Common use of Contingency Consideration Clause in Contracts

Contingency Consideration. In addition to the Purchase Price, Seller may be entitled to receive additional consideration (the "earnout"). The earnout will be based on fifty percent (50%) of the differential between the Initial Value and the Ending Value as defined below: (a) Initial Value: $31,800,000 (b) Ending Value: Either (i) if an initial public offering of NTRC (defined as Buyer's market research business, the Division's business and the business of any company acquired by Buyer which is involved in the provision of market research) common stock occurs or if NTRC is sold prior to December 31, 1998, the average market capitalization of NTRC over the first 30 days of trading adjusted for any dilution caused by such a public stock offering or the aggregate consideration received for NTRC (including the assumption of any funded debt), or (ii) if an initial public offering of NTRC common stock does not occur and NTRC is not sold prior to December 31, 1998, the average analyst estimate of NTRC's net income for the year ending December 31, 1999 multiplied by NCO's preceding 30 day average 1999 EPS multiple (based on analyst estimates) at December 31, 1998. At Seller's discretion, Seller may delay calculation of the Ending Value as calculated in (b) (ii) above until January 31, 1999 or February 28, 1999 in order to obtain a more favorable preceding 30 day average multiple of NCO's 1999 estimated EPS. If an initial public offering of NTRC common stock does not occur or if NTRC is not sold prior to December 31, 1998 and Seller elects at any time prior to April 30, 1999 not to accept the Ending Value as calculated in (b) (ii) above, Seller may elect to convert to an alternative earnout calculation as follows: on March 31, 1999, Seller will be paid seven (7) times the amount by which the Division's 1998 EBITDA exceeds 120% of the Division's 1997 EBITDA. For purposes of this calculation, the Division's 1997 EBITDA will be $1,891,000 or the Division's actual 1997 EBITDA, whichever is greater. In addition, on March 31, 2000, Seller will be paid seven (7) times the amount by which the Division's 1999 actual EBITDA exceeds 110% of the Division's actual 1998 EBITDA. In all instances in which an earnout calculation involves the use of EBITDA, such EBITDA shall be normalized by adding back any acquisition-related or other extraordinary non-recurring expenses. Seller may elect (at any time before April 30, 2000) to be paid the earnout, if any, in either cash or in the form of a convertible note, convertible into NCO common stock at a price equal to $3.00 above NCO's trailing average 30 trading day per share price on the payment date. The principal sum of the note shall be equal to the amount of the earnout less the value of the conversion options as based on a Black-Scholes model, the assumptions of which shall be mutually agreed upon by Buyer and Seller at the time the earnout is being calculated. The interest rate on the convertible note shall be equal to the rate paid by NCO under its prevailing line of credit, but shall not exceed 7.5%. Such note shall be for a term of five (5) years. All dates in 1999 and 2000 shall be appropriately adjusted if NCO's Form 10-K is filed after March 31, 1999 or 2000. In connection with the foregoing, Seller shall have ten (10) business days to review and object, in a writing to be delivered within such 10-day period, to Buyer's calculation of the earnout unless an objection is raised, Buyer's calculation of the earnout shall be final and binding on the parties for all purposes. In the event of an objection, subject to the provision of Section 15.19, for a period of thirty (30) calendar days, Seller may or at its sole cost and expense, engage the Arbiter to audit the books and records relative to the calculation of the earnout only. Upon completion of the audit within the 30- day period, Seller shall deliver the written audit to Buyer. The parties shall jointly review the audit and determine whether an adjustment is required. If an agreement cannot be reached, the Arbiter shall be consulted and it's determination shall be final.

Contingency Consideration. In addition to the Purchase Price, ------------------------- Seller may be entitled to receive additional consideration (the "earnout"). The earnout will be based on fifty percent (50%) of the differential between the Initial Value and the Ending Value as defined below: (a) Initial Value: $31,800,000 (b) Ending Value: Either (i) if an initial public offering of NTRC (defined as Buyer's market research business, the Division's business and the business of any company acquired by Buyer which is involved in the provision of market research) common stock occurs or if NTRC is sold prior to December 31, 1998, the average market capitalization of NTRC over the first 30 days of trading adjusted for any dilution caused by such a public stock offering or the aggregate consideration received for NTRC (including the assumption of any funded debt), or (ii) if an initial public offering of NTRC common stock does not occur and NTRC is not sold prior to December 31, 1998, the average analyst estimate of NTRC's net income for the year ending December 31, 1999 multiplied by NCO's preceding 30 day average 1999 EPS multiple (based on analyst estimates) at December 31, 1998. At Seller's discretion, Seller may delay calculation of the Ending Value as calculated in (b) (ii) above until January 31, 1999 or February 28, 1999 in order to obtain a more favorable preceding 30 day average multiple of NCO's 1999 estimated EPS. If an initial public offering of NTRC common stock does not occur or if NTRC is not sold prior to December 31, 1998 and Seller elects at any time prior to April 30, 1999 not to accept the Ending Value as calculated in (b) (ii) above, Seller may elect to convert to an alternative earnout calculation as follows: on March 31, 1999, Seller will be paid seven (7) times the amount by which the Division's 1998 EBITDA exceeds 120% of the Division's 1997 EBITDA. For purposes of this calculation, the Division's 1997 EBITDA will be $1,891,000 or the Division's actual 1997 EBITDA, whichever is greater. In addition, on March 31, 2000, Seller will be paid seven (7) times the amount by which the Division's 1999 actual EBITDA exceeds 110% of the Division's actual 1998 EBITDA. In all instances in which an earnout calculation involves the use of EBITDA, such EBITDA shall be normalized by adding back any acquisition-related or other extraordinary non-recurring expenses. Seller may elect (at any time before April 30, 2000) to be paid the earnout, if any, in either cash or in the form of a convertible note, convertible into NCO common stock at a price equal to $3.00 above NCO's trailing average 30 trading day per share price on the payment date. The principal sum of the note shall be equal to the amount of the earnout less the value of the conversion options as based on a Black-Scholes model, the assumptions of which shall be mutually agreed upon by Buyer and Seller at the time the earnout is being calculated. The interest rate on the convertible note shall be equal to the rate paid by NCO under its prevailing line of credit, but shall not exceed 7.5%. Such note shall be for a term of five (5) years. All dates in 1999 and 2000 shall be appropriately adjusted if NCO's Form 10-K is filed after March 31, 1999 or 2000. In connection with the foregoing, Seller shall have ten (10) business days to review and object, in a writing to be delivered within such 10-day period, to Buyer's calculation of the earnout unless an objection is raised, Buyer's calculation of the earnout shall be final and binding on the parties for all purposes. In the event of an objection, subject to the provision of Section 15.19, for a period of thirty (30) calendar days, Seller may or at its sole cost and expense, engage the Arbiter to audit the books and records relative to the calculation of the earnout only. Upon completion of the audit within the 30- 30-day period, Seller shall deliver the written audit to Buyer. The parties shall jointly review the audit and determine whether an adjustment is required. If an agreement cannot be reached, the Arbiter shall be consulted and it's determination shall be final.