Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (this “Agreement”), is made as of August 30, 2005,
by and among Ascension Capital Group, Ltd., a Texas limited partnership, with
principal executive offices at 2201 E. Lamar Blvd., Suite 200, Arlington, Texas
76006 (“Seller”), Ascension Capital Management, L.L.C., a Texas limited
liability company (the “General Partner”), The Erich M. Ramsey Trust (the
“Ramsey Trust”), Erich M. Ramsey (“Ramsey”), Leonard R. Oszustowicz
(“Oszustowicz”), Jeffrey J. Walter (“Walter,” and together with the General
Partner, the Ramsey Trust, Ramsey and Oszustowicz, the “Partners”), on the one
hand, and Encore Capital Group, Inc., a Delaware corporation, with principal
executive offices at 8875 Aero Drive, San Diego, California 92123 (“Encore”),
and Ascension Acquisition, LP, a Texas limited partnership (“Buyer”), an
indirect wholly-owned subsidiary of Encore, on the other hand (Encore and Buyer
are sometimes collectively referred to herein as the “Encore Parties”).

 

RECITALS

 

A. Seller is in the business of, among other things, servicing bankruptcy
accounts, purchasing bankruptcy accounts and providing administrative services,
and Seller has developed proprietary software, including “BKTrakker” and
“LITTrakker” to license and support such activities.

 

B. Partners collectively hold or control all of the outstanding general
partnership and the limited partnership interests of Seller.

 

C. Seller and Partners desire to sell to Buyer, and Buyer desires to purchase
from Seller, the business and substantially all of the assets associated
therewith, in exchange for certain consideration and the assumption of certain
specified liabilities of Seller, in accordance with the terms and conditions set
forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the covenants, representations, warranties
and agreements contained herein, and subject to the satisfaction of the
conditions set forth herein, the parties agree as follows:

 

1. DEFINED TERMS

 

The following capitalized terms shall have the meanings set forth as follows:

 

1.1 “Accounts” means all delinquent and bankruptcy accounts in Seller’s
portfolio which are listed in the Computer File.

 

1.2 “Account Document” means, with respect to each Account, any application,
purchase or other agreement, billing statement, notice, correspondence or other
information in Seller’s possession that relates to an Account. An Account
Document may include, without limitation, original documents or copies thereof,
whether by photocopy, microfiche, microfilm or other reproduction process.

 

1.3 “Accounts Receivable” means all trade accounts receivable and other rights
to payment from customers of Seller, whether billed or unbilled, including all
trade accounts

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receivable representing amounts receivable in respect of services rendered to
customers of Seller.

 

1.4 “Acquired Assets” has the meaning set forth in Section 2.1.1.

 

1.5 “Assumed Liabilities” has the meaning set forth in Section 2.1.2.

 

1.6 “Business” means managing secured and unsecured consumer credit obligations,
accounts and receivables in bankruptcy, purchasing secured and unsecured
consumer credit obligations in bankruptcy, building systems to purchase and
manage secured and unsecured consumer credit obligations in bankruptcy, building
systems to manage legal services in bankruptcy, managing legal services in
bankruptcy matters, and providing bankruptcy tools and services to the consumer
finance industry.

 

1.7 “Code” means the Internal Revenue Code of 1986, as amended.

 

1.8 “Computer File” means the computer file, tape, cartridge or disk or other
electronic medium containing Account information.

 

1.9 “Contract” means any written or oral contract, agreement, instrument, order,
arrangement, commitment or understanding of any nature, including, but not
limited to, the Accounts, sales orders, purchase orders, leases, subleases, data
processing agreements, maintenance agreements, license agreements, sublicense
agreements, loan agreements, promissory notes, security agreements, pledge
agreements, deeds, mortgages, guaranties, indemnities, warranties, employment
agreements, consulting agreements, sales representative agreements, joint
venture agreements, buy-sell agreements, options or warrants.

 

1.10 “Employee Benefit Plan” means any employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or any other plan, program, policy or arrangement for or regarding
bonuses, commissions, incentive compensation, vacation, deferred compensation,
pensions, profit sharing, retirement, payroll savings, stock options, stock
purchases, stock awards, stock ownership, phantom stock, stock appreciation
rights, medical/dental expense payment or reimbursement, disability income or
protection, sick pay, group insurance, self insurance, death benefits, employee
welfare (including any self-insured employee welfare benefit plans) or fringe
benefits of any nature, but specifically excluding employment Contracts and
severance arrangements with individual employees.

 

1.11 “Encumbrance” means any lien, security interest, pledge, mortgage,
easement, covenant, restriction, reservation, conditional sale, prior
assignment, or other encumbrance, claim, burden or charge of any nature.

 

1.12 “ERISA Affiliate” means, with respect to any person, any trade or business
(whether or not incorporated) (i) under common control within the meaning of
Section 4001(b)(1) of ERISA with such person or (ii) which together with such
person is treated as a single employer under Sections 414(b), (c), (m) and (o)
of the Code.

 

1.13 “Excluded Assets” means those assets identified on Schedule 1.13 attached
hereto.

 

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1.14 “Excluded Liabilities” has the meaning set forth in Section 2.2.

 

1.15 “GAAP” means generally accepted accounting principles under United States
accounting rules and regulations, consistently applied, provided that, in cases
where such generally accepted accounting principles permit the use of two or
more accounting policies (“Accepted Policies”) yielding different results, the
preferred Accepted Policy under United States accounting rules and regulations
shall be used.

 

1.16 “Governmental Authority” means any nation or government, any state,
municipality or other political subdivision thereof and any entity, body,
agency, commission or court, whether domestic, foreign or multinational,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any executive official thereof.

 

1.17 “Hazardous Substances” means any substance, waste, contaminant, pollutant
or material that has been determined by any United States federal government
authority, or any state or local government authority having jurisdiction over
Seller’s Real Property, to be capable of posing a risk of injury or damage to
health, safety, property or the environment, including, but not limited to (a)
all substances, wastes, contaminants, pollutants and materials defined or
designated as hazardous, dangerous or toxic pursuant to any Law of any state in
which any of Seller’s leased or owned Real Property is located or any United
States Law, and (b) asbestos, polychlorinated biphenyls and petroleum.

 

1.18 “HIPAA” means the Health Insurance Portability and Accountability Act of
1996.

 

1.19 “Insurance Policy” means any public liability, product liability, general
liability, comprehensive, property damage, vehicle, life, hospital, medical,
dental, disability, worker’s compensation, key man, fidelity bond, theft,
forgery, errors and omissions, directors’ and officers’ liability, or other
insurance policy of any nature.

 

1.20 “Intangible” means any or all of the following and all rights in, arising
out of, or associated therewith, whether registered or unregistered, as
applicable: (i) all United States and foreign patents and applications therefor
and all reissues, divisions, renewals, extensions, provisional, continuations
and continuations in part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know-how, technology, technical data, marketing lists, vendor
lists, pricing information and customer lists, and all documentation relating to
any of the foregoing; (iii) all works of authorship, copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (iv) all mask works, mask work registrations and
applications therefor, and all other rights corresponding thereto throughout the
world; (v) all industrial designs and any registrations and applications
therefor throughout the world; (vi) all trade names, trade identity indicators,
logos, common law trademarks and service marks; trademark and service mark
registrations and applications therefor (including intent to use applications)
throughout the world, including all associated goodwill; (vii) all databases and
data collections and all rights therein throughout the world; (viii) all
Software, including all source code, object code, firmware, development tools,
files, records and data, all media on which any of the foregoing is recorded,
all Web addresses, sites and domain names; (ix) any

 

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similar corresponding or equivalent intellectual property or other rights to any
of the foregoing; and (x) all documentation related to any of the foregoing
throughout the world.

 

1.21 “Judgment” means any order, writ, injunction, citation, award, decree or
other judgment of any nature of any Governmental Authority or arbitration
tribunal.

 

1.22 “Knowledge” means, with respect to any natural Person, the knowledge that
such Person actually has or reasonably ought to have, and with respect to any
Person, the knowledge that the executive officers of such Person actually have
or reasonably ought to have in the ordinary course of performing their duties.

 

1.23 “Law” means any provision of any foreign, federal, state or local law,
statute, ordinance, charter, constitution, treaty, rule or regulation.

 

1.24 “Material Adverse Effect” means any change, event or effect that,
individually or in the aggregate, is materially adverse to the financial
condition, financial performance or business prospects of (a) the Business; (b)
any of the Acquired Assets; or (c) any of the assets of third parties that are
used in the Business and which are not readily replaceable, as well as any
change, event or effect that, individually or in the aggregate, materially
increases Seller’s Obligations under any of the Assumed Liabilities.

 

1.25 “MicroSage Agreement” means that certain Agreement dated May 20, 2004 by
and between Ascension Capital Group, Ltd., MicroSage, Inc., and Mike Loeckle, as
amended by that certain First Amendment dated as of July 28, 2005 and any
subsequent amendments thereto.

 

1.26 “Obligation” means any debt, liability or obligation of any nature, whether
secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued,
absolute, fixed, contingent, ascertained, unascertained, known, unknown or
otherwise.

 

1.27 “Original Purchase Agreement” means each of the purchase agreements listed
on Schedule 1.27, pursuant to which Seller purchased any Accounts.

 

1.28 “Permit” means any license, permit, approval, waiver, order, authorization,
right or privilege of any nature, granted, issued, approved or allowed by any
foreign, federal, state or local governmental body, administrative agency or
regulatory authority.

 

1.29 “Person” means any individual, sole proprietorship, joint venture,
partnership, corporation, association, cooperative, trust, estate, governmental
body, administrative agency, regulatory authority or other entity of any nature.

 

1.30 “Proceeding” means any demand, claim, suit, action, litigation,
investigation, arbitration, administrative hearing or other proceeding of any
nature.

 

1.31 “Real Property” means any real estate, land, building, condominium, town
house, structure or other real property of any nature, all shares of stock or
other ownership interests in cooperative or condominium associations or other
forms of ownership interest through which interests in real estate may be held,
and all appurtenant and ancillary rights thereto, including, but not limited to,
easements, covenants, water rights, sewer rights and utility rights.

 

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1.32 “Related Agreements” shall have the meaning set forth in Section 4.1.

 

1.33 “Software” means any computer program, operating system, applications
system, firmware or software of any nature, including any prior versions or
releases thereof, whether operational, under development or inactive, including
all object code, source code, technical manuals, user manuals and other
documentation therefor, whether in machine-readable form, programming language
or any other language or symbols, and whether stored, encoded, recorded or
written on disk, tape, film, memory device, paper or other media of any nature
(including, without limitation, the “BKTrakker,” “PJV Software,” “Web Objects”
and “LITTrakker” software) other than “shrink wrap” software.

 

1.34 “Tangible Property” means any furniture, fixtures, leasehold improvements,
vehicles, office equipment, computer equipment, other equipment, machinery,
tools, forms, supplies or other tangible personal property of any nature.

 

1.35 “Tax” means (a) any foreign, federal, state or local income, earnings,
profits, gross receipts, franchise, capital stock, net worth, sales, use,
occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature; (b) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee, assessment, sewer rent or other fee or charge of any
nature; or (c) any deficiency, interest or penalty imposed with respect to any
of the foregoing.

 

2. THE TRANSACTION

 

2.1 Sale and Purchase of Acquired Assets. On the Closing Date (as defined in
Section 11.1), effective to the fullest extent possible at 5:00 p.m. (California
time) on the Closing Date, and subject to the other terms and conditions of this
Agreement, Seller shall sell, transfer, assign and convey to Buyer, and Buyer
shall purchase, all right, title and interest in and to the Acquired Assets (as
defined in Section 2.1.1), free and clear of all Encumbrances other than the
Assumed Liabilities and those Encumbrances set forth on Schedule 4.6, and Seller
shall assign to Buyer, and Buyer shall assume, the Assumed Liabilities.

 

2.1.1 Acquired Assets. The “Acquired Assets” means all assets of Seller other
than the Excluded Assets, including, without limitation, all assets used by
Seller in or for the Business, wherever located and whether or not reflected on
Seller’s books and records, including, but not limited to, the following assets:

 

(a) All of Seller’s Accounts Receivable and all other current assets of Seller,
including, but not limited to, prepaid expenses, security deposits, rent
escrows, and other prepayments, deposits and escrows.

 

(b) All of Seller’s Tangible Property and Software including, without
limitation, the “BKTrakker,” “LITTrakker,” “PJV Software,” and “Web Objects”
software, and Intangibles including, but not limited to, all rights in and to
the name “Ascension” and all derivations thereof.

 

(c) All rights of Seller under its Material Contracts (as defined in Section
4.14) and Employee Benefit Plans; provided, however, that with respect

 

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to any such Material Contract or Employee Benefit Plan requiring a consent to
transfer, which consent cannot be obtained prior to Closing, Seller shall use
its reasonable best efforts to deliver to Buyer as soon as possible after the
Closing such consent along with the rights under any such Material Contracts,
and the personnel records of Continuing Employees to the extent permissible by
law.

 

(d) All of Seller’s rights under any noncompetition, nondisclosure or other
restrictive covenant made for the benefit of Seller or its affiliates (or any of
their respective predecessors) in any Contract with current or former employees
of Seller, regardless of whether any such current employee accepts Buyer’s offer
pursuant to Section 2.3.

 

(e) All transferable rights under all of Seller’s Permits granted or issued to
Seller or otherwise held by Seller relating to or for the benefit of Seller.

 

(f) All of Seller’s Real Property, whether owned or leased.

 

(g) All of Seller’s rights with respect to telephone numbers, telephone
directory listings and advertisements, and all of Seller’s goodwill.

 

(h) All of Seller’s customer lists, prospect lists, supplier lists, data bases,
computer media, sales and marketing materials, invoices, correspondence, files,
books and records relating to the Acquired Assets or the Business.

 

(i) All of Seller’s claims, causes of action and other legal rights and
remedies, whether or not known as of the Closing Date, relating to Seller’s
ownership of the Acquired Assets and/or the operation of the Business.

 

(j) All of Seller’s Accounts.

 

(k) The Computer File and all Account Documents relating to Seller’s Accounts.

 

(l) All of Seller’s claims, causes of action, Contract rights, powers and
remedies and other legal rights and remedies, whether or not known as of the
Closing Date, arising under all of Seller’s Contracts, including the Original
Purchase Agreements, and all indemnification rights under such Contracts.

 

2.1.2 Assumed Liabilities. Buyer shall assume and pay, perform and discharge
only the following liabilities of Seller and not any of the Excluded Liabilities
(as defined in Section 2.2), solely to the extent such liabilities accrue or
arise from and after the Closing, in accordance with the respective terms and
subject to the respective conditions thereof (collectively, the “Assumed
Liabilities”):

 

(a) The Obligations of Seller under those Material Contracts (as defined in
Section 4.14) to which a Seller is a party but only to the extent that such
liabilities are not due to any material breach or default by Seller under any
such Material Contract.

 

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(b) The Obligations of Seller arising under or related to the Original Purchase
Agreements, provided that the incurrence or existence of any such Obligation is
not the result of a breach, failure, or default of Seller under, any
representation, warranty, covenant or other provision of the Original Purchase
Agreements; provided further that Buyer assumes the Obligations under the
Original Purchase Agreements only to the extent that such Obligations arise in
connection with the performance or non-performance of the Original Purchase
Agreements from and after the Closing Date.

 

(c) All trade accounts payable that arose in the ordinary course of business and
that are included as a current liability on Seller’s books and records as
consistently maintained as of the Closing Date other than those accounts payable
for which the original payment due date is past, unless such accounts are listed
on Schedule 2.1.2(c).

 

(d) Any Obligation of Seller described on Schedule 2.1.2(d).

 

2.2 Excluded Liabilities. Except for the Assumed Liabilities, Buyer shall not
assume, and shall have no liability for, any Obligations of Seller (the
“Excluded Liabilities”). All Obligations of Seller other than the Assumed
Liabilities shall remain the sole responsibility of Seller.

 

2.3 Seller’s Employees. Subject to the condition that the Closing occurs, Buyer
shall offer to employ, immediately following the Closing Date, each of the
employees of Seller on terms and with employee benefits that are not materially
less favorable to such employee than such employee currently enjoys as an
employee of Seller. Each offer of employment shall be made on the Closing Date
as soon as reasonably possible after the Closing. Effective upon, and subject
to, the Closing, Seller shall terminate the employment of each employee of
Seller. Schedule 2.3 lists the name of each employee of Seller and indicates for
each such employee the full-time, part-time or temporary status, annual salary,
any other compensation payable (including compensation payable pursuant to
bonus, incentive, deferred compensation or commission arrangements), vacation
and severance benefits, date of employment and position. The employment of each
employee of Seller who accepts Buyer’s offer of employment (each, a “Continuing
Employee”) will be on an “at will” basis and will be on terms and conditions
including benefits comparable to those set forth on Schedule 2.3 for such
Continuing Employee, other than Ramsey, Oszustowicz, Walter and Caruso, who will
be offered employment contracts. Seller shall terminate the Contracts of
employment with each of Oszustowicz and Walter effective at or prior to the
Closing. Buyer does not assume, and Seller shall be fully responsible for the
payment of, any severance or other benefits related to or payable upon the
termination of any of Seller’s employees including, without limitation, any
Continuing Employee who fails to accept Buyer’s employment offer. Seller shall
cooperate with Buyer’s efforts to employ and retain the employees of Seller. To
the extent legally permissible, within thirty (30) days of the Closing Date,
Seller shall provide to Buyer accurate and complete copies of the personnel
records of Seller’s employees who are Continuing Employees. Seller shall be
responsible for compliance with all Laws related to the termination by Seller of
Seller’s employees. Nothing in this Agreement will be construed to create a
right in any Continuing Employee to initial or continued employment with Buyer.
Any employment offered by Buyer to any Continuing Employee, other than Ramsey,
Oszustowicz, Walter and

 

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Caruso, shall be “at will” and may be terminated by Buyer or by such Continuing
Employee at any time for any reason (subject to any written commitments to the
contrary made by Buyer and applicable Law). Buyer shall have complete
responsibility for any Obligation arising out of or related to the termination
of any Continuing Employee. Seller shall give any notices required by Law and
take whatever other actions with respect to the Seller’s Employee Benefit Plans
as may be necessary to carry out the terms and conditions of this Section 2.3.
Seller shall provide Buyer with completed INS Forms I-9 and attachments with
respect to each Continuing Employee who accepts Buyer’s offer of employment,
except for such Continuing Employees as Seller certifies in writing to Buyer are
exempt from such requirement. Seller acknowledges that, after the Closing, Buyer
shall be responsible for all decisions regarding the employment and termination
of Continuing Employees at Buyer’s cost, expense and liability as Buyer in its
sole discretion shall deem to be in the best interests of Buyer. Buyer shall
adopt Seller’s Employee Benefit Plans set forth on Schedule 4.16 as provided in
Section 12.5 of this Agreement.

 

3. PURCHASE PRICE

 

3.1 Purchase Price. On the terms and subject to the conditions of this
Agreement, Buyer shall pay to Seller Twenty-One Million, Eight Hundred Six
Thousand, Nine Hundred Fifty-Eight and No/100 Dollars ($21,806,958.00) (the
“Purchase Price”), payable as follows. At the Closing, Buyer shall: (a) pay
Thirteen Million Two Hundred Seventy-One Thousand, Nine Hundred Fifty-Eight and
No/100 Dollars ($13,271,958.00) by wire transfer of immediately available funds,
in such amounts and directed to those Persons set forth on the payoff schedule
identified on Schedule 3.1; (b) deposit Two Million Five Hundred Thirty-Five
Thousand and No/100 Dollars ($2,535,000.00) (the “Indemnity Escrow Amount”) in
escrow pursuant to Section 3.2.1, (c) deposit Two Million and No/100 Dollars
($2,000,000.00) (the “Retention Escrow Amount”) in escrow pursuant to Section
3.2.2; and (d) issue to Seller the number of shares of unregistered Encore
common stock (the “Encore Common Stock”) that is equal to Four Million and
No/100 Dollars ($4,000,000.00) divided by the average of the closing sale price
of one share of Encore Common Stock on the NASDAQ National Market for each of
the ten (10) trading days ending on and including the third trading day prior to
the Closing Date. Seller shall provide Buyer with written wire transfer
instructions for the payment of the Purchase Price, or shall update Schedule 3.1
to include such instructions, at least forty-eight (48) hours prior to the
Closing Date. Buyer shall assume the Assumed Liabilities pursuant to an
Assignment and Assumption Agreement in substantially the form attached hereto as
Exhibit 3.1 (the “Assumption Agreement”).

 

3.2 Escrow.

 

3.2.1 Indemnity Escrow Amount. Buyer shall deposit the Indemnity Escrow Amount
with an escrow agent mutually acceptable to Buyer and Seller (the “Escrow
Agent”) to secure Seller’s obligation to pay any amounts to which Buyer is
entitled pursuant to the indemnification provisions set forth in Section 14 of
this Agreement. The Escrow Agent shall hold the Indemnity Escrow Amount in an
interest bearing account pursuant to the terms and conditions of an escrow
agreement in substantially the form attached hereto as Exhibit 3.2.1 (the
“Indemnity Escrow Agreement”). The Indemnity Escrow Agreement shall provide for,
among other things: (a) the payment of all or a portion of the Indemnity Escrow
Amount to Buyer to the extent Buyer is entitled to

 

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indemnification pursuant to Section 14; (b) promptly following the first
anniversary of the Closing Date, the release to Seller of Eight Hundred Forty
Five Thousand and No/100 Dollars ($845,000.00) (plus a specified portion of the
earnings on the Indemnity Escrow Amount), minus any amounts paid to Buyer from
the Indemnity Escrow Amount and minus any unsatisfied claims under Section 14
pending against the Indemnity Escrow Amount at such time (the Indemnity Escrow
Amount so released, the “Released Indemnity Escrow Amount”); and (c) that the
Indemnity Escrow Amount (plus a specified portion of the earnings on the
Indemnity Escrow Amount), minus (i) any Released Indemnity Escrow Amount; (ii)
any amounts paid to Buyer from the Indemnity Escrow Amount; and (iii) any
unsatisfied claims under Section 14 pending against the Indemnity Escrow Amount
at such time, will be held by the Escrow Agent until the second (2nd) annual
anniversary of the Closing Date, at which time the balance net of such paid
amounts and net of amounts reserved for payment of unsatisfied pending claims
will be released to Seller. Any amounts paid to Buyer from the Indemnity Escrow
Amount pursuant to the indemnification provisions of Section 14 shall be treated
as an adjustment to the Purchase Price. The cost and expense of the Escrow Agent
shall be borne by Buyer, except to the extent provided in Sections 6 and 10 of
the Indemnity Escrow Agreement with respect to fees and expenses of counsel to
the Escrow Agent and investment fees or charges relating to the escrow fund.

 

3.2.2 Retention Escrow Amount. Buyer shall deposit the Retention Escrow Amount
with the Escrow Agent. The cost and expense of the Escrow Agent shall be borne
by Buyer, except to the extent provided in Sections 6 and 10 of the Retention
Escrow Agreement (as defined below) with respect to fees and expenses of counsel
to the Escrow Agent and investment fees or charges relating to the escrow fund.
The Escrow Agent shall hold the Retention Escrow Amount in an interest bearing
account or other permitted investments pursuant to the terms and conditions of
an escrow agreement in substantially the form attached hereto as Exhibit 3.2.2
(the “Retention Escrow Agreement”). The Retention Escrow Agreement shall provide
for, among other things: (a) specified disbursements to Seller on each of the
first, second and third anniversaries of the Closing Date, subject to the
condition that Ramsey remain employed by Buyer; and (b) specified disbursements
to Buyer, in the event that Ramsey’s employment is terminated by Buyer for
“Cause” or Ramsey terminates his employment with Buyer for any reason other than
“Good Reason” prior to the three year anniversary of the Closing Date. For
purposes of the immediately preceding sentence only, “Cause” shall be defined
as: (a) commission of any act of fraud; (b) commission of a crime constituting a
felony; or (c) commission of any act of willful misconduct involving moral
turpitude by Ramsey in the course of Ramsey’s employment; and “Good Reason”
shall be defined as: (a) a breach by Buyer of any material provision of Ramsey’s
Employment Agreement with Buyer that continues for thirty days after Buyer
receives written notice from Ramsey describing the breach; (b) a material
reduction or alteration in the nature or scope of Ramsey’s authority, duties,
powers, functions, or responsibilities such that they are no longer consistent
or comparable to those previously performed by Ramsey for Buyer, unless such
reduction or alteration shall have been expressly consented to in writing by
Ramsey before such reduction or alteration occurs; (c) any reduction in Ramsey’s
compensation or salary below the level of such compensation or salary held by
Ramsey at the time of such reduction, unless expressly consented to in writing
by Ramsey before such reduction occurs; (d) any reduction in Ramsey’s benefits
below the level of benefits

 

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offered by Buyer to employees having a similar position and title and comparable
tenure, unless expressly consented to in writing by Ramsey before such reduction
occurs; (e) any failure by Buyer to pay Ramsey’s compensation, salary, or
benefits, where such failure continues for thirty days after Buyer receives
Ramsey’s written notice describing such failure, provided, however, that Ramsey
shall be under no obligation to provide such written notice more than twice in
any one calendar year, after which any subsequent failure to pay shall
immediately constitute Good Reason; or (f) any request or attempt by Buyer to
relocate Ramsey’s principal place of business or office location outside the
greater Dallas-Fort Worth metropolitan area, unless Ramsey expressly consents in
writing to such relocation. The parties agree that upon receipt of a Trigger
Event Notice or a Termination Event Notice, as those terms are defined in the
Retention Escrow Agreement, the party who has received the notice shall be
entitled to petition an arbitrator pursuant to the provisions of Section 15.17
of this Agreement for a declaration that a Trigger Event or Termination Event
has not occurred.

 

3.3 Working Capital Adjustment

 

3.3.1 Estimated Closing Working Capital. Set forth on Schedule 3.3.1 is an
estimate of the working capital of the Acquired Assets and the Assumed
Liabilities at Closing, which amount shall be mutually agreed to by Seller and
Buyer prior to the Closing Date (the “Estimated Working Capital”).

 

3.3.2 Determination of Actual Closing Working Capital. Buyer shall determine the
actual working capital of the Acquired Assets and the Assumed Liabilities at
Closing (the “Actual Closing Working Capital”) within ninety days following the
Closing Date. Buyer shall use actual amounts of each component of working
capital as of the Closing Date on the same basis and applying the same
accounting principles, policies and practices agreed to by Seller and Buyer in
preparing the Estimated Working Capital, with any agreed upon treatment of those
items of liabilities and assets used in the calculation of Estimated Working
Capital as set forth on Schedule 3.3.1. Buyer shall notify Seller of its
determination of the Actual Closing Working Capital within ninety days of the
Closing Date.

 

3.3.3 Payment of Adjustment Amount. If the Actual Closing Working Capital is
greater than negative $2,499,642.00, then Buyer shall pay Seller the amount that
Actual Closing Working Capital is greater than negative $2,499,642.00. As one
example, if Actual Closing Working Capital were negative $2,299,642.00, then
Buyer would pay Seller $200,000.00. If the Actual Closing Working Capital is
less than negative $2,599,642.00, then Seller shall pay Buyer the amount that
Actual Closing Working Capital is greater than negative $2,599,642.00. As one
example, if Actual Closing Working Capital were negative $2,799,642.00, then
Seller would pay Buyer $200,000.00. The payment by Buyer or Seller, if any,
pursuant to this Section 3.3.3 shall be referred to as the “Final Adjustment
Amount.” The Final Adjustment Amount shall be paid within three (3) business
days following the determination of the Actual Closing Working Capital by wire
transfer in immediately available funds in accordance with the instructions of
the receiving party, subject to the provisions of Section 3.3.4 below.

 

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3.3.4 Procedure for Objection to Determination of Actual Closing Working
Capital.

 

(a) If Seller does not deliver written notice to Buyer of its objection (the
“Objection Notice”) to the Actual Closing Working Capital calculation within
thirty (30) days of Seller’s receipt of the Actual Closing Working Capital
calculation (the “Objection Period”), the Actual Closing Working Capital
calculated by Buyer shall be binding and conclusive on Seller and Buyer and
shall be used in computing the Final Adjustment Amount. Upon receipt of the
Actual Closing Working Capital as calculated by Buyer, Seller may deliver
written notice to Buyer that it concurs with the calculation at which time it
shall be binding and conclusive on Seller and Buyer and shall be used in
computing the Final Adjustment Amount.

 

(b) If Seller delivers the Objection Notice to Buyer stating the basis of
Seller’s objection within the Objection Period and Buyer and Seller fail to
resolve the issues outstanding with respect to the calculation of the Actual
Closing Working Capital within thirty (30) days of Buyer’s receipt of the
Objection Notice, Buyer and Seller shall submit the issues remaining in dispute
to a nationally recognized accounting firm (other than the auditors used by
Encore or Seller within the three (3)-year period preceding the dispute)
selected by Buyer and Seller (the “Arbitrator”), which Arbitrator shall be
instructed to arbitrate such dispute and resolve the disputed issues applying
the same accounting principles, policies and practices used by Buyer in
preparing the Estimated Working Capital. Buyer and Seller shall furnish or cause
to be furnished to the Arbitrator such work papers and other documents and
information relating to the disputed issues as the Arbitrator may request and
are available to that party or its agents and shall be afforded the opportunity
to present to the Arbitrator any material relating to the disputed issues and to
discuss the issues with the Arbitrator. The Arbitrator’s review shall be limited
to the objections made in the Objection Notice and Buyer’s responses thereto.
The Actual Closing Working Capital amount as finalized by the Arbitrator shall
be deemed final and conclusive with respect to the Actual Closing Working
Capital and shall be binding on Seller and Buyer for such purposes. If the
calculation of Actual Closing Working Capital determined by the Arbitrator does
not exceed the amount initially proposed by Buyer by more than 10%, the fees and
expenses of the Arbitrator shall be paid by Seller; if such calculation exceeds
the amount proposed by Buyer by more than 50%, the fees and expenses of the
Arbitrator shall be paid by Buyer; if such calculation falls somewhere in
between the foregoing amounts the fees and expenses of the Arbitrator shall be
borne equally by Buyer and Seller. The Arbitrator shall determine the issues in
dispute and deliver its written determination to Seller and Buyer within thirty
(30) days of the submission of the disputed issues to the Arbitrator. The
Arbitrator’s determination of the disputed issues shall be final, binding and
conclusive on Buyer, Seller and the Partners, shall not be appealable, and shall
be used in the calculation of the Final Adjustment Amount.

 

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4. REPRESENTATIONS OF SELLER AND PARTNERS

 

As of the date hereof and as of the Closing Date, Seller and each Partner
represents and warrants to and for the benefit of Buyer as follows:

 

4.1 Organization. Seller is a limited partnership duly organized and validly
existing under the Laws of its jurisdiction of organization. Seller possesses
the full power and authority to own the Acquired Assets, conduct the Business as
and where presently conducted, and enter into and perform this Agreement and the
Assumption Agreement and all other agreements and documents contemplated by this
Agreement (the “Related Agreements”) to which Seller is a party. Seller is duly
qualified to do business in Texas and Seller is not required to be qualified in
any other jurisdiction except where the failure to be so qualified would not
have, and could not be reasonably be expected to have, a Material Adverse
Effect. Schedule 4.1 states: (a) Seller’s exact legal name; and (b) all
fictitious, assumed or other names of any type that are registered or used by it
or under which it has done business at any time. Accurate and complete copies of
Seller’s articles or certificate of organization, operating agreement and other
organization and related documents, each as amended to date, have been delivered
to Buyer. Schedule 4.1 is an accurate and complete list of the authorized,
issued and outstanding general partnership and limited partnership interests and
the names of all of the managers, directors and officers of the general partner
of Seller, as applicable. Except for the general partnership and limited
partnership interests listed on Schedule 4.1, there are no other issued or
outstanding interests in Seller. All of the issued and outstanding general
partnership interests and limited partnership interests have been duly
authorized and validly issued, with no liability attaching to the ownership
thereof. There are no outstanding options, puts, calls, warrants, subscriptions,
appreciation rights, phantom stock, or other Contracts relating to the offering,
sale, issuance, redemption or disposition of any interests or other securities
in Seller. Seller does not own any securities of any corporation or any other
interest in any Person, except as set forth on Schedule 4.1.

 

4.2 Effect of Agreement. The execution, delivery and performance of this
Agreement and the Related Agreements by Seller and the consummation by Seller of
the transactions contemplated hereby and thereby: (a) have been, or shall have
been by the Closing Date, duly authorized by all necessary actions by its
partners; (b) do not constitute a violation of or a default under the
certificate of limited partnership or other organizational documents of Seller;
(c) except as set forth on Schedule 4.2, do not constitute a default or breach
of (immediately after the giving of notice, passage of time or both), or
termination of any material Contract to which Seller is a party or by which
Seller is bound; (d) do not constitute a violation of any Law applicable to
Seller or the Acquired Assets except where the failure to comply would not have
a Material Adverse Effect; (e) except as stated on Schedule 4.2, do not require
the consent of any Person; (f) except as set forth on Schedule 4.2, do not
accelerate or otherwise modify any material Obligation of Seller; and (g) do not
result in the creation of any Encumbrance upon, or give to any other Person any
interest in, any of the Acquired Assets. Except as set forth in Schedule 4.2,
there exist no rights of first refusal or other preemptive rights with respect
to the Business or the Acquired Assets. This Agreement and the Related
Agreements to which Seller is a party constitute the valid and legally binding
agreement of Seller, enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

 

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4.3 Financial and Corporate Records. Seller’s books and records are and have
been properly prepared and maintained in form and substance adequate for
preparing audited financial statements in accordance with GAAP and, except as
set forth on Schedule 4.3, are accurate and complete in all material respects.

 

4.4 Compliance with Law. The operation of the Business and Seller’s ownership,
possession and use of the Acquired Assets comply with all Laws applicable to
Seller, the Business and Acquired Assets or Obligations, except where the
failure to comply would not have a Material Adverse Effect on Seller. Except as
set forth on Schedule 4.4, Seller has obtained and holds all Permits required
for the lawful operation of the Business as and where the Business is presently
conducted, except where the failure to obtain and maintain such Permits would
not have a Material Adverse Effect. All material Permits relating to the
Business held by Seller are listed on Schedule 4.4.

 

4.5 Financial Statements. Schedule 4.5 includes accurate and complete copies of
the audited balance sheet and statements of income, equity, cash flows and notes
thereto of Seller as of and for the fiscal years ended December 31, 2003 and
December 31, 2004 (the “Financial Statements”), as well as the unaudited balance
sheet and statements of income, equity and cash flows of Seller as of and for
the period ended June 30, 2005 (the “Interim Financial Statements”). The
Financial Statements were prepared in accordance with GAAP and present fairly in
all material respects the financial condition, results of operations and cash
flows of Seller as of such dates and for such periods. The Interim Financial
Statements were prepared in accordance with GAAP (except for the absence of
footnote disclosures and as disclosed in Schedule 4.3), and reflect all
adjustments that are necessary for a fair presentation thereof (consisting only
of normal recurring adjustments).

 

4.6 Acquired Assets. Seller has provided to Buyer detailed lists of the Acquired
Assets. Except as set forth on Schedule 4.6, Seller has good and marketable
title to all of the Acquired Assets and has the right to transfer all right,
title and interest in the Acquired Assets to Buyer, free and clear of any
Encumbrance. Except for the Acquired Assets, no other assets are necessary to
operate the Business.

 

4.7 Seller’s Obligations. All amounts due to customers for collections made by
Seller as of the date hereof or due to customers prior to the Closing Date have
been or will be remitted to the proper customers or have been deposited in the
appropriate customer account maintained by Seller in the ordinary course of
business consistent with past practices.

 

4.8 Absence of Undisclosed Liabilities. Except as set forth on Schedule 4.8,
Seller has not incurred, and neither the Acquired Assets nor Seller is subject
to, any material Obligations (whether accrued, absolute, contingent or otherwise
including, without limitation accrued but not yet payable Tax liabilities) which
are not shown or reflected on the Financial Statements, the Interim Financial
Statements, or that would be required to be reflected on Seller’s Interim
Financial Statements if prepared as of the Closing Date.

 

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4.9 Operations Since December 31, 2004. Except as set forth on Schedule 4.9,
from December 31, 2004 and as of the date of this Agreement, Seller has
conducted its business in the ordinary course consistent with past practice and:

 

4.9.1 Except as reflected on the Interim Financial Statements, Seller has not
(a) created or assumed any material Encumbrance upon any of the Acquired Assets;
(b) incurred any material Obligation; (c) made any material loan or advance to
any Person; (d) assumed, guaranteed or otherwise become liable for any material
Obligation of any Person; (e) committed for any material capital expenditure;
(f) purchased, leased, sold, abandoned or otherwise acquired or disposed of any
material part of the Acquired Assets; (g) waived any material right or canceled
any material debt or claim; (h) assumed or entered into any material Contract;
(i) materially increased, or authorized such an increase in, the compensation or
benefits paid or provided to any of its directors, officers, employees,
salesmen, agents or representatives; (j) accelerated any closings of Chapter 7
bankruptcy cases; or (k) done anything else of a material nature outside the
ordinary course of business, whether or not specifically described in any of the
foregoing clauses. For the purposes of subparts (a) through (k) stated in this
subsection, no topic of such subpart shall be considered material until the same
shall involve an amount exceeding $30,000.00 in any single case or $100,000.00
in the aggregate.

 

4.9.2 There has been no Material Adverse Effect affecting Seller or the Acquired
Assets or the financial condition of Seller.

 

4.10 Accounts Receivable. All of Seller’s Accounts Receivable arose in the
ordinary course of business and are proper and valid accounts receivable. The
reserves for doubtful accounts reflected in the Interim Financial Statements are
adequate. Seller has no Knowledge of any reason why Seller’s Accounts
Receivables, less reserved amounts, are not collectible in full in the ordinary
course of business. There are no material (individually or in the aggregate)
refunds, discounts, rights of setoff or assignment affecting any such Accounts
Receivable that are not reflected on the Financial Statements. Proper amounts of
deferred revenues appear on Seller’s books and records, in accordance with GAAP.

 

4.11 Tangible Property. Except as set forth on Schedule 4.6, Seller has good and
valid title to all of its Tangible Property, free and clear of any Encumbrances.
Except as set forth on Schedule 4.11, all of Seller’s Tangible Property is
located at the Facilities (as defined in Section 4.12), and Seller has the full
and unqualified right to require the immediate return of any of its Tangible
Property that is not located at the Facilities. All Tangible Property used by
Seller is in good condition, ordinary wear and tear excepted, and is sufficient
for the operation of the Business as presently conducted.

 

4.12 Real Property. Seller owns no Real Property. Schedule 4.12 lists all Real
Property leased by Seller (the “Facilities”), showing location, rental cost,
landlord, square footage and lease expiration date of each respective leased
Real Property, together with details of any security deposit and other prepaid
amounts owing in respect of each Real Property lease. To Seller’s Knowledge, the
Real Property is not subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations on use of any nature, except
for zoning laws and other land use restrictions, which would prohibit the
operation of Seller’s Business as presently conducted. Seller has heretofore
delivered or made available to Buyer true, correct and complete copies of all
Real Property leases, including all modifications, amendments and supplements
thereto. Each Real Property lease is valid, binding and in full force and
effect, and, except as set forth on Schedule 4.12, as of the Closing all amounts
currently owing pursuant to the Real Property leases will have been paid in
full. Seller is not in

 

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default or breach in any material respect under any Real Property lease and no
event or circumstance has occurred that, with notice or lapse of time or both,
would constitute any material event of default thereunder. Seller has not
received notice of, nor has there been any, threatened default by any landlord
under any Real Property lease. All required consents, approvals or authorization
of, filing with, or notice to, any party to any Real Property Lease in
connection with the transactions contemplated by this Agreement have been
completed. All of the land, buildings, structures, plants, facilities and other
improvements used by Seller in the conduct of its business are included in the
Real Property set forth on Schedule 4.12. All Facilities under lease by Seller
are in good condition, ordinary wear and tear excepted, and are sufficient for
the current operations of the Business. No Facilities, nor the occupancy,
maintenance or use thereof, is in violation of, or breach or default under, any
Contract to which Seller is a party or to the Knowledge of Seller any Law, and
no notice from any lessor, governmental body or other Person has been received
by Seller claiming any violation of, or breach or default under, any Contract to
which Seller is a party or Law, or requiring or calling attention to the need
for any work, repairs, construction, alternation or installations. Seller has
not placed or caused to be placed any Hazardous Substances on or under any of
the Facilities, except in accordance with applicable laws governing the use,
handling, storage or disposal of Hazardous Substances.

 

4.13 Intellectual Property. Schedule 4.13 is an accurate and complete list and
description of (1) all Intangibles required to operate the Business that are
owned, marketed, licensed, used, under development, or otherwise possessed by
Seller, and (2) all Software required to operate the Business that is owned,
marketed, licensed, used, under development, or otherwise possessed by Seller
that is (i) customized, (ii) not readily available from another source, or (iii)
the cost to license of which is over $10,000 per year. Seller agrees to provide
all Software and Intangibles required to operate the Business to Buyer; however,
Seller cannot confirm that Schedule 4.13 includes all inventions, invention
disclosures, improvements, trade secrets, proprietary information, know-how,
technology, technical data, marketing lists, vendor lists, pricing information,
customer lists, works of authorship, copyrights, all mask works, industrial
designs, trade identity indicators, all databases, database collections, source
code, object code, firmware, development tools, files, records, data, computer
program, operating system, application system, technical manuals, user manuals,
or any equivalent intangibles and Seller’s failure to list such items shall not
constitute a breach of the Agreement. Except as otherwise provided on Schedule
4.13, Seller has good and valid title to all Software and Intangibles listed on
Schedule 4.13, and has the full legally-enforceable right to use the Software to
operate the business of Seller, to transfer to Buyer all of Seller’s Software
and Intangibles, listed on Schedule 4.13, free and clear of any Encumbrance
(except for any royalty requirements in the MicroSage Agreement). Except as
disclosed on Schedule 4.13, Seller does not have any Software or other
Intangibles in escrow or any obligation to escrow the Software. Except as
disclosed on Schedule 4.13, the Software listed thereon is the original work of
authorship created by the Seller and none of the Software contains any source
code or portions of source code (including any “canned program” or “free-ware”)
created by any party other than the Sellers. Except as disclosed on Schedule
4.13, the Software does not use, embed or incorporate any computer software or
programs that are subject to any “open source,” “copy left” or other similar
type of license term and the Software is not subject to any such license. Seller
acknowledges that LITTrakker includes certain open source code that has not yet
been used by a third party. Seller represents and warrants that such open source
code may be easily replaced, without any adverse effects on LITTrakker, with
commercially available code that

 

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may be licensed for less than $1,000 per year. To Seller’s Knowledge, none of
Seller’s Software or Intangibles listed on Schedule 4.13, or Seller’s past or
current uses of such Software or Intangibles has violated or infringed upon, or
is violating or infringing upon, any Software or other Intangible of any Person.
To Seller’s Knowledge, no Person is violating, misappropriating or infringing
upon, or has violated, misappropriated or infringed upon at any time, any of
Seller’s Software or Intangibles listed on Schedule 4.13. Except as set forth on
Schedule 4.13, none of Seller’s Software or Intangibles listed on Schedule 4.13
is owned by or registered in the name of any current or former partner,
director, executive, officer, employee, salesman, agent, customer,
representative or contractor of Seller nor does any such Person have any
interest therein or right thereto, including but not limited to the right to
royalty payments, except as set forth on Schedule 4.13. Except as set forth on
Schedule 4.13, Seller owns no other Software or Intangible. Except as set forth
on Schedule 4.13, Seller has not granted to any other Person any licenses in the
Software or Intangibles of the Seller. Set forth on Schedule 4.13 is a list of
each of Seller’s registered and unregistered trademarks.

 

4.14 Material Contracts. For the purposes of this Agreement, “Material
Contracts” means all of the material Contracts to which Seller is a party or by
which Seller is bound, excluding Contracts which constitute Employee Benefit
Plans listed on Schedule 4.16, oral Contracts with employees for “at will”
employment, Contracts that constitute Insurance Policies listed on Schedule
4.20, this Agreement, and all Related Agreements entered into or to be entered
into between Seller and Buyer, or among Seller, Buyer and other parties in
connection herewith. Each of the Material Contracts constitutes a valid and
binding obligation of Seller and each other party thereto, is in full force and
effect and is enforceable against Seller and each other party thereto in
accordance with its terms, subject to general equitable principles (regardless
of whether such enforceability is considered in a proceeding at equity or at
law), and except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application relating to creditors’ rights. Set forth on Schedule 4.14 is
an accurate and complete list of all Material Contracts. Except as set forth on
Schedule 4.14, with respect to each of the Material Contracts, Seller is not in
default thereunder in any material respect nor would be in default thereunder in
any material respect with the passage of time, the giving of notice or both.
Except as set forth on Schedule 4.14, to Seller’s Knowledge, none of the other
parties to any Material Contract is in default thereunder in any material
respect or would be in default thereunder with the passage of time, the giving
of notice or both. Except as set forth on Schedule 4.14, Seller has not given or
received any notice of default or notice of termination with respect to any
Material Contract. The Material Contracts are all the material Contracts
necessary and sufficient to operate the Business as currently operated. Except
as set forth on Schedule 4.14, there are no currently outstanding proposals or
offers submitted by Seller to any customer, prospect, supplier or other Person
which, if accepted, would result in a legally binding Contract of Seller.

 

4.15 Employees and Independent Contractors. Except as limited by any employment
Contracts listed on Schedule 4.15 and except for any limitations of general
application which may be imposed under applicable employment Laws, Seller has
the right to terminate the employment of each of its employees at will and to
terminate the engagement of any of its at will independent contractors without
payment to such employee or independent contractor other than for services
rendered through termination and without incurring any penalty or liability
other than liability for severance pay in accordance with Seller’s disclosed
severance pay policy. Seller is in full compliance with all Laws respecting
employment practices, except

 

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where the failure to so comply would not have a Material Adverse Effect on
Seller. Seller has not been a party to or bound by any union or collective
bargaining Contract, nor is any such Contract currently in effect or being
negotiated by or on behalf of Seller. Seller has not experienced any labor
problem that was or is material to the Business. Seller’s relations with its
employees are currently on a good and normal basis. Except as set forth on
Schedule 4.15, the employees identified on Schedule 2.3 are all of the employees
necessary to conduct the Business. Except as indicated on Schedule 4.15, no
Partner, and no officer or manager of the general partner of Seller has
indicated to Seller an intention to terminate his or her employment with Seller.
Seller has not had an “employment loss” within the meaning of the Workers’
Adjustment and Retraining Notification Act and the regulations thereunder.

 

4.16 Employee Benefit Plans.

 

4.16.1 Schedule 4.16 sets forth a true and complete list of (i) each “employee
pension benefit plan” as defined in Section 3(2) of ERISA, (ii) each “employee
welfare benefit plan” as defined in Section 3(1) of ERISA, and (iii) each
employment consulting, engagement, retainer or golden parachute agreement or
arrangement, employment bonus or other incentive compensation, stock option,
stock purchase, stock or other equity-related award, restricted stock, phantom
stock, deferred compensation, profit-sharing, severance pay, change in control,
retention, salary continuation, sick leave, vacation pay, leave of absence, paid
time off, loan, educational assistance, legal assistance, and other material
fringe benefit plan, program, agreement or arrangement, in each case which is
sponsored, maintained or contributed to by the Seller or any ERISA Affiliate, or
under which Seller or any ERISA Affiliate otherwise has liability, for the
benefit of any current or former employee or director of the Seller (and any
eligible dependent and beneficiary thereof) (collectively, the “Employee Benefit
Plans”). Except as set forth on a separate Schedule 4.16.1, neither Seller nor
any ERISA Affiliate has outstanding or is a party to or subject to any liability
under any agreement, arrangement, plan or policy subject to or entitled to
grandfathered treatment under Code Section 409A and the regulations and other
guidance issued thereunder. With respect to each Employee Benefit Plan, complete
and accurate copies of the following documents (if applicable), to the extent
requested by Buyer, have been made available to Buyer or its counsel or have
been offered to be so made available: (i) the most recent plan document
constituting the Employee Benefit Plan and all amendments thereto, and any
related trust documents; (ii) the most recent summary plan description and all
related summaries of material modifications; (iii) the Form 5500 and attached
schedules filed with the Internal Revenue Service (“IRS”) for the past three (3)
plan years; (iv) the financial statements for the past three (3) fiscal years;
(v) the most recent IRS determination letter; and (vi) all trust agreements,
plan contracts with service providers or with insurers providing benefits to
participants or liability insurance for fiduciaries or bonding. Except as set
forth on Schedule 4.16.1, the Seller has no unwritten or undocumented Employee
Benefit Plans.

 

4.16.2 The Seller has performed and complied in all material respects with all
of its obligations under or with respect to the Employee Benefit Plans. Each
Employee Benefit Plan and related trust agreement, annuity contract or other
funding instrument complies with and has been administered and operated in
compliance in all material respects in accordance with its terms and with all
applicable Laws, including but not limited to the Code and ERISA, and neither
Seller nor any ERISA Affiliate has direct or

 

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indirect liability under the requirements provided by any and all Laws,
including but not limited to ERISA, COBRA, HIPAA and the Code, and applicable to
an Employee Benefit Plan. Neither Seller nor any subsidiary has any liability by
virtue of being a member of a controlled group with a person who has liability
under the Code or ERISA. All amendments and actions required to bring each of
the Employee Benefit Plans into conformity in all material respects with all of
the applicable provisions of ERISA, the Code and other applicable Laws have been
made or taken except to the extent that such amendments or actions are not
required by Law to be made or taken until a date after the Closing Date. No
action, suit, claim, investigation or other proceeding with respect to an
Employee Benefit Plan (other than routine claims for benefits) are pending or,
to the Knowledge of Seller, threatened which could result in or subject the
Seller to any liability causing a Material Adverse Effect. There are no audits,
investigations, or examinations pending or, to the Knowledge of Seller,
threatened with respect to any Employee Benefit Plan by the IRS, the United
States Department of Labor, the PBGC or any other similar Governmental
Authority. There is no material violation of ERISA or the Code with respect to
the filing of applicable reports, documents and notice regarding the Employee
Benefit Plans with the Secretary of Labor and the Secretary of Treasury or the
furnishing of such documents to the participants or beneficiaries of the
Employee Benefit Plans.

 

4.16.3 None of the Employee Benefit Plans is a “multiemployer plan” within the
meaning of Section 3(37) of ERISA, and neither the Seller nor any of its ERISA
Affiliates have ever maintained, been required to contribute to or been required
to pay any amount with respect to a “multiemployer plan” at any time in the past
six (6) years. None of the Employee Benefit Plans is subject to Title IV of
ERISA or to the funding requirements of Section 412 of the Code or Section 302
of ERISA, and neither the Seller nor any of its ERISA Affiliates have ever had
any obligation to or liability (contingent or otherwise) with respect to any
such plan. Each Employee Benefit Plan and its related trust intended to be
qualified under Sections 401(a) and 501(a) of the Code, respectively, has so
qualified and has received a favorable determination, opinion or advisory letter
from the Internal Revenue Service and nothing has occurred with respect to such
Employee Benefit Plan since the date of such letter which could cause the loss
of such qualification or the imposition of any material liability, penalty or
tax under ERISA or the Code. Neither the Seller nor, to the Knowledge of Seller,
any “party in interest” or “disqualified person” with respect to any Employee
Benefit Plan, has engaged in a “prohibited transaction” within the meaning of
Section 406 of ERISA or Section 4975 of the Code with respect to any Employee
Benefit Plan that could result in a material tax or penalty. To Seller’s
Knowledge, no Employee Benefit Plan, or any fiduciary of any such Employee
Benefit Plan has: (i) engaged in any transaction prohibited by ERISA or the
Code; (ii) breached any fiduciary duty owed by it; or (iii) engaged in any
transaction as a result of which the Seller would be subject to any liability
pursuant to Sections 406 or 409 of ERISA or to either a civil penalty assessed
pursuant to Section 502(i) or Section 502(l) of ERISA or a tax imposed pursuant
to Section 4975 of the Code.

 

4.16.4 All contributions and premiums (including all employer contributions and
employee salary reduction contributions) that are due with respect to any
Employee Benefit Plan have been made within the time periods prescribed by
applicable Law or by the terms of such Employee Benefit Plan or any agreement
relating thereto to the respective Employee Benefit Plan, and all contributions,
liabilities or expenses of any

 

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Employee Benefit Plan (including workers’ compensation) for any period ending on
or before the Closing Date which are not yet due will have been paid or accrued
in accordance with GAAP on or prior to the Closing Date. All premiums or other
payments for all periods ending before the Closing Date that are due on or
before such Closing Date from the Seller will have been paid with respect to
each Employee Benefit Plan.

 

4.16.5 Except for health care continuation requirements under Section 4980B of
the Code and Part 6 of Subtitle I of ERISA (“COBRA”) or applicable state law,
the Seller does not have any obligations for retiree health or retiree life
benefits (whether or not insured) to any current or former employee or director
after his or her termination of employment or service with the Seller. All group
health plans (as defined in Code Section 5001(b)) of the Seller have been
operated in compliance in all material respects with the applicable requirements
of COBRA.

 

4.16.6 Except as disclosed on Schedule 4.16.6, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
herein will, either alone or in combination with any other event: (i) result in
any payment becoming due, or increase the amount of compensation due, to any
current or former employee or director of the Seller; (ii) increase any benefits
payable under any Employee Benefit Plan; or (iii) result in any acceleration of
the time of payment or vesting of any such compensation or benefits. Further,
the Seller has not announced any type of plan or binding commitment to create
any additional Employee Benefit Plan, to enter into any agreement with any
current or former employee or director, or to amend or modify any existing
Employee Benefit Plan or agreement with any current or former employee or
director.

 

4.16.7 Neither Seller nor any subsidiary has terminated or taken action to
terminate (in whole or in part) any Employee Benefit Plan.

 

4.16.8 Neither Seller nor any subsidiary maintains any Employee Benefit Plan or
other benefit arrangement covering any employee or former employee outside of
the United States and has never been obligated to contribute to any such plan.

 

4.16.9 None of the rights of Seller’s employees in any Employee Benefit Plan
will be impaired by the consummation of the transactions contemplated by this
Agreement, and all of the rights of Seller thereunder will be enforceable by
Buyer at or after the Closing Date without the consent or agreement of any other
party that has not been obtained previously. Each Employee Benefit Plan
(including any Employee Benefit Plan covering former employees and retirees) may
be amended or terminated by Buyer on or at any time after the Closing Date.

 

4.17 Customers, Prospects and Suppliers. Each of the current customers of Seller
(the “Customers”) has signed a Contract and are listed on Schedule 4.17. Seller
has previously delivered to Buyer a list of Seller’s prospects and proposals
with respect to the Business. All of the proposals made to the prospects listed
on Schedule 4.17 are still pending and have not been rejected. Except as set
forth on Schedule 4.17, none of the Customers has given notice or otherwise
indicated to Seller that it will or intends to terminate or not renew its
Contract or relationship with Seller before the scheduled expiration date or
otherwise terminate its

 

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relationship with Seller. The relationship of Seller with its customers and
suppliers are currently on a good and normal basis. Seller has not received
notice of any termination of any Contract or relationship with any of the
Customers, and no such termination of any Contract or relationship has been
threatened. To Seller’s Knowledge, the transactions contemplated by this
Agreement will not materially adversely affect Buyer’s relations with any of the
Customers.

 

4.18 Taxes. Seller has timely filed all Tax returns and reports required to be
filed by it (including, without limitation, all declarations, reports,
estimates, information returns and statements (referred to herein as “Tax
Returns”), all of which were accurately prepared, and, except as set forth in
Schedule 4.18, Seller has timely paid all Taxes or withholdings required to be
paid or withheld by it (whether or not shown or required to be shown on any Tax
Return). To Seller’s Knowledge, Seller has properly withheld from payments to
its employees, contractors, salesmen, agents, representatives, vendors and other
Persons all amounts required by Law to be withheld, and Seller has timely filed
all Tax Returns to be filed by it with respect to such withholdings. Except as
indicated on Schedule 4.18, (a) no audit or other Proceeding is pending or
threatened against Seller; (b) no notice of deficiency or adjustment has been
received by Seller, by or from any governmental taxing authority, with respect
to sales, use, excise, real property, payroll, withholding or similar Taxes; (c)
there are no agreements or waivers in effect which provide for an extension of
time for the assessment of any such Tax against Seller; (d) for any Taxes of
Seller that are not yet due and payable, Seller has no material payment
liability for which it has not provided adequate reserves on its books and
records in accordance with GAAP; and (e) there are no liens for Taxes upon the
Acquired Assets other than any liens for Taxes not yet due and payable.

 

4.19 Proceedings, Judgments, and Breaches. Except (a) with respect to bankruptcy
Proceedings initiated by or on behalf of Seller; and (b) as described on
Schedule 4.19, (i) no Proceeding involving or related to the Acquired Assets or
the Business is currently pending or threatened; (ii) no Judgment involving or
related to Seller, the Acquired Assets or the Business is currently outstanding;
and (iii) no breach of contract, material breach of warranty, tort, negligence,
infringement, product liability, discrimination, wrongful discharge or other
material claim of any nature involving or related to Seller, the Acquired Assets
or the Business is currently being asserted or threatened by or against Seller,
and to Seller’s Knowledge there is no basis for any such claim. As to each
matter described on Schedule 4.19, accurate and complete copies of all material
pertinent pleadings, judgments, orders, correspondence and other legal documents
have been delivered to Buyer or have been made available to Buyer for review.

 

4.20 Insurance. To Seller’s Knowledge, Schedule 4.20 is an accurate and complete
list of all Insurance Policies currently owned or maintained by Seller
(excluding Insurance Policies that constitute Employee Benefit Plans described
on Schedule 4.16) and all liability and errors and omissions Insurance Policies
owned or maintained by Seller. Seller has not received notice of cancellation
with respect to any such Insurance Policy, and there is no basis for the insurer
thereunder to terminate any such Insurance Policy. To Seller’s Knowledge, each
such Insurance Policy is or was in full force and effect during the period(s) of
coverage indicated on Schedule 4.20. All premiums payable under all such
Insurance Policies have been timely paid, and Seller otherwise has complied in
all material respects with the terms and conditions of all such Insurance
Policies. Seller has not received notice of any threatened termination of,
material premium increase with respect to, or material alteration of coverage
under, any of the

 

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Insurance Policies. Except as described on Schedule 4.20, there are no claims
that are pending under any of the Insurance Policies described thereupon.

 

4.21 Questionable Payments. Neither Seller, nor any of the current or former
partners, directors, executives, officers, representatives, agents or employees
of Seller (when acting in such capacity or otherwise on behalf of Seller): (a)
has used or is using any corporate funds for any illegal contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b) has
used or is using any corporate funds for any direct or indirect unlawful
payments to any foreign or domestic government officials or employees; (c) has
violated or is violating any provision of the Foreign Corrupt Practices Act of
1977, except for violations which, individually and in the aggregate, would not
have, and could not be reasonably be expected to have, a Material Adverse
Effect; (d) has established or maintained, or is maintaining, any unlawful or
unrecorded fund of corporate monies or other properties; (e) has made any false
or fictitious entries on the books and records of Seller; (f) has made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature using corporate funds or otherwise on behalf of Seller; or (g) made
any material favor or gift that is not deductible for federal income tax
purposes using corporate funds or otherwise on behalf of Seller.

 

4.22 Related Party Transactions. Except as described on Schedule 4.22 and except
for any employment Contracts listed on Schedule 4.15, (a) no Partner, (b) no
director, officer, affiliate or controlling Persons of Seller, (c) no immediate
family member of any such Partner, director, officer, affiliate or controlling
Person, and (d) no entity controlled by any one or more of the foregoing
(excluding Seller) (collectively, the “Related Parties”): (i) owns, directly or
indirectly, any interest in (excepting not more than three percent (3%) stock
holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any person or
entity which is engaged in business as, a competitor, or as a lessor, lessee,
customer, distributor, sales agent, or supplier of any material amount of goods
or services to Seller; (ii) owns, directly or indirectly, in whole or in part,
any material tangible or intangible property that Seller uses or the use of
which is necessary for the conduct of the Business; (iii) has any cause of
action or other claim whatsoever against Seller or the Business; (iv) on behalf
of Seller, has made any payment or commitment to pay any commission, fee or
other amount to, or purchase or obtain or otherwise contract to purchase or
obtain any goods or services from, any corporation or other person of which any
officer or director of Seller, or an immediate family member of the foregoing,
is a partner or stockholder (excepting stock holdings solely for investment
purposes in securities of publicly held and traded companies). Schedule 4.22
contains a complete list of all material contracts and agreements between Seller
and any Related Party relating to the Business, entered into on or prior to the
date of this Agreement or contemplated to be entered into before Closing.

 

4.23 Brokerage Fees. Except for The Patriot Group LLC and as set forth on
Schedule 4.23, which brokerage fee, finder’s fee and all other costs and
expenses relating thereto shall be paid by Seller, no Person acting on behalf of
Seller is or shall be entitled to any brokerage or finder’s fee in connection
with the transactions contemplated by this Agreement.

 

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4.24 Portfolio of Accounts

 

4.24.1 The Computer File on the server being acquired by Buyer sets forth, as of
the date hereof, an accurate and complete list of the Accounts and the status of
each Account, except with respect to ordinary course of business delays in
reporting.

 

4.24.2 The Computer File taken as a whole accurately reflects, in all material
respects, all activities on the Accounts during all periods during which the
Accounts were owned by Seller, except with respect to ordinary course of
business delays in reporting.

 

4.24.3 Seller has operated in the ordinary course with respect to the Accounts
and has made appropriate adjustments in the data base in which entries on the
Accounts are made in the ordinary and normal course of its business, consistent
with its past practices.

 

4.24.4 Seller: (a) has good and valid title to each Account and corresponding
Account Documents, is the sole owner thereof; and (b) except for the consents
that may be required to be obtained with respect to the transfer of Accounts
purchased under the Original Purchase Agreements listed on Schedule 4.24.4, has
full right to transfer and sell such Account and related Account Documents and
is transferring and selling all of its right, title and interest in and to the
Accounts and Account Documents to Buyer, free and clear of any Encumbrance
(other than, with respect to any Account (A) any Encumbrance arising under the
Original Purchase Agreement in respect thereof and (B) any Encumbrance arising
in connection with the collection activity of third party collection agencies or
attorneys previously retained by Seller).

 

4.24.5 The Original Purchase Agreements constitute all of the purchase
agreements relating to the Accounts. Seller is not in breach of or default under
any of the Original Purchase Agreements except where such occurrence would not
have a Material Adverse Effect on the Business.

 

4.24.6 To Seller’s Knowledge, each Account has been maintained, billed,
collected and serviced by Seller and its agents in compliance with all
applicable laws, rules, and regulations, except where the failure to do so would
not have a Material Adverse Effect on such Account.

 

4.25 Bulk Sales Laws. Seller has and will have complied with all bulk sales and
transfer laws applicable to the transactions contemplated by this Agreement.

 

4.26 Full Disclosure. No representation or warranty made by Seller in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact that is necessary to make the representation or warranty made, in
the light of the circumstances under which it was made, not false or misleading
in any material respect. The copies of Seller’s documents attached hereto as
schedules, if any, are accurate and complete in all material respects.

 

4.27 Investment Representation. Seller is acquiring the Encore Common Stock for
its own account and not for the benefit of others for investment, and not with a
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act or state securities

 

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laws or any rule or regulation thereunder. Seller understands that the Encore
Common Stock is not registered under the Securities Act or state securities laws
and that the issuance contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act and state securities laws on the
grounds that no distribution or public offering of the Encore Common Stock is to
be effected, and that Encore’s reliance on such exemption is predicated, in
part, on Seller’s representations and warranties set forth herein.

 

4.28 Stop Transfer Instructions and Legend Restricting Transfer. Seller
understands and agrees to the entry of stop transfer instructions with Encore’s
transfer agent to the effect that the Encore Common Stock may not be transferred
except in compliance with the Securities Act and state securities laws and a
lock-up agreement between Seller and Encore. In the event the Encore Common
Stock is issued in certificated form, Seller understands and agrees that the
certificate representing such shares shall have legends in substantially similar
form as set forth below:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS,
CONDITIONS AND RESTRICTIONS OF A LOCKUP AGREEMENT, DATED AS OF AUGUST 30, 2005,
BETWEEN ENCORE CAPITAL GROUP, INC. (THE “COMPANY”), ASCENSION ACQUISITION, LP
AND ASCENSION CAPITAL GROUP, LTD., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
OFFICES OF ENCORE CAPITAL GROUP, INC. SUCH AGREEMENT, AMONG OTHER THINGS, MAY
RESTRICT THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD,
ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED, ENCUMBERED OR DISPOSED OF, EXCEPT AS
EXPRESSLY PROVIDED IN SUCH AGREEMENT. STOP TRANSFER INSTRUCTIONS HAVE BEEN
PLACED AGAINST THE SECURITIES AND THE CERTIFICATES EVIDENCING THE SECURITIES TO
RESTRICT THEIR TRANSFER, EXCEPT AS PERMITTED UNDER SUCH AGREEMENT.

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY THE
SECURITIES ACT, IF APPLICABLE, AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE
EVIDENCED BY AN OPINION OF COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT
NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT.”

 

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4.29 Lock-Up Restrictions. The undersigned acknowledges that the Encore Common
Stock received by the undersigned will be subject to restrictions set forth in a
Lock-Up Agreement required to be entered into by the undersigned, which
agreement restricts the transfer of the Encore Common Stock for three years
following the Closing Date.

 

4.30 Investment Experience. By reason of the undersigned’s or its officers’ or
general partners’ business or financial experience, or by reason of the business
or financial experience of the undersigned’s financial, tax or legal advisor,
the undersigned is capable of evaluating the risks and merits of an investment
in the Encore Common Stock and of protecting the undersigned’s own interests in
connection with this investment.

 

4.31 Encore Information. The undersigned acting through its officers and/or
general partner has been given the opportunity to ask questions and receive
answers concerning Encore Common Stock, Encore’s financial performance and any
other matter concerning an investment in Encore Common Stock and any
restrictions on selling Encore Common Stock. In addition, the undersigned has
been given an opportunity to receive any additional information reasonably
requested by the undersigned relating to the Encore Common Stock and Encore that
Encore possesses or can acquire without unreasonable effort or expense. Further,
the undersigned acknowledges receipt and review of the SEC Documents (as defined
below in Section 6.4) concerning Encore.

 

5. REPRESENTATIONS OF PARTNERS

 

As of the date hereof and as of the Closing Date, each Partner represents and
warrants to and for the benefit of Buyer as follows:

 

5.1 Authority and Effect of Agreement. Such Partner has the capacity and all
requisite power and authority to enter into this Agreement and the Related
Agreements to which such Partner is a party and to perform such Partner’s
obligations hereunder and thereunder and to consummate the transactions
contemplated by this Agreement and the Related Agreements to which such Partner
is a party. The execution, delivery and performance of this Agreement by such
Partner and the Related Agreements to which such Partner is a party and the
consummation by such Partner of the transactions contemplated hereby and
thereby: (a) except as set forth on Schedule 5.1, do not constitute a default or
breach of (immediately after the giving of notice, passage of time or both), or
termination of any material Contract to which such Partner is a party or by
which such Partner is bound; (b) do not constitute a violation of any Law
applicable to such Partner or such Partner’s assets except where the failure to
comply would not have a Material Adverse Effect; (c) except as stated on
Schedule 5.1, do not require the consent of any Person; (d) do not accelerate or
otherwise modify any Obligation of such Partner; and (e) do not result in the
creation of any Encumbrance upon, or give to any other Person any interest in,
any of such Partner’s assets. This Agreement and the Related Agreements to which
such Partner is a party constitute the valid and legally binding agreements of
such Partner, enforceable against such Partner in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors’ rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Partners hold all of the outstanding general partnership
interests and limited partnership interests in

 

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Seller. There is no other vote or approval of a trustee that is necessary to
approve this Agreement and the transactions contemplated hereby.

 

5.2 Brokerage Fees. Except for The Patriot Group LLC and as set forth on
Schedule 5.2, which brokerage fee, finder’s fee and all other costs and expenses
relating thereto shall be paid by Seller, no Person acting on behalf of such
Partner is or shall be entitled to any brokerage or finder’s fee in connection
with the transactions contemplated by this Agreement.

 

5.3 Full Disclosure. No representation or warranty made by a Partner in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact that is necessary to make the representation or warranty made, in
the light of the circumstances under which it was made, not false or misleading
in any material respect. The copies of documents attached hereto as schedules,
if any, are accurate and complete in all material respects.

 

6. REPRESENTATIONS OF BUYER AND ENCORE

 

As of the date hereof, Buyer and Encore represent and warrant to and for the
benefit of Seller and the Partners as follows:

 

6.1 Organization. Encore is a corporation that is duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Buyer is
a limited partnership that is duly organized and validly existing under the Laws
of the State of Texas. Each of Encore and Buyer has the full requisite power and
authority to own its assets, conduct its business as and where such business is
presently conducted, and enter into this Agreement.

 

6.2 Effect of Agreement. The execution, delivery and performance by each of
Encore and Buyer of this Agreement and the Related Agreements to which it is a
party, and its consummation of the transactions contemplated hereby and thereby:
(a) have been duly authorized by all necessary corporate actions by its board of
directors or its general partner, as applicable; (b) do not constitute a
violation of or default under its charter, bylaws, certificate of limited
partnership, limited partnership agreement or other organizational documents;
(c) do not constitute a default or breach (immediately or after the giving of
notice, passage of time or both) under any Contract to which it is a party or by
which it is bound; (d) do not constitute a violation of any Law or Judgment that
is applicable to it or to its business or assets or to the transactions
contemplated by this Agreement; and (e) except as stated on Schedule 6.2, do not
require the consent of any Person. This Agreement and the Related Agreements to
which Encore or Buyer is a party constitute the valid and legally binding
agreement of Encore or Buyer, as the case may be, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

 

6.3 Brokerage Fees. No Person acting on behalf of either Encore or Buyer is
entitled to any brokerage, finder’s or investment banking fee in connection with
the transactions contemplated by this Agreement.

 

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6.4 SEC Documents. All of Encore’s reports and other documents required to be
filed by Encore with the Securities and Exchange Commission (the “SEC”) since
December 31, 2004 (the “SEC Documents”) pursuant to the requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the
respective dates of such SEC Documents: (a) complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents; and (b) when filed
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
Encore included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with accounting principles generally accepted in the United States of America
during the periods involved and fairly present the consolidated financial
position of Encore and its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and the lack of complete footnotes).

 

6.5 Stock Issuance. At or prior to the Closing Date, Encore will have taken all
necessary corporate action to permit it to issue the Encore Common Stock
pursuant to Section 3.1 of this Agreement. At Closing, the Encore Common Stock
will be validly issued, fully paid, and nonassessable.

 

6.6 Full Disclosure. No representation or warranty made by Buyer or Encore in
this Agreement contains any untrue statement of a material fact or omits to
state a material fact that is necessary to make the representation or warranty
made, in the light of the circumstances under which it was made, not false or
misleading in any material respect. The copies of documents attached hereto as
schedules, if any, are accurate and complete in all material respects.

 

7. PRE-CLOSING COVENANTS OF SELLER AND PARTNERS; TERMINATION

 

Seller and each Partner hereby covenant and agree that from the date of this
Agreement until the Closing Date:

 

7.1 Conduct of the Business. Except as specifically contemplated in this
Agreement, from the date of this Agreement to the Closing Date, Seller and
Partners will use their best efforts: (a) to preserve intact the present
business organization of Seller and the Business and Acquired Assets; (b) to
keep available the services of Seller’s present officers and employees material
to the Business; and (c) to preserve Seller’s relationships with customers,
suppliers and others having business dealings with Seller.

 

7.2 Closing. Each Partner that owns an equity interest in Seller shall vote in
favor of the transactions contemplated by this Agreement.

 

7.3 Termination of Agreement. This Agreement may be terminated at any time prior
to the Closing:

 

7.3.1 By the mutual written consent of Seller and the Encore Parties.

 

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7.3.2 By Seller by delivery of written notice to the Encore Parties if:

 

(a) the Closing has not occurred on or before August 31, 2005, unless the
failure to close is due to the failure of Seller or any Partner to perform, in
any material respect, any of their obligations (including the delivery by Seller
to Buyer of the Financial Statements and the consents identified in Schedule
7.3.2) under this Agreement required to be performed by them prior to the
Closing; or

 

(b) there is a Judgment of any Governmental Authority which prohibits or
restrains Seller or any of the Encore Parties from consummating the transactions
contemplated hereby and such Judgment has become final and non-appealable,
provided that prior to termination under this Section 7.3.2(b) Seller has used
commercially reasonable best efforts to have such Judgment vacated.

 

7.3.3 By the Encore Parties by delivery of written notice to Seller if there has
occurred an event, change, occurrence or circumstance that has had or could
reasonably be expected to have a Material Adverse Effect that cannot be cured by
Seller within thirty (30) days of the occurrence of such event, change,
occurrence or circumstance.

 

8. RELATED AGREEMENTS

 

The following Contracts have been executed on or prior to the date of this
Agreement, each of which will be effective as of the Closing Date:

 

8.1 Employment and Non-Competition Agreements. Ramsey, Oszustowicz, Walter and
Carl A. Caruso have each entered into Employment Agreements with Buyer and
Encore in the forms attached to this Agreement as Exhibit 8.1(a) (the
“Employment Agreements”) and Ramsey, Oszustowicz and Walter have each entered
into Non-Competition Agreements with Buyer and Encore in the forms attached to
this Agreement as Exhibit 8.1(b) (the “Non-Competition Agreements”).

 

8.2 Services Agreement. Buyer and the Ramsey Law Firm have entered into a
Services Agreement in the form attached to this Agreement as Exhibit 8.2 (the
“Services Agreement”).

 

8.3 Escrow Agreements. Buyer, Encore and Seller have entered into the Indemnity
Escrow Agreement in the form attached to this Agreement as Exhibit 3.2.1 and the
Retention Escrow Agreement in the form attached to this Agreement as Exhibit
3.2.2.

 

8.4 Lock-Up Agreement. Buyer, Encore and Seller shall enter into a lock-up
agreement in the form attached hereto as Exhibit 8.4 (the “Lock-Up Agreement”),
which shall provide for the lock-up of the Encore Common Stock for a period of
three years from the Closing Date, except for family estate planning transfers
as provided therein and certain hedging transactions upon the prior approval of
the board of directors of Encore.

 

8.5 Loss Reimbursement Agreement. Buyer, Encore, Seller, and Ramsey shall enter
into a loss reimbursement agreement in the form attached hereto as Exhibit 8.5
(the “Loss Reimbursement Agreement”), which shall provide for certain
obligations of Ramsey under

 

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specified conditions relating to the investment of the Retention Escrow Amount
under Ramsey’s direction and control.

 

9. CONDITIONS TO OBLIGATION OF THE ENCORE PARTIES TO CLOSE

 

All obligations of the Encore Parties to consummate the transactions provided
for hereby are subject, in the discretion of Encore Parties, to the
satisfaction, on or prior to the Closing, of each of the conditions of this
Section 9, any of which may be waived in writing by the Encore Parties:

 

9.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller and each Partner contained herein and in any certificate or
Related Agreement delivered pursuant hereto or in connection herewith shall be
true and correct at and as of the Closing as though made at that time, other
than the representations and warranties that expressly speak as of a specific
date or time which shall be true and correct only as of such time.

 

9.2 Performance of Seller and Partners. Seller and each Partner shall have duly
performed or complied with, as applicable, all of the covenants, acts, and
obligations to be performed or complied with by Seller and such Partner
hereunder at or prior to the Closing, and Seller and each Partner shall have
executed and delivered to the Encore Parties this Agreement and all Related
Agreements to which they are a party.

 

9.3 No Material Changes. During the period from the date of the Interim
Financial Statements to the Closing, there shall not have been any Material
Adverse Effect with respect to Seller, the Acquired Assets or the Business, the
Acquired Assets shall not have sustained any uninsured material casualty or
other loss, damage or destruction, and there shall not be any fact, circumstance
or event that, in the Encore Parties’ sole judgment, could have a Material
Adverse Effect with respect to Seller, its financial condition, operations, the
Acquired Assets, properties or prospects or the Business.

 

9.4 Compliance Certificate. The Encore Parties shall have received a certificate
from Seller and each Partner, dated the Closing Date, signed and verified by, in
the case of Seller, Seller’s President and Secretary, and, in the case of such
Partner, such Partner, certifying that the conditions specified in Sections 9.1¸
9.2 and 9.3 above have been fulfilled.

 

9.5 Delivery of Audited Financial Statements. Seller shall deliver to the Encore
Parties audited Financial Statements and the Interim Financial Statements.

 

9.6 Consents. Seller shall obtain and deliver to the Encore Parties each of the
consents identified on Schedule 7.3.2 as a condition to closing. To the extent
Seller has not done so by the Closing Date, Seller remains obligated pursuant to
Section 2.1.1(c) of this Agreement to use its reasonable best efforts to obtain
and deliver to the Encore Parties all necessary consents as listed on Schedule
4.2 as soon as possible after the Closing Date.

 

9.7 Approval of Documents. The form and substance of all certificates,
instruments, opinions, schedules, exhibits, other agreements contemplated by
this Agreement and the Related Agreements delivered to Buyer under this
Agreement shall be satisfactory to Buyer and its counsel.

 

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10. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE

 

All obligations of Seller to consummate the transactions provided for hereby are
subject, in the discretion of Seller, to the satisfaction, on or prior to the
Closing, of each of the conditions of this Section 10, any of which may be
waived in writing by Seller:

 

10.1 Accuracy of Representations and Warranties. The representations and
warranties of the Encore Parties contained herein and in any certificate or
other writing delivered pursuant hereto or in connection herewith shall be true
and correct at and as of the Closing as though made at that time, other than
representations and warranties that expressly speak as of a specific date or
time which shall be true and correct only as of such time.

 

10.2 Performance of the Encore Parties. The Encore Parties shall have duly
performed or complied with all of the covenants, acts and obligations to be
performed or complied with by them hereunder at or prior to the Closing, and the
Encore Parties shall have executed and delivered to Seller this Agreement and
all of the Related Agreements to which each Encore Party is a party.

 

10.3 Certificate. Seller shall have received a certificate dated the Closing
Date signed and verified by Buyer and Encore certifying that the conditions
specified in Sections 10.1 and 10.2 have been fulfilled.

 

10.4 Approval of Documents. The form and substance of all certificates,
instruments, opinions, schedules, exhibits, other agreements contemplated by
this Agreement and the Related Agreements delivered to Seller under this
Agreement shall be satisfactory to Seller and its counsel.

 

11. CLOSING

 

11.1 Closing. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall be held at the offices of Carrington, Coleman, Sloman &
Blumenthal, L.L.P., or such other time or location as is mutually agreeable on
the date first above written (the “Closing Date”). The Closing shall be
considered to have been effective at 5:00 p.m. (California time) on the Closing
Date.

 

11.2 Obligations of Seller at Closing. At the Closing, Seller shall deliver to
the Encore Parties the following:

 

11.2.1 the consents identified on Schedule 7.3.2 and those additional consents
listed on Schedule 4.2. To the extent that any of the consents on Schedule 4.2
have not been obtained or cannot be delivered by Seller as of the Closing Date,
Seller remains obligated pursuant to Section 2.1.1(c) of this Agreement to use
its reasonable best efforts to obtain and deliver to the Encore Parties all
necessary consents as listed on Schedule 4.2 as soon as possible after the
Closing Date;

 

11.2.2 certified copies of the resolutions of the general partner and limited
partners authorizing the execution of this Agreement and the consummation of the
transactions contemplated hereby;

 

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11.2.3 a certificate of existence for Seller in the State of Texas;

 

11.2.4 a legal opinion of counsel to Seller in the form attached hereto as
Exhibit 11.2.4;

 

11.2.5 to the extent that such are capable of being physically delivered, all of
the Acquired Assets and related bills of sale, assignments, deeds, endorsements,
affidavits, pay-off letters from holders of debt which encumber the Acquired
Assets and documents reasonably necessary to remove such Encumbrances;

 

11.2.6 the Indemnity Escrow Agreement and the Retention Escrow Agreement;

 

11.2.7 the Assumption Agreement;

 

11.2.8 the Financial Statements and the Interim Financial Statements;

 

11.2.9 a draft of the amendment to Seller’s certificate of limited partnership,
to be filed with the Secretary of State of the State of Texas, changing Seller’s
name to a name reasonably approved by the Encore Parties;

 

11.2.10 the updated Computer File;

 

11.2.11 evidence of termination of the Contracts of employment between Seller
and each of Oszustowicz and Walter; and

 

11.2.12 all other agreements, certificates, instruments and documents reasonably
requested by the Encore Parties in order to fully consummate the transactions
contemplated by this Agreement and carry out the purposes and intent of this
Agreement.

 

11.3 Obligations of the Encore Parties at Closing. At the Closing, the Encore
Parties shall deliver to Seller the following:

 

11.3.1 any consents identified in Schedule 6.2 as well as any other consents
required to consummate the transactions contemplated by this Agreement;

 

11.3.2 certified copies of the resolutions of the Board of Directors of: (i) the
general partner of Buyer; and (ii) Encore, authorizing the execution of this
Agreement, the consummation of the transactions contemplated hereby, and the
adoption of Seller’s Employee Benefit Plans;

 

11.3.3 the Employment Agreements, Non-Competition Agreements and Services
Agreement contemplated by Section 8 of this Agreement;

 

11.3.4 a certificate of existence and a good standing certificate of Buyer and
Encore in its jurisdiction of incorporation and in Texas;

 

11.3.5 the Purchase Price paid as contemplated by Section 3.1 (including
evidence of instruction by Encore for the issuance of stock certificates, duly
executed and

 

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issued in the name of Seller, representing the number of shares of Encore Common
Stock to be issued to Seller pursuant to Section 3.1);

 

11.3.6 a legal opinion of the Encore Parties’ counsel in the form attached as
Exhibit 11.3.6;

 

11.3.7 the Indemnity Escrow Agreement and the Retention Escrow Agreement;

 

11.3.8 the Assumption Agreement;

 

11.3.9 all other agreements, certificates, instruments and documents reasonably
requested by Seller in order to fully consummate the transactions contemplated
by this Agreement and carry out the purposes and intent of this Agreement.

 

12. CERTAIN POST-CLOSING OBLIGATIONS

 

12.1 Transition and Cooperation. From and after the Closing Date: (a) Seller
shall fully cooperate to transfer to Buyer the control and enjoyment of the
Business and the Acquired Assets; (b) Seller shall not take any action, directly
or indirectly, alone or together with others, which obstructs or impairs the
assumption by Buyer of the Acquired Assets; (c) Seller shall promptly deliver to
Buyer all of the Acquired Assets received by Seller or in the possession of
Seller and not previously delivered to Buyer; (d) Seller shall promptly deliver
to Buyer all correspondence, papers, documents and other items and materials
received by Seller or found to be in the possession of Seller which pertain to
the Business or the Acquired Assets; and (e) Seller shall provide Buyer access
to Seller’s payroll records and systems.

 

12.2 Use of Names. Immediately after the Closing Date, each of Seller and
General Partner shall file articles of amendment to its certificate of limited
partnership and certificate of formation to change its name to a name agreed
upon by Seller and the Encore Parties, and shall cease all use of all
organizational names, fictitious names, product names and other names used by
Seller at any time on or before the Closing Date, except as may be necessary to
perform its obligations hereunder. Seller shall be allowed to list the name
Ascension Capital Group, Ltd. as a prior business name on any insurance policy.
Upon the Encore Parties’ request, Seller shall promptly sign all consents and
other documents that may be necessary to assign the rights to such names to the
Encore Parties and to allow the Encore Parties to use or appropriate the use of
such names.

 

12.3 Contract Matters. After the Closing, each Contract shall be handled in
accordance with the following provisions:

 

12.3.1 Concurrent with the Closing or soon thereafter: (i) the Seller shall
deliver to Buyer the Material Contracts; and (ii) for each such Material
Contract, the Seller shall use its reasonable best efforts to deliver to Buyer a
written agreement in a form reasonably satisfactory to Buyer, signed by the
party or parties (other than Seller) to such Material Contract pursuant to which
such party or parties thereto: (x) consent to the transfer and assignment of
such Material Contract to Buyer; and (y) confirm that Buyer will have all rights
that the Seller had under such Material Contract.

 

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12.3.2 To the extent Seller does not deliver such consent to assignment of a
Material Contract prior to Closing, Seller hereby agrees to use its reasonable
best efforts to provide Buyer such consent as soon as possible after the
Closing.

 

12.4 Further Assurances; Post-Closing Cooperation. At any time or from time to
time after the Closing, each of Buyer and Seller shall: (i) execute and deliver
such other instruments of sale, transfer, conveyance, assignment and
confirmation; (ii) provide such materials and information; and (iii) take such
other actions, as Buyer and Seller may reasonably deem necessary or desirable in
order (A) to (x) transfer, convey and assign more effectively to Buyer, the
Acquired Assets and the Assumed Liabilities, (y) confirm Buyer’s title to all of
the Acquired Assets and Assumed Liabilities, and (z) to the full extent
permitted by law, put Buyer in actual possession and operating control of the
Acquired Assets and assist Buyer in exercising all rights with respect thereto,
(B) otherwise to cause Buyer and Seller to fulfill their obligations under this
Agreement, and (C) fully consummate the transaction contemplated hereby and
carry out the purposes and intent of this Agreement.

 

12.5 Retirement and Group Plans. As of the Closing Date, Seller shall transfer
the benefits and obligations of Seller’s Employee Benefit Plans set forth on
Schedule 4.16 to Buyer, and Buyer shall adopt such Employee Benefit Plans and
assume such obligations subject to the Buyer’s right to amend or terminate such
Employee Benefit Plans; provided, however, that such adoption and assumption
shall not limit Buyer’s rights under this Agreement with respect to Non-Assumed
Obligations or breaches of representations and warranties of the Seller. As to
any “M&A Qualified Beneficiary” with respect to the Agreement (as defined in
Treas. Reg. Section 54.4980B-9 Q&A-4(a)), Buyer agrees to provide COBRA coverage
for the duration of the COBRA continuation coverage period set forth in Treas.
Reg. Section 54.4980B-7 and to handle all claims that may arise in relation to
that coverage. Buyer shall be responsible for providing similar coverage under
the standard group insurance plans of Buyer, for all medical, dental, disability
and related claims incurred after the termination of Seller’s Employee Benefit
Plans for each Continuing Employee if Buyer terminates one or more of Seller’s
Employee Benefit Plans. As soon as practicable following the Closing Date,
Seller shall take all necessary actions to cause its 401(k) retirement plan to
be assigned to Buyer. Seller shall provide Buyer with all of the information
reasonably requested by Buyer, in a reasonable format requested by Buyer, which
is necessary to determine the amount attributable to each participant as well as
all other relevant participant data, including vesting information. After the
Closing Date, Seller shall be responsible for preparing, completing, and timely
filing all Annual Reports on Form 5500 and an audit for Seller’s 401(k) Plan for
plan years that ended prior to the Closing Date, and Buyer shall be responsible
for timely filing all Annual Reports on Form 5500 and any 401(k) Plan audit for
plan years that ended after the Closing Date.

 

12.6 Access to Accounting Information. For a period of five (5) years after the
Closing Date, Seller shall permit the Encore Parties and their authorized
representatives to have reasonable access to copies of Seller’s financial
statements, opinions of independent public accountants, and accounting
information, workpapers, notes and related materials for the years ended
December 31, 2002, 2003 and 2004 and for the period from January 1, 2005 through
and including the Closing Date, and any interim periods therein, for review and
analysis. Seller shall instruct its accountants, directors, officers, employees
and other

 

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personnel to cooperate with and assist the Encore Parties and their authorized
representatives to the extent reasonably requested by them.

 

12.7 Reconciliations and Allocations. At and after the Closing, all payments
received by Seller on account of Accounts Receivable in existence as of the
Closing Date or arising after the Closing Date under any of the Contracts, all
payments received by Seller on account of Accounts in existence as of the
Closing Date or arising after the Closing Date under any Account and all other
payments received by Seller with respect to the operation of the Business after
the Closing Date, shall be held in trust for Buyer and shall be promptly paid to
Buyer.

 

12.8 Tax Matters

 

12.8.1 Liability for Taxes

 

(a) Taxable Periods Ending On or Before the Closing Date. Seller shall be
responsible for filing all Tax Returns required to be filed by or with respect
to Seller for any taxable year or taxable period ending on or before the Closing
Date and shall be liable for all Taxes for any taxable year or period ending on
or before the Closing Date that are due and payable by Seller (including,
without limitation, any income Taxes attributable to income received by Seller)
or with respect to the Acquired Assets or Assumed Liabilities.

 

(b) Taxable Periods Commencing On or After the Closing Date. Buyer shall be
responsible for filing all Tax Returns required to be filed by or with respect
to the Acquired Assets and the Assumed Liabilities for any taxable year or
period commencing after the Closing Date and shall be liable for and any and all
Taxes for any taxable year or period commencing on or after the Closing Date
that are due or payable by Buyer with respect to the Acquired Assets or Assumed
Liabilities.

 

(c) Taxable Periods Commencing Before the Closing Date and Ending After the
Closing Date. In the case of any taxable year or period that commences before
and would otherwise end after the Closing Date (the “Closing Period”), Seller
shall be liable for any real or personal property Taxes with respect to the
Acquired Assets that accrue up to and including the Closing Date, and Buyer
shall be liable for any real or personal property Taxes with respect to the
Acquired Assets that accrue beginning after the Closing Date. For these
purposes, the amount of real or personal property Taxes for any Closing Period
attributable to Seller shall be equal to (i) the total amount of real or
personal property Taxes for the Closing Period, multiplied by (ii) a fraction,
the numerator of which is the number of days in the Closing Period up to and
including the Closing Date and the denominator of which is the total number of
days in the Closing Period. In the event this Section 12.8.1(c) applies to any
taxable year or period, Buyer shall be responsible for filing any required Tax
Returns for such year or period and paying all Taxes due for such year or
period, provided: (i) no later than twenty (20) days before the due date for the
filing of any Tax Return for such Closing Period (including extensions thereof)
(the “Due Date”), Buyer shall notify Seller in writing of the amount of Taxes
attributable to Seller for the Closing Period; and

 

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(ii) within fifteen (15) days of receiving such notice, but in no event later
than five (5) days before the Due Date, Seller shall pay either to the relevant
taxing authority or to Buyer, as Seller may elect, an amount equal to the amount
of real or personal property Taxes owed to the relevant taxing authority that
are attributable to Seller.

 

(d) Mutual Cooperation. As soon as practicable, but in any event within thirty
(30) days after a request by either Seller or Buyer, the party to which such
request is made shall deliver to the requesting party such information and other
data relating to the Tax Returns and Taxes of Sellerand shall make available
such knowledgeable employees of the Seller or Buyer, as may be appropriate, as
the requesting party may reasonably request, including providing the information
and other data customarily required by the requesting party to cause the
completion and filing of all Tax Returns for which the requesting party has
responsibility or liability under this Agreement, or to respond to audits by any
taxing authorities with respect to any Tax Returns or taxable periods for which
the requesting party has any responsibility or liability under this Agreement or
to otherwise enable the requesting party to satisfy its accounting or tax
requirements.

 

12.8.2 Resolution of Disagreements Among Seller and Buyer. If Seller and Buyer
disagree as to the amount of Taxes for which each is liable under this
Agreement, Seller and Buyer shall promptly consult each other in an effort to
resolve such dispute. If any such point of disagreement cannot be resolved
within thirty (30) days of the initial date of consultation, Seller and Buyer
shall submit the issues remaining in dispute to the Arbitrator (as defined in
section 3.3.4(b)), which Arbitrator shall be instructed to arbitrate such
dispute and resolve the disputed issues. Seller and Buyer shall furnish or cause
to be furnished to the Arbitrator such work papers and other documents and
information relating to the disputed issues as the Arbitrator may request and
are available to that party or its agents and shall be afforded the opportunity
to present to the Arbitrator any material relating to the disputed issues and to
discuss the issues with the Arbitration. The Arbitrator’s review shall be
limited to the issues in dispute which were submitted to the Arbitrator for
resolution. In no event shall the Arbitrator determine that a party’s liability
for Taxes exceeds the maximum amount for which both parties assert such party is
liable or determine that a party’s liability for Taxes is less than the minimum
amount for which both parties assert such party is liable. The parties’ Tax
obligations as finalized by the Arbitrator shall be deemed final and conclusive
with respect to the parties’ Tax obligations and shall be binding on Seller and
Buyer for such purposes. The fees and expenses of the Arbitrator in resolving
all such objections shall be borne by: (i) Buyer in an amount equal to the
proportion that the Arbitrator finds that Buyer is responsible to bear in
relation to the total amount at issue; and (ii) Seller in an amount equal to the
proportion that the Arbitrator finds that Seller is responsible to bear in
relation to the total amount at issue in all such objections. For example, if
the aggregate amount at issue in all the objections made by Seller is $100 and
the Arbitrator finds that Buyer is responsible for $60 of the $100 and Seller is
responsible for $40 of the $100, then Buyer shall be responsible for sixty
percent (60%) of the fees and expenses of the Arbitrator and Seller shall be
responsible for forty percent (40%) of such fees and expenses. The Arbitrator
shall determine the issues in dispute and deliver its written determination to
Buyer and Seller within thirty (30) days of the submission of the disputed
issues to the

 

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Arbitrator. The Arbitrator’s determination of the disputed issues shall be
final, binding and conclusive on Buyer, Seller and Partners and shall not be
appealable.

 

12.9 Accounts. Seller agrees to take all appropriate steps to indicate on its
records that the Accounts have been sold to, and are the property of, Buyer.
Seller shall provide an affidavit stating that a specific Account was purchased
by Buyer within ten (10) business days of Buyer’s request. From and after the
Closing Date, Buyer shall not collect or attempt to collect any account listed
in the Computer File.

 

12.10 Registration of Encore Common Stock. To the extent that the Encore Common
Stock received by Seller pursuant to this Agreement constitutes Registrable
Securities (as defined below) as of the Filing Date and to the extent requested
by the holder or holders of seventy-five percent (75%) or more of the
Registrable Securities, Encore shall register such Registrable Securities for
resale pursuant to a registration statement on Form S-3 (or on such other form
or successor form appropriate for such purpose). As used herein, “Registrable
Securities” means any Encore Common Stock received by Seller pursuant to this
Agreement that is held by Seller or an Estate Planning Transferee (as defined
below), except any such Encore Common Stock that (i) has been registered and
sold pursuant to an effective registration statement under the Securities Act of
1933 (the “Securities Act”), (ii) has been transferred in compliance with Rule
144 or Rule 145 under the Securities Act (or any successor provision thereto) or
is transferable pursuant to Rule 145 or paragraph (k) of Rule 144 (or any
successor provision thereto) or (iii) has otherwise been transferred and is not
subject to transfer restrictions under the Securities Act; “Estate Planning
Transferee” means each Partner and each transferee of Seller or any Partner that
(x) is a permitted transferee of Seller or such Partner pursuant to Section
1(a)(2)(ii) of the Lockup Agreement (which shall not include the counterparty to
a Transaction or a Forward Transaction, as such terms are defined in the Lockup
Agreement) and (y) receives such shares in a transaction that includes an
assignment of the registration rights granted under Section 12.10 of this
Agreement; and “Filing Date” means the third anniversary of the date of this
Agreement; provided, however, that in the event the holding period under Rule
144(d) (or a successor provision) is tolled as a result of a hedging transaction
or any other reason, then the Filing Date shall be similarly tolled and shall be
deemed to occur only after the expiration of a period following the third
anniversary of the date of this Agreement that is equal to the number of days by
which such holding period was tolled. Encore shall make the registration
statement effective on or prior to the Filing Date. Each Partner and Estate
Planning Transferee shall furnish to Encore a completed customary selling
stockholder questionnaire, in form and substance satisfactory to Encore (a
“Selling Stockholder Questionnaire”). Encore shall not be required to register
or include the Registrable Securities of an Estate Planning Transferee or a
Partner in a registration statement filed or to be filed pursuant to this
Section 12.10 and shall not be liable for any related damages to any Estate
Planning Transferee or Partner who fails to furnish to Encore a fully completed
Selling Stockholder Questionnaire at least 10 business days prior to the filing
date of the related registration statement. As a condition to Encore’s
obligation to register any Registrable Securities of any Estate Planning
Transferee or Partner, each Estate Planning Transferee and Partner shall,
severally and not jointly, agree in writing to indemnify and hold harmless
Encore, its directors, officers, agents and employees, each person who controls
Encore (within the meaning of Section 15 of the Securities Act and Section 20 of
the Securities Exchange Act of 1934), and the directors, officers, agents or
employees of such controlling persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising

 

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solely out of or based solely upon: (i) such Estate Planning Transferee’s or
such Partner’s failure to comply with the prospectus delivery requirements of
the Securities Act or (ii) any untrue statement of a material fact contained in
any registration statement, any prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the extent
that, (A) such untrue statements or omissions are based solely upon information
regarding such Estate Planning Transferee or Partner furnished in writing to
Encore by such Estate Planning Transferee or Partner, as the case may be,
expressly for use therein, or to the extent that such information relates to
such Estate Planning Transferee or Partner or such Estate Planning Transferee’s
or Partner’s proposed method of distribution of Registrable Securities and was
reviewed and approved by such Estate Planning Transferee or such Partner, as the
case may be, expressly for use in such registration statement, such prospectus
or such form of prospectus or in any amendment or supplement thereto or (B) the
use by such Estate Planning Transferee or such Partner, as the case may be, of
an outdated or defective prospectus after Encore has notified such Estate
Planning Transferee or Partner in writing that the prospectus is outdated or
defective and prior to the receipt by such Estate Planning Transferee or Partner
of an amended or supplemented prospectus, but only if and to the extent that
following the receipt of the amended or supplemented prospectus the misstatement
or omission giving rise to such Loss would have been corrected. In no event
shall the liability of any selling Estate Planning Transferee or Partner
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Estate Planning Transferee or Partner, as the case may be, upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. The fees and expenses of the registration shall be paid for by
Encore, except for underwriting or brokerage commissions, fees or expenses and
fees and expenses of legal counsel to Seller, any Estate Planning Transferee or
Partner, if any, which shall be borne by Seller.

 

13. RESTRICTIVE COVENANTS OF SELLER

 

13.1 Certain Acknowledgements. Seller expressly acknowledges that:

 

13.1.1 General. The Business previously conducted by Seller which in the future
will be conducted by Buyer and its subsidiaries involves the provision of
services using proprietary and confidential systems and information.

 

13.1.2 Access to Information. During the period that Seller owned the Business,
Seller had access to proprietary and confidential property, knowledge and
information of the Business which, after Closing, shall be proprietary and
confidential property, knowledge and information of Buyer and such property,
knowledge and information must be kept in strict confidence to protect the
Business and maintain competitive position of Buyer in the marketplace and such
property, knowledge and information would be useful to competitors of Buyer for
indefinite periods of time.

 

13.1.3 Basis for Covenants. The covenants of Sections 13.2, 13.3, 13.4 and 13.5
(the “Covenants”) are a material part of this Agreement and are an integral part
of the obligations of Seller hereunder, the Covenants are supported by good and
adequate consideration and the Covenants are reasonable and necessary to protect
the legitimate business interests of Buyer and Encore.

 

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13.2 Nondisclosure Covenants. At all times after the date of this Agreement, for
an indefinite period of time, except with Buyer’s prior written consent, Seller
shall not, directly or indirectly, in any capacity, communicate, publish or
otherwise disclose to any Person, or use for the benefit of any Person, any
confidential or proprietary property, knowledge or information of Buyer relating
to the Business, including without limitation: (a) any information concerning
the Acquired Assets or the conduct and details of the Business and any
information concerning the Business; (b) the identity of customers and
prospects, their specific requirements, and the names, addresses and telephone
numbers of individual contacts at customers and prospects; (c) prices, renewal
dates and other detailed terms of customer and supplier Contracts and proposals;
(d) pricing policies, marketing and sales strategies, methods of delivering
products and services, and products and service development projects and
strategies; (e) employment and payroll records; (f) forecasts, budgets and other
nonpublic financial information; and (g) expansion plans, management policies,
methods of operation, and other business strategies and policies.

 

13.3 Noncompetition Covenants. During the period beginning on the date of this
Agreement and ending on the fifth (5th) anniversary of the Closing Date, except
with Buyer’s prior written consent, Seller, directly or indirectly, shall not in
any capacity, at any location worldwide:

 

13.3.1 Solicitation Restrictions. Communicate with or solicit any Person who is
or during such period becomes a customer, prospect, supplier, employee,
salesman, agent or representative of, or a consultant to, Buyer in any manner
which interferes with such Person’s relationship with Buyer in the conduct of
the Business, or in an effort to obtain any such Person as a customer, employee,
salesman, agent or representative of, or a consultant to, any other Person that
conducts a business competitive with the Business.

 

13.3.2 Competing Business Restrictions. Establish, own, manage, operate, finance
or control, or participate in the establishment, ownership, management,
operation, financing or control of, or be a director, officer, employee,
salesman, agent or representative of, or be a consultant to, any Person that
conducts a business competitive with the Business.

 

13.4 Nonsolicitation. During the period beginning on the date of this Agreement
and ending on the fifth (5th) anniversary of the Closing Date, Seller shall not
solicit or hire any of the employees of Buyer or any of the Continuing Employees
to become employees or independent contractors of Seller or any of its
affiliates engaged in any business competitive with the Business.

 

13.5 Certain Exclusions. Confidential and proprietary property, knowledge and
information of Buyer shall not include any information that is now known by or
readily available to the general public, nor shall it include any information
that in the future becomes known by or readily available to the general public
other than as a result of any breach of the Covenants of this Agreement.

 

13.6 Enforcement of Covenants. Seller expressly acknowledges that it would be
extremely difficult to measure the damages that might result from any breach of
the Covenants, and that any breach of the Covenants will result in irreparable
injury to the Encore Parties for

 

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which money damages could not adequately compensate. If a breach of the
Covenants occurs, then the Encore Parties shall be entitled, in addition to all
other rights and remedies that they may have at law or in equity, to have an
injunction issued by any competent court enjoining and restraining Seller from
continuing such breach. The existence of any claim or cause of action that
Seller or Partners may have against the Encore Parties shall not constitute a
defense or bar to the enforcement of any of the Covenants. If the Encore Parties
must resort to litigation to enforce any of the Covenants that has a fixed term,
such term shall be extended for a period of time equal to the period during
which a breach of such Covenant was occurring, beginning on the date of a final
court order (without further right of appeal) holding that such a breach
occurred or, if later, the last day of the original fixed term of such Covenant.

 

13.7 Scope of Covenants. If any Covenant, or any part thereof, or the
application thereof, is construed to be invalid, illegal or unenforceable, the
other Covenants, or the other portions of such Covenant, or the application
thereof, shall not be affected thereby and shall be enforceable without regard
thereto. If any of the Covenants is determined to be unenforceable because of
its scope, duration, geographical area or other factor, the court making such
determination shall have the power to reduce or limit such scope, duration, area
or other factor, and such Covenant shall then be enforceable in its reduced or
limited form.

 

14. INDEMNIFICATION

 

14.1 Seller’s and Partners’ Indemnification. From and after the Closing Date,
Seller and Partners, on a pro rata basis in accordance with each Partners
relative ownership interest in Seller (it being understood that any amounts
offset by Buyer under Sections 3.3 and 14 shall reduce the Purchase Price
payable and therefore shall reduce the aggregate amount payable to Seller
notwithstanding Partners’ pro rata relative ownership interest in Seller), shall
indemnify and hold harmless the Encore Parties, their representatives, their
successors and assigns and their respective representatives (the “Buyer
Indemnified Parties”), from and against any and all actions, suits, claims,
demands, debts, liabilities, obligations, losses, damages, costs and expenses,
including without limitation reasonable attorney’s fees, expenses and court
costs, arising out of or caused by, directly or indirectly, any of all of the
following (collectively, the “Losses”):

 

14.1.1 Misrepresentation. Any misrepresentation, breach, inaccuracy or failure
of any warranty or representation made by Seller or any Partner in or pursuant
to this Agreement or any schedule, exhibit or other agreement or document
contemplated by this Agreement.

 

14.1.2 Nonperformance. Any failure or refusal by Seller or any Partner to
satisfy or perform any covenant, term or condition of this Agreement or any
schedule, exhibit or other agreement or document contemplated by this Agreement
that is required to be satisfied or performed by any or all of them.

 

14.1.3 Non-Assumed Obligations. Any: (a) Excluded Liability; and (b) any
Obligation that may be imposed upon any of the Buyer Indemnified Parties as a
result of any Law under which any of the Buyer Indemnified Parties may have
successor liability for any Tax or other Obligations of Seller other than the
Assumed Liabilities (collectively, the “Non-Assumed Obligations”).

 

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14.1.4 Unasserted Claims. Any action, suit or claim arising out of, caused by or
based upon any actual or alleged act or omission of Seller, any Partner or any
of their respective Representatives at any time before the Closing other than
the Assumed Liabilities.

 

14.1.5 Intentional Misrepresentation, Fraud or Criminal Matter. Any intentional
misstatement, fraud or crime committed by Seller or any Partner.

 

14.1.6 Proceedings by Employees. Any Proceeding against any of the Buyer
Indemnified Parties by or on behalf of any employee of Seller or the Ramsey Law
Firm who is not hired by Buyer or by or on behalf of any Continuing Employee
which relates to matters or events that occurred prior to the Closing.

 

14.1.7 Materiality. For purposes of calculating the amount of Losses incurred by
the Buyer Indemnified Parties arising out of or resulting from any
misrepresentation, breach, inaccuracy or failure of any warranty or
representation made by Seller or any Partner, the references to “materiality,”
“in all material respects,” “Material Adverse Effect” (or other correlative
terms) shall be disregarded; provided, however, that “materiality,” “in all
material respects,” “Material Adverse Effect” or (or other correlative terms)
shall not be disregarded for purposes of determining whether a
misrepresentation, breach, inaccuracy or failure of any warranty or
representation, in fact, occurred.

 

14.2 Encore Parties’ Indemnification. From and after the Closing Date, the
Encore Parties shall indemnify and hold harmless Seller, each Partner and their
respective Representatives (the “Seller Indemnified Parties”), from and against
any and all Losses arising out of or caused by, directly or indirectly, any of
the following:

 

14.2.1 Misrepresentation. Any misrepresentation, breach, inaccuracy or failure
of any warranty or representation made by any of the Encore Parties in or
pursuant to this Agreement or any schedule, exhibit or other agreement or
document contemplated by this Agreement.

 

14.2.2 Nonperformance. Any failure or refusal by the Encore Parties to satisfy
or perform any covenant, term or condition of this Agreement or any schedule,
exhibit or other agreement or document contemplated by this Agreement that is
required to be satisfied or performed by any of the Encore Parties.

 

14.2.3 Assumed Liabilities. Any failure or refusal of Buyer to satisfy or
perform any of the Assumed Liabilities; provided, however, that Buyer shall have
the right to negotiate the amount and terms of repayment of any accounts payable
constituting Assumed Liabilities and pay and discharge such accounts payable in
accordance with the mutual agreement of Buyer and such payees, as long as
Buyer’s negotiation and discharge of such Assumed Liabilities does not result in
any Obligation to, or otherwise negatively impact the credit history or
creditworthiness of, Seller.

 

14.2.4 Unasserted Claim. Any action, suit or claim arising out of, caused by or
based upon any act or omission of any of the Encore Parties or any of their
representatives at any time after the Closing Date.

 

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14.3 Indemnification Procedures. With respect to each event, occurrence or
matter (each, an “Indemnification Matter”) as to which any Buyer Indemnified
Party or Seller Indemnified Party (in either case, an “Indemnitee”) is entitled
to indemnification from Seller, Partner or the Encore Parties, as the case may
be (referred to, as the case may be, “Indemnitor”) under this Section 14:

 

14.3.1 Notice of Claims. If: (a) a claim is made by a third party against any
party that is subject to a right of indemnification hereunder, (b) any party
hereto becomes aware of facts or circumstances establishing that such party has
experienced or incurred Losses or will experience or incur Losses subject to
set-off or indemnification under this Section 14, or (c) any party becomes aware
of any facts or events that could give rise to indemnification by an Indemnitor
hereunder, then such Indemnitee shall give to Indemnitor written notice of such
claim (“Indemnification Notice”) as soon as reasonably practicable but in no
event more than thirty (30) days after the Indemnitee has received notice of or
obtains actual knowledge of such claim (provided that failure to give such
notice shall not limit the Indemnitor’s indemnification obligation hereunder
except to the extent that the delay in giving, or failure to give, the notice
adversely affects the Indemnitor’s ability to defend against the claim). To the
extent practicable, the Indemnification Notice will describe with reasonable
specificity (1) the nature of and the basis for the set-off or indemnification
claim, including any relevant supporting documentation, and (2) an estimate of
all Losses associated therewith.

 

14.3.2 Procedure in Event of Indemnification Claim. If an Indemnitee desires to
assert an indemnification claim pursuant to Section 14.1 or Section 14.2, the
Indemnitee promptly shall provide an Indemnification Notice to the Indemnitor in
accordance with the procedures set forth in Section 14.3.1 hereof. If the
Indemnitor does not object within twenty (20) days after receipt of the
Indemnification Notice to the propriety of the indemnification claims described
as being subject to indemnification pursuant to Section 14.1 or Section 14.2 or
the amount of Losses asserted in the Indemnification Notice, the indemnification
claims described in the Indemnification Notice shall be deemed final and binding
upon the Indemnitor (the “Permitted Indemnification Claims”). If the Indemnitor
contests the propriety of an indemnification claim described on the
Indemnification Notice and/or the amount of Losses associated with such claim,
then the Indemnitor shall deliver to the Indemnitee a written notice detailing
with reasonable specificity all specific objections the Indemnitor has with
respect to the indemnification claims contained in the Indemnification Notice
(“Indemnification Objection Notice”). If the Indemnitor and the Indemnitee are
unable to resolve the disputed matters described in the Indemnification
Objection Notice within fifteen (15) business days after the date the Indemnitee
received the Indemnification Objection Notice, the disputed matters will be
subject to the dispute resolution procedures set forth in Section 15.17 hereof.
Any undisputed indemnification claims contained in the Indemnification Notice
shall be deemed to be final and binding upon the Indemnitor and shall constitute
a Permitted Indemnification Claim. If the procedures in Section 15.17 result in
all or any portion of an indemnification claim properly being subject to
indemnification pursuant to Section 14.1 or Section 14.2 such claim or portion
thereof shall be final and binding upon Indemnitor and shall constitute a
Permitted Indemnification Claim.

 

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14.3.3 Defense of Third Party Claims. An Indemnitee against whom a third party
Claim is made shall give the Indemnitor prompt notice of such Claim so that the
Indemnitor shall have an opportunity to defend such Claim, at the Indemnitor’s
sole expense and with counsel selected by the Indemnitor and reasonably
satisfactory to the Indemnitee; provided, however, that such Indemnitee at all
times also shall have the right to participate fully in such defense through
counsel selected by the Indemnitee at its sole expense. Failure of an Indemnitor
to give an Indemnitee written notice of its election to defend such claim within
twenty (20) days after receipt of notice thereof shall be deemed a waiver by
such Indemnitor of its right to defend such Claim. If an Indemnitor shall elect
not to assume the defense of such Claim (or if such Indemnitor shall be deemed
to have waived its right to defend such Claim), the Indemnitee against whom such
Claim is made shall have the right, but not the obligation, to undertake the
sole defense of, and to compromise or settle, the Claim on behalf, for the
account, and at the risk and expense, of the Indemnitor (including the payment
by such Indemnitor of the Indemnitees’ reasonable attorneys’ fees); provided,
however, that if the Indemnitee undertakes the sole defense of such Claim, it
shall defend such Claim in good faith and shall apprise the Indemnitor from time
to time as the Indemnitee deems appropriate of the progress of such defense. If
the Indemnitor assumes the defense of such Claim, the obligation of such
Indemnitor hereunder as to such Claim shall include taking all reasonable steps
appropriate to the defense or settlement of such Claim. The Indemnitor, in the
defense of such Claim, shall not consent to the entry of any judgment or enter
into any settlement (except with the written consent of the Indemnitee, which
shall not be unreasonably withheld) which does not include as an unconditional
term thereof the giving by the claimant to the Indemnitee against whom such
Claim is made of a release from all liability in respect of such Claim (which
release shall exclude only any obligations incurred in connection with any such
settlement). If the Claim is one that cannot by its nature be defended solely by
the Indemnitor, then the Indemnitee shall make available all information and
assistance that the Indemnitor reasonably may request. Indemnitor shall pay
Indemnitee’s reasonable out-of-pocket expenses actually incurred in making such
information available.

 

14.3.4 Payments. All amounts owed by the Indemnitor to the Indemnitee (if any)
shall be paid in full within fifteen (15) business days following such time as a
claim or portion thereof becomes final and binding upon the Indemnitor and
constitutes a Permitted Indemnification Claim.

 

14.4 Survival Periods. For purposes of this Agreement, a “Survival Period” shall
be the period during which a claim for indemnification may be asserted under
this Agreement by an Indemnitee. The Survival Periods under this Agreement shall
commence on the date of this Agreement and shall terminate as follows:

 

14.4.1 The Survival Period for the representations, warranties, covenants, and
obligations of the Encore Parties, Seller and Partners set forth in this
Agreement shall terminate two (2) years following the Closing Date; provided,
however, that the Survival Period for (a) representations, warranties,
covenants, and obligations arising under Section 4.1 (Organization), Section 4.2
(Effect of Agreement), Section 4.6 (Acquired Assets), Section 4.18 (Taxes),
Section 6.1 (Organization), Section 6.2 (Agreement) and Section 12 (Certain
Post-Closing Obligations), and (b) Indemnification Matters

 

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involving intentional misrepresentation, fraud or criminal matters shall
continue indefinitely except as limited by law (including any applicable
statutes of limitation, extensions and tollings thereof).

 

14.4.2 The Survival Period shall not apply to any Indemnification Matter if, and
only to the extent that, the Indemnitor is entitled to coverage under any
Insurance Policy maintained by, or for the benefit of, the Indemnitor.

 

14.4.3 No Indemnitor shall have any liability with respect to any
Indemnification Matter unless an Indemnitee gives an Indemnification Notice with
respect thereto within the Survival Period. Notwithstanding the foregoing, if
prior to the close of business on the last day of the applicable Survival
Period, an Indemnitor shall have been properly notified as provided hereunder of
a claim for indemnity hereunder and such claim shall not have been finally
resolved or disposed of at such date, such claim shall continue to survive and
shall remain a basis for indemnity hereunder until such claim is finally
resolved or disposed of in accordance with the terms hereof.

 

14.5 Setoff and Holdback. In addition to all other rights and remedies that the
Encore Parties may have as the Indemnitee, the Encore Parties shall have the
right to setoff against any amounts due to Seller, whether due under this
Agreement, any of the Related Agreements or otherwise, any sums for which either
of the Encore Parties is entitled to indemnification under this Section 14.
Except as otherwise provided in this Section 14, the Encore Parties’ rights to
indemnification under this Section 14 shall not be in any manner limited by or
to this right of setoff. If any Indemnification Matters are pending at a time
when any of the Encore Parties is required to pay any amount due to Seller, the
Encore Parties shall have the right, upon notice to Seller, to withhold from
such payment, until final determination of such pending Indemnification Matters,
the total amount for which Seller may become liable as a result thereof, as
determined by the Encore Parties reasonably and in good faith.

 

14.6 Shareholder/Partner Suits. No party shall have any liability under this
Section 14 or otherwise for suits bought by the other party’s shareholders or
partners.

 

14.7 Limitations on Seller’s and Partners’ Indemnification Obligation. The
indemnification obligations of this Section 14 are subject to the following
limitations:

 

14.7.1 No indemnification pursuant to Section 14.1 shall be made unless the
aggregate amount of Losses incurred by the Buyer Indemnified Parties exceeds
Seventy-Five Thousand and No/100 Dollars ($75,000.00) (the “Buyer Threshold
Amount”), and, in such event, indemnification shall be made only to the extent
that the aggregate amount of Losses incurred by the Buyer Indemnified Parties
exceeds Seventy-Five Thousand and No/100 Dollars ($75,000.00).

 

14.7.2 In the absence of intentional misrepresentation, fraud or criminal
matters on the part of Seller or Partners, in no event shall Seller’s and
Partners’ aggregate obligation to indemnify the Buyer Indemnified Parties
pursuant to Section 14.1 with respect to Indemnification Matters exceed an
amount equal to the Indemnity Escrow Amount, except for claims involving (a)
breaches of the representations and warranties arising under Section 4.6
(Acquired Assets), Section 4.13 (Intellectual Property), and

 

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Section 4.18 (Taxes), (b) the Excluded Liabilities, and (c) liabilities relating
to noncompetition covenants of Seller, all of which shall not be subject to such
cap.

 

14.7.3 In the absence of intentional misrepresentation, fraud or criminal
matters on the part of Seller or Partners, in no event shall Seller’s and
Partners’ aggregate obligation to indemnify the Buyer Indemnified Parties
pursuant to Section 14.1 with respect to Indemnification Matters exceed an
amount equal to the Purchase Price (as may be adjusted pursuant to Section 3.3)
for claims involving (a) breaches of the representations and warranties arising
under Section 4.6 (Acquired Assets) and Section 4.13 (Intellectual Property) and
the Tabb Smith litigation related thereto, and (b) liabilities relating to
noncompetition covenants of Seller and Partners.

 

14.7.4 Seller’s and Partners’ aggregate obligation to indemnify the Buyer
Indemnified Parties pursuant to Section 14.1 with respect to Indemnification
Matters involving Section 4.18 (Taxes) and the Excluded Liabilities, shall not
be capped.

 

14.7.5 With respect to Losses incurred by Buyer Indemnified Parties in excess of
the Indemnity Escrow Amount, each Partner shall be liable for such Losses only
to the extent of the percentage partnership interest in Seller owned by such
Partner.

 

14.8 Insurance and Tax Benefits. The amount of any Losses incurred by an
Indemnitee shall be reduced by any amount received by the Indemnitee with
respect thereto under any insurance coverage or pursuant to any tax benefit
available to the Indemnitee relating thereto. The Indemnitees shall use
reasonable efforts to collect any amounts available under such insurance
coverage or take advantage of such tax benefit.

 

14.9 Exclusive Remedy. The parties hereby agree to limit their recourse for all
matters, and not make any claim for any Loss under, relating to or arising out
of this Agreement, except for: (i) claims for indemnification pursuant to this
Section 14; (ii) any provision of this Agreement as to which the parties hereto
also shall have the right to seek injunctive relief, including specific
enforcement; (iii) claims arising under the Related Agreements, which shall be
governed by the applicable terms thereof; and (iv) claims based on fraud or
intentional misrepresentation.

 

15. OTHER PROVISIONS

 

15.1 Fees and Expenses. The Encore Parties shall pay all of the fees and
expenses incurred by the Encore Parties, and Seller and Partners shall pay all
of the fees and expenses incurred by them, in negotiating and preparing this
Agreement (and all of the Related Agreements executed in connection herewith or
therewith) and in consummating the transactions contemplated by this Agreement
and the Related Agreements. Seller shall be responsible for all fees paid or
payable to The Patriot Group LLC in connection with the transactions
contemplated by this Agreement.

 

15.2 Notice. All notices, consents or other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given: (a) when delivered personally or (b) upon receipt of proof of
delivery indicating the date of delivery after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the first page of this Agreement.

 

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Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within twenty four (24) hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. Notice to Seller at the address specified in the preamble to this
Agreement or to the facsimile number specified in Schedule 15.2 to the attention
of Erich M. Ramsey shall suffice as notice to Seller, provided that a copy
thereof is simultaneously sent to Carrington, Coleman, Sloman & Blumenthal,
L.L.P., 200 Crescent Court, Suite 1500, Dallas, Texas 75201, attention Gregg R.
Cannady, Esquire, and in the case of each the Ramsey Trust, the General Partner,
Oszustowicz or Walter a copy thereof is simultaneously sent to such parties at
the addresses specified in Schedule 15.2. Notice to the Encore Parties at the
address specified in the preamble to this Agreement or to the facsimile number
specified in Schedule 15.2 to the attention of General Counsel shall suffice as
notice to the Encore Parties, provided that a copy thereof is simultaneously
sent to Snell & Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004,
attention John Dorris, Esquire. Any party may change its address for notice and
the address to which copies must be sent by giving notice of the new addresses
to the other parties in accordance with this Section 15.2, except that any such
change of address notice shall not be effective unless and until received.

 

15.3 Survival of Representations. All representations and warranties made in
this Agreement or pursuant hereto shall survive the date of this Agreement, the
Closing Date and the consummation of the transactions contemplated by this
Agreement for the period that is the longer of: (a) two (2) years after the
Closing Date or (b) the periods set forth in Section 14.4.

 

15.4 Reliance by the Encore Parties. Notwithstanding the right of the Encore
Parties to investigate the Business, the Acquired Assets and the financial
condition of Seller, the Encore Parties have relied upon, each of the
representations and warranties made by Seller and the Partners in this Agreement
or pursuant hereto.

 

15.5 Entire Understanding. This Agreement, together with the Exhibits and
Schedules hereto, states the entire understanding among the parties with respect
to the subject matter hereof, and supersedes all prior oral and written
communications and agreements, and all contemporaneous oral communications and
agreements, with respect to the subject matter hereof, including without
limitation all confidentiality agreements and letters of intent previously
entered into among some or all of the parties hereto. No amendment or
modification of this Agreement shall be effective unless in writing and signed
by the party against whom enforcement is sought.

 

15.6 Publicity. All voluntary public announcements concerning the transactions
contemplated by this Agreement shall be mutually acceptable to both the Encore
Parties and Seller. Unless required by Law, the parties shall not make any
public announcement or issue any press release concerning the transactions
contemplated by this Agreement without the prior written consent of the other
parties. With respect to any announcement that any of the parties is required by
Law or stock exchange or The Nasdaq Stock Market regulation to issue, such party
shall, to the extent possible under the circumstances, review the necessity for
and the contents of the announcement with the other parties before issuing the
announcement.

 

15.7 Assignments. None of the parties may assign this Agreement or any rights or
obligations under this Agreement without the prior written consent of the other
parties. This

 

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Agreement shall bind, benefit, and be enforceable by and against the parties
hereto, and their respective successors and consented-to assigns.

 

15.8 Waivers. Except as otherwise expressly provided herein, no waiver with
respect to this Agreement shall be enforceable unless in writing and signed by
the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between or among any of the parties, shall constitute a waiver of, or
shall preclude any other or further exercise of, any right, power or remedy.

 

15.9 Severability. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.

 

15.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.

 

15.11 Section Headings. The section and subsection headings in this Agreement
are used solely for convenience of reference, do not constitute a part of this
Agreement, and shall not affect its interpretation.

 

15.12 References. All words used in this Agreement shall be construed to be of
such number and gender as the context requires or permits. Unless a particular
context clearly requires otherwise, the words “hereof” and “hereunder” and
similar references refer to this Agreement in its entirety and not to any
specific section or subsection of this Agreement.

 

15.13 CONTROLLING LAW. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.

 

15.14 Jurisdiction and Process. Each of the parties hereto hereby: (a) consents
to submit to the personal jurisdiction of a federal court located in the County
of San Diego, City of San Diego or, if such court does not have jurisdiction,
any California state court located in such county, with respect to all actions
and proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby; (b) agrees not to attempt to deny such personal
jurisdiction by motion or other request for leave from any such court; (c)
agrees that all claims with respect to any such action or proceeding may be
heard and determined in such federal or California state court; (d) waives the
defense of an inconvenient forum; and (e) agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

 

15.15 No Third-Party Beneficiaries. No provision of this Agreement is intended
to or shall be construed to grant or confer any right to enforce this Agreement,
or any remedy for breach of this Agreement, to or upon any Person other than the
parties hereto, including, but

 

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not limited to, any Continuing Employee, customer, prospect, supplier, employee,
contractor, salesman, agent or representative of Seller.

 

15.16 Neutral Construction. The parties have negotiated this Agreement and all
of the terms and conditions contained in this Agreement in good faith and at
arms’ length, and each party has been represented by counsel during such
negotiations. No term, condition, or provision contained in this Agreement shall
be construed against any party or in favor of any party: (a) because such party
or such party’s counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (b) because of any presumption as
to any inequality of bargaining power between or among the parties. Furthermore,
all terms, conditions, and provisions contained in this Agreement shall be
construed and interpreted in a manner which is consistent with all other terms,
conditions, and provisions contained in this Agreement.

 

15.17 Negotiated Resolution. Except with respect to disputes arising pursuant to
Section 3.3.4 or Section 12.8.2 (which shall be resolved according to the
provisions set forth in Section 3.3.4 or Section 12.8.2, respectively), if any
dispute arises: (a) out of or relating to, this Agreement or any alleged breach
thereof; or (ii) with respect to any of the transactions or events contemplated
hereby (a “Dispute”), the party desiring to resolve such Dispute shall deliver a
written notice describing such Dispute with reasonable specificity to the other
parties (the “Dispute Notice”). If any party delivers a Dispute Notice pursuant
to this Section 15.17, or if any Indemnifying Party delivers to any Indemnitee
an Indemnification Objection Notice pursuant to Section 14.3, the parties
involved in the Dispute shall meet at least twice within the fifteen (15)
business day period commencing with the date of the Dispute Notice or the
Indemnification Objection Notice (as the case may be) and in good faith shall
attempt to resolve such Dispute.

 

If the Dispute is not resolved pursuant to the above paragraph, the Dispute
shall be settled by arbitration conducted in San Diego, California, or such
other place as mutually agreed to by the parties, which shall be in accordance
with the rules and procedures of Judicial Arbitration and Mediation Services,
Inc. (JAMS) then in effect with respect to commercial disputes; provided that
discovery shall be limited to depositions and interrogatories, document
production and other written discovery. Within thirty (30) days after the giving
of a Dispute Notice or the Indemnification Objection Notice (as the case may
be), the parties shall agree on the selection of one reputable, disinterested
arbitrator from a list of qualified candidates by JAMS having no affiliation
with any of the parties. If at the end of such thirty (30) day period, the
parties cannot agree on the selection of a neutral arbitrator, then on the
application of either party to the dispute, JAMS shall promptly select and
appoint an arbitrator from a list of qualified candidates compiled by JAMS
having no affiliation with any of the parties to act as the neutral arbitrator.
The neutral arbitrator selected shall hear the claim, dispute or controversy in
question. The arbitration of such issues, including the determination of any
amount of damages suffered by any party hereto by reason of the acts or
omissions of any party, shall be final and binding upon all parties.
Notwithstanding the foregoing, the arbitrator shall not be authorized to award
punitive damages with respect to any such claim or controversy, nor shall any
party seek punitive damages relating to any matter under, arising out of or
relating to this Agreement in any other forum. Except as otherwise set forth in
the Agreement, the cost of any arbitration hereunder, including the cost of the
record or transcripts thereof, if any, administrative fees, and all other fees
involved including reasonable attorneys’ fees incurred by the party determined
by the arbitrator to be the prevailing

 

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party, shall be paid by the party determined by the arbitrator not to be the
prevailing party, or otherwise allocated in an equitable manner as determined by
the arbitrator. The parties shall use reasonable efforts to enable the
arbitrator to render its decision no later than sixty (60) days after the
submission of the Dispute or Indemnification Objection Notice to the arbitrator.

 

[Remainder of Page Intentionally Blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement
to be executed as of the date first written above.

 

SELLER: ASCENSION CAPITAL GROUP, LTD.

By:

 

ASCENSION CAPITAL MANAGEMENT, L.L.C.,

its General Partner

By:  

/s/ Erich M. Ramsey

   

Erich M. Ramsey, Chief Executive Officer

BUYER: ASCENSION ACQUISITION, LP

By:

 

ACG HOLDING, INC.,

its General Partner

By:  

/s/ J. Brandon Black

   

Name: J. Brandon Black

   

Title: President

ENCORE: ENCORE CAPITAL GROUP, INC. By:  

/s/ J. Brandon Black

   

Name: J. Brandon Black

   

Title: President

 

[Signature Page to Asset Purchase Agreement]

--------------------------------------------------------------------------------

PARTNERS:

ASCENSION CAPITAL MANAGEMENT, L.L.C.,

General Partner

By:  

/s/ Erich M. Ramsey

   

Erich M. Ramsey, Chief Executive Officer

ERICH M. RAMSEY TRUST By:  

/s/ Erich M. Ramsey

   

Erich M. Ramsey, Trustee

/s/ Erich M. Ramsey

Erich M. Ramsey

/s/ Leonard R. Oszustowicz

Leonard R. Oszustowicz

/s/ Jeffrey J. Walter

Jeffrey J. Walter

 

[Signature Page to Asset Purchase Agreement]