INDEMNITY STOCK ESCROW
AND PLEDGE AGREEMENT
THIS INDEMNITY 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 indemnity
obligations of the Pledgors pursuant to the Merger Agreement (the "Indemnity
Obligations"); 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 461,573 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. Indemnity Escrow and Pledge of Shares. Each Pledgor hereby grants a
security interest to Pledgee in the Pledged Securities and the Indemnity 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 Indemnity Obligations 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 by the Pledgors of any Indemnity Obligations, 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 Indemnity Obligations are fully and finally resolved.
The Pledged Securities and all proceeds therefrom, together will all income
earned thereon, is herein called the "Indemnity Escrow Fund." The Indemnity
Escrow Fund will be held, invested, reinvested and disbursed by the Escrow Agent
in accordance with the terms hereof and the Merger Agreement.
3. 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.
4. Dividends. Any cash dividends will be distributed currently by
Pledgee to the Pledgors.
5. Voting Rights. During the term of this Agreement or until Pledgee
obtains possession of any Pledged Securities pursuant to Section 9 herein, 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.
6. 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 Indemnity Escrow Fund (and
included within the definition of Pledged Securities and Indemnity 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.
7. Termination of Agreement. The Indemnity Escrow Fund shall be held by
the Escrow Agent for a period of one year following the Effective Time (the
"Indemnity Escrow Termination Date"); provided, however, if as of such date the
Indemnitees shall have made a claim for indemnification or payment pursuant to
Article 11 of the Merger Agreement (including, but not limited to, a Third-Party
Claim) or otherwise, which has not been finally resolved by such date, Escrow
Agent shall continue to hold the Indemnity Escrow Fund until all such claims
(including, but not limited to, all Third-Party Claims) shall have been finally
resolved. 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 (i) deliver to the Pledgors all the shares of the
Pledged Securities then in the Escrow Agent's possession, if any, free and clear
from the encumbrance created by the provisions of this Agreement and duly
endorsed for transfer and (ii) the executed Release of Lien. The number of
Pledged Securities is equal to each Pledgor's proportionate share of the
Indemnity Escrow Fund as set forth on Exhibit A ("Pro Rata Share"). Any
delivery to Pledgors to be made by Escrow Agent under this Section 7 shall be
made so that each Pledgor receives his Pro Rata Share of the total amount of
each type of property (principally Pledged Securities) constituting the
Indemnity Escrow Fund immediately before such distribution.
8. Indemnification Event. Pledgee and the Purchaser and the other BCC
Parties included in the definition of Indemnitee are indemnified pursuant to the
terms of Article 11 of the Merger Agreement (which terms are incorporated herein
by reference) from and against any Damages, subject to the limitations set forth
in Article 11 of the Merger Agreement and herein. The Pledged Securities will
be security for the Indemnity Obligations, subject to the limitations, and in
the manner provided, in Article 11 of the Merger Agreement and this Agreement.
9. Remedies. Until the happening of any event that an Indemnitee has
determined has given or could give rise to a right of indemnification under the
Merger Agreement (an "Indemnification Event"), 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.
Upon the occurrence of any Indemnification Event, the Escrow Agent shall
make distributions from the Indemnity Escrow Fund to Pledgee upon receiving a
written joint distribution request executed by both Pledgee and the Stockholder
Representative specifying the amount that is to be distributed to Pledgee from
the Escrow Fund. If there is a disagreement as to the disbursement and delivery
of the Escrow Fund between the Pledgee and the Pledgors, the disagreement shall
be resolved pursuant to the provisions 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 to Pledgee hereunder, if any, on the basis
of the decision of the arbitrator as so certified.
Any amount owed pursuant to an Indemnification Obligation will be payable
out of the Pledged Securities then held by the Escrow Agent at a per share value
equal to $6.50. If Pledged Securities are applied to satisfy an Indemnification
Obligation, 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
number of shares necessary to satisfy the Indemnification Obligation to Pledgee
(which shares shall become treasury shares with respect to Pledgee) and to
reissue the remaining shares in the names of the original holder of the shares
of the Pledged Securities. The reissued shares that are not issued to Pledgee
shall then be delivered to the Escrow Agent and continue to be shares of Pledged
Securities until the Indemnity Escrow Termination Date. No fractional shares of
Pledged Securities shall be delivered to Pledgee to satisfy any Indemnification
Obligation; and in lieu of any such fractional shares, the number of Pledged
Securities so delivered to Pledgee shall be rounded to the nearest whole share
and the amount of cash delivered to Pledgee to satisfy such Indemnification
Event shall be adjusted accordingly. In the event that the Escrow Fund contains
cash in addition to the Pledged Securities, any Indemnification Obligations
shall be satisfied first from the Pledged Securities and then from such cash.
10. Obligation of Escrow Agent. If there is any dispute as to whether (i)
the Escrow Agent is obligated to deliver any cash, shares (constituting all or
any part of the Pledged Securities) or other documents which it holds or (ii) as
to whom said cash, 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, cash 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,
cash 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), cash 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 Indemnity
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 Indemnity 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Indemnity Stock
Escrow and Pledge Agreement in multiple original counterparts as of the day and
year first above written.
PLEDGORS:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
STOCKHOLDER REPRESENTATIVE:
PLEDGEE:
BILLING CONCEPTS CORP.
By:
Name:
Title:
ESCROW AGENT:
U.S. Trust Company of Texas, N.A.
By:
Name:
Title:
EXHIBIT A
LIST OF PLEDGORS PRO RATA SHARE
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 369,258 shares - 80.0%
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ 92,315 shares - 20.0%