EARNOUT STOCK ESCROW
AND PLEDGE AGREEMENT
THIS EARNOUT STOCK ESCROW AND PLEDGE AGREEMENT (this "Agreement") made and
entered into this 4th day of April, 2000, by and among the Persons named on
Exhibit A (collectively, the "Pledgors"), as the former shareholders of Operator
Service Company, a Texas corporation, and Billing Concepts Corp., a Delaware
corporation ("Pledgee"), and U.S. Trust Company of Texas, N.A., as Escrow Agent
("Escrow Agent"). Except as otherwise defined herein, capitalized terms used in
this Escrow Agreement will have the meanings set forth in the Merger Agreement
(as hereinafter defined).
W I T N E S S E T H:
WHEREAS, contemporaneously herewith the Pledgors and Pledgee are executing
a certain Plan of Reorganization, Merger and Acquisition Agreement (the "Merger
Agreement"), which contemplates, inter alia, the deposit of certain securities
into escrow with the Escrow Agent for the purpose of securing the earnout
payment pursuant to the Merger Agreement as further defined herein (the "Earnout
Obligation"); and,
WHEREAS, the Pledgors and Pledgee have agreed that the Pledgors and Pledgee
will enter into this Agreement with the Escrow Agent pursuant to which the
Pledgors pledge in escrow to the Escrow Agent 769,000 shares (the "Pledged
Securities") of the common stock of Pledgee pursuant to Section 2.6 of the
Merger Agreement; and,
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and Ten Dollars ($10.00) and other good and valuable
consideration, the receipt whereof is hereby acknowledged, the parties hereto
agree as follows:
1. Appointment of Escrow Agent. The Pledgors and Pledgee hereby appoint
U.S. Trust Company of Texas, N.A. to serve as Escrow Agent, and the Escrow Agent
hereby accepts, under the terms of this Agreement, such appointment and the
agency created thereby.
2. Earnout Escrow and Pledge of Shares. Each Pledgor hereby grants a
security interest to Pledgee in the Pledged Securities and the Earnout Escrow
Fund (as hereinafter defined). Concurrent with the Closing, the Pledgors will
deposit the Pledged Securities with the Escrow Agent who will hold such shares
in escrow in order to secure the Earnout Obligation until the Escrow Agent is
required to release such shares pursuant to the terms of this Agreement and the
Merger Agreement. The Escrow Agent agrees to accept delivery of the Pledged
Securities in escrow subject to the terms and conditions of the Merger Agreement
and this Agreement and to hold the Pledged Securities as security for the
payment of the Earnout Obligation, all in accordance with the applicable terms
and provisions hereof and of the Merger Agreement. Each Pledgor has also
deposited with the Escrow Agent duly executed stock powers naming the Escrow
Agent as attorney-in-fact and agent for the limited purpose of reconveying the
Pledged Securities to Pledgee or such Pledgor, as the case may be. Pledgee has
executed and delivered a Release of Lien (the "Release of Lien") to the Escrow
Agent releasing and terminating its security interest in the Pledged Securities
and which Release of Lien is to be held in escrow by the Escrow Agent until the
Earnout Obligation is fully and finally resolved. The Pledged Securities and
any proceeds therefrom, together with all income earned thereon (not including
cash dividends but including distributions), is herein called the "Earnout
Escrow Fund." The Earnout Escrow Fund will be held and disbursed by the Escrow
Agent in accordance with the terms hereof and the Merger Agreement.
3. Earnout Obligation. If the Seller/Surviving Corporation achieves
EBITDA (as defined below) of $4,110,000 or more in the twelve-month period
ending December 31, 2000 (the "EBITDA Threshold"), then all of the Pledged
Securities will be delivered by the Escrow Agent to the Pledgors in their Pro
Rata Share as provided herein. If the Surviving Corporation fails to achieve
the EBITDA Threshold, all of the Pledged Securities will be delivered by the
Escrow Agent to Pledgee as provided herein.
For purposes hereof "EBITDA" means for calendar year 2000 of the
Seller/Surviving Corporation, net earnings before interest (income and expense),
federal income taxes, depreciation and amortization, all of which are to be
determined in accordance with generally accepted accounting principles,
reflective of actual expenses incurred and reflected in the statement of
earnings, and incurred consistent with that necessary to execute Seller's
business plan (as presented to Buyer).
In no event shall the EBITDA include any losses or expenses for which BCC
has been indemnified and recovered from Stockholders under Article 11 of the
Merger Agreement.
BCC shall provide the EBITDA calculation and supporting working papers to
the Stockholder Representative within 90 days of December 31, 2000. The
Stockholder Representative shall have 30 days after receipt of the calculation
to object. If he objects, he shall notify BCC in writing. If the parties are
unable to resolve the dispute within 10 days, the disagreement shall be
resolved pursuant to the provisions set forth in Section 18.11 of the Merger
Agreement.
4. Representations of the Pledgors. Each Pledgor warrants and represents
that (i) there are no restrictions upon the transfer of any of the Pledged
Securities owned by such Pledgor, other than as may appear on the face of the
certificate(s) and except as arise under applicable federal and state securities
laws and regulations, (ii) the Pledged Securities owned by such Pledgor are not
subject to any encumbrances, except as arise under applicable federal and state
securities laws and regulations and as described or referred to herein, and
(iii) such Pledgor has the right to transfer the Pledged Securities owned by
such Pledgor free of any encumbrance or obligation and without obtaining the
consents of any other persons except as may be required under applicable federal
and state securities laws and regulations.
5. Dividends. Any cash dividends will be distributed currently by
Pledgee to the Pledgors.
6. Voting Rights. While the Pledged Securities remain in the Escrow
Agent's possession pursuant to this Agreement, the Pledgors shall have the right
to vote the Pledged Securities on all corporate questions as shareholders of
Pledgee and, if a need shall arise, the Escrow Agent shall execute due and
timely proxies in favor of the Pledgors to this end. While the Pledged
Securities remain in the Escrow Agent's possession pursuant to this Agreement,
the Pledgors will retain and be able to exercise all other incidents of
ownership of the Pledged Securities that are not inconsistent with the terms and
conditions hereof.
7. Stock Adjustments. In the event that, during the term of this
Agreement, (i) any stock dividend, reclassification, readjustment or other
change be declared or made in the capital stock of the issuer of the Pledged
Securities or (ii) the issuer of any of the Pledged Securities be consolidated
with or merged into another corporation, then, and in any such event or events,
all new, substituted or additional shares (or other securities), cash or other
consideration issued by reason of any such event, shall be deemed and treated as
an integral part of the Pledged Securities and Earnout Escrow Fund (and included
within the definition of Pledged Securities and Earnout Escrow Fund set forth
hereinabove) and shall be held by the Escrow Agent pursuant to the terms of this
Agreement in the same manner as the shares of stock originally deposited
hereunder.
8. Termination of Agreement. Unless earlier terminated due to a Change
of Control (as defined below), the Earnout Escrow Fund shall be held by the
Escrow Agent until receipt of a distribution request pursuant to Section 9 (the
"Earnout Escrow Termination Date"). Upon termination of this Agreement
according to the above terms, the security interests herein created in the
Pledged Securities shall be terminated and the Escrow Agent shall deliver to the
Pledgors or Pledgee, as the case may be, all the shares of the Pledged
Securities then in the Escrow Agent's possession, free and clear from the
encumbrance created by the provisions of this Agreement and duly endorsed for
transfer, and the executed Release of Lien.
For purposes hereof, "Change of Control" shall mean a change of control of
the Surviving Corporation after the Effective Time and before December 31, 2000
through a transaction in which (a) all or substantially all of its assets are
transferred to another Person, other than an Affiliate of BCC, or (b) a
majority of the voting power of the Surviving Corporation is transferred to
another Person other than an Affiliate of BCC, or (c) BCC's current
Chairman/Chief Executive Officer and Chief Financial Officer both resign or are
both terminated from employment or (d) termination of employment of either ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ by his respective employer other than "for cause"
under the employment agreements to be executed as of the Effective Date. If a
Change of Control occurs on or before December 31, 2000, then the Escrow Agent
shall distribute the Earnout Escrow Fund to the Pledgors in their Pro Rata
Share. The "Pro Rata Share" shall be each Pledgor's proportionate share of the
Earnout Indemnity Fund as set forth on Exhibit A.
9. Remedies. Until the Earnout Escrow Termination Date, Pledgee's rights
with respect to the Escrow Fund shall be those of a Secured Party under the
Texas Business and Commerce Code in force (the "Code") at the date of this
Agreement and under any other applicable law from time to time in effect.
On or after the Earnout Escrow Termination Date, the Escrow Agent shall
make a distribution of all shares of Pledged Securities from the Earnout Escrow
Fund upon receiving a written joint distribution request executed by both
Pledgee and the Stockholder Representative and specifying to whom the Pledged
Securities are to be distributed from the Earnout Escrow Fund. If there is a
disagreement as to the disbursement and delivery of the Earnout Escrow Fund
between the Pledgee and the Pledgors, the disagreement shall be resolved
pursuant to the provisions of Section 18.11 of the Merger Agreement and, upon
completion of any arbitration proceeding, the arbitrator or other appropriate
party shall certify the results of the arbitration to the Escrow Agent,
including the decision, and the Escrow Agent shall be entitled to rely and act
accordingly with respect to payments hereunder, on the basis of the decision of
the arbitrator as so certified.
The Escrow Agent, as attorney-in-fact and agent for the holder of the
Pledged Securities, shall deliver to the transfer agent for the BCC Stock (the
"Transfer Agent"), the certificates representing the shares of Pledged
Securities together with instructions to the Transfer Agent to reissue the
shares to Pledgee (which shares shall become treasury shares with respect to
Pledgee) or Pledgors, as the case may be.
10. Obligation of Escrow Agent. If there is any dispute as to whether (i)
the Escrow Agent is obligated to deliver any shares (constituting all or any
part of the Pledged Securities) or other documents which it holds or (ii) as to
whom said shares of stock or other documents are to be delivered, the Escrow
Agent shall not be obligated to make any delivery, but, in such event, may hold
the same until receipt by the Escrow Agent of an authorization, in writing,
signed by all of the parties having an interest in such dispute directing the
disposition of the same; or, in the absence of such authorization, the Escrow
Agent may hold said shares of stock and/or other documents until the final
determination of the rights of the parties in accordance with the Merger
Agreement. If such written authorization is not given or proceedings for such
determination are not begun and diligently continued, the Escrow Agent may, but
is not required to, bring an appropriate action or proceeding for leave to
deposit said shares of stock, cash and/or documents in the Registry of the
District Court in and for San Antonio, Texas, pending such determination.
The Escrow Agent shall not be responsible for any acts or omissions unless
negligently or willfully done, and upon making delivery of the shares of stock
and/or documents which the Escrow Agent holds in accordance with the terms of
this Agreement, the Escrow Agent shall have absolutely no further liability
hereunder. The Escrow Agent shall serve without bond, security or surety.
In the event that the Escrow Agent places the shares of stock (constituting
all or any part of the Pledged Securities), or any other documents that have
actually been delivered to the Escrow Agent as Escrow Agent pursuant to this
Agreement in the Registry of an appropriate Court having jurisdiction thereof,
and files an action of interpleader, naming the parties hereto, the Escrow Agent
shall thereupon and thereafter be released and relieved from any and all further
obligation and liability hereunder or in connection herewith. The parties shall
and do hereby, jointly and severally, agree to indemnify and hold the Escrow
Agent harmless from any and all damages or losses arising hereunder or in
connection herewith, including but not limited to all costs and expenses
incurred by the Escrow Agent in connection with the filing of such action
including, but not limited to, reasonable attorney's fees for the Escrow Agent's
attorneys through all trial and appellate levels.
11. Expenses. All fees and expenses of the Escrow Agent incurred in
performing its responsibilities hereunder will be paid 50% by the Pledgors and
50% by Pledgee upon receipt of a written invoice from the Escrow Agent.
12. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
resignation to the parties to this Agreement, specifying a date not less than
ten days following such notice date of when such resignation will take effect.
Pledgee will designate a successor Escrow Agent in accordance with the terms of
the Merger Agreement. The Escrow Agent will promptly transfer the Earnout
Escrow Fund to such designated successor.
13. Modification and Alteration. This Agreement may not be altered or
amended unless in writing, signed by the parties against whom enforcement is
sought.
14. Persons Bound. This Agreement shall be binding upon and shall inure
to the benefit of Pledgee, the Pledgors and the Escrow Agent and their
respective heirs, representatives, successors and assigns.
15. Entire Agreement. This Agreement represents the entire agreement
between the parties with regard to the pledging, deposit in escrow and the
holding of the Earnout Escrow Fund as collateral for the purposes set out
herein.
16. Time is of the Essence. The parties acknowledge that time is of the
essence.
IN WITNESS WHEREOF, the parties hereto have executed this Earnout Stock
Escrow and Pledge Agreement in multiple original counterparts as of the day and
year first above written.
PLEDGORS:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Custodian for
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, Custodian for ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Independent Executor of the Estate of ▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇
PLEDGEE: ESCROW AGENT:
BILLING CONCEPTS CORP. U.S. TRUST COMPANY OF TEXAS, N.A.
By: By:
Name: Name:
Title: Title: STOCKHOLDER
REPRESENTATIVE
EXHIBIT A
LIST OF PLEDGORS PRO RATA SHARE
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 461,398 -
60.000%
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ 121,568 - 15.808%
▇▇▇▇▇ ▇. & ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 26,866 - 3.494%
▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 8,955 - 1.164%
▇▇▇▇ ▇▇▇▇▇▇ 8,955 - 1.164%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 4,702 - 0.611%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 940 - 0.122%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 90 - 0.012%
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 90 - 0.012%
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 672 - 0.087%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 26,866 - 3.494%
▇▇▇▇▇▇ ▇. ▇▇▇▇ 3,582 - 0.466%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 15,739 - 2.047%
▇▇▇▇▇▇ ▇. ▇▇▇▇ 4,858 - 0.632%
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ 2,993 - 0.389%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 261 - 0.034%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 261 - 0.034%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 14,194 - 1.846%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Independent Executor of the
Estate of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 43,657 - 5.677%
▇▇▇▇▇ ▇. ▇▇▇▇▇ 537 - 0.070%
LIST OF PLEDGORS PRO RATA SHARE
▇▇▇▇▇▇ ▇. ▇▇▇▇ 54 - 0.007%
▇▇▇▇▇▇▇▇ ▇▇▇ 90 - 0.012%
▇▇▇▇ ▇▇▇▇▇, Custodian for ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 2,955- .384%
▇▇▇▇ ▇▇▇▇▇, Custodian for ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ 2,955- .384%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 90 - 0.012%
▇▇▇▇▇▇▇ ▇. & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 10,746- .397%
▇▇▇▇ ▇. ▇▇▇▇▇▇ 179 - 0.023%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 90 - 0.012%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 4,657- .606%