ESCROW AGREEMENT
PARTIES: JDR HOLDINGS, INC.
a Delaware corporation ("JDR")
000 X. Xxxxxxxx Xxxxxxxx
Xxxxxx, XX 00000
NCO GROUP, INC.
a Pennsylvania corporation ("NCO")
000 Xxxxxxxxxxxx Xxxxxx
Xxxx Xxxxxxxxxx, XX 00000
THE CHASE MANHATTAN BANK ("Escrow Agent")
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
DATE: March 31, 1999
BACKGROUND
A. JDR, NCO and JDR Acquisition Inc. ("Newco") are parties to an
Amended and Restated Agreement and Plan of Reorganization dated as of November
1, 1998 ("Reorganization Agreement"), and a related Amended and Restated Plan of
Merger dated as of November 1, 1998 ("Plan of Merger") providing for the merger
(the "Merger") of Newco with and into JDR with the conversion of each
outstanding share of JDR Stock (as defined in the Reorganization Agreement) into
immediately deliverable shares of NCO Stock (as defined in the Plan of Merger)
and the right to receive additional shares of NCO Stock held by the Escrow Agent
under this Agreement. NCO will deliver to the Escrow Agent shares of NCO Stock
("Escrowed Stock") as is equal to six percent (6%) of the total NCO Stock to be
issued to the stockholders of JDR (the "Stockholders" or the "JDR Stockholders")
in exchange for their shares of JDR Stock in accordance with the terms of the
Plan of Merger (5% of the total NCO Stock is to be issued in the Merger and put
into escrow hereunder is hereinafter referred to as the "Base Escrow Fund" and
1% of the total NCO Stock to be issued in the Merger and put into escrow
hereunder is hereinafter referred to as the "Tax Escrow Fund".).
B. JDR and NCO have delivered to the Escrow Agent Exhibit A attached
hereto setting forth a list of the names and addresses of JDR's Stockholders
showing as to each the number of shares of NCO Stock (including fractional
shares) deposited in the Base Escrow Fund and the Tax Escrow Fund in respect of
the shares of JDR Stock owned by such Stockholders.
NOW, THEREFORE, the parties hereto agree as follows:
1. Stockholder Accounts.
a. The Escrowed Stock shall be held of record in the name of the
Escrow Agent as escrow agent for the purposes of this Agreement. The Escrow
Agent shall maintain records and an account for each Stockholder showing the
number of shares deposited hereunder in respect of the shares of JDR Stock owned
by each such Stockholder. As soon as practicable after the effective date of the
Merger determined pursuant to the Plan of Merger (the "Effective Date"), the
Escrow Agent shall mail to each Stockholder a statement showing the number of
shares of Escrowed Stock held by the Escrow Agent for such Stockholder. Unless
the Escrow Agent is notified to the contrary by NCO, the Effective Date shall be
March 31, 1999. Subsequent statements shall be distributed following any
distributions pursuant to Section 2.b hereof.
b. At all times prior to the distribution of any Escrowed Stock to
NCO hereunder, all income earned on and all dividends or other distributions
paid with respect to any of the Escrowed Stock or Escrowed Cash, shall be the
sole property of the JDR Stockholders as their respective interests are set
forth herein, and the JDR Stockholders shall have the right to vote all Escrowed
Shares as their respective interests are set forth herein at all meetings of
shareholders of NCO.
2. Distribution of Escrowed Stock. The Escrow Agent shall distribute
the Escrowed Stock as follows:
a. In accordance with the mutual written direction of NCO and the
Stockholder's Agents.
b. When payment of any claim for indemnification becomes due under
Section 14 of the Reorganization Agreement, NCO shall forward to the Escrow
Agent with a copy to the Stockholder's Agents a notice ("Payment Notice")
setting forth the amount of shares and/or Escrowed Cash (as defined in Section
3) to which NCO is entitled ("Claim Amount") and provide evidence to the Escrow
Agent of the receipt by the Stockholder's Agent (as provided for in Section 13
hereof) of the Payment Notice. The Claim Amount shall be applied against all
Stockholders' accounts maintained by the Escrow Agent on a pro rata basis based
upon the amounts of Escrowed Stock initially deposited therein as indicated on
Exhibit A hereto. The Escrow Agent within 10 business days thereafter shall
deliver to NCO a certificate representing such number of shares of NCO Stock,
rounded downward to the nearest whole share, valued at the Valuation Price (as
defined below), equal to the amount specified in the Payment Notice allocated by
the Escrow Agent to accounts containing Escrowed Stock; provided that such
delivery shall only occur if either (i) the Escrow Agent has not received notice
from the Stockholder's Agents of its intention to contest the Claim Amount
within 7 business days after Escrow Agent and the Stockholder's Agents receive
NCO's Payment Notice or (ii) the Payment Notice is accompanied by either a final
judgment or order or a settlement agreement determining the amount of shares
and/or Escrowed Cash owed, and provided further, that all indemnification claims
under Section 14 of the Reorganization Agreement other than indemnification
claims made with respect to JDR sales and use tax liability claims ("Tax
Claims") shall be paid only from the Base Escrow Fund and all Tax Claims shall
be paid only from the Tax Escrow Fund as indicated in the Payment Notice. In the
event that the value of the Escrowed Stock in an account is insufficient to pay
the allocable portion of the Claim Amount, the Escrow Agent shall not be
entitled to make up any deficiency from any other account. Notwithstanding any
other provisions of this Agreement, the aggregate amount of all Claims to which
NCO is entitled shall not exceed, with respect to the Base Escrow Fund, the
product of the Valuation Price and the number of shares of NCO Stock initially
deposited in the Base Escrow Fund and, with respect to the Tax Escrow Fund, the
product of the Valuation Price and the number of shares of NCO Stock initially
deposited in the Tax Escrow Fund.
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c. On the one year anniversary of the Effective Date (the
"Termination Date"), the Escrow Agent shall distribute to the Stockholders the
remaining shares and remaining Escrowed Cash held in the Base Escrow Fund (less
a number of shares as indicated to the Escrow Agent in writing by NCO and
Stockholder's Agents (as defined in Section 13) equal to the aggregate of the
fractional share interests to which NCO is entitled by reason of the deposit by
NCO of an excess fractional share hereunder or by reason of distribution to NCO
of less than the Claim Amount specified in a Payment Notice, which shall be
distributed to NCO) less the shares and/or Escrowed Cash having a total value,
based upon the Valuation Price, equal to the aggregate amount set forth in any
then outstanding claim notices ("Pending Claim Amount") delivered under Section
14 of the Reorganization Agreement ("Claim Notices"). For this purpose the
amount set forth in any outstanding Claim Notices shall be allocated among
accounts in the same manner as set forth in Section 2.b hereof.
d. After the Termination Date, upon resolution of each remaining
outstanding Claim Notices in accordance with the procedure set forth in Section
2.b with respect to Payment Notices, the Escrow Agent shall distribute to the
Stockholders the remaining shares and Escrowed Cash held in the Base Escrow Fund
(less a number of shares as indicated to the Escrow Agent in writing by NCO and
Stockholder's Agents equal to the aggregate of the fractional share interests to
which NCO is entitled by reason of the deposit by NCO of an excess fractional
share hereunder or by reason of distribution to NCO of less than the Claim
Amount specified in a Payment Notice, which shall be distributed to NCO) less
the shares and/or Escrowed Cash having a total value, based upon the Valuation
Price, equal to the aggregate amount set forth in any then outstanding Claim
Notices. For this purpose the amount set forth in any outstanding Claim Notices
shall be allocated among accounts in the same manner as set forth in Section 2.b
hereof.
e. On the date Tax Claims have been resolved and satisfied with
applicable taxing authorities or the applicable portion of the statute of
limitations has run, the Escrow Agent shall distribute to the Stockholders the
remaining shares and the remaining Escrowed Cash held in the Tax Escrow Fund
(less a number of shares as indicated to the Escrow Agent in writing by NCO and
Stockholder's Agents equal to the aggregate of the fractional share interests to
which NCO is entitled by reason of the deposit by NCO of an excess fractional
share hereunder or by reason of distribution to NCO of less than the Claim
Amount specified in a Payment Notice, which shall be distributed to NCO).
f. No fractional shares of NCO Stock shall be distributed by the
Escrow Agent. In lieu of the distribution of fractional shares, the number of
shares of NCO Stock to be distributed to each Stockholder in accordance with
this Agreement shall be rounded off to the nearest whole number of shares of NCO
Stock by NCO.
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3. Valuation of Escrowed Stock. Except as otherwise expressly provided
for, the value of each share of the Escrowed Stock for purposes of this
Agreement shall be the arithmetic average of the last reported sale prices
("Valuation Price") of one share of NCO Stock, as reported on the Nasdaq
National Market during the ten (10) trading days ending on and including the
trading day one day before the Effective Date (as defined in the Reorganization
Agreement). The parties agree that the Valuation Price is $33.81875.
4. Exchange of Collateral. A Stockholder may, at its or his option,
deposit with the Escrow Agent an equivalent value of cash ("Escrowed Cash") in
exchange for all or any portion of the Escrowed Stock in such Stockholder's
account. The equivalent value of the cash will be based on the last reported
sale price of NCO common stock, as reported on the Nasdaq National Market, on
the day that the cash is surrendered in substitution for the Escrowed Stock
("Exchange Value"); provided, however, no substitution hereunder may be
permitted or made if the Exchange Value is less than the Valuation Price. In any
such case, references to the Escrowed Stock and distributions thereof shall be
deemed to refer instead to the Escrowed Cash and distributions thereof. The
Escrowed Cash shall be held in such investment suitable for escrow accounts as
NCO, Escrow Agent and such Stockholder shall reasonably agree.
5. Resignation and Removal of Escrow Agent. The Escrow Agent may resign
at any time or be removed by the mutual consent of NCO and the Stockholder's
Agents upon notice given at least 30 days prior to the effective date of such
resignation or removal; provided, however, that no resignation or removal of the
Escrow Agent and no appointment of a successor Escrow Agent shall be effective
until the acceptance of appointment by a successor Escrow Agent in the manner
herein provided. In the event of the resignation or removal of the Escrow Agent,
and the failure of NCO and the Stockholder's Agents to agree upon a successor
Escrow Agent within 30 days after the receipt of notice of such resignation or
removal, NCO shall have the right to appoint a successor Escrow Agent which
shall be a commercial bank or trust company having a combined capital and
surplus of at least $100,000,000. Any successor Escrow Agent, whether appointed
by the mutual agreement of NCO and the Stockholder's Agents or otherwise, shall
execute and deliver to the predecessor Escrow Agent an instrument accepting such
appointment, and thereupon such successor Escrow Agent shall, without further
act, become vested with all the estates, properties, rights, powers and duties
of the predecessor Escrow Agent as if originally named herein.
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6. Liability of Escrow Agent; Expenses. The Escrow Agent shall have no
liability or obligation hereunder except for its willful misconduct or gross
negligence. The Escrow Agent may rely upon any instrument, not only as to its
due execution, validity and effectiveness, but also as to the truth and accuracy
of any information contained therein, which the Escrow Agent shall in good faith
believe to be genuine, to have been signed or presented by the person or parties
purporting to sign the same and to conform to the provisions of this Agreement.
The Escrow Agent may consult legal counsel selected by it in the event of any
dispute or question of the construction of any of the provisions hereof or of
the Reorganization Agreement or of its duties hereunder, and shall incur no
liability and shall be fully protected in acting in accordance with the opinion
or instruction of such counsel. The fees and expenses of the Escrow Agent
charged and incurred in performing its obligations hereunder shall be borne by
NCO. Escrow Agent shall be entitled to compensation for its services as stated
in the fee schedule attached hereto as Exhibit B, which such compensation shall
be paid by NCO. The fee agreed upon for the services rendered hereunder is
intended as full compensation for Escrow Agent's services as contemplated by
this Agreement; provided, however, that in the event that the conditions for the
disbursement of funds under this Agreement are not fulfilled, or Escrow Agent
renders any material service not contemplated in this Agreement, or there is any
assignment of interest in the subject matter of this Agreement, or any material
modification hereof, or if any material controversy arises hereunder, or Escrow
Agent is made a party to any litigation pertaining to this Agreement, or the
subject matter hereof, then Escrow Agent shall be reasonably compensated for
such extraordinary services and reimbursed for all costs and expenses, including
reasonable attorney's fees, occasioned by any delay, controversy, litigation or
event, and the same shall be recoverable from NCO.
7. Indemnification of Escrow Agent. Subject to Section 6 hereof, each
of NCO and the Stockholders, severally and not jointly, hereby indemnify and
hold harmless Escrow Agent from and against, one-half of any and all loss,
liability, cost, damage and expense, including, without limitation, reasonable
counsel fees, which Escrow Agent may suffer or incur by reason of any action,
claim or proceeding brought against Escrow Agent arising out of or relating in
any way to this Agreement or any transaction to which this Agreement relates
unless such action, claim or proceeding is the result of the willful misconduct
or gross negligence of Escrow Agent. Anything in this agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action. The
parties hereto acknowledge that the foregoing indemnities shall survive the
resignation or removal of the Escrow Agent or the termination of this Agreement.
8. Notices. All notices, consents, waivers 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 when delivered personally or one
business day after being sent by a nationally recognized overnight delivery
service, postage or delivery charges prepaid. Notices may also be given by
prepaid facsimile and shall be effective on the date transmitted if confirmed
telephonically immediately thereafter and within 48 hours thereafter by a signed
original sent in the manner provided in the preceding sentence. Notwithstanding
the foregoing, notices to the Escrow Agent shall be deemed given on the date
received by the Escrow Agent.
Notices to JDR shall be sent to JDR's address stated on page one of
this Agreement to the attention of its president and notices to the Stockholders
shall be sent to their most recent addresses of record with NCO or its transfer
agent. Notices to NCO shall be sent to NCO's address stated on page one of this
Agreement to the attention of its General Counsel, with a copy sent
simultaneously to the same address to the attention of its Chief Financial
Officer.
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Notices to the Escrow Agent (including any Payment Notice) shall be
sent to:
The Chase Manhattan Bank
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Escrow Administration, 10th Floor
Fax: (000) 000-0000
with copies to NCO and the Stockholders (at their respective
addresses set forth in the Reorganization Agreement).
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 8, provided that any such change of address
notice shall not be effective unless and until received.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
principles of conflicts of laws and any action brought hereunder involving the
Escrow Agent shall be brought in the federal or state courts located in the
County of New York, State of New York. Each party hereto irrevocably waives any
objection on the grounds of venue, forum non-conveniens or any similar grounds
and irrevocably consents to service of process by mail or in any other manner
permitted by applicable law and consents to the jurisdiction of said courts. In
any action not involving the Escrow Agent, the provisions of Section 15.16 of
the Reorganization Agreement shall be controlling.
10. Assignment; Binding Effect. The rights of the Stockholders
hereunder are personal and may not be assigned or otherwise transferred except
by operation of law. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
11. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original and all of which together shall constitute
one and the same instrument.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and cannot be changed, modified or terminated except by written amendment.
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13. Right of Stockholder's Agent to Act for Former JDR Stockholders.
Each of the JDR Stockholders expressly grants to Xxxxx D'Xxxx and Advanta
Partners LP, or their respective designees (collectively the "Stockholder's
Agents") the full power and authority to represent such JDR Stockholder for the
purpose of handling claims under and pursuant to this Escrow Agreement including
settling all disputes related thereto, provided that nothing herein shall have
the effect of treating any JDR Stockholder differently from any other. Any
action by the Stockholder's Agents shall be valid only if authorized by both
such agents. JDR agrees to indemnify, defend and hold harmless the Stockholder's
Agent from any and all costs, expenses, damages or liabilities of any kind
whatsoever (including legal fees) arising by virtue of their services as
Stockholder's Agent hereunder.
14. Certain Procedures With Respect to Escrow Agent.
a. In the event written instructions are given (other than in
writing at the time of execution of the Agreement), by or on behalf of NCO or
the Stockholder's Agents, whether in writing, by telecopier or otherwise
pursuant to this Agreement, the Escrow Agent is authorized to seek confirmation
of such instructions by telephone call-back to the person or persons designated
on Exhibit C hereto, as applicable, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated who
confirms such written instructions. The persons and telephone numbers for
call-backs may be changed only in a writing actually who confirm such written
instructions received and acknowledged by the Escrow Agent. The parties to this
Agreement acknowledge that such security procedure is commercially reasonable.
b. In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands from
any party hereto which, in its opinion, conflict with any of the provisions of
this Agreement, it shall be entitled to refrain from taking any action and its
sole obligation shall be to keep safely all property held in escrow until it
shall be directed otherwise in writing by all of the other parties hereto or by
a final order or judgment of a court of competent jurisdiction.
[SIGNATURES APPEAR ON NEXT PAGE]
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WITNESS THE DUE EXECUTION AND DELIVERY OF THIS ESCROW AGREEMENT AS OF
THE DATE FIRST STATED ABOVE.
JDR HOLDINGS, INC. NCO GROUP, INC.
By: /s/ Xxxxx X. D'Xxxx By: /s/ Xxxxxxx X. Xxxxxxx
----------------------- ---------------------------
Name: Xxxxx X. D'Xxxx Name: Xxxxxxx X. Xxxxxxx
Title: CEO Title: CEO
ESCROW AGENT:
THE CHASE MANHATTAN BANK
By: /s/ Xxxx Xxxxxxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxxxxxx
Title: Vice President
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EXHIBIT A:* List of JDR Stockholders and Escrowed Stock
EXHIBIT B:* Compensation of Escrow Agent
EXHIBIT C:* Persons and Telephone Number(s) for Instruction Confirmation
*Exhibits to be supplied to the SEC upon request.
