NONDISCLOSURE, NONSOLICITATION, NONCOMPETITION
AND STANDSTILL AGREEMENT
This Nondisclosure, Nonsolicitation, Noncompetition and Standstill
Agreement ("Agreement") is made and dated this 2nd day of February, 1997 by and
between J. Xxxxx X'Xxxxx ("Principal") and NCO GROUP, INC., a Pennsylvania
corporation ("NCO").
BACKGROUND
Pursuant to the terms and conditions of an Asset Acquisition Agreement
(the "Acquisition Agreement") dated as of February 2, 1997 among CRW Financial,
Inc. ("CRW"), Kaplan & Xxxxxx, Inc. ("Kaplan"), NCO, CRWF Acquisition, Inc. and
K&K Acquisition, Inc., CRWF Acquisition, Inc. and K&K Acquisition, Inc.
(collectively, "Buyers") have acquired the Accounts Receivable Collection
Business (as defined in the Acquisition Agreement) of CRW and Kaplan
(collectively, the "Sellers"), respectively. Pursuant to the Acquisition
Agreement, CRW acquired 345,178 shares (the "Closing Securities") of the common
stock, no par value per share of NCO (the "Common Stock") and a warrant to
purchase 250,000 shares (the "Warrant Securities") of Common Stock on the terms
and conditions set forth in the Warrant. Principal is an Affiliate and/or
Associate of the Sellers (as such terms are defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the"Exchange Act")). Principal has
agreed to enter into this Agreement to induce NCO to enter into the Acquisition
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Certain Acknowledgements. Principal expressly acknowledges that:
1.1 NCO's Business. The accounts receivable collection
business (collectively, "NCO's Business") conducted by NCO and certain
subsidiaries of NCO which now or in the future conduct any accounts receivable
collection business (NCO, Buyers and all such existing and future subsidiaries
of NCO, including without limitation, the Accounts Receivable Collection
Business and the CRW Subsidiaries (as defined in the Acquisition Agreement), are
referred to as the "NCO Companies") involve the provision of accounts receivable
collection business services using proprietary and confidential systems and
information.
1.2 Competitive Nature of Business. NCO's Business is highly
competitive, is marketed throughout the United States and requires long sales
"lead times" often exceeding one year. The NCO Companies expend substantial time
and money, on an ongoing basis, to train their employees, maintain and expand
their customer base, and improve and develop their products and services.
1.3 Access to Information. During the period that Sellers
owned the Accounts Receivable Collection Business, Principal had access to
proprietary and confidential property, knowledge and information of the Accounts
Receivable Collection Business which has become the proprietary and confidential
property, knowledge and information of the NCO Companies; such property,
knowledge and information must be kept in strict confidence to protect NCO's
Business and maintain the NCO Companies' competitive positions in the
marketplace; and such property, knowledge and information would be useful to
competitors of the NCO Companies for indefinite periods of time.
1.4 Benefit to Principal. Principal has and will continue to
materially benefit from the transactions contemplated by the Acquisition
Agreement as an Affiliate and/or Associate of CRW.
1.5 Basis for Covenants. NCO and Buyers were induced by and
relied on this Agreement, including without limitation the covenants of Xxxxxxxx
0, 0, 0, xxx 0 (xxx "Xxxxxxxxx"), to enter into the Acquisition Agreement; the
Covenants are a material part of the consideration bargained for by NCO and
Buyers and, without the agreement of Principal to be bound by the Covenants, NCO
and Buyers would not have agreed to enter into the Acquisition Agreement; the
Covenants are supported by good and adequate consideration; and the Covenants
are reasonable and necessary to protect the legitimate business interests of the
NCO Companies.
2. Nondisclosure Covenants. At all times after the date of this
Agreement, for an indefinite period of time, except with NCO's prior written
consent, Principal shall not, directly or indirectly, in any capacity,
communicate, publish or otherwise disclose to any Person, or use for the benefit
of any Person, any confidential or proprietary property, knowledge or
information of the NCO Companies, no matter when or how such knowledge or
information was obtained, including without limitation (a) any information
concerning the Specified Assets (as defined in the Acquisition Agreement) or the
conduct and details of the Accounts Receivable Collection Business; (b) the
identity of customers and prospects, their specific requirements, and the names,
addresses and telephone numbers of individual contacts at customers and
prospects; (c) prices, renewal dates and other detailed terms of customer and
supplier Contracts and proposals; (d) pricing policies, marketing and sales
strategies, methods of delivering products and services, and products and
service development projects and strategies; (e) employment and payroll records;
(f) forecasts, budgets and other nonpublic financial information; and (g)
expansion plans, management policies, methods of operation, and other business
strategies and policies.
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3. Noncompetition Covenants. During the period beginning on
the date of this Agreement and ending on February 1, 2000, except
with NCO's prior written consent, Principal shall not, directly or
indirectly, in any capacity, at any location worldwide:
3.1 Solicitation Restrictions. Communicate with or solicit any
Person who is or during such period becomes a customer, prospect, supplier,
employee, salesman, agent or representative of, or a consultant to, the NCO
Companies, in any manner which interferes with such Person's relationship with
the NCO Companies, or in an effort to obtain any such Person as a customer,
employee, salesman, agent or representative of, or a consultant to, any other
Person that conducts a business competitive with NCO's Business.
3.2 Competing Business Restrictions. Establish, own, manage,
operate, finance or control, or participate in the establishment, ownership,
management, operation, financing or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person that conducts a business competitive with or similar to all or any part
of NCO's Business.
4. Nonsolicitation. During the period beginning on the date of this
Agreement and ending on August 1, 1997, neither Principal nor any of its
Affiliates shall solicit or hire any of the employees of the NCO Companies or
any of the employees of the Accounts Receivable Collection Business who were
employed by such entities prior to the Closing Date to become employees or
independent contractors of Principal or any of its Affiliates.
5. Certain Exclusions.
5.1 Confidential Information. For the purpose of Section 2,
Confidential and proprietary property, knowledge and information of the NCO
Companies shall not include any information or client that is now known by or
readily available to the public, nor shall it include any information that in
the future becomes known by or readily available to the public other than as a
result of any breach of the Covenants of this Agreement.
5.2 Ownership of Public Company Stock. The beneficial
ownership (determined in accordance with Rule 13d-3 under the Exchange Act) by
Principal of not more than five percent (5%) of the outstanding securities of
any public company shall not, by itself, constitute a breach of the Covenants of
Section 3.2, even if such public company competes with the NCO Companies.
5.3 Telespectrum Worldwide Inc. The parties acknowledge
that Principal is an Affiliate and/or Associate of Telespectrum
Worldwide, Inc. and its subsidiaries (collectively,
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"Telespectrum"). Principal shall not be deemed to have violated the Covenants of
Section 3.1 or Section 4 concerning the solicitation or hiring of certain
persons (collectively, "Prohibited Solicitations") provided that Principal did
not initiate, recommend or cause the Prohibited Solicitation. Principal shall
not be deemed to have violated the provisions of Section 3.2 to the extent that
Telespectrum is providing accounts receivable collection services as an adjunct
to services it provides to its clients and Principal is not otherwise in
violation of the Covenants of Section 2 or Section 3.1. Principal shall not be
deemed to have violated the Covenants of Section 3.2 in the event that
Telespectrum engages in or acquires a business competitive with NCO's Business
(a "Competing Business") provided that Principal did not initiate the entry into
or the acquisition of the Competing Business by TeleSpectrum. None of the
provisions of Section 3 or Section 4 shall apply to Telespectrum. Nothing in
this Section 5.3 shall limit the rights of the NCO Companies pursuant to Section
7.
6. Standstill. At all times after the date of this Agreement and for so
long as CRW, J. Xxxxx X'Xxxxx and Xxxxxxxx X. Xxxxxxxx, and their respective
Affiliates or Associates (collectively, the "Restricted Group") individually or
collectively have beneficial ownership (determined in accordance with Rule 13d-3
under the Exchange Act) of at least one percent (1%) of the outstanding
securities of NCO entitled to vote generally in the election of directors:
6.1 No Acquisition or Solicitation. Except with NCO's prior
written consent, Principal shall not: (a) purchase, offer to purchase, acquire,
offer to acquire, or agree to acquire by purchase, by joining a partnership,
limited partnership, syndicate or other "group" (as such term is used in Section
13(d)(3) of the Exchange Act) or otherwise (any such act, to "acquire"), any
securities of NCO entitled to vote generally in the election of directors, or
securities convertible into or exercisable or exchangeable for such securities
(collectively, "Restricted Securities") except upon exercise of the Warrant by
CRW or as a result of a stock split, stock dividend or similar recapitalization
by NCO; (b) participate in the formation, or encourage the formation, of any
"person" (as such term is used in Section 13(d)(3) of the Exchange Act), which
owns or seeks to acquire beneficial ownership or otherwise acts in respect of
Restricted Securities; (c) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are defined or used
in Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to NCO, or execute any written consent in lieu of a
meeting of holders of Restricted Securities or any class thereof; (d)
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initiate, propose or otherwise solicit shareholders of NCO for the approval of
one or more shareholder proposals with respect to NCO or induce or attempt to
induce any other person to initiate any shareholder proposal; (e) seek election
to or seek to place a representative on the Board of Directors of NCO or seek
the removal of any member of the Board of Directors of NCO; (f) call or seek to
have called any meeting of the shareholders of NCO; (g) deposit any Restricted
Securities in a voting trust or subject them to a voting agreement or other
agreement or arrangement with respect to the voting of such Restricted
Securities; (h) otherwise act, directly or indirectly, alone or in concert with
others, to seek to control the management, Board of Directors, policies or
affairs of NCO, or solicit, propose, seek to effect or negotiate with any other
person with respect to any form of business combination transaction with NCO or
any Affiliate thereof, or any restructuring, recapitalization or similar
transaction with respect to NCO or any Affiliate thereof (solicit, make or
propose or encourage or negotiate with any other person with respect to, or
announce an intent to make, any tender offer or exchange offer for any
Restricted Securities, or disclose an intent, purpose, plan or proposal with
respect to NCO or any Restricted Securities inconsistent with the provisions of
this Agreement, including an intent, purpose, plan or proposal that is
conditioned on or would require NCO to waive the benefit of or amend any
provision of this Agreement, or assist, participate in, facilitate, encourage or
solicit any effort or attempt by any person to do or seek to do any of the
foregoing; (i) request NCO (or its directors, officers, employees or agents),
directly or indirectly, to amend or waive any provision of this Section 6
(including this Section 6.1(i)) or otherwise seek any modification to or waiver
of any of the agreements or obligations under this Section 6; (j) encourage or
render advice to or make any recommendation or proposal to any person or other
entity to engage in any of the actions covered by this Section 6 (including this
clause (j)).
6.2 Voting. The Principal shall vote all Restricted Securities
beneficially owned by the Principal in connection with any action to be taken by
the shareholders of NCO in accordance with the recommendation of the Board of
Directors of NCO.
7. Enforcement of Covenants. Principal expressly acknowledges that it
would be extremely difficult to measure the damages that might result from any
breach of the Covenants, and that any breach of the Covenants will result in
irreparable injury to the NCO Companies for which money damages could not
adequately compensate. If a breach of the Covenants occurs, then the NCO
Companies shall be entitled, in addition to all other rights and remedies that
they may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining Principal and all other Persons involved therein
from continuing
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such breach. The existence of any claim or cause of action that Principal or any
such other Person may have against any member of the NCO Companies shall not
constitute a defense or bar to the enforcement of any of the Covenants. If the
NCO Companies must resort to litigation to enforce any of the Covenants that has
a fixed term, then such term shall be extended for a period of time equal to the
period during which a breach of such Covenant was occurring, beginning on the
date of a final court order (without further right of appeal) holding that such
a breach occurred or, if later, the last day of the original fixed term of such
Covenant.
8. Scope of Covenants. If any Covenant, or any part thereof, or the
application thereof, is construed to be invalid, illegal or unenforceable, then
the other Covenants, or the other portions of such Covenant, or the application
thereof, shall not be affected thereby and shall be enforceable without regard
thereto. If any of the Covenants is determined to be unenforceable because of
its scope, duration, geographical area or other factor, then the court making
such determination shall have the power to reduce or limit such scope, duration,
area or other factor, and such Covenant shall then be enforceable in its reduced
or limited form.
9. Miscellaneous.
9.1 Notice. All notices, consents or other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered personally, (b) three
business days after being mailed by first class certified mail, return receipt
requested, postage prepaid, or (c) one business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, to
the parties at their respective addresses set forth below. Notices may also be
given by prepaid telegram or facsimile and shall be effective on the date
transmitted if confirmed within 24 hours thereafter by a signed original sent in
the manner provided in the preceding sentence. Notice to Principal shall be sent
to 000 X. Xxxxx Xxxx, Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000, with a copy to Xxxxxx
Xxxxx & Bockius LLP, 0000 Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, attention:
Xxxxxxx X. Xxxxxxx, Esquire. Notice to NCO shall be sent to 0000 Xxxxxx Xxxx,
Xxxx Xxxx, Xxxxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxx, President, with a
copy to Blank Rome Xxxxxxx & XxXxxxxx, Four Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxxx XX
00000, attention Xxxx X. Xxxxxxx, Esquire. 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 9.1, except that
any such change of address notice shall not be effective unless and until
received.
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9.2 Entire Understanding. This Agreement states the entire
understanding among the parties with respect to the subject matter hereof, and
supersedes all prior oral and written communications and agreements, and all
contemporaneous oral communications and agreements, with respect to the subject
matter hereof. No amendment or modification of this Agreement shall be effective
unless in writing and signed by the party against whom enforcement is sought.
9.3 Parties in Interest. This Agreement shall Agreement shall
bind, benefit and be enforceable by and against Principal, and, if Principal is
a natural person, Principal's heirs, personal representatives, estate and
beneficiaries, and NCO and its successors and assigns. Principal may not assign
this Agreement or its rights and obligations hereunder without the express prior
written consent of NCO which may be withheld in its sole and absolute
discretion. NCO may assign its rights and duties under this Agreement to any NCO
Company or to any successor, by operation of law or otherwise, to the Accounts
Receivable Collection Business.
9.4 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 or further exercise of, any right, power or
remedy.
9.5 Severability. If any provision of this Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.
9.6 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.
9.7 Section Headings. The section and subsection headings in
this Agreement are used solely for convenience of reference, do not constitute a
part of this Agreement, and shall not affect its interpretation.
9.8 Controlling Law. THIS AGREEMENT IS MADE UNDER, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND TO
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BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
9.10 Jurisdiction and Process. In any action between or among
any of the parties, whether arising out of this Agreement or otherwise, (a) each
of the parties irrevocably consents to the exclusive jurisdiction and venue of
the federal and state courts located in the Commonwealth of Pennsylvania; (b) if
any such action is commenced in a state court, then, subject to applicable law,
no party shall object to the removal of such action to any federal court located
in the Commonwealth of Pennsylvania; (c) each of the parties irrevocably waives
the right to trial by jury; (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 9.1; and (e) the prevailing parties shall be entitled to
recover their reasonable attorney's fees (including, if applicable, charges for
in-house counsel) and court costs from the other parties.
9.11 No Third-Party Beneficiaries. No provision of this
Agreement is intended to or shall be construed to grant or confer any right to
enforce this Agreement, or any remedy for breach of this Agreement, to or upon
any Person other than the parties hereto and the NCO Companies.
9.12 Neutral Construction. The parties have negotiated this
Agreement and all of the terms and conditions contained in this Agreement in
good faith and at arms' length, and each party has been represented by counsel
during such negotiations. No term, condition, or provision contained in this
Agreement shall be construed against any party or in favor of any party (i)
because such party or such party's counsel drafted, revised, commented upon, or
did not comment upon, such term, condition, or provision; or (ii) because of any
presumption as to any inequality of bargaining power between or among the
parties. Furthermore, all terms, conditions, and provisions contained in this
Agreement shall be construed and interpreted in a manner which is consistent
with all other terms, conditions, and provisions contained in this Agreement.
9.13 "Person" As used in this Agreement, "Person" means any
individual, sole proprietorship, joint venture, partnership, corporation,
limited liability company, bank, association, cooperative, trust, estate,
government, governmental, administrative or regulatory body, or other entity of
any nature.
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EACH PARTY HAS CAUSED THIS AGREEMENT TO BE EXECUTED ON ITS
BEHALF BY A DULY AUTHORIZED OFFICER, AS OF THE DATE FIRST STATED
ABOVE.
PRINCIPAL
/s/ J. Xxxxx X'Xxxxx
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NCO GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Title: President
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