants") are a material part of this Agreement and are an
integral part of the obligations of Seller hereunder; the Covenants are
supported by good and adequate consideration; and the Covenants are reasonable
and necessary to protect the legitimate business interests of Buyer.
12.2. Nondisclosure Covenants. At all times after the date of this
Agreement, for an indefinite period of time, except with Buyer's prior written
consent, Seller shall not, directly or indirectly, in any capacity communicate,
publish or otherwise disclose to any Person, or use for the benefit of any
Person, any confidential or proprietary property, knowledge or information of
Buyer acquired by Buyer in the transaction contemplated by this Agreement, no
matter when or how such knowledge or information was obtained, including without
limitation (a) any information concerning the Specified Assets, or the conduct
and details of the Division's business; (b) the identity of customers and
prospects, their specific requirements, and the names, addresses and telephone
numbers of individual contacts at customers and prospects; (c) prices, renewal
dates and other detailed terms of customer and supplier Contracts and proposals;
(d) pricing policies, marketing and sales strategies, methods of delivering
Software and services, and Software and service development projects and
strategies; (e) source code, object code, user manuals, technical manuals and
other documentation for Software products; (f) screen designs, report designs
and other designs, concepts and visual expressions for Software products; (g)
employment and payroll records; (h) forecasts, budgets and other nonpublic
financial information; and (i) expansion plans, management policies, methods of
operation, and other business strategies and policies.
12.3. Noncompetition Covenants. During the period beginning on the
date of Closing and ending on the fifth (5th) anniversary of the Closing Date,
except with Buyer's prior written consent, Seller shall not, directly or
indirectly, in any capacity, at any location worldwide:
12.3.1 Solicitation Restrictions. Communicate with or
solicit any Person who is or during such period becomes a customer, prospect,
supplier, employee, salesman, agent or representative of, or a consultant to,
Buyer, in any manner which interferes or is reasonably foreseeable that it will
interfere with such Person's relationship
31
with Buyer in connection with Buyer's operation of the Division's business, or
in an effort to obtain any such Person as a customer, employee, salesman, agent
or representative of, or a consultant to, any other Person that conducts a
business directly competitive with the Division's business as such exists on the
Closing Date.
12.3.2 Competing Business Restrictions. Establish, own,
manage, operate, finance or control, or participate in the establishment,
ownership, management, operation, financing or control of, any Person that
conducts a business directly competitive with all or any part of the Division's
business. The foregoing notwithstanding, Seller shall be permitted to (i)
continue operating its customer care consulting business ( including its
information gathering and survey activities) conducted by its TARP division,
(ii) provide limited market research services to its customers which are
ancillary to other services provided pursuant to telemarketing contracts with
its customers so long as such market research services do not exceed ten percent
(10%) of the overall services to be provided under such contracts, and (iii)
provide up to a maximum of $1,000,000 in each year, exclusive of clauses (i) and
(ii), of non-analytical information gathering and survey services without such
being a violation of the Covenants, provided that Seller shall not expand or in
any way reenter the business previously conducted by the Division. Nothing shall
prevent Seller from acquiring other companies engaged in the customer care
business similar to that conducted by Seller's TARP division, so long as Seller,
following such acquisitions, remains in compliance with the restrictions of this
Agreement.
12.4. Certain Exclusions. Confidential and proprietary property,
knowledge and information of Buyer 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 Seller or its executive officers of not more than
five percent (5%) of the outstanding securities of any public or private company
shall not, by itself, constitute a breach of the Covenants of Section 12.2, even
if such public company competes with Buyer.
12.5 Seller's Release of Certain Employees' Noncompetition
Covenants. In connection with Buyer's employment of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, Seller
agrees to release any noncompetition covenants which ▇▇▇▇▇▇▇▇▇ and Raquet
executed for the benefit of Seller with respect to the Division's business, and
in consideration thereof, Buyer agrees to limit its use of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
to market research services. Buyer shall use its best efforts to obtain
▇▇▇▇▇▇▇▇▇'▇ and Raquet's release of Seller from any further obligation by Seller
to them in connection with their respective employment agreements with Seller.
12.6 Nonsolicitation of Employees. During the period beginning on
the date of this Agreement and ending eighteen (18) months thereafter, Seller or
any of its affiliates shall not solicit, or hire any employees who were employed
by the Division's business prior to the date of this Agreement to become
employees or independent contractors of Seller or any of its affiliates.
Notwithstanding the foregoing, after ninety (90) days following
32
Closing, this restriction shall no longer be imposed on Seller in connection
with general solicitations or hiring as a result of such general solicitations
of any such former non-managerial employees of the Division who are telephone
representatives or supervisors of telephone representatives.
12.7 Enforcement of Covenants. Seller expressly acknowledges that it
would be extremely difficult to measure the damages that might result from any
breach of the Covenants, and that any breach of the Covenants will result in
irreparable injury to Buyer for which money damages could not adequately
compensate. If a breach of the Covenants occurs, then Buyer shall be entitled,
in addition to all other rights and remedies that it may have at law or in
equity, to have an injunction issued by any competent court enjoining and
restraining Seller and all other Persons involved therein from continuing such
breach. The existence of any claim or cause of action that Seller or any such
other Person may have against any member of Buyer shall not constitute a defense
or bar to the enforcement of any of the Covenants. If Buyer 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.
12.8 Scope of Covenants. If any Covenant, or any part thereof, or
the appli cation 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.
13. INDEMNIFICATION
13.1. Seller's Indemnification. From and after the Closing Date,
Seller shall indemnify and hold harmless Buyer, and its respective successors
and assigns, and its respective directors, officers, employees, agents and
representatives, from and against any and all actions, suits, claims, demands,
debts, liabilities, obligations, losses, damages, costs and expenses, including
without limitation reasonable attorney's fees and court costs, arising out of or
caused by, directly or indirectly, any of all of the following:
13.1.1 Misrepresentation. Any misrepresentation, breach or
failure of any warranty or representation made by Seller in this Agreement.
13.1.2 Nonperformance. Any failure of Seller to satisfy or
perform any of its covenants under this Agreement required to be satisfied or
performed by Seller.
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13.1.3 Non-Assumed Obligations. Any Obligation of Seller
other than those expressly included in the Specified Liabilities.
13.1.4 Proceedings by Employees. Any Proceeding against
Buyer by or on behalf of any employee of Seller who is not hired by Buyer.
13.1.5 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Any Obligation of or
Proceeding (including fines and penalties) against the Buyer or NCO from any
breach of a representation or warranty of Seller as to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act.
13.2 Buyer's Indemnification. From and after the Closing Date, Buyer
and NCO shall jointly and severally indemnify and hold harmless Seller and its
respective successors and assigns, and their respective directors, officers,
employees, agents and representatives, from and against any and all actions,
suits, claims, demands, debts, liabilities, obligations, losses, damages, costs
and expenses, including without limitation reasonable attorney's fees and court
costs, arising out of or caused by, directly or indirectly, any of the
following:
13.2.1 Misrepresentation. Any misrepresentation, breach or
failure of any warranty or representation made by Buyer in or pursuant to this
Agreement.
13.2.2 Nonperformance. Any failure of Buyer to satisfy or
perform any of its covenants under this Agreement.
13.2.3 Specific Liabilities. Any failure of Buyer to
satisfy or perform any of the Specific Liabilities.
13.2.4 Post-Closing Operation of the Business. Buyer's
operation of the Division's business following the Closing Date.
13.3 Indemnification Procedures. With respect to each event,
occurrence or matter ("Indemnification Matter") as to which any party (the
"Indemnitee") is entitled to indemnification from any other party (the
"Indemnitor") under this Section 13:
13.3.1 Notice. Within ten (10) days after the Indemnitee
receives written documents underlying the Indemnification Matter or, if the
Indemnification Matter does not involve a third-party action, suit, claim or
demand, promptly after the Indemnitee first has actual knowledge of the
Indemnification Matter, the Indemnitee shall give notice to the Indemnitor of
the nature of the Indemnification Matter and the amount demanded or claimed in
connection therewith ("Indemnification Notice"), together with copies of any
such written documents.
13.3.2 Defense. If a third-party action, suit, claim or
demand is involved, then, upon receipt of the Indemnification Notice, the
Indemnitor shall, at its
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expense and through counsel of its choice, promptly assume and have sole control
over the litigation, defense or settlement (the "Defense") of the
Indemnification Matter, except that (a) the Indemnitee may, at its option and
expense and through counsel of its choice, participate in (but not control) the
Defense; (b) if the Indemnitee reasonably believes that the handling of the
Defense by the Indemnitor may have a material adverse affect on the Indemnitee,
its business or financial condition, or its relationship with any customer,
prospect, supplier, employee, salesman, consultant, agent or representative,
then the Indemnitee may, at its option and expense and through counsel of its
choice, assume control of the Defense, provided that the Indemnitor shall be
entitled to participate in the Defense at its expense and through counsel of its
choice; (c) the Indemnitor shall not consent to any Judgment, or agree to any
settlement, without the Indemnitee's prior written consent, which consent shall
not unreasonably be withheld; and (d) if the Indemnitor does not promptly assume
control over the Defense or, after doing so, does not continue to prosecute the
Defense in good faith, the Indemnitee may, at its option and through counsel of
its choice, but at the Indemnitor's expense, assume control over the Defense. In
any event, the Indemnitor and the Indemnitee shall fully cooperate with each
other in connection with the Defense, including without limitation by furnishing
all available documentary or other evidence as is reasonably requested by the
other.
13.3.3 Payments. All amounts owed by the Indemnitor to the
Indemnitee (if any) shall be paid in full within fifteen (15) business days
after a final Judgment (at the expiration of any appeal period) determining the
amount owed is rendered, or after a final settlement or agreement as to the
amount owed is executed.
13.4 Limits on Indemnification. Indemnitor's liability under this
Section ? shall be limited as follows:
13.4.1 Threshold. No amount shall be payable by the
Indemnitor under this Section 13 unless and until the aggregate amount otherwise
payable by the Indemnitor under this Section 13 exceeds One Hundred Thousand
Dollars ($100,000), in which event the Indemnitor shall pay such aggregate
amount and all future amounts payable by the Indemnitor under this Section 13.
13.4.2 Ceiling. The Indemnitor's total liability under this
Section 13 shall not exceed Five Million Dollars ($5,000,000).
13.4.3 Time Periods. The Indemnitor shall have no liability
with respect to any Indemnification Matter unless the Indemnitee gives an
Indemnification Notice with respect thereto within twenty-four (24) months after
the Closing Date.
13.5 Exceptions. None of the foregoing limitations shall apply in
the case of any Indemnification Matter involving (i) intentional fraud; (ii)
Taxes or (iii) covenants to be performed after Closing.
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13.6 Additional Remedies. The remedies provided in Section 13 shall
constitute the exclusive remedies for the matters covered thereby. With respect
to any other matters not covered by Section 13, any party shall be entitled to
such rights and remedies as such party may have at law or in equity, including
the right to seek specific performance or rescission, none of which rights or
remedies shall be affected or diminished by the remedies provided hereunder.
14. TERMINATION
14.1. Termination by Mutual Consent. At any time before the Closing,
this Agreement may be terminated by the mutual written consents of Buyer and
Seller, authorized by their respective boards of directors.
14.2. Termination on Default. As used herein, "Default" means, with
respect to Seller on the one hand, or with respect to Buyer on the other hand,
that any of the representations and warranties made by such parties in or
pursuant to this Agreement is or becomes false or misleading in any material
respect, or any provision of this Agreement to be satisfied or performed by such
parties is not substantially satisfied or performed in a timely manner, in
either case for reasons within the reasonable control of such parties. If a
Default occurs and is not cured within ten days after notice is given by the
non-Defaulting party to the Defaulting party specifying the nature of the
Default (or on or before the Closing Date if sooner), then the non-Defaulting
party may terminate this Agreement immediately upon notice to the Defaulting
party.
14.3. Termination at Closing. If any of the conditions set forth in
Section 8 is not satisfied on or before the fifteenth (15th) days after
satisfaction of the condition set forth in Section 8.4, then Seller may
terminate this Agreement by notifying Buyer on the sixteenth (16th) day after
the Closing Date effective the Closing Date. If any of the conditions set forth
in Section 9 is not satisfied on or before the fifteenth (15th) day after the
satisfaction of the condition set forth in Section 9.5, then Buyer may terminate
this Agreement by notifying Seller on the sixteenth (16th) day after Closing
Date effective the Closing Date.
15. OTHER PROVISIONS
15.1. Confidentiality. During the period from the date of this
Agreement to the Closing Date, (a) each of the parties shall maintain the
confidentiality of all information normally maintained as confidential and
exchanged among them in connection with this Agreement, in the same manner that
the recipient of the information maintains the confidentiality of its own
confidential information, and (b) none of the parties will discuss the existence
or nature of this Agreement or the transaction contemplated hereby with any of
Seller's customers, prospects, suppliers, employees, contractors, salesmen,
agents or representatives, except in the manner reasonably determined by Buyer
and Seller. If this Agreement is terminated in accordance with Section 14, then
each party shall promptly
36
return all confidential information and materials of the other parties, and the
provisions of the foregoing sentence shall survive such termination
indefinitely. Seller and Buyer each acknowledge that any breach of this Section
15.1 may cause irreparable injury to the others for which money damages could
not adequately compensate. If there is such a breach, the aggrieved parties
shall be entitled, in addition to all other rights and remedies they may have at
law or in equity, to have an injunction issued by any competent court enjoining
and restraining the breaching parties from continuing such breach. The existence
of any claim or cause of action which any of the breaching parties may have
against any of the aggrieved parties shall not constitute a defense or bar to
the enforcement of this Section 15.1.
15.2. Fees and Expenses. Buyer shall pay all of the fees and
expenses incurred by it, and Seller shall pay all of the fees and expenses
incurred by it, in negotiating and preparing this Agreement (and all other
Contracts executed in connection herewith or therewith) and in consummating the
transactions contemplated by this Agreement. Buyer shall pay the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filing fee.
15.3. Notice. All notices, consents or other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three business
days after being mailed by first class certified mail, return receipt requested,
postage prepaid, or (c) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the first page of this Agreement.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. 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 15.3, except that any such change of address notice shall not be
effective unless and until received.
15.4. Survival of Representations. All representations and
warranties made in this Agreement or pursuant hereto shall survive the date of
this Agreement, the Effective Date, the Closing Date and the consummation of the
transactions contemplated by this Agreement for a period of eighteen(18) months
after the Closing Date unless otherwise set forth in this Agreement, and
thereafter, except for any claims of intentional fraud, no party may make any
claim for indemnification or otherwise on account of any breach of warranty or
on account of a misrepresentation.
15.5. Interpretation of Representations. Each representation and
warranty made in this Agreement or pursuant hereto is independent of all other
representations and warranties made by the same parties, whether or not covering
related or similar matters, and must be independently and separately satisfied.
Exceptions or qualifications to any such representation or warranty shall not be
construed as exceptions or qualifications to any other representation or
warranty.
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15.6. Reliance by Buyer. Notwithstanding the right of Buyer to
investigate the Division's business, Assets and financial condition of Seller,
and notwithstanding any knowledge determined or determinable by Buyer as a
result of such investigation, Buyer has the unqualified right to rely upon, and
have relied upon, each of the representations and warranties made by Seller in
this Agreement or pursuant hereto. For the purposes hereof, the reference to
"knowledge" means that none of the executive officers of Seller and neither
▇▇▇▇▇▇▇▇▇ nor Raquet have any actual knowledge that the statement made is
incorrect.
15.7. Entire Understanding. This Agreement, together with the
Exhibits and Schedules hereto, states the entire understanding among the parties
with respect to the subject matter hereof, and supersedes all prior oral and
written communications and agreements, and all contemporaneous oral
communications and agreements, with respect to the subject matter hereof,
including without limitation all confidentiality letter agreements and letters
of intent previously entered into among some or all of the parties hereto. No
amendment or modification of this Agreement shall be effective unless in writing
and signed by the party against whom enforcement is sought.
15.8. Publicity. All voluntary public announcements concerning the
transactions contemplated by this Agreement shall be mutually acceptable to both
Buyer and Seller. Unless required by Law, the parties shall not make any public
announcement or issue any press release concerning the transactions contemplated
by this Agreement without the prior written consent of the other parties. With
respect to any announcement that any of the parties is required by Law or stock
exchange or The Nasdaq Stock Market regulation to issue, such party shall, to
the extent possible under the circumstances, review the necessity for and the
contents of the announcement with the other parties before issuing the
announcement.
15.9. Parties in Interest. No party may assign this Agreement or any
rights or obligations under this Agreement without the prior written consent of
the other party, which consent shall not unreasonably be withheld. This
Agreement shall bind, benefit, and be enforceable by and against the parties
hereto, and their respective successors and consented-to assigns.
15.10. ▇▇▇▇▇▇ Management Company. NCO has retained ▇▇▇▇▇▇ Management
Company ("SMC") as an advisor in connection with this transaction. Seller and
NCO acknowledge that SMC shall not be liable to either of them or their
successors by virtue of or in connection with SMC's services to NCO.
15.11. Waivers. Except as otherwise expressly provided herein, no
waiver with respect to this Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought. Except as otherwise
expressly provided herein, no failure to exercise, delay in exercising, or
single or partial exercise of any right, power or remedy by any party, and no
course of dealing between or among any of the parties, shall
38
constitute a waiver of, or shall preclude any other or further exercise of, any
right, power or remedy.
15.12. Severability. If any provision of this Agreement is construed
to be invalid, illegal or unenforceable, then the remaining provisions hereof
shall not be affected thereby and shall be enforceable without regard thereto.
15.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
15.14. Section Headings. The section and subsection headings in this
Agreement are used solely for convenience of reference, do not constitute a part
of this Agreement, and shall not affect its interpretation.
15.15. References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
Unless a particular context clearly requires otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection of this Agreement.
15.16. Controlling Law. THIS AGREEMENT IS MADE UNDER, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
15.17. Jurisdiction and Process. In any action between or among any
of the parties, whether arising out of this Agreement or otherwise, (a) each of
the parties irrevocably consents to the exclusive jurisdiction and venue of the
federal and state courts located in the Commonwealth of Pennsylvania; (b) if any
such action is commenced in a state court, then, subject to applicable law, no
party shall object to the removal of such action to any federal court located in
the Commonwealth of Pennsylvania; (c) each of the parties irrevocably waives the
right to trial by jury; and (d) each of the parties irrevocably consents to
service of process by first class certified mail, return receipt requested,
postage prepaid, to the address at which such party is to receive notice in
accordance with Section 15.4.
15.18. No Third-Party Beneficiaries. No provision of this Agreement
is intended to or shall be construed to grant or confer any right to enforce
this Agreement, or any remedy for breach of this Agreement, to or upon any
Person other than the parties hereto
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including, but not limited to, any customer, prospect, supplier, employee,
contractor, salesman, agent or representative of Seller.
15.19. Seller's Access to Buyer's Records. In connection with
Seller's right to review or audit Buyer's books and records for any event,
including the calculation of the earnout, as permitted in this Agreement, in
order to preserve Buyer's rights pursuant to Section 12 and any other section of
this Agreement, Seller agrees that it shall not be permitted access to any
detailed client and/or employee specific information as part of any such review
or audit.
[SIGNATURES ON THE FOLLOWING PAGE]
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EACH PARTY HAS CAUSED THIS AGREEMENT TO BE EXECUTED ON ITS BEHALF BY A DULY
AUTHORIZED OFFICER, AS OF THE DATE FIRST STATED ABOVE.
SELLER:
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------
Title: COO
Date: 1/16/98
BUYER:
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Title: President and CEO
Date: 1/16/98
NCO:
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Title: Chairman and CEO
Date: 1/16/98
41