-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wbh4/99SbKKrzyTW4E9rFcMbGTDjWNyvn/Oycn4BeWu9xD02+ahSCgSkGBF7hP1D rWztxce0RtQyrMYfKbDkSw== 0000950116-99-000757.txt : 19990416 0000950116-99-000757.hdr.sgml : 19990416 ACCESSION NUMBER: 0000950116-99-000757 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCO GROUP INC CENTRAL INDEX KEY: 0001022608 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 232858652 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21639 FILM NUMBER: 99594566 BUSINESS ADDRESS: STREET 1: 515 PENNSYLVANIA AVE CITY: FT WASHINGTON STATE: PA ZIP: 19034 BUSINESS PHONE: 2157939300 8-K 1 FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ----------------------------------- Date of Report (Date of earliest event reported): March 31, 1999 NCO GROUP, INC. ----------------------------------- (Exact name of Registrant as specified in its charter)
Pennsylvania 0-21639 23-2858652 - ------------------------------------- ---------------------------------- ---------------------------------- (State or other jurisdiction of (Commission File Number) (I.R.S. Employee incorporation or organization) Identification Number)
515 Pennsylvania Avenue Fort Washington, Pennsylvania 19034 ------------------------------------------------------------ (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (215) 793-9300 ================================================================================ Item 2. Acquisition or Disposition of Assets. On March 31, 1999, NCO Group, Inc. ("NCO") acquired JDR Holdings, Inc. ("JDR") by the merger of JDR Acquisition Inc. ("Newco"), a wholly-owned subsidiary of NCO, into JDR Holdings, Inc., with JDR becoming a wholly-owned subsidiary of NCO (the "Merger"). In consideration of the Merger, the stockholders of JDR received a total of 3,388,597 shares of common stock, no par value, of NCO ("NCO Common Stock") in exchange for all of the outstanding shares of capital stock of JDR and outstanding warrants to purchase capital stock of JDR. Additionally, NCO assumed all outstanding stock options of JDR, which have been converted in the Merger into options to purchase up to 333,538 shares of NCO Common Stock. The transaction was accounted for as a pooling of interests and treated as a tax free reorganization. JDR is one of the leading providers of accounts receivable management services and a provider of other services such as telemarketing, and telecommunications consulting and brokerage services to businesses ranging from Fortune 500 corporations to small businesses. JDR's revenue for fiscal year ended December 31, 1998 was $51.0 million. Risks Associated with Recent Acquisitions. The businesses acquired by NCO in 1998 and acquired in the JDR Merger had combined revenues of $223.2 million in 1997 compared to NCO's revenue of $85.3 million in 1997. If NCO is unable to successfully handle these new businesses and integrate them into NCO's operations, NCO may not be able to realize expected operating efficiencies, eliminate redundant costs or operate the businesses profitably. The integration of these businesses is subject to a number of risks, including risks that: (i) the conversion of the acquired companies' computer and operating systems to NCO's systems may take longer or cost more than expected; (ii) NCO may be unable to retain clients or key employees of the acquired companies; and (iii) the acquired companies might have additional liabilities that NCO did not anticipate at the time of the acquisitions. Forward Looking Statements Certain statements included in this Current Report on Form 8-K, other than historical facts, are forward-looking statements (as such term is defined in the Securities Exchange Act of 1934, and the regulations thereunder) which are intended to be covered by the safe harbors created thereby. Forward-looking statements include, without limitation, statements as to the Company's objective to grow through strategic acquisitions and internal growth, the impact of acquisitions on the Company's earnings, the Company's ability to realize operating efficiencies in the integration of its acquisitions, trends in the Company's future operating performance, Year 2000 compliance, the effects of legal or governmental proceedings, the effects of changes in accounting pronouncements and statements as to the Company's or management's beliefs, expectations and opinions. Forward-looking statements are subject to risks and uncertainties and may be affected by various factors which may cause actual results to differ materially from those in the forward-looking statements. In addition to the factors discussed in this report, certain risks, uncertainties and other factors, including, without limitation, the risk that the Company will not be able to realize operating efficiencies in the integration of its acquisitions, risks associated with growth and future acquisitions, fluctuations in quarterly operating results, risks relating to Year 2000 compliance and the other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and filed on March 31, 1999 and the Company's Registration Statement on Form S-4, filed on February 26, 1999, as amended, can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements. Item 7. Financial Statements and Exhibits. The following exhibits are being filed as part of this report: (a) Financial Statements of businesses acquired. It is impracticable to provide the required financial statements for the acquired business at this time. The required financial statements will be filed as an amendment to this Form 8-K as soon as practicable, but not later than June 14, 1999. (b) Pro Forma Financial Information. It is impracticable to provide the required pro forma financial information for the acquired business at this time. The required pro forma financial information will be filed as an amendment to this Form 8-K as soon as practicable, but not later than June 14, 1999. (c) Exhibits. Number Title ------ ----- 1.* Amended and Restated Agreement and Plan of Reorganization Agreement, dated as of November 1, 1998, by and among NCO, JDR and Newco. 2.* Amended and Restated Agreement and Plan of Merger, dated as of November 1, 1998, by and among NCO, JDR and Newco. 3. Escrow Agreement, dated as of March 31, 1999 by and among NCO, JDR and The Chase Manhattan Bank. 4. JDR 1997 Option Plan, adopted on June 11, 1997. 5. Employment Agreement dated as of March 31, 1999, by and between NCO and David D'Anna. - ------------------------ *Incorporated by reference to NCO's Joint Proxy/Registration Statement on Form S-4 (Registration No. 333-73087), filed with the Securities Exchange Commission on February 26, 1999, as amended. -2- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NCO GROUP, INC. By: /s/ Joseph C. McGowan ---------------------------------- Joseph C. McGowan Executive Vice President Date: April 15, 1999 EX-3 2 EXHIBIT 3 ESCROW AGREEMENT PARTIES: JDR HOLDINGS, INC. a Delaware corporation ("JDR") 500 N. Franklin Turnpike Ramsey, NJ 07446 NCO GROUP, INC. a Pennsylvania corporation ("NCO") 515 Pennsylvania Avenue Fort Washington, PA 19034 THE CHASE MANHATTAN BANK ("Escrow Agent") 450 West 33rd Street New York, NY 10001 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. -2- 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. -3- 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. -4- 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. -5- Notices to the Escrow Agent (including any Payment Notice) shall be sent to: The Chase Manhattan Bank 450 West 33rd Street New York, NY 10001 Attention: Joseph Morales Escrow Administration, 10th Floor Fax: (212) 946-8156 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. -6- 13. Right of Stockholder's Agent to Act for Former JDR Stockholders. Each of the JDR Stockholders expressly grants to David D'Anna 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] -7- 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/ David E. D'Anna By: /s/ Michael J. Barrist ----------------------- --------------------------- Name: David E. D'Anna Name: Michael J. Barrist Title: CEO Title: CEO ESCROW AGENT: THE CHASE MANHATTAN BANK By: /s/ John Sciacchitano --------------------------- Name: John Sciacchitano Title: Vice President -8- 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. EX-4 3 EXHIBIT 4 JDR HOLDINGS, INC. 1997 OPTION PLAN As Adopted by the Board of Directors June 11, 1997 1. Purpose. JDR Holdings, Inc., a Delaware corporation (the "Company"), hereby adopts the JDR Holdings, Inc. 1997 Option Plan (the "Plan"). The Plan is intended to recognize the contributions made to the Company by employees (including employees who are members of the Board of Directors) of the Company or any Affiliate, to provide such persons with additional incentive to devote themselves to the future success of the Company or an Affiliate, and to improve the ability of the Company or an Affiliate to attract, retain, and motivate individuals upon whom the Company's sustained growth and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest in the Company through receipt of rights to acquire the Company's Non-Voting Common Stock, par value $.001 per share (the "Non-Voting Common Stock"), and through the transfer or issuance of Non-Voting Common Stock. In addition, the Plan is intended as an additional incentive to directors of the Company who are not employees of the Company or an Affiliate to serve on the Board of Directors and to devote themselves to the future success of the Company by providing them with an opportunity to acquire or increase their proprietary interest in the Company through the receipt of rights to acquire Non-Voting Common Stock. Furthermore, the Plan may be used to encourage consultants and advisors of the Company to further the success of the Company. 2. Definitions. Unless the context clearly indicates otherwise, the following terms shall have the following meanings: (a) "Affiliate" means a corporation which is a parent corporation or a subsidiary corporation with respect to the Company within the meaning of Section 424(e) or (f) of the Code. (b) "Award" shall mean a transfer of Non-Voting Common Stock made pursuant to the terms of the Plan. (c) "Award Agreement" shall mean the agreement between the Company and a Grantee with respect to an Award made pursuant to the Plan, including, without limitation, an Option Document. (d) "Board of Directors" means the Board of Directors of the Company. (e) "Change of Control" shall have the meaning as set forth in Section 9 of the Plan. (f) "Code" means the Internal Revenue Code of 1986, as amended. (g) "Committee" shall have the meaning set forth in Section 3 of the Plan. (h) "Company" means JDR Holdings, Inc., a Delaware corporation. (i) "Disability" shall have the meaning set forth in Section 22(e)(3) of the Code. (j) "Employee" means an employee of the Company or an Affiliate. (k) "Fair Market Value" shall have the meaning set forth in Subsection 8(b) of the Plan. (l) "Grantee" shall mean a person to whom an Award has been granted pursuant to the Plan. (m) "ISO" means an Option granted under the Plan which is intended to qualify as an "incentive stock option" within the meaning of Section 422(b) of the Code. (n) "Non-Employee Director" shall mean a member of the Board of Directors of the Company who is a "non-employee director" as that term is defined in paragraph (b)(3) of Rule 16b-3 and an "outside director" as that term is defined in Treasury Regulations Section 1.162-27 promulgated under the Code. (o) "Non-qualified Stock Option" means an Option granted under the Plan which is not intended to qualify, or otherwise does not qualify, as an "incentive stock option" within the meaning of Section 422(b) of the Code. (p) "Non-Voting Common Stock" shall have the meaning set forth in Section 1 of the Plan. (q) "Option" means either an ISO or a Non-qualified Stock Option granted under the Plan. (r) "Optionee" means a person to whom an Option has been granted under the Plan, which Option has not been exercised and has not expired or terminated. (s) "Option Document" means the document described in Section 8 of the Plan which sets forth the terms and conditions of each grant of Options. (t) "Option Price" means the price at which Shares may be purchased upon exercise of an Option, as calculated pursuant to Subsection 8(b) of the Plan. (u) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. (v) "SAR" shall have the meaning set forth in Section 11 of the Plan. (w) "Section 16 Officers" means any person who is an "officer" within the meaning of Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended, or any successor rule. -2- (x) "Shares" means the shares of Non-Voting Common Stock of the Company which are the subject of Options or granted as Awards under the Plan. 3. Administration of the Plan. The Board of Directors may administer the Plan and/or it may, in its discretion, designate a committee or committees composed of two or more of directors, each of whom is a Non-Employee Director, to operate and administer the Plan with respect to all or a designated portion of the participants. Any such committee designated by the Board of Directors, and the Board of Directors itself in its administrative capacity with respect to the Plan, is referred to as the "Committee." (a) Meetings. The Committee shall hold meetings at such times and places as it may determine, shall keep minutes of its meetings, and shall adopt, amend and revoke such rules or procedures as it may deem proper; provided, however, that it may take action only upon the agreement of a majority of the whole Committee. Any action which the Committee shall take through a written instrument signed by a majority of its members shall be as effective as though it had been taken at a meeting duly called and held. (b) Exculpation. No member of the Board of Directors shall be personally liable for monetary damages for any action taken or any failure to take any action in connection with the administration of the Plan or the granting of Options or Awards under the Plan, provided that this Subsection 3(b) shall not apply to (i) any breach of such member's duty of loyalty to the Company, an Affiliate, or the Company's stockholders, (ii) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (iii) acts or omissions that would result in liability under applicable law, and (iv) any transaction from which the member derived an improper personal benefit. (c) Indemnification. Service on the Committee shall constitute service as a member of the Board of Directors of the Company. Each member of the Committee shall be entitled, without further act on his part, to indemnity from the Company and limitation of liability to the fullest extent provided by applicable law and by the Company's Certificate of Incorporation and/or By-law in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan or the granting of Options or Awards thereunder in which he or she may be involved by reason of his or her being or having been a member of the Committee, whether or not he or she continues to be such member of the Committee at the time of the action, suit or proceeding. (d) Interpretation. The Committee shall have the power and authority to interpret the Plan and to adopt rules and regulations for its administration that are not inconsistent with the express terms of the Plan. Any such actions by the Committee shall be final, binding and conclusive on all parties in interest. 4. Grants of Options under the Plan. Grants of Options under the Plan may be in the form of a Non-qualified Stock Option, an ISO or a combination thereof, at the discretion of the Committee. 5. Eligibility. All Employees, members of the Board of Directors and consultants and advisors to the Company shall be eligible to receive Options and Awards hereunder. Consultants and advisors shall be eligible only if they render bona fide services to the Company unrelated to the offer or sale of securities. The Committee, in its sole discretion, shall determine whether an individual qualifies as an Employee. -3- 6. Shares Subject to Plan. The aggregate maximum number of Shares for which Awards or Options may be granted pursuant to the Plan is 211.23. The number of Shares which may be issued under the Plan shall be subject to adjustment in accordance with Section 10. The Shares shall be issued from authorized and unissued Non-Voting Common Stock or Non-Voting Common Stock held in or hereafter acquired for the treasury of the Company. If an Option terminates or expires without having been fully exercised for any reason or if Shares subject to an Award have been conveyed back to the Company pursuant to the terms of an Award Agreement, the Shares for which the Option was not exercised or the Shares that were conveyed back to the Company shall again be available for issuance pursuant to the terms of one or more Options, or one or more Awards, granted pursuant to the Plan. 7. Term of the Plan. The Plan is effective as of June 11, 1997, the date on which it was adopted by the Board of Directors, subject to the approval of the Plan within one year after such date by the stockholders in the manner required by state law. If the Plan is not so approved by the stockholders, all Options granted under the Plan shall be null and void. No ISO may be granted under the Plan after June 10, 2007. 8. Option Documents and Terms. Each Option granted under the Plan shall be a Non-qualified Stock Option unless the Option shall be specifically designated at the time of grant to be an ISO for Federal income tax purposes. If any Option designated an ISO is determined for any reason not to qualify as an incentive stock option within the meaning of Section 422 of the Code, such Option shall be treated as a Non-qualified Stock Option for all purposes under the provisions of the Plan. Options granted pursuant to the Plan shall be evidenced by the Option Documents in such form as the Committee shall from time to time approve, which Option Documents shall comply with and be subject to the following terms and conditions and such other terms and conditions as the Committee shall from time to time require which are not inconsistent with the terms of the Plan. (a) Number of Option Shares. Each Option Document shall state the number of Shares to which it pertains. An Optionee may receive more than one Option, which may include Options which are intended to be ISO's and Options which are not intended to be ISO's, but only on the terms and subject to the conditions and restrictions of the Plan. Notwithstanding anything herein to the contrary, no Optionee shall be granted Options during one fiscal year of the Company for more than two hundred (200) Shares (such number to be subject to adjustment in accordance with Section 10). (b) Option Price. Each Option Document shall state the Option Price which, for a Non-qualified Stock Option, may be less than, equal to, or greater than the Fair Market Value of the Shares on the date the Option is granted and, for an ISO, shall be at least 100% of the Fair Market Value of the Shares on the date the Option is granted as determined by the Committee in accordance with this Subsection 8(b); provided, however, that if an ISO is granted to an Optionee who then owns, directly or by attribution under Section 424(d) of the Code, shares possessing more than ten percent of the total combined voting power of all classes of stock of the Company or an Affiliate, then the Option Price shall be at least 110% of the Fair Market Value of the Shares on the date the Option is granted. If the Non-Voting Common Stock is traded in a public market, then the Fair Market Value per share shall be, if the Non-Voting Common Stock is listed on a national securities exchange or included in the NASDAQ System, the last reported sale price thereof on the relevant date, or, if the Non-Voting Common Stock is not so listed or included, the mean between the last reported "bid" and "asked" prices thereof on the relevant date, as reported on NASDAQ or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines. -4- (c) Exercise. No Option shall be deemed to have been exercised prior to the receipt by the Company of written notice of such exercise and (unless arrangements satisfactory to the Company have been made for payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board) of payment in full of the Option Price for the Shares to be purchased. Each such notice shall specify the number of Shares to be purchased and shall (unless the Shares are covered by a then current registration statement or a Notification under Regulation A under the Securities Act of 1933, as amended (the "Act")), contain the Optionee's acknowledgment in form and substance satisfactory to the Company that (a) such Shares are being purchased for investment and not for distribution or resale (other than a distribution or resale which, in the opinion of counsel satisfactory to the Company, may be made without violating the registration provisions of the Act), (b) the Optionee has been advised and understands that (i) the Shares have not been registered under the Act and are "restricted securities" within the meaning of Rule 144 under the Act and are subject to restrictions on transfer and (ii) the Company is under no obligation to register the Shares under the Act or to take any action which would make available to the Optionee any exemption from such registration, (c) such Shares may not be transferred without compliance with all applicable federal and state securities laws, and (d) an appropriate legend referring to the foregoing restrictions on transfer and any other restrictions imposed under the Option Documents may be endorsed on the certificates. Notwithstanding the foregoing, if the Company determines that issuance of Shares should be delayed pending (A) registration under federal or state securities laws, (B) the receipt of an opinion of counsel satisfactory to the Company that an appropriate exemption from such registration is available, (C) the listing or inclusion of the Shares on any securities exchange or an automated quotation system or (D) the consent or approval of any governmental regulatory body whose consent or approval is necessary in connection with the issuance of such Shares, the Company may defer exercise of any Option granted hereunder until any of the events described in this sentence has occurred. (d) Medium of Payment. Subject to the terms of the applicable Option Document, an Optionee shall pay for Shares (i) in cash, (ii) by certified or cashier's check payable to the order of the Company, or (iii) by such other mode of payment as the Committee may approve, including payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. The Optionee may also exercise the Option in any manner contemplated by Section 11. Furthermore, the Committee may provide in an Option Document that payment may be made in whole or in part in shares of the Company's Non-Voting Common Stock held by the Optionee. If payment is made in whole or in part in shares of the Company's Non-Voting Common Stock, then the Optionee shall deliver to the Company certificates registered in the name of such Optionee representing the shares owned by such Optionee, free of all liens, claims and encumbrances of every kind and having an aggregate Fair Market Value on the date of delivery that is at least as great as the Option Price of the Shares (or relevant portion thereof) with respect to which such Option is to be exercised by the payment in shares of Non-Voting Common Stock, endorsed in blank or accompanied by stock powers duly endorsed in blank by the Optionee. In the event that certificates for shares of the Company's Non-Voting Common Stock delivered to the Company represent a number of shares in excess of the number of shares required to make payment for the Option Price of the Shares (or relevant portion thereof) with respect to which such Option is to be exercised by payment in shares of Non-Voting Common Stock, the stock certificate or certificates issued to the Optionee shall represent (i) the Shares in respect of which payment is made, and (ii) such excess number of shares. Notwithstanding the foregoing, the Committee may impose from time to time such limitations and prohibitions on the use of shares of the Non-Voting Common Stock to exercise an Option as it deems appropriate. -5- (e) Termination of Options. (i) No Option shall be exercisable after the first to occur of the following: (A) Expiration of the Option term specified in the Option Document, which, in the case of an ISO, shall not occur after (1) ten years from the date of grant, or (2) five years from the date of grant if the Optionee on the date of grant owns, directly or by attribution under Section 424(d) of the Code, shares possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of an Affiliate; (B) Except to the extent otherwise provided in an Optionee's Option Document, a finding by the Committee, after full consideration of the facts presented on behalf of both the Company and the Optionee, that the Optionee has been engaged in disloyalty to the Company or an Affiliate, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his employment or service, or has disclosed trade secrets or confidential information of the Company or an Affiliate. In such event, in addition to immediate termination of the Option, the Optionee shall automatically forfeit all Shares for which the Company has not yet delivered the share certificates upon refund by the Company of the Option Price. Notwithstanding anything herein to the contrary, the Company may withhold delivery of share certificates pending the resolution of any inquiry that could lead to a finding resulting in a forfeiture; (C) The date, if any, set by the Board of Directors as an accelerated expiration date in the event of the liquidation or dissolution of the Company; or (D) The occurrence of such other event or events as may be set forth in the Option Document as causing an accelerated expiration of the Option. (E) Except as otherwise set forth in the Option Document and subject to the foregoing provisions of this Subsection 8(e), thirty days after the Optionee's employment or service with the Company or its Affiliates terminates for any reason other than Disability or death or one year after such termination due to Optionee's Disability or death. With respect to this Subsections 8(e)(i)(E), the only Options that may be exercised during the thirty-day or one-year period, as the case may be, are Options which were exercisable on the last date of such employment or service and not Options which, if the Optionee were still employed or rendering service during such three-month or one-year period, would become exercisable, unless the Option Document specifically provides to the contrary. The terms of an executive severance agreement or other agreement between the Company and an Optionee, approved by the Committee, whether entered into prior or subsequent to the grant of an Option, which provide for Option exercise dates later than those set forth in Subsection 8(e)(i) shall be deemed to be Option terms approved by the Committee and consented to by the Optionee. (ii) Notwithstanding the foregoing, the Committee may extend the period during which all or any portion of an Option may be exercised to a date no later than the Option term specified in the Option Document pursuant to Subsection 8(e)(i)(A), provided that any change pursuant to this Subsection 8(e)(ii) which would cause an ISO to become a Non-qualified Stock Option may be made only with the consent of the Optionee. -6- (iii) Notwithstanding anything to the contrary contained in the Plan or an Option Document, an ISO shall be treated as a Non-qualified Stock Option to the extent such ISO is exercised at any time after the expiration of the time period permitted under the Code for the exercise of an ISO. (f) Transfers. Except as otherwise provided in this Subsection 8(f), no Option granted under the Plan may be transferred, except by will or by the laws of descent and distribution, and, during the lifetime of the person to whom an Option is granted, such Option may be exercised only by him. Notwithstanding the foregoing, an Option, other than an ISO, shall be transferrable pursuant to a "domestic relations order" as defined in the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder, and also shall be transferrable, without payment of consideration, to (a) immediate family members of the holder (i.e., spouse or former spouse, parents, issue, including adopted and "step" issue or siblings), (b) trusts for the benefit of immediate family members, and (c) partnerships whose only partners are such family members. Any transferee will be subject to all of the conditions set forth in the Option prior to its transfer. (g) Limitation on ISO Grants. To the extent that the aggregate fair market value of the shares of Non-Voting Common Stock (determined at the time the ISO is granted) with respect to which ISO's under all incentive stock option plans of the Company or its Affiliates are exercisable for the first time by the Optionee during any calendar year exceeds $100,000, such ISO's shall, to the extent of such excess, be treated as Non-qualified Stock Options. (h) Other Provisions. Subject to the provisions of the Plan, the Option Documents shall contain such other provisions including, without limitation, provisions authorizing the Committee to accelerate the exercisability of all or any portion of an Option granted pursuant to the Plan, additional restrictions upon the exercise of the Option or additional limitations upon the term of the Option, as the Committee shall deem advisable. (i) Amendment. Subject to the provisions of the Plan, the Committee shall have the right to amend any Option Document or Award Agreement issued to an Optionee or Award holder, subject to the Optionee's or Award holder's consent if such amendment is not favorable to the Optionee or Award holder, or if such amendment has the effect of changing an ISO to a Non-Qualified Stock Option, except that the consent of the Optionee or Award holder shall not be required for any amendment made pursuant to Subsection 8(e)(i)(C) or Section 9 of the Plan, as applicable. 9. Change of Control. In the event of a Change of Control, the Committee may take whatever actions it deems necessary or desirable with respect to any of the Options outstanding, which need not be treated identically, including, without limitation, accelerating (a) the expiration or termination date in the respective Option Documents to a date no earlier than seven (7) days after notice of such acceleration is given to the Optionees, or (b) the exercisability of the Option. Notwithstanding the foregoing, in the event of a Change of Control, except as otherwise set forth in the Option Document, Options granted pursuant to the Plan will become automatically exercisable in full. A "Change of Control" shall be deemed to have occurred upon the earliest to occur of the following events: -7- (i) the date the stockholders of the Company (or the Board of Directors of the Company, if stockholder action is not required) approve a plan or other arrangement pursuant to which the Company will be dissolved or liquidated; (ii) the date the stockholders of the Company (or the Board of Directors of the Company, if stockholder action is not required) approve a definitive agreement to sell or otherwise dispose of substantially all of the assets of the Company and its subsidiaries; or (iii) the date any "person" (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended) (other than the Company or any of its Affiliates, David E. D'Anna, Advanta Partners LP or their respective affiliates, any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates or any person acting on behalf of the Company as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering), shall have become the beneficial owner of, or shall have obtained voting control over, more than fifty percent (50%) of the outstanding shares of the Company's Voting Common Stock, par value $.001 per share. 10. Adjustments on Changes in Capitalization. (a) Except as otherwise set forth in the Option Document, in the event that the outstanding Shares are changed by reason of a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination or exchange of shares and the like (not including the issuance of Non-Voting Common Stock on the conversion of other securities of the Company which are convertible into Non-Voting Common Stock) or dividends payable in Shares, an equitable adjustment shall be made by the Committee in the aggregate number of shares available under the Plan and in the number of Shares and price per Share subject to outstanding Options. Unless the Committee makes other provisions for the equitable settlement of outstanding Options, if the Company shall be reorganized, consolidated, or merged with another corporation, or if all or substantially all of the assets of the Company shall be sold or exchanged, an Optionee shall at the time of issuance of the stock under such corporate event be entitled to receive upon the exercise of his or her Option the same number and kind of shares of stock or the same amount of property, cash or securities as he or she would have been entitled to receive upon the occurrence of any such corporate event as if he or she had been, immediately prior to such event, the holder of the number of shares covered by his or her Option. (b) Any adjustment under this Section 10 in the number of Shares subject to Options shall apply proportionately to only the unexercised portion of any Option granted hereunder. (c) The Committee shall have authority to determine the adjustments to be made under this Section, and any such determination by the Committee shall be final, binding and conclusive. -8- 11. Stock Appreciation Rights (SARs). (a) In General. Subject to the terms and conditions of the Plan, the Committee may, in its sole and absolute discretion, grant to an Optionee the right to surrender an Option to the Company, in whole or in part, and to receive in exchange therefor payment by the Company of an amount equal to the excess of the fair market value of the shares of Non-Voting Common Stock subject to such Option, or portion thereof, so surrendered (determined in the manner described in section 8(b) as of the date the SARs are exercised) over the exercise price to acquire such shares (which right shall be referred to as an "SAR"). Except as may otherwise be provided in an Option Document, such payment may be made, as determined by the Committee in accordance with subsection 11(c) below and set forth in the Option Agreement, either in shares of Non-Voting Common Stock or in cash or in any combination thereof. (b) Grant. Each SAR shall relate to a specific Option granted under the Plan and shall be granted to the Optionee concurrently with the grant of such Option by inclusion of appropriate provisions in the Option Agreement pertaining thereto. The number of SARs granted to an Optionee shall not exceed the number of shares of Non-Voting Common Stock which such Optionee is entitled to purchase pursuant to the related Option. The number of SARs held by an Optionee shall be reduced by (i) the number of SARs exercised under the provisions of the Option Agreement pertaining to the related Option, and (ii) the number of shares of Non-Voting Common Stock purchased pursuant to the exercise of the related Option. (c) Payment. The Committee shall have sole discretion to determine whether payment in respect of SARs granted to any Optionee shall be made in shares of Non-Voting Common Stock, or in cash, or in a combination thereof. If payment is made in Non-Voting Common Stock, the number of shares of Non-Voting Common Stock which shall be issued pursuant to the exercise of SARs shall be determined by dividing (i) the total number of SARs being exercised, multiplied by the amount by which the Fair Market Value (as determined under section 8(b)) of a share of Non-Voting Common Stock on the exercise date exceeds the exercise price for shares covered by the related Option, by (ii) the Fair Market Value of a share of Non-Voting Common Stock on the exercise date of the SARs. No fractional share of Non-Voting Common Stock shall be issued on exercise of an SAR; cash may be paid by the Company to the individual exercising an SAR in lieu of any such fractional share. If payment on exercise of an SAR is to be made in cash, the individual exercising the SAR shall receive in respect of each share to which such exercise relates an amount of money equal to the difference between the Fair Market Value of a share of Non-Voting Common Stock on the exercise date and the exercise price for shares covered by the related Option. (d) Limitations. SARs shall be exercisable at such times and under such terms and conditions as the Committee, in its sole and absolute discretion, shall determine; provided, however, that an SAR may be exercised only at such times and by such individuals as the related Option may be exercised under the Plan and the Option Agreement. 12. Terms and Conditions of Awards. Awards granted pursuant to the Plan shall be evidenced by written Award Agreements in such form as the Committee shall from time to time approve, which Award Agreements shall comply with and be subject to the following terms and conditions and such other terms and conditions which the Committee shall from time to time require which are not inconsistent with the terms of the Plan. (a) Number of Shares. Each Award Agreement shall state the number of shares of Non-Voting Common Stock to which it pertains. (b) Purchase Price. Each Award Agreement shall specify the purchase price, if any, which applies to the Award. If the Board specifies a purchase price, the Grantee shall be required to make payment on or before the payment date specified in the Award Agreement. A Grantee shall pay for Shares (i) in cash, (ii) by certified check payable to the order of the Company, or (iii) by such other mode of payment as the Committee may approve. -9- (c) Grant. In the case of an Award which provides for a grant of Shares without any payment by the Grantee, the grant shall take place on the date specified in the Award Agreement. In the case of an Award which provides for a payment, the grant shall take place on the date the initial payment is delivered to the Company, unless the Committee or the Award Agreement otherwise specifies. Stock certificates evidencing Shares granted pursuant to an Award shall be issued in the sole name of the Grantee. Notwithstanding the foregoing, as a precondition to a grant, the Company may require an acknowledgment by the Grantee as required with respect to Options under Subsection 8(c). (d) Conditions. The Committee may specify in an Award Agreement any conditions under which the Grantee of that Award shall be required to convey to the Company the Shares covered by the Award. Upon the occurrence of any such specified condition, the Grantee shall forthwith surrender and deliver to the Company the certificates evidencing such Shares as well as completely executed instruments of conveyance. The Committee, in its discretion, may provide that certificates for Shares transferred pursuant to an Award be held in escrow by the Company or an officer of the Company until such time as each and every condition has lapsed and that the Grantee be required, as a condition of the Award, to deliver to such escrow agent or Company officer stock powers covering the Award Shares duly endorsed by the Grantee. Unless otherwise provided in the Award Agreement, distributions made on Shares held in escrow shall be deposited in escrow, to be distributed to the party becoming entitled to the Shares on which the distribution was made. Stock certificates evidencing Shares subject to conditions shall bear a legend to the effect that the Non-Voting Common Stock evidenced thereby is subject to repurchase by, or conveyance to, the Company in accordance with the terms applicable to such Shares under an Award made pursuant to the Plan and that the Shares may not be sold or otherwise transferred. (e) Lapse of Conditions. Upon termination or lapse of each and every forfeiture condition, the Company shall cause certificates without the legend referring to the Company's repurchase or acquisition right (but with any other legends that may be appropriate) evidencing the Shares covered by the Award to be issued to the Grantee upon the Grantee's surrender to the Company of the legended certificates held by him. (f) Rights as Stockholder. Upon payment of the purchase price, if any, for Shares covered by an Award and compliance with the acknowledgment requirement of subsection 12(c), the Grantee shall have all of the rights of a stockholder with respect to the Shares covered thereby, including the right to vote the Shares and receive all dividends and other distributions paid or made with respect thereto, except to the extent otherwise provided by the Committee or in the Award Agreement. 13. Amendment of the Plan. The Board of Directors of the Company may amend the Plan from time to time in such manner as it may deem advisable. Nevertheless, the Board of Directors of the Company may not change the class of individuals eligible to receive an ISO or increase the maximum number of shares as to which Options may be granted under the Plan, or to any individual under the Plan in any year, without obtaining approval, within twelve months before or after such action, by the stockholders in the manner required by state law. No amendment to the Plan shall adversely affect any outstanding Option or Award, however, without the consent of the Optionee or Grantee, as the case may be. -10- 14. No Commitment to Retain. The grant of an Option or Award pursuant to the Plan shall not be construed to imply or to constitute evidence of any agreement, express or implied, on the part of the Company or any Affiliate to retain the Optionee or Grantee as an employee, consultant or advisor of the Company or any Affiliate, as a member of the Company's Board of Directors or in any other capacity. 15. Withholding of Taxes. In connection with any event relating to an Option or Award, the Company shall have the right to (a) require the recipient to remit or otherwise make available to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Shares or (b) take whatever other action it deems necessary to protect its interests with respect to tax liabilities. The Company's obligations under the Plan shall be conditioned on the Optionee's or Grantee's compliance, to the Company's satisfaction, with any withholding requirement. -11- EX-5 4 EXHIBIT 5 EMPLOYMENT AGREEMENT THIS AGREEMENT, made this 31st day of March 1999, by and between NCO Group, Inc., a Pennsylvania corporation, (hereinafter called "Company"), and David E. D'Anna, an individual (hereinafter called "Employee"). W I T N E S S E T H: WHEREAS, Employee's present employer, JDR Holdings, Inc. ("JDR"), is being acquired by and merged with a wholly owned subsidiary of Company (the "Merger"); WHEREAS, Company wishes to continue to employ Employee and Employee wishes to continue in the employ of Company on the terms and conditions contained in this Agreement. NOW, THEREFORE, subject to the closing of the aforementioned acquisition and merger, and in consideration of the facts, mutual promises and covenants contained herein, intending to be legally bound hereby, Company and Employee agree as follows: 1. Definitions. As used herein, the following terms shall have the meanings set forth below unless the context otherwise requires. "Affiliate" shall mean a person who with respect to any entity, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such entity; "Annual Bonus" shall mean the bonus payments set forth in Section 5(b), as such amount may be adjusted from time to time. "Base Compensation" shall mean the annual rate of compensation set forth in Section 5(a), as such amount may be adjusted from time to time. "Board" shall mean the Board of Directors of Company. "Business" shall mean the business conducted by Company or JDR in the past and on the date of execution of this Agreement, including without limitation any business in the debt collection, telemarketing, outsourcing and teleservices industries, and including business activities in developmental stages, business activities which may be developed by Company, or any Subsidiary or corporate parent thereof or entity sharing a common corporate parent with Company, during the period of Employee's employment by Company, and all other business activities which flow from a reasonable expansion of any of the foregoing, including any business engaged in by Company subsequent to the execution of this Agreement in which Employee participates. "Cause" shall mean any one or more of the following: (a) if Employee is convicted of a felony involving fraud, theft or embezzlement or has entered a plea of nolo contendere (or similar plea) to a charge of such an offense; or (b) if Employee commits any act of fraud or deliberate misappropriation relating to or involving Company; or (c) if Employee commits a material breach of this Agreement. "Commencement Date" shall have the meaning specified in Section 4 hereof. "Confidential Information" shall have the meaning specified in Section 14(c) hereof. "Disability" shall mean Employee's inability, for a period of 150 consecutive days, or more than 240 days in the aggregate over a consecutive period of eighteen months, to perform the essential duties of Employee's position, with or without any reasonable accommodation required by law, due to a mental or physical impairment which substantially limits one or more major life activities. "Restricted Area" shall have the meaning specified in Section 14(a) hereof. "Restricted Period" shall mean: (a) For purposes of Section 14(a)(A), from the date hereof until one (1) year after Employee's employment with Company is either terminated by Employee or by Company for Cause, or for the remaining term of this Agreement if Employee's employment with Company is terminated by Company without Cause; (b) For purposes of Section 14(a)(B), from the date hereof until five (5) years after Employee's employment is either terminated by Employee or by Company for Cause, or for five (5) years after the remaining term of this Agreement if Employee's employment with Company is terminated by Company without Cause; -2- "Subsidiary" shall mean any corporation in which Company owns directly or indirectly 50% or more of the Voting Stock or 50% or more of the equity; or any other venture in which it owns either 50% or more of the voting rights or 50% or more of the equity. "Term of Employment" shall mean the period specified in Section 4 hereof as the same may be modified in accordance with this Agreement. 2. Employment. Company hereby employs Employee and Employee hereby accepts employment by Company for the period and upon the terms and conditions specified in this Agreement. 3. Office and Duties. (a) Employee initially shall serve as Executive Vice President of Company and Divisional Chief Executive Officer of Company's Technology Based Outsourcing Division (the "Division"). In such capacity, Employee shall render such services as are necessary and desirable to protect and advance the best interests of Company, acting, in all instances, under the supervision of and in accordance with the policies set by the Board. Employee will be responsible for and provide senior management services relating to the debt collection and professional financial services and related marketing of the services of Company and ongoing senior management services relating to all aspects of Company's general administration. In addition, Employee will render such other executive services and perform such other executive duties for Company and its direct and indirect wholly owned Subsidiaries thereof (collectively, with Company, the "NCO Group") as the Boards of Directors of the members of the NCO Group may from time to time reasonably request of Employee. Employee may, in addition, hold such offices with the NCO Group which may from time to time be offered to Employee. Employee's authority shall be subject at all times to the direction and control of the Chief Executive Officer of Company and the Boards of Directors of Company and the other members of the NCO Group and to the Boards' discretion to determine the policies of the NCO Group. (b) For as long as Employee shall remain an employee of Company, Employee's entire working time, energy, skill and best efforts shall be devoted to the performance of Employee's duties hereunder in a manner which will faithfully and diligently further the business and interests of Company. Employee may engage in charitable, civic, fraternal, trade and professional association activities that do not interfere with Employee's obligations to Company, but Employee shall not be employed by any other for-profit business without prior written consent of Board, which shall not be unreasonably withheld. -3- (c) Employee's services will be conducted at Company's headquarters in Ramsey, New Jersey and at such other places as Employee's duties may require; provided however, that Employee shall not be required by Company to relocate his principal residence without his consent, and shall not be required to perform services in any location that is greater than fifty (50) miles from his principal residence, except in the course of normal daily business travel. 4. Term. Employee shall be employed by Company for an initial Term of Employment (the "Initial Term"), commencing on the effective date of the Merger (the "Commencement Date"), and ending on March 31, 2002, unless sooner terminated as hereinafter provided. Unless either party elects to terminate this Agreement at the end of the Initial Term by giving the other party written notice of such election at least one hundred eighty (180) days before the expiration of the Initial Term, the Term of Employment shall be deemed to have been extended for an additional term of one (1) year (the "Additional Term") commencing on the day after the expiration of the Initial Term. At any time during the Additional Term, either party may terminate this Agreement by giving the other party written notice of such election at least sixty (60) days prior to such termination. 5. Compensation and Benefits. (a) For all of the service rendered by Employee to Company, Employee shall receive Base Compensation at the gross annual rate of Three Hundred Sixty-Seven Thousand Five Hundred Dollars ($367,500.00) payable in installments in accordance with Company's regular payroll practices in effect from time to time. The amount of Base Compensation payable hereunder shall be adjusted no later than June 30 of each year during the Term of Employment, effective as of June 1 of each year, by an increase of at least five (5) percent, and may be further increased by such other amounts as may be determined in the discretion of the Board. -4- (b) In addition to the foregoing compensation, if the outsourcing business of the Division records an increase in gross revenues in any year over the immediately prior year's gross revenues, then Employee shall be entitled to receive an annual bonus (the "Annual Bonus") in the amount of One Hundred Fifty Thousand Dollars ($150,000.00). If such increase in gross revenues exceeds the immediately prior year's gross revenues by more than 20%, then the Annual Bonus shall be increased by an amount equal to the product obtained by multiplying Fifteen Thousand Dollars ($15,000.00) by the lesser of (x) 10 or (y) the amount by which such percentage increase in gross revenues exceeds 20%. For example, if the Division's outsourcing business annual gross revenues for 1998 were $1,000,000, and the applicable annual gross revenues for 1999 are $1,250,000 (i.e., an increase in annual gross revenue of 25%), then the Annual Bonus of $150,000 would be increased by $75,000 to a total of $225,000. It should be noted that in no event would the total Annual Bonus as calculated above exceed Three Hundred Thousand Dollars ($300,000.00). If the increase in applicable gross revenues exceeds 30%, any further additional bonus shall be at the discretion of Company. For purposes of determining gross revenues, such revenues must be of a quality consistent with the Division's past practice and the applicable business plan. In addition, the Annual Bonus formula set forth above shall be subject to adjustment for any extraordinary events, including, without limitation, shifts in business between divisions, as well as acquisitions and divestitures within the Division. For the year ending December 31, 1999, a 20% increase in the immediately prior year's gross revenues would be attained if the applicable gross revenues for the year ended December 31, 1999 equal $44,877,600. 6. Fringe Benefits. As an inducement to Employee to commence employment hereunder, and in consideration of Employee's covenants under this Agreement, Employee shall be entitled to the benefits set forth below (the "Fringe Benefits") during the Term of Employment: (a) Employee shall be eligible to participate in any health, life, accident or disability insurance, sick leave or other benefit plans or programs made available to other similarly situated employees of Company as long as they are kept in force by Company and provided that Employee meets the eligibility requirements and other terms, conditions and restrictions of the respective plans and programs. (b) Employee shall be entitled to paid vacation and personal days during each year, subject to Company's generally applicable policies. All vacation and personal days must be used within the year in which available and may not be carried over into subsequent years. Employee shall give oral or written prior to the commencement of any vacation in excess of five (5) business days. (c) Company will reimburse Employee for all reasonable expenses incurred by Employee in connection with the performance of Employee's duties hereunder upon receipt of documentation therefor in accordance with Company's regular reimbursement procedures and practices in effect from time to time. Payment to Employee will be made upon presentation of expense vouchers in such detail as Company may from time to time require. (d) Company shall provide Employee one Company leased automobile which shall of comparable value to that presently provided to Employee, shall provide automobile insurance on that Company leased automobile, shall provide a cellular telephone and shall maintain Employee's reserved parking space at the Ramsey, New Jersey office. 7. Disability. If Employee suffers a Disability, Company may terminate Employee's employment relationship with Company at any time thereafter by giving Employee ten (10) days written notice of termination. Thereafter, Company shall have no obligation to Employee for Base Compensation, Annual Bonus, Fringe Benefits or any other form of compensation or benefit to Employee, except as otherwise required by law or by benefit plans provided at Company expense, other than (a) amounts of Base Compensation accrued through the date of termination, (b) a pro rata portion of the Annual Bonus to the date of termination of employment, to the extent payable hereunder, and (c) reimbursement of appropriately documented expenses incurred by Employee before the termination of employment, to the extent that Employee would have been entitled to such reimbursement but for the termination of employment. -5- 8. Death. If Employee dies during the Term of Employment, the Term of Employment and Employee's employment with Company shall terminate as of the date of Employee's death. Company shall have no obligation to Employee or Employee's estate for Base Compensation, Annual Bonus, Fringe Benefits or any other form of compensation or benefit, except as otherwise required by law or by benefit plans provided at Company expense, other than (a) amounts of Base Compensation that have accrued through the date of Employee's death, (b) a pro rata portion of the Annual Bonus to the date of Employee's death, to the extent payable hereunder, and (c) reimbursement of appropriately documented expenses incurred by Employee before Employee's death, to the extent that Employee would have been entitled to such reimbursement but for his death. 9. Termination for Cause. Company may terminate Employee's employment relationship with Company at any time for Cause. Upon termination of Employee under this Section 9, Company shall have no obligation to Employee for Base Compensation, Annual Bonus, Fringe Benefits or other form of compensation or benefits other than (a) amounts of Base Compensation accrued through the date of termination, and (b) reimbursement of appropriately documented expenses incurred by Employee before the termination of employment, to the extent that Employee would have been entitled to such reimbursement but for the termination of employment. 10. Termination without Cause. Company may terminate Employee's employment relationship with Company at any time without Cause. Notwithstanding termination of Employee' employment under this Section 10, Employee shall continue to be eligible to receive and Company shall continue to pay Employee's Base Compensation in accordance with standard payroll practices, a prorated portion of the Annual Bonus and all other compensation and benefits as such amounts would have accrued through the end of the Initial Term or, if such termination occurs during the Additional Term, through the end of the Additional Term. 11. Termination by Employee. Employee may terminate his employment at any time upon at least 30 days' prior written notice to Company. If Employee terminates his employment, Company shall have no obligation to Employee for Base Compensation, Annual Bonus, Fringe Benefits or other form of compensation or benefits other than (a) amounts of Base Compensation accrued through the date of termination, and (b) reimbursement of appropriately documented expenses incurred by Employee before the termination of employment, to the extent that Employee would have been entitled to such reimbursement but for the termination of employment. -6- 12. Consideration. Employee agrees and acknowledges that Employee is agreeing to be bound by the terms of this Agreement, including without limitation the provisions of Sections 13 and 14, in consideration of Company's agreement to pay in full all amounts due as Base Compensation and other amounts due after Employee's termination without Cause in accordance with Section 10 of this Agreement; and Employee further agrees and acknowledges that the benefits described above constitute full, complete and adequate consideration for Employee's obligations hereunder. 13. Company Property. All advertising, sales, manufacturers' and other materials or articles or information, including without limitation data processing reports, computer programs, software, customer information and records, business records, price lists or information, samples, or any other materials or data of any kind furnished to Employee by Company or developed by Employee on behalf of Company or at Company's direction or for Company's use or otherwise in connection with Employee's employment hereunder, are and shall remain the sole property of Company, including in each case all copies thereof in any medium, including computer tapes and other forms of information storage. If Company requests the return of such materials at any time during or at or after the termination of Employee's employment, Employee shall deliver all copies of the same to Company immediately. Notwithstanding the foregoing, Employee may retain records relevant to the filing of Employee's personal income taxes and Company shall grant Employee reasonable access during normal business hours, to business records of Company relevant to the discharge of Employee's duties as an officer of Company or any other legitimate non-competitive business purpose. 14. Noncompetition, Trade Secrets, Etc. Employee hereby acknowledges that, during and solely as a result of his employment by Company, Employee will have access to confidential information and business and professional contacts. In consideration of such special and unique opportunities afforded by Company to Employee as a result of Employee's employment and the other benefits referred to in Section 12 of this Agreement, Employee hereby agrees as follows: (a) For the duration of the Restricted Period, Employee shall not directly or indirectly (A) engage in (as a principal, shareholder, partner, director, officer, agent, employee, consultant or otherwise) or be financially interested in any business operating within the United States (the "Restricted Area"), which is involved in or any other business activities which are the same as, similar to or in competition with the Business, or with any business activities carried on by Company, or being definitely planned by Company, at the time of the termination of Employee's employment; provided however, that nothing contained in this Section 14 shall prevent Employee from holding for investment no more than five percent (5%) of any class of equity securities of a company whose securities are publicly traded on a national securities exchange or in a national market system; or (B) induce or attempt to influence any employee, customer, independent contractor or supplier of Company to terminate employment or any other relationship with Company. -7- (b) During the Term of Employment, Employee shall not, directly or indirectly, disclose or otherwise communicate to any of the clients, customers or accounts of Company, its Affiliates or any Subsidiary thereof that he is considering terminating, or has decided to terminate, employment with Company. Following the termination of Employee's employment, Company shall have sole discretion to determine who may notify the clients, customers or accounts of Company of the termination of Employee's employment, and the form, substance and timing of such notification; provided, however, that Company shall not disseminate any notice of Employee's termination for any reason other than Cause which is unfavorable to Employee's professional or personal reputation or career. Company shall inform Employee of the identity of all persons or entities to be so notified and provide to Employee a copy of any written notice to such persons or entities at least ten business days prior to its dissemination to allow Employee to object to or otherwise challenge the content of the written notice and/or its dissemination. (c) Employee shall not use for Employee's personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company other than Company, any "Confidential Information" which term shall mean any information regarding the business methods, business policies, policies, procedures, techniques, research or development projects or results, historical or projected financial information, budgets, trade secrets, or other knowledge or processes of or developed by Company or any names and addresses of customers or clients or any data on or relating to past, present or prospective Company customers or clients or any other confidential information relating to or dealing with the business operations or activities of Company, made known to Employee or learned or acquired by Employee while in the employ of Company, but Confidential Information shall not include information otherwise lawfully known generally by or readily accessible to the trade or the general public. All memoranda, notes, lists, records, files, documents and other papers and other like items (and all copies, extracts and summaries thereof) made or compiled by Employee or made available to Employee concerning the business of Company shall be Company's property and shall be delivered to Company promptly upon the termination of Employee's employment with Company or at any other time on request. The foregoing provisions of this Subsection 14(c) shall apply during and after the period when Employee is an employee of Company and shall be in addition to (and not a limitation of) any legally applicable protections of Company's interest in confidential information, trade secrets and the like. At the termination of Employee's employment with Company, Employee shall return to Company all copies of Confidential Information in any medium, including computer tapes and other forms of data storage. Notwithstanding the foregoing, Employee may retain records relevant to the filing of Employee's personal income taxes and Company shall grant Employee reasonable access during normal business hours, to business records of Company relevant to Employee's discharge of Employee's duties as an officer of Company or other legitimate non-competitive business purpose. -8- (d) Any and all writings, inventions, improvements, processes, procedures and/or techniques which Employee may make, conceive, discover or develop, either solely or jointly with any other person or persons, at any time when Employee is an employee of Company, whether or not during working hours and whether or not at the request or upon the suggestion of Company, which relate to or are useful in connection with the Business or with any business now or hereafter during the time of Employee's employment hereunder carried on or known by Employee to be contemplated by Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of Company. Employee shall make full disclosure to Company of all such writings, inventions, improvements, processes, procedures and techniques, and shall do everything necessary or desirable to vest the absolute title thereto in Company. Employee shall write and prepare all specifications and procedures regarding such inventions, improvements, processes, procedures and techniques and otherwise aid and assist Company so that Company can prepare and present applications for copyright or Letters Patent therefor and can secure such copyright or Letters Patent wherever possible, as well as reissues, renewals, and extensions thereof, and can obtain the record title to such copyright or patents so that Company shall be the sole and absolute owner thereof in all countries in which it may desire to have copyright or patent protection. Employee shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques. (e) Employee acknowledges that the restrictions contained in the foregoing Subsections (a), (b), (c) and (d), in view of the nature of the business in which Company is engaged, are reasonable and necessary in order to protect the legitimate interests of Company, that their enforcement will not impose a hardship on Employee or significantly impair Employee's ability to earn a livelihood, and that any violation thereof would result in irreparable injuries to Company. Employee therefore acknowledges that, in the event of Employee's violation of any of these restrictions, Company shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which Company may be entitled. (f) If the Restricted Period or the Restricted Area specified in Subsections (a) and (b) above should be adjudged unreasonable in any proceeding, then the period of time shall be reduced by such amount or the area shall be reduced by the elimination of such portion or both such reductions shall be made so that such restrictions may be enforced for such time and in such area as is adjudged to be reasonable. If Employee violates any of the restrictions contained in the foregoing Subsections (a) or (b), the Restricted Period shall be extended by a period equal to the length of time from the commencement of any such violation until such time as such violation shall be cured by Employee to the satisfaction of Company. Company shall have the right and remedy to require Employee to account for and pay over to Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Employee as the result of any transactions constituting a breach of this Section 14, and Employee shall account for and pay over such amounts to Company upon Company's request therefor. Employee hereby expressly consents to the jurisdiction of any court within the Commonwealth of Pennsylvania to enforce the provisions of this Section 14, and agrees to accept service of process by mail relating to any such proceeding. Company may supply a copy of Section 14 of this Agreement to any future or prospective employer of Employee or to any person to whom Employee has supplied information if Company determines in good faith that there is a reasonable likelihood that Employee has violated or will violate such Section. -9- 15. Prior Agreements. Employee represents to Company that there are no restrictions, agreements or understandings, oral or written, to which Employee is a party or by which Employee is bound that prevent or make unlawful Employee's execution or performance of this Agreement. 16. Consent to Jurisdiction/Arbitration. (a) Any legal suit, action, claim, proceeding or investigation arising out of or relating to this Agreement may be instituted in the Montgomery County Court of Common Pleas of the Commonwealth of Pennsylvania, and each of the parties hereto waives any objection which party may now or hereafter have to such venue of any such suit, action, claim, proceeding or investigation, and irrevocably submits to the jurisdiction of any such court. Any and all service of process and any other notice in any such suit, action, claim, proceeding or investigation shall be effective against any party if given by registered or certified mail, return receipt requested, or by any other means of mail which requires a signed receipt, postage prepaid, mailed to such party as herein provided. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against any other party in any jurisdiction other than Pennsylvania. (b) With the exception of Company's right to injunctive or equitable relief described in paragraph 14(e) above, any dispute, controversy or claim arising out of or relating to this Agreement or the breach or alleged breach of this Agreement shall be settled by arbitration in Montgomery County, Pennsylvania in accordance with the commercial arbitration rules, then obtaining, of the American Arbitration Association, and judgment upon any such arbitration award rendered by the arbitrators may be entered in any state or federal court sitting in Pennsylvania. If the parties to any such dispute, controversy or claim are unable to agree upon an arbitrator or arbitrators, then three arbitrators shall be appointed by the American Arbitration Association, as it may determine, in accordance with the commercial arbitration rules and practices, then obtaining, of such Association. If the parties to any such dispute, controversy or claim shall agree upon two arbitrators, but such parties or such arbitrators shall be unable to agree upon a third arbitrator, then only such third arbitrator shall be appointed as aforesaid by the American Arbitration Association. Each of the parties and the arbitrators shall use its best efforts to keep confidential the existence of any dispute and arbitration proceedings and all information relating thereto or submitted in connection therewith and, in the event of judicial proceedings for the enforcement of this paragraph or any award pursuant thereto, shall cooperate to seal the record of any such arbitration or judicial proceedings. (c) In the event judicial proceedings or arbitration proceedings are commenced, the prevailing party shall be entitled to an award for its reasonable legal fees and costs incurred in relation to such proceedings. -10- 17. Miscellaneous. (a) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. (b) Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of such jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when personally delivered, on the day specified for delivery when deposited with a recognized national or regional courier service for delivery to the intended addressee or five (5) days following the day when deposited in the United States mails, first class postage prepaid, addressed as set forth below: If to Employee: Mr. David E. D'Anna 30 Trotters Lane Mahwah, NJ 07430 with a copy, given in the manner prescribed above, to: Herbert Henryson II Wolf, Block, Schorr and Solis-Cohen LLP 250 Park Avenue New York, NY 10177 If to Company: Michael Barrist Chief Executive Officer NCO Group, Inc. 515 Pennsylvania Avenue Fort Washington, PA 19034 with a copy, given in the manner prescribed above, to: -11- Joshua Gindin Executive Vice-President and General Counsel NCO Group, Inc. 515 Pennsylvania Avenue Fort Washington, PA 19034 In addition, notice by mail shall be by air mail if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section for the giving of notice. (d) Binding Nature of Agreement. This Agreement shall be binding upon Company and shall inure to the benefit of Company, its present and future Subsidiaries, Affiliates, successors and assigns including any transferee of the business operation, as a going concern, in which Employee is employed and shall be binding upon Employee, Employee's heirs and personal representatives. None of the rights or obligations of Employee hereunder may be assigned or delegated, except that in the event of Employee's death or Disability, any rights of Employee hereunder shall be transferred to Employee's estate or personal representative, as the case may be. Company may assign its rights and obligations under this Agreement in whole or in part to any one or more Affiliates or successors, but no such assignment shall relieve Company of its obligations to Employee if any such assignee fails to perform such obligations. (e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when such number of counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. (f) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. -12- (g) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the employment of Employee by Company, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing. Notwithstanding the foregoing, nothing herein shall limit the application of any generally applicable Company policy, practice, plan or the terms of any manual or handbook applicable to Company's employees generally, except to the extent the foregoing directly conflict with this Agreement, in which case the terms of this Agreement shall prevail. (h) Section Headings. The Section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (i) Number of Days. Except as otherwise provided herein, in computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday. (j) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. (k) Survival. All provisions of this Agreement which by their terms survive the termination of Employee's employment with Company, including without limitation the covenants of Employee set forth in Sections 13 and 14 and the obligations of Company to make any post-termination payments under this Agreement, shall survive termination of Employee's employment by Company and shall remain in full force and effect thereafter in accordance with their terms. IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first above written. NCO GROUP, INC. By: /s/ Michael J. Barrist --------------------------------- Name: Michael J. Barrist Title: CEO /s/ David E. D'Anna -----------------------------------------(SEAL) David E. D'Anna -13- -----END PRIVACY-ENHANCED MESSAGE-----