Filed with the Securities and Exchange Commission on May 3, 2004
Registration No. 333-112711-02
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2 ON FORM S-3
TO FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933*
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NCO GROUP, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania
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(State or other jurisdiction
of incorporation or organization)
23-2858652
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(I.R.S. Employer
Identification Number)
507 Prudential Road
Horsham, Pennsylvania 19044
(215) 441-3000
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(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Michael J. Barrist
President and Chief Executive Officer
NCO Group, Inc.
507 Prudential Road
Horsham, Pennsylvania 19044
(215) 441-3000
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Lawrence R. Wiseman, Esq.
Melissa Palat Murawsky, Esq.
Blank Rome LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Telephone: (215) 569-5500
Fax: (215) 569-5555
Approximate date of commencement of sale to the public: As soon as
practicable after the effective date of this registration statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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* Filed as a Post-Effective Amendment on Form S-3 to such Form S-4
Registration Statement pursuant to the procedure described in "Introductory
Statement."
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Calculation of Registration Fee
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price Per Share Aggregate Offering Price Registration Fee
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Shares of common stock, no par value,
underlying warrants 142,223 (1) (2) (2) (2)
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(1) This Registration Statement covers 142,223 shares of NCO common stock
issuable upon exercise of warrants held by certain selling shareholders of which
shares may be offered from time to time by the selling shareholders.
(2) Not applicable. All filing fees payable in connection with the
registration of the issuance of these securities were paid in connection with
the filing of our Form S-4 Registration Statement (No. 333-112711) on February
11, 2004.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion, dated May 3, 2004
PROSPECTUS
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[GRAPHIC OMITTED]
NCO Group, Inc.
507 Prudential Road
Horsham, Pennsylvania 19044
(215) 441-3000
142,223 Shares
Common Stock
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Our shareholders listed in this prospectus under the title "Selling
Shareholders" are offering and selling 142,223 shares of our common stock
pursuant to this prospectus. The shares of common stock being sold pursuant to
this prospectus are issuable upon exercise of warrants which were assumed by us
in the acquisition of RMH Teleservices, Inc. on April 2, 2004. We may receive
proceeds upon exercise of these warrants; however, we will not receive any
proceeds from the sale of our common stock by the selling shareholders. The
shares will be sold, if at all, at prevailing market prices for our common stock
or at prices negotiated by the selling shareholders.
Our common stock trades on the Nasdaq National Market under the symbol
NCOG. On April 29, 2004 the last reported sale price of our common stock was
$22.74 per share.
Prospective purchasers should consider the "Risk Factors" beginning on
page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is [ ], 2004
Table of Contents
Introductory Statement....................................................... 4
Forward-Looking Statements................................................... 4
The Company.................................................................. 5
Risk Factors................................................................. 6
Where You Can Find More Information..........................................19
Use of Proceeds..............................................................19
Selling Shareholders.........................................................20
Plan of Distribution.........................................................22
Legal Matters................................................................24
Experts ....................................................................24
You should rely only on the information incorporated by reference or provided in
this prospectus. We have not authorized anyone else to provide you with
different information. The selling shareholders will not make an offer of these
shares in any state where the offer is not permitted. You should not assume that
the information in this prospectus is accurate as of any date other than the
date on the front page of this prospectus.
3
Introductory Statement
NCO Group, Inc. hereby amends its registration statement on Form S-4
(No. 333-112711) by filing this Post-Effective Amendment No. 2 on Form S-3 with
respect to up to 142,223 shares of NCO's common stock issuable in connection
with the exercise of certain warrants which were assumed by us in our
acquisition of RMH Teleservices, Inc. on April 2, 2004. All of the shares being
offered hereby are issuable upon the exercise of warrants which were originally
issued by RMH in connection with a private placement completed on October 3,
2003. The shares being offered hereby are also referred to as Warrant Shares.
All 142,223 shares of common stock were previously included in the registration
statement on Form S-4.
In consideration of the merger, excluding outstanding options and
warrants, the shareholders of RMH received a total of approximately 3.5 million
shares of NCO common stock in exchange for all of the outstanding shares of
capital stock of RMH. Also, as a result of the merger, all outstanding options
and warrants to acquire shares of RMH common stock immediately before the
consummation of the merger continue in effect after the merger as options and
warrants to purchase NCO common stock, subject to the adjustments stated below.
Upon the consummation of the merger, each RMH stock option and each RMH warrant
was automatically adjusted to provide that:
o the number of shares of NCO common stock issuable upon the
exercise of the RMH option or warrant is equal to the number of
shares of RMH common stock which would have been issued upon
exercise of the RMH option or warrant immediately before the
consummation of the merger, multiplied by 0.2150 and rounded off
to the nearest whole number of shares; and
o the exercise price per share of NCO common stock under the RMH
option or warrant is the amount equal to the exercise price per
share under the RMH stock option or warrant immediately before the
consummation of the merger, divided by 0.2150 and rounded up to
the nearest whole cent.
The designation of this Post-Effective Amendment No. 2 on Form S-3 as
Registration No. 333-112711-02 denotes that this registration statement relates
only to the resale of the Warrant Shares. This Post-Effective Amendment No. 2 on
Form S-3 shall have no effect on Post-Effective Amendment No. 1 on Form S-8 (the
"Form S-8") (Registration No. 333-112711-01) filed by NCO on April 20, 2004
related to shares of NCO common stock issuable pursuant to the RMH Teleservices,
Inc. Amended and Restated 1996 Stock Incentive Plan, which Form S-8 shall
continue in full force and effect.
Forward-Looking Statements
Some of the information in this prospectus may contain forward-looking
statements. Forward-looking statements can be identified by the use of
forward-looking language such as "will likely result," "may," "are expected to,"
"is anticipated," "estimate," "projected," "intends to" or other similar words.
These forward-looking statements are subject to certain risks and uncertainties,
including but not limited to the risks described below. See "Risk Factors" on
page 6. When considering the forward-looking statements, you should keep in mind
these risk factors and other cautionary statements in this prospectus. You
should not place undue reliance on any forward-looking statement which speaks
only as of the date made.
4
The Company
Background
We are the largest provider of accounts receivable management and
collection services in the world. We provide services to clients in the
financial services, healthcare, retail and commercial telecommunications,
utilities, education and government sectors. As a result of our acquisition of
RMH on April 2, 2004, we also provide outsourced customer relationship
management services to major corporations in the technology, telecommunications,
financial services, insurance, retail, transportation and logistics industries.
Address and Telephone Number of NCO
Our executive offices are located at 507 Prudential Road, Horsham, PA
19044 and our telephone number is (215) 441-3000.
5
Risk Factors
In considering whether to acquire shares of our common stock, you should
consider carefully the risks associated with the ownership of our common stock.
These risks are described in detail below.
Risks Related to Our Business
Decreases in our collections due to the economic condition in the United States
may have an adverse effect on our results of operations, revenue and stock
price.
Due to the economic condition in the United States, which has led to
high rates of unemployment and personal bankruptcy filings, the ability of
consumers to pay their debts has significantly decreased. Defaulted consumer
loans that we service or purchase are generally unsecured, and we may be unable
to collect these loans in case of the personal bankruptcy of a consumer. Because
of higher unemployment rates and bankruptcy filings, our collections may
significantly decline, which may adversely impact our results of operations,
revenue and stock price.
Terrorist attacks, war and threats of attacks and war may adversely impact our
results of operations, revenue and stock price.
Terrorist attacks, war and threats of attacks and war may adversely
impact our results of operations, revenue and stock price. Recent terrorist
attacks in the United States and on U.S. targets abroad, as well as future
events occurring in response or in connection to them, including, without
limitation, future terrorist attacks against U.S. targets and threats of war or
actual conflicts involving the United States or its allies, may adversely impact
our operations, including affecting our ability to collect our clients' accounts
receivable. More generally, any of these events could cause consumer confidence
and spending to decrease or result in increased volatility in the economy. They
could also result in an adverse effect on the economy of the United States. Any
of these occurrences could have a material adverse effect on our results of
operations, collections and revenue, and may result in the volatility of the
market price for our common stock.
Our business is dependent on our ability to grow internally.
Our business is dependent on our ability to grow internally, which is
dependent upon:
o our ability to retain existing clients and expand our existing
client relationships; and
o our ability to attract new clients.
Our ability to retain existing clients and expand those relationships
is subject to a number of risks, including the risk that:
o we fail to maintain the quality of services we provide to our
clients;
o we fail to maintain the level of attention expected by our
clients; and
o we fail to successfully leverage our existing client relationships
to sell additional services.
6
Our ability to attract new clients is subject to a number of risks,
including:
o the market acceptance of our service offerings;
o the quality and effectiveness of our sales force; and
o the competitive factors within the accounts receivable management
and collection industry.
If our efforts to retain and expand our client relationships and to
attract new clients do not prove effective, it could have a materially adverse
effect on our business, results of operations and financial condition.
Implementation of an enterprise resource planning system could cause business
interruptions and negatively affect our profitability and cash flows.
We are planning to begin the process of implementing an enterprise
resource planning, referred to as ERP, system in 2004 to improve customer
service, enhance operating efficiencies, and provide more effective management
of business operations. This implementation will enable us to better meet both
the changing standards of industry technology and the needs of our customer
base. Implementation of ERP systems and software carry risks such as cost
overruns, project delays, business interruptions and delays, and the diversion
of management's attention from operations. These risks could adversely affect
us, and could have a material adverse effect on our business, results of
operations, financial condition and cash flows.
If we are not able to respond to technological changes in telecommunications and
computer systems in a timely manner, we may not be able to remain competitive.
Our success depends in large part on our sophisticated
telecommunications and computer systems. We use these systems to identify and
contact large numbers of debtors and record the results of our collection
efforts. If we are not able to respond to technological changes in
telecommunications and computer systems in a timely manner, we may not be able
to remain competitive. We have made a significant investment in technology to
remain competitive and we anticipate that it will be necessary to continue to do
so in the future. Telecommunications and computer technologies are changing
rapidly and are characterized by short product life cycles, so we must
anticipate technological developments. If we are not successful in anticipating,
managing, or adopting technological changes on a timely basis or if we do not
have the capital resources available to invest in new technologies, our business
could be materially adversely affected.
We are highly dependent on our telecommunications and computer systems.
As noted above, our business is highly dependent on our
telecommunications and computer systems. These systems could be interrupted by
terrorist acts, natural disasters, power losses, or similar events. Our business
is also materially dependent on services provided by various local and long
distance telephone companies. If our equipment or systems cease to work or
become unavailable, or if there is any significant interruption in telephone
services, we may be prevented from providing services. Because we generally
recognize income only as accounts are collected, any failure or interruption of
services would mean that we would continue to incur payroll and other expenses
without any corresponding income.
7
We compete with a large number of providers in the accounts receivable
management and collection industry. This competition could have a materially
adverse effect on our future financial results.
We compete with a large number of companies in providing accounts
receivable management and collection services. We compete with other sizable
corporations in the United States and abroad such as Outsourcing Solutions,
Inc., IntelliRisk Management Corporation, Risk Management Alternatives, Inc.,
and GC Services LP, as well as many regional and local firms. We may lose
business to competitors that offer more diversified services and/or operate in
broader geographic areas than we do. We may also lose business to regional or
local firms who are able to use their proximity to or contacts at local clients
as a marketing advantage. In addition, many companies perform the accounts
receivable management and collection services offered by us in-house. Many
larger clients retain multiple accounts receivable management and collection
providers, which exposes us to continuous competition in order to remain a
preferred provider. Because of this competition, in the future we may have to
reduce our collection fees to remain competitive and this competition could have
a materially adverse effect on our future financial results.
Many of our clients are concentrated in the financial services and healthcare
sectors. If either of these sectors performs poorly or if there are any adverse
trends in these sectors it could materially adversely affect us.
For the year ended December 31, 2003, we derived approximately 40.0% of
our revenue, excluding purchased accounts receivable, from clients in the
financial services sector, and approximately 23.2% of our revenue from clients
in the healthcare sector. If either of these sectors performs poorly, clients in
these sectors may have fewer or smaller accounts to refer to us, or they may
elect to perform accounts receivable management and collection services
in-house. If there are any trends in any of these sectors to reduce or eliminate
the use of third-party accounts receivable management and collection services,
the volume of referrals we receive could decrease.
We have international operations and various factors relating to our
international operations could affect our results of operations.
We operate in Canada and the United Kingdom. Approximately 5.4% of our
2003 revenues were derived from Canada and the United Kingdom. Political or
economic instability in Canada or the United Kingdom could have an adverse
impact on our results of operations due to diminished revenues in these
countries. Our future revenue, costs of operations and profit results could be
affected by a number of factors related to our international operations,
including changes in foreign currency exchange rates, changes in economic
conditions from country to country, changes in a country's political condition,
trade protection measures, licensing and other legal requirements, and local tax
issues.
Unanticipated currency fluctuations in the Canadian Dollar, British
Pound or Euro could lead to lower reported consolidated results of operations
due to the translation of these currencies into U.S. dollars when we consolidate
our financial results. In addition, we provide services to our U.S. clients
through call centers in India and Barbados. The employees of the call centers
are hired through a subcontractor. Any political or economic instability in
India or Barbados could have an adverse impact on our results of operations.
8
Most of our contracts do not require clients to place accounts with us, may be
terminated on 30 or 60 days notice and are on a contingent fee basis. We cannot
guarantee that existing clients will continue to use our services at historical
levels, if at all.
Under the terms of most of our contracts, clients are not required to
give accounts to us for collection and usually have the right to terminate our
services on 30 or 60 days notice. Accordingly, we cannot guarantee that existing
clients will continue to use our services at historical levels, if at all. In
addition, most of these contracts provide that we are entitled to be paid only
when we collect accounts. Therefore, under applicable accounting principles, we
can recognize revenues only upon the collection of funds on behalf of clients.
Our success depends on our senior management team and if we are not able to
retain them, it could have a materially adverse effect on us.
We are highly dependent upon the continued services and experience of
our senior management team, including Michael J. Barrist, our chairman,
president and chief executive officer. We depend on the services of Mr. Barrist
and the other members of our senior management team to, among other things,
continue the development and implementation of our growth strategies, and
maintain and develop our client relationships.
We may seek to make strategic acquisitions of companies. Acquisitions involve
additional risks that may adversely affect us.
We may be unable to make acquisitions because suitable companies in the
accounts receivable management and collection business or the business process
outsourcing business are not available at favorable prices due to increased
competition for these companies.
We may have to borrow money, incur liabilities, or sell or issue stock
to pay for future acquisitions and we may not be able to do so at all or on
terms favorable to us. Additional borrowings and liabilities may have a
materially adverse effect on our liquidity and capital resources. If we issue
stock for all or a portion of the purchase price for future acquisitions, our
shareholders' ownership interest may be diluted. If the price of our common
stock decreases or potential sellers are not willing to accept our common stock
as payment for the sale of their businesses, we may be required to use more of
our cash resources, if available, in order to continue our acquisition program.
Completing acquisitions involves a number of risks, including diverting
management's attention from our daily operations and other additional
management, operational and financial resources. We might not be able to
successfully integrate future acquisitions into our business or operate the
acquired businesses profitably, and we may be subject to unanticipated problems
and liabilities of acquired companies.
We are dependent on our employees and a higher turnover rate would have a
material adverse effect on us.
We are dependent on our ability to attract, hire and retain qualified
employees. The accounts receivable management and collection industry
experiences a high employee turnover rate. Many of our employees receive modest
hourly wages and some of these employees are employed on a part-time basis. A
higher turnover rate among our employees would increase our recruiting and
training costs and could materially adversely impact the quality of services we
provide to our clients. If we were unable to recruit and retain a sufficient
number of employees, we would be forced to limit our growth or possibly curtail
our operations. Growth in our business will require us to recruit and train
qualified personnel at an accelerated rate from time to time. We cannot assure
you that we will be able to continue to hire, train and retain a sufficient
number of qualified employees. Any increase in hourly wages, costs of employee
benefits or employment taxes also could materially adversely affect us.
9
Our employees are not represented by a labor union. If our employees
attempt to organize a labor union, and are successful, this could increase our
recruiting and training costs and could decrease our operating efficiency and
productivity.
If we fail to comply with government regulation of the collections industry, it
could result in the suspension or termination of our ability to conduct
business.
The collections industry is regulated under various U.S. federal and
state, Canadian and United Kingdom laws and regulations. Many U.S. states, as
well as Canada and the United Kingdom, require that we be licensed as a debt
collection company. The Federal Trade Commission has the authority to
investigate consumer complaints against debt collection companies and to
recommend enforcement actions and seek monetary penalties. If we fail to comply
with applicable laws and regulations, it could result in the suspension or
termination of our ability to conduct collections, which would materially
adversely affect us. In addition, new federal, state or foreign laws or
regulations, or changes in the ways these rules or laws are interpreted or
enforced, could limit our activities in the future or significantly increase the
cost of regulatory compliance. If we expand our international operations, we may
become subject to additional government controls and regulations in other
countries, which may be stricter or more burdensome than those in the United
States.
Several of the industries we serve are also subject to varying degrees
of government regulation. Although our clients are generally responsible for
complying with these regulations, we could be subject to various enforcement or
private actions for our failure, or the failure of our clients, to comply with
these regulations.
We may experience variations from quarter to quarter in operating results and
net income that could adversely affect the price of our common stock.
Factors that could cause quarterly fluctuations include, among other
things, the following:
o the timing of our clients' accounts receivable management and
collection programs and the commencement of new contracts and
termination of existing contracts;
o the timing and amount of collections on purchased accounts
receivable;
o customer contracts that require us to incur costs in periods prior
to recognizing revenue under those contracts;
o the effects of a change of business mix on profit margins;
o the timing of additional selling, general and administrative
expenses to support new business;
o the costs and timing of completion and integration of
acquisitions; and
o the tendency for our business to be slower in the third and fourth
quarters of the year due to the summer and holiday seasons.
10
If we do not achieve the results projected in our public forecasts, it could
have a materially adverse effect on the market price of our common stock.
We routinely publicly announce investor guidance concerning our
expected results of operations. Our investor guidance contains forward-looking
statements and may be affected by various factors discussed in "Risk Factors"
and in our Annual Report on Form 10-K that may cause actual results to differ
materially from the results discussed in the investor guidance. Our investor
guidance reflects numerous assumptions, including our anticipated future
performance, general business and economic conditions and other matters, some of
which are beyond our control. In addition, unanticipated events and
circumstances may affect our actual financial results. Our investor guidance is
not a guarantee of future performance and the actual results throughout the
periods covered by the investor guidance may vary from the projected results. If
we do not achieve the results projected in our investor guidance, it could have
a materially adverse effect on the market price of our common stock.
In connection with past and future acquisitions, merger related accounting
impairment and amortization charges might reduce our profitability.
Under generally accepted accounting principles, acquired assets and
assumed liabilities of acquired companies are recorded on our books at their
fair values at the date the acquisition is completed. Any excess of the value of
the consideration paid by us at the date the acquisition was completed over the
fair value of the identifiable tangible and intangible assets of the acquired
company, including customer lists, will be treated as excess of purchase price
over the fair value of net assets acquired (commonly known as goodwill).
Goodwill is not amortized for accounting purposes. However, the amounts
allocable to certain identifiable intangible assets, including customer lists,
are amortized over their respective useful lives. As a result, we may incur
substantial accounting amortization charges that will affect our profitability.
In addition, if in the future the book value of the goodwill is in excess of its
fair value or we lose a significant client of the acquired company, we may need
to record an impairment charge to reduce goodwill or the customer list to its
fair value.
Goodwill represented 53.5% of our total assets at December 31, 2003. If the
goodwill is deemed to be impaired, we may need to take a charge to earnings to
write-down the goodwill to its fair value.
Our balance sheet includes goodwill, which represents the excess of
purchase price over the fair market value of the net assets of the acquired
businesses based on their respective fair values at the date of acquisition.
Effective January 1, 2002, we adopted Statement of Financial Accounting
Standard No. 142, "Goodwill and Other Intangibles," referred to as SFAS 142. As
a result of adopting SFAS 142, we no longer amortize goodwill. Goodwill must be
tested at least annually for impairment. The annual impairment test will be
completed as of October 1st of each year. The test for impairment uses a fair
value based approach, whereby if the implied fair value of a reporting unit's
goodwill is less than its carrying amount, goodwill would be considered
impaired. We make significant assumptions to estimate the future revenue and
cash flows used to determine the fair value of our reporting units. If the
expected revenue and cash flows are not realized or if a sustained significant
depression in our market capitalization indicates that our assumptions are not
accurately estimating our fair value, impairment losses may be recorded in the
future.
As of December 31, 2003, our balance sheet included goodwill that
represented 53.5% of total assets and 103.3 % of shareholders' equity. If the
goodwill is deemed to be impaired under SFAS 142, we may need to take a charge
to earnings to write-down the goodwill to its fair value and this could have a
materially adverse effect on the market price of our common stock.
11
You should be aware that our earnings for periods beginning after
December 31, 2001, do not include charges for the amortization of goodwill and
you should consider this when comparing such earnings with historical earnings
for periods ended on or before December 31, 2001, which included goodwill
amortization charges.
Our stock price has been and is likely to continue to be volatile, which may
make it difficult for shareholders to resell common stock when they want to and
at prices they find attractive.
The trading price of our common stock has been and is likely to be
highly volatile. Our stock price could be subject to wide fluctuations in
response to a variety of factors, including the following:
o announcements of fluctuations in our or our competitors' operating
results;
o the timing and announcement of acquisitions by us or our
competitors;
o changes in our publicly available guidance of future results of
operations;
o government regulatory action;
o changes in estimates or recommendations by securities analysts;
o adverse or unfavorable publicity about us or our services;
o the commencement of material litigation, or an unfavorable
verdict, against us;
o terrorist attacks, war and threats of attacks and war;
o additions or departures of key personnel; and
o sales of common stock.
In addition, the stock market in recent years has experienced
significant price and volume fluctuations. Such volatility and decline have
affected many companies irrespective of, or disproportionately to, the operating
performance of these companies. These broad fluctuations may materially
adversely affect the market price of our common stock.
Most of our outstanding shares are available for resale in the public market
without restriction. The sale of a large number of these shares could adversely
affect our stock price and could impair our ability to raise capital through the
sale of equity securities or make acquisitions for stock.
Sales of our common stock could adversely affect the market price of
our common stock and could impair our future ability to raise capital through
the sale of equity securities or make acquisitions for stock. As of April 19,
2004, there were 31,338,000 shares of our common stock outstanding. Most of
these shares are available for resale in the public market without restriction,
except for shares held by our affiliates. Generally, our affiliates may either
sell their shares under a registration statement or in compliance with the
volume limitations and other requirements imposed by Rule 144 adopted by the
SEC.
12
In connection with the acquisitions of RMH on April 2, 2004 and the
minority interest of NCO Portfolio Management, Inc. on March 26, 2004, we issued
approximately 5.3 million shares of common stock. All of these shares are
available for resale in the public market, except that shares issued in the RMH
merger to RMH shareholders who entered into lock up agreements with us and
shares issued in the mergers to shareholders who were affiliates of RMH or NCO
Portfolio before the mergers or who became affiliates of us after the merger,
are subject to certain restrictions on transferability. As a result of future
sales of such common stock, or the perception that these sales could occur, the
market price of our common stock may decline and could decline significantly.
In addition, as of April 19, 2004, we had the authority to issue up to
approximately 4,691,793 shares of our common stock under our stock option plans.
We also had outstanding notes convertible into an aggregate of 3,797,084 shares
of our common stock at a conversion price of $32.92 per share. Additionally, we
had outstanding warrants to purchase approximately 360,565 shares of our common
stock.
"Anti-takeover" provisions may make it more difficult for a third party to
acquire control of us, even if the change in control would be beneficial to
shareholders.
We are a Pennsylvania corporation. Anti-takeover provisions in
Pennsylvania law and our charter and bylaws could make it more difficult for a
third party to acquire control of us. These provisions could adversely affect
the market price of our common stock and could reduce the amount that
shareholders might receive if we are sold. For example, our charter provides
that our board of directors may issue up to 5,000,000 shares of preferred stock
without shareholder approval. In addition, our bylaws provide for a classified
board, with each board member serving a staggered three-year term. Directors may
be removed only for cause and only with the approval of the holders of at least
65% of our common stock.
Collections may not be sufficient to recover the cost of investments in
purchased accounts receivable.
We purchase past due accounts receivable generated primarily by
consumer credit transactions. These are obligations that the individual consumer
has failed to pay when due. The accounts receivable are purchased from consumer
creditors such as banks, finance companies, retail merchants, hospitals,
utilities, and other consumer-oriented companies. Substantially all of the
accounts receivable consist of account balances that the credit grantor has made
numerous attempts to collect, has subsequently deemed uncollectable, and charged
off its books. After purchase, collections on accounts receivable could be
reduced by consumer bankruptcy filings, which have been on the rise. The
accounts receivable are purchased at a significant discount, typically less than
10% of face value, to the amount the customer owes and, although we estimate
that the recoveries on the accounts receivable will be in excess of the amount
paid for the accounts receivable, actual recoveries on the accounts receivable
will vary and may be less than the amount expected, and may even be less than
the purchase price paid for such accounts. The timing or amounts to be collected
on those accounts receivable cannot be assured. If cash flows from operations
are less than anticipated as a result of our inability to collect the purchased
accounts receivable, we may not be able to purchase new accounts receivable and
our future growth and profitability will be materially adversely affected.
We use estimates in reporting results of purchased accounts receivable. If
collections on portfolios are materially less than expected, we may be required
to record impairment expenses that could have a materially adverse effect on us.
Our revenue from purchased accounts receivable is recognized based on
estimates of future collections on portfolios of accounts receivable purchased.
Although estimates are based on analytics, the actual amount collected on
portfolios and the timing of those collections will differ from our estimates.
If collections on portfolios are materially less than estimated, we may be
required to record impairment expenses that will reduce earnings and could
materially adversely affect our earnings, financial condition and
creditworthiness.
13
We may be adversely affected by possible shortages of available
accounts receivable for purchase at favorable prices. The availability of
portfolios of past due consumer accounts receivable for purchase at favorable
prices depends on a number of factors outside of our control, including the
continuation of the current growth trend in consumer debt and competitive
factors affecting potential purchasers and sellers of portfolios of accounts
receivable. The growth in consumer debt may also be affected by changes in
credit grantors' underwriting criteria and regulations governing consumer
lending. Any slowing of the consumer debt growth trend could result in less
credit being extended by credit grantors. Consequently, fewer delinquent
accounts receivable could be available at prices that we find attractive. If
competitors raise the prices they are willing to pay for portfolios of accounts
receivable above those we wish to pay, we may be unable to buy the type and
quantity of past due accounts receivable at prices consistent with its historic
return targets. In addition, we may overpay for portfolios of delinquent
accounts receivable, which may have a materially adverse effect on our financial
results.
We may be unable to compete with other purchasers of past due accounts
receivable, which may have an adverse effect on our financial results.
We face bidding competition in our acquisitions of portfolios of past
due consumer accounts receivable. Some of our existing competitors and potential
new competitors may have greater financial and other resources that allow them
to offer higher prices for the accounts receivable portfolios. New purchasers of
such portfolios entering the market also cause upward price pressures. We may
not have the resources or ability to compete successfully with our existing and
potential new competitors. To remain competitive, we may have to increase our
bidding prices, which may have an adverse impact on our financial results.
Risks Related to RMH's Business
On April 2, 2004 we acquired RMH. RMH is engaged in the outsourced
customer relationship management business, also referred to as CRM. RMH has
additional business risks that may have an adverse effect on the combined
company.
RMH has incurred significant losses in recent years. RMH's financial condition
and results of operations could have an adverse effect on us.
RMH incurred significant losses in its fiscal 2003, 2002 and 2001
primarily as a result of bad debt expenses, impairment and restructuring
charges, a charge associated with projected minimum purchase requirements under
agreements with telephone long distance carriers related to the migration from
outbound to inbound CRM services, underutilization of capacity, and unfavorable
currency exchange rates between the United States and Canada which have resulted
in higher operating costs in Canada to support clients in the United States. RMH
incurred a significant loss in the quarter ended December 31, 2003 primarily as
a result of a decline in billable hours resulting from the timing of
telemarketing campaigns, reductions in outsourcing associated with recent
economic conditions, the impact of the Do-Not-Call Implementation Act, which
resulted in a continued decline in outbound customer relationship management
services, and continued unfavorable currency exchange rates between the United
States and Canada. In addition, RMH had a working capital deficit of $17,241,000
and $14,569,000 at December 31, 2003 and September 30, 2003, respectively. The
report of RMH's independent auditors on its financial statements for the year
ended September 30, 2003 states that RMH's recurring losses from operations,
uncertainty regarding the ability to remain in compliance with restrictive debt
covenants under the revolving credit facility, and uncertainty regarding the
ability to obtain additional financing to fund RMH's operations and capital
requirements raise substantial doubt about RMH's ability to continue as a going
concern. RMH's financial condition and results of operations could have an
adverse effect on us.
14
If we are not able to integrate RMH's operations into our business in a timely
manner, the anticipated benefits of the acquisition of RMH may not be realized
in a timely fashion, or at all, and our overall business may be adversely
affected.
The success of the RMH acquisition will depend, in part, on our ability
to realize the anticipated revenue enhancements, growth opportunities and
synergies of combining with RMH and to effectively utilize the resources we
have. The merger involves risks related to the integration and management of
acquired technology, operations and personnel. The integration of RMH's business
with ours will be a complex, time-consuming and potentially expensive process
and may disrupt our business if not completed in a timely and efficient manner.
Some of the difficulties that may be encountered by us include:
o integration of administrative, financial, and information
technology;
o efforts and resources and coordination of marketing and sales
efforts;
o restructuring and reorganization;
o maintaining client relationships;
o the diversion of management's attention from other ongoing
business concerns; and
o potential conflicts between business cultures.
If our management focuses too much time, money and effort to integrate
RMH's operations and assets with ours, they may not be able to execute our
overall business strategy or realize the anticipated benefits of the merger with
RMH.
RMH relies on a few major clients for a significant portion of its revenues. The
loss of any of these clients or their failure to pay RMH could reduce RMH's
revenues and adversely affect RMH's results of operations.
Substantial portions of RMH's revenues are generated from a few key
clients. One client, MCI WORLDCOM Communications, Inc. and MCI WORLDCOM Network
Services, Inc., each a subsidiary of WorldCom, Inc. and collectively referred to
as MCI, accounted for 34.2% of RMH's net revenues in 2003. MCI accounted for
32.0% and 32.5% of RMH's net revenues in the quarter ended December 31, 2003 and
the quarter ended December 31, 2002, respectively. In addition, two other
clients each accounted for over 10% of RMH's net revenues in 2003. Most of RMH's
clients are not contractually obligated to continue to use RMH's services at
historic levels or at all. If any of these clients were to significantly reduce
the amount of services RMH performs for them, fail to pay RMH, or terminate the
relationship altogether, RMH's revenues and business would be harmed.
On July 21, 2002, WorldCom, Inc. announced that it had filed for
voluntary relief under Chapter 11 of the United States Bankruptcy Code. While
RMH continued to provide services to MCI, these events create uncertainty about
RMH's future business relationship with MCI, which, if not resolved in a manner
favorable to RMH, could have a significant adverse impact on RMH's future
operating results and liquidity. In the event that RMH's business relationship
with MCI were to terminate, RMH's contracts with MCI call for certain wind-down
periods and the payment by RMH of certain termination fees, as defined in such
contracts, during which time RMH would seek new business volume. However,
replacing lost MCI business volume is subject to significant uncertainty, could
take substantially longer than the wind-down periods, and would be dependent on
a variety of factors which our management cannot predict at this time.
15
A decrease in demand for RMH's services in one or more of the industries to
which RMH provides services could reduce RMH's revenues and adversely affect
RMH's results of operations.
RMH's success is dependent in large part on continued demand for its
services from businesses within the telecommunications, financial services,
insurance, technology and logistics industries. A reduction in or the
elimination of the use of outsourced CRM services within any of these industries
could harm RMH's business.
An increase in communication rates or a significant interruption in
communication service could harm RMH's business.
RMH's ability to offer services at competitive rates is highly
dependent upon the cost of communication services provided by various local and
long distance telephone companies. Any change in the telecommunications market
that would affect RMH's ability to obtain favorable rates on communication
services could harm RMH's business. Moreover, any significant interruption in
communication service or developments that could limit the ability of telephone
companies to provide RMH with increased capacity in the future could harm RMH's
existing operations and prospects for future growth.
Fluctuations in currency exchange rates could adversely affect RMH's business.
A significant portion of RMH's business is conducted in Canada. RMH's
results of operations have been negatively impacted by the increase in the value
of the Canadian dollar in relation to the value of the U.S. dollar over the past
nine months, which has increased RMH's cost of doing business in Canada. Further
increases in the value of the Canadian dollar in relation to the value of the
U.S. dollar would further increase such costs and adversely affect RMH's results
of operations. In addition, RMH expects to expand its operations into other
countries and, accordingly, will face similar exchange rate risk with respect to
the costs of doing business in such countries as a result of any increases in
the value of the U.S. dollar in relation to the currencies of such countries.
There is no guarantee that RMH will be able to successfully hedge its foreign
currency exposure in the future.
RMH may not be able to effectively win business against its competition.
The CRM services industry is highly competitive. RMH competes with:
o the in-house CRM operations of its clients or potential clients;
o other outsourced CRM providers, some of which have greater
resources than RMH has; and
o providers of other marketing and CRM formats and, in particular,
other forms of direct marketing such as interactive shopping and
data collection through television, the internet and other media.
Many businesses that are significant consumers of CRM services use more
than one CRM services firm at a time and reallocate work among various firms
from time to time. RMH and other firms seeking to perform outsourced CRM
services are frequently required to compete with each other as individual
programs are initiated. We cannot be certain that RMH will be able to compete
effectively against its current competitors or that additional competitors, some
of which may have greater resources than RMH has, will not enter the industry
and compete effectively against it. As competition in the industry increases,
RMH may face increasing pressure on the prices for its services. RMH will face
continued pricing pressure as its competitors migrate call centers to lower cost
labor markets.
16
Consumer resistance to outbound services could harm the customer relationship
management services industry.
As the CRM services industry continues to grow, the effectiveness of
CRM services as a direct marketing tool may decrease as a result of consumer
saturation and increased consumer resistance to customer acquisition activities,
particularly direct sales.
Government regulation of the customer relationship management industry and the
industries RMH serves may increase RMH's costs and restrict the operation and
growth of RMH's business.
The CRM services industry is subject to an increasing amount of
regulation in the United States and Canada. Most of the statutes and regulations
in the United States allow a private right of action for the recovery of damages
or provide for enforcement by the Federal Trade Commission, state attorneys
general or state agencies permitting the recovery of significant civil or
criminal penalties, costs and attorneys' fees in the event that regulations are
violated. The Canadian Radio-Television and Telecommunications Commission
enforces rules regarding unsolicited communications using automatic dialing and
announcing devices, live voice and fax. We cannot assure you that RMH will be in
compliance with all applicable regulations at all times. We also cannot assure
you that new laws, if enacted, will not adversely affect or limit RMH's current
or future operations.
Several of the industries served by RMH, particularly the insurance,
financial services and telecommunications industries, are subject to government
regulation. RMH could be subject to a variety of private actions or regulatory
enforcement for RMH's failure or the failure of RMH's clients to comply with
these regulations. RMH's results of operations could be adversely impacted if
the effect of government regulation of the industries RMH serves is to reduce
the demand for RMH's services or expose RMH to potential liability. RMH and its
employees who sell insurance products are required to be licensed by various
state insurance commissions for the particular type of insurance product sold
and to participate in regular continuing education programs. RMH's participation
in these insurance programs requires RMH to comply with certain state
regulations, changes in which could materially increase RMH's operating costs
associated with complying with these regulations.
RMH may be unable to hire or retain qualified personnel.
By its nature, RMH's industry is labor intensive. CRM representatives,
who make up a significant portion of RMH's workforce, generally receive modest
hourly wages. RMH's recruiting and training costs are increased and RMH's
operating efficiency and productivity are decreased by:
o any increases in hourly wages, costs of employee benefits or
employment taxes;
o the high turnover rate experienced in RMH's industry;
o the high degree of training necessary for some of RMH's CRM
service offerings, particularly insurance product customer
acquisition and technology customer service;
o RMH's rapid growth; and
17
o competition for qualified personnel with other CRM service firms
and with other employers in labor markets in which RMH's customer
interaction centers are located.
Additionally, some of RMH's employees have attempted to organize a
labor union, which, if successful, could further increase RMH's recruiting and
training costs and could further decrease RMH's operating efficiency and
productivity. RMH may not be able to continue to cost-effectively recruit, train
and retain a sufficient number of qualified personnel to meet the needs of RMH's
business or to support RMH's growth. If RMH is unable to do so, RMH's results of
operations could be harmed.
18
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
and other information we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, NW, Washington, D.C., 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our
SEC filings are also available on the SEC's Internet site (http://www.sec.gov).
We have filed a post-effective amendment on Form S-3 to our
registration statement on Form S-4 to register the shares of our common stock
offered under this prospectus. This prospectus is a part of such registration
statement. As allowed by SEC rules, this prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement. The SEC also allows us to "incorporate by reference" the
information we file with the SEC, which means we can disclose information to you
by referring you to another document filed separately with the SEC. Information
incorporated by reference is deemed to be part of this prospectus. Later
information filed by us with the SEC updates and supersedes this prospectus.
This prospectus incorporates important business and financial
information about us that is not included in or delivered with this prospectus.
Copies of any such information are available without charge to any person to
whom this prospectus is delivered, upon written or oral request. Written
requests for such documents should be directed to Steven L. Winokur, Executive
Vice President, Finance; Chief Financial Officer; Chief Operating Officer of
Shared Services; and Treasurer, NCO Group, Inc., 507 Prudential Road, Horsham,
PA 19044 and telephone requests may be directed to Mr. Winokur at (215)
441-3000.
The following documents previously filed by NCO with the SEC pursuant
to the Exchange Act are incorporated in this prospectus by this reference:
SEC Filings Period
- --------------------------------------------- -----------------------------------------
Annual Report on Form 10-K Year ended December 31, 2003
Current Report on Form 8-K Filed on January 23, 2004, March 3, 2004,
March 29, 2004 and April 2, 2004
Registration Statement on Form 8-A filed
pursuant to Section 12(g) of the Exchange Act Filed on October 29, 1996
All documents filed by NCO pursuant to Sections 13(a), 13(c), 14 or
15(d) (other than current reports furnished under items 9 or 12 of Form 8-K) of
the Exchange Act subsequent to the date of this prospectus and prior to the
termination of the offering will be deemed to be incorporated by reference in
this prospectus and to be a part of this prospectus from the date any such
document is filed.
Use of Proceeds
All net proceeds from the sale of our common stock will go to the
selling shareholders. Accordingly, we will not receive any proceeds from the
sale of the shares by the selling shareholders. In the event the selling
shareholders exercise all of the warrants covered by this registration statement
and pay the exercise price in cash, we would receive proceeds of $2,646,770. We
intend to use any proceeds received from the exercise of such warrants to
finance our current operations, planned capital expenditure requirements and
internal growth.
19
Selling Shareholders
The following table provides certain information as of the date of this
prospectus regarding each selling shareholder's beneficial ownership of our
common stock prior to and after the sale of the shares offered under this
prospectus. Beneficial ownership is determined in accordance with the rules of
the SEC, and generally includes voting or investment power with respect to
securities. In accordance with SEC rules, shares which may be acquired upon
exercise of warrants which are currently exercisable or which become exercisable
within sixty days of the date of this prospectus are deemed to be beneficially
owned by the warrant holder.
All of the shares being offered hereby are issuable upon the exercise
of warrants which were originally issued by RMH in connection with a private
placement completed on October 3, 2003. In connection with our acquisition of
RMH on April 2, 2004, we assumed the warrants.
The warrants provide each warrant holder a cashless exercise option, as
each warrant holder can authorize us to withhold from issuance a number of
shares of common stock issuable upon the exercise of their warrant which when
multiplied by the market price of our common stock would equal the aggregate
exercise price of their warrant. Unless the selling shareholders utilize the
cashless exercise option, upon exercise of each of the warrants, we will receive
$18.61 per share of common stock. Assuming that each selling shareholder
exercises their respective warrants, does not utilize the cashless exercise
option and sells all of the shares issuable to them upon that exercise, after
the offering the selling shareholders will own less than 1% of our outstanding
common stock.
20
Warrant Shares
Included in
Shares Beneficial
Beneficially Ownership Before Shares
Owned Offering and Beneficially
Before Being Offered Owned After
Name of Selling Shareholder Offering for Sale Offering
--------------------------- -------- ----------- --------
Alydar Fund L.P. 1,045 774 271
Alydar Fund, Ltd. 4,361 1,967 2,394
Alydar QP Fund L.P. 4,956 2,633 2,323
Burguete Investment Partnership L.P. 11,718 11,718 --
Constable Capital LLC 20,694 4,139 16,555
Constable Capital QP LLC 6,181 1,236 4,945
Columbus Capital Partners L.P. 27,681 5,536 22,145
Columbus Capital Offshore Fund, Ltd. 17,523 3,505 14,018
Craig-Hallum Capital Group(1) 23,704 23,704 --
Pleiades Investment Partners - R, LP 60,624 11,132 49,492
Potomac Capital International Ltd. 17,602 3,198 14,404
Potomac Capital Partners L.P. 80,828(2) 14,679 66,149(2)
SF Capital Partners 213,280 42,656 170,624
Shottenfeld Qualified Associates L.P. 34,078 6,816 27,262
WBL Limited Partnership 17,066 3,413 13,653
Wedbush Morgan Securities cust. f/b/o
Jeffrey A. Sowada IRA 5,117 5,117 --
Total: 616,300 142,223 474,077
(1) Craig-Hallum Capital Group was the placement agent for the private placement
financing RMH completed on October 3, 2003.
(2) Includes shares issuable upon currently exercisable warrants which were
issued by RMH Teleservices, Inc. on September 28, 2001.
21
Plan of Distribution
The selling shareholders and any of their pledgees, donees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling shareholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling shareholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling shareholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling shareholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling shareholders may from time to time pledge or grant a
security interest in some or all of the Warrant Shares owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell shares of common stock from time to time
under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling shareholders to include the pledgee, transferee or other
successors in interest as selling shareholders under this prospectus.
Upon us being notified in writing by a selling shareholder that any
material arrangement has been entered into with a broker-dealer for the sale of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling shareholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares of common stock were sold, (iv) the commissions
paid or discounts or concessions allowed to such broker-dealer(s), where
applicable, (v) that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this prospectus,
and (vi) other facts material to the transaction. In addition, upon us being
notified in writing by a selling shareholder that a donee or pledge intends to
sell more than 500 shares of common stock, a supplement to this prospectus will
be filed if then required in accordance with applicable securities law.
22
The selling shareholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling shareholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each selling shareholder has
represented and warranted to us that it does not have any agreement or
understanding, directly or indirectly, with any person to distribute the common
stock.
We are required to pay all fees and expenses incident to the
registration of the shares. We have agreed to indemnify the selling shareholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
23
LEGAL MATTERS
The legality of the issuance of shares offered hereby has been passed
upon by Blank Rome LLP, Philadelphia, PA.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 2003, as set forth in their report (which contains
an explanatory paragraph related to the change in method of accounting for
goodwill and its related amortization as described in Note 2 to the consolidated
financial statements), which is incorporated by reference in this prospectus and
elsewhere in the registration statement. Our financial statements and schedule
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
24
PART II
Information not required in prospectus
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
agent's commissions, payable by us in connection with the sale of common stock
being registered. All amounts are estimates except the Securities and Exchange
Commission filing fee.
Legal fees and expenses*............................................. $10,000
SEC registration fee ................................................ (1)
Accounting fees and expenses*........................................ 5,000
Printing and engraving expenses*..................................... 500
Miscellaneous*....................................................... 1,000
Total............................................................. $16,500
- -----------
* Indicates estimate for the purpose of this filing.
(1) All filing fees payable in connection with the registration of the issuance
of these securities were paid in connection with the filing of our Form S-4
Registration Statement (No. 333-112711) on February 11, 2004.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 1741 through 1750 of Subchapter D, Chapter 17, referred to as
Subchapter 17D, of the Pennsylvania Business Corporation Law of 1988, as
amended, referred to as the PBCL, contain provisions for mandatory and
discretionary indemnification of a corporation's directors, officers and other
personnel and related matters.
Under Section 1741, subject to certain limitations, a corporation has
the power to indemnify directors and officers under certain prescribed
circumstances against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
an action or proceeding, whether civil, criminal, administrative or
investigative, to which any of them is a party by reason of such person being a
representative, director or officer of the corporation or serving at the request
of the corporation as a representative of another corporation, partnership,
joint venture, trust or other enterprise, if such person acted in good faith and
in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal proceeding,
had no reasonable cause to believe such person's conduct was unlawful.
Section 1742 provides for indemnification in derivative actions except
in respect of any claim, issue or matter as to which the person has been
adjudged to be liable to the corporation unless and only to the extent that the
proper court determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for the expenses that the court deems
proper. Section 1744 provides that, unless ordered by a court, any
indemnification under Section 1741 or 1742 shall be made by the corporation only
as authorized in the specific case upon a determination that the representative
met the applicable standard of conduct, and such determination will be made by
the board of directors (i) by a majority vote of a quorum of directors not
parties to the action or proceeding; (ii) if a quorum is not obtainable, or if
obtainable and a majority of disinterested directors so directs, by independent
legal counsel; or (iii) by the shareholders.
II-1
Under Section 1743, indemnification is mandatory to the extent that the
officer or director has been successful on the merits or otherwise in defense of
any action or proceeding referred to in Section 1741 or Section 1742 or in
defense of any claim, issue or matter therein if the appropriate standards of
conduct are met.
Section 1745 provides that expenses (including attorneys' fees)
incurred in defending a civil or criminal action or proceeding may be paid by
the corporation in advance of the final disposition of such action or proceeding
referred to in Subchapter 17D of the PBCL upon receipt of an undertaking by or
on behalf of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
corporation.
Section 1746 provides generally that, except in any case where the act
or failure to act giving rise to the claim for indemnification is determined by
a court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17D of the
PBCL shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding that office.
Section 1747 grants to a corporation the power to purchase and maintain
insurance on behalf of any person who is or was a representative of the
corporation against any liability asserted against and incurred by such person
in such person's capacity as a representative of the corporation, whether or not
the corporation would have the power to indemnify such person under Subchapter
17D of the PBCL. Sections 1748 and 1749 extend the indemnification and
advancement of expenses provisions contained in Subchapter 17D of the PBCL to
successor corporations in fundamental change transactions and to representatives
serving as fiduciaries of employee benefit plans.
Section 1750 provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, Subchapter 17D of the PBCL, shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a representative of the corporation and shall inure to the
benefit of the heirs and personal representative of such person.
For information regarding provisions under which a director or officer
of NCO may be insured or indemnified in any manner against any liability which
such person may incur in such person's capacity as such, reference is made to
NCO's articles of incorporation and bylaws, copies of which are incorporated
herein by reference, which provide in general that NCO shall indemnify its
directors and officers to the fullest extent authorized by law.
II-2
ITEM 16. EXHIBITS
Number Description
------ -----------
4.1 Specimen Stock Certificate. (Incorporated by reference to
Exhibit 4.1 of NCO's Registration Statement on Form S-1
(Registration No. 333-11745), as amended, filed with the
Securities and Exchange Commission on September 11, 1996.)
4.2 Registration Rights Agreement dated as of October 3, 2003
among RMH Teleservices, Inc., the individuals and entities
listed on the signature pages thereto and Craig-Hallum
Capital Group LLC. (Incorporated by reference to Exhibit 10.2
to RMH's Current Report on Form 8-K (File No. 000-2133),
filed with the Securities and Exchange Commission on October
9, 2003.)
4.3 Form of Warrant dated October 3, 2003 and executed by RMH
Teleservices, Inc. (Incorporated by reference to Exhibit 10.3
to RMH's Current Report on Form 8-K (File No. 00-2133), filed
with the Securities and Exchange Commission on October 9,
2003.)
5.1 Opinion of Blank Rome LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Blank Rome LLP. (Included in Exhibit 5.1.)
24.1* Powers of attorney.
- -------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those clauses is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement;
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(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Horsham, State of Pennsylvania, on May 3, 2004.
NCO GROUP, INC.
By: /s/ Michael J. Barrist
-------------------------------------
Michael J. Barrist
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed by the following persons as of May 3,
2004 in the capacities indicated:
Signatures Title
---------- -----
/s/ Michael J. Barrist Chairman of the Board, President and
- --------------------------------- Chief Executive Officer (principal
Michael J. Barrist executive officer)
* Executive Vice President, Finance; Chief
- --------------------------------- Financial Officer; Chief Operating
Steven L. Winokur Officer of Shared
Services; and Treasurer (principal
financial and accounting officer)
* Director
- ---------------------------------
William C. Dunkelberg, Ph.D.
* Director
- ---------------------------------
Charles C. Piola, Jr.
* Director
- ---------------------------------
Leo J. Pound
* Director
- ---------------------------------
Eric S. Siegel
* Director
- ---------------------------------
Allen F. Wise
* By: /s/ Michael J. Barrist
----------------------------
Michael J. Barrist
Attorney-in-Fact
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INDEX OF EXHIBITS
All exhibits are filed electronically, unless incorporated by reference.
Number Description
------ -----------
4.1 Specimen Stock Certificate. (Incorporated by reference to
Exhibit 4.1 of NCO's Registration Statement on Form S-1
(Registration No. 333-11745), as amended, filed with the
Securities and Exchange Commission on September 11, 1996.)
4.2 Registration Rights Agreement dated as of October 3, 2003
among RMH Teleservices, Inc., the individuals and entities
listed on the signature pages thereto and Craig-Hallum
Capital Group LLC. (Incorporated by reference to Exhibit 10.2
to RMH's Current Report on Form 8-K (File No. 000-2133),
filed with the Securities and Exchange Commission on October
9, 2003.)
4.3 Form of Warrant dated October 3, 2003 and executed by RMH
Teleservices, Inc. (Incorporated by reference to Exhibit 10.3
to RMH's Current Report on Form 8-K (File No. 00-2133), filed
with the Securities and Exchange Commission on October 9,
2003.)
5.1 Opinion of Blank Rome LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Blank Rome LLP. (Included in Exhibit 5.1.)
24.1* Powers of attorney.
- -------------------
* Previously filed
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