EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
Among
CO-SOURCE CORPORATION,
its SHAREHOLDERS and OPTIONHOLDERS,
H.I.G.-DCI INVESTMENTS, L.P.
and
NCO GROUP, INC.
April 17, 1999
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Table of Contents
Page
ARTICLE I
PURCHASE AND SALE OF SHARES AND OPTIONS..................................................................1
1.01 Purchase Price..................................................................................1
1.02 Sale Transactions...............................................................................1
1.03 Purchase Price Adjustment.......................................................................2
1.04 The Closing.....................................................................................4
ARTICLE II
CONDITIONS TO CLOSING....................................................................................5
2.01 Conditions to Buyer's Obligations...............................................................5
2.02 Conditions to the Shareholders', HIG Cayman's and the Optionholders'
Obligations.....................................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
EACH SHAREHOLDER, HIG CAYMAN AND EACH OPTIONHOLDER......................................................8
3.01 Authority.......................................................................................8
3.02 Execution and Delivery; Valid and Binding Agreement.............................................8
3.03 Ownership of Capital Stock......................................................................9
3.04 Ownership of DCI Shares.........................................................................9
3.05 DCI.............................................................................................9
3.06 HIG Cayman......................................................................................9
3.07 Brokerage.......................................................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................9
4.01 Organization and Corporate Power...............................................................10
4.02 Subsidiaries...................................................................................10
4.03 Authorization; No Breach; Valid and Binding Agreement..........................................10
4.04 Capital Stock..................................................................................11
4.05 Financial Statements...........................................................................11
4.06 Absence of Certain Developments................................................................12
4.07 Title to Properties............................................................................13
4.08 Tax Matters....................................................................................13
4.09 Contracts and Commitments......................................................................14
4.10 Intellectual Property..........................................................................15
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4.11 Litigation.....................................................................................16
4.12 Governmental Consents, etc.....................................................................16
4.13 Employee Benefit Plans.........................................................................16
4.14 Insurance......................................................................................17
4.15 Compliance with Laws...........................................................................17
4.16 Environmental Compliance and Conditions........................................................18
4.17 Affiliated Transactions........................................................................18
4.18 Absence of Undisclosed Liabilities.............................................................18
4.19 Employee Relations.............................................................................19
4.20 Questionable Payments..........................................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................19
5.01 Organization and Power.........................................................................19
5.02 Authorization; Valid and Binding Agreement.....................................................20
5.03 No Breach......................................................................................20
5.04 Governmental Consents, etc.....................................................................20
5.05 Litigation.....................................................................................20
5.06 Brokerage......................................................................................20
5.07 Investment Representation......................................................................20
5.08 Financing......................................................................................20
ARTICLE VI
PRE-CLOSING COVENANTS...................................................................................21
6.01 Conduct of the Business........................................................................21
6.02 Access to Books and Records....................................................................22
6.03 Regulatory Filings.............................................................................22
6.04 Conditions.....................................................................................23
6.05 Exclusive Dealing..............................................................................23
6.06 Consulting Agreement...........................................................................23
6.07 Code Section 280G Consents.....................................................................23
ARTICLE VII
COVENANTS OF BUYER......................................................................................23
7.01 Access to Books and Records....................................................................23
7.02 Notification...................................................................................24
7.03 Director and Officer Liability and Indemnification.............................................24
7.04 Regulatory Filings.............................................................................24
7.05 Conditions.....................................................................................24
7.06 Contact with Customers and Suppliers...........................................................24
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ARTICLE VIII
TERMINATION.............................................................................................24
8.01 Termination....................................................................................24
8.02 Effect of Termination..........................................................................25
ARTICLE IX
SURVIVAL................................................................................................25
9.01 Survival of Representations and Warranties.....................................................26
ARTICLE X
SHAREHOLDER REPRESENTATIVE..............................................................................26
10.01 Designation; Reliance..........................................................................26
10.02 Authority......................................................................................26
10.03 Exculpation....................................................................................27
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS.....................................................................27
11.01 Disclosure Generally...........................................................................27
11.02 Acknowledgment by Parties......................................................................27
11.03 Tax Matters....................................................................................28
11.04 Further Assurances.............................................................................30
11.05 Restrictive Covenants of HIG...................................................................30
11.06 Indemnification................................................................................32
11.07 Cefalu Non-Competition.........................................................................32
ARTICLE XII
DEFINITIONS.............................................................................................34
12.01 Definitions....................................................................................34
12.02 Cross-Reference of Other Definitions...........................................................36
ARTICLE XIII
MISCELLANEOUS...........................................................................................37
13.01 Press Releases and Communications..............................................................37
13.02 Expenses.......................................................................................37
13.03 Knowledge Defined..............................................................................37
13.04 Waiver of Certain Transfer Restrictions........................................................37
13.05 Notices........................................................................................38
13.06 Assignment.....................................................................................39
13.07 Severability...................................................................................39
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13.08 No Strict Construction.........................................................................39
13.09 Amendment and Waiver...........................................................................39
13.10 Complete Agreement.............................................................................39
13.11 Counterparts...................................................................................39
13.12 Governing Law..................................................................................39
13.13 No Third Party Beneficiaries...................................................................39
13.14 Section Headings...............................................................................40
13.15 Specific Performance...........................................................................40
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EXHIBITS
Exhibit A Form of Warrants
Exhibit B Closing Certificate of the Company
Exhibit C Closing Certificate of the Shareholder Representative
Exhibit D-1 Opinion of the Company's Counsel
Exhibit D-2 Opinion of the Shareholders' and Optionholders' Counsel
Exhibit E Opinion of Buyer's Counsel
Exhibit F Closing Certificate of the Buyer
Exhibit G Form of Registration Rights Agreement
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SCHEDULES
Affiliated Transactions Schedule
Authorization Schedule
Capital Stock Schedule
Contracts Schedule
Developments Schedule
Employee Benefits Schedule
Employee Relations Schedule
Environmental Compliance Schedule
Financial Statements Schedule
Indebtedness Schedule
Insurance Schedule
Intellectual Property Schedule
Liabilities Schedule
Lien Schedule
Litigation Schedule
Optionholders Schedule
Permits Notification Schedule
Real Property Schedule
Regulatory Permits Schedule
Shareholders Schedule
Subsidiary Schedule
Taxes Schedule
Third-Party Consents Schedule
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
April 17, 1999, among NCO Group, Inc., a Pennsylvania corporation ("Buyer"),
Co-Source Corporation, a Delaware corporation (the "Company"), the Persons
listed on the attached Shareholders Schedule (the "Shareholders"), the Persons
listed on the attached Optionholders Schedule (the "Optionholders"), H.I.G.-DCI
Investments, L.P., a Cayman Islands limited partnership ("HIG Cayman"), DCI
Holding, Inc., a Delaware corporation ("DCI") and, for the purposes of Section
11.05 only, H.I.G. Investment Group, L.P., a Cayman Islands limited partnership.
Capitalized terms used and not otherwise defined herein have the meanings set
forth in Article XII below.
The Shareholders own all of the issued and outstanding shares
of capital stock of the Company (the "Shares"). The Optionholders own all of the
issued and outstanding options to acquire Shares (the "Options").
As of the date hereof, HIG Cayman owns all the issued and
outstanding shares of DCI, a Shareholder.
Subject to the terms and conditions set forth herein, the
parties hereto desire to consummate the Sale Transactions (as described below in
Section 1.02).
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND OPTIONS
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1.01 Purchase Price. The aggregate consideration to be
delivered by Buyer to the Shareholders (other than DCI) and Optionholders and
HIG Cayman (the "Purchase Price") on the Closing Date shall be (a) an amount in
cash equal to $121 million plus the total amount of Cash on Hand as of the
Closing minus the outstanding amount of the Indebtedness as of the Closing minus
the SAR Payments plus the aggregate exercise price of the Options plus the
amount, if any, by which the Estimated Net Working Capital (as defined in
Section 1.03(a) below) exceeds $-1,200,888 minus the amount, if any, by which
Estimated Net Working Capital is less than $-1,200,888, and (b) warrants to
purchase 250,000 shares of Buyer's common stock (the "Buyer Common Stock") in
substantially the form set forth as Exhibit A hereto (the "Warrants").
1.02 Sale Transactions. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the terms and conditions set forth herein, each of the Shareholders (other
than DCI), HIG Cayman and each of the Optionholders agrees to and will
consummate, at the Closing, the following transactions (the "Sale
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Transactions"): (A) each Shareholder (other than DCI) shall sell, assign,
transfer and convey to Buyer, and Buyer shall purchase and acquire from the
Shareholders (other than DCI), good and valid legal title to all of the Shares
held by such Shareholders against payment at the Closing in an amount equal to
the portion of the aggregate Purchase Price which such Shareholder would be
entitled to in the event the Purchase Price was distributed to the Shareholders
and Optionholders (as provided in the following clause (C)) in a complete
liquidation of the Company pursuant to the Company's Certificate of
Incorporation (the "Closing Shareholder Consideration"), (B) HIG Cayman shall
sell, transfer and convey to Buyer, and Buyer shall purchase and acquire from
HIG Cayman all of the outstanding shares of DCI (the "DCI Shares") against
payment at the Closing in an amount equal to the portion of the Closing
Shareholder Consideration which DCI would be entitled to receive for its Shares
pursuant to clause (A) (the "HIG Consideration") and (C) each Optionholder shall
sell, assign, transfer and convey to Buyer, and Buyer shall purchase and acquire
from each Optionholder, all of the Options against payment at the Closing in an
amount equal to (i) the portion of the aggregate Purchase Price which such
Optionholder would be entitled (if such Optionholder had exercised his Options)
in the event the Purchase Price was distributed to the Shareholders and
Optionholders in a complete liquidation of the Company pursuant to the Company's
Certificate of Incorporation minus (ii) the aggregate exercise price of such
Optionholder's Options (the "Closing Optionholder Consideration"). Buyer shall
be entitled to withhold from the Closing Optionholder Consideration, and shall
remit to the proper governmental authority, any amounts required to be withheld
by the Company or the Optionholders under applicable law.
1.03 Purchase Price Adjustment.
(a) At least three days prior to the Closing Date, the
Shareholder Representative shall deliver to Buyer its good faith
calculation of its estimate of the Net Working Capital as of the
Closing Date (the "Estimated Net Working Capital").
(b) Within 60 days after the Closing Date, Buyer will deliver
to the Shareholder Representative its calculation of the Net Working
Capital as of the Closing Date (the "Preliminary Net Working Capital
Statement"). If the Shareholder Representative has any objections to
the Preliminary Net Working Capital Statement, the Shareholder
Representative shall deliver to Buyer a statement setting forth its
objections thereto (an "Objections Statement"). If an Objections
Statement is not delivered to Buyer within 30 days, the Preliminary Net
Working Capital Statement shall be final, binding and non-appealable by
the parties hereto. The Shareholder Representative and Buyer shall
negotiate in good faith to resolve any such objections, but if they do
not reach a final resolution within 30 days after the delivery of the
Objections Statement, the Shareholder Representative and Buyer shall
submit such dispute to Xxxxxx Xxxxxxxx LLP (the "Independent Auditor").
The Shareholder Representative and Buyer shall use their commercially
reasonable efforts to cause the Independent Auditor to resolve all
disagreements as soon as practicable, but in any event within 30 days
after the submission of the dispute to the Independent Auditor. The
resolution of the dispute by the Independent Auditor shall be final,
binding and non-appealable on the parties hereto. The costs and
expenses of the Independent Auditor shall be paid equally by Buyer and
the Shareholder Representative.
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(c) If the Net Working Capital as finally determined pursuant
to clause (b) above is greater than the Estimated Net Working Capital,
Buyer shall pay to the Shareholders (other than DCI), the Optionholders
and HIG Cayman the difference between the Net Working Capital as
finally determined pursuant to clause (b) above and the Estimated Net
Working Capital. If the Net Working Capital as finally determined
pursuant to clause (b) above is less than the Estimated Net Working
Capital, the Shareholder Representative (on behalf of the Shareholders,
HIG Cayman and the Optionholders) shall pay to Buyer from the Holdback
Amount the amount of the difference between the Net Working Capital as
finally determined pursuant to clause (b) above and the Estimated Net
Working Capital. Buyer shall promptly deliver to each Shareholder
(other than DCI), HIG Cayman and Optionholder its portion (determined
in accordance with the last sentence of this clause (c)) of any amounts
determined pursuant to this clause (c) to be due by Buyer by wire
transfer of immediately available funds to one or more accounts
designated by the Shareholder Representative to Buyer. The Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders) shall promptly deliver to Buyer from the Holdback Amount
any amounts determined pursuant to this clause (c) to be due by the
Shareholder Representative (on behalf of the Shareholders, HIG Cayman
and the Optionholders) by wire transfer of immediately available funds
to one or more accounts designated by Buyer to the Shareholder
Representative. Any amounts to be received by any Shareholder, HIG
Cayman or any Optionholder pursuant to this clause (c) shall be such
additional amount that such Shareholder, HIG Cayman or Optionholder
would have received at the Closing if the amount of any payment made
pursuant to this clause (c) was added to the Purchase Price in
calculating the Closing Shareholder Consideration, the HIG
Consideration and the Closing Optionholder Consideration.
(d) In the calculation of the Estimated Net Working Capital
and Preliminary and/or Final Net Working Capital as provided in this
Section 1.03, a liability shall be accrued with respect to the
potential state and local sales and use tax liability of Xxxxxxxx &
Michaels, Inc. (1) for the state of Texas pursuant to the audit
referenced in that certain letter, dated February 8, 1999, to Xxxxxxxx
& Michaels, Inc. (the "Texas Audit") and (2) for the Commonwealth of
Pennsylvania pursuant to an audit, if any, which may arise from the
date hereof until the date which is six months after the Closing Date
(the "Possible Pennsylvania Audit"), which accrual (the "Accrual")
shall be deemed a Working Capital Liability; the Accrual shall be
determined in the good faith judgment of the Shareholder
Representative, as reasonably agreed to by Buyer. If the Accrual cannot
be agreed upon by the Shareholder Representative and Buyer, the
Shareholder Representative's determination of the Accrual shall be used
in the determination of Estimated Net Working Capital. Upon the
resolution of the Texas Audit or any Possible Pennsylvania Audit or on
the date which is six months after the Closing Date if no Possible
Pennsylvania Audit has been commenced on such date, if it is finally
determined that the Accrual exceeded the actual amount of liability
which the Company may have in connection with the Audit, such excess,
if any, shall be paid (without interest) by the Buyer to the
Shareholder Representative who shall allocate such excess as provided
in the last sentence of Section 1.03 (c) above. Buyer additionally
agrees that neither it nor any of its agents, employees, shareholders,
or other affiliates shall communicate with or otherwise take any action
with respect to any state or local authority in such a manner as would
induce or incite such authority to assess any state or local tax
liability.
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1.04 The Closing.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxx located at 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx at 10:00
a.m. on the date which is the third business day following satisfaction
or waiver of all of the closing conditions set forth in Article II
hereof (other than those to be satisfied at the Closing) or on such
other date or at such other location as is mutually agreeable to Buyer
and the Shareholder Representative. The date and time of the Closing
are herein referred to as the "Closing Date." If acceptable to the
Shareholder Representative and Buyer, the Closing may be effected by
facsimile transmission of the executed closing documents identified in
Section 1.04(b) and Article II, by payment of the Purchase Price in the
manner set forth in Section 1.04(b), and by sending original copies of
the closing documents by reputable overnight delivery service, postage
or delivery charges prepaid, for delivery to the parties at the
addresses set forth in Section 13.05 on the first business day
following the Closing Date.
(b) Subject to the terms and conditions set forth in this
Agreement, the parties hereto shall consummate the following
transactions (the "Closing Transactions") on the Closing Date:
(i) Buyer shall deliver to each Optionholder the
amount of its Closing Optionholder Consideration, by wire transfer of
immediately available funds to one or more accounts designated by the
Shareholder Representative to Buyer prior to the Closing;
(ii) the Shareholder Representative (on behalf of
the Optionholders) shall deliver to the Company the instruments (if
any) evidencing all of the Options duly endorsed for transfer or
accompanied by appropriate transfer documents and executed releases
from each Optionholder releasing the Company and its Subsidiaries from
any claims which such Optionholder may have against the Company and its
Subsidiaries (other than claims related to such Optionholder's
employment with the Company);
(iii) Buyer shall deliver to each Shareholder (other
than DCI) and HIG Cayman the amount of its Closing Shareholder
Consideration and HIG Consideration, respectively, by wire transfer of
immediately available funds to one or more accounts designated by the
Shareholder Representative to Buyer prior to the Closing;
(iv) the Shareholder Representative (on behalf of
the Shareholders (other than DCI) and HIG Cayman) shall deliver to
Buyer stock certificates representing the Shares and the DCI Shares
duly endorsed for transfer or accompanied by duly executed stock powers
and executed releases from each Shareholder and HIG Cayman releasing
the Company and its Subsidiaries from any claims which such Shareholder
may have against the Company and its Subsidiaries (other than claims
related to such Shareholder's employment with the Company);
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(v) Buyer shall repay, or cause to be repaid, on
behalf of the Company and its Subsidiaries, all amounts necessary to
discharge fully the then outstanding balance of the Indebtedness by
wire transfer of immediately available funds as directed by the holders
of the Indebtedness set forth on the Indebtedness Schedule at or prior
to the Closing, and the Shareholder Representative (on behalf of the
Shareholders, HIG Cayman and the Optionholders) shall deliver to Buyer
all appropriate payoff letters and releases and shall make arrangements
reasonably satisfactory to Buyer for such holders to deliver lien
releases and canceled notes at the Closing;
(vi) Buyer shall pay, or cause to be paid, on behalf
of the Company, all amounts necessary to discharge fully all of the
Company's then outstanding obligations under those certain Stock
Appreciation Rights Agreements, dated April 15, 1997, by and between
the Company and each of Xxxxxxx Xxxxxxxxx, Xxxxxx X. Xxxxxx, III and
Xxxxx Xxxxxx (the "SAR Payments") by wire transfer of immediately
available funds as directed by Xxxxxxx Xxxxxxxxx, Xxxxxx X. Xxxxxx, III
and Xxxxx Xxxxxx at or prior to the Closing, and the Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders) shall deliver to Buyer all appropriate termination
letters and releases at the Closing;
(vii) Buyer shall deliver the Warrants to the
Shareholders (other than DCI), HIG Cayman and the Optionholders; and
(viii) Buyer, the Company and the Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders) shall make such other deliveries in accordance with
Article II hereof.
ARTICLE II
CONDITIONS TO CLOSING
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2.01 Conditions to Buyer's Obligations. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Articles
III and IV hereof shall be true and correct in all material respects
except that, with respect to the representations and warranties set
forth in Section 3.03 and Section 3.04 and those representations and
warranties which are modified by the terms "material," "Material
Adverse Effect" or similar qualifications, such representations and
warranties shall be true and correct in all respects, in either case,
on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date;
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(b) The Company, the Shareholders, HIG Cayman and the
Optionholders shall have performed in all material respects all of the
covenants and agreements required to be performed by them under this
Agreement at or prior to the Closing;
(c) All of the consents which are set forth on the Third-Party
Consents Schedule attached hereto shall have been obtained;
(d) The applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated;
(e) On or before the Closing Date, no action or proceeding
shall have been commenced that prohibits or restrains or attempts to
prohibit or restrain, and no order or judgment shall have been issued
and no new law shall have been enacted, that prohibits or restrains or
retroactively attempts to prohibit or restrain the consummation of the
transactions contemplated by this Agreement;
(f) There shall not have been any material adverse change or
material casualty loss (which is not substantially covered by
insurance) affecting the Company and its Subsidiaries taken as a whole
or their business, assets or financial condition taken as a whole,
between the date of this Agreement and the Closing Date;
(g) The Company or the Shareholder Representative (on behalf
of the Shareholders, HIG Cayman and the Optionholders), as the case may
be, shall have delivered to Buyer each of the following:
(i) a certificate of the Company in the form set forth
in Exhibit B attached hereto, dated the Closing Date, stating that the
preconditions specified in subsections (a) through (e) hereof,
inclusive, as they relate to the Company have been satisfied;
(ii) a certificate of the Shareholder Representative
(on behalf of the Shareholders, HIG Cayman and the Optionholders) in
the form of Exhibit C attached hereto, dated the Closing Date, stating
that the preconditions specified in subsections (a), (b), (c) and (f)
as they relate to the Shareholders, HIG Cayman and the Optionholders
have been satisfied;
(iii) evidence of the third party and governmental
consents described in subsections (c) and (d) above;
(iv) the instruments (if any) evidencing the Options
the stock certificates representing the Shares and the stock
certificates representing the DCI Shares, in each case duly endorsed
for transfer or accompanied by duly executed stock powers or transfer
documents;
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(v) all minute books, stock books, ledgers and
registers, corporate seals and other corporate records relating to the
organization, ownership and maintenance of the Company, its
Subsidiaries and DCI;
(vi) resignations effective as of the Closing Date from
such officers and directors of the Company or its Subsidiaries as Buyer
shall have requested in writing and delivered to the Shareholder
Representative not less than five days prior to the Closing Date;
(vii) a copy of the Certificate of Incorporation or
Articles of Incorporation of each of the Company, its Subsidiaries and
DCI, certified by the Secretary of State of the state in which each is
incorporated and a Certificate of Good Standing or equivalent
certificate from the state in which each is incorporated and each state
in which each is duly qualified to transact business;
(viii) a certificate signed by each of the Shareholders
(other than DCI), HIG Cayman and Optionholders acknowledging (A) the
respective amounts of the Purchase Price to be paid to them at Closing,
as determined pursuant to Sections 1.02(A), (B) and (C) which amounts
shall be set forth in an annex to such certificate and shall
additionally be provided to Buyer on or before the Closing Date, and
(B) their respective percentage interests for determining their
interest in any adjustment to the Purchase Price determined pursuant to
Section 1.03;
(ix) opinions of counsel from Xxxxxxxx & Xxxxx as to
the matters concerning the Company set forth as Exhibit D-1 attached
hereto and from Xxxxxxxx & Xxxxx or other firm reasonably acceptable to
Buyer as to the matters concerning the Shareholders, HIG Cayman and the
Optionholders set forth as Exhibit D-2 attached hereto;
(x) certified copies of the resolutions duly adopted
by the board of directors (or its equivalent governing body) of the
Company and HIG Cayman, and of any Shareholder or Optionholder which is
not a natural person, authorizing the execution, delivery and
performance of this Agreement;
(xi) the documents, instruments, stock certificates
required to be delivered to Buyer pursuant to Section 1.04(b); and
(xii) all other documents, certificates, instruments and
writings reasonably requested to be delivered by the Company at or
prior to the Closing pursuant to this Agreement or otherwise required
in connection herewith.
2.02 Conditions to the Shareholders', HIG Cayman's and the
Optionholders' Obligations. The obligations of the Shareholders, HIG Cayman and
the Optionholders to consummate the transactions contemplated by this Agreement
are subject to the satisfaction of the following conditions as of the Closing
Date:
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(a) The representations and warranties set forth in Article V
hereof shall be true and correct in all material respects except that,
with respect to the representations and warranties which are modified
by the term "material" or similar qualifications, such representations
and warranties shall be true and correct in all respects, in either
case, on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date;
(b) Buyer shall have performed in all material respects all
the covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing;
(c) The applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated;
(d) On or before the Closing Date, no action or proceeding
shall have been commenced that prohibits or restrains or attempts to
prohibit or restrain, and no order or judgment shall have been issued
and no new law shall have been enacted, that prohibits or restrains or
retroactively attempts to prohibit or restrain the consummation of the
transactions contemplated by this Agreement;
(e) Buyer shall have delivered to the Shareholder
Representative, an opinion of counsel from Blank Rome Xxxxxxx &
XxXxxxxx LLP as to the matters concerning the Buyer set forth as
Exhibit E attached hereto;
(f) Buyer shall have delivered to the Shareholder
Representative certified copies of the resolutions duly adopted by
Buyer's board of directors (or its equivalent governing body)
authorizing the execution, delivery and performance of this Agreement;
(g) Buyer shall have executed and delivered to the Shareholder
Representative the Registration Rights Agreement attached hereto as
Exhibit G;
(h) Buyer shall have delivered to the Shareholder
Representative (on behalf of the Shareholders and the Optionholders) a
certificate in the form set forth as Exhibit F attached hereto, dated
the Closing Date, stating that the preconditions specified in
subsections (a) through (d) hereof, inclusive, have been satisfied; and
(i) The Closing Transactions set forth in Section 1.04(b)(i),
(iii), (vi) and (vii) shall have been completed.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
EACH SHAREHOLDER, HIG CAYMAN AND EACH OPTIONHOLDER
--------------------------------------------------
Each Shareholder, HIG Cayman and each Optionholder, solely for
himself or itself (on a several, and not joint basis), represents and warrants
to Buyer as follows:
3.01 Authority. Such Shareholder, HIG Cayman or such
Optionholder (as the case may be) has all requisite power and authority and full
legal capacity to execute and deliver this Agreement and to perform his or its
obligations hereunder.
3.02 Execution and Delivery; Valid and Binding Agreement. This
Agreement has been duly executed and delivered by such Shareholder, HIG Cayman
or such Optionholder (as the case may be), and assuming that this Agreement is
the valid and binding agreement of Buyer, this Agreement constitutes the valid
and binding obligation of such Shareholder or such Optionholder (as the case may
be), enforceable in accordance with its terms.
3.03 Ownership of Capital Stock. Such Shareholder or such
Optionholder, as the case may be, is the record and beneficial owner of the
number of Shares or Options, as applicable, as set forth opposite his or its
name on the attached Shareholders Schedule or Optionholders Schedule, as the
case may be. On the Closing Date, such Shareholder shall transfer to Buyer good
title to such Shares and such Optionholder shall transfer to the Buyer such
Options, in either case free and clear of all claims, pledges, security
interests, liens, charges, encumbrances, options, proxies, voting trusts or
agreements and other restrictions and limitations of any kind, other than
applicable federal and state securities law restrictions.
3.04 Ownership of DCI Shares. HIG Cayman is the record and
beneficial owner of the DCI Shares. The DCI Shares represent 100% of the issued
and outstanding stock of DCI. On the Closing Date, HIG Cayman shall transfer to
Buyer good title to such DCI Shares, free and clear of all claims, pledges,
security interests, liens, charges, encumbrances, options, proxies, voting
trusts or agreements and other restrictions and limitations of any kind, other
than applicable federal and state securities law restrictions.
3.05 DCI. HIG Cayman and DCI hereby represent and warrant to
Buyer that (i) DCI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to enter into this Agreement and perform its obligations hereunder;
(ii) the execution, delivery and performance of this Agreement by DCI and the
consummation of the transactions contemplated hereby have been approved by all
requisite corporate action; (iii) DCI is not subject to or obligated under its
Certificate of Incorporation, its Bylaws, any law, or rule statute, regulation
or order, judgment or decree, or any material agreement or instrument, or any
license, franchise or permit, which would be breached or violated in any
material respect by DCI's execution, delivery or performance of this Agreement;
(iv) DCI's sole asset is the Shares; and (v) since its formation, the only
activities DCI has conducted are to hold the Shares and to enter into the
transactions contemplated by this Agreement.
3.06 HIG Cayman. HIG Cayman hereby represents and warrants
that its sole asset is the DCI Shares and that since its formation, the only
activities HIG Cayman has conducted are to hold the DCI Shares and to enter into
the transactions contemplated by this Agreement.
9
3.07 Brokerage. Except for the fees and expenses of Xxxxxxx
Xxxxx & Co. and the fees of H.I.G. Capital Management, Inc. (both of which shall
be paid by the Shareholders and the Optionholders), there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of any Shareholder, any Optionholder or the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Buyer that:
4.01 Organization and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and the Company has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own and
operate its properties and to carry on its businesses as now conducted, except
where the failure to hold such authorizations, licenses and permits would not
have a material adverse effect upon the business, assets, financial condition or
operating results of the Company and its Subsidiaries, taken as a whole (a
"Material Adverse Effect"). The Company is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of business as
now conducted requires it to qualify, which jurisdictions are listed on the
Regulatory Permits Schedule, except where the failure to be so qualified would
not have a Material Adverse Effect. The Company and its Subsidiaries hold all
permits, licenses, approvals, certificates and registrations of any governmental
or regulatory authority whether within or outside the United States
(collectively, "Permits") which are necessary for the conduct of their
operations except those Permits the failure to hold which would not have a
Material Adverse Effect. All such Permits are in full force and effect, no
violations which have not been remedied have been recorded in respect of any
Permit and neither the Company nor any Subsidiary is in default, nor has
received any notice of any claim of default, with respect to any such Permit or
of any notice of any other claim or Proceeding relating to any such Permit. The
Regulatory Permits Schedule sets forth each of the Permits held by the Company
and the Subsidiaries.
4.02 Subsidiaries. Except as set forth on the attached
Subsidiary Schedule, neither the Company nor any of its Subsidiaries owns or
holds the right to acquire any stock, partnership interest, joint venture
interest or other equity ownership or participation interest in any other
Person. Each of the Subsidiaries identified on the Subsidiary Schedule is
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority and all
authorizations, licenses and permits necessary to own its properties and to
carry on its businesses as now conducted and is qualified to do business in
every jurisdiction in which its ownership of property or the conduct of
businesses as now conducted requires it to qualify, except in each such case
where the failure to hold such authorizations, licenses and permits or to be so
qualified would not have a Material Adverse Effect. All of the capital stock of
each of the Subsidiaries is owned by the Company of record and beneficially, and
the Company has good and valid legal title to all of the capital stock of the
Subsidiaries, free and clear of any liens other than as disclosed on the Lien
Schedule.
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4.03 Authorization; No Breach; Valid and Binding Agreement.
Except as set forth on the attached Authorization Schedule, the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby have been approved by all corporate
actions required by Company's board of directors and its shareholders and do not
conflict with or result in any breach of, constitute a default under, result in
a violation of, result in the creation of any lien, security interest, charge or
encumbrance upon any assets of the Company or any of its Subsidiaries, or
require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body, under the provisions of the
Company's or any of its Subsidiary's certificate or articles of incorporation or
bylaws or any material indenture, mortgage, lease, loan agreement or other
agreement or instrument to which the Company or any of its Subsidiaries is
bound, or any law, statute, rule or regulation or order, judgment or decree to
which the Company or any of its Subsidiaries is subject. Assuming that this
Agreement is a valid and binding obligation of Buyer, this Agreement constitutes
a valid and binding obligation of the Company, enforceable in accordance with
its terms. The Permits Notification Schedule sets forth each of the Permits
listed on the Regulatory Permits Schedule which will or may require notification
and/or approval by a governmental authority for its continued use in connection
with the business of the Company and the Subsidiaries after the consummation of
the transactions contemplated hereby.
4.04 Capital Stock. The authorized number of shares of capital
stock of the Company ("Common Stock") consists of 150,000 shares of the
Company's Class A Common Stock, par value $.01 per share and 14,000 shares of
the Company's Class B Common Stock, par value $.01 per share, 10,000 shares of
Class C Common Stock, par value $.01 per share, 25,000 shares of Class D Common
Stock, par value $.01 per share. As of the date hereof, 100,000 shares of Common
Stock are issued and outstanding and are owned of record and beneficially by the
Shareholders in the amounts as set forth on the attached Shareholders Schedule.
All of the outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and nonassessable. Except as set
forth on the Capital Stock Schedule, the Company does not have any other capital
stock, equity securities, securities or rights containing any equity features
authorized, issued or outstanding, and there are no agreements, options,
warrants, stock appreciation rights, phantom stock plans or other rights or
arrangements existing or outstanding which provide for the sale or issuance of
any of the foregoing by the Company. Except as set forth on the attached Capital
Stock Schedule, there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or otherwise
acquire any shares of capital stock or other equity securities of the Company of
any kind. Except as set forth on the Capital Stock Schedule, there are no
agreements or other obligations (contingent or otherwise) which require the
Company to repurchase or otherwise acquire any shares of the Company's capital
stock or other equity securities.
4.05 Financial Statements. The Company has furnished Buyer
with copies of its (i) unaudited balance sheet with respect to the Company as of
February 28, 1999, and the related statement of income for the two-month period
then ended (such balance sheet referred to herein as the "Latest Balance Sheet")
and (ii) audited balance sheets and statements of income with respect to the
11
Company as of and for the fiscal year ended December 31, 1998 and the period
from April 15, 1997 through December 31, 1997. Except as set forth on the
attached Financial Statements Schedule, such financial statements have been
based upon the information concerning the Company contained in the Company's
books and records, and present fairly in all material respects the financial
condition and results of operations of the Company as of the times and for the
periods referred to therein in accordance with GAAP (subject, in the case of the
unaudited financial statements, to normal year-end audit adjustments). All funds
collected on behalf of customers by the Company or the Subsidiaries have been
properly remitted to customers or are properly reflected on the financial
statements of the Company and its Subsidiaries. The books and records of the
Company and its Subsidiaries fairly reflect in all material respects the
transactions to which it is a party or by which its properties are subject or
bound. Such books and records have been properly kept maintained and are in
compliance in all material respects with all applicable legal and accounting
requirements. The minute books of the Company, its Subsidiaries and DCI contain
records which are accurate in all material respects of all corporate actions of
the respective shareholders and board of directors of the Company, its
Subsidiaries and DCI.
4.06 Absence of Certain Developments. Since the date of the
Latest Balance Sheet, there has not been any material casualty loss (which is
not substantially covered by insurance) or any material adverse change in the
business, assets, financial condition or results of operations of the Company
and its Subsidiaries, taken as a whole. Except as set forth on the attached
Developments Schedule and except as expressly contemplated by this Agreement,
since the date of the Latest Balance Sheet, neither the Company nor any
Subsidiary has individually or in the aggregate:
(a) borrowed any amount (other than pursuant to the Company's
and its Subsidiaries' existing credit facilities) or incurred or become
subject to any material liabilities (other than liabilities incurred in
the ordinary course of business and consistent with past practice,
liabilities under contracts entered into in the ordinary course of
business and consistent with past practice and borrowings from banks
(or similar financial institutions) necessary to meet ordinary course
working capital requirements and which in any event will not exceed an
aggregate of $250,000);
(b) mortgaged, pledged or subjected to any lien, charge or
other encumbrance, any material portion of its assets, except Permitted
Liens;
(c) sold, assigned, leased, licensed or transferred any
material portion of its tangible assets, except in the ordinary course
of business and consistent with past practice;
(d) sold, assigned or transferred any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets,
except in the ordinary course of business and consistent with past
practice;
(e) suffered any material extraordinary losses or waived any
rights of material value;
12
(f) issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock
or other equity securities or warrants, options or other rights to
acquire its capital stock or other equity securities, or any bonds or
debt securities;
(g) made any material capital expenditures or commitments
therefor in excess of the allotted capital expenditure budget of the
Company and its Subsidiaries copies of which have been delivered to
Buyer; or
(h) entered into any other material transaction or contract,
except in the ordinary course of business and consistent with past
practice; or
(i) has taken any of the actions or done any of the things
described in clause (b) of Section 6.01.
For the purpose of this Section 4.06, "material" means the sum of $250,000 with
respect to any transaction or series of related transactions.
4.07 Title to Properties.
(a) Except as set forth on the Lien Schedule, the Company owns
good and marketable title to all of the personal property shown on the
Latest Balance Sheet, free and clear of all liens, security interests
and other encumbrances, except for Permitted Liens.
(b) Neither the Company nor any Subsidiary owns any real
property. The real property demised by the leases (the "Leased Real
Property") described on the attached Real Property Schedule constitutes
all of the real property leased by the Company and its Subsidiaries.
The Leased Real Property leases are in full force and effect, and the
Company or a Subsidiary holds a valid and existing leasehold interest
under each of the leases. The Company has delivered or made available
to Buyer complete and accurate copies of each of the leases described
on the Real Property Schedule, and none of the leases have been
modified in any material respect, except to the extent that such
modifications are disclosed by the copies delivered or made available
to Buyer. Neither the Company nor any Subsidiary is in default in any
material respect under any of such leases and, to the knowledge of the
Company, the other party to such leases is not in default in any
material respect. No notice from any lessor, governmental body or other
Person has been received by Company or any Subsidiary claiming any
material violation of, or breach or default under, any lease or law.
(c) To the Company's knowledge, the Company and each of its
Subsidiaries possess all of their respective material assets and
property that are leased from other persons under valid and enforceable
contracts. The Company and its Subsidiaries have all assets necessary
to operate, or which are material to the operation of, its respective
businesses. The property and assets of the Company and its
Subsidiaries, wherever located, are generally in good condition,
ordinary wear and tear excepted.
13
4.08 Tax Matters. (a) Except as set forth on the Taxes
Schedule,
(i) Each of the Company and its Subsidiaries has
filed all Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all material respects. All Taxes
owed by any of the Company and its Subsidiaries (whether or not shown
on any Tax Return) have been paid or properly accrued. None of the
Company and its Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return which has not
been timely filed. There are no liens for Taxes on any of the assets of
any of the Company and its Subsidiaries other than Taxes not yet due
and payable.
(ii) To the Company's knowledge, each of the Company
and its Subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(iii) There is no dispute or claim concerning any Tax
Liability of any of the Company and its Subsidiaries either claimed or
raised by any authority in writing.
(iv) None of the Company and its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(v) None of the Company and its Subsidiaries has made
any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G, and
none of the Company and its Subsidiaries has been a United States real
property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). None of the Company and its Subsidiaries is a party
to any Tax allocation or sharing agreement. None of the Company and its
Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Company) or (B) has any liability for the Taxes
of any Person (other than any of the Company and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(vi) The unpaid Taxes of the Company and its
Subsidiaries (A) did not, as of the date of the Latest Balance Sheet,
exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the Latest Balance Sheet
(rather than in any notes thereto) and (B) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
14
(b) The Taxes Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to any of the Company and
its Subsidiaries for taxable periods ended on or after April 15, 1997,
indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Company has
made available to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and its
Subsidiaries since April 15, 1997.
4.09 Contracts and Commitments.
(a) Except as set forth on the attached Contracts Schedule,
neither the Company nor any Subsidiary is party to any: (i) collective
bargaining agreement or contract with any labor union; (ii) written
bonus, pension, profit sharing, retirement or other form of deferred
compensation plan, other than as described in Section 4.13 or the
schedules relating thereto; (iii) stock purchase, stock option or
similar plan; (iv) written contract for the employment or engagement of
any officer, individual employee or other person on a full-time or
consulting basis; (v) agreement or indenture relating to the borrowing
of money or to mortgaging, pledging or otherwise placing a lien on any
material portion of the Company's or any Subsidiary's assets; (vi)
guaranty of any obligation for borrowed money or other material
guaranty; (vii) lease, license, or agreement under which it is lessee
or licensee of, or holds or operates any personal property owned by any
other party, for which the annual rental exceeds $25,000; (viii) lease
or license agreement under which it is lessor or licensor of or permits
any third party to hold or operate any property, real or personal, for
which the annual rental exceeds $25,000; (ix) contract or group of
related contracts with the same party for the purchase of products or
services, under which the undelivered balance of such products and
services has a selling price in excess of $25,000; (x) contract or
group of related contracts with the same party for the sale of products
or services under which the undelivered balance of such products or
services has a sales price in excess of $25,000; or (xi) contract which
prohibits the Company or any Subsidiary from freely engaging in
business anywhere in the world; (xii) any software license or contract
(excluding licenses for "off the shelf" software which is generally
commercially available), (xiii) contracts under which any rights in
and/or ownership of any material part of the customer base, business or
assets of any of the Company or any of its Subsidiaries, or any shares
or other ownership interests in any of the Company or any of its
Subsidiaries was acquired; and (xiv) any other agreement, arrangement
or contract under which the Company or any of its Subsidiaries has any
ongoing obligations that contemplates or involves the payment or
delivery of cash or other consideration in an amount or having a value
in excess of $25,000 in the aggregate, or contemplates or involves the
performance of services having a value in excess of $25,000 in the
aggregate under which the Company or any of its Subsidiaries has any
ongoing obligations, including without limitation, any escrow
agreements or indemnification agreements.
(b) Buyer either has been supplied with, or has been given
access to, true and correct copies of all written contracts which are
referred to on the Contracts Schedule, together with all amendments,
waivers or other changes thereto.
15
(c) Other than under Section 10.15 of the Stock Purchase
Agreement, dated July 17, 1998, by and among the Company, International
Account Systems, Inc., Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx and Xxxxxxxx &
Michaels, Inc. (the "IAS Purchase Agreement"), neither the Company nor
any Subsidiary is in default under any contract listed on the Contracts
Schedule, except where such default would not have a Material Adverse
Effect. To the knowledge of the Company, each such contract is in full
force and effect in accordance with its terms and in accordance with
any amendments to such contract which have been disclosed or made
available to Buyer. Except as set forth in Contracts Schedule, neither
the Company nor any Subsidiary has given or received written notice of
a material default or notice of termination with respect to any
contract listed in the Contracts Schedule.
4.10 Intellectual Property.
(a) All of the patents, registered trademarks, registered
service marks, registered copyrights, application for any of the
foregoing and material unregistered trademarks, service marks,
copyrights, trade names and corporate names used in the conduct of the
Company's and its Subsidiaries' respective businesses (collectively,
"Intellectual Property") are set forth on the attached Intellectual
Property Schedule. Except as set forth on the Intellectual Property
Schedule (i) the Company or its Subsidiaries owns and possesses all
right, title and interest in and to, or possesses the valid right to
use, any material Intellectual Property; (ii) neither the Company nor
any Subsidiary has received any written notices of infringement or
misappropriation from any third party with respect to any material
Intellectual Property; and (iii) to the Company's knowledge, neither
the Company nor any Subsidiary is currently infringing on intellectual
property rights of any other Person. Neither the Company nor any
Subsidiaries is in violation of any material provisions of any "off the
shelf" software license to which it is a party.
(b) The Company or a Subsidiary owns free and clear of any
liens or has valid licenses or other rights to use all computer
software programs necessary to permit the Company and its Subsidiaries
to conduct their operations as currently conducted. With respect to the
software owned or used by the Company or any Subsidiary, to the
Company's knowledge, each component of such software that creates,
accepts, displays, stores, retrieves, accesses, recognizes,
distinguishes, compares, sorts, manipulates, processes, calculates or
otherwise uses dates or date-related data will do so accurately,
without operating defects, using dates in the 20th and 21st centuries,
and will not be materially adversely affected by the advent of the year
2000, the advent of the 21st century, or the transition from the 20th
century through the year 2000 and into the 21st century.
4.11 Litigation. Except as set forth on the attached
Litigation Schedule, there are no actions, suits, proceedings or investigations
pending or, to the Company's knowledge, overtly threatened against the Company
or any Subsidiary, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would result in liability to the
Company or any Subsidiary in excess of $50,000 individually or $250,000 in the
aggregate, and neither the Company nor any Subsidiary is subject to any
outstanding judgment, order or decree of any court or governmental body. As to
16
each matter described on the Litigation Schedule, accurate and complete copies
of all pertinent pleadings, judgments, orders, correspondence and other legal
documents requested by Buyer have been made available to Buyer. If prior to the
Closing, the Company or any Subsidiary is served with process or receives notice
that an action, suit, proceeding or investigation may be commenced against it,
the Company shall promptly notify Buyer.
4.12 Governmental Consents, etc. Except for the applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx
"XXX Xxx"), no material permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with any of the execution, delivery or performance of
this Agreement by the Company or the consummation by the Company of any other
transaction contemplated hereby.
4.13 Employee Benefit Plans.
(a) Except as listed on the attached Employee Benefits
Schedule, with respect to employees and former employees of the Company
or any of its Subsidiaries, neither the Company nor any Subsidiary
maintains or contributes or has an obligation to contribute to (i) any
nonqualified deferred compensation or retirement plans, (ii) any
qualified defined contribution retirement plans, (iii) any qualified
defined benefit pension plans (the plans described in (ii) and (iii)
are collectively referred to as the "Pension Plans"), and (iv) any
welfare benefit plans and other material fringe benefit plans (the
"Welfare Plans"). The Pension Plans and the Welfare Plans are
collectively referred to as the "Plans." Each of the Pension Plans has
received a favorable determination letter from the Internal Revenue
Service that such Plan is a "qualified plan" under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), the related
trusts are exempt from tax under Section 501(a) of the Code, and the
Company is not aware of any facts or circumstances that would
jeopardize the qualification of such Pension Plan. The Plans comply in
form and in operation in all material respects with the requirements of
the Code and the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) With respect to the Plans, (i) all required contributions
have been made or properly accrued, (ii) other than with respect to any
multiemployer Pension Plans, there are no actions, suits or claims
pending, other than routine claims for benefits, and (iii) other than
with respect to any multiemployer Pension Plans, there have been no
"prohibited transactions" (as that term is defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) The Company has furnished to Buyer true and complete
copies of (i) the most recent determination letter received from the
Internal Revenue Service regarding the Plans, (ii) the latest financial
statements for the Plans and latest prepared actuarial reports and
(iii) copies of all of the documents described in paragraph (a) of this
Section.
(d) None of the Company, its Subsidiaries or, to the Company's
knowledge, any of its directors, officers, employees or any other
"fiduciary," as such term is defined in Section 3 of ERISA, has
committed any material breach of fiduciary responsibility imposed
17
by ERISA or any other applicable law with respect to the Plans which
would subject Buyer, its subsidiaries or any of their respective
directors, officers or employees to any material liability under ERISA
or any applicable law.
(e) Neither the Company nor any Subsidiary has incurred any
material liability for any tax or civil penalty imposed by Section 4975
of the Code or Section 502 of ERISA.
4.14 Insurance. The attached Insurance Schedule lists each
material insurance policy maintained by the Company and its Subsidiaries. All of
such insurance policies are in full force and effect, neither the Company nor
any Subsidiary is in material default with respect to its obligations under any
of such insurance policies and all premiums due thereon have been paid (other
than such amounts as are disputed in good faith by the Company or any
Subsidiary). Set forth on the Insurance Schedule is a list of all pending claims
under such policies. The Company has not within the twelve months prior to the
date of this Agreement received any written notice from or on behalf of any
insurance carrier issuing policies or binders relating to or covering the
Company and its Subsidiaries that there will be a cancellation or non-renewal of
existing policies or binders.
4.15 Compliance with Laws. The Company and each Subsidiary is
and has been in compliance in all material respects with all applicable laws,
regulations, orders and judgments of foreign, federal, state and local
governments and all agencies thereof.
4.16 Environmental Compliance and Conditions.
(a) To the Company's knowledge, the Company and its
Subsidiaries have obtained and possesses all material permits, licenses
and other authorizations required under federal, state and local laws
and regulations concerning public health and safety, worker health and
safety, and pollution or protection of the environment in effect on or
prior to the Closing Date, including all such laws and regulations
relating to the emission, discharge, release or threatened release of
any chemicals, petroleum, pollutants, contaminants or hazardous or
toxic materials, substances or wastes into ambient air, surface water,
groundwater or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of any chemicals, petroleum, pollutants, contaminants or
hazardous or toxic materials, substances or waste ("Environmental and
Safety Requirements"), except where the failure to possess such
licenses, permits and authorizations would not have a Material Adverse
Effect.
(b) Except as set forth on the attached Environmental
Compliance Schedule, to the Company's knowledge, the Company and its
Subsidiaries are in compliance with all terms and conditions of all
permits, licenses and authorizations described in 4.16(a) and are also
in compliance with all other Environmental and Safety Requirements and
all written notices or demand letters issued, entered, promulgated or
approved thereunder, except where the failure to comply would not have
a Material Adverse Effect.
18
(c) To the Company's knowledge, neither the Company nor any
Subsidiary has received any written notice of violations or liabilities
arising under Environmental and Safety Requirements, including any
investigatory, remedial or corrective obligation, relating to the
Company, its Subsidiaries or their facilities and arising under
Environmental and Safety Requirements.
(d) This Section 4.16 constitutes the sole and exclusive
representations and warranties of the Company with respect to
Environmental Safety Requirements and all other environmental matters.
4.17 Affiliated Transactions. Except as set forth on the
attached Affiliated Transactions Schedule, no officer, director, shareholder or
Affiliate (including, without limitation, DCI) of the Company, any Subsidiary or
any individual in such officer's, director's or shareholder's immediate family
is a party to any material agreement, contract, commitment or transaction with
the Company or its Subsidiaries or has any material interest in any material
property used by the Company or its Subsidiaries.
4.18 Absence of Undisclosed Liabilities. Except (a) for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the Latest Balance Sheet, and (b) as
otherwise disclosed on the Latest Balance Sheet or in the Liabilities Schedule,
since December 31, 1998, neither the Company nor any Subsidiary has incurred any
debt, liabilities or obligations of any nature, whether absolute, accrued,
unmatured, contingent, known or unknown or otherwise, or any unsatisfied
judgments or any leases of personalty or realty or unusual or extraordinary
commitments liabilities or obligations (whether direct, indirect, accrued or
contingent) required to be presented on the Company's balance sheet in
accordance with GAAP.
4.19 Employee Relations. Neither the Company nor any
Subsidiary has been a party to or bound by any union or collective bargaining
contract, nor is any such contract currently in effect or being negotiated by or
on behalf of the Company or any Subsidiary. Except as set forth in the Employee
Relations Schedule, neither the Company nor any Subsidiary is a party to any
written or oral employment agreement with any of its officers, directors,
employees, consultants, agents, or other persons which is not terminable by the
Company or its Subsidiaries at will without penalty or cost to the Company or
its Subsidiaries. There are no pending, nor, to the knowledge of the Company,
threatened walkouts, strikes, union organizing efforts or labor disturbances or
any pending arbitration, unfair labor practice, grievance, or other proceeding
of any kind with respect to the Company's or any Subsidiary's employees. Upon
termination of the employment of any of its employees, neither the Company nor
any Subsidiary will by reason of any action taken or agreement, contract,
arrangement or plan be liable to any of its employees for severance pay or any
other payments, except as and to the extent set forth in the Employee Relations
Schedule. Since April 15, 1997, the Company and its Subsidiaries have not had an
"employment loss" within the meaning of the Workers' Adjustment and Retraining
Notification Act ("WARN Act") and the regulations thereunder.
4.20 Questionable Payments. To the knowledge of the Company,
within the last two years no current or former director, executive, officer,
representative, agent or employee of the Company or any of its Subsidiaries
19
(when acting in such capacity or otherwise on behalf of the Company or any of
its Subsidiaries), (a) has used or is using any corporate funds for any illegal
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) has used or is using any corporate funds for any direct
or indirect unlawful payments to any foreign or domestic government officials or
employees; (c) has violated or is violating any provision of the Foreign Corrupt
Practices Act of 1977, (d) has established or maintained, or is maintaining, any
unlawful or unrecorded fund of corporate monies or other properties; (e) has
made at any time since April 15, 1997, any false or fictitious entries on the
books and records of any of the Company or any of its Subsidiaries; (f) has made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
of any nature using corporate funds or otherwise on behalf of the Company or any
of its Subsidiaries; or (g) made any material favor or gift that is not
deductible for federal income tax purposes using corporate funds or otherwise on
behalf of the Company or any of its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to the Shareholders, HIG Cayman,
the Optionholders and the Company that:
5.01 Organization and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with full corporate power and authority to enter
into this Agreement and perform its obligations hereunder.
5.02 Authorization; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby, including the issuance of
the Warrants, have been duly and validly authorized by all requisite corporate
action, and no other corporate proceedings on its part are necessary to
authorize the execution, delivery or performance of this Agreement. Assuming
that this Agreement is a valid and binding obligation of the Shareholders, HIG
Cayman, the Optionholders and the Company, this Agreement and the Warrants
constitute valid and binding obligations of Buyer, enforceable in accordance
with their terms.
5.03 No Breach. Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws, any applicable law, or rule or
regulation of any governmental authority, or any material agreement or
instrument, or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated in any material
respect by Buyer's execution, delivery or performance of this Agreement,
including the issuance of the Warrants.
5.04 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act, Buyer is not required to submit any material
notice, report or other filing with any governmental authority in connection
with the execution, delivery or performance by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
Person is required to be obtained by Buyer in connection with its execution,
20
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. The issuance of the Warrants by Buyer does not
require registration under the Securities Act of 1933, as amended (the "Act"),
and is otherwise in compliance with all applicable federal, state or local laws.
5.05 Litigation. There are no actions, suits or proceedings
pending or, to the Buyer's knowledge, overtly threatened against or affecting
Buyer at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would materially adversely affect
Buyer's performance under this Agreement or the consummation of the transactions
contemplated hereby.
5.06 Brokerage. Except for the fees and expenses of Xxxxxxxxx,
Xxxxxx & Xxxxxxxx (which shall be paid by Buyer), there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Buyer.
5.07 Investment Representation. Buyer is purchasing the
Shares, the DCI Shares and the Options for its own account with the present
intention of holding such securities for investment purposes and not with a view
to or for sale in connection with any public distribution of such securities in
violation of any federal or state securities laws. Buyer is an "accredited
investor" as defined in Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
5.08 Financing. Buyer has and shall have at the Closing
sufficient cash and available credit facilities (and has provided evidence
thereof satisfactory to the Shareholder Representative) to pay the full
consideration payable to the Shareholders and the Optionholders hereunder, to
make all other necessary payments by it in connection with the purchase of the
Shares, the DCI Shares and the Options and to pay all of its related fees and
expenses.
ARTICLE VI
PRE-CLOSING COVENANTS
---------------------
6.01 Conduct of the Business.
(a) From the date hereof until the Closing Date, the Company
shall use its, and the Shareholders, HIG Cayman and the Optionholders
shall cause the Company and its Subsidiaries to use their, commercially
reasonable efforts to carry on its and their businesses according to
their ordinary course of business and substantially in the same manner
as heretofore conducted. The Company and its Subsidiaries will use all
commercially reasonable efforts to preserve intact their business
organization, to keep available the services of their officers and
employees and to maintain satisfactory relationships with customers,
suppliers and others having business relationships with them and will
take no action which would materially adversely affect the ability of
the parties to consummate the transactions contemplated by this
Agreement, or the timing thereof; provided that, the foregoing
21
notwithstanding, the Company may use all available cash in excess of
working capital requirements to repay any Indebtedness and satisfy its
obligations under those Stock Appreciation Rights Agreements described
in Section 1.04(b)(vi) hereof prior to the Closing. The Company shall
consult with Buyer as to the management of business and affairs of the
Company and its Subsidiaries at such reasonable times as Buyer may
reasonably request.
(b) From the date hereof until the Closing Date, except as
otherwise provided for by this Agreement or consented to in writing by
Buyer, the Company shall not and shall not permit any Subsidiary to,
and the Shareholders, HIG Cayman, and the Optionholders shall not
permit the Company or any Subsidiary to, (i) issue, sell or transfer
any shares of its or any Subsidiary's capital stock or other equity
securities, (ii) issue, sell or transfer any securities convertible
into, or options with respect to, warrants to purchase or rights to
subscribe for any shares of its or any Subsidiary's capital stock or
other equity securities; (iii) effect any recapitalization,
reclassification, stock dividend, stock split or like change in its
capitalization; (iv) amend its or any Subsidiary's certificate or
articles of incorporation or bylaws; (v) make any redemption or
purchase of any shares of its or any Subsidiary's capital stock; (vi)
borrow any amount (other than pursuant to the Company's and its
Subsidiaries' existing credit facilities) or incur or become subject to
any material liabilities (other than liabilities incurred in the
ordinary course of business and consistent with past practice,
liabilities under contracts entered into in the ordinary course of
business and consistent with past practice and borrowings from banks
(or similar financial institutions) necessary to meet ordinary course
working capital requirements and which in any event do not exceed an
aggregate of $250,000); (vii) mortgage, pledge or subject to any lien,
charge or other encumbrance, any material portion of its assets, except
Permitted Liens; (viii) sell, assign, lease, license or transfer any
material portion of its tangible assets, except in the ordinary course
of business and consistent with past practice; (ix) sell, assign,
lease, license or transfer any patents, trademarks, trade names,
copyrights, trade secrets or other intangible assets, except in the
ordinary course of business and consistent with past practice; (x)
waive any rights of material value; (xi) issue, sell or transfer any
bonds or debt securities;(xii) make any material capital expenditures
or commitments in excess of amounts previously budgeted therefor;
(xiii) enter into any material transaction or contract, except in the
ordinary course of business and consistent with past practice; (xiv)
assume, guarantee, endorse or otherwise become liable or responsible
for the obligations of any Person except in the ordinary course of
business and consistent with past practice; (xv) increase in any manner
the compensation of any of its directors, officers or employees except
in the ordinary course of business, consistent with past practice as
part of their regularly scheduled review; (xvi) pay or agree to pay any
pension, retirement allowance or other employee benefit not required,
or enter into or amend or agree to enter into or amend any agreement or
arrangement with any of its directors, officers or employees, whether
past or present, relating to any such pension, retirement allowance or
other employee benefit, except as required under currently existing
agreements, plans or arrangements; (xvii) grant any severance or
termination pay to, or enter into or amend any employment, severance or
change in control agreement with, any of its directors, officers or
employees; or (xviii) enter into or become obligated under any
collective bargaining agreement or any agreement with any labor union
or association representing employees, pension plan, welfare plan,
22
multiemployer plan, employee benefit plan, benefit arrangement, or
similar plan or arrangement, which was not in existence on the date
hereof, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay, retirement or other benefit plan, agreement or
arrangement, or employment or consulting agreement with or for the
benefit of any Person, or amend any of such plans or any of such
agreements in existence on the date hereof; (xix) make any change in
the accounting methods or accounting practices followed by the Company
and its Subsidiaries, except as required by GAAP; (xx) settle any
action, suit, claim, investigation or proceeding (whether legal,
administrative or arbitrative) in excess of $100,000 other than any
action, suit, claim, investigation or proceeding involving claim
against a predecessor of the Company or any Subsidiary; (xxi) merge
with or into or consolidate with any other Person (other than between
Subsidiaries) or make any acquisition of all or any part of the assets
or capital stock or business of any other Person except for tangible
property acquired in the ordinary course of business and consistent
with past practice; or (xxii) agree or become legally bound to do any
of the foregoing.
6.02 Access to Books and Records. From the date hereof until
the Closing Date, the Company shall provide Buyer and its authorized
representatives ("Buyer's Representatives") with full access at all reasonable
times and upon reasonable notice to the offices, properties, personnel, books
and records of the Company and its Subsidiaries in order for Buyer to have the
opportunity to make such investigation as it shall reasonably desire to make of
the affairs of the Company and its Subsidiaries. Buyer acknowledges that it
remains bound by the Confidentiality Agreement, dated January 28, 1999, with the
Company (the "Confidentiality Agreement").
6.03 Regulatory Filings. Promptly after the date hereof, the
Company and its appropriate Affiliates shall make or cause to be made all
filings and submissions (which shall be complete in all respects) under the HSR
Act and any other material laws or regulations applicable to the Company and its
Subsidiaries for the consummation of the transactions contemplated herein. The
Company and its appropriate Affiliates shall use their reasonable best efforts
to obtain termination of the waiting period or any review under the HSR Act. The
Company shall coordinate and cooperate with Buyer in exchanging such information
and assistance as Buyer may reasonably request in connection with all of the
foregoing.
6.04 Conditions. The Company, HIG Cayman, each Shareholder and
each Optionholder shall use commercially reasonable efforts to cause the
conditions set forth in Section 2.01 to be satisfied and to consummate the
transactions contemplated herein; provided that none of the Company, any
Subsidiary, any Shareholder, HIG Cayman or any Optionholder shall be required to
expend any funds to obtain any third-party or governmental consents described in
Section 2.01(c) or (d).
6.05 Exclusive Dealing. During the period from the date of
this Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 8.01, each Shareholder shall not take or permit any other
Person on its behalf to take, and the Company shall not take, any action to
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any Person (other than Buyer and Buyer's Representatives)
concerning any purchase of the Shares, any merger involving the Company, any
23
sale of substantially all of the assets of the Company or similar transaction
involving the Company (other than assets sold in the ordinary course of
business) except to the extent not prohibited by Section 6.01(b).
6.06 Consulting Agreement. On or before the Closing Date, the
Company (a) shall pay all of its obligations under that certain Consulting and
Noncompetition Agreement dated April 15, 1997 (the "Consulting Agreement") by
and between the Company and Xxxxxxx X. Xxxxxxxxx and shall have received a
release signed by Xxxxxxx X. Xxxxxxxxx acknowledging the satisfaction in full of
all of such obligations or (b) shall deliver to Buyer evidence that HIG Cayman
or one of its Affiliates has assumed such obligations in full and a release
signed by Xxxxxxx X. Xxxxxxxxx releasing the Company (as operated by Buyer after
the Closing) and Buyer from liability thereunder. On or before the Closing Date,
the Company shall have terminated the Consulting Agreement, dated April 15,
1997, by and between Xxxxxxxx & Michaels, Inc. and H.I.G. Capital Management,
Inc. and shall have received a release signed by H.I.G. Capital Management, Inc.
acknowledging such termination.
6.07 Code Section 280G Consents. As of or prior to the
Closing, the Company shall have received the consent of the Shareholders and
such other documentation necessary to avoid the application of Code Section
280G.
ARTICLE VII
COVENANTS OF BUYER
------------------
7.01 Access to Books and Records. From and after the Closing,
Buyer shall, and shall cause the Company to, provide the Shareholder
Representative, the Shareholders and their authorized representatives with
reasonable access (for the purpose of examining and copying), during normal
business hours, to the books and records of the Company and its Subsidiaries
with respect to periods prior to the Closing Date in connection with any matter
whether or not relating to or arising out of this Agreement or the transactions
contemplated hereby. Unless otherwise consented to in writing by the Shareholder
Representative, the Company shall not, for a period of five years following the
Closing Date, destroy, alter or otherwise dispose of any books and records of
the Company, or any portions thereof, relating to periods prior to the Closing
Date without first offering to surrender to the Shareholder Representative (on
behalf of the Shareholders) such books and records or such portions thereof.
7.02 Notification. From the date hereof until the Closing
Date, Buyer shall disclose to the Company and the Shareholder Representative in
writing any material variances from Buyer's representations and warranties
contained in Article V promptly upon discovery thereof.
7.03 Director and Officer Liability and Indemnification. For a
period of five years after the Closing, Buyer shall not, and shall not permit
the Company or any of its Subsidiaries, or their respective successors, to
amend, repeal or modify any provision in the Company's or any of its
Subsidiaries' certificate or articles of incorporation or bylaws as in existence
on the date hereof relating to the exculpation or indemnification of any
24
officers and directors (unless required by law), it being the intent of the
parties that the officers and directors of the Company and its Subsidiaries
shall continue to be entitled to such exculpation and indemnification to the
full extent of the law.
7.04 Regulatory Filings. Promptly after the date hereof, Buyer
shall make or cause to be made all filings and submissions (which shall be
complete in all respects) under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated herein, and Buyer shall be responsible for all filing
fees under the HSR Act. Buyer shall use its reasonable best efforts to obtain
termination of the waiting period or any review under the HSR Act. Buyer shall
coordinate and cooperate with the Company in exchanging such information and
assistance as the Company may reasonably request in connection with all of the
foregoing.
7.05 Conditions. Buyer shall use commercially reasonable
efforts to cause the conditions set forth in Section 2.02 to be satisfied and to
consummate the transactions contemplated herein.
7.06 Contact with Customers and Suppliers. Prior to the
Closing, Buyer and Buyer's Representatives shall contact and communicate with
the employees, customers and suppliers of the Company and its Subsidiaries in
connection with the transactions contemplated hereby only with the prior written
consent of the Company or the Shareholder Representative; provided, however,
that Buyer and Buyer's Representatives may contact any of the Key Employees at
reasonable times and upon reasonable notice.
ARTICLE VIII
TERMINATION
-----------
8.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Buyer and the Shareholder
Representative (on behalf of the Shareholders, HIG Cayman and the
Optionholders);
(b) by Buyer, if there has been a material violation or breach
by the Company, the Shareholders, HIG Cayman or the Optionholders of
any covenant, representation or warranty contained in this Agreement
which has prevented the satisfaction of any condition to the
obligations of Buyer at the Closing and such violation or breach has
not been waived by Buyer or, in the case of a covenant breach, cured by
the Company, the Shareholders, HIG Cayman or the Optionholders within
ten days after written notice thereof from Buyer;
(c) by the Shareholder Representative, if there has been a
material violation or breach by Buyer of any covenant, representation
or warranty contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of the Shareholders,
HIG Cayman or the Optionholders at the Closing and such violation or
25
breach has not been waived by the Shareholder Representative or, with
respect to a covenant breach, cured by Buyer within ten days after
written notice thereof by the Shareholder Representative, any
Shareholder, HIG Cayman or any Optionholder (provided that the failure
to deliver the Purchase Price at the Closing as required hereunder
shall be subject to cure hereunder unless otherwise agreed to in
writing by the Shareholder Representative); or
(d) by either Buyer or the Shareholder Representative if the
transactions contemplated hereby have not been consummated by May 31,
1999 (or in the event that the Federal Trade Commission or the
Department of Justice issues a second request for information based on
the Buyer's or the Company's and its Affiliates' filings under the HSR
Act, June 30, 1999); provided that (i) neither Buyer nor the
Shareholder Representative shall be entitled to terminate this
Agreement pursuant to this Section 8.01(d) if such Person's (or the
Company's, any Shareholder's, HIG Cayman's or any Optionholder's, in
the case of the Shareholder Representative) knowing or willful breach
of this Agreement has prevented the consummation of the transactions
contemplated hereby.
Notwithstanding the foregoing, no party shall be entitled to terminate this
Agreement pursuant to Sections 8.01(b), (c) or (d) above if such party is in
breach in any material respect of any covenant, representation or warranty made
by it in this Agreement.
8.02 Effect of Termination. In the event of termination of
this Agreement by either Buyer or the Shareholder Representative as provided
above, the provisions of this Agreement shall immediately become void and of no
further force and effect (other than this Section 8.02, Article XII and Article
XIII hereof which shall survive the termination of this Agreement), and there
shall be no liability on the part of any of Buyer, the Company, the
Shareholders, HIG Cayman or the Optionholders to one another, except for knowing
or willful breaches of this Agreement prior to the time of such termination.
ARTICLE IX
SURVIVAL
--------
9.01 Survival of Representations and Warranties. The
representations and warranties set forth in this Agreement and in any
certificates delivered at the Closing in connection with this Agreement shall
terminate at the Closing and shall be of no further force or effect.
ARTICLE X
SHAREHOLDER REPRESENTATIVE
--------------------------
10.01 Designation; Reliance. HIG Cayman (the "Shareholder
Representative") is hereby designated by each of the Shareholders and each of
the Optionholders to serve as the representative of the Shareholders and the
Optionholders with respect to the matters expressly set forth in this Agreement
to be performed by the Shareholder Representative. Buyer shall be entitled
26
to rely on its communications with or documents signed by the Shareholder's
Representative (on behalf of the Shareholders, HIG Cayman and the Optionholders)
as if such communications were made by or such documents were signed by the
Shareholders, HIG Cayman and the Optionholders, and the Shareholders, HIG Cayman
and the Optionholders shall hold Buyer harmless from any liability it incurs due
to such reliance.
10.02 Authority. Each of the Shareholders, HIG Cayman and the
Optionholders, by the execution of this Agreement, hereby irrevocably appoints
the Shareholder Representative as the agent, proxy and attorney-in-fact for such
Shareholders and such Optionholders for all purposes of this Agreement
(including the full power and authority on such Shareholder's, HIG Cayman's and
such Optionholder's behalf (i) to consummate the transactions contemplated
herein; (ii) to withhold $250,000 of the Purchase Price (the "Holdback Amount")
on behalf of the Shareholders (other than DCI), the Optionholders and HIG Cayman
in order to satisfy any obligations owing under Section 1.03 and to withhold
such greater amounts necessary to pay such Shareholder's HIG Cayman and such
Optionholder's expenses incurred in connection with the negotiation and
performance of this Agreement (whether incurred on or after the date hereof);
(iii) to disburse any funds received hereunder to such Shareholder, HIG Cayman
or Optionholder and each other Shareholder or Optionholder; (iv) to endorse and
deliver any certificates or instruments representing the Shares and the Options
and execute such further instruments of assignment as Buyer shall reasonably
request; (v) to execute and deliver on behalf of such Shareholder, HIG Cayman
and such Optionholder any amendment or waiver hereto; (vi) to take all other
actions to be taken by or on behalf of such Shareholder, HIG Cayman or such
Optionholder in connection herewith; and (vii) to do each and every act and
exercise any and all rights which HIG Cayman, such Shareholder or the
Shareholders or such Optionholder or the Optionholders collectively are
permitted or required to do or exercise under this Agreement). Each of the
Shareholders, HIG Cayman and each of the Optionholders agrees that such agency
and proxy are coupled with an interest, are therefore irrevocable without the
consent of the Shareholder Representative and shall survive the death,
incapacity, bankruptcy, dissolution or liquidation of any Shareholder or
Optionholder. After the obligations, if any, of the Shareholders, HIG Cayman and
the Optionholders have been satisfied under Section 1.03 and the expenses and
amounts referred to in (ii) above have been paid in full, the excess of the
Holdback Amount over the amounts, if any, paid by the Shareholder Representative
pursuant to clause (ii) above (the "Excess Amount") shall be promptly paid by
the Shareholder Representative to the Shareholders (other than DCI), HIG Cayman
and the Optionholders in such amounts as such Shareholder, HIG Cayman or
Optionholder would have received at the Closing if the Excess Amount was added
to the Purchase Price in calculating the Closing Shareholder Consideration, the
HIG Consideration and the Closing Optionholder Consideration
10.03 Exculpation. Neither the Shareholder Representative nor
any agent employed by it shall incur any liability to any Shareholder or
Optionholder by virtue of the failure or refusal of the Shareholder
Representative for any reason to consummate the transactions contemplated hereby
or relating to the performance of its other duties hereunder, except for actions
or omissions constituting fraud or bad faith.
27
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS
-----------------------------------
11.01 Disclosure Generally. If and to the extent any
information required to be furnished in any Schedule is contained in this
Agreement or in any other Schedule attached hereto, such information shall be
deemed to be included in all Schedules in which the information is required to
be included provided that such information is relevant and responsive to such
other Schedules. The inclusion of any information in any Schedule attached
hereto shall not be deemed to be an admission or acknowledgment by the Company,
the Shareholders, HIG Cayman or the Optionholders, in and of itself, that such
information is material to or outside the ordinary course of the business of the
Company.
11.02 Acknowledgment by Parties.
(a) Buyer acknowledges that it has conducted to its
satisfaction, an independent investigation and verification of the
financial condition, results of operations, assets, liabilities,
properties and projected operations of the Company and, in making its
determination to proceed with the transactions contemplated by this
Agreement, Buyer has relied on the results of its own independent
investigation and verification and the representations and warranties
of the Company and the Shareholders, HIG Cayman and the Optionholders
expressly and specifically set forth in this Agreement, including the
Schedules attached hereto. SUCH REPRESENTATIONS AND WARRANTIES BY THE
COMPANY, THE SHAREHOLDERS, HIG CAYMAN AND THE OPTIONHOLDERS CONSTITUTE
THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
THE SHAREHOLDERS, HIG CAYMAN AND THE OPTIONHOLDERS TO BUYER IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND BUYER
UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT
LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL
CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY)
ARE SPECIFICALLY DISCLAIMED BY THE COMPANY, THE SHAREHOLDERS, HIG
CAYMAN AND THE OPTIONHOLDERS.
(b) The Company, the Shareholders, HIG Cayman and the
Optionholders acknowledge that notwithstanding the right of Buyer to
investigate the business, assets and financial condition of the Company
and its Subsidiaries, and notwithstanding any knowledge obtained or
obtainable by Buyer as a result of such investigation, Buyer has the
unqualified right to rely upon, and has relied upon, each of the
representations and warranties made by the Company, the Shareholders,
HIG Cayman and the Optionholders in this Agreement or pursuant hereto.
28
(c) The parties acknowledge that each representation and
warranty made in this Agreement or pursuant hereto is independent of
all other representations and warranties made by the same parties,
whether or not covering related or similar matters, and must be
independently and separately satisfied. Exceptions or qualifications to
any such representation or warranty shall not be construed as
exceptions or qualifications to any other representation or warranty.
11.03 Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and the Shareholders, HIG Cayman
and the Optionholders for certain tax matters following the Closing Date:
(a) Responsibility for Filing Tax Returns. Buyer shall prepare
or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiaries for all periods ending prior to or
including the Closing Date which have not yet been filed as of the
Closing Date. At least 15 days prior to the date on which each such Tax
Return relating to the period from January 1, 1999 until the Closing is
filed, Buyer shall submit such Tax Return to the Shareholder
Representative for the Shareholder Representative's review and
approval, which approval may be withheld if the filing of such Tax
Return, as prepared by Buyer, is reasonably expected by the Shareholder
Representative to adversely affect the Tax liability of any
Shareholder, HIG Cayman or any Optionholder.
(b) Cooperation on Tax Matters.
(i) Buyer, the Company, its Subsidiaries, the
Shareholders, HIG Cayman and the Optionholders shall cooperate fully,
as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon any other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. The Company, its Subsidiaries, the Shareholders, HIG Cayman
and the Optionholders agree (A) to retain all books and records with
respect to Tax matters pertinent to the Company and its Subsidiaries
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Buyer or the Company, any extensions of the respective
taxable periods), and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, the Company and its Subsidiaries or the Company, as the case
may be, shall allow the other party to take possession of such books
and records.
(ii) Buyer, the Shareholders, HIG Cayman and the
Optionholders further agree, upon request, to use their best efforts to
obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce
29
or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(iii) Buyer, the Shareholders, HIG Cayman and the
Optionholders further agree, upon request, to provide the other party
with all information that either party may be required to report
pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(c) Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving the Company, its
Subsidiaries and DCI shall be terminated as of the Closing Date and,
after the Closing Date, the Company and its Subsidiaries shall not be
bound thereby or have any liability thereunder.
(d) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) ("Transfer Taxes") incurred in connection with
this Agreement (including any realty transfer or similar tax imposed in
any states or subdivisions), shall be paid by Buyer when due, and Buyer
will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees. The Shareholders,
HIG Cayman and the Optionholders shall reimburse Buyer for 50% of any
such Transfer Taxes.
(e) Tax Benefits Associated with Sale Transactions. The
parties hereto agree that any Tax refunds attributable to the sale of
the Options pursuant to Section 1.02 hereof and attributable to the
satisfaction of its obligations under the Consulting Agreement pursuant
to Section 6.06 shall be for the benefit of the Shareholders and the
Optionholders. Buyer shall prepare, or shall cause the Company to
prepare, all Tax Returns in a manner that maximizes the present value
of such Tax refunds (including, without limitation, (i) claiming
deductions attributable to the Sale Transactions in the Company's Tax
Return for the taxable year that includes or, if applicable, ends on
the Closing Date, (ii) carrying back any net operating losses resulting
from such deductions to prior taxable years to the extent permitted by
applicable Tax law, and (iii) filing as soon as is practicable any
claims for Tax refunds attributable to such deductions to which the
Company is entitled with respect to (A) estimated Taxes paid for the
taxable period including or ending on the Closing Date and/or (B) Taxes
paid for any period to which any net operating losses referred to in
preceding clause (ii) are carried back), and shall permit the
Shareholder Representative to review the portion of any such Tax Return
which relates to such carrybacks and Tax refund claims prior to the
filing of such Tax Return. Buyer shall pay over to each Shareholder and
Optionholder, within fifteen (15) days after receipt or entitlement
thereto, the additional amount which such Shareholder or Optionholder
would have received at the Closing if the aggregate amount of such Tax
refunds had been added to the Purchase Price in the calculation of the
Closing Shareholder Consideration and the Closing Optionholder
Consideration.
11.04 Further Assurances. From time to time, as and when requested by
any party hereto and at such party's expense, any other party shall execute and
30
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as the requesting party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
11.05 Restrictive Covenants of HIG.
(a) HIG-DCI Investments, L.P. and H.I.G. Investment Group,
L.P. (collectively, "HIG"), expressly acknowledge that:
(i) NCO Business. The accounts receivable collection
business conducted by the Company and any of its Subsidiaries (after the
Closing, referred to as the "NCO Companies") involve the provision of accounts
receivable collection business services using proprietary and confidential
systems and information.
(ii) Competitive Nature of Business. The business of
the Company and any of its Subsidiaries is highly competitive, is marketed
throughout the United States, Canada and the United Kingdom and requires long
sales "lead times" often exceeding one year. The NCO Companies expend
substantial time and money, on an ongoing basis, to train their employees,
maintain and expand their customer base, and improve and develop their products
and services.
(iii) Access to Information. During the period that
HIG Cayman was a shareholder of the Company, it had access to proprietary and
confidential property, knowledge and information of the Business of the Company
and any of its Subsidiaries which, after Closing, shall be proprietary and
confidential property, knowledge and information of the NCO Companies. Such
property, knowledge and information must be kept in strict confidence to protect
NCO's business and maintain the NCO Companies' competitive positions in the
marketplace, and such property, knowledge and information would be useful to
competitors of the NCO Companies for indefinite periods of time.
(iv) Basis for Covenants. The covenants of Section
11.05 (the "Covenants") are a material part of this Agreement and are an
integral part of the obligations of HIG hereunder; the Covenants are supported
by good and adequate consideration; and the Covenants are reasonable and
necessary to protect the legitimate business interests of the NCO Companies.
(v) Nondisclosure Covenants. At all times after the
Closing Date, except with NCO's prior written consent, HIG shall not, directly
or indirectly, in any capacity, communicate, publish or otherwise disclose to
any Person, or use for the benefit of any Person, any confidential or
proprietary property, knowledge or information of the Company or any of its
Subsidiaries, no matter when or how such knowledge or information was obtained,
including without limitation (a) any information concerning the conduct and
details of the business; (b) the identity of customers and prospects for which
proposals have been submitted as of the Closing Date, their specific
requirements, and the names, addresses and telephone numbers of individual
contacts at customers and prospects; (c) prices, renewal dates and other
detailed terms of customer and supplier contracts and proposals; (d) pricing
policies, marketing and sales strategies, methods of delivering products and
services, and products and service development projects and strategies; (e)
31
employment and payroll records; (f) forecasts, budgets and other nonpublic
financial information; and (g) expansion plans, management policies, methods of
operation, and other business strategies and policies.
(b) Noncompetition and Noninterference Covenants.
(i) Competing Business Restrictions. During the
period beginning on the Closing Date and ending on the first
anniversary of the Closing Date (the "Noncompetition Term") of the
Closing Date, HIG shall not directly or indirectly establish, own,
manage, operate, finance or control, or participate in the
establishment, ownership, management, operation, financing or control
of, or be a director, officer, employee, salesman, agent or
representative of, or be a consultant to, any Person that engages in
the collection of commercial accounts receivable
(ii) Noninterference. During the period beginning on
the Closing Date and ending on the second anniversary of the Closing
Date (the "Noninterference Term"), HIG shall not directly or indirectly
solicit for employment as salesman, agent, representative or
consultant, any employee of the NCO Companies employed by the Company
or any of its Subsidiaries in any management or supervisory capacity as
of the Closing Date or direct any of its affiliates to state any
disparaging information regarding the NCO Companies to any of the
Company's or its Subsidiaries' customers, business prospects or
suppliers; provided however, that this clause (ii) shall not apply to
any portfolio companies in which HIG has invested and, provided
further, that HIG shall not be precluded from hiring any person who (a)
initiates discussions regarding employment with HIG without any direct
solicitation by HIG, (b) responds to any public advertisement placed by
HIG or (c) has been terminated by or resigned from the NCO Companies
prior to the commencement of employment discussions between HIG and
such person.
(c) Nonsolicitation. During the Noninterference Term, HIG
shall not directly or indirectly solicit any employee of the Company or
any of its Subsidiaries who becomes an employee of the NCO Companies on
the Closing Date to become employees or independent contractors of HIG
or any of its affiliates; provided however, that this clause (d) shall
not apply to any portfolio companies in which HIG has invested and,
provided further, that HIG shall not be precluded from hiring any
person who (a) initiates discussions regarding employment with HIG
without any direct solicitation by HIG, (b) responds to any public
advertisement placed by HIG or (c) has been terminated by or resigned
from the NCO Companies prior to the commencement of employment
discussions between HIG and such person.
(d) Certain Exclusions. Confidential and proprietary property,
knowledge and information of the NCO Companies shall not include any
information that is now known by or readily available to the general
public, nor shall it include any information that in the future becomes
known by or readily available to the general public other than as a
result of any breach of the Covenants of this Agreement. The ownership
by HIG of not more than five percent (5%) of the outstanding securities
32
of any public company shall not, by itself, constitute a breach of the
Covenants of this Section 11.05, even if such public company competes
with the NCO Companies.
(e) Enforcement of Covenants. HIG expressly acknowledges that
it would be extremely difficult to measure the damages that might
result from any breach of the Covenants, and that any breach of the
Covenants will result in irreparable injury to the NCO Companies for
which money damages could not adequately compensate. If a breach of the
Covenants occurs, then the NCO Companies shall be entitled, in addition
to all other rights and remedies that they may have at law or in
equity, to have an injunction issued by any competent court enjoining
and restraining HIG and all other Persons involved therein from
continuing such breach. The existence of any claim or cause of action
that HIG or any such other Person may have against any of the NCO
Companies shall not constitute a defense or bar to the enforcement of
any of the Covenants. If the NCO Companies must resort to litigation to
enforce any of the Covenants that has a fixed term, then such term
shall be extended for a period of time equal to the period during which
a breach of such Covenant was occurring, beginning on the date of a
final court order (without further right of appeal) holding that such a
breach occurred or, if later, the last day of the original fixed term
of such Covenant.
(f) Scope of Covenants. If any Covenant, or any part thereof,
or the application thereof, is construed to be invalid, illegal or
unenforceable, then the other Covenants, or the other portions of such
Covenant, or the application thereof, shall not be affected thereby and
shall be enforceable without regard thereto. If any of the Covenants is
determined to be unenforceable because of its scope, duration,
geographical area or other factor, then the court making such
determination shall have the power to reduce or limit such scope,
duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
11.06 Indemnification. Buyer shall indemnify the Shareholders,
HIG Cayman, the Optionholders and the Shareholders' and HIG Cayman's direct and
indirect shareholders, partners, officers, directors, employees, agents,
representatives, successors and permitted assigns and save and hold each of them
harmless against and pay on behalf of or reimburse such Persons as and when
incurred for any loss, liability, demand, claim, action, cause of action, cost,
damage, fine or expense (including reasonable attorneys' fees), which any such
Person may suffer, sustain or become subject to, as a result of, in connection
with, relating to the disclosure of the IAS Purchase Agreement and related
documentation to the Buyer.
11.07 Cefalu Non-Competition. Xxxxxx X. Xxxxxx, III ("Cefalu")
hereby acknowledges that, during and solely as a result of his past employment
with the Company and his continued employment by NCO Financial Systems, Inc.
("NCO"), he will have access to confidential information and business and
professional contacts. In consideration of such special and unique opportunities
afforded by NCO to Cefalu as a result of Xxxxxx'x employment, the other benefits
referred to in that certain Employment Agreement, dated April 16, 1999, between
NCO Financial Systems, Inc. and Xxxxxx X. Xxxxxx, III (the "Employment
Agreement") and the benefits conferred on Cefalu hereunder, Cefalu hereby
agrees, except as agreed to in writing by NCO to the contrary, as follows:
33
(a) For the duration of the Restricted Period (as defined in the
Employment Agreement), Cefalu shall not directly or indirectly (A) engage in (as
a principal, shareholder, partner, director, officer, agent, employee,
consultant or otherwise) or be financially interested in any business operating
within the United States (the "Restricted Area")which is involved in or any
other business activities which are the same as, similar to or in competition
with the business or with any business activities carried on by NCO, or being
definitely planned by NCO, at the time of the termination of Xxxxxx'x
employment; provided however, that nothing contained in this Section 11.07 shall
prevent Cefalu from holding for investment no more than three percent (3%) of
any class of equity securities of a company whose securities are publicly traded
on a national securities exchange or in a national market system; or (B) induce
or attempt to influence any employee, customer, independent contractor or
supplier of NCO to terminate employment or any other relationship with NCO.
(b) Cefalu shall not use for Xxxxxx'x personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than NCO, any "Confidential
Information" which term shall mean any information regarding the business
methods, business policies, policies, procedures, techniques, research or
development projects or results, historical or projected financial information,
budgets, trade secrets, or other knowledge or processes of or developed by NCO
or any names and addresses of customers or clients or any data on or relating to
past, present or prospective NCO customers or clients or any other confidential
information relating to or dealing with the business operations, or activities
of NCO as such relate specifically to commercial collection services, made known
to Cefalu or learned or acquired by Cefalu while in the employ of NCO, but
Confidential Information shall not include information otherwise lawfully known
generally by or readily accessible to the trade or the general public. All
memoranda, notes, lists, records, files, documents and other papers and other
like items (and all copies, extracts and summaries thereof) made or compiled by
Cefalu or made available to Cefalu concerning the business of NCO shall be NCO's
property and shall be delivered to NCO promptly upon the termination of Xxxxxx'x
employment with NCO or at any other time on request. The foregoing provisions of
this Section11.07(b) shall apply during and after the period when Cefalu is an
employee of NCO and shall be in addition to (and not a limitation of) any
legally applicable protections of NCO's interest in confidential information,
trade secrets and the like. At the termination of Xxxxxx'x employment with NCO,
Cefalu shall return to NCO all copies of Confidential Information in any medium,
including computer tapes and other forms of data storage. Notwithstanding the
foregoing, Cefalu may retain records relevant to the filing of Xxxxxx'x personal
income taxes and NCO shall xxxxx Xxxxxx reasonable access during normal business
hours, to business records of NCO relevant to Xxxxxx'x discharge of Xxxxxx'x
duties as an officer of NCO or other legitimate non-competitive business
purpose. Notwithstanding the requirements of this Section 11.07(b), should
Cefalu leave his employment and work in a position that does not violate any of
the restrictions contained in this Section, then Cefalu shall have the right to
use Confidential Information, provided, however, that such right shall not
permit Cefalu to remove any documents or materials from NCO that are deemed
Confidential Information.
(c) Cefalu acknowledges that the restrictions contained in the
foregoing clauses (a) and (b) above, in view of the nature of the business in
which NCO is engaged, are reasonable and necessary in order to protect the
legitimate interests of NCO, that their enforcement will not impose a hardship
on Cefalu or significantly impair Xxxxxx'x ability to earn a livelihood, and
34
that any violation thereof would result in irreparable injuries to NCO. Cefalu
therefore acknowledges that, in the event of Xxxxxx'x violation of any of these
restrictions, NCO shall be entitled to obtain from any court of competent
jurisdiction preliminary and permanent injunctive relief as well as damages and
an equitable accounting of all earnings, profits and other benefits arising from
such violation, which rights shall be cumulative and in addition to any other
rights or remedies to which NCO may be entitled.
(d) If the Restricted Period or the Restricted Area specified in
Subsections (a) and (b) above should be adjudged unreasonable in any proceeding,
then the period of time shall be reduced by such amount or the area shall be
reduced by the elimination of such portion or both such reductions shall be made
so that such restrictions may be enforced for such time and in such area as is
adjudged to be reasonable. If Cefalu violates any of the restrictions contained
in the foregoing clauses (a) or (b), the Restricted Period shall be extended by
a period equal to the length of time from the commencement of any such violation
until such time as such violation shall be cured by Cefalu to the satisfaction
of NCO. NCO shall have the right and remedy to require Cefalu to account for and
pay over to NCO all compensation, profits, monies, accruals, increments or other
benefits derived or received by Cefalu as the result of any transactions
constituting a breach of this Section 11.07, and Cefalu shall account for and
pay over such amounts to NCO upon NCO's request therefor. Cefalu hereby
expressly consents to the jurisdiction of any court within the Commonwealth of
Pennsylvania to enforce the provisions of this Section 11.07, and agrees to
accept service of process by mail relating to any such proceeding. NCO may
supply a copy of Section 11.07 of this Section to any future or prospective
employer of Cefalu or to any person to whom Cefalu has supplied information if
NCO determines in good faith that there is a reasonable likelihood that Cefalu
has violated or will violate such Section.
ARTICLE XII
DEFINITIONS
-----------
12.01 Definitions. For purposes hereof, the following terms,
when used herein with initial capital letters, shall have the respective
meanings set forth herein:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person.
For the purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.
"Cash On Hand" means all cash and cash equivalents of the
Company and its Subsidiaries minus all cash and cash equivalents owed by the
Company and its Subsidiaries to their customers (whether held in trust or
otherwise).
"GAAP" means United States generally accepted accounting
principles consistently applied.
35
"Indebtedness" means, without duplication, all obligations of
the Company for borrowed money set forth on the Indebtedness Schedule and any
accrued interest, prepayment premiums or penalties related thereto.
"Net Working Capital" means (i) Working Capital Assets minus
(ii) Working Capital Liabilities.
"Permitted Liens" means (i) statutory liens for current Taxes
or other governmental charges not yet due and payable or the amount or validity
of which is being contested in good faith by appropriate proceedings by the
Company and for which appropriate reserves have been established in accordance
with GAAP; (ii) mechanics', carriers', workers', repairers' and similar
statutory liens arising or incurred in the ordinary course of business for
amounts which are not delinquent and which are not, individually or in the
aggregate, significant; (iii) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Leased
Real Property which are not violated by the current use and operation of the
Leased Real Property; and (iv) covenants, conditions, restrictions, easements
and other similar matters of record affecting title to the Leased Real Property
which do not materially impair the occupancy or use of the Leased Real Property
for the purposes for which it is currently used or proposed to be used in
connection with the Company's business.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiaries" means Xxxxxxxx & Michaels, Inc., a Delaware
corporation, Metropolitan Consumer Collection Services, Inc., a Delaware
corporation, and International Account Systems, Inc., a Florida corporation.
"Tax" or "Taxes" means any federal, state, local or foreign
income, gross receipts, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, ad valorem/personal property,
stamp, excise, occupation, sales, use, transfer, value added, alternative
minimum, estimated or other tax, including any interest, penalty or addition
thereto, whether disputed or not.
"Tax Returns" means any return, report, information return or
other document (including schedules or any related or supporting information)
filed or required to be filed with any governmental entity or other authority in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
"Working Capital Assets" means all current assets, excluding
Cash On Hand, deferred taxes and any entitlement to Tax refunds which are
required to be paid over to the Shareholders and Optionholders pursuant to
Section 11.03(e) hereof, of the Company and the Subsidiaries as of the Closing
Date determined in accordance with GAAP.
36
"Working Capital Liabilities" means all current liabilities of
the Company and the Subsidiaries as of the Closing Date determined by the
Company in accordance with GAAP; provided, however, that Working Capital
Liabilities shall not include the Indebtedness or any current maturities of the
Indebtedness.
12.02 Cross-Reference of Other Definitions. Each capitalized
term listed below is defined in the corresponding Section of this Agreement:
Term Section No.
---- -----------
Accrual 1.03(d)
Agreement Preamble
Buyer Preamble
Buyer Stock 1.01
Buyer's Representatives 6.02
Cefalu 11.07
Closing 1.04(a)
Closing Date 1.04(a)
Closing Optionholder Consideration 1.02
Closing Shareholder Consideration 1.02
Closing Transactions 1.04(b)
Code 4.13(a)
Common Stock 4.04
Company Preamble
Consulting Agreement 6.06
Confidentiality Agreement 6.02
Covenants 11.05(a)(iv)
DCI Preamble
DCI Shares 1.02
Employment Agreement 11.07
Environmental and Safety Requirements 4.16(a)
ERISA 4.13(a)
Estimated Net Working Capital 1.03(a)
HIG 11.05
HIG Cayman Preamble
HIG Consideration 1.02
Holdback Amount 10.02
Independent Auditor 1.03(b)
HSR Act 4.12
Intellectual Property 4.10
Key Employees 13.03
Latest Balance Sheet 4.05
Leased Real Property 4.07(b)
Material Adverse Effect 4.01
NCO 11.07
37
NCO Companies 11.05
Noncompetition Term 11.05(b)(i)
Noninterference Term 11.05(b)(ii)
Objections Statement 1.03(b)
Optionholders Preamble
Options Preamble
Pension Plans 4.13(a)
Permits 4.01
Plans 4.13(a)
Possible Pennsylvania Audit 1.03(d)
Preliminary Net Working Capital 1.03(b)
Purchase Price 1.01
Restricted Area 11.07(a)
Sale Transactions 1.02
SAR Payments 1.04(b)(vi)
Shareholder Representative 10.01
Shareholders Preamble
Shares Preamble
Texas Audit 1.03(d)
Transfer Taxes 11.03(d)
WARN Act 4.19
Warrants 1.01
Welfare Plans 4.13(a)
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Press Releases and Communications. No press release or
public announcement related to this Agreement or the transactions contemplated
herein, or prior to the Closing, any other announcement or communication to the
employees, customers or suppliers of the Company, shall be issued or made by any
party except by Buyer with the approval of the Shareholder Representative (which
shall not unreasonably be withheld), unless required by law (in the reasonable
opinion of counsel) in which case Buyer and the Shareholder Representative shall
have the right to review such press release, announcement or communication prior
to its issuance, distribution or publication.
13.02 Expenses. Except as otherwise expressly provided herein,
each party shall pay all of its own respective expenses (including attorneys'
and accountants' fees and expenses) in connection with the negotiation of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not).
38
13.03 Knowledge Defined. For purposes of this Agreement, the
term "the Company's knowledge" as used herein shall mean the actual knowledge
after reasonable investigation of Xxxxxx X. Xxxxxx, III, Xxxxxx Xxxxxx, Xxxxx
Xxxxxxxxxx and Xxxx Xxxxxx (collectively, the "Key Employees").
13.04 Waiver of Certain Transfer Restrictions. Concurrently
with the Closing, the Company expressly waives the restrictions on transfer of
the Options contained in those certain Stock Option Agreements, dated as of
February 10, 1998, by and between the Company and each of Xxxxxx Xxxxxx and
Xxxxx Xxxxxxxxxx.
13.05 Notices. All notices, demands and other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when personally
delivered, one day after deposit with Federal Express or similar overnight
courier service or three days after being mailed by first class mail, return
receipt requested. Notices, demands and communications to Buyer, the Company,
the Shareholders, the Optionholders and the Shareholder Representative shall,
unless another address is specified in writing, be sent to the addresses
indicated below:
Notices to Buyer:
-----------------
NCO Group, Inc.
000 Xxxxxxxxxxxx Xxxxxx
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx, President
with a copy to:
Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxx
Notices to Shareholders, to Optionholders or to the
Shareholder Representative:
---------------------------------------------------
H.I.G.-DCI Investments, L.P.
c/o H.I.G. Capital Management, Inc.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
39
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Learner
Notices to Company:
-------------------
Co-Source Corporation
c/o H.I.G. Capital Management, Inc.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
13.06 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, and neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned or
delegated by any party without the prior written consent of the Shareholder
Representative in the case of assignment by Buyer or by Buyer in the case of
assignment by any other party. Notwithstanding the foregoing, Buyer shall have
the right to assign its right to purchase the Shares and the Options to any
subsidiary of Buyer provided that such assignment shall not limit Buyer's
obligations hereunder.
13.07 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
13.08 No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any Person.
13.09 Amendment and Waiver. Any provision of this Agreement or
the schedules or exhibits hereto may be amended or waived only in a writing
signed by Buyer, the Company and the Shareholder Representative. No waiver of
any provision hereunder or any breach or default thereof shall extend to or
affect in any way any other provision or prior or subsequent breach or default.
13.10 Complete Agreement. This Agreement and the documents
referred to herein (including the Confidentiality Agreement) contain the
complete agreement between the parties hereto and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
40
13.11 Counterparts. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
13.12 Governing Law. All matters relating to the
interpretation, construction, validity and enforcement of this Agreement shall
be governed by and construed in accordance with the domestic laws of the State
of New York without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of laws of any jurisdiction other than the State of New
York.
13.13 No Third Party Beneficiaries. This Agreement is solely
for the benefit of the parties hereto, and their respective successors and
permitted assigns, and this Agreement shall not be deemed to confer upon or give
to any other Person or third party any remedy, claim liability, reimbursement,
cause of action or other right.
13.14 Section Headings. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
13.15 Specific Performance. The parties agree that any breach
of the terms of this Agreement would give rise to irreparable harm for which
money damages would not be an adequate remedy and accordingly the parties agree
that, in addition to any other remedies, each shall be entitled to enforce the
terms of this Agreement by a decree of specific performance without the
necessity of proving the inadequacy of money damages as a remedy.
* * * * *
41
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
CO-SOURCE CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------
Its
-------------------------------------------
SHAREHOLDERS:
DCI HOLDING, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------------
Its
-------------------------------------------
ANTARES CAPITAL CORPORATION (f/k/a
ANTARES LEVERAGED CAPITAL CORP.)
By: /s/ Xxxxx Xxxxxxx
------------------------------------------
Its: Director
/s/ Xxxxxx X. Xxxxxx, III
----------------------------------------------
Xxxxxx X. Xxxxxx, III
OPTIONHOLDERS:
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------------------
Xxxxx X. Xxxxxxxxxx
/s/ Xxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxx X. Xxxxxx
42
BUYER:
-----
NCO GROUP, INC.
By: /s/ Xxxx Xxxxxxx
------------------------------------------
Its Executive Vice President
H.I.G.-DCI INVESTMENTS, L.P.
By: /s/ Xxxxxxx Xxxxx
------------------------------------------
Its
-------------------------------------------
Solely with respect to the provisions of
Section 11.05:
H.I.G. INVESTMENT GROUP, L.P.
By: /s/ Xxxxxxx Xxxxx
------------------------------------------
Its
-------------------------------------------
43
