NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED HEREUNDER (COLLECTIVELY, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND APPLICABLE
STATE SECURITIES LAWS AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER THEREOF SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO THE
SECURITIES SHALL HAVE BECOME EFFECTIVE.
THIS WARRANT MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT
OF THE COMPANY WHICH MAY BE WITHHELD IN ITS SOLE AND ABSOLUTE DISCRETION.
NON-TRANSFERABLE
COMMON STOCK PURCHASE WARRANT
To subscribe for and purchase shares
of Common Stock, no par value, of
NCO GROUP, INC.
THIS CERTIFIES that, for value received, CRW FINANCIAL, INC., a
Delaware corporation (the "Holder"), subject to the terms and conditions hereof,
shall be entitled to purchase from NCO GROUP, INC., a Pennsylvania corporation
(the "Company"), at any time during the period from 9:00 A.M. (Philadelphia
Time) on February 3, 1997, through 5:00 P.M. (Philadelphia Time) on January 31,
2002, Two Hundred and Fifty Thousand (250,000) shares of Common Stock (as
hereinafter defined) of the Company (individually, a "Warrant Share" and
collectively, the "Warrant Shares"), at an initial exercise price of $27.625 per
share, subject to adjustment from time to time pursuant to the provisions of
Section 3, and further subject to the Company's right to pay cash in lieu of
issuing Warrant Shares as provided in Section 1.2. For purposes of this Warrant,
the term "Common Stock" shall mean the class of capital stock of the Company
designated common stock, no par value per share, as constituted on the date
hereof, and any other class of capital stock of the Company resulting from
successive changes or reclassifications of the Common Stock.
1. Exercise of Warrants.
1.1 Method of Exercise. The Warrant evidenced hereby may be
exercised by the Holder, in whole but not in part, by the delivery at the
principal office of the Company (or at such other office or agency of the
Company as it may designate by notice in
writing to the Holder), during normal business hours, of this Warrant and the
Form of Exercise attached hereto as Exhibit "A", duly completed and executed,
and payment of the Purchase Price (as defined in Section 2) of the Warrant
Shares by wire transfer of immediately available United States federal funds or
by bank certified, treasurer's or cashier's check payable to the order of the
Company. The business day on which the last of such documents and payment of the
Purchase Price is received by the Company as provided above shall be the
"Exercise Date" for the purposes of this Warrant.
1.2 Cash Payment in Lieu of Issuing Warrant Shares. Anything in this
Warrant to the contrary notwithstanding, upon any exercise of this Warrant by
the Holder, in lieu of issuing all or any part of the Warrant Shares which are
the subject of such exercise, the Company shall have the option (the "Cash
Payment Option"), to pay the Holder an amount (the "Cash Payment Amount") equal
to such number of Warrant Shares for which the Company has elected to exercise
the Cash Payment Option multiplied by the difference between (a) the Market
Price (as defined in Section 13) per share of Common Stock as of the Exercise
Date less (b) the Exercise Price (as defined in Section 2) as of the Exercise
Date. The Company may exercise its Cash Payment Option hereunder at any time
prior to the Effective Date (as defined in Section 1.3) by notification to the
Holder and by payment of the Cash Payment Amount by wire transfer of immediately
available United States federal funds or by bank certified, treasurer's or
cashier's check payable to the order of the Holder.
1.3 Effective Date. The Warrant Shares purchased by the Holder
pursuant to Section 1.1, less any Warrant Shares as to which the Company has
exercised its Cash Payment Option pursuant to Section 1.2, shall be deemed to be
issued to the Holder effective as of the opening of business on the sixth
business day following the Exercise Date (the "Effective Date") so that the
Holder shall be deemed the record holder for such Warrant Shares for all
purposes immediately after the opening of business on the Effective Date.
1.4 Delivery of Certificates. The certificate for the Warrant Shares
purchased by the Holder pursuant to Section 1.1, less any Warrant Shares as to
which the Company has exercised its Cash Payment Option pursuant to Section 1.2,
shall be delivered to the Holder within a reasonable time, not exceeding ten
(10) business days, after the Exercise Date. The certificate evidencing the
Warrant Shares shall bear a restrictive legend substantially in the form set
forth on Exhibit "B".
-2-
1.5 No Fractional Shares. No fractional Warrant Shares, or scrips
for any such fractional Warrant Shares, shall be issued upon the exercise of
this Warrant.
1.6 Status of Warrant Shares. The Company represents and warrants to
the Holder that all Warrant Shares which may be issued upon the exercise of this
Warrant, when issued in accordance with the terms hereof, shall be duly
authorized, validly issued, fully paid and nonassessable.
2. Exercise Price.
The initial exercise price shall be $27.625 per share, subject to
adjustment from time to time as hereinafter provided (such price, as last
adjusted, being hereinafter referred to as the "Exercise Price"). The Exercise
Price multiplied by the number of Warrant Shares being purchased shall be the
"Purchase Price" therefor.
3. Adjustments to Exercise Price and Warrant Shares.
The Exercise Price and the number of Warrant Shares issuable upon
the exercise of the Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 3.
3.1 Adjustment for Change in Capital Stock. (a) If the Company: (1)
pays a dividend or makes a distribution on its Common Stock in shares of its
Common Stock or in shares of its capital stock other than Common Stock; (2)
subdivides its outstanding shares of Common Stock into a greater number of
shares; (3) combines its outstanding shares of Common Stock into a smaller
number of shares; or (4) issues by reclassification of its Common Stock any
shares of its capital stock; then, (i) the number of shares of Common Stock for
which this Warrant is exercisable immediately after the occurrence of any such
event shall be adjusted to equal the number of shares of Common Stock which a
record holder of the same number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the occurrence of such event would
own or be entitled to receive after the happening of such event, and (ii) the
Exercise Price shall be adjusted to equal (A) the Exercise Price multiplied by
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
(b) The adjustment provided for in this Section 3.1 shall be
made successively whenever any event listed above shall occur and shall become
effective immediately after the record date,
-3-
in the case of a dividend or distribution, and immediately after the effective
date, in the case of a subdivision, combination or reclassification.
(c) If, as a result of an adjustment pursuant to this Section
3.1, the Holder shall be entitled to receive shares of two or more classes of
capital stock of the Company upon exercise of the Warrant, the Company shall
determine the allocation of the adjusted Exercise Price between the classes of
capital stock. After such allocation, the exercise privilege and the Exercise
Price of each class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this Section 3.
(d) This Section 3.1 shall not apply to any transaction to which
Section 3.2 is applicable.
3.2 Certain Transactions. If the Company consolidates or merges with
or into, or sells, transfers or leases all or substantially all its assets to,
any Person, upon consummation of such transaction this Warrant shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the Holder of a Warrant would have owned immediately after
the consolidation, merger, sale, transfer or lease if the Holder had exercised
the Warrant immediately before the effective date of such transaction.
Concurrently with the consummation of such transaction, the Person formed by or
surviving any such consolidation or merger (if other than the Company), or the
Person to which such sale, transfer or lease shall have been made, shall enter
into a supplemental Warrant so providing and further providing for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
provided for in Section 3. The successor Person shall send to the Holder a
notice describing the supplemental Warrant. If the issuer of securities
deliverable upon exercise of the supplemental Warrant is an Affiliate (as
defined in Section 13) of the formed, surviving, transferee or lessee Person,
that issuer shall join in the supplemental Warrant Agreement.
3.3 Company Determination Final. Any determination that the Company
or the Board of Directors of the Company must make pursuant this Section 3 shall
be evidenced in a Board resolution, a copy of which shall be sent to the Holder.
3.4 Notices to Holder. (a) Upon any adjustment of the Exercise Price
pursuant to this Section 3, the Company shall promptly thereafter (i) cause a
certificate to be executed by the President, or any Vice President, and by the
Chief Financial Officer (or his functional equivalent, however titled) setting
forth the Exercise Price after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon
-4-
which such calculations are based and setting forth the number of Warrant Shares
issuable after such adjustment in the Exercise Price, upon exercise of the
Warrant in full and payment of the adjusted Exercise Price, which certificate
shall be conclusive evidence of the correctness of the matters set forth
therein, and (ii) notify the Holder of such adjustments by sending him a copy of
the certificate referenced in the preceding clause (i). Where appropriate, such
notice may be given in advance.
(b) The failure to give the notice required by this Section 3.4
or any defect therein shall not affect the legality or validity of the
transaction to which it relates.
4. Payment of Taxes. The Company shall pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Shares upon exercise of
the Warrant. The Company shall not, however, be required to pay any tax or taxes
which may be payable in respect of any transfer involved in the issuance and
delivery of this Warrant, or any supplemental or replacement Warrant, or any
certificate for Warrant Shares or other securities in a name other than that of
CRW Financial, Inc., and the Company shall not be required to issue or deliver
any such supplemental or replacement Warrants or certificates unless and until
the Person(s) requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
5. Certain Covenants. (a) The Company shall at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its authorized and issued Common Stock
held in its treasury, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon exercise of this Warrant, the maximum number of
Warrant Shares which may then be deliverable upon the exercise in full of this
Warrant.
(b) The Company shall cause all Warrant Shares to be listed on each
national securities exchange or securities quotation system, if any, on which
the other outstanding shares of Common Stock of the Company are then listed or
quoted.
(c) The Company shall (i) use its best efforts to comply with the
current public information requirements of Rule 144 ("Rule 144") under the 1933
Act and (ii) at all times Rule 144 is available for use by Holder, furnish the
Holder upon request with all information within the possession of the Company,
required for the preparation and filing of Rule 144.
-5-
6. Representations and Warranties.
(a) The Company hereby represents and warrants to the Holder as
follows:
(i) This Warrant has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed by a duly
authorized officer of the Company and constitutes a valid and binding obligation
of the Company.
(ii) Neither the execution and delivery of this Warrant, nor the
consummation of the transactions contemplated hereby, will violate or result in
any violation of or be in conflict with or constitute a default under any term
of the charter or bylaws of the Company or of any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
the Company.
(iii) Upon exercise of this Warrant and payment of the Purchase
Price by the Holder in the manner set forth in Section 1.1, (i) the Warrant
Shares will be duly issued, fully paid and nonassessable shares of Common Stock
and free from all transfer or documentary taxes, liens and charges with respect
to the issuance thereof and (ii) the Holder shall receive valid title to all of
the Warrant Shares.
(b) The Holder hereby represents and warrants to the Company as
follows (which shall be affirmed by the Holder on the Exercise Date): this
Warrant and the Warrant Shares issuable upon exercise of the Warrant
(collectively, the "NCO Securities") are being acquired for Holder's own account
and not on behalf of any other person, for investment purposes only and not with
a view to, or for sale in connection with, any resale or distribution of the NCO
Securities. Holder has received and examined the Company's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission ("SEC")
on September 11, 1996, and all amendments thereto, and NCO's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1996, and reports and statements
filed since such date with the SEC. Holder has had the opportunity to ask
questions and receive answers from the Company concerning the Company, and has
been furnished with all other information about the Company which it has
requested. Holder believes that it has been fully apprised of all facts and
circumstances necessary to permit it to make an informed decision about
acquiring the NCO Securities, that it has sufficient knowledge and experience in
business and financial matters, that it is capable of evaluating the merits and
risks of an investment in the NCO Securities, and that it has the capacity to
protect its own interests in connection with the transactions contemplated
hereby. Holder has been advised by the Company and understands that (a) the NCO
Securities have not been registered under any securities Laws, including without
-6-
limitation, the securities Laws of the United States or the State of
Pennsylvania, (b) the NCO Securities must be held indefinitely unless and until
they are subsequently registered or an exemption from registration becomes
available, (c) the NCO Securities shall bear appropriate restrictive legends and
(d) the Company shall have the right to place a stop order against the NCO
Securities.
7. Holder; No Rights as Shareholder. The Holder shall be deemed the
owner of this Warrant for all purposes. The Holder shall not be entitled by
virtue of ownership of this Warrant to any rights whatsoever as a shareholder of
the Company with respect to the Common Stock issuable upon exercise of this
Warrant, either at law or in equity, including, without limitation, the right to
vote and to receive dividends and other distributions.
8. Restrictions on Transfer. (a) The Holder may not Transfer this
Warrant (as defined in Section 13) without the express prior written consent of
the Company which may be withheld in its sole and absolute discretion, and any
Transfer in violation of this Section 8(a) shall be void and of no force or
effect; provided, however, that the Company shall not unreasonably withhold its
consent to the transfer of this Warrant to any of the two executive officers of
CRW or to an Affiliate of CRW as of the date hereof. In the event that the
Company consents to any Transfer requested by the Holder to any Person (a
"Proposed Transferee"), such Transfer shall be further conditioned upon the
receipt of: (a) an opinion of counsel reasonably satisfactory to the Company
that such Transfer to a Proposed Transferee would not result in a violation of
the provisions of the Securities Act of 1933, as amended (the "Securities Act")
and applicable state securities laws and (b) the Proposed Transferee executes a
Standstill Agreement with the Company in form acceptable to the Company.
(b) In addition to the restrictions contained in the legend to be
placed on the Warrant Shares as set forth on Exhibit "B", the Holder may not
Transfer the Warrant Shares issuable upon exercise of this Warrant prior to
August 1, 1997 without the written consent of the Company which may be withheld
in its sole and absolute discretion and any Transfer in violation of this
Section 8(b) shall be void and of no force or effect; provided, however, that
the Company shall not unreasonably withhold its consent to the transfer of the
Warrant Shares to an executive officer of CRW or an Affiliate of CRW as of the
date hereof provided that such proposed transferee executes a Standstill
Agreement with the Company in form acceptable to the Company.
(c) Each Holder of this Warrant and any Warrant Shares issued upon
exercise of this Warrant, by taking or holding the same, consents to and agrees
to be bound by the provisions of this Section 8.
-7-
9. Lost Warrant. Upon receipt by the Company at its principal office of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and in the case of any such loss, theft, or
destruction, upon delivery of indemnity reasonably satisfactory to the Company
or, in case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company will issue a new Warrant of like tenor in lieu of this
Warrant.
10. Expiration. This Warrant, in all events, shall be wholly void and
have no effect after 5:00 P.M. (Philadelphia Time) on January 31, 2002.
11. Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, or (b) one
business day after being sent by a reputable overnight delivery service, postage
or delivery charges prepaid (provided that confirmation of delivery is obtained
from such service), to the parties at their respective addresses set forth
below:
If to the Company:
NCO Group, Inc.
0000 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, President
If to the Holder:
CRW Financial, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxx xx Xxxxxxx, XX 00000
Attention: J. Xxxxx X'Xxxxx
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided above. Any party may change its
address for notice and the address to which copies must be sent by giving notice
of the new addresses to the other parties in accordance with this Section 10,
except that any such change of address notice shall not be effective unless and
until received.
12. Severability. In the event that one or more of the provisions of
this Warrant shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity,
-8-
illegality or unenforceability shall not affect any other provision of this
Warrant, but this Warrant shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be entirely performed within such Commonwealth without
giving effect to principles of conflicts of laws.
14. Definitions. As used in this Agreement:
(a) "Affiliate" means any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified. The terms "control," "controlled by"
and "under common control with" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, as general partner,
as a limited partner with a right to receive 50% or more of the income or assets
of a limited partnership, by contract or otherwise.
(b) "Market Price" means, (a) the last sale price for the Common
Stock on the principal securities exchange on which the Common Stock is listed
or admitted to trading, or (b) if not so listed or admitted to trading on any
securities exchange, the last sale price, or in the absence of a last sale
price, the closing bid price, for the Common Stock on The Nasdaq Stock Market,
or (c) if the Common Shares shall not be listed on Nasdaq, the closing bid price
in the over-the-counter market, in each such case averaged over a period of 20
consecutive trading days ending on the trading day prior to the Exercise Date.
If at any time the Common Stock is not listed on any such exchange or such
System or quoted in the over-the-counter market, the Market Price of the Common
Stock shall be deemed to be the higher of (1) the book value thereof, as
determined in accordance with generally accepted accounting principles
consistent with those then being applied by the Company by any firm of
independent certified public accountants (which may be the regular auditors of
the Company) of recognized national standing selected by the Board of Directors
of the Company, as of the last day of the month ending within 31 days preceding
the Exercise Date, and (ii) the fair market value thereof, as determined in good
faith by an independent brokerage firm, Standard & Poor's Corporation or Xxxxx'x
Investors Service, as of a date which is within 15 days preceding the Exercise
Date.
(c) "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, association, cooperative,
-9-
trust, estate, governmental body, administrative agency, regulatory authority or
other entity of any nature.
(d) "Transfer" means the disposing of or parting with all or any
portion of an interest (legal or equitable) by any means, direct or indirect,
absolute or conditional, voluntary or involuntary, including, but not limited
to, by sale, assignment, disposition, court order, operation of law,
dissolution, merger, consolidation, division, spin-off, dividend, distribution,
equitable or other distribution after divorce or separation, settlement,
exchange, waiver, abandonment, gift, alienation, bequest, pledge, hypothecation,
encumbrance or disposal.
15. Neutral Construction. The parties have negotiated this Warrant and
all of the terms and conditions contained in this Warrant in good faith and at
arms' length, and each party has been represented by counsel during such
negotiations. No term, condition, or provision contained in this Agreement shall
be construed against any party or in favor of any party (i) because such party
or such party's counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (ii) because of any presumption as
to any inequality of bargaining power between or among the parties. Furthermore,
all terms, conditions, and provisions contained in this Warrant shall be
construed and interpreted in a manner which is consistent with all other terms,
conditions, and provisions contained in this Warrant.
IN WITNESS WHEREOF, NCO GROUP, INC., has caused this Warrant to be
signed by its duly authorized officer and dated as of February 2, 1997.
NCO GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxx,
President
Agreed to and Accepted:
CRW FINANCIAL, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
--------------------------
Title: CFO
-----------------------
-10-
EXHIBIT "A"
-------------
FORM OF EXERCISE
------------------
(to be executed by the Holder)
The Holder hereby exercises its rights to subscribe for and purchase
________ shares of common stock, no par value, ("Common Stock"), of NCO GROUP,
INC. evidenced by the attached Warrant, hereby affirms that the representations
and warranties set forth in Section 6(b) are true and correct on the date hereof
as if made on and as of the date hereof, and herewith makes payment of the
Purchase Price of $ _______________ therefor in full. Please issue a certificate
in the name of the Holder for the Common Stock in accordance with the
instructions given below.
Dated:______________________ __________________________
Signature of Holder
Instructions for registration of shares
Social Security or Employer Identification
Number of Holder:_____________________
Address of Holder:
_________________________________
Street
_________________________________
City, State and Zip Code
EXHIBIT "B"
-------------
Form of Restrictive Legend
To Be Imprinted On Warrant Shares
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER
THEREOF SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT WITH RESPECT TO SUCH SHARES SHALL HAVE BECOME EFFECTIVE."
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON "TRANSFER" AS DEFINED IN AND SET FORTH IN A
REGISTRATION RIGHTS AGREEMENT, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY."
