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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
NCO GROUP, INC.,
CARDINAL ACQUISITION CORPORATION
AND
COMPASS INTERNATIONAL SERVICES CORPORATION
Dated as of May 12, 1999
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
Section 1.1. The Merger.......................................................1
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Section 1.2. Certificate of Incorporation.....................................1
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Section 1.3. By-Laws..........................................................2
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Section 1.4. Directors and Officers...........................................2
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Section 1.5. Effective Time...................................................2
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ARTICLE II
CONVERSION OF SHARES
Section 2.1. Company Common Stock.............................................2
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Section 2.2. Fractional Interests.............................................3
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Section 2.3. Anti-Dilution Provisions.........................................3
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Section 2.4. Purchaser Common Stock...........................................3
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Section 2.5. Exchange of Shares...............................................3
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Section 2.6. Employee Stock Options...........................................5
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization.....................................................5
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Section 3.2. Capitalization...................................................6
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Section 3.3. Authorization of this Agreement..................................7
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Section 3.4. Consents and Approvals; No Violation.............................7
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Section 3.5. Financial Statements and Reports.................................8
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Section 3.6. Absence of Material Adverse Change...............................9
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Section 3.7. Information in Proxy Statement/Prospectus, Registration
Statement and HSR Filings.......................................10
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Section 3.8. Undisclosed Liabilities..........................................10
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Section 3.9. Taxes............................................................10
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Section 3.10. Litigation.......................................................11
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Section 3.11. Compliance with Laws.............................................11
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Section 3.12. Real Property; Assets............................................11
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Section 3.13. Employment Agreements and Benefits, etc..........................13
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Section 3.14. Opinion of Financial Advisor.....................................13
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Section 3.15. Finders and Brokers..............................................14
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Section 3.16. Certain Contracts and Arrangements...............................14
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Section 3.17. Employee Relations...............................................15
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Section 3.18. Intellectual Property; Software..................................15
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Section 3.19. Environmental Matters............................................16
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Section 3.20. Related Party and Affiliate Transactions.........................16
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Section 3.21. Insurance........................................................16
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Section 3.22. Questionable Payments............................................17
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Section 3.23. Print and Mail Business..........................................17
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Section 3.24. Disclosure.......................................................17
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
Section 4.1. Organization.....................................................17
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Section 4.2. Capitalization...................................................18
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Section 4.3. Authorization of this Agreement..................................18
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Section 4.4. Consents and Approvals; No Violation.............................18
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Section 4.5. Financial Statements and Reports.................................19
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Section 4.6. Absence of Material Adverse Change...............................20
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Section 4.7. Information in Proxy Statement/Prospectus, Registration Statement
and HSR Filings..................................................20
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Section 4.8. Finders and Investment Bankers...................................21
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Section 4.9. Disclosure.......................................................21
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1. Conduct of the Business of the Company............................21
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Section 5.2. Conduct of the Business of Parent and the Purchaser...............24
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ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1. Proxy Statement/Prospectus; S-4 Registration Statement............24
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Section 6.2. Access to Information.............................................25
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Section 6.3. Consents..........................................................26
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Section 6.4. Board Actions; Company Stockholder Meeting........................27
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Section 6.5. Commercially Reasonable Efforts...................................27
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Section 6.6. Public Announcements..............................................28
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Section 6.7. Consent of the Parent.............................................28
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Section 6.8. No Solicitation...................................................28
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Section 6.9. Indemnification...................................................30
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Section 6.10. Employee Benefits.................................................31
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Section 6.11. Tax Covenants.....................................................32
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Section 6.12. Print and Mail Sale Agreement.....................................32
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ARTICLE VII
CLOSING CONDITIONS
Section 7.1. Conditions to the Obligations of the Parent, the Purchaser
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and the Company....................................................32
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Section 7.2. Conditions to the Obligations of the Parent and the Purchaser......33
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Section 7.3. Conditions to the Obligations of the Company.......................35
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ARTICLE VIII
CLOSING
Section 8.1. Time and Place.....................................................36
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Section 8.2. Filings at the Closing.............................................36
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ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.1. Termination........................................................36
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Section 9.2. Procedure and Effect of Termination................................38
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ARTICLE X
MISCELLANEOUS
Section 10.1. Amendment and Modification.........................................39
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Section 10.2. Waiver of Compliance; Consents.....................................39
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Section 10.3. Survival of Warranties.............................................39
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Section 10.4. Notices............................................................39
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Section 10.5. Assignment; Parties in Interest....................................40
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Section 10.6. Expenses...........................................................41
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Section 10.7. Specific Performance...............................................41
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Section 10.8. Governing Law......................................................41
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Section 10.9. Counterparts.......................................................41
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Section 10.10. Interpretation.....................................................41
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Section 10.11. Entire Agreement...................................................41
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Section 10.12. Severability.......................................................41
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Section 10.13. Jurisdiction and Process...........................................42
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Section 10.14. Interpretation of Representations..................................42
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Section 10.15. Reliance by Parent and Purchaser...................................42
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ANNEX I: Defined Terms
ANNEX II: Form of Voting Agreement
ANNEX IIA: List of Stockholders signing Voting Agreement
ANNEX III: Form of Parent Tax Certificate
ANNEX IV: Form of Company Tax Certificate
ANNEX V: Form of Tax Opinion from Parent's Counsel
ANNEX VI: Form of Tax Opinion from Company's Counsel
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 12, 1999, among
NCO Group, Inc., a Pennsylvania corporation (the "Parent"), Cardinal Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of the Parent
(the "Purchaser"), and Compass International Services Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of the Parent, the Purchaser
and the Company have approved the merger of the Purchaser with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
herein;
WHEREAS, this Agreement is intended to be and is adopted as
plan of reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, concurrently with the execution of this Agreement,
and as a condition and inducement to Parent's willingness to enter into this
Agreement each stockholder of the Company listed on Annex IIA, is entering into
a Voting Agreement in the form attached hereto as Annex II.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. (a) Upon the terms and subject to the
satisfaction or waiver, if permissible, of the conditions set forth in Article
VII hereof, and in accordance with the provisions of this Agreement and the
General Corporation Law of the State of Delaware (the "DGCL"), the parties
hereto shall cause the Purchaser to be merged with and into the Company, and the
Company shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Delaware. At the Effective Time, the separate existence of
the Purchaser shall cease.
(b) The Surviving Corporation shall retain the name of the
Company and shall possess all the rights, privileges, immunities, powers and
franchises of the Purchaser and the Company and shall by operation of law become
liable for all the debts, liabilities and duties of the Company and the
Purchaser.
1.2. CERTIFICATE OF INCORPORATION. Subject to Section 6.9(a)
hereof, the Certificate of Incorporation of the Purchaser in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with provisions
thereof and as provided by law.
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1.3. BY-LAWS. Subject to Section 6.9(a) hereof, the By-Laws of
the Purchaser in effect immediately prior to the Effective Time shall be the
By-Laws of the Surviving Corporation until thereafter amended, altered or
repealed as provided therein and by law.
1.4. DIRECTORS AND OFFICERS. The directors and officers of the
Purchaser immediately prior to the Effective Time shall be the directors and
officers, respectively, of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation.
1.5. EFFECTIVE TIME. The Merger shall become effective at the
time when a properly executed certificate of merger (the "Certificate of
Merger"), together with any other documents required by law to effectuate the
Merger, shall be filed and recorded with the Secretary of State of the State of
Delaware in accordance with Sections 103 and 251 or 253 of the DGCL. The
Certificate of Merger shall be filed in accordance with Section 103 of the DGCL
as soon as practicable after the Closing. The date and time when the Merger
shall become effective is herein referred to as the "Effective Time."
ARTICLE II
CONVERSION OF SHARES
2.1. COMPANY COMMON STOCK. (a) Each share (a "Share") of
common stock, par value $0.01 per share (the "Common Stock"), of the Company
issued and outstanding immediately prior to the Effective Time (except for
Shares then owned beneficially or of record by the Company, the Parent, the
Purchaser or any of the other Parent Subsidiaries or the Company Subsidiaries,
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive 0.23739 (the "Exchange Ratio")
of a share of common stock, no par value, of the Parent ("Parent Common Stock")
(such fractional share, the "Merger Consideration").
(b) Each Share issued and outstanding immediately prior to the
Effective Time which is then owned beneficially or of record by the Company, the
Parent, the Purchaser or any of the other Parent Subsidiaries or the Company
Subsidiaries, shall, by virtue of the Merger and without any action on the part
of the holder thereof, be canceled and retired and cease to exist, without any
conversion thereof.
(c) Each Share issued and held in the Company's treasury
immediately prior to the Effective Time shall, by virtue of the Merger, be
canceled and retired and cease to exist, without any conversion thereof.
(d) At the Effective Time the holders of certificates
representing Shares shall cease to have any rights as stockholders of the
Company, except for the right to
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receive the Merger Consideration and for such rights, if any, as they may have
pursuant to the DGCL.
2.2. FRACTIONAL INTERESTS. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and such fractional interests will not entitle the
owner thereof to any rights as a shareholder of the Parent. In lieu of a
fractional interest in a share of Parent Common Stock, each holder of Shares
exchanged pursuant to Section 2.1 who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock shall receive cash (without
interest) in an amount equal to the product of such fractional interest
multiplied by the Parent Common Stock Value.
2.3. ANTI-DILUTION PROVISIONS. The Exchange Ratio shall be
adjusted appropriately to reflect any stock dividends, splits, recapitalizations
or other similar transactions with respect to the Shares and the shares of
Parent Common Stock where the record date occurs prior to the Effective Time.
2.4. PURCHASER COMMON STOCK. Each share of common stock, par
value $0.01 per share ("Purchaser Common Stock"), of the Purchaser issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and exchangeable for one fully paid and non-assessable share of common
stock, par value $0.01 per share ("Surviving Corporation Common Stock"), of the
Surviving Corporation. From and after the Effective Time, each outstanding
certificate theretofore representing shares of Purchaser Common Stock shall be
deemed for all purposes to evidence ownership of and to represent the same
number of shares of Surviving Corporation Common Stock.
2.5. EXCHANGE OF SHARES. (a) Prior to the Effective Time, the
Parent shall deposit in trust with ▇▇▇▇▇ ▇▇▇▇▇▇ Shareholder Services or another
exchange agent designated by the Purchaser and reasonably satisfactory to the
Company (the "Exchange Agent"), shares of Parent Common Stock in an amount
sufficient to pay the Merger Consideration payable pursuant to Section 2.1(a)
plus sufficient cash to make the payments required under Section 2.2 (such
amount being hereinafter referred to as the "Exchange Fund"). The Exchange Agent
shall, pursuant to irrevocable instructions, issue the shares of Parent Common
Stock out of the stock portion of the Exchange Fund and make the payments
provided for in Section 2.2 of this Agreement out of the cash portion of the
Exchange Fund. The Exchange Agent shall invest the cash portion of the Exchange
Fund as the Parent directs, in direct obligations of the United States of
America, obligations for which the full faith and credit of the United States of
America is pledged to provide for the payment of all principal and interest,
commercial paper obligations receiving the highest rating from either ▇▇▇▇▇'▇
Investors Services, Inc. or Standard & Poor's Corpora tion, or certificates of
deposit, bank repurchase agreements or banker's acceptances of commercial banks
with capital exceeding $10,000,000,000. The Exchange Fund shall not be used for
any other purpose except as provided in this Agreement.
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(b) Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each record holder (other
than the Company, the Parent, the Purchaser or any of the other Parent
Subsidiaries or the Company Subsidiaries) as of the Effective Time of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented Shares (the "Certificates") a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor the number
of shares of Parent Common Stock equal to the product of the number of Shares
represented by such Certificate and the Exchange Ratio plus cash in lieu of
fractional shares, less any applicable withholding tax, and such Certificate
shall forthwith be canceled. No interest shall be paid or accrued on the shares
of Parent Common Stock or the cash payable upon the surrender of the
Certificates. If payment is to be made to a Person other than the Person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the Person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a Person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Exchange Agent and the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 2.5, each Certificate (other
than Certificates representing Shares owned benefi cially or of record by the
Company, the Parent, the Purchaser or any of the other Parent Subsidiaries or
Company Subsidiaries) shall represent for all purposes the right to receive the
number of shares of Parent Common Stock equal to the product of the number of
Shares evidenced by such Certificate and the Exchange Ratio plus cash in lieu of
fractional shares, without any interest thereon.
(c) If any Certificate is lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Exchange Agent, the
Surviving Corporation or the Parent, the posting by such person of a bond in
such reasonable amount as such entity may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
shall issue, in exchange for such lost, stolen or destroyed Certificate, the
applicable portion of the Merger Consideration pursuant to this Agreement.
(d) After the Effective Time there shall be no transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immedi ately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the applicable portion of the Merger Consideration
pursuant to this Agreement.
(e) Any portion of the Exchange Fund which remains unclaimed
by the stockholders of the Company for one year after the Effective Time
(including any interest
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received with respect thereto) shall be repaid to the Surviving Corporation,
upon demand. Any stockholders of the Company who have not theretofore complied
with Section 2.5(b) shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) for payment of
their proportionate claim for the Merger Consideration plus cash in lieu of
fractional shares, without any interest thereon, but shall have no greater
rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under Delaware law.
2.6. EMPLOYEE STOCK OPTIONS. The Company's Employee Incentive
Compensation Plan (the "Company Option Plan") and all options to acquire Shares
granted pursuant to the Company Option Plan that are issued and outstanding
immediately before the Effective Time (collectively, the "Options"), shall be
assumed by the Parent on the Effective Time and shall continue in effect, as an
option plan of Parent and as options issued by Parent, respectively, in
accordance with the terms and conditions by which they are governed immediately
before the Effective Time (and each Option that becomes fully vested and
exercisable as a result of the Merger shall continue as a fully vested and
exercisable option of Parent), subject to the adjustments set forth in the next
sentence. On the Effective Time, each Option shall, by virtue of the Merger and
without any action on the part of the holder thereof, be automatically adjusted
to provide that (a) the number and type of shares issuable upon exercise of such
Option shall be that number of shares of Parent Common Stock (rounded off to the
nearest whole number of shares) equal to the number of Shares issuable upon
exercise of such Option immediately before the Effective Time, multiplied by the
Exchange Ratio, and (b) the exercise price per share of Parent Common Stock
under such Option shall be that amount (rounded up to the nearest whole cent)
equal to the exercise price per Share under such Option immediately before the
Effective Time, divided by the Exchange Ratio.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the
Purchaser as follows:
3.1. ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of the Company Subsidiaries which is a corporation is duly
organized, and each of the Company Subsidiaries which is a limited partnership
is duly formed, and each of the Company Subsidiaries is validly existing and in
good standing, in each case under the laws of the jurisdictions of its
incorporation or formation, as the case may be. Each of the Company and the
Company Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to conduct its business as now being conducted.
Except as set forth in Section 3.1 of the disclosure letter delivered by the
Company to the Parent and Purchaser prior to the execution of this Agreement
(the "Company Disclosure Letter"),
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each of the Company and the Company Subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification nec ▇▇▇▇▇▇, except where the failure to be so qualified
or licensed and in good standing would not have a material adverse effect on the
business or financial condition of the Company and the Company Subsidiaries
taken as a whole. Each of the Company Subsidiaries is listed in Section 3.1 of
the Company Disclosure Letter, and except as and to the extent set forth
therein, the Company owns beneficially and of record directly or indirectly all
of the issued and outstanding capital stock or limited partnership interests, as
the case may be, of each of the Company Subsidiaries, free and clear of any
liens, claims, charges, mortgages or other encumbrances (collectively, "Liens").
Except as set forth in Section 3.1 of the Company Disclosure Letter, neither the
Company nor any of the Company Subsidiaries owns, controls or holds with the
power to vote, directly or indirectly, of record, beneficially or otherwise, any
capital stock or any equity or ownership interest in any Person. The Company has
heretofore delivered to the Parent accurate and complete copies of the
Certificate of Incorporation and By-Laws of the Company and each of the Company
Subsidiaries, as currently in effect.
3.2. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of (A) 50,000,000 shares of Common Stock of which, as of the
date hereof, there are 14,405,973 shares issued and outstanding, 2,000,000
shares reserved for issuance under the Company Option Plan, and no shares held
in the Company's treasury, and (B) 10,000,000 shares of Preferred Stock, par
value $0.01 per share ("Company Preferred Stock"), of which as of the date
hereof, none were issued or outstanding. No other capital stock or other
security of the Company is authorized, issued or outstanding. All issued and
outstanding Shares and capital stock of the Company Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable. Except for outstanding
options to acquire not more than 1,234,945 shares issued pursuant to the Company
Option Plan and except as set forth in Section 3.2 of the Company Disclosure
Letter, there are not now, and at the Effec tive Time there will not be, any
securities, options, warrants, calls, subscriptions, pre emptive rights,
earn-outs or other rights or other agreements or commitments whatsoever
obligating the Company or any of the Company Subsidiaries to issue, transfer,
deliver or sell or cause to be issued, transferred, delivered or sold any
additional shares of capital stock or other securities of the Company or any of
the Company Subsidiaries, or obligating the Company or any of the Company
Subsidiaries to grant, extend or enter into any such agreement or commitment.
There are no outstanding contractual obligations of the Company or any of the
Company Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of the Company Subsidiaries. There are no
outstanding contractual obligations of the Company or any of the Company
Subsidiaries to vote or to dispose of any shares of the capital stock of any of
the Company Subsidiaries.
(b) All issuances and grants of all outstanding Options, and
all offerings, sales and issuances by the Company and each of the Company
Subsidiaries of any shares of capital stock, including the Shares, were
conducted in compliance with all applicable
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laws and all requirements set forth in all applicable agreements or plans,
except where the failure to comply with such applicable laws, agreements or
plans would not, individually or in the aggregate, have a material adverse
effect on the business or financial condition of the Company and the Company
Subsidiaries taken as a whole.
(c) There is no stockholder rights plan (or similar plan
commonly referred to as a "poison pill") or similar existing agreement or plan
under which the Company or any of the Company Subsidiaries is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities.
3.3. AUTHORIZATION OF THIS AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and the Print and Mail Sale Agreement and, subject to approval by the
stockholders of the Company, to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Print and Mail
Sale Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized and approved by the Company's
Board of Directors, the Board of Directors has declared the advisability of this
Agreement and the consummation of the transactions contemplated hereby and
thereby, and, except for the adoption of this Agreement by the stockholders of
the Company, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or the Print and Mail Sale Agreement or
consummate the transactions contemplated hereby and thereby. Each of this
Agreement and the Print and Mail Sale Agreement has been duly and validly
executed and delivered by the Company, and each of this Agreement and the Print
and Mail Sale Agreement constitutes a valid and binding agreement of the
Company, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting the rights and remedies of creditors, and the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Assuming that
none of the Parent, the Purchaser or any affiliate or associate of the Parent or
Purchaser is an Interested Stockholder (as defined by Section 203 of the DGCL)
at the time of execution of this Agreement or the Voting Agreements, this
Agreement, the Merger and the Voting Agreements have been approved by the Board
of Directors of the Company so that Section 203 of the DGCL will not apply to
this Agreement, the Merger, the Voting Agreements or the transactions
contemplated hereby and thereby.
3.4. CONSENTS AND APPROVALS; NO VIOLATION. Except for (i)
filings required under the Securities Act of 1933, as amended (the "Securities
Act"), the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
(ii) the filing of a Pre-Merger Notification and Report Form by the Company
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"),
(▇▇▇) the filing and recordation of appropriate merger documents as required by
the DGCL and, if applicable, the laws of other states in which the Company is
qualified to do business, and (iv) filings under securities or blue sky laws or
takeover statutes of the various states, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is necessary
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for the consummation by the Company of the transactions contemplated by this
Agree ment, the failure to make or obtain which is reasonably likely to have a
material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby or on the business or financial condition of
the Company and the Company Subsidiaries taken as a whole. Neither the execution
and delivery of this Agreement nor the consum mation of the transactions
contemplated hereby nor compliance by the Company with any of the provisions
hereof will (i) conflict with or result in any violation of any provision of the
Certificate of Incorporation or By-Laws of the Company, (ii) result in a
violation or breach of, or constitute a default or give rise to any right of
termination, cancellation, loss of material benefits or acceleration or give to
any Person any interest in or result in the creation of any Lien upon any of the
properties or assets of the Company or any of the Company Subsidiaries, with or
without notice or lapse of time, or both, under the Certificate of Incorporation
or By-Laws of the Company or any note, bond, mortgage, indenture, license,
benefit plan, agreement or other instrument or obligation to which the Company
or any of the Company Subsidiaries is a party or by which any of them or any of
their properties or assets is bound or (iii) assuming the truth of the
representations and warranties of the Parent and the Purchaser contained herein
and their compliance with all agreements contained herein and assuming the due
making or obtaining of all filings, permits, authorizations, consents and
approvals referred to in the preceding sentence, violate any statute, rule,
regulation, order, injunction, writ or decree of any public body or authority by
which the Company or any of the Company Subsidiaries or any of their respective
assets or properties is bound, excluding from the foregoing clauses (ii) and
(iii) mortgages, leases and other agreements listed on Section 3.4 of the
Company Disclosure Letter, and other conflicts, violations, breaches, defaults
or rights which, either individually or in the aggregate, are not reasonably
likely to have a material adverse effect on the business or financial condition
of the Company and the Company Subsidiaries taken as a whole or to materially
impair the ability of the Company to perform its obligations hereunder or
consummate the transactions contemplated hereby.
3.5. FINANCIAL STATEMENTS AND REPORTS. (a) The Company has
filed all forms, reports and documents with the Securities and Exchange
Commission (the "SEC") required to be filed by it pursuant to the Securities Act
and the Exchange Act (collectively, the "Company SEC Filings"), all of which
have complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act. None of such Company SEC Filings, at the
time filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Company SEC Filings filed after the date of this
Agreement and prior to the Effective Time (i) will comply in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act and (ii) will not at the time they will be filed, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that, except as set forth in Section 3.7 hereof, no representation is made by
the
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Company with respect to the S-4 Registration Statement or the Proxy Statement/
Prospectus.
(b) The consolidated balance sheets and the related
consolidated statements of income, cash flow and changes in stockholder equity
of the Company and the Company Subsidiaries (i) contained in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30,
1998 and September 30, 1998 and the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (collectively, the "1998 Financial Statements"),
and (ii) to be contained in Company SEC Filings filed after the date hereof
(collectively with the 1998 Financial Statements, the "Financial Statements"),
when filed (i) complied or will comply in all material respects as to form with
the published rules and regulations of the SEC and (ii) presented or will
present fairly the consolidated financial position of the Company and the
Company Subsidiaries as of such date, and the consolidated results of their
operations and their cash flows for the periods presented therein, in conformity
with GAAP applied on a consistent basis, except as otherwise noted therein, and
subject in the case of quarterly financial statements to normal year-end audit
adjustments and except that the quarterly financial statements do not or will
not contain all of the footnote disclosures required by GAAP.
(c) All funds collected on behalf of customers of the Company
or any Company Subsidiary have in all material respects been properly remitted
to the customer or are in all material respects properly reflected on the
Financial Statements of the Company and the Company Subsidiaries.
(d) The books and records of the Company and its Subsidiaries
have been prepared and maintained in form and substance adequate in all material
respects for preparing the Company's financial statements in accordance with
GAAP.
3.6. ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31,
1998, except as reflected in the Company's 1998 Financial Statements or on
Section 3.6 of the Company Disclosure Letter, (i) there has not been any
material adverse change in the business or financial condition of the Company
and the Company Subsidiaries taken as a whole, other than changes in general
economic or business conditions, changes that may result from the public
announcement of this Agreement, changes generally affecting companies operating
in the industries in which the Company and the Company Subsidiaries operate or
changes solely affecting the Print and Mail Business (as hereinafter defined),
(ii) the Company and the Company Subsidiaries have conducted their businesses in
the ordinary course of business and in a manner consistent with past practice in
all material respects, and (iii) neither the Company nor any of the Company
Subsidiaries has taken any of the actions or done any of the things described in
clauses (a) through (m) of Section 5.1.
3.7. INFORMATION IN PROXY STATEMENT/PROSPECTUS, REGISTRATION
STATEMENT AND HSR FILINGS. The Proxy Statement/Prospectus (or any amendment
thereof or supplement thereto), at the date mailed to Company stockholders and
at the time of the
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Company Stockholders Meeting, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or Purchaser for inclusion in the Proxy
Statement/Prospectus. None of the information supplied by the Company for
inclusion or incorporation by reference in the S-4 Registration Statement will,
at the date it becomes effective and at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/ Prospectus will comply in all material respects
with the provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder. To the knowledge of the Company, none of the information
supplied or to be supplied by or on behalf of the Company or any of the Company
Subsidiaries for inclusion or incorporation by reference in the filing or
filings required under the HSR Act, at the date filed, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. No representation
is made hereby with respect to statements made in such filing or filings based
on information supplied by Parent for inclusion therein.
3.8. UNDISCLOSED LIABILITIES. Except for liabilities or
obligations reflected or reserved against in the 1998 Financial Statements,
incurred in the ordinary course of business after December 31, 1998, or set
forth in Section 3.8 of the Company Disclosure Letter, none of the Company or
any of the Company Subsidiaries has any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) which are required by GAAP to be so
reflected or reserved against.
3.9. TAXES. Except as set forth in Section 3.9 of the Company
Disclosure Letter: (i) the Company and the Company Subsidiaries have filed with
the appropriate governmental agencies all material Tax Returns required to be
filed, taking into account any extension of time to file granted to or obtained
on behalf of the Company and the Company Subsidiaries; (ii) all material taxes
of the Company and the Company Subsidiaries required to be paid have been paid
to the proper authorities, other than such Taxes that are being contested in
good faith by appropriate proceedings and that are adequately reserved for in
accordance with GAAP; (iii) no deficiency has been asserted or assessed against
the Company or any of the Company Subsidiaries, and no examination of the
Company or any of the Company Subsidiaries is pending or, to the knowledge of
the Company, is threatened for any material amount of Tax by any taxing
authority; (iv) no extension of the period for assessment or collection of any
material Tax is currently in effect and none has been requested; (v) no material
Tax Liens have been filed with respect to any Taxes except Liens which are
disclosed in the balance sheet contained in the 1998 Financial Statements, Liens
for Taxes not yet due and payable and Liens for Taxes that are being contested
in good faith; (vi) since January 1, 1999, the Company and each of the
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Company Subsidiaries have not made any voluntary adjustments by reason of a
change in their accounting methods for any taxable period on or before the
Effective Time; and (vii) the Company and the Company Subsidiaries are not
parties to any Tax sharing or Tax allocation agreement except as set forth in
the Print and Mail Sale Agreement. Except as set forth in Section 3.9 of the
Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries has made any material payments, is obligated to make any material
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any material payments that will not be deductible under Code
ss. 280G. Neither the Company nor any of the Company Subsidiaries has any
liability for the Taxes of any Person (other than any of the Company or any of
the Company Subsidiaries) under Reg. ss.1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise. For purposes of this Agreement, "Tax" or "Taxes" shall mean all
United States federal, state or local or foreign taxes and any other applicable
taxes, duties, levies, charges and assessments of any nature, including social
security payments and deductibles relating to wages, salaries and benefits and
payments to subcontractors (to the extent required under applicable tax law),
and also including all interest, penalties and additions imposed with respect to
such amounts; and "Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any taxing
authority or jurisdiction (foreign or domestic) with respect to Taxes.
3.10. LITIGATION. Except as set forth in Section 3.10 of the
Company Disclosure Letter and except for such matters as are not reasonably
likely to result in liability to the Company or any of the Company Subsidiaries
in excess of $100,000, individually or in the aggregate for all related claims,
there are no (i) actions, suits or proceedings or investigations pending or, to
the knowledge of the Company, threatened, or (ii) outstanding awards, judgments,
orders, writs, injunctions or decrees, or, to the knowledge of the Company,
applications, requests or motions therefor, against or affecting the assets,
business, operations or financial condition of the Company or the Company
Subsidiaries at law or in equity in any court or any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality.
3.11. COMPLIANCE WITH LAWS. Except as set forth in Section
3.11 of the Company Disclosure Letter, there are no violations or defaults by
the Company or any of the Company Subsidiaries under any statute, law,
ordinance, rule, regulation, judgment, order, decree, permit, concession, grant,
franchise, license or other governmental authorization or approval applicable to
them or any of their properties or their operations which are reasonably likely
to have a material adverse effect on the business or financial condition of the
Company and the Company Subsidiaries, taken as a whole.
3.12. REAL PROPERTY; ASSETS. (a) Section 3.12 of the Company
Disclosure Letter lists all material items of real property either owned by the
Company or the Company Subsidiaries (the "Company Owned Real Property") or
leased by the Company or the Company Subsidiaries (the "Company Leased Real
Property"). Except as set forth
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in Section 3.12 of the Company Disclosure Letter, the Company and the Company
Subsidiaries have good and marketable title to the Company Owned Real Property
listed on Section 3.12 of the Company Disclosure Letter and valid leasehold
interests in the Company Leased Real Property listed on Section 3.12 of the
Company Disclosure Letter, in each case, free and clear of all Liens, except as
set forth on Section 3.12 of the Company Disclosure Letter and except for (i)
Liens for taxes and other governmental charges and assessments which are not yet
due and payable or which are being contested in good faith by appropriate
proceedings, (ii) Liens of carriers, warehousemen, mechanics and materialmen and
other like Liens arising in the ordinary course of business, (iii) easements,
rights of way, title imperfections and restrictions, zoning ordinances and other
similar encumbrances affecting the real property which do not have a material
adverse effect on the use of the properties or assets subject thereto or
affected thereby, (iv) statutory Liens in favor of lessors arising in connection
with any property leased to the Company or the Company Subsidiaries, excluding
Liens arising from any default or breach by the Company or any of the Company
Subsidiaries, (v) Liens reflected in the Financial Statements and (vi) any other
Liens which are not material ("Permitted Company Liens").
(b) Each lease (including any option to purchase contained
therein) pursuant to which the Company or any of the Company Subsidiaries leases
any Company Leased Real Property listed on Section 3.12 of the Company
Disclosure Letter (the "Company Leases") is in full force and effect and, to the
knowledge of the Company, is enforceable against the landlord which is party
thereto in accordance with its terms. There exists no material default or event
of default (or any event with notice or lapse of time or both would become a
material default) on the part of the Company or any of the Company Subsidiaries
under any Company Leases. The Company has delivered to the Parent and the
Purchaser complete and correct copies of all Company Leases including all
amendments thereto. Except as set forth in Section 3.12 of the Company
Disclosure Letter, neither the Company nor any of the Company Subsidiaries has
received any notice of any default under any lease by which the Company leases
the Company Leased Real Property nor any other termination notice with respect
thereto.
(c) Except as set forth in Section 3.12 of the Company
Disclosure Letter, the Company and the Company Subsidiaries have legal and
beneficial ownership of all of their respective material tangible personal
property and assets reflected in the balance sheet forming part of the Financial
Statements, except for properties and assets disposed of in the ordinary course
of business since the date of such balance sheet, in each case, free and clear
of all Liens, except as set forth on Section 3.12 of the Company Disclosure
Letter and except for Permitted Company Liens. The Company and each of the
Company Subsidiaries possess all of their respective material assets and
property that are leased from other Persons under valid and enforceable
contracts.
(d) The Company and the Company Subsidiaries have all of the
assets which are necessary and material to the operation of its respective
businesses. The material assets of the Company and the Company Subsidiaries,
wherever located, are
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generally in operating condition, ordinary wear and tear excepted, other than
assets that are no longer used in the conduct of their businesses.
3.13. EMPLOYMENT AGREEMENTS AND BENEFITS, ETC. (a) Section
3.13 of the Company Disclosure Letter lists each employee benefit plan, program,
policy or form of contract of the Company or any of the Company Subsidiaries, or
to which there is an obligation to contribute by the Company or any of the
Company Subsidiaries, other than any such plans, programs, policies, contracts
or obligations, that, in the aggregate, are not material to the Company and the
Company Subsidiaries taken as a whole. Section 3.13 of the Company Disclosure
Letter sets forth, as of the date hereof, the number of options issued and
outstanding under the Company Option Plan, the vesting and exercisability of
which, pursuant to the terms of such plan, would be accelerated by reason of or
in connection with the execution of or consummation of the transactions
contemplated by this Agreement.
(b) ERISA. All employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and/or the Code,
currently maintained or contributed to, or to which there is an obligation to
contribute, by the Company or any of the Company Subsidiaries (the "Company
Plans") comply in all respects with the requirements of ERISA and the Code as
applicable, except for any failures to comply which, individually or in the
aggregate, are not reasonably likely to have a material adverse effect on the
Company and the Company Subsidiaries taken as a whole. No employee benefit plan
(other than a multiemployer plan as defined in sec tion 3(37) of ERISA) to which
the Company or any member of the same controlled group of corporations as the
Company within the meaning of section 4001 of ERISA contributes and which is
subject to Part 3 of Subtitle B of Title I of ERISA has incurred any "accumu
lated funding deficiency" within the meaning of section 302 of ERISA or section
412 of the Code and no material liability (other than for annual premiums) to
the Pension Benefit Guaranty Corporation has been incurred by the Company or any
of the Company Subsidiaries with respect to any such plan. None of the Company
or any of the Company Subsidiaries has incurred any material liability for any
tax or penalty imposed by sec tion 4975 of the Code or section 502(i) of ERISA.
None of the Company or any of the Company Subsidiaries has withdrawn at any time
within the preceding six years from any multiemployer plan, as defined in
section 3(37) of ERISA. There are no material pending or, to the Company's
knowledge, threatened claims by or on behalf of any of the Plans or by any
employee involving any such Company Plan (other than routine claims for
benefits).
3.14. OPINION OF FINANCIAL ADVISOR. The Board of Directors of
the Company has received an opinion of ▇▇▇▇▇▇ Brothers, Inc., dated as of the
date hereof, that the Exchange Ratio is fair, from a financial point of view, to
the holders of the Shares.
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3.15. FINDERS AND BROKERS. Except for ▇▇▇▇▇▇ Brothers, Inc.,
whose fees are set forth in the engagement letters attached to Section 3.15 of
the Company Disclosure Letter, no agent, investment banker, broker, finder,
intermediary or other Person acting on behalf of the Company or any of the
Company Subsidiaries, is or shall be entitled to any brokerage, or finder's or
other similar fee or commission in connection with the Merger, the sale of the
Print and Mail Business and the other transactions contemplated by this
Agreement. The Company has made available to Parent a copy of all commitments,
agreements or other documentation in respect of which fees, commissions or other
amounts may become payable to, and all indemnification and other contracts
related to the engagement of, ▇▇▇▇▇▇ Brothers, Inc.
3.16. CERTAIN CONTRACTS AND ARRANGEMENTS. Except as set forth
in Section 3.16 of the Company Disclosure Letter and except for agreements,
arrangements or contracts which are exhibits to the Company SEC Filings, neither
the Company nor any of the Company Subsidiaries is a party to or bound by any,
is bound by, owns properties subject to, or receives benefits under: (a) any
agreement, arrangement or contract not made in the ordinary course of business
that (x) has been or would currently be required to be filed as an exhibit to
any Company SEC Filing under the Exchange Act or (y) is or may reasonably be
expected to be material to the financial condition, business or results of
operations of the Company and the Company Subsidiaries, taken as a whole; (b)
any agreement, indenture or other contract relating to the borrowing of money by
the Company or any of the Company Subsidiaries or the guarantee by the Company
or any of the Company Subsidiaries of any such obligation in each case, in an
amount in excess of $500,000 currently outstanding or guaranteed or relating to
future amounts which could reasonably be expected to exceed $500,000 (other than
agreements and instruments relating to transactions between the Company and any
of the Company Subsidiaries or between the Company Subsidiaries); (c) any
agreement, arrangement or commitment (with respect to which there exist pending
or future obligations) relating to the employment, election or retention of any
present or former director, officer or any key employee with a base salary in
excess of $100,000 of the Company or any of the Company Subsidiaries or
providing for severance, termination or similar payments (other than amounts
required by applicable law) to any such persons; and (d) any agreement
containing covenants that limit, in any respect material to the Company and the
Company Subsidiaries, the ability of the Company or any of the Company
Subsidiaries to compete in any line of business or with any person, or that
involve any restriction on the geographic area in which, or method by which, the
Company or any of the Company Subsidiaries may carry on its business, other than
standard agency or distribution agreements that provide for exclusive geographic
territories. Except as set forth in Section 3.16 of the Company Disclosure
Letter, neither the Company nor any of the Company Subsidiaries, nor, to the
knowledge of the Company, any other party thereto, is in violation of or default
under any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or any of the
Company Subsidiaries is a party or to which the Company or any of the Company
Subsidiaries or any of their respective properties, assets or business may be
subject, except for such violations or defaults which would not, individually or
in the aggregate, have had or would reasonably be expected to
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have a material adverse effect on the Company and the Company Subsidiaries taken
as a whole. Except as set forth in Section 3.16 of the Company Disclosure
Letter, neither the Company nor any of the Company Subsidiaries has given or
received written notice of a material default or notice of termination with
respect to any contract listed in Section 3.16 of the Company Disclosure Letter
or any contract which is an exhibit to any Company SEC Filing.
3.17. EMPLOYEE RELATIONS. Except as set forth in Section 3.17
of the Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is a party to or bound by any union or collective bargaining
contract, nor is any such contract currently being negotiated by or on behalf of
Company or any of the Company Subsidiaries. There are no pending, nor, to the
knowledge of the Company, threatened walkouts, strikes, union organizing efforts
or labor disturbances or any pending arbitration, unfair labor practice,
grievance, or other proceeding of any kind with respect to the Company's or any
of the Company Subsidiaries' employees. Upon termination of the employment of
any of its employees, neither the Company nor any of the Company Subsidiaries
will by reason of any action taken or agreement, contract, arrangement or plan
be liable to any of its employees for severance pay or any other payments,
except as set forth in Section 3.17 of the Company Disclosure Letter. Except as
set forth in Section 3.17 of the Company Disclosure Letter, since December 31,
1998, no senior operations site manager of the Company or any Company Subsidiary
has, on or prior to the date hereof, indicated to ▇▇▇▇▇▇ ▇. ▇▇▇ or ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ an intention to terminate employment with the Company or the Company
Subsidiaries. Since December 31, 1994, Company and the Company Subsidiaries have
not had an "employment loss" within the meaning of the Workers' Adjustment and
Retraining Notification Act ("WARN Act") and the regulations thereunder.
3.18. INTELLECTUAL PROPERTY; SOFTWARE. (a) Except as,
individually or in the aggregate, would not reasonably be likely to have a
material adverse effect on the business or financial condition of the Company
and the Company's Subsidiaries taken as a whole, and except as set forth in
Section 3.18 of the Company Disclosure Letter, the conduct of the business of
the Company and the Company Subsidiaries does not, to the knowledge of the
Company, infringe upon any Intellectual Property (as defined below) right of any
Person; and except as set forth in Section 3.18 of the Company Disclosure Letter
and except for such matters as are not reasonably likely to result in liability
to the Company or any of the Company Subsidiaries in excess of $100,000
individually or in the aggregate for all related claims, there are no pending
or, to the knowledge of Company, threatened proceedings or litigation by any
person against the use by the Company or the Company Subsidiaries of any name,
corporate name, fictitious name, software, trademarks, trade names, service
marks, service names, logos, assumed names, copyrights, trade secrets, patents
and all registrations, and applications therefor, and all good will with respect
to the foregoing, which are owned by the Company or any of the Company
Subsidiaries or used in the operation of the Company's or any of the Company
Subsidiaries' business as currently conducted (collectively, the "Intellectual
Property").
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(b) Except as set forth in Section 3.18 of the Company
Disclosure Letter, the Company owns or has valid licenses or other rights to use
the Intellectual Property which are necessary to permit the Company to conduct
its operations as currently conducted and which are material to its operations.
(c) The Company and the Company Subsidiaries have conducted an
analysis of, and developed a compliance program (the "Compliance Program") with
respect to, the effect of Year 2000 (including the correct processing and
calculation of dates prior to, during and after the Year 2000) upon the
software, telecommunications and automated processes of the Company and the
Company Subsidiaries. The Company believes that the costs of implementing the
Compliance Program and completing the modifications necessary to become Year
2000 compliant, if any, will not be material.
3.19. ENVIRONMENTAL MATTERS. To the knowledge of the Company,
the Company and the Company Subsidiaries are in compliance with all applicable
health, safety and environmental laws, except to the extent that non-compliance
is not reasonably likely to have a material adverse effect on the business or
financial condition of the Company and the Company Subsidiaries, taken as a
whole. To the knowledge of the Company, except as set forth in Section 3.19 of
the Company Disclosure Letter, there is no matter which is reasonably likely to
expose the Company or any of the Company Subsidiaries to a material liability
pursuant to environmental laws to clean-up or remedy any release of hazardous
substances at any of the real property of the Company and the Company
Subsidiaries.
3.20. RELATED PARTY AND AFFILIATE TRANSACTIONS. Except as set
forth in Section 3.20 of the Company Disclosure Letter or in the Company SEC
Filings, no event has occurred that would be required to be reported by Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC. Section 3.20 of
the Company Disclosure Letter identifies each person who is an "affiliate" (as
that term is used in Rule 145 under the Securities Act) of Company as of the
date of this Agreement.
3.21. INSURANCE. The Company and the Company Subsidiaries are
covered by valid and currently effective insurance policies issued in favor of
the Company or the Company Subsidiaries that are customary for companies of
similar size and financial condition. All such policies are in full force and
effect, all premiums due thereon have been paid and the Company has complied in
all material respects with the provisions of such policies. The Company has not
been advised in writing within the year prior to the date of this Agreement of
any defense to coverage in connection with any pending claim to coverage
asserted or noticed by the Company under or in connection with any of its
existing insurance policies, other than customary reservations of right. The
Company has not within the twelve months prior to the date of this Agreement
received any written notice from or on behalf of any insurance carrier issuing
policies or binders relating to or covering the Company and the Company
Subsidiaries that there will be a cancellation or non-renewal of existing
policies or binders.
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3.22. QUESTIONABLE PAYMENTS. To the knowledge of the Company,
within the last year no current or former director, executive, officer,
representative, agent or employee of the Company or any of the Company
Subsidiaries (when acting in such capacity or otherwise on behalf of the Company
or any of the Company Subsidiaries or any of their predecessors) (a) has made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
of any nature using corporate funds or otherwise on behalf of the Company or any
of the Company Subsidiaries; or (b) made any material gift that is not
deductible for federal income tax purposes using corporate funds or otherwise on
behalf of the Company or any of the Company Subsidiaries.
3.23. PRINT AND MAIL BUSINESS. None of the Print and Mail
Subsidiaries provide accounts receivable management services or teleservices.
None of the assets of any of the Print and Mail Subsidiaries are used in the
operations of the accounts receivable management or teleservices businesses of
the Company and the Company's A/R and Teleservices Subsidiaries. Except as
described in Section 3.23 of the Company Disclosure Letter, there are no (i)
outstanding contracts, liabilities, obligations, loans, advances or guarantees
between or among any of the Print and Mail Subsidiaries, on the one hand, and
the Company or any Company A/R and Teleservices Subsidiary, on the other hand,
or (ii) outstanding guarantees given to any third party by the Company or any
Company A/R and Teleservices Subsidiary with respect to any contracts,
liabilities, obligations, loans, advances of any Print and Mail Subsidiary.
3.24. DISCLOSURE. No representation or warranty by the Company
in this Agreement (including the Company Disclosure Letter) contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was
made, to make the statements herein or therein not misleading. There is no fact
known to the Company which would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company and the
Company Subsidiaries taken as a whole which has not been set forth in the
Company SEC Filings or in this Agreement (including the Company Disclosure
Letter).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
The Parent and the Purchaser jointly and severally represent
and warrant to the Company as follows:
4.1. ORGANIZATION. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Pennsylvania. The Purchaser and each of the other Parent Subsidiaries is a
corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of the Parent, the
Purchaser and the other Parent Subsidiaries has all requisite power and author
ity to own, lease and operate its properties and to conduct its business as now
being con ducted. Each of the Parent, the Purchaser and the other Parent
Subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on the business or financial condition
of the Parent, the Purchaser and the other Parent Subsidiaries taken as a
whole. Except as and to the extent set forth in the disclosure letter delivered
by the Parent and the Purchaser to the Company prior to the execution of this
Agreement (the "Parent Disclosure Letter") or in the Parent SEC Filings, the
Parent owns beneficially and of record directly or indirectly all of the issued
and outstanding capital stock of each of the Parent Subsidiaries, free and
clear of any Liens.
4.2. CAPITALIZATION. The authorized capital stock of the
Parent consists of (a) 37,500,000 shares of Parent Common Stock of which, as of
the date hereof, there are 21,473,897 shares issued and outstanding, 2,891,235
reserved for issuance under Parent's stock option plans, warrants and
convertible notes, and no shares held in the Parent's treasury, and (b)
5,000,000 shares of preferred stock, of which as of the date hereof, no shares
were issued or outstanding. No other capital stock of the Parent is authorized,
issued or outstanding. All issued and outstanding Shares and capital stock of
the Company Subsidiaries are duly authorized, validly issued, fully paid and
nonas sessable.
4.3. AUTHORIZATION OF THIS AGREEMENT. Each of the Parent and
the Purchaser has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Parent's and the Purchaser's respective Board of Directors, each
of the Board of Directors of the Parent and the Purchaser has declared the
advisability of this Agreement and the consummation of the transactions
contemplated hereby, and, no other corporate proceedings on the part of the
Parent and the Purchaser are necessary to authorize this Agreement or consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and
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delivered by the Parent and the Purchaser, and this Agreement constitutes a
valid and binding agreement of the Parent and the Purchaser, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting the rights and remedies of creditors, and the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4. CONSENTS AND APPROVALS; NO VIOLATION. Except for (i)
filings required under the Securities Act and the Exchange Act, (ii) the filing
of a Pre-Merger Notification and Report Form by the Company under the HSR Act,
(iii) the filing and recordation of appropriate merger documents as required by
the DGCL and, if applicable, the laws of other states in which the Parent or the
Purchaser is qualified to do business, and (iv) filings under securities or blue
sky laws or takeover statutes of the various states, no filing with, and no
permit, authorization, consent or approval of, any public body or authority is
necessary for the consummation by the Parent and the Purchaser of the trans
actions contemplated by this Agreement, the failure to make or obtain which is
reasonably likely to have a material adverse effect on the ability of the Parent
or the Purchaser to consummate the transactions contemplated hereby or on the
business or financial condition of the Parent, the Purchaser and the other
Parent Subsidiaries taken as a whole. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by either the Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or result in any violation of any provision of the
Certificate of Incorporation or By-Laws of the Parent or the Purchaser, (ii)
result in a violation or breach of, or constitute a default or give rise to any
right of termination, cancellation, loss of material benefits or acceleration or
give to any Person any interest in or result in the creation of any Lien upon
any of the properties or assets of the Parent, the Purchaser or any of the other
Parent Subsidiaries, with or without notice or lapse of time, or both, under the
Certificate of Incorporation or the By-Laws of the Parent or the Purchaser or
any note, bond, mortgage, indenture, license, benefit plan, agreement or other
instrument or obligation to which the Parent, the Purchaser or any of the other
Parent Subsidiaries is a party or by which any of them or any of their
properties or assets is bound or (iii) assuming the truth of the representations
and warranties of the Company contained herein and their compliance with all
agreements contained herein and assuming the due making or obtaining of all
filings, permits, authorizations, consents and approvals referred to in the
preceding sentence, violate any statute, rule, regulation, order, injunction,
writ or decree of any public body or authority by which the Parent, the
Purchaser or any of the other Parent Subsidiaries or any of their respective
assets or properties is bound, excluding from the foregoing clauses (ii) and
(iii) mortgages, leases and other agreements listed on Section 4.4 of the Parent
Disclosure Letter, and other conflicts, violations, breaches or defaults which,
either individually or in the aggregate, are not reasonably likely to have a
material adverse effect on the business or financial condition of the Parent,
the Purchaser and the other Parent Subsidiaries taken as a whole or to
materially impair the ability of the Parent or the Purchaser to perform their
respective obligations hereunder or consummate the transactions contemplated
hereby.
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4.5. FINANCIAL STATEMENTS AND REPORTS. (a) The Parent has
filed all forms, reports and documents with the SEC required to be filed by it
pursuant to the Securities Act and the Exchange Act (collectively, the "Parent
SEC Filings"), all of which have complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act. None of such
Parent SEC Filings, at the time filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Parent SEC Filings
filed after the date of this Agreement and prior to the Effective Time, (I) will
comply in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and (II) will not at the time they will be
filed, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; PROVIDED, HOWEVER, that, except as set forth in Section 4.7
hereof, no representation is made by the Parent or the Purchaser with respect to
the S-4 Registration Statement or the Proxy Statement/Prospectus.
(b) The consolidated balance sheets and the related
consolidated statements of income, cash flow and changes in shareholder equity
of the Parent and the Parent Subsidiaries (i) contained in the Parent's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30,
1998 and September 30, 1998 and the Parent's Annual Report on Form 10-K for the
year ended December 31, 1998 (collectively, the"Parent 1998 Financial
Statements"), and (ii) to be contained in Parent SEC Filings filed after the
date hereof (collectively with the 1998 Parent Financial Statements, the "Parent
Financial Statements"), when filed (i) complied or will comply in all material
respects as to form with the published rules and regulations of the SEC and (ii)
presented or will present fairly the consolidated financial position of the
Parent and the Parent Subsidiaries as of such date, and the consolidated results
of their operations and their cash flows for the periods presented therein, in
conformity with GAAP applied on a consistent basis, except as otherwise noted
therein, and subject in the case of quarterly financial statements to normal
year-end audit adjustments and except that the quarterly financial statements do
not contain all of the footnote disclosures required by GAAP.
4.6. ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31,
1998, except as reflected in the Parent 1998 Financial Statements or on Section
4.6 of the Parent Disclosure Letter, there has not been any material adverse
change in the business or financial condition of the Parent and the Parent
Subsidiaries taken as a whole, other than changes in general economic or
business conditions, changes that may result from the public announcement of
this Agreement, or changes generally affecting companies operating in the
industries in which the Parent and the Parent Subsidiaries operate.
4.7. INFORMATION IN PROXY STATEMENT/PROSPECTUS, REGISTRATION
STATEMENT AND HSR FILINGS. The S-4 Registration Statement (or any amendment
thereof or supplement thereto), at the date it becomes effective and at the time
of the Company Stockholders Meeting, will not contain any untrue statement of a
material fact or omit to
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state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made by Parent or
Purchaser with respect to statements made therein based on information supplied
by the Company for inclusion in the S-4 Registration Statement. None of the
information supplied by Parent or Purchaser for inclusion or incorporation by
reference in the Proxy Statement/Prospectus will, at the date mailed to
shareholders and at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The S-4
Registration Statement will comply in all material respects with the provisions
of the Securities Act and the rules and regulations thereunder. To the knowledge
of the Parent, none of the information supplied or to be supplied by or on
behalf of any of the Parent and the Parent Subsidiaries for inclusion or
incorporation by reference in the filing or filings required under the HSR Act,
at the date filed, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. No representation is made hereby with respect to
statements made in such filing or filings based on information supplied by
Company for inclusion therein.
4.8. FINDERS AND INVESTMENT BANKERS. Except for
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ & Co., no agent, investment banker, broker, finder,
intermediary, or other Person acting on behalf of the Parent or any of the
Parent Subsidiaries is or shall be entitled to any brokerage, or finder's or
other similar fee or commission in connection with the Merger and the other
transactions contemplated by this Agreement.
4.9. DISCLOSURE. No representation or warranty by the Parent
or the Purchaser in this Agreement (including the Parent Disclosure Letter)
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was made, to make the statements herein or therein not
misleading. There is no fact known to the Parent or the Purchaser which would
reasonably be expected to have a material adverse effect on the business or
financial condition of the Parent and the Parent Subsidiaries taken as a whole
which has not been set forth in the Parent SEC Filings or in this Agreement
(including the Parent Disclosure Letter).
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1. CONDUCT OF THE BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement (including, without limitation, Section 7.2(f))
or as otherwise set forth on Section 5.1 of the Company Disclosure Letter,
during the period from the date of this Agreement to the Effective Time, the
Company and the Company Subsidiaries will each
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conduct its operations in all material respects according to its ordinary and
usual course of business, and will use commercially reasonable efforts to
preserve intact its business organization, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
customers, suppliers and others having business relationships with it and will
take no action that could reasonably be deemed to have a material adverse effect
on the ability of the Company to consummate the transactions contemplated by
this Agreement, or the timing thereof. The Company shall consult regularly with
Parent on the management and business affairs of the Company and the Company
Subsidiaries. The Company will promptly advise the Parent in writing of any
change in the Company's or any of the Company Subsidiaries' business or
financial condition which is materially adverse to it and the Company
Subsidiaries taken as a whole. Without limiting the gene rality of the
foregoing, except as set forth on Section 5.1 of the Company Disclosure Letter,
and except as otherwise expressly contemplated by this Agreement (including,
without limitation, Section 7.2(f)), prior to the Effective Time, neither the
Company nor any of the Company Subsidiaries will, without the prior written
consent of the Parent:
(a) amend its Certificate of Incorporation or By-Laws;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of additional options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any shares of capital stock of any
class or any securities convertible into or exercisable for shares of
capital stock of any class, except as required by any employee benefit
or stock option plan or agreement existing as of the date hereof and
listed in Section 5.1 of the Company Disclosure Letter;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any shares
of its capital stock, except any distribution made by any of the
Company Subsidiaries to the Company or any of the other Company
Subsidiaries (other than the Print and Mail Subsidiaries);
(d) (i) create, incur, assume, maintain or permit to exist any
debt (including obligations in respect of capital leases) other than as
in existence on the date hereof (or which, in the ordinary course of
business, replaces any such debt) in an aggregate amount for the
Company and the Company Subsidiaries taken as a whole exceeding
$500,000; (ii) except in the ordinary course of business and consistent
with past practices assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obliga tions of any Person other than any of the Company
Subsidiaries (other than the Print and Mail Subsidiaries); or (iii)
make any loans, advances or capital contribu tions to, or investments
in, any Person other than any of the Company Subsidiaries (other than
the Print and Mail Subsidiaries), except for notes taken by the Company
pursuant to the terms of the Print and Mail Sale Agreement, and
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customary loans or advances to employees or trade credit in the
ordinary course of business and consistent with past practices, which
in any event will not exceed $25,000 in the aggregate;
(e) except in the ordinary course of business or as otherwise
contem plated by or described or referred to in the Company SEC Filings
filed on or before the date hereof, or as provided by the Print and
Mail Sale Agreement, sell, transfer, mortgage, lease, license or
otherwise dispose of or encumber, any assets of the Company or a
Company Subsidiary which have a value on the Company's books, either
individually or in the aggregate, in excess of $50,000;
(f) (i) increase in any manner the compensation of any of its
directors, officers or employees except in the ordinary course of
business, consistent with past practice as part of their regularly
scheduled review; (ii) pay or agree to pay any pension, retirement
allowance or other employee benefit not required, or enter into or
amend or agree to enter into or amend any agreement or arrangement with
any of its directors, officers or employees, whether past or present,
relating to any such pension, retirement allowance or other employee
benefit, except as required under currently existing agreements, plans
or arrangements; (iii) grant (other than as required pursuant to
existing agreements or plans) any severance or termination pay to, or
enter into or amend any employment, severance or change in control
agreement with, any of its directors, officers or employees; or (iv)
except as may be required to comply with applicable law, enter into or
become obligated under any collective bargaining agreement or any
agreement with, any labor union or association representing employees,
pension plan, welfare plan, multiemployer plan, employee benefit plan,
benefit arrangement, or similar plan or arrangement, which was not in
existence on the date hereof, including any bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other benefit plan,
agreement or arrangement, or employment or consulting agreement with or
for the benefit of any Person, or amend any of such plans or any of
such agreements in existence on the date hereof;
(g) authorize or commit to make any material capital
expenditures in excess of $100,000 per expenditure;
(h) make any material change in the accounting methods or
accounting practices followed by the Company, except as required by
GAAP;
(i) settle any action, suit, claim, investigation or
proceeding (legal, administrative or arbitrative) for an amount in
excess of $100,000;
(j) make any election under the Code;
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(k) enter into any contract that if entered into on or prior
to the date hereof would be required to be disclosed on Section 3.16 of
the Company Disclosure Letter;
(l) merge with or into or consolidate with any other Person
(other than between the Company Subsidiaries (other than the Print and
Mail Subsidiaries)) or make any acquisition of all or any part of the
assets or capital stock or business of any other Person except for
tangible property acquired in the ordinary course of business; or
(m) agree to do any of the foregoing.
5.2. CONDUCT OF THE BUSINESS OF PARENT AND THE PURCHASER.
Except as contemplated by this Agreement or as otherwise set forth on Section
5.2 of the Parent Disclosure Letter, during the period from the date of this
Agreement to the Effective Time, the Parent and the Parent Subsidiaries will
take no action that could reasonably be deemed to have a material adverse effect
on the ability of the parties to consummate the transactions contemplated by
this Agreement, or the timing thereof. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agree ment,
prior to the Effective Time, neither the Parent nor any of the Parent
Subsidiaries will, without the prior written consent of the Company:
(a) amend the Certificate of Incorporation or By-Laws of
Parent in a manner which would materially adversely change the rights
of holders of Parent Common Stock;
(b) during the Averaging Period (as hereinafter defined), pay
any dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of its capital stock, except any
distribution made by any of the Parent Subsidiaries to the Parent or
any of the other Parent Subsidiaries; or
(c) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. PROXY STATEMENT/PROSPECTUS; S-4 REGISTRATION STATEMENT.
In connec tion with the solicitation of approval of the principal terms of this
Agreement and the Merger by the Company's stockholders, the Company, the Parent
and the Purchaser shall as promptly as practicable prepare and file with the
SEC, on a confidential basis (if practicable), a preliminary proxy statement
relating to the Merger and this Agreement and use commercially reasonable
efforts to obtain and furnish the information required to be
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included by the SEC in the Proxy Statement/Prospectus (as hereinafter defined).
The Company, after consultation with the Parent, shall respond as promptly as
practicable to any comments made by the SEC with respect to the preliminary
proxy statement and shall cause a definitive proxy statement to be mailed to its
shareholders at the earliest practicable date after the S-4 Registration
Statement (as hereinafter defined) has been declared effective. Such definitive
proxy statement shall also constitute a prospectus of Parent with respect to the
Parent Common Stock to be issued in the Merger (such proxy statement and
prospectus are referred to herein as the "Proxy Statement/Prospectus"), which
prospectus is to be filed with the SEC as part of a registration statement on
Form S-4 (the "S-4 Registration Statement") for the purpose of registering under
the Securities Act the Purchaser Common Stock to be issued pursuant to Section
2.1(a). The Parent shall as promptly as practicable prepare and file with the
SEC the S-4 Registration Statement after the SEC has advised that it will not
review, or has no further comments on, the Proxy Statement/Prospectus. The
Parent, after consultation with the Company, shall respond as promptly as
practicable to any comments made by the SEC with respect to the S-4 Registration
Statement, and shall use all commercially reasonable efforts to have the S-4
Registration Statement declared effective by the SEC. The Parent shall also take
any action required to be taken under applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger to
stockholders of the Company; PROVIDED, HOWEVER, that Parent shall not be
required (i) to qualify to do business as a foreign corporation in any
jurisdiction in which it is now qualified or (ii) to file a general consent to
service of process in any jurisdiction. The Company shall furnish all
information concerning the Company and the holders of the Shares as may be
reasonably requested by Parent in connection with such action. If at any time
prior to the Effective Time any information relating to the Company or Parent,
or any of their respective affiliates, officer or directors, should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement either the S-4 Registration Statement or the Proxy
Statement/Prospectus, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of the Company.
6.2. ACCESS TO INFORMATION. (a) The Company will (i) give
Parent and its authorized representatives reasonable access during normal
business hours to all offices and other facilities and to all books and records
of the Company and the Company Subsidiaries, in order to permit Parent to make
such inspections as it may reasonably require and (ii) will furnish Parent with
a copy of each report, schedule and other document filed or received by it,
during the period between the date hereof and the Effective Date, pursuant to
the requirements of federal and state securities laws and such financial and
operating data and other information with respect to the business and properties
of the Company and the Company Subsidiaries as Parent may from time to time
reasonably request.
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(b) Parent will furnish the Company with a copy of each
publicly available report, schedule and other document filed or received by it,
during the period between the date hereof and the Effective Date, pursuant to
the requirements of federal and state securities laws.
(c) Parent and the Company and their respective authorized
representatives shall continue to abide by the provisions of the Confidentiality
Agreement, dated January 25, 1999 (the "Confidentiality Agreement"), by and
between the Parent and the Company.
6.3. CONSENTS. (a) The Parent and the Company each shall use
their commercially reasonable efforts to obtain all consents of third parties
under the agreements set forth in Section 6.3 of the Company Disclosure Letter
or the Parent Disclosure Letter, as the case may be, obtain all material
consents of governmental authorities, and to make all governmental filings,
necessary to the consummation of the transactions contemplated by this
Agreement. The Company, the Parent and the Purchaser shall as soon as
practicable file Pre-Merger Notification and Report Forms under the HSR Act with
the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and shall use their
commercially reasonable efforts to respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation.
(b) Each of the parties hereto agrees to furnish to each other
party hereto such necessary information and commercially reasonable assistance
as such other party may request in connection with its preparation of necessary
filings or submissions to any regulatory or governmental agency or authority,
including, without limitation, any filing necessary under the provisions of the
HSR Act, or any other federal, state, local or foreign statute or regulations.
Each of the parties shall respond as promptly as practicable to (i) any
inquiries or requests from the FTC or the Antitrust Division for additional
information or documentation and (ii) any inquiries or requests received from
any state attorney general or other governmental entity in connection with
antitrust or related matters. Each of the parties shall (1) give the other party
prompt notice of the commence ment of any claim, action, suit or proceeding by
or before any governmental entity with respect to the Merger or any of the
transactions contemplated by this Agreement, (2) keep the other party informed
as to the status of any such claim, action, suit or pending or proceeding, and
(3) promptly inform the other party of any communication to or from the FTC or
the Antitrust Division or any other governmental entity regarding the Merger or
the transactions contemplated by this Agreement. Each of the parties will
consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any claim, action, suit or proceeding under or relating to the HSR or any
other federal or state antitrust or fair trade law. In addition, except as may
be prohibited by any governmental entity or by any applicable federal, state,
local or foreign laws, ordinances or regulations, in connection with any claim,
action, suit or proceeding under or relating to the HSR Act or any other
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federal or state antitrust or fair trade law or any other similar claim, action,
suit or proceeding, each of the parties will permit authorized representatives
of the other party to be present, to the extent reasonably practicable, at each
meeting or conference relating to any such claim, action, suit or proceeding and
to have access to and be consulted in connection with any document, opinion or
proposal made or submitted to any governmental entity in connection with any
such claim, action, suit or proceeding
(c) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose or cause any of the Parent Subsidiaries to dispose of any assets, or to
commit to cause the Company or any of the Company Subsidiaries to dispose of any
assets; (ii) to discontinue or cause any of the Parent Subsidiaries to
discontinue offering any product, or to commit to cause the Company or any of
the Company Subsidiaries to discontinue offering any product; (iii) to license
or otherwise make available, or cause any of the Parent Subsidiaries to license
or otherwise make available, to any persons, any technology, intellectual
property, software or other intangible assets, or to commit to cause the Company
or any of the Company Subsidiaries to license or otherwise make available to any
person any technology, intellectual property, software or other intangible
assets to the extent reasonably practicable; (iv) to hold separate or cause any
of the Parent Subsidiaries to hold separate any assets or operations, or to
commit to cause the Company or any of the Company Subsidiaries to hold separate
any assets or operations; or (v) to make or cause any of the Parent Subsidiaries
to make any commitment (to any governmental entity or otherwise) regarding its
future operations or the future operations of the Company or any of the Parent
Subsidiaries or Company Subsidiaries, if any of the actions described in (i)-(v)
above would materially interfere with Parent's anticipated benefits from the
trans actions contemplated hereby or have a material adverse effect on Parent.
6.4. BOARD ACTIONS; COMPANY STOCKHOLDER MEETING. (a) The Board
of Directors of the Company has determined that the Merger is advisable and in
the best interests of its stockholders and, subject to Section 6.8 hereof, (i)
the Board of Directors of the Company will recommend to the Company's
stockholders the adoption and approval of this Agreement and the transactions
contemplated hereby and the other matters to be submitted to the Company's
stockholders in connection herewith and use its commercially reasonable efforts
to obtain the necessary approvals by the Company's stockholders of this
Agreement and the transactions contemplated hereby; (ii) the Proxy
Statement/Prospectus shall include a statement to the effect that the Board of
Directors of the Company has recommended that the Company's stockholders vote in
favor of adopt and approve the Merger at the Company's Stockholders Meeting; and
(iii) neither the Board of Directors of the Company nor any committee thereof
shall withdraw, amend or modify, or propose or resolve to withdraw, amend or
modify, in a manner adverse to Parent, the recom mendation of the Board of
Directors of the Company that Company's stockholders vote in favor of and adopt
and approve the Merger.
(b) As soon as reasonably practicable after the date of the Agreement,
Company shall duly call, give notice of, convene and hold the Company
Stockholder Meeting for
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the purpose of approving this Agreement and the transactions contemplated by
this Agreement. The Company will convene the Company Stockholder Meeting, as
promptly as practicable and in any event use its reasonable best efforts to
convene such meetings within 45 days after the Form S-4 is declared effective by
the SEC.
6.5. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions hereof, each of the parties hereto agrees to use its commercially
reasonable efforts consistent with applicable legal requirements to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary or proper and advisable under applicable laws and regulations to
ensure that the conditions set forth in Article VII hereof are satisfied and to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
6.6. PUBLIC ANNOUNCEMENTS. The Parent and the Company will
obtain the prior written consent of the other before issuing any press release
or otherwise making any public statements with respect to the Merger, except as
may be required by law or by obligations pursuant to any listing agreement with
any securities exchange.
6.7. CONSENT OF THE PARENT. The Parent, as the sole
stockholder of the Purchaser, by executing this Agreement consents to the
execution and delivery of this Agreement by the Purchaser and the consummation
of the Merger and the other transactions contemplated hereby, and such consent
shall be treated for all purposes as a vote duly cast at a meeting of the
stockholders of the Purchaser held for such purpose.
6.8. NO SOLICITATION. (a) The Company shall not, nor shall it
authorize or permit any of the Company Subsidiaries to, nor shall it authorize
or permit any of its, or the Company Subsidiaries', directors, officers or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by or acting on behalf of it or any of the Company
Subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or knowingly encourage (including by way of furnishing non-public
information), or take any other action designed to facilitate, any inquiries or
the making of any proposal which constitutes a Company Takeover Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding any Company Takeover Proposal or (iii) enter into any letter of
intent, agreement in principle, acquisi tion agreement or similar agreement
(each a "Company Acquisition Agreement") with respect to a Company Takeover
Proposal, or (iv) approve, endorse or recommend a Company Takeover Proposal;
PROVIDED, HOWEVER, that if and to the extent that, at any time prior to the time
of the adoption of this Agreement by the Company's stockholders, the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that failing to do so would violate its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response to any
Company Takeover Proposal which is a Company Superior Proposal (as hereinafter
defined) and which was not solicited by it and which did not otherwise result
from a breach of this Section 6.8(a); (x) furnish information with respect to
the Company and the Company Subsidiaries to any Person inquiring about or making
a Company Takeover Proposal
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pursuant to a customary confidentiality agreement (as determined by the Company
based on the advice of its outside counsel containing limitations no less
restrictive than the limitations imposed on Parent pursuant to the
Confidentiality Agreement); and (y) participate in discussions or negotiations
regarding such Company Takeover Proposal; PROVIDED that prior to or at the time
of furnishing any such information or entering into such discussions or
negotiations, the Company shall: (1) inform Parent in writing as to the fact
such information is to be provided, (2) furnish to Parent the identity of the
recipient of such information and/or the potential acquirer and the terms of
such Company Takeover Proposal and (3) furnish to or notify Parent of the
availability of such written information to Parent (to the extent such
information has not been previously furnished by the Company to Parent). Without
limiting the generality of the foregoing, the Company acknowledges and agrees
that any violation of the restrictions set forth in the preceding sentence by
any director, officer, employee, investment banker, financial advisor, attorney,
accountant or other representative of the Company or any of the Company
Subsidiaries shall be deemed to constitute a breach of this Section 6.8(a) by
the Company. The Company agrees that it will immediately cease and cause to be
terminated any existing discussions with any person that relate to any Company
Takeover Proposal. For purposes of this Agreement, "Company Takeover Proposal"
means any inquiry, proposal or offer from any Person relating to any Company
Takeover Event. For purposes of this Agreement, "Company Takeover Event" means
any direct or indirect acquisition or purchase of a business that constitutes
10% or more of the net revenues, net income or assets of the Company and the
Company Subsidiaries (other than the Print and Mail Subsidiaries (as hereinafter
defined)), taken as a whole, or 10% or more of any class of equity securities of
the Company, any tender offer or exchange offer that if consummated would result
in any Person beneficially owning 10% or more of any class of any equity
securities of the Company, or any sale, lease, exchange, transfer or license of
assets, or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company (or any
Company Subsidiary (other than the Print and Mail Subsidiaries)) whose business
constitutes 10% or more of the net revenues, net income or assets of the Company
and the Company Subsidiaries taken as a whole, other than the transactions
contemplated by the Print and Mail Sale Agreement.
(b) Except as expressly permitted by this Section 6.8(b), the
Board of Directors of the Company shall not (i) withdraw or modify or propose
publicly to withdraw or modify, in a manner adverse to the Parent and the
Purchaser, its approval or recommendation of this Agreement, or (ii) approve or
recommend, or propose publicly to approve or recommend any Company Takeover
Proposal, unless (x) such Company Takeover Proposal is a Company Superior
Proposal, (y) the Board of Directors of the Company determines in good faith,
after consultation with outside counsel, that in light of a Company Superior
Proposal it is necessary to do so in order to comply with its fiduciary duties
under applicable law, and (z) neither the Company nor any Company Subsidiary nor
any representative of the Company or a Company Subsidiary shall have caused the
Company Superior Proposal to be made in violation of Section 6.8(a). For
purposes of this Agreement, the term "Company Superior Proposal" means any bona
fide written proposal to acquire, directly or indirectly, for consideration
consisting of cash
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and/or securities, more than a majority of the Shares then outstanding or all or
substantially all the assets of the Company, that the Board of Directors of the
Company determines in good faith, after taking into account advice from its
financial advisor, to be more favorable from a financial point of view to the
Company and its stockholders than the Merger.
(c) Nothing contained in this Section 6.8(c) shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
such disclosure is required under applicable law; PROVIDED that the Company does
not amend, withdraw or modify, or propose to amend, withdraw or modify, its
position with respect to the Merger, or approve, recommend or propose publicly
to approve or recommend a Company Takeover Proposal, unless the Company and the
Board of Directors has complied with the provisions of Section 6.8(b).
(d) Anything in this Agreement to the contrary
notwithstanding, the Company shall submit this Agreement for approval to the
stockholders of the Company at the Company Stockholder Meeting whether or not
the Board of Directors determines at any time subsequent to the date hereof that
the Agreement is no longer advisable and recommends that the stockholders reject
it.
6.9. INDEMNIFICATION. (a) For a period of six years after the
Effective Time, the Parent shall, and shall cause the Surviving Corporation to,
indemnify, defend and hold harmless the present and former officers, directors,
employees and agents of the Company and the Company Subsidiaries (other then the
Print and Mail Subsidiaries) (collectively, the "Indemnified Parties") from and
against, and pay or reimburse the Indemnified Parties for, all losses,
obligations, expenses, claims, damages or liabilities (whether or not resulting
from third-party claims and including interest, penalties, out-of-pocket
expenses and attorneys' fees incurred in the investigation or defense of any of
the same or in asserting any of their rights hereunder) resulting from or
arising out of actions or omissions occurring on or prior to the Effective Time
(including, without limitation, the transactions contemplated by this Agreement)
to the full extent permitted or required under applicable law as of the
Effective Time and, in the case of indemnification by the Surviving Corporation,
to the extent permitted under the provisions of the Certificate of Incorporation
and the By-Laws of the Company in effect at the date hereof (which provisions
shall not be amended in any manner which adversely affects any Indemnified
Party, for a period of six years), including provisions relating to payment and
advances of expenses incurred in the defense of any action or suit; PROVIDED
that in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of each such claim shall
continue until final disposition of such claim. Without limiting the foregoing,
in any case in which approval by the Surviving Corporation is required to
effectuate any indemnification, the Parent shall cause the Surviving Corporation
to direct, at the election of the Indemnified Party, that the determination of
any such approval shall be made by independent counsel jointly selected by the
Indemnified Party and the Parent.
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(b) For not less than six years after the Effective Time, the
Parent and the Purchaser shall maintain in effect directors' and officers'
liability insurance covering the Indemnified Parties who are currently covered
by the Company's existing directors' and officers' liability insurance, on terms
and conditions no less favorable to such directors and officers than those in
effect on the date hereof; PROVIDED that the deductible thereunder (which shall
be paid by the Parent) may be increased to no more than $25,000; and, PROVIDED,
FURTHER, that in no event shall the Parent be required to expend in any one year
an amount in excess of $250,000; and, PROVIDED, FURTHER, that if the annual
premiums of such insurance coverage exceed such amount, the Parent shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) Any Indemnified Party wishing to claim indemnification
under Section 6.9(a) shall provide notice to the Parent promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and (i) the Parent shall retain counsel satisfactory to the Parent, the
Indemnified Party and the insurer under any applicable directors' and officers'
liability insurance, (ii) the Parent shall pay all reasonable fees and expenses
of such counsel for the Indemnified Party promptly as statements therefor are
received, and (iii) the Parent will use all reasonable efforts to assist in the
vigorous defense of any such matter, PROVIDED that neither Parent nor the
Company shall be liable for any settlement of any claims effected without its
written consent, which consent, however, shall not be unreasonably withheld; and
PROVIDED, FURTHER, that neither Parent nor Company shall be obligated to pay the
fees and expenses of more than one counsel for all Indemnified Parties in any
single action unless in the reasonable judgment of any such Indemnified Party a
conflict of interest may exist between such Indemnified Party and any other
Indemnified Parties with respect to any claims. The omission by any Indemnified
Party to give notice as provided herein shall not relieve the Parent of its
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Parent and the Parent is
damaged as a result of such failure to give notice. The Parent and the
Indemnified Party shall cooperate in the defense of any action or claim subject
to this Section 6.9, including but not limited to furnishing all available
documentary or other evidence as is reasonably requested by the other.
(d) This Section 6.9 is intended for the benefit of the
Indemnified Parties whether or not parties to this Agreement and each of the
Indemnified Parties shall be entitled to enforce the covenants contained herein.
(e) If the Parent or the Surviving Corporation or any of their
respective successors or assigns (i) reorganizes or consolidates with or merges
into any other Person and is not the resulting, continuing or surviving
corporation or entity of such reorganiza tion, consolidation or merger, or (ii)
liquidates, dissolves or transfers all or substantially all of its properties
and assets to any Person or Persons, then, and in such case, proper provision
will be made so that the successors and assigns of the Surviving Corporation
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assumes all of the obligations of the Parent or the Surviving Corporation, as
the case may be, set forth in this Section 6.9.
6.10. EMPLOYEE BENEFITS. Until the first anniversary of the
Closing, Parent shall maintain or caused to be maintained for the benefit of
each employee of the Parent or any of its Subsidiaries who was an employee of
the Company or any of its Subsidiaries immediately prior to the Closing employee
benefit plans and programs that provide such employee with benefits, rights and
entitlements which are comparable to similarly situated employees of the Parent.
Following the Effective Time, Parent shall cause the Surviving Company to honor
in accordance with their terms all employment, severance and other compensation
agreements and arrangements existing on or prior to the execution of this
Agreement which are between the Company and any of the Company Subsidiaries and
any officer, director or employee thereof.
6.11. TAX COVENANTS. Whether before or after the Effective
Time, neither the Parent nor the Company shall take (or permit any of their
Affiliates to) take any action that could reasonably be expected to jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code. Each of the Parent and the Company shall use its respective
commercially reasonable efforts (I) to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code and (II) to
cause its respective officers to furnish such representations to Blank Rome
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP ("Parent's Counsel") and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis
("Company's Counsel") as may be reasonably requested to enable such counsel to
deliver the opinions described in Sections 7.2(d) and 7.3(c).
6.12. PRINT AND MAIL SALE AGREEMENT. The Company shall use its
commercially reasonable efforts to consummate the transactions contemplated by
the Print and Mail Sale Agreement in accordance with its terms. The Company
shall advise Parent of, and consult with Parent with respect to, material
developments in connection with such sale. Neither the Company nor any Company
Subsidiary shall agree or consent to any amendment, waiver, consent,
modification or other change to, or the termination of, the Print and Mail Sale
Agreement unless it shall have first received the approval of Parent (which
shall not unreasonably be withheld).
ARTICLE VII
CLOSING CONDITIONS
7.1. CONDITIONS TO THE OBLIGATIONS OF THE PARENT, THE
PURCHASER AND THE COMPANY. The respective obligations of each party to effect
the Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions:
(a) There shall not be in effect any statute, rule or
regulation enacted, promulgated or deemed applicable by any
governmental authority of competent jurisdiction that makes
consummation of the Merger illegal and no temporary
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restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Merger shall be in
effect; PROVIDED, HOWEVER, that each of the parties shall use their
commercially reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
(b) This Agreement shall have been approved and adopted by the
affirmative vote of the holders of the requisite number of shares of
Common Stock in accordance with the Certificate of Incorporation and
By-Laws of the Company and the DGCL.
(c) Each of the Parent, the Company and any other person (as
defined in the HSR Act and the rules and regulations thereunder)
required in connection with the Merger to file a Pre-Merger
Notification and Report Form under the HSR Act with the FTC and the
Antitrust Division shall have made such filing and the applicable
waiting period with respect to each such filing (including any
extension thereof by reason of a request for additional information)
shall have expired or been terminated.
(d) The S-4 Registration Statement shall have become effective
under the Securities Act and shall not be the subject of any stop order
or proceedings seeking a stop order and no stop order or similar
restraining order shall be threatened or entered by the SEC or any
state securities administration preventing the Merger.
7.2. CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND THE
PURCHASER. The obligations of Parent and Purchaser to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions.
(a) The representations and warranties of the Company
contained in this Agreement that are qualified by materiality or
contained in Section 3.2 shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on and as of
the Closing Date and the representations and warranties of the Company
contained in this Agreement that are not so qualified shall be true and
correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date
(except in each case to the extent any such representation or warranty
expressly speaks as of an earlier specified date, in which case, as of
such date), except (i) in each case where the failure of the
representations and warranties (other than the representations and
warranties set forth in Section 3.2) to be so true and correct (without
giving effect to any qualification as to "material,"
"materiality,""material adverse effect" or similar qualifications) are
not, individually or in the aggregate, reasonably likely to have a
material adverse effect on the Parent and the Parent Subsidiaries taken
as a whole or on the Company and the Company Subsidiaries (excluding
the Print
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and Mail Subsidiaries) taken as a whole, or (ii) in each case where the
failure of such representations and warranties to be so true and
correct (x) is with respect to representations and warranties relating
to the Print and Mail Business and (y) the sale of the Print and Mail
Business is consummated in accordance with the terms of the Print and
Mail Sale Agreement and (iii) in the case of Section 3.2, so long as
the number of shares of Company Common Stock outstanding or subject to
options on the Effective Date does not exceed that amount set forth in
Section 3.2 by more than 10,000 shares or by more than 10,000 option
shares in the aggregate, provided that the exercise prices of such
additional options equal or exceed $10.50 per share.
(b) The Company shall have, in all material respects,
performed all covenants and agreements and complied with all conditions
required by this Agreement to be performed or complied with by the
Company prior to or on the Closing Date. The Company shall deliver to
Parent a certificate of its Chief Executive Officer, solely in his
capacity as such, as to the satisfaction of the conditions in
paragraphs (a) and (b) of this Section 7.2.
(c) There shall not be pending any action, suit or proceeding
by a governmental entity (a) challenging or seeking to restrain or
prohibit the consum mation of the Merger; (b) relating to the Merger
and seeking material monetary damages from the Parent, the Company or
any of the Parent or Company Subsidiary; (c) seeking to prohibit or
limit in any material respect Parent's ability to vote, receive
dividends with respect to or otherwise exercise ownership rights with
respect to the capital stock of the Company; or (d) which would
materially and adversely affect the right of Parent, the Company or any
Parent or Company Subsidiary to own the assets or operate the business
of the Company after the Effective Time; PROVIDED that Parent shall use
reasonable efforts to resolve such matters.
(d) There shall not be pending any actions, suits or
proceeding: (i) which individually or in the aggregate, taking into
account the totality of the facts and circumstance and the probability
of an adverse judgement, are reasonably likely to have material adverse
effect on the Company and the Company A/R and Teleservices Subsidiaries
taken as a whole or on the Parent and the Parent Subsidiaries taken as
a whole and (ii) which (A) challenges or seeks to restrain or prohibit
the consummation of the Merger; (B) relates to the Merger and seeks to
obtain from Parent or any of its subsidiaries damages; (C) seeks to
prohibit or limit in any material respect Parent's ability to vote,
receive dividends with respect to or otherwise exercise ownership
rights with respect to the capital stock of the Company; or (D) affects
adversely the right of Parent, the Company or any subsidiary of Parent
to own the assets or operate the business of Company; provided,
however, that to the extent that any damages payable in connection with
any such claim, action, suit or proceeding will be fully reimbursed by
insurance coverage pursuant to insurance policies held by Company or
Parent, such damages shall be disregarded in determining the material
adverse effect of such claim, action, suit or proceeding on the policy
holder.
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(e) Parent shall have received from Parent's Counsel an
opinion in substantially the form attached hereto as Annex V, dated on
or about the date of mailing of the Proxy Statement/Prospectus, which
opinion shall be reconfirmed at the Effective Time, substantially to
the effect that the Merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368(a) of
the Code. In rendering such opinion, Parent's Counsel shall be entitled
to request and rely upon representations contained in certificates of
officers of Parent and Company, which certificates are in substantially
the form attached hereto as Annex III and Annex IV, as the case may be.
(f) Since the date hereof, there shall not have been any
material adverse change in the business or financial condition of the
Company and the Company Subsidiaries taken as a whole, other than
changes in general economic or business conditions, changes that may
result from the public announcement of this Agreement, changes
generally affecting companies operating in the industries in which the
Company and the Company Subsidiaries operate or changes solely
affecting the Print and Mail Subsidiaries.
(g) The sale of the Print and Mail Subsidiaries shall have
been consummated in accordance with the terms of the Print and Mail
Sale Agreement.
(h) Neither the Parent nor the Purchaser may rely on the
failure of any condition set forth in this Article VII to be satisfied
if such failure was caused by the Parent's or the Purchaser's failure
to use commercially reasonable efforts to consummate the transactions
contemplated by this Agreement.
7.3. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) The representations and warranties of the Parent and the
Purchaser contained in this Agreement that are qualified by materiality
shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date and the representations and
warranties of the Parent contained in this Agreement that are not so
qualified shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except in each case to the extent any such
representation or warranty expressly speaks as of an earlier specified
date, in which case, as of such date), except in each case where the
failure of the representations and warranties to be so true and correct
(without giving effect to any qualification as to "material,"
"materiality,""material adverse effect" or similar qualifications) are
not, individually or in the aggregate, reasonably likely to have a
material adverse effect on the Parent and the Parent Subsidiaries taken
as a whole.
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(b) The Parent and the Purchaser shall have, in all material
respects, performed all covenants and agreements and complied with all
conditions required by this Agreement to be performed or complied with
by the Parent and the Purchaser prior to or on the Closing Date. The
Parent shall deliver to Company a certificate of its Chief Executive
Officer, solely in his capacity as such, as to the satisfaction of the
conditions in paragraphs (a) and (b) of this Section 7.3.
(c) Company shall have received from Company's Counsel an
opinion in substantially the form attached hereto as Annex VI, dated on
or about the date of mailing of the Proxy Statement/Prospectus, which
opinion shall be reconfirmed at the Effective Time, substantially to
the effect that the Merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368(a) of
the Code. In rendering such opinion, Company's Counsel shall be
entitled to request and rely upon representations contained in
certificates of officers of Parent and Company, which certificates are
in substantially the form attached hereto as Annex III and Annex IV, as
the case may be.
(d) The Company may not rely on the failure of any condition
set forth in this Article VII to be satisfied if such failure was
caused by the Company's failure to use commercially reasonable efforts
to consummate the transactions contemplated by this Agreement.
ARTICLE VIII
CLOSING
8.1. TIME AND PLACE. The closing of the Merger (the "Closing")
shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, as soon as practicable following
satisfaction or waiver, if permissible, of the conditions set forth in Article
VII. The date on which the Closing actually occurs is herein referred to as the
"Closing Date."
8.2. FILINGS AT THE CLOSING. At the Closing, the Parent, the
Purchaser and the Company shall cause the Certificate of Merger, together with
any other documents required by law to effectuate the Merger, to be filed and
recorded with the Secretary of State of the State of Delaware in accordance with
the provisions of Sections 103 and 251 or 253 of the DGCL and shall take any and
all other lawful actions and do any and all other lawful things necessary to
cause the Merger to become effective.
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ARTICLE IX
TERMINATION AND ABANDONMENT
9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual consent of the Board of Directors of the Parent
and the Board of Directors of the Company;
(b) by either the Parent or the Company if the Merger shall
not have been consummated on or before October 31, 1999; PROVIDED,
HOWEVER, that the right to terminate this Agreement shall not be
available to any party whose failure to fulfill any obligation under or
breach of this Agreement has been the cause of, or resulted in, the
failure of the Merger to have occurred on or before the aforesaid date;
(c) by either the Parent or the Company, if any court of
competent jurisdiction in the United States or other governmental
agency of competent jurisdiction shall have issued an order, decree or
ruling or taken any other action restraining, permanently enjoining or
otherwise prohibiting the Merger, and such order, decree, ruling or
other action shall have become final and non-appealable;
(d) by either the Parent or the Company, if the approval of
the Merger by the stockholders of the Company shall not have been
obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of such stockholders or at any
adjournment or postponement thereof;
(e) by the Company:
(i) upon the breach of any representation, warranty,
covenant or other agreement of Parent contained in this Agreement, or
if any representation or warranty of Parent shall be or shall have
become inaccurate, in either case such that Parent fails to cure such
breach within fifteen (15) business days after receiving notice of such
breach (but only if such breach is capable of being cured) and such
breach would cause any of the conditions set forth in Section 7.3(a) or
(b) not to be satisfied at the time of such breach or at the time such
representation or warranty was or shall have become inaccurate or, if
capable of being cured, at the end of such cure period;
(ii) if the arithmetic per share average of the last
reported sales prices of one share of Parent Common Stock, as reported
on the NASDAQ National Market during the five (5) trading days ending
on and including the trading day one day before the Company Stockholder
Meeting (such 5-day period,
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the "Averaging Period"), is less than $27.50 (such amount to be
proportionately adjusted in the event the Parent Common Stock is
subdivided, whether by stock split, stock dividend or otherwise, into a
greater number or combined, whether by reverse stock split or
otherwise, into a lesser number).
(f) By Parent:
(i) upon the breach of any representation, warranty,
covenant or other agreement of the Company contained in this Agreement,
or if any repre sentation or warranty of the Company shall be or shall
become inaccurate, in either case such that the Company fails to cure
such breach within fifteen (15) business days after receiving notice of
such breach (but only if such breach is capable of being cured) and
such breach would cause any of the conditions set forth in Section
7.2(a) or (b) not to be satisfied at the time of such breach or at the
time such representation or warranty was or shall have become
inaccurate, or, if capable of being cured, at the end of such cure
period;
(ii) if (a) the Board of Directors of the Company
shall have failed to recommend, or shall for any reason have withdrawn
or shall have amended or modified in a manner adverse to Parent its
recommendation in favor of, the adoption and approval of the Merger;
(b) the Company shall have failed to include in the Proxy
Statement/Prospectus the recommendation of the Board of Directors of
the Company in favor of the adoption and approval of the Merger; (c)
the Company shall have entered into any Company Acquisition Agreement;
or (d) a tender or exchange offer relating to securities of the Company
shall have been commenced and the Company shall not have sent to its
stockholders and, if applicable, optionholder, within ten (10) business
days after the commencement of such tender or exchange offer, a
statement disclosing that the Company recommends rejection of such
tender or exchange offer.
9.2. PROCEDURE AND EFFECT OF TERMINATION. (a) In the event of
termina tion and abandonment of the Merger by the Parent, the Purchaser or the
Company pursuant to Section 9.1, written notice thereof shall forthwith be given
to the others, and this Agreement shall terminate and the Merger shall be
abandoned, without further action by any of the parties hereto. The Purchaser
agrees that any termination by the Parent shall be conclusively binding upon it,
whether given expressly on its behalf or not, and the Company shall have no
further obligation with respect to it. If this Agreement is terminated as
provided herein, no party hereto shall have any liability or further obligation
to any other party to this Agreement; PROVIDED that any termination shall be
without pre ▇▇▇▇▇▇ to the rights of any party hereto arising out of any
intentional breach by any other party of any covenant or agreement contained in
this Agreement, and PROVIDED, FURTHER, that the obligations set forth in
Sections 3.15, 4.8, 6.2 (last sentence), 9.2, 10.6 and 10.8 shall in any event
survive any termination.
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(b) (i) If this Agreement is terminated by Parent or the
Company pursuant to Section 9.1(d) and a Company Superior Proposal is
consummated at any time prior to the first anniversary date of this Agreement,
then, contemporaneously with the consummation of such transaction, the Company
shall pay to Parent by wire transfer of immediately available funds to an
account specified by Parent, a nonrefundable fee in an amount equal to
$3,500,000 plus an amount equal to the documented out-of-pocket costs and
expenses incurred by Parent in connection with the transactions contemplated by
this Agreement, not to exceed $1,200,000.
(ii) In the event of a termination of this Agreement
by Parent pursuant to Section 9.1(f)(ii), then the Company shall within ten
business days of such termination pay Parent by wire transfer of immediately
available funds to an account specified by Parent a non-refundable termination
fee of $3,500,000 plus an amount equal to the documented out-of-pocket costs and
expenses incurred by Parent in connection with the transactions contemplated by
this Agreement, not to exceed $1,200,000.
ARTICLE X
MISCELLANEOUS
10.1. AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified or supplemented only by written
agreement of the Parent, the Purchaser and the Company at any time prior to the
Effective Time with respect to any of the terms contained herein; PROVIDED that
after this Agreement is adopted by the Company's stockholders, no such amendment
or modification shall be made that reduces the amount or changes the form of the
Merger Consideration or otherwise ma terially and adversely affects the rights
of the Company's stockholders hereunder, without the further approval of such
stockholders.
10.2. WAIVER OF COMPLIANCE; CONSENTS. Any failure of the
Parent or the Purchaser, on the one hand, or the Company, on the other hand, to
comply with any obligation, covenant, agreement or condition herein may be
waived by the Company or the Parent, respectively, only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Sec tion 10.2. The Purchaser hereby agrees that any consent or waiver of
compliance given by the Parent hereunder shall be conclusively binding upon it,
whether given expressly on its behalf or not.
10.3. SURVIVAL OF WARRANTIES. Each and every representation
and warranty made in this Agreement shall survive the date of this Agreement but
shall expire with, and
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be terminated and extinguished by, the Merger, or the termination of this
Agreement pursuant to Section 9.1. This Section 10.3 shall have no effect upon
any other obligation of the parties hereto, whether to be performed before or
after the Closing.
10.4. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if (A) delivered personally or by
overnight courier, (B) mailed by registered or certified mail, return receipt
requested, postage prepaid, or (C) transmitted by telecopy, and in each case,
addressed to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice; PROVIDED that notices of a
change of address shall be effective only upon receipt thereof):
(a) if to the Parent or the Purchaser, to
NCO Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with copies to
NCO Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) if to the Company, to
Compass International Service Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
40
47
with a copy to
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Any notice so addressed shall be deemed to be given (x) three business days
after being mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid and (y) upon delivery, if transmitted by hand
delivery, overnight courier or telecopy.
10.5. ASSIGNMENT; PARTIES IN INTEREST. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties. Except for Section 6.9, which is intended for the benefit
of the Company's directors, officers, employees and agents, and Section 6.11,
which is intended for the benefit of the Company's stockholders, this Agreement
is not intended to confer upon any other Person except the parties any rights or
remedies under or by reason of this Agreement.
10.6. EXPENSES. Except as provided in Section 9.2(b), whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
10.7. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, as provided in Section 10.13, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.8. GOVERNING LAW. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of Delaware, without giving effect to the conflict of laws
rules thereof to the extent such rules would permit the application of the laws
of another jurisdiction.
10.9. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
41
48
10.10. INTERPRETATION. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
10.11. ENTIRE AGREEMENT. This Agreement, including the Company
Disclosure Letter and the Parent Disclosure Letter, the Annexes hereto, the
Voting Agreement, and the Confidentiality Agreement, embody the entire agreement
and under standing of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements and the understandings
between the parties with respect to such subject matter.
10.12. SEVERABILITY. If any provision, including any phrase,
sentence, clause, section or subsection, of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering such provision in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision herein contained invalid, inoperative, or unenforceable to any extent
whatsoever.
10.13. 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 State of Delaware, (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 State of Delaware, (C) each of the parties irrevocably waives the right
to trial by jury, (D) each of the parties irrevocably consents to service of
process by first class certified mail, return receipt requested, postage
prepaid, to the address at which such party is to receive notice in accordance
with Section 10.4 and (E) the prevailing parties shall be entitled to recover
their reasonable attorneys' fees and court costs from the other parties.
10.14. INTERPRETATION OF REPRESENTATIONS; DISCLOSURE LETTERS.
Each represen tation 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. Except as set forth herein, exceptions
or qualifications to any such representation or warranty shall not be construed
as exceptions or qualifications to any other representation or warranty. The
parties acknowledge that the Company Disclosure Letter and the Parent Disclosure
Letter (i) relate to certain matters concerning the disclosures required and
transactions contemplated by this Agreement, (ii) are qualified in their
entirety by reference to specific provisions of this Agreement, (iii) are not
intended to constitute and shall not be construed as indicating that such matter
is required to be disclosed, nor shall such disclosure be construed as an
admission that such information is material with respect to the Company or
Parent, as the case may be, except to the extent required by this Agreement,
(iv) disclosure of the information contained in one section or part of the
Company Disclosure Letter or the Parent Disclosure Letter shall be deemed as
proper disclosure for all sections
42
49
or parts of the Company Disclosure Letter or the Parent Disclosure Letter, as
the case may be, only if appropriately cross-referenced or if the relevance
thereof is reasonably manifest on its face to be relevant and responsive to the
other section or sections where such disclosure is required; and (v) disclosure
of the information contained in one section of the Company Disclosure Letter or
the Parent Disclosure Letter shall be deemed as proper disclosure for each
provision in that section of the Agreement for which such disclosure is
required, even if such provision is not qualified by a reference to the Company
Disclosure Letter or the Parent Disclosure Letter, as the case may be, provided
that the relevance thereof is reasonably manifest on its face to be relevant and
responsive to the provisions in that section which are not qualified by a
reference to the Company Disclosure Letter or Parent Disclosure Letter, as the
case may be.
10.15. RELIANCE BY PARENT AND PURCHASER. Notwithstanding the
right of Parent and Purchaser to investigate the business, assets and financial
condition of the Company and the Company Subsidiaries, and notwithstanding any
knowledge obtained or obtainable by Parent and Purchaser as a result of such
investigation, Parent and Purchaser have the unqualified right to rely upon, and
have relied upon, each of the representations and warranties made by the Company
in this Agreement or pursuant hereto.
[remainder of page intentionally left blank - signature page to follow]
43
50
IN WITNESS WHEREOF, the Parent, the Purchaser and the Company
have caused this Agreement to be signed by their respective duly authorized
officers as of the date first above written.
PARENT: NCO GROUP, INC.
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------
Title: EVP
-----------------------
PURCHASER: CARDINAL ACQUISITION
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title: EVP
-----------------------
THE COMPANY COMPASS INTERNATIONAL
SERVICES CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------
Title: Chairman
-----------------------
44
51
ANNEX I
DEFINED TERMS
ANTITRUST DIVISION: as defined in Section 6.3(a).
A/R AND TELESERVICES SUBSIDIARIES: the Company Subsidiaries other than
the Print and Mail Subsidiaries.
AVERAGING PERIOD: as defined in Section 9.1(e).
CERTIFICATE OF MERGER: as defined in Section 1.5.
CERTIFICATES: as defined in Section 2.5(b).
CLOSING: as defined in Section 8.1.
CLOSING DATE: as defined in Section 8.1.
CODE: as defined in the second recital of this Agreement.
COMMON STOCK: as defined in Section 2.1(a).
COMPANY: as defined in the first paragraph of this Agreement.
COMPANY ACQUISITION AGREEMENT: as defined in Section 6.8(a).
COMPANY DISCLOSURE LETTER: as defined in Section 3.1.
COMPANY LEASES: as defined in Section 3.12(b).
COMPANY LEASED REAL PROPERTY: as defined in Section 3.12(a).
COMPANY OPTION PLAN: as defined in Section 2.6.
COMPANY OWNED REAL PROPERTY: as defined in Section 3.12(a).
COMPANY PLANS: as defined in Section 3.13(b).
COMPANY PREFERRED STOCK: as defined in Section 3.2(a).
COMPANY SEC FILINGS: as defined in Section 3.5(a).
COMPANY STOCKHOLDER MEETING: the annual or special meeting of the
stockholders of the Company to be held to vote on the approval of this Agreement
and the transactions contemplated hereby.
52
COMPANY SUBSIDIARY: means any corporation of which the outstanding
securities having ordinary voting power to elect a majority of the board of
directors are directly or indirectly owned by the Company or any limited
partnership of which the Company or any Company Subsidiary is the general
partner.
COMPANY SUPERIOR PROPOSAL: as defined in Section 6.8(a).
COMPANY TAKEOVER EVENT: as defined in Section 6.8(a).
COMPANY TAKEOVER PROPOSAL: as defined in Section 6.8(a).
COMPLIANCE PROGRAM: as defined in Section 3.18(c).
CONFIDENTIALITY AGREEMENT: as defined in Section 6.2(b)
DGCL: as defined in Section 1.1(a).
EFFECTIVE TIME: as defined in Section 1.5.
ERISA: as defined in Section 3.13(b).
EXCHANGE ACT: as defined in Section 3.4.
EXCHANGE AGENT: as defined in Section 2.6(a).
EXCHANGE FUND: as defined in Section 2.6(a).
EXCHANGE RATIO: as defined in Section 2.1(a)
FINANCIAL STATEMENTS: as defined in Section 3.5(b).
FTC: the Federal Trade Commission.
GAAP: generally accepted accounting principles as in effect in the
United States, consistently applied.
HSR ACT: as defined in Section 3.4.
INDEMNIFIED PARTIES: as defined in Section 6.8(a).
INTERESTED STOCKHOLDER: as defined in Section 3.3 (and Section 203 of
the DGCL).
INTELLECTUAL PROPERTY: as defined in Section 3.18(a).
2
53
LIEN: as defined in Section 3.1.
MERGER: as defined in the first recital of this Agreement.
MERGER CONSIDERATION: as defined in Section 2.1(a).
OPTIONS: as defined in Section 2.6.
PARENT: as defined in the first paragraph of this Agreement.
PARENT COMMON STOCK: as defined in Section 2.1(a).
PARENT COMMON STOCK VALUE:
PARENT DISCLOSURE LETTER: as defined in the first paragraph of Article
IV of this Agreement.
PARENT FINANCIAL STATEMENTS: as defined in Section 4.5(b).
PARENT 1998 FINANCIAL STATEMENTS: as defined in Section 4.5(b).
PARENT SEC FILINGS: as defined in Section 4.5(a).
PARENT SUBSIDIARY: means any corporation of which the outstanding
securities having ordinary voting power to elect a majority of the board of
directors are directly or indirectly owned by Parent.
PER SHARE VALUE: as defined in Section 2.2(b).
PERSON: any natural person, firm, partnership, association,
corporation, company, trust, business trust, governmental authority or other
entity.
PRINT AND MAIL BUSINESS: the business currently conducted through the
Print and Mail Subsidiaries.
PRINT AND MAIL SALE AGREEMENT: that certain Stock Purchase Agreement,
dated as of the date hereof by and between the Company and Swiss-Irish
Enterprises, Inc..
PRINT AND MAIL SUBSIDIARIES: ▇▇▇▇▇▇ Direct Mail Service, Inc., Compass
Mail Services Holding Corporation, Compass Mail Services, Inc., Compass Mail
Services, L.P., Compass Print & Mail Services, Inc., Compass Print Services
Holding Corporation, Compass Print Services, L.P., MB Strategic Services, Ltd.,
MetroWebb, Inc., MWI Laser Group, Inc. and The Mail Box, Inc.
PROXY STATEMENT/PROSPECTUS: as defined in Section 6.1.
3
54
PURCHASER: as defined in the first paragraph of this Agreement.
PURCHASER COMMON STOCK: as defined in Section 2.4.
S-4 REGISTRATION STATEMENT: as defined in Section 6.1.
SECURITIES ACT: as defined in Section 3.4.
SEC: as defined in Section 3.5(a).
SHARES: as defined in Section 2.1(a).
SURVIVING CORPORATION: as defined in Section 1.1(a).
SURVIVING CORPORATION COMMON STOCK: as defined in Section 2.4.
TAX OR TAXES: as defined in Section 3.9.
4
55
ANNEX II
--------
VOTING AGREEMENT
PARTIES: THE STOCKHOLDERS LISTED ON THE
SIGNATURE PAGES HERETO
NCO GROUP, INC.
a Pennsylvania corporation ("Acquiror")
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: May ___, 1999
BACKGROUND: Acquiror, [ ], a Delaware corporation and a wholly owned subsidiary
of Acquiror ("Newco"), and [Cardinal], a Delaware corporation (the "Company"),
are entering into an Agreement and Plan of Merger dated as of the date hereof
(the "Merger Agreement"), which provides (subject to the conditions set forth
therein) for the merger, as amended and supplemented from time-to-time
hereafter, of Newco with and into the Company (the "Merger"). The persons listed
on the signature page under "Stockholders" (individually, a "Stockholder" and
collectively, the "Stockholders") are stockholders of the Company. As a
condition to the willingness of Acquiror and Newco to enter into the Merger
Agreement, Acquiror and Newco have required that the Stockholders enter into,
and in order to induce Acquiror and Newco to enter into the Merger Agreement,
the Stockholders have agreed to enter into, this Agreement. The parties agree
and acknowledge that this Agreement and the Proxy referred to in Section 3(b)
hereof shall terminate and become null and void with respect to any Stockholder
at the option of such Stockholder if after the date hereof the Exchange Ratio
(as defined in the Merger Agreement) shall be amended without the consent of
such Stockholder in any manner which is material and adverse to such
Stockholder.
INTENDING TO BE LEGALLY BOUND, in consideration of the foregoing and
the mutual agreements contained herein and in the Merger Agreement, the parties
hereto agree as follows:
1. CERTAIN DEFINITIONS
(a) All capitalized terms used but not otherwise defined in this
Agreement have the meanings ascribed to such terms in the Merger Agreement.
(b) "EXPIRATION DATE" shall mean the earlier of (i) the date upon
which the Merger Agreement is validly terminated pursuant to Section 9.1
thereof, and (ii) the date upon which the Merger becomes effective in accordance
with the terms and conditions of the Merger Agreement.
(c) A Stockholder shall be deemed to "OWN" or to have acquired
"OWNERSHIP" of a security if the Stockholder: (i) is a record owner of such
security; or (ii) is
56
a "beneficial owner" (within the meaning of Rule 13d-3 under the Exchange Act)
of such security.
(d) The "RECORD DATE" for a particular matter shall be the date
fixed for persons entitled: (i) to receive notice of, and to vote at, a meeting
of the stockholders of the Company called for the purpose of voting on such
matter; or (ii) to take action by written consent of the stockholders of the
Company with respect to such matter.
(e) "SUBJECT SECURITIES" shall mean with respect to each
Stockholder: (i) all securities of the Company (including shares of Company
Common Stock and all options, warrants and other rights to acquire shares of
Company Common Stock) Owned by the Stockholder (individually or jointly) as of
the date of this Agreement; and (ii) all additional securities of the Company
(including all additional shares of Company Common Stock and all additional
options, warrants and other rights to acquire shares of Company Common Stock) of
which the Stockholder (individually or jointly) acquires Ownership during the
period from the date of this Agreement through the Expiration Date.
(f) A Person shall be deemed to have effected a "TRANSFER" of a
security if such Person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security including, without limitation, transfers of such
security to the shareholders, partners or equity holders of such person as a
dividend or other distribution; or (ii) enters into an agreement or commitment
contemplating the possible sale of, pledge of, encumbrance of, grant of an
option with respect to, transfer of or disposition of such security or any
interest therein including, without limitation, an agreement or commitment
contemplating the possible transfer of such security to the shareholders,
partners, or equity holders of such person as a dividend or distribution.
2. TRANSFER OF SUBJECT SECURITIES
(a) TRANSFEREE OF SUBJECT SECURITIES TO BE BOUND BY THIS
AGREEMENT. Each of the Stockholders agrees that, during the period from the date
of this Agreement through the Expiration Date, such Stockholder shall not cause
or permit any Transfer of any of the Subject Securities Owned by such
Stockholder to be effected unless each Person to which any of such Subject
Securities, or any interest in any of such Subject Securities, is or may be
transferred shall have executed a counterpart of this Agreement as a Stockholder
and a proxy in the form attached hereto as Exhibit A (with such modifications as
Acquiror may reasonably request) as a result of the Transfer.
(b) TRANSFER OF VOTING RIGHTS. Each of the Stockholders agrees
that, during the period from the date of this Agreement through the Expiration
Date, such Stockholder shall ensure that: (a) none of the Subject Securities
Owned by such Stockholder is deposited into a voting trust; and (b) no proxy is
granted, and no voting agreement or similar agreement (other than this
Agreement) is entered into, with respect to any of the Subject Securities Owned
by such Stockholder.
3. VOTING OF SHARES.
(a) AGREEMENT. Each of the Stockholders covenants and agrees that,
during the period from the date of this Agreement through the Expiration Date,
at any meeting of the stockholders of the Company, however called, and at every
adjournment or postponement thereof, and in any written action by consent of the
stockholders of the Company unless otherwise directed in writing by Acquiror,
such Stockholder shall (i) appear in person or by proxy, or cause the holder of
record as of the Record Date to appear in person or by proxy, at any annual or
special meeting of stockholders of the Company (including the Company
Stockholder Meeting) for the purpose of establishing a quorum, and (ii) vote or
cause to be voted all issued and outstanding shares of Company Common Stock that
are Owned by such Stockholder (individually or jointly) as of the Record Date in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the adoption and approval of the terms thereof and in favor of the
other transactions contemplated by the Merger Agreement and each of the actions
contemplated by the Merger Agreement and any action required in furtherance
thereof.
(b) PROXY. Contemporaneously with the execution of this Agreement:
(i) each of the Stockholders shall deliver to Acquiror a proxy in the form
attached hereto as Exhibit A, which shall be irrevocable to the fullest extent
permitted by law, with respect to the shares referred to therein (the "Proxy");
and (ii) each of the Stockholders shall cause to be delivered to Acquiror an
additional proxy (in the form attached hereto as Exhibit A) executed on behalf
of the record owner of any issued and outstanding shares of Company Common Stock
that are Owned (but are not owned of record) by such Stockholder.
4. NO SOLICITATION.
(a) Each Stockholder covenants and agrees that, during the period
commencing on the date of this Agreement and ending on the Expiration Date, such
Stockholder shall not, directly or indirectly through another Person, do any of
the things described in clauses (i) through (iv) of Section 6.8(a) of the Merger
Agreement.
(b) Each Stockholder shall immediately cease any existing
discussions with any Person that relate to any Company Takeover Proposal.
(c) Notwithstanding the restrictions set forth in this Section 4,
each of the Company and any person who is an officer or director of the Company
may take any action consistent with the terms of the Merger Agreement.
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each Stockholder,
severally and not jointly, represents and warrants to Acquiror as follows:
(a) AUTHORIZATION. Such Stockholder has the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement and the Proxy and to perform such Stockholder's obligations hereunder
and thereunder. This Agreement and the Proxy have been duly executed and
delivered by such Stockholder and constitute the legal, valid and binding
obligations of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
57
(b) NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(i) The execution and delivery of this Agreement and the Proxy
by such Stockholder does not, and the performance of this Agreement and the
Proxy by such Stockholder will not: (A) conflict with or violate any law, order,
decree or judgment applicable to such Stockholder or by which such Stockholder
or any of such Stockholder's properties are bound or affected; or (B) result in
any breach of or constitute a default or breach (immediately or after the giving
of notice, passage of time, or both) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the Subject Securities pursuant to, any contract to
which such Stockholder is a party or by which such Stockholder or any of such
Stockholder's properties is bound or affected.
(ii) The execution and delivery of this Agreement and the
Proxy by such Stockholder does not, and the performance of this Agreement and
the Proxy by such Stockholder will not, require any Consent of any Person.
(c) TITLE TO SUBJECT SECURITIES. As of the date hereof, such
Stockholder Owns in the aggregate (including shares owned of record and shares
owned beneficially) the number of issued and outstanding shares of Company
Common Stock set forth below such Stockholder's name on the signature page
hereof, and the number of options, warrants and other rights to acquire shares
of Company Common Stock set forth below such Stockholder's name on the signature
page hereof, and does not directly or indirectly Own, any shares of capital
stock of the Company, or any option, warrant or other right to acquire any
shares of capital stock of the Company, other than the shares and options,
warrants and other rights set forth below such Stockholder's name on the
signature page hereof.
(d) ACCURACY OF REPRESENTATIONS. The representations and
warranties of such Stockholder contained in this Agreement are accurate in
all respects as of the date of this Agreement, will be accurate in all respects
at all times through the Expiration Date and will be accurate in all respects
as of the date of the consummation of the Merger as if made on that date.
6. OTHER COVENANTS OF THE STOCKHOLDERS.
(a) STOCKHOLDERS' MEETING AND PRE-CLOSING COOPERATION. Each of
the Stockholders covenants and agrees that upon the request of Acquiror, such
Stockholder shall promptly take any and all actions within his or her power that
are necessary or desirable to cause the Company Stockholder Meeting to be held
pursuant to Section 251 of the Delaware General Corporation Law, as amended, or
any other applicable law.
(b) FURTHER ASSURANCES. At any time and from time-to-time
after the date hereof through the Closing Date, and without additional
consideration, each of the Stockholders will take such action and execute and
deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, proxies, consents and other instruments as
Acquiror may reasonably request for the purpose of
58
effectively carrying out this Agreement.
(c) LEGEND. Immediately after the execution of this Agreement
(and from time-to-time prior to the Expiration Date upon the acquisition by any
of the Stockholders (individually or jointly) of Ownership of any shares of
Company Common Stock), each of the Stockholders shall instruct the Company to
cause each certificate of such Stockholder evidencing any issued and outstanding
shares of Company Common Stock Owned by such Stockholder (individually or
jointly) to bear a legend in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED
OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
TERMS AND CONDITIONS OF THE AGREEMENT DATED AS OF MAY [ ], 1999, AS IT
MAY BE AMENDED, BY AND AMONG NCO GROUP, INC. AND THE RECORD AND/OR
BENEFICIAL OWNER OF THIS CERTIFICATE AND OTHER PERSONS, A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
7. RULE 145
(a) Stockholder understands that the common stock of Acquiror
being issued in the Merger ("Acquiror Shares") will be issued pursuant to a
registration statement on Form S-4, and that Stockholder may be deemed an
"affiliate" of the Company as such term is defined for purposes of paragraphs
(c) and (d) of Rule 145 under the Securities Act of 1933, as amended (the "
Securities Act"). Stockholder agrees that Stockholder shall not effect any sale,
transfer or other disposition of any Acquiror Shares unless:
(i) such sale, transfer or other disposition is effected
pursuant to an effective registration statement under the Securities Act;
(ii) such sale, transfer or other disposition is made
in conformity with the requirements of Rule 145 under the Act, as evidenced by a
broker's letter and a representation letter executed by Stockholder(satisfactory
in form and content to Acquiror) stating that such requirements have been met;
(iii) counsel reasonably satisfactory to Acquiror
shall have advised Acquiror in a written opinion letter (satisfactory in form
and content to Acquiror), upon which Acquiror may rely, that such sale, transfer
or other disposition will be exempt from registration under the Act; or
(iv) an authorized representative of the SEC shall
have rendered written advice to Stockholder to the effect that the SEC would
take no action, or that the staff of the SEC would not recommend that the SEC
take action, with respect to such sale, transfer or other disposition, and a
copy of such written advice and all other related communications with the SEC
shall have been delivered to Acquiror.
(b) Stockholder acknowledges and agrees that (a) stop transfer
instructions will be given to Acquiror's transfer agent with respect to the
Acquiror Shares, and (b) each certificate representing any of such shares shall
bear a legend identical or
59
similar in effect to the following legend (together with any other legend or
legends required by applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145(d) OF THE SECURITIES ACT OF 1933
APPLIES AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF SUCH RULE OR AS OTHERWISE PROVIDED IN
SECTION 7 OF A VOTING AGREEMENT DATED AS OF MAY [ ], 1999,
BETWEEN THE REGISTERED HOLDER HEREOF AND THE ISSUER, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE ISSUER."
8. MISCELLANEOUS.
(a) NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. All representations, warranties and agreements made by the
Stockholders in this Agreement shall terminate upon the Expiration Date except
Section 7 which shall survive the Effective Time and remain in full force and
effect with respect to each Stockholder with the earlier of (i) such time as
that Stockholder has disposed of all of his Acquiror Shares in compliance with
Section 7(a), or (ii) such time as that Stockholder shall have satisfied the
requirements of Rule 145(d)(2) or (d)(3); provided, however, nothing in this
Section 8(a) shall relieve any Stockholder from liability after the Expiration
Date for any breach on or prior to the Expiration Date of any representation,
warranty, or agreement made by such Stockholder in this Agreement.
(b) NOTICES. All notices, consents or other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or one (1)
business day after being sent by a nationally recognized overnight delivery
service, postage or delivery charges prepaid or five (5) business days after
being sent by registered or certified mail, return receipt requested, postage
charges prepaid. Notices also may be given by prepaid facsimile and shall be
effective on the date transmitted if confirmed within 48 hours thereafter by a
signed original sent in one of the manners provided in the preceding sentence.
Notices to Acquiror shall be sent to its address stated on page one of this
Agreement to the attention of Acquiror's General Counsel, with a copy sent
simultaneously to the same address to the attention of Blank Rome ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire . Notices to the Stockholders shall be sent to their
respective addresses stated on the signature page of this Agreement, with a copy
sent simultaneously to ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. 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 8(b), provided that any such change of address notice shall not be
effective unless and until received.
(c) ENTIRE UNDERSTANDING. This Agreement and the other
agreements referred to herein, state the entire understanding among the parties
with respect to the subject matter hereof, and supersede all prior oral and
written communications and agreements, and all contemporaneous oral
communications and agreements, with respect
60
to the subject matter hereof. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(d) WAIVERS. Except as otherwise expressly provided herein, no
waiver with respect to this Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought. Except as otherwise
expressly provided herein, no failure to exercise, delay in exercising, or
single or partial exercise of any right, power or remedy by any party, and no
course of dealing between or among any of the parties, shall constitute a waiver
of or shall preclude any other for further exercise of, any right, power or
remedy.
(e) SEVERABILITY. If any provision of this Agreement or any
part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (i) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (ii) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (iii)
the invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement. Each
provision of this Agreement is separable from every other provision of this
Agreement, and each part of each provision of this Agreement is separable from
every other part of such provision.
(f) 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.
(g) SECTION HEADINGS. Section and subsection headings in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
(h) REFERENCES. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
(i) CONTROLLING LAW. THIS AGREEMENT IS MADE UNDER, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
(j) JURISDICTION AND PROCESS. In any action between or among
any of the parties, whether arising out of this Agreement or otherwise, (i) each
of the parties irrevocably consents to the exclusive jurisdiction and venue of
the federal and state courts located in the State of Delaware, (ii) 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
State of Delaware, (iii) each of the parties irrevocably waives
61
the right to trial by jury, (iv) 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 8(b), and (v) the prevailing parties shall be entitled
to recover their reasonable attorneys' fees and court costs from the other
parties.
(k) NON-EXCLUSIVITY. The rights and remedies of Acquiror
hereunder are not exclusive of or limited by any other rights or remedies which
Acquiror may have, whether at law, in equity, by contract or otherwise, all of
which shall be cumulative (and not alternative).
(l) BANKRUPTCY QUALIFICATION. Each representation or warranty
made in or pursuant to this Agreement regarding the enforceability of any
contract shall be qualified to the extent that such enforceability may be
effected by bankruptcy, insolvency and other similar laws or equitable
principles (but not those concerning fraudulent conveyance) generally affecting
creditors' rights and remedies.
(m) CONSTRUCTION. The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement. As used in this Agreement, the words "include" and "including"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation".
(n) ASSIGNMENT; BINDING EFFECT. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either of the parties hereto (whether by operation of law
or otherwise) without the prior written consent of the other party. Subject to
the preceding sentence, this Agreement shall be binding upon each of the
Stockholders and his, her or its heirs, successors and assigns, and shall inure
to the benefit of Acquiror and its successors and assigns. Without limiting any
of the restrictions set forth in Section 2 or elsewhere in this Agreement, this
Agreement shall be binding upon any Person to whom any Subject Securities are
transferred. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
on any Person other than the parties hereto or their respective heirs,
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
(o) SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that Acquiror shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of proper
jurisdiction, this being in addition to any other remedy to which Acquiror is
entitled at law or in equity.
(p) OTHER AGREEMENTS AND INDEPENDENCE OF OBLIGATIONS. Nothing
in this Agreement shall limit any of the rights or remedies of Acquiror or any
of the obligations of
62
the Stockholders under any other agreement. The covenants and obligations of the
Stockholders set forth in this Agreement shall be construed as independent of
any other agreement or arrangement between any or all of the Stockholders, on
the one hand, and the Company or Acquiror, on the other. The existence of any
claim or cause of action by any or all of the Stockholders against the Acquiror
or the Company shall not constitute a defense to the enforcement of any of such
covenants or obligations against any or all of the Stockholders.
(q) OBLIGATIONS OF STOCKHOLDERS; SIGNATURES OF ALL
STOCKHOLDERS NOT REQUIRED. The obligations of the Stockholders under this
Agreement shall be several and not joint. Each Stockholder agrees that the
failure of any other Stockholder listed on the signature page to execute and
deliver this Agreement shall not affect in any way the validity or
enforceability of this Agreement with respect to those Stockholders who have
executed this Agreement or the rights of Acquiror under this Agreement.
[BALANCE OF PAGE INTENTIONALLY BLANK]
63
IN WITNESS WHEREOF, each of the undersigned has caused this Voting
Agreement to be executed as of the date first stated above.
NCO GROUP, INC.
By:_________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
Executive Vice President -
Corporate Development
STOCKHOLDERS:
___________________________________________
Name:
Address:___________________________________
____________________________________________
Facsimile:__________________________________
Number of issued and
outstanding shares of
Company Common Stock Owned
of record as of the date of
this Agreement:
--------------
Number of additional issued
and outstanding shares of
Company Common Stock Owned
(but not of record) as of
the date of this Agreement:
---------------
Number of options, warrants
and other rights to acquire
shares of Company Common
Stock owned of record as of
the date of this Agreement:
---------------
Number of additional
options, warrants and other
rights to acquire shares of
Company Common Stock Owned
(but not of record) as of
the date of this Agreement:
---------------
64
EXHIBIT A
FORM OF IRREVOCABLE PROXY
IRREVOCABLE PROXY
The undersigned Stockholder of [Cardinal], a Delaware corporation (the
"Company"), hereby irrevocably (to the fullest extent permitted by law) appoint
and constitutes ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and NCO Group, Inc., a
Pennsylvania corporation ("Acquiror"), and each of them, the attorneys and
proxies of the undersigned with full power of substitution and resubstitution,
to the full extent of the undersigned's rights with respect to (i) the issued
and outstanding shares of capital stock of the Company owned of record by the
undersigned as of the date of this proxy, which shares are specified on the
final page of this proxy and (ii) any and all other shares of capital stock of
the Company which the undersigned (individually or jointly) may acquire after
the date hereof. (The shares of the capital stock of the Company referred to in
clauses (i) and (ii) of the immediately preceding sentence are collectively
referred to as the "Shares.") Upon the execution hereof, all prior proxies given
by the undersigned with respect to any of the Shares are hereby revoked, and no
subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted
in connection with the Voting Agreement, dated as of May [ ], 1999 , between
Acquiror, the undersigned and other stockholders of the Company (the
"Agreement"), and is granted in consideration of Acquiror entering into the
Agreement and Plan of Merger, dated as of the date hereof, among Acquiror,
[Newco]., a Delaware corporation and wholly owned subsidiary of Acquiror, and
the Company (the "Merger Agreement"). Capitalized terms used but not otherwise
defined in this proxy have the meanings ascribed to such terms in the Agreement.
The attorneys and proxies named above will be empowered, and may
exercise this proxy, at any time during the period from the date hereof through
the Expiration Date at any meeting of the stockholders of the Company, however
called, and at every adjournment or postponement thereof, or in any written
action by consent of stockholders of the Company, to (i) appear, or cause the
holder of record as of the Record Date to appear, at any annual or special
meeting of stockholders of the Company (including the [Company's Stockholder
Meeting]) for the purpose of establishing a quorum, and (ii) vote or cause to be
voted the shares (A) in favor of the Merger and the other transactions
contemplated by the Merger Agreement, the execution and delivery by the Company
of the Merger Agreement and the adoption and approval of the terms thereof and
in favor of the Merger and each of the other actions contemplated by the Merger
Agreement and any action required in furtherance hereof and thereof; (B) against
any other action, agreement or transaction that would, directly or indirectly,
result in a Company Takeover Event; and (C) against any action, agreement or
transaction that is intended or could reasonably be expected (x) to facilitate a
person other than the Acquiror in acquiring the Company or (y) to impede,
interfere with, delay, postpone, discourage or materially adversely affect the
consummation of the Merger.
65
The undersigned Stockholder[s] may vote the Shares on all other
matters.
This proxy shall be binding upon the heirs, successors and assigns of
the undersigned (including any transferee of any of the Shares).
Any term or provision of this proxy which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this proxy or affecting the
validity or enforceability of any of the terms or provisions of this proxy in
any other jurisdiction. If any provision of this proxy is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
This proxy shall terminate upon the Expiration Date.
Dated: May [ ], 1999
STOCKHOLDER:
___________________________________
Name:
Number of shares
of Company Common
Stock owned of
record as of the
date of this
proxy:
--------------
66
ANNEX IIA
----------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Leeds ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Haq
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, Trustee for 1998 RDM Trust
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Children's Trust
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
67
ANNEX III
---------
NCO GROUP, INC.
CARDINAL ACQUISITION CORPORATION
OFFICERS' CERTIFICATE
The undersigned officers of NCO Group, Inc., a Pennsylvania business
corporation ("NCO"), and Cardinal Acquisition Corporation, a Delaware
corporation which is a wholly-owned subsidiary of NCO ("Sub"), in connection
with the legal opinions to be delivered by Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis relating to an Agreement and Plan of Reorganization
("Reorganization Agreement") and related Agreement and Plan of Merger dated ,
1999 ("Plan of Merger") (the Reorganization Agreement and the Plan of Merger as
mentioned collectively referred to as the "Merger Agreement") by and between NCO
Group, Inc. and Compass International Services Corporation, incorporated under
the Delaware General Corporation Law, as amended ("Compass"), and recognizing
that Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis will rely on
this Certificate in delivering such opinions, hereby certify that the facts
which are described in this Certificate relating to the proposed merger
("Merger") of Sub with and into Compass pursuant to the Merger Agreement are
true, complete and correct in all respects as of the date hereof and will be
true, complete and correct in all respects on the Effective Date of the Merger
as set forth in the Merger Agreement1, and further certify as follows:
1. I am familiar with the terms and provisions of the Merger Agreement
pursuant to which: (a) Sub will be merged with and into Compass, with Compass
surviving the Merger and (b) Compass shareholders will receive NCO Common Stock
--------
1 All terms used and not defined herein shall have the meaning ascribed to
them in the Plan of Merger.
68
pursuant to certain formula conversion ratios.
2. As to the matters set forth below, I either have personal knowledge
or have obtained information from officers and employees of NCO and Sub, in whom
I have confidence and whose duties require them to have personal knowledge
thereof.
3. I also have examined the Joint Proxy Statement/Prospectus (the
"Prospectus") of NCO and Compass dated on or about , 1999 relating to
the Merger (including the financial statements and exhibits that are a
part of or incorporated in the Prospectus), and to the best of my knowledge,
information and belief, the facts stated in or incorporated in the Prospectus
relating to NCO and Sub are true, correct and complete.
4. To the best of my knowledge, the fair market value of the NCO Common
Stock to be received by each shareholder of Compass will be approximately equal
to the fair market value of the Compass stock surrendered in exchange therefor.
5. Prior to the Merger, NCO will be in control of Sub within the
meaning of Section 368(c) of the Internal Revenue Code, as amended ("Code").
6. Following the Reorganization, Compass will hold at least ninety
percent (90%) of the fair market value of its net assets and at least seventy
percent (70%) of the fair market value of its gross assets and at least ninety
percent (90%) of the fair market value of Sub's net assets and at least seventy
percent (70%) of the fair market value of Sub's gross assets held immediately
prior to the transaction. For purposes of this representation, amounts paid by
Compass or Sub to shareholders who receive cash or other property, amounts used
by Compass or Sub to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by Compass will be
included as assets of Compass or Sub, respectively, immediately prior to the
transaction.
7. Following the Merger, Compass will not issue additional shares of
its stock that would result in NCO losing control of Compass within the meaning
of Section
69
368(c) of the Code.
8. NCO has no plan or intention to reacquire any of its stock to be
issued in the Merger.
9. NCO has no plan or intention to liquidate Compass; to merge Compass
into another corporation; to sell or otherwise dispose of the stock of Compass;
or to cause Compass to sell or otherwise dispose any of the assets of Compass or
any of the assets acquired from Sub, except for dispositions made in the
ordinary course of business or transfers described in Section 368(a)(2)(C) of
the Code.
10. Following the transaction, Compass will continue its historic
business or use a significant portion of Compass' business assets in a business.
11. NCO, Sub, Compass, and the shareholders of Compass will each pay
their respective expenses, if any, incurred in connection with the Merger.
12. There is no intercorporate indebtedness between NCO and Compass,
nor between Sub and Compass, that was issued, acquired, or will be settled at a
discount.
13. Neither NCO nor Sub are "investment companies" as defined in
Sections 368(a)(2)(F)(iii) or (iv) of the Code.
14. No Sub stock will be issued in the Merger.
15. None of the compensation received by any shareholder-employees of
Compass was separate consideration for, or allocable to, any of their shares of
Compass Common Stock; none of the shares of NCO Common Stock received by any
shareholder-employees were separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any stockholder-employees
will be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar services.
16. In the Merger, shares of Compass stock representing "control" of
70
Compass, as defined under Section 368(c) of the Code, will be exchanged solely
for NCO stock. For purposes of this representation, Compass stock exchanged for
cash or other property furnished by NCO will be considered as acquired by NCO.
Further, no liabilities of Compass or the Compass shareholders will be assumed
by NCO, nor will any of the Compass stock be subject to any liabilities.
17. NCO does not own, directly or indirectly, nor has it owned during
the past five (5) years, directly or indirectly, any Compass stock.
18. Sub is either (i) a newly created subsidiary of NCO created for the
sole purpose of effectuating the Merger, or (ii) an existing subsidiary of NCO,
if the use of such subsidiary does not prevent the issuance of the legal
opinions described in the initial paragraph hereof.
NCO GROUP, INC.:
DATED: , 1999. By:___________________________________
CARDINAL ACQUISITION CORPORATION:
DATED: , 1999. By:___________________________________
71
ANNEX IV
--------
Compass International Services Corporation
----------------------
----------------------
COMPANY TAX CERTIFICATE
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We refer to the Agreement dated as of May 12, 1999 (the "Agreement")
among NCO Group, Inc., a Pennsylvania corporation ("Parent"), Cardinal
Acquisition Corporation, a Delaware corporation and a transitory wholly-owned
subsidiary of Parent ("Merger Sub"), and Compass International Services
Corporation, a Delaware corporation (the "Company"), which provides for the
merger (the "Merger") of Merger Sub with and into the Company on the terms and
conditions therein set forth, the time at which the Merger becomes effective
being hereinafter referred to as the "Effective Time." It is a condition to the
obligations of the Company to effect the Merger that ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇,
counsel to Company, pursuant to Section 7.3(c) of the Agreement, and it is a
condition of the obligation of Parent and Merger Sub to effect the Merger that
Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to Parent and Merger Sub, pursuant to
Section 7.2(e) of the Agreement, render opinions to Company and Parent,
respectively, regarding certain United States federal income tax consequences of
the Merger. Capitalized terms not defined herein have the meanings specified in
the Agreement.
In connection with such opinions to be rendered by each of you, and
acknowledging that each of you will rely upon the statements and representations
made in this letter, the Company hereby certifies and represents to each of you
that the statements and representations stated herein are true, correct and
complete in all respects at the date hereof and will be true, correct and
complete in all respects as of the Effective Time (as if made as of the
Effective Time).
1. The Company Common Stock is the only stock of the Company
issued and outstanding. The fair market value of the Parent Common
Stock and any cash in lieu of a fractional share of Parent Common Stock
received by each Company stockholder will be approximately equal to the
fair market value of the Company Common Stock surrendered in the
exchange. In connection with the Merger, no holder of Company stock
will receive in exchange for Company stock, directly or indirectly, any
consideration from Parent other than Parent Common Stock and cash in
lieu of a fractional share thereof.
72
Compass International Services Corporation
_______ __, 1999
Page 2
2. At the Effective Time, the Company will hold at least 90%
of the fair market value of its net assets and at least 70% of the fair
market value of its gross assets held immediately prior to the
Effective Time. For purposes of this representation, amounts used by
the Company to pay Merger expenses, amounts paid by the Company to
redeem stock, securities, warrants or options of the Company as part of
any overall plan of which the Merger is part, and amounts distributed
by the Company to stockholders of the Company (except for regular,
normal dividends) as part of any overall plan of which the Merger is a
part, in each case will be treated as constituting assets of the
Company immediately prior to the Effective Time. Without limiting the
foregoing, all proceeds that have been received from the sales of stock
by the Company in connection with the Stock Purchase Agreement between
the Company and Swiss-Irish Enterprises, dated May __ 1999, have been
retained by the Company for use in its business.
3. Prior to and in connection with the Merger, (i) the
Company has not redeemed (and will not redeem) any Company stock and
has not made (and will not make) any extraordinary distributions with
respect thereto; and (ii) no person that is related to the Company
within the meaning of Temp. Treas. Reg. ss. 1.368-1T(e)(2)(ii) has
acquired (or will acquire) Company stock from any holder thereof.
4. Any dispositions prior to the Merger, in contemplation or
as part of the Merger, of assets held by the Company will be (or have
been) for full fair market value.
5. Each of the Company and its stockholders has paid and
will pay only their respective expenses, if any, incurred in connection
with the Merger, and the Company has not agreed to assume, nor will it
directly or indirectly assume, any expense or other liability, whether
fixed or contingent, of any holder of Company Common Stock.
6. There is no intercorporate indebtedness currently
existing between Parent and the Company or between Merger Sub and the
Company that was issued, was acquired or was or will be settled at a
discount.
7. The Company has no plan or intention to issue additional
shares of its stock after the Effective Time that would result in
Parent losing control of the Company within the meaning of Section
368(c) of the Code.
8. At the Effective Time, the Company will not have
outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in the
Company that, if exercised or converted, would affect Parent's
acquisition or retention of control of the Company, as defined in
Section 368(c) of the Code. Immediately prior to the Effective Time,
other than options outstanding under the Company's Option Plan, there
will be no options, warrants, equity securities,
73
Compass International Services Corporation
_______ __, 1999
Page 3
calls, rights, commitments or agreements of any character to which the
Company or any of its subsidiaries is a party or by which it is bound
obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or any of its subsidiaries or obligating
the Company or any of its subsidiaries to grant or enter into any such
option, warrant, equity security, call, right, commitment or agreement.
9. The Company is not an investment company, as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
10. The Company is not under the jurisdiction of a court in
a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
11. At the Effective Time, the total fair market value of
the assets of the Company will exceed the sum of its liabilities, plus
(without duplication) the amount of any liabilities to which such
assets are subject.
12. None of the compensation to be received by any Company
stockholder who is an employee of the Company or any affiliate of the
Company at the Effective Time, whether for past or future services to
the Company, will be separate consideration for, or allocable to, any
of his or her shares of Company Common Stock.
13. None of the Parent Common Stock to be received in the
Merger by any Company stockholder who is an employee of the Company or
an affiliate of the Company at the Effective Time in exchange for
Company Common Stock will be separate consideration for, or allocable
to, any employment arrangement.
14. In the Merger, shares of Company stock representing
control of the Company (within the meaning of Section 368(c) of the
Code) will be exchanged solely for Parent Common Stock. No shares of
Company Common Stock are, or at the Effective Time will be, held by any
direct or indirect subsidiary of the Company. For purposes of this
paragraph 15, shares of Company stock to be exchanged for cash or other
property originating with Parent are treated as constituting
outstanding shares of the Company stock at the Effective Time.
15. Following the Merger, the Company will continue its
historic business or use a significant portion of its business assets
in a business.
16. The payment of cash in lieu of fractional shares of
Parent Common Stock is solely for the purposes of avoiding the expense
and inconvenience to Parent of issuing fractional shares and does not
represent separately bargained-for consideration. The total
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Compass International Services Corporation
_______ __, 1999
Page 4
cash consideration that will be paid in the Merger to the holders of
Company Capital Stock in lieu of issuing fractional shares of Parent
Common Stock will not exceed 1% of the total consideration that will be
issued in the Merger to the holders of the Company Common Stock in
exchange for their Company Common Stock. Except for any cases in which
a Company stockholder holds a beneficial interest in shares of Company
Common Stock through more than one account and such multiple accounts
cannot be aggregated by the Company, either because the beneficial
interests cannot be identified by the Company or it would be
impracticable for the Company to do so, the fractional share interests
of each Company stockholder will be aggregated, and no Company
stockholder will receive an amount of cash greater than the Share
Value.
17. At the Effective Time of the Merger, there will be no
accrued but unpaid dividends on Company Common Stock.
The Company hereby undertakes to inform each of you and Parent
immediately should any of the foregoing statements or representations become
untrue, incorrect or incomplete in any respect on or prior to the Effective
Time. This letter is being furnished to each of you solely for your benefit and
for use in rendering your opinions and is not to be used, circulated, quoted or
otherwise referred to for any other purpose (other than as referred to or
included in your opinions) without the express written consent of the Company.
Very truly yours,
By:________________________________
Name:
Title:
75
ANNEX V
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(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
@▇▇▇▇▇▇▇▇▇.▇▇▇
NCO Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RE: ACQUISITION OF COMPASS INTERNATIONAL SERVICES CORPORATION
---------------------------------------------------------
Gentlemen:
You have requested our opinion concerning certain Federal income tax
consequences of the merger of Cardinal Acquisition Corporation, an entity
incorporated under the Delaware Corporation Law, as amended ("Sub"), and a
wholly-owned subsidiary of NCO Group, Inc., a Pennsylvania business corporation,
("Parent"), with and into Compass International Services Corporation, an entity
incorporated under the Delaware Corporation Law ("Compass"). The terms of the
merger are described in the Joint Proxy Statement/ Prospectus of Parent dated
, 1999 (the "Prospectus"). Our opinion is based upon our
understanding of the facts of and incident to the transaction, as are set forth
in the Prospectus, and upon the condition that those facts are true, correct and
complete. Further, our opinion is issued in reliance upon the Officer's
Certificates of Parent and Sub and the Officer's Certificate of Compass
(attached as exhibits hereto) relating to the truth, correctness and
completeness of those facts and the facts in the Prospectus, including the
financial statements and exhibits that are a part thereof. Those exhibits
include the Amended the Agreement and Plan of Merger both dated as of
, 1999 by and between Parent, Sub and Compass
(together, the "Plan of Merger"). This opinion is being furnished pursuant to
the Plan of Merger, and all capitalized terms herein, unless otherwise
specified, have the meanings assigned thereto in the Plan of Merger.
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NCO Group, Inc.
Page 2
In connection with our opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Plan of Merger, the Prospectus and such other documents as we have deemed
necessary or appropriate as a basis for the opinions set forth below. In our
examination we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such latter documents. As to any facts
material to this opinion which we did not independently establish or verify, we
have relied upon statements and representations of officers and other
representatives of Parent, Sub, Compass and others. In particular, we have
relied upon certain representations of the managements of Parent, Sub and
Compass in the Officer's Certificates which are attached hereto.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986 as amended (the "Code")1, Treasury
Regulations and the pertinent judicial authorities and interpretive rulings of
the Internal Revenue Service (the "Service").
Based solely upon the foregoing and provided that the Merger and the
other transactions contemplated by the Plan of Merger are consummated in the
manner described in the Prospectus, we are of the opinion that under present
law, for federal income tax purposes:
1. The Merger of Sub into Compass will constitute a
reorganization within the meaning of Section 368(a) of the Code. Parent, Sub and
Compass each will be "a party to a reorganization" within the meaning of Section
368(b) of the Code.
2. Compass shareholders will recognize no gain or loss upon
their exchange of Compass stock for shares of Parent Common Stock. Code Section
354(a).
--------
1 Unless otherwise indicated, all section references are to sections of the
Code.
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NCO Group, Inc.
Page 3
3. The basis of the Parent Common Stock received by the
shareholders of Compass (including fractional shares) will be the same as the
basis of the Compass stock surrendered in exchange. Code Section 358(a)(1).
4. The holding period of the Parent Common Stock received by a
Compass shareholder (including any fractional shares) will include the period
during which the Compass stock surrendered in exchange therefor was held by such
Compass shareholder, provided that the Compass stock surrendered was a capital
asset in the hands of such Compass shareholder on the date of the exchange. Code
Section 1223(a).
5. Cash received by shareholders of Compass in lieu of
fractional shares of Parent will be treated as a distribution in redemption of
their fractional share interests subject to the provisions and limitations of
Section 302 of the Code. Rev.
Rul. 66-365, 1966-2 C.B. 116.
This letter expresses our views only as to the specific issues
addressed above. No opinion is expressed concerning the Federal income tax
treatment of the transaction under any provision of the Code not specifically
referenced herein, including the tax treatment of the substitution by Parent of
any options to purchase Compass Common Stock. No opinion is expressed with
respect to state and local taxes, Federal or state securities law, or any other
Federal, state or local law not expressly referenced herein.
Our opinions set forth our legal judgement, and are not binding on the
Service or any other person. Therefore, there can be no assurance that the
conclusions set forth herein would be sustained by a court if challenged.
Further, the opinions set forth represent our conclusions based upon
the documents reviewed by us and the facts presented to us. Any material
amendments to such documents or changes in any significant fact could affect the
opinions expressed herein.
We are pleased to offer this opinion based upon the Federal income tax
laws
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NCO Group, Inc.
Page 4
as of this date. No assurances can be provided as to future changes in or
administrative or judicial interpretations of these laws.
This letter is solely for your use in connection with the transaction
referenced herein. It may not be reproduced, quoted in whole or in part,
referred to in any other context or filed with any governmental agency without
the prior written consent of this firm.
Very truly yours,
BLANK ROME ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
cms
79
ANNEX VI
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______, 1999
Compass International Services Corporation
Attention: Board of Directors
Ladies and Gentlemen:
We have been requested to render this opinion concerning certain
matters of federal income tax law in connection with the proposed merger of
Cardinal Acquisition Corporation, a newly formed corporation, organized and
existing under the laws of the State of Delaware ("Merger Sub") which is wholly
owned by NCO Group, Inc., a corporation organized and existing under the laws of
the State of Pennsylvania ("Parent"), with and into Compass International
Services Corporation, a corporation organized and existing under the laws of the
State of Delaware (the "Company"), with the Company surviving the merger and
becoming a wholly owned subsidiary of Parent, pursuant to the applicable
corporate law of the State of Delaware (the "Merger"), and in accordance with
that certain Agreement and Plan of Merger dated as of May 12, 1999, among the
Company, Parent and Merger Sub (the "Agreement") and related documents and
agreements referenced in the Agreement (together with the Agreement, the "Merger
Agreement"). Our opinion is being delivered to you pursuant to Section 7.3(c) of
the Agreement.
Except as otherwise provided, capitalized terms referred to herein have
the meanings set forth in the Merger Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as special legal counsel to the Company in connection
with the Merger. As such, and for the purpose of rendering this opinion, we have
examined (or will examine on or prior to the Effective Time of the Merger) and
are relying (or will rely) upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents
(including all schedules and exhibits thereto):
1. The Merger Agreement;
2. The Stock Purchase Agreement between Compass International
Services Corporation and Swiss-Irish Enterprises, dated May
12, 1999 (the "Stock Purchase Agreement");
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_____, 1999
Page 2
3. Representations made to us by Parent and Merger Sub, including
those representations contained in that certain Parent Tax
Certificate dated _____;
4. Representations made to us by the Company, including those
representations contained in that certain Company Tax
Certificate dated ____;
5. Parent's Registration Statement on Form S-4, dated _____; and
6. Such other instruments and documents related to the formation,
organization and operation of the Company, Parent and Merger
Sub or the consummation of the Merger and the transactions
contemplated by the Merger Agreement as we have deemed
necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
1. Original documents (including signatures) are authentic;
documents submitted to us as copies conform to the original
documents, and there has been (or will be by the Effective
Time of the Merger) due execution and delivery of all
documents where due execution and delivery are prerequisites
to the effectiveness thereof;
2. Any representation or statement referred to above made "to the
knowledge of" or otherwise similarly qualified is correct
without such qualification;
3. The Merger will be consummated pursuant to the Merger
Agreement and will be effective under the applicable state
law;
4. After the Merger, the Company will hold "substantially all" of
its and Merger Sub's properties within the meaning of Section
368(a)(2)(E)(i) of the Code and the regulations promulgated
thereunder;
5. Following the Merger, the Company will continue its historic
business or use a significant portion of its historic business
assets in a business;
6. No outstanding indebtedness of the Company, Parent or Merger
Sub has represented or will represent equity for tax purposes
(including, without limitation, any loans from Parent to the
Company); no outstanding equity of the Company, Parent or
Merger Sub has represented or will represent indebtedness for
tax purposes; no outstanding security (other than the Company
Option Plan),
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_____, 1999
Page 3
instrument, agreement or arrangement that provides for,
contains, or represents either a right to acquire the Company
stock or to share in the appreciation thereof constitutes or
will constitute "stock" for purposes of Section 368(c) of the
Code;
7. Each of Company, Parent and Merger Sub has paid and will pay
only its respective expenses, if any, incurred in connection
with the Merger, and neither Parent, Merger Sub nor Company
has agreed to assume, nor will it directly or indirectly
assume, any expense or other liability, whether fixed or
contingent, of any holder of Common Stock; and
8. Neither Parent, the Company nor Merger Sub is, or will be at
the time of the Merger: (a) an "investment company" within the
meaning of Section 368(a)(2)(F) of the Code; or (b) under the
jurisdiction of a court in a Title 11 or similar case within
the meaning of Section 368(a)(3)(A) of the Code.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, it is
our opinion, as special counsel for Company, that for federal income tax
purposes:
(i) the Merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Code, and the
Company, Merger Sub and Parent will each be a party
to such reorganization within the meaning of Section
368(b) of the Code;
(ii) no gain or loss will be recognized by Company,
Parent, or Merger Sub as a result of the Merger;
(iii) no gain or loss will be recognized by the
stockholders of the Company upon the exchange of
their Common Stock solely for shares of Parent Common
Stock pursuant to the Merger, except with respect to
cash, if any, received in lieu of fractional shares
of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for Common
Stock pursuant to the Merger (including fractional
shares of Parent Common Stock for which cash is
received) will be the same as the aggregate tax basis
of the Common Stock exchanged therefor;
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_____, 1999
Page 4
(v) the holding period for shares of Parent Common Stock
received solely in exchange for Common Stock pursuant
to the Merger will include the holding period of the
Common Stock exchanged therefor, provided such Common
Stock was held as a capital asset by the stockholder
at the Effective Time; and
(vi) a stockholder of the Company who receives cash in
lieu of a fractional share of Parent Common Stock
will recognize gain or loss equal to the difference,
if any, between such stockholder's tax basis in such
fractional share (as described in clause (iv) above)
and the amount of cash received.
In addition to the assumptions set forth above, this opinion is subject
to the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising
under the Code, existing judicial decisions, administrative
regulations and published rulings and procedures. Our opinion
is not binding upon the Internal Revenue Service or the
courts, and the Internal Revenue Service is not precluded from
asserting a contrary position. Furthermore, no assurance can
be given that future legislative, judicial or administrative
changes, on either a prospective or retroactive basis, would
not adversely affect the accuracy of the opinion expressed
herein. Nevertheless, we undertake no responsibility to advise
you of any new developments in the application or
interpretation of the federal income tax laws.
2. Our opinion concerning certain of the federal tax consequences
of the Merger is limited to the specific federal tax
consequences presented above. No opinion is expressed as to
any transaction other than the Merger, including any
transaction undertaken in connection with the Merger. In
addition, this opinion does not address any other federal,
estate, gift, state, local or foreign tax consequences that
may result from the Merger.
3. No opinion is expressed if all the transactions described in
the Merger Agreement are not consummated in accordance with
the terms of such Merger Agreement and without waiver or
breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon
which we relied are not true and accurate at all relevant
times. In the event any one of the statements,
representations, warranties or assumptions upon which we have
relied to issue this
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_____, 1999
Page 5
opinion is incorrect, our opinion might be adversely affected
and may not be relied upon.
4. No ruling has been or will be requested from the Internal
Revenue Service concerning the federal income tax consequences
of the Merger. In reviewing this opinion, you should be aware
that the opinion set forth above represents our conclusions
regarding the application of existing federal income tax law
to the instant transaction. If the facts vary from those
relied upon (including if any representation, covenant,
warranty or assumption upon which we have relied is
inaccurate, incomplete, breached or ineffective), our opinion
contained herein could be inapplicable. You should be aware
that an opinion of counsel represents only counsel's best
legal judgment, and has no binding effect or official status
of any kind, and that no assurance can be given that contrary
positions will not be taken by the Internal Revenue Service or
that a court considering the issues would not hold otherwise.
5. This opinion is being delivered solely for the purpose of
satisfying the condition set forth in Section 7.3(c) of the
Merger Agreement. This opinion may not be relied upon or
utilized for any other purpose or by any other person or
entity, including the Company and its stockholders, and may
not be made available to any other person or entity, without
our prior written consent. We do, however, consent to the use
of our name in the Registration Statement wherever it appears.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇