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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): May 9, 1996
QUINTEL ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-27046 22-3322277
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
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One Blue Hill Plaza
Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code:(914) 620-1212
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QUINTEL ENTERTAINMENT, INC.
INDEX TO FORM 8-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
MAY 21, 1996
ITEMS IN FORM 8-K
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Page
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Facing page
Item 5. Other Events. 3
Item 7. Financial Statements and Exhibits. 4
(c) Exhibits
Signatures 5
Exhibit Index 6
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ITEM 5. OTHER EVENTS.
A. Acquisition of New Lauderdale. As reported in the Registrant's
Annual Report on Form 10-K filed with the Securities and Exchange Commission
for the fiscal year ended November 30, 1995, the Registrant and Psychic Readers
Network, Inc., a Florida corporation ("PRN"), entered into a preliminary letter
of intent pursuant to which the Registrant agreed to purchase PRN's 50%
interest in New Lauderdale, L.C., a Florida limited liability company ("New
Lauderdale"), of which Calling Card Co., Inc., the Registrant's wholly owned
subsidiary ("Calling Card"), owns the remaining 50% interest.
On May 9, 1996, the Board of Directors of the Registrant approved a
definitive form of Acquisition Agreement (the "Acquisition Agreement") by and
among the Registrant, Calling Card and PRN, for the acquisition by the
Registrant of PRN's 50% interest in New Lauderdale (the "Acquisition"). In
consideration for the Acquisition, the Registrant will issue to PRN up to
3,200,000 shares of Common Stock. The definitive Acquisition Agreement now
provides that the Registrant will become entitled to 100% of New Lauderdale's
income only upon the closing of the Acquisition.
Stockholder approval of the Acquisition is required by NASDAQ and
Delaware law. On May 9, 1996, the five principal stockholders of the
Registrant, who own in the aggregate approximately 75% of its outstanding
Common Stock, $.001 par value, and who are also the executive officers and
members of the Board of Directors of the Registrant, approved by written
consent without a meeting pursuant to Delaware law, the proposed Acquisition
and the definitive form of the Acquisition Agreement. Accordingly, the
Registrant will not solicit proxies from the other stockholders of the
Registrant in order to obtain stockholder approval for the Acquisition. The
Registrant expects to send an Information Statement to the other stockholders
of the Registrant on or about June 15, 1996.
The closing of the Acquisition is subject to the Registrant's
notification to NASDAQ of the proposed issuance of the 3,200,000 shares of
Common Stock in connection with the Acquisition.
Subject to the foregoing, it is presently anticipated that the
execution of the Acquisition Agreement and the simultaneous closing of the
Acquisition will occur on or about July 15, 1996.
B. Amendment to PRN Service Agreement. The Registrant and PRN are
parties to an agreement dated July 7, 1995, pursuant to which PRN provides the
Registrant with live psychic operator services in connection with the operation
of the Registrant's telephone entertainment programs (the "Service Agreement").
The
3
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billing of the services provided by PRN to the Registrant pursuant to such
Service Agreement is determined by the number of minutes of live psychic
services used by the telephone entertainment programs conducted by the
Registrant. The Registrant and PRN have amended the Service Agreement
effective as of March 1, 1996, pursuant to which the term of the Service
Agreement was extended from June 30, 1996 to May 31, 1997, and PRN agreed to
bill the Registrant at a reduced rate for a portion of the service minutes
provided to the Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS.
Exhibit Number
5.1 Form of definitive Acquisition Agreement among the Registrant,
Psychic Readers Network and Calling Card Co., Inc., with
schedules and exhibits thereto.
5.2 Amendment to Live Operator Service Agreement between PRN and
Calling Card, dated as of March 1, 1996.
4
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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.
Dated: May 21, 1996 QUINTEL ENTERTAINMENT, INC.
By:/s/ Jeffrey L. Schwartz
------------------------------------
Jeffrey L. Schwartz
Chairman and Chief Executive Officer
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EXHIBIT INDEX
5.1 Form of definitive Acquisition Agreement among the Registrant,
Psychic Readers Network and Calling Card Co., Inc., with
schedules and exhibits thereto.
5.2 Amendment to Live Operator Service Agreement between PRN and
Calling Card, dated as of March 1, 1996.
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AGREEMENT
between
QUINTEL ENTERTAINMENT, INC.,
CALLING CARD CO, INC.,
and
PSYCHIC READERS NETWORK, INC.
________________________________
Dated: as of January 17, 1996
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TABLE OF CONTENTS
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ARTICLE 1: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 AMENDED AND RESTATED SERVICE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 CLOSING MARKET PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 EMPLOYMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 ESCROWEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 FEDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 FYE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 LINDSEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 NON-COMPETITION AND RIGHT OF FIRST REFUSAL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 3
1.16 OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 PRN PRINCIPALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 QUINTEL ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 QUINTEL PRINCIPALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 REGISTER; REGISTERED; REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 STOLZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2: TRANSFER OF NL INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 TRANSFER OF NL INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 THE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 FORFEITURE PROVISIONS REGARDING THE ESCROW SHARES . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 DELIVERY AND RELEASE OF CERTIFICATES FOR THE ESCROW SHARES . . . . . . . . . . . . . . . . . . . 6
2.5 DETERMINATION OF EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6.1 DELIVERIES BY PRN AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6.2 DELIVERIES BY QUINTEL AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6.3 DELIVERIES BY CALLING CARD AT CLOSING . . . . . . . . . . . . . . . . . . . . . 8
2.6.4 OTHER DELIVERIES AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6.5 DISTRIBUTION OF NL'S RETAINED EARNING . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3: REGISTRATION OF SHARES; LOCK-UP AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 REGISTRATION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 LOCK UP AGREEMENTS: TREATMENT OF PRN PRINCIPALS AS "AFFILIATES"; LIMITATION ON SALE OF
SHARES BY QUINTEL PRINCIPALS AND PRN PRINCIPALS THROUGH SEPTEMBER 5, 1996 . . . . . . . . . . . . 9
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3.3 ADDITIONAL LOCK UP AGREEMENT BY PRN PRINCIPALS DURING TWO YEAR PERIOD FOLLOWING CLOSING . . . . . 11
3.4 LOANS TO PRN PRINCIPALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PRN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 EXISTENCE AND GOOD STANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 TITLE TO NL INTEREST; ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.9 NO CHANGES SINCE THE BALANCE SHEET DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.10 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.11 REQUIRED APPROVALS, NOTICES AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.12 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.13 REPRESENTATIONS TRUE AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 5: REPRESENTATIONS OF QUINTEL AND CALLING CARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 EXISTENCE AND GOOD STANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.5 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.6 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.7 LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.8 NO CHANGES SINCE THE BALANCE SHEET DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.10 REQUIRED APPROVALS, NOTICES AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.11 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6: COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 NO BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7: SURVIVAL OF REPRESENTATIONS; INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF PRN AND THE PRN PRINCIPALS . . . . . . . . . . . . 30
7.2 OBLIGATION OF PRN AND THE PRN PRINCIPALS TO INDEMNIFY . . . . . . . . . . . . . . . . . . . . . . 31
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF QUINTEL AND CALLING CARD . . . . . . . . . . . . . 31
7.4 OBLIGATION OF QUINTEL AND CALLING CARD TO INDEMNIFY . . . . . . . . . . . . . . . . . . . . . . . 32
7.5 NOTICE AND OPPORTUNITY TO DEFEND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5.1 NOTICE OF ASSERTED LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5.2 OPPORTUNITY TO DEFEND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.5.3 SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 8: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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8.1 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.4 "KNOWLEDGE" DEFINED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 DUTIES AND LIABILITIES OF ESCROWEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.6 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.7 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.8 SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.12 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.13 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.14 THIRD-PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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AGREEMENT dated as of January 17, 1996 by and between QUINTEL
ENTERTAINMENT, INC., a corporation organized under the laws of Delaware with
offices at One Blue Hill Plaza, Pearl River, New York 10956 (hereafter referred
to as "QUINTEL"), CALLING CARD CO, INC., a corporation organized under the laws
of New York with offices at One Blue Hill Plaza, Pearl River, New York 10956
(hereafter referred to as "Calling Card"), and PSYCHIC READERS NETWORK, INC., a
Florida corporation with offices at 2455 E. Sunrise Boulevard, Fort Lauderdale,
Florida 33304 (hereafter referred to as "PRN").
W I T N E S S E T H :
WHEREAS, the parties wish to confirm the terms upon which QUINTEL has
agreed to acquire from PRN one hundred percent (100%) of the interest of PRN
(the "NL Interest") in NEW LAUDERDALE, L.C. ("NL"), a Florida limited liability
company.
NOW, THEREFORE, in consideration of the agreements herein set forth
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1: DEFINITIONS.
Capitalized terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article 1. Certain
additional defined terms are set forth elsewhere in this Agreement.
1.1 AMENDED AND RESTATED SERVICE AGREEMENT.
"Amended and Restated Service Agreement" means the Agreement among
PRN, Quintel and Calling Card in the form annexed hereto as Schedule 1.1.
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1.2 CLOSING.
"Closing" shall mean the consummation of the transfer of the NL
Interest.
1.3 CLOSING DATE.
"Closing Date" shall mean the date on which the Closing occurs.
1.4 CLOSING MARKET PRICE.
"Closing Market Price" shall mean $7.125 ($71/8), the closing price of
the Common Stock on January 17, 1996.
1.5 COMMISSION.
"Commission" means the United States Securities and Exchange
Commission.
1.6 COMMON STOCK.
"Common Stock" means the shares of common stock par value U.S.$.001
per share of QUINTEL.
1.7 EBIT.
"EBIT" shall mean earnings before interest and taxes.
1.8 EMPLOYMENT AGREEMENT.
"Employment Agreement" means the agreement between Steven L. Feder and
Calling Card in the form annexed hereto as Schedule 1.8.
1.9 ESCROW AGREEMENT.
"Escrow Agreement" means the agreement in the form annexed hereto as
Schedule 1.9.
1.10 ESCROWEE.
"Escrowee" means the firm of Feder, Kaszovitz, Isaacson, Weber, Skala
& Bass LLP, attorneys for QUINTEL and Calling Card.
1.11 FEDER.
"Feder" means Steven L. Feder, one of the shareholders of PRN.
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1.12 FYE.
"FYE" means Fiscal Year Ending.
1.13 LINDSEY.
"Lindsey" means Thomas H. Lindsey, one of the shareholders of PRN.
1.14 GAAP.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
1.15 NON-COMPETITION AND RIGHT OF FIRST REFUSAL AGREEMENT.
"Non-Competition and Right of First Refusal Agreement" means the
agreement in the form annexed hereto as Schedule 1.15.
1.16 OTHER DOCUMENTS.
"Other Documents" shall mean all Schedules and Exhibits to this
Agreement and all other instruments, agreements and documents executed or to be
executed by any party hereto in connection with the transactions contemplated
hereby.
1.17 PERSON.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or other department or agency thereof.
1.18 PRN PRINCIPALS.
"PRN Principals" shall mean each of Steven L. Feder, Peter Stolz and
Thomas H. Lindsey.
1.19 QUINTEL ACCOUNTANTS.
"QUINTEL Accountants" shall mean Feldman Gutterman Meinberg & Co.
while they continue to act as one of QUINTEL's accounting firms, or, if they
are no longer acting in such capacity, such other firm of certified public
accountants then acting as accountants for QUINTEL.
1.20 QUINTEL PRINCIPALS.
"QUINTEL Principals" shall mean each of Jeffrey L. Schwartz, Michael
G. Miller, Jay Greenwald, Claudia Newman Hirsch and Andrew Stollman.
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1.21 REGISTER; REGISTERED; REGISTRATION.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a Registration Statement with the
Commission in compliance with the Securities Act and/or the Securities and
Exchange Act of 1934, and applicable rules and regulations under either such
Act, and the declaration or ordering of the effectiveness of such Registration
Statement.
1.22 REGISTRATION RIGHTS AGREEMENT.
"Registration Rights Agreement" means the agreement in the form of
Schedule 1.22 annexed hereto.
1.23 SECURITIES ACT.
"Securities Act" shall mean the Securities Act of 1933, as amended.
1.24 SHARES.
"Shares" shall mean the shares of QUINTEL's Common Stock delivered to
PRN in exchange for the NL Interest.
1.25 STOLZ.
"Stolz" means Peter Stolz, one of the shareholders of PRN.
ARTICLE 2: TRANSFER OF NL INTEREST.
2.1 TRANSFER OF NL INTEREST.
QUINTEL and PRN hereby confirm in this Agreement the terms and
conditions pursuant to which PRN has agreed to sell and transfer to NL Corp.,
a Delaware corporation which is a subsidiary of QUINTEL, and NL Corp. shall
acquire PRN's NL Interest from PRN in consideration for the Shares upon the
terms set forth in this Agreement.
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2.2 THE SHARES.
The Shares will consist of three million two hundred thousand
(3,200,000) shares of QUINTEL's common stock par value $.001 per share.
2.2.1 The certificates representing the Shares will bear
the following legend:
"Any transfer or other disposition of the shares represented
by this certificate is subject to the provisions of an
Agreement dated as of January 17, 1996 among Quintel
Entertainment, Inc. (the "Corporation"), Calling Card Co.,
Inc., Psychic Readers Network, Inc., Steven L. Feder,
Thomas H. Lindsey, Jay Greenwald, Michael Miller, Claudia
Newman, Jeffrey Schwartz, Andrew Stollman and Peter Stolz.
The shares of stock represented by this certificate have not
been registered under the United States Securities Act of
1933, as amended (the "Act") and may be transferred only if
(i) registered under the Act and if the requirements of any
state having jurisdiction are complied with or (ii) the
transfer is exempt from such registration and state
requirements and counsel reasonably acceptable to the
Corporation has delivered to the Corporation a written
opinion reasonably acceptable to the Corporation setting
forth the basis for such exemption."
2.3 FORFEITURE PROVISIONS REGARDING THE ESCROW SHARES.
One million two hundred thousand (1,200,000) of the Shares (hereafter
referred to as the "Escrow Shares") shall be subject to forfeiture as set
forth below:
i. None of the 1,200,000 Escrow Shares shall be forfeited
and all of the Escrow Shares shall be delivered to PRN, if
(1) NL's EBIT for the entire FYE 11/30/96 is at least twelve
million ($12,000,000) dollars, or (2) NL's EBIT for the
first or second quarters of FYE 11/30/96 is at least five
million ($5,000,000) dollars, or (3) NL's aggregate EBIT for
the first and second quarters of FYE 11/30/96 is at least
five million ($5,000,000) dollars;
ii. If none of the conditions set forth in subparagraph
2.3-i. is satisfied, but NL's EBIT for either the first
quarter of FYE 11/30/96 or the second quarter of FYE
11/30/96 is at least three million ($3,000,000) dollars,
then 400,000 Escrow Shares shall be forfeited and delivered
to QUINTEL, and 800,000 Escrow Shares shall be delivered to
PRN;
iii. If none of the conditions set forth in subparagraphs
2.3-i or 2.3-ii is satisfied, but if NL's EBIT in each of
the first quarter of FYE 11/30/96 and the second quarter of
FYE 11/30/96 is more than two million ($2,000,000) dollars,
then 400,000 Escrow Shares shall be forfeited and delivered
to QUINTEL, and 800,000 Escrow Shares shall be delivered to
PRN; and
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<PAGE> 10
iv. If none of the conditions set forth in subparagraphs
2.3-i., 2.3-ii. or 2.3-iii. is satisfied, but if NL's EBIT
for either the first quarter of FYE 11/30/96 or the second
quarter of FYE 11/30/96 is more than two million
($2,000,000) dollars, then 800,000 Escrow Shares shall be
forfeited and delivered to QUINTEL, and 400,000 Escrow
Shares shall be delivered to PRN; and
v. If none of the conditions set forth in subparagraphs
2.3-i., 2.3-ii., 2.3-iii., or 2.3-iv. is satisfied, then all
of the 1,200,000 Escrow Shares shall be forfeited and
delivered to QUINTEL.
2.4 DELIVERY AND RELEASE OF CERTIFICATES FOR THE ESCROW SHARES.
At the Closing, the certificates representing the Escrow Shares shall
be delivered to QUINTEL's counsel as Escrowee, and shall be held by Escrowee
pursuant to the terms of the Escrow Agreement. Upon the determination of EBIT
for a fiscal quarter, certificates representing the number of Escrow Shares, if
any, to which PRN would then be entitled shall be promptly delivered to the PRN
Principals (allocated among them in the same proportion as the Shares were
allocated among them). No Escrow Shares shall be forfeited and delivered to
Quintel until the determination of EBIT for the entire FYE 11/30/96.
2.5 DETERMINATION OF EBIT.
The determination of EBIT for any period shall be made by the QUINTEL
Accountants in accordance with GAAP and consistent with past practices in
connection with the preparation of NL's financial statements. In the event PRN
disagrees with the QUINTEL Accountant's treatment of any item of income or
expense in determining EBIT, PRN shall have the right to appoint its own firm
of certified public accountants (the "PRN Accountants") to examine the issue
within fifteen (15) business days following receipt of the QUINTEL Accountants'
determination, and if the PRN Accountants and the QUINTEL Accountants cannot
resolve the issue within thirty (30) days, then a third accountant will be
selected by PRN's Accountants and the QUINTEL Accountants and the decision of a
majority of the three accounting firms (which shall be in accordance with GAAP
and consistent with past practices in connection with the preparation of NL's
financial statements) shall be final and binding
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<PAGE> 11
upon the parties. Each party shall bear the cost of its own accountant, but in
the event of the appointment of a third accountant, the party against whom the
issue is resolved shall bear the cost of the third accountant.
2.6 CLOSING.
The Closing shall take place concurrently with the execution of this
Agreement at the offices of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass
LLP, 750 Lexington Avenue, New York, New York.
2.6.1 DELIVERIES BY PRN AT CLOSING.
At Closing, PRN shall deliver to QUINTEL:
i. documents transferring and assigning the NL
Interest to QUINTEL or its subsidiary
acquiring the NL Interest;
ii. the Escrow Agreement executed by PRN;
iii. the Non-Competition and Right of First
Refusal Agreement to be executed by PRN and
the PRN Principals;
iv. an opinion letter of PRN's counsel Holland &
Knight;
v. the Amended and Restated Service Agreement,
and the Letter of Instruction referred to
therein;
vi. a copy of PRN's Certificate of Incorporation,
including all amendments, certified by the
Secretary of State of Florida;
vii. a certificate from Florida to the effect that
such corporation is in good standing in
Florida.
viii. such other documents or instruments as may be
necessary in order to consummate the
transactions described in this Agreement.
2.6.2 DELIVERIES BY QUINTEL AT CLOSING.
At Closing, QUINTEL shall deliver to PRN:
i. certificates representing Two Million
(2,000,000) Shares divided among the PRN
Principals as follows:
890,000 Shares to Feder, 44.5%
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<PAGE> 12
<TABLE>
<S> <C> <C>
220,000 Shares to Lindsey, 44.5%
----------
890,000 Shares to Stolz, 11 %
----------
</TABLE>
ii. the Escrow Agreement executed by QUINTEL;
iii. the Non-Competition and Right of First
Refusal Agreements executed by QUINTEL;
iv. the opinion of QUINTEL's counsel Feder,
Kaszovitz, Isaacson, Weber, Skala & Bass LLP;
v. a certificate from the Secretary of State of
the State of Delaware to the effect that
QUINTEL is in good standing in such state.
vi. such other documents or instruments as may be
necessary in order to consummate the
transactions described in this Agreement.
2.6.3 DELIVERIES BY CALLING CARD AT CLOSING.
At Closing, Calling Card shall deliver:
i. the Employment Agreement executed by Calling
Card;
ii. such other documents or instruments as may be
necessary in order to consummate the
transactions described in this Agreement.
2.6.4 OTHER DELIVERIES AT CLOSING.
At Closing, the following shall be delivered:
i. the Employment Agreement executed by Feder
shall be delivered by Feder;
ii. the Non-Competition and Right of First
Refusal Agreements executed by the PRN
Principals shall be delivered by each of
them;
iii. a certificate representing the Escrow Shares
will be delivered by Quintel to the Escrow
Agent.
iv. the Letter of Direction and Stock Powers
referred to in Section 3.4.1.1.
2.6.5 DISTRIBUTION OF NL'S RETAINED EARNING.
At Closing PRN will be entitled to receive fifty (50%)
percent of NL's retained earnings, for the period from
February 1, 1996 through the Closing Date, plus the Deferred
Tax Asset (as such term is defined in this paragraph); PRN's
share of the retained earnings plus the Deferred Tax Asset
shall be collectively referred to in this paragraph as
"PRN's Retained Earnings Distribution". The term "Deferred
Tax Asset" shall mean an amount equal to forty (40%) percent
of the difference between (i)
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<PAGE> 13
PRN's share of NL's Retained Earnings determined under GAAP
as at Closing and (ii) the amount of NL's Retained Earnings
allocable to PRN for tax purposes from the inception of NL
through the Closing.
PRN's Retained Earnings Distribution shall be determined by
QUINTEL's Accountants in accordance with GAAP based upon a
review of NL's financial statements as of the Closing Date.
In the event of any disagreement between QUINTEL and PRN
regarding the treatment of any item of income or expense or
any other item bearing upon the special determination, the
dispute shall be resolved in the same manner provided for in
paragraph 2.5. PRN's Retained Earnings Distribution shall
be paid to it within five (5) business days after delivery
of the QUINTEL's Accountant's determination (subject to
adjustment in the event of dispute upon resolution of the
dispute in accordance with the procedure described in
paragraph 2.5), provided, however, that to the extent that
NL's available cash is insufficient to pay PRN's Retained
Earnings Distribution as of such payment date, the amount of
such shortfall shall be paid by NL in equal amounts to PRN,
with interest at the prime rate and such obligation shall
evidenced by an Earnings Distribution Note in the form
annexed as Schedule 2.6, which will provide for aggregate
monthly minimum payments of principal of $75,000.00 plus 50%
of cash flow in excess of $500,000.00.
ARTICLE 3: REGISTRATION OF SHARES; LOCK-UP AGREEMENTS.
3.1 REGISTRATION OF SHARES.
3.1.1 QUINTEL agrees that it will, as promptly as
practicable after the Closing, file, and use its best efforts to cause
to become effective under the Securities Act, a registration statement
covering the Shares (the "Registration Statement") to permit the
public distribution, which shall include the resale on a continuing
basis, of the Shares by the PRN Principals, in accordance with the
Registration Rights Agreement.
3.2 LOCK UP AGREEMENTS: TREATMENT OF PRN PRINCIPALS AS
"AFFILIATES"; LIMITATION ON SALE OF SHARES BY QUINTEL
PRINCIPALS AND PRN PRINCIPALS THROUGH SEPTEMBER 5, 1996.
3.2.1 The PRN Principals by their execution of this
Agreement agree that for as long as the PRN Principals as a group hold
Shares which in the aggregate constitute five (5%) percent or more of
the total voting shares of common stock of QUINTEL, the PRN Principals
will not sell or otherwise dispose of that number of their Shares
which in the aggregate exceed the number of shares which could be sold
if the provisions of Rule 144-e(1) (as in effect on the date of this
Agreement) promulgated under the Securities Act, applied to each PRN
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<PAGE> 14
Principal as if the Shares were "restricted securities" as defined in
Rule 144(a)(3) notwithstanding the fact that the Shares may have been
registered for sale under the Securities Act or that each of the PRN
Principals may not be an "affiliate" as defined in Rule 144(a)(1);
provided, however, that if a PRN Principal's Shares are not in fact
"restricted securities" as defined in Rule 144(a)(3), such PRN
Principal shall be permitted to sell that number of Shares whose net
proceeds (deducting brokerage commissions only) is equal to (x) the
principal amount of a loan made by Quintel to a PRN Principal pursuant
to Section 3.4.2 of this Agreement or (y) to pay the PRN Principal's
Net Tax Liability (as such term is defined below), if any.
3.2.1.1 The term "Net Tax Liability" shall apply only
if the acquisition of the NL Interest is not treated as a
tax- free transaction, and shall mean, in such event,
A. Twenty eight (28%) percent (or such lesser
percentage at which the capital gain from the
sale of the NL Interest is taxed under the
Internal Revenue Code) of the sum of:
(i) the Closing Market Price of all of
such PRN Principal's Shares
multiplied by One minus the
Appraisal Discount (defined below),
and
(ii) the proceeds, if any, realized by
the PRN Principal from the sale of
Shares prior to the date of any loan
provided for herein or the due date
of a PRN Principal's Net Tax
Liability;
less:
B. Sixty (60%) percent of the product obtained
by multiplying
(1) NL's retained earnings through the
Closing Date distributed to PRN
by
(2) the PRN Principal's equity interest
in PRN.
3.2.1.2 The term "Appraisal Discount" means the
discount applied by the PRN Principals' expert in valuing
the Shares for tax purposes.
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<PAGE> 15
3.2.2 Each PRN Principal and each QUINTEL Principal agrees
that from the Closing Date until September 5, 1996 they will not sell
among them during any three (3) month period occurring prior to
September 5, 1996 that number of shares of Common Stock which exceeds
the greater of (1) 750,000 shares of Common Stock or (2) that number
of shares of Common Stock equal to the product of (x) the average
weekly trading volume of the Common Stock during the four calendar
weeks preceding a sale of shares of Common Stock multiplied by (y)
five (5).
3.2.2.1 In determining the number of shares
of Common Stock which may be sold by each PRN Principal and
QUINTEL Principal during any three (3) month period referred
to in Section 3.2.2, the PRN Principals shall be entitled to
sell among them in the aggregate one-sixth (1/6) of the
aggregate number of shares of Common Stock which may be sold
by all of the PRN Principals and QUINTEL Principals during
such period, and each QUINTEL Principal shall be entitled to
sell one- sixth (1/6) of the aggregate number of shares of
Common Stock which may be sold by all of the PRN Principals
and QUINTEL Principals during such period.
3.3 ADDITIONAL LOCK UP AGREEMENT BY PRN PRINCIPALS DURING TWO
YEAR PERIOD FOLLOWING CLOSING.
In addition to the lock up agreements provided for in Section 3.2 of
this Agreement, the PRN Principals agree that during the two (2) year period
following the Closing (hereafter referred to as the "Section 3.3 Lock Up
Period") the PRN Principals will not sell or otherwise dispose of their shares
of Common Stock (including any shares of Common Stock which they may acquire in
addition to the Shares but excluding 86,000 shares of Common Stock owned by the
PRN Principals as of the date hereof) except as provided in this Section 3.3.
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<PAGE> 16
3.3.1 If a QUINTEL Principal decides to sell any Common
Stock, the QUINTEL Principal shall give notice to the PRN Principals
and each other QUINTEL Principal of his or her intention to sell
shares of Common Stock not later than twenty-four (24) hours prior to
the date on which the QUINTEL Principal wishes to commence such sale
(such notice of sale is referred to as the "Sale Notice" and a QUINTEL
Principal giving a Sale Notice is referred to as the "Selling QUINTEL
Principal"). The Sale Notice shall:
i. set forth the number of shares of Common
Stock which the Selling QUINTEL Principal wishes to
sell (the number of shares identified in a Sale
Notice is referred to as the "Base Shares");
ii. the date on which the Selling QUINTEL
Principal proposes to commence selling such shares
(such date is referred to as the "First Sale Date").
The First Sale Date shall not be earlier than forty-eight (48) hours
following the giving of the Sale Notice by the Selling QUINTEL
Principal. The PRN Principals shall then have the right to sell that
number of their shares of Common Stock (the "Aggregate PRN Shares")
equal to the product of the number of shares of Common Stock owned by
all of the PRN Principals at the date of the Sale Notice multiplied by
a fraction (hereafter referred to as the "QUINTEL Calculation
Fraction"), the numerator of which is the number of Base Shares
identified in the Sale Notice by the Selling QUINTEL Principal and the
denominator of which is the total number of shares of Common Stock
owned by all of the QUINTEL Principals as of the date of the Sale
Notice. As among them, the PRN Principals shall each have the right
to then sell that number of shares of Common Stock equal to the
Aggregate PRN Shares multiplied by a fraction (hereafter referred to
as the "PRN Calculation Fraction"), the numerator of which is the
number of shares of Common Stock owned by the PRN Principal and the
denominator of which is the total number of shares of Common Stock
owned by all of the PRN Principals.
3.3.1.1 Each PRN Principal may give written notice to
any other PRN Principal that the PRN Principal does not wish
to sell all or a portion of his allocated
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<PAGE> 17
portion of the Aggregate PRN Shares (hereafter such number of shares
of Common Stock of the Aggregate PRN Shares which a PRN Principal
would be entitled to sell but determines not to sell is referred to as
the "Waived Shares"), in which event the other PRN Principals shall
have the right to sell an additional number of shares of Common Stock
equal to the product of the Waived Shares multiplied by a fraction,
the numerator of which is the number of shares of Common Stock owned
by such PRN Principal and the denominator of which is the total number
of shares of Common Stock owned by the PRN Principals other than the
PRN Principal giving notice of his election not to sell the Waived
Shares. Any Waived Shares which any other PRN Principal decides not
to sell, may then be sold by the remaining PRN Principal.
3.3.1.2 The lock-up agreement set forth in this
Section 3.3 shall not apply to the sale by the PRN
Principals of that number of shares of Common Stock which
equals (A) the result obtained by dividing (i) the Net Tax
Liability by (ii) the market price of the Common Stock on
April 14, 1997, or (B) the result obtained by dividing (i)
the principal balance of a loan made pursuant to Section 3.4
which has come due by (ii) the market price of the Common
Stock on the date preceding such due date. In the event of
a sale by a PRN Principal pursuant to the exception provided
for in this subsection 3.3.1.2, the QUINTEL Principals shall
be free to sell that number of shares of Common Stock which
equals the product obtained by multiplying the total number
of shares of Common Stock owned by the QUINTEL Principals by
a fraction, the numerator of which is the number of shares
of Common Stock sold by the PRN Principals pursuant to the
exception provided for in this subsection 3.3.1.2. and the
denominator of which is the total number of shares of Common
Stock owned by the PRN Principals prior to such sale.
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<PAGE> 18
3.3.1.3 The PRN Principals and the QUINTEL Principals
agree that any Sale Notice for purposes of this Section 3.3
or Section 3.4 shall be effective as to that PRN Principal
or QUINTEL Principal if it is given orally by telephone or
in person, followed immediately by written notice given by
facsimile or overnight delivery or mail to the addresses and
facsimile numbers set forth under each person's signature at
the end of this Agreement, or to such other address or fax
number which is given in writing to all parties to this
Agreement.
3.4 LOANS TO PRN PRINCIPALS.
3.4.1 If at the time a Selling QUINTEL Principal gives a
Sale Notice during the Section 3.3 Lock Up Period, a Registration
Statement covering the Shares has not become effective under the
Securities Act and, in the opinion of counsel to QUINTEL, the sale of
the Shares is not permitted under an applicable exemption from the
registration requirements under the Securities Act and applicable
state law requirements, then the PRN Principals shall have the right
to require the Selling Quintel Principal to sell that number of
additional shares of Common Stock (such additional number of shares is
referred to as the "Aggregate Additional Shares") equal to the number
of shares of Common Stock owned by the PRN Principals multiplied by
the Quintel Calculation Fraction and to loan the Net Additional Sale
Proceeds (as defined in Section 3.4.1.3) to the PRN Principals
exercising their Section 3.4.1 Loan Right (as such term is defined
herein). Each PRN Principal shall have a Section 3.4.1 Loan Right as
to that number of shares of Common Stock equal to the product of the
Aggregate Additional Shares multiplied by the PRN Calculation
Fraction. The right of a PRN Principal to require a Selling QUINTEL
Principal to sell additional shares of Common Stock pursuant to this
Section 3.4.1 and make the loan required under this Section 3.4.1 is
referred to as the "Section 3.4.1 Loan Right".
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<PAGE> 19
3.4.1.1 A Section 3.4.1 Loan Right may only be
exercised by a PRN Principal if a PRN Principal gives notice
of exercise (the "Exercise Notice") to the Selling QUINTEL
Principal not later than twenty-four (24) hours prior to the
First Sale Date, and if certificates representing the shares
of Common Stock as to which the Section 3.4.1 Loan Right is
being exercised (hereafter the number of shares as to which
a Section 3.4.1 Loan Right is exercised by a PRN Principal
are referred to as the "Section 3.4.1 Shares"), together
with stock powers signed in blank in form for transfer of
the Section 3.4.1 Sale Shares are delivered to the Selling
QUINTEL Principal not later than the First Sale Date to
secure repayment of the loan made pursuant to this Section
3.4.1 (hereafter referred to as "Section 3.4.1 Loan"). Time
shall be of the essence with respect to the deliveries
required under this Paragraph 3.4.2.1. At Closing, the PRN
Principals shall deliver to the Escrowee certificates
representing [__________] shares of Common Stock, together
with stock powers signed in blank in form for transfer, and
a Letter of Direction authorizing and directing the Quintel
Principals to sell the Aggregate Additional Shares pursuant
to this Section 3.4.1 and agreeing to accept the resulting
Section 3.4.1 Loan and execute the Loan Documents referred
to in Section 3.4.1.4, and granting the Quintel Principals a
power of attorney to execute the Loan Documents. The Letter
of Direction shall be effective from the Closing until
revoked by a PRN Principal by notice to the Escrowee and the
Chairman of Quintel. Upon such revocation, any certificates
for shares of Common Stock which have not been sold as
provided for herein shall be returned to the PRN Principals.
3.4.1.2 The Selling QUINTEL Principal shall increase
the number of shares offered for sale pursuant to a Sale
Notice by the number of the Section 3.4.1 Shares identified
in the Exercise Notice (the sum of the Base Shares and the
Section
15
<PAGE> 20
3.4.1 Shares is referred to as the "Covered Shares"). Any
Covered Shares not sold by the Selling QUINTEL Principal
within five (5) trading days following the expiration of the
Exercise Period resulting from a Sale Notice (such five (5)
day period is referred to as the "Sale Period") shall be
allocated between the PRN Principal and the Selling Quintel
Principal in the same ratio as the original number of Base
Shares bears to the original number of Section 3.4.1 Shares,
and certificates representing the number of Covered Shares
so allocated to the PRN Principal shall be promptly returned
to the PRN Principal and any sale of such number of Shares
shall require the delivery of a new Sale Notice and give
rise to a new Section 3.4.1 Loan Right for each PRN
Principal.
3.4.1.3 The amount of the Section 3.4.1 Loan by the
Selling Quintel Principal to the PRN Principal exercising a
Section 3.4.1 Loan Right shall be equal to (A) one (1) minus
the combined marginal federal and state income tax rate of
the Quintel Principal multiplied by (B) the average price
per share of the Covered Shares which the Selling QUINTEL
Principal sells pursuant to the Sale Notice (such amount is
referred to as the "Net Additional Sale Proceeds") during
the Sale Period.
3.4.1.4 The Section 3.4.1 Loan shall be made to the
PRN Principals exercising their Section 3.4.1 Loan Right
within five (5) business days after expiration of the Sale
Period. Each Section 3.4.1 Loan shall be evidenced by a
Note in the form annexed hereto as Schedule 3.4.1(A) (the
"Section 3.4.1 Note"), which will be executed and delivered
upon the making of the Section 3.4.1 Loan, and repayment
shall be secured by a pledge of the Section 3.4.1 Sale
Shares pursuant to the Security Agreement in the form
annexed hereto as Schedule 3.4.1(B) (the "Security
Agreement"), and shall be jointly and severally guaranteed
by the PRN Principals pursuant to a guaranty in the form
annexed hereto as Schedule 3.4.1-(C) (the
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<PAGE> 21
"Guaranty"). Each Section 3.4.1 Note shall bear interest at
the rate equal to the minimum "Applicable Federal Rate"
required by Section 7872 of the Internal Revenue Code on the
date the loan is made, with such interest payable monthly
and the entire balance of interest and principal shall be
repayable in full within five (5) business days after the
first to occur of (i) the date a Registration permitting the
sale of the Shares under the Securities Act becomes
effective or (ii) the sale of the Shares is exempt from such
registration and applicable state law requirements in the
opinion of counsel to Quintel.
3.4.2 QUINTEL agrees that, in the event that (i) the market
price of QUINTEL's Common Stock on April 15, 1997 is not at least
eighty (80%) percent of the Closing Market Price of the Common Stock,
or (ii) a Registration Statement covering the Shares has not become
effective under the Securities Act and, in the opinion of counsel to
QUINTEL, the sale of the Shares is not permitted under an applicable
exemption from the registration requirements under the Securities Act
and applicable state law requirements, and if QUINTEL or the PRN
Principals have been unable to arrange for a loan, secured by the
Shares, in an amount equal to the PRN Principal's Net Tax Liability,
then QUINTEL shall, on or about April 15, 1997, at the request of the
PRN Principals, make a loan to each PRN Principal requesting a loan in
an amount equal to the PRN Principal's Net Tax Liability, provided,
however, that in no event shall the total amount of all loans made to
the PRN Principals exceed two million five hundred thousand
($2,500,000.00) dollars in the aggregate.
3.4.2.1 Each loan to a PRN Principal by QUINTEL
pursuant to this Section 3.4.2 (a "Section 3.4.2 Loan") will
be evidenced by a Promissory Note in the form annexed hereto
as Schedule 3.4.2 (each referred to as a "Section 3.4.2
Note") and secured by a pledge of all of the Holder's Shares
pursuant to the Security Agreement, and shall be jointly and
severally guaranteed by the PRN Principals
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<PAGE> 22
pursuant to the Guaranty, which documents shall be executed
by the PRN Principal upon the making of the loan. Each
Section 3.4.2. Loan shall be repayable upon the earlier of
(x) 24 months after the loan is made or (y) if the Section
3.4.2 Loan was made pursuant to subclause (i) of this
Section 3.4.2, in the event that the Common Stock trades at
the Closing Market Price or higher for five (5) days during
any consecutive thirty (30) day period after the date of the
Section 3.4.2. Loan, on the date which is five (5) business
days following such event, or (z) if the Section 3.4.2 Loan
was made pursuant to subclause (ii) of this Section 3.4.2,
within five (5) business days after the first to occur of
(xx) the date a Registration permitting the sale of the
Shares under the Securities Act becomes effective or (yy)
the sale of the Shares is exempt from such registration and
applicable state law requirements in the opinion of counsel
to Quintel.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PRN.
PRN and by their signatures at the end of this Agreement, the PRN
Principals jointly and severally represent, warrant and covenant to QUINTEL and
Calling Card the following:
4.1 EXISTENCE AND GOOD STANDING.
PRN is a corporation validly existing under the laws of Florida, and
has all requisite power and authority to own, lease and operate all its
properties and to carry on its business as now being conducted.
4.2 CAPITAL STOCK.
PRN has an authorized capitalization consisting of One Thousand
(1,000) shares par value $1.00, of which four hundred and forty five (445)
shares are issued to Feder, one hundred and ten
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<PAGE> 23
(110) shares are issued to Stolz and four hundred and forty five (445) shares
are issued to Lindsey. All such outstanding shares have been duly authorized
and validly issued and are fully paid and non-assessable, and have not been
issued in violation of any preemptive rights of stockholders. No other class
of capital stock of PRN is authorized or outstanding. There are no outstanding
options, warrants, rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of PRN.
4.3 FINANCIAL STATEMENTS.
4.3.1 PRN and the PRN Principals have reviewed the following
financial statements (the "Financial Statements"):
(i) balance sheet (the "Balance Sheet") of NL as at
November 30, 1995 (the "Balance Sheet Date") and the related
statements of operations, cash flows and supporting
schedules for the year ended November 30, 1995;
(ii) balance sheet of NL as at 02/29/96, and the related
statements of operations, cash flows and supporting
schedules for the three months ended 02/29/96.
4.3.2 The Financial Statements are true and correct and,
except as stated therein, have been be prepared in accordance with GAAP
throughout the periods indicated. Each of the balance sheets fairly presents
the financial condition of NL at the date thereof and, except as indicated
therein, reflects all claims against and all debts and liabilities of NL,
fixed or contingent, as at the date thereof, required to be shown thereon under
GAAP and the related statements of operations and cash flows accurately present
the results of operation of NL and cash flows for the period indicated.
4.3.3 Since the Balance Sheet Date, except as set forth on
Schedule 4.3.3 to this Agreement, there has been (a) no material adverse change
in the assets or liabilities, or in the business or financial condition, the
results of operations, or to the best knowledge, information and
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belief of PRN and the PRN Principals, in the prospects, of NL and (b) no change
in the assets or liabilities, or in the business or financial condition, or the
results of operations, of NL except in the ordinary course of business; and no
fact or condition exists or, to the best knowledge, information and belief of
PRN or the PRN Principals is contemplated, or threatened, which might cause
such a material adverse change in the future.
4.4 TITLE TO NL INTEREST; ENCUMBRANCES.
PRN has good and marketable title to the NL Interest, subject to no
encumbrance, lien, charge or other restriction of any kind or character.
4.5 LITIGATION.
Except as set forth in Schedule 4.5 to this Agreement, to their best
knowledge, information and belief, there is no action, suit, proceeding at law
or in equity by any Person, or any arbitration or any administrative or other
proceeding by or before any governmental or other instrumentality or agency,
pending, threatened, against or affecting NL, or any of its properties or
rights, and they do not know of any valid basis for any such action, proceeding
or investigation. Except as set forth on Schedule 4.5, neither PRN, the PRN
Principals nor NL is subject to any judgment, order or decree entered in any
lawsuit or proceeding which would prevent or interfere with the consummation of
the transactions contemplated hereby.
4.6 LIABILITIES.
NL has no outstanding claims against it or liabilities or
indebtedness, contingent or otherwise, except as set forth in the Balance Sheet
or referred to in the footnotes thereto, other than (i) liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business and
consistent with past practice and other liabilities, which individually or in
the aggregate, are not
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material to the business prospects, operation, properties, income or condition
(financial or otherwise) of NL or (ii) liabilities set forth on any Schedule
hereto.
4.7 COMPLIANCE WITH LAWS.
To the best of their knowledge, information and belief, NL is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, regulations and orders and all other applicable requirements of
any governmental, regulatory or administrative agency or authority or court or
other tribunal having jurisdiction, the violation of which, individually or in
the aggregate, would have a material adverse effect on NL's business or its
financial conditions or prospects. To the best of their knowledge, information
and belief, NL is not now charged with, and is not now under individual
investigation with respect to, any violation of any law, regulations, or order
affecting its business, and NL has filed all reports required to be filed with
any governmental, regulatory or administrative agency.
4.8 LICENSES.
To the best of their knowledge, information and belief, NL has all
licenses and permits and other governmental certificates, authorizations and
approvals (collectively, "Licenses") required by any governmental or regulatory
body for the operation of its business and the use of its properties as
presently operated or used, except where the failure to have such Licenses
would not have a material and adverse effect on the financial condition,
results of operations, assets, properties or business of NL. All of the
Licenses are in full force and effect and no action or claim is pending, nor to
the best of their knowledge, information and belief is threatened, to revoke or
terminate any of the Licenses or declare any License invalid in any material
respect.
4.9 NO CHANGES SINCE THE BALANCE SHEET DATE.
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Since the Balance Sheet Date, except as specifically stated on
Schedule 4.9 to this Agreement, PRN has not
(a) incurred on behalf of NL any liability or obligation
of any nature (whether accrued, absolute, contingent or
otherwise), except in the ordinary course of business;
(b) permitted any of NL's assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind;
(c) sold, transferred or otherwise disposed of any of
NL's assets except in the ordinary course of business;
(d) amended or terminated any agreement which is material
to the business of NL;
(e) agreed, whether or not in writing, to do any of the
foregoing.
4.10 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS.
PRN and the PRN Principals each has the full legal right and capacity
to execute, deliver and perform this Agreement and the Other Documents and the
transactions contemplated thereby, each of which has been duly authorized by
all necessary corporate action of PRN. This Agreement and the Other Documents
have been duly executed and delivered by PRN and the PRN Principals and
constitute the valid and binding obligation of each of them enforceable against
each in accordance with their terms except as the enforcement thereof may be
limited by bankruptcy, reorganization, moratorium, insolvency and other laws of
general applicability relating to or affecting creditors' rights or general
principles of equity. None of PRN or the PRN Principals is subject to, or a
party to, any charter, by-law, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or character, which
would prevent consummation of the transactions contemplated by this Agreement
or compliance by them with the terms, conditions and provisions of this
Agreement and the Other Documents. The execution, delivery and performance of
this Agreement and the Other Documents and the consummation of the transactions
contemplated thereby will not
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(i) violate, conflict with or result in the breach of any
provision of the charter documents or by-laws of PRN;
(ii) violate, conflict with or result in the breach or
material modification of any of the terms of, or constitute (or with
notice or lapse of time or both constitute) a default under, or
otherwise give any other contracting party the right to accelerate or
terminate, any obligation, contract, agreement, lien, judgment, decree
or other instrument to which PRN or any of the PRN Principals is a
party or by or to which any of them or any of their assets or
properties may be bound or subject;
(iii) violate any order, writ, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body
against, or binding upon, PRN or any of the PRN Principals or upon any
of their assets; or
(iv) violate any statute, law or regulation of any
jurisdiction.
4.11 REQUIRED APPROVALS, NOTICES AND CONSENTS.
No consent or approval of, other action by, or notice to, any
governmental body or agency, domestic or foreign, or any third party is
required in connection with the execution and delivery by PRN and the PRN
Principals of this Agreement and the Other Documents or the consummation by PRN
and the PRN Principals of the transactions contemplated thereby.
4.12 DISCLOSURE.
None of this Agreement, the Financial Statements, any Schedule hereto,
or any certificate, document or written statement to be delivered as required
under this Agreement by or on behalf of PRN or the PRN Principals contains, or
will contain, any untrue statement of a material fact, or omits, or will omit,
any statement of a material fact required to be stated or necessary in order to
make the statements contained herein or therein not misleading. There is no
fact known to PRN or the PRN Principals which materially and adversely affects
the business, prospects or financial condition of NL or its properties or
assets, which has not been, or will not be, set forth in this Agreement or any
Schedule hereto, or in the certificates, documents or statements in writing to
be delivered at the Closing.
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ARTICLE 5: REPRESENTATIONS OF QUINTEL AND CALLING CARD.
QUINTEL and Calling Card jointly and severally represent, warrant and
covenant to PRN as follows:
5.1 EXISTENCE AND GOOD STANDING.
QUINTEL is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Calling Card is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Calling Card is a wholly owned subsidiary of QUINTEL.
5.2 SHARES.
The Shares delivered at Closing have been duly authorized and validly
issued and are fully paid and non-assessable and have not been issued in
violation of any preemptive rights of stockholders.
5.3 FINANCIAL STATEMENTS.
5.3.1 QUINTEL has reviewed the Financial Statements.
5.3.2 The Financial Statements are true and correct and,
except as stated therein, have been prepared in accordance with GAAP throughout
the periods indicated. Each of the balance sheets fairly presents the
financial condition of NL at the date thereof and, except as indicated therein,
reflects all claims against and all debts and liabilities of NL, fixed or
contingent, as at the date thereof, required to be shown thereon under GAAP and
the related statements of operations and cash flows accurately present the
results of operation of NL and cash flows for the period indicated.
5.3.3 Since the Balance Sheet Date, except as set forth on
Schedule 4.3.3 to this Agreement, there has been (a) no material adverse change
in the assets or liabilities, or in the
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business or financial condition, the results of operations, or to the best
knowledge, information and belief of QUINTEL in the prospects, of NL and (b) no
change in the assets or liabilities, or in the business or financial condition,
or the results of operations, of NL except in the ordinary course of business;
and no fact or condition exists to the best knowledge, information and belief
of QUINTEL, or is contemplated or threatened, which might cause such a material
adverse change in the future.
5.4 LITIGATION.
Except as set forth in Schedule 4.5 to this Agreement, to its best
knowledge, information and belief, there is no action, suit, proceeding at law
or in equity by any Person, or any arbitration or any administrative or other
proceeding by or before any governmental or other instrumentality or agency,
pending, threatened, against or affecting NL, or any of its properties or
rights, and it does not know of any valid basis for any such action, proceeding
or investigation. Except as set forth on Schedule 4.5, neither QUINTEL nor NL
is not subject to any judgment, order or decree entered in any lawsuit or
proceeding which would prevent or interfere with the consummation of the
transactions contemplated hereby.
5.5 LIABILITIES.
NL has no outstanding claims against it or liabilities or
indebtedness, contingent or otherwise, except as set forth in the Balance Sheet
or referred to in the footnotes thereto, other than (i) liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business and
consistent with past practice and other liabilities which individually or in
the aggregate, are not material to the business prospects, operation,
properties, income or condition (financial or otherwise) of NL or (ii)
liabilities set forth on any Schedule hereto or which are not required to be
set forth on any Schedule hereto because such liabilities are specifically
excluded from disclosure on the Schedules provided for by the provisions of
this Agreement.
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5.6 COMPLIANCE WITH LAWS.
To the best of its knowledge, information and belief, NL is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, regulations and orders and all other applicable requirements of
any governmental, regulatory or administrative agency or authority or court or
other tribunal having jurisdiction, the violation of which, individually or in
the aggregate, would have a material adverse effect on NL's business or its
financial conditions or prospects. To the best of its knowledge, information
and belief, NL is not now charged with, and is not now under individual
investigation with respect to, any violation of any law, regulations, or order
affecting its business, and NL has filed all reports required to be filed with
any governmental, regulatory or administrative agency.
5.7 LICENSES.
To the best of its knowledge, information and belief, NL has all
Licenses required by any governmental or regulatory body for the operation of
its business and the use of its properties as presently operated or used,
except where the failure to have such Licenses would not have a material and
adverse effect on the financial condition, results of operations, assets,
properties or business of NL. All of the Licenses are in full force and effect
and no action or claim is pending, nor to the best knowledge, information and
belief of QUINTEL, is threatened to revoke or terminate any of the Licenses or
declare any License invalid in any material respect.
5.8 NO CHANGES SINCE THE BALANCE SHEET DATE.
Since the Balance Sheet Date, except as specifically stated on
Schedule 4.9 to this Agreement, QUINTEL has not
(a) incurred on behalf of NL any liability or obligation
of any nature (whether accrued, absolute, contingent
or otherwise), except in the ordinary course of
business;
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(b) permitted any of NL's assets to be subjected to any
mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind;
(c) sold, transferred or otherwise disposed of any of
NL's assets except in the ordinary course of business;
(d) amended or terminated any agreement which is material
to the business of NL;
(e) agreed, whether or not in writing, to do any of the
foregoing.
5.9 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS.
QUINTEL and Calling Card each has the full authority to execute,
deliver and perform this Agreement and the Other Documents and the transactions
contemplated thereby. This Agreement and the Other Documents have been duly
and validly authorized, executed and delivered by QUINTEL and Calling Card,
constitute a valid and binding agreement of QUINTEL and Calling Card
enforceable against QUINTEL and Calling Card, as the case may be, in accordance
with their respective terms, except as the enforcement thereof may be limited
by bankruptcy, reorganization, moratorium, insolvency and other laws of general
applicability relating to or affecting creditors' rights or general principles
of equity. Except as set forth in Schedule 5.9 to this Agreement, neither
QUINTEL nor Calling Card is subject to, or a party to, any mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which would prevent consummation of the transactions contemplated by
this Agreement and the Other Documents or compliance by the QUINTEL or Calling
Card with the terms, conditions and provisions of this Agreement and the Other
Documents. The execution, delivery and performance of this Agreement and the
Other Documents and the consummation of the transactions contemplated thereby
will not
(i) violate, conflict with or result in the breach of any
provision of the charter documents or by-laws of Quintel or Calling
Card;
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(ii) violate, conflict with or result in the breach or
material modification of any of the terms of, or constitute (or with
notice or lapse of time or both constitute) a default under, or
otherwise give any other contracting party the right to accelerate or
terminate, any obligation, contract, agreement, lien, judgment, decree
or other instrument to which QUINTEL or Calling Card is a party or by
or to which QUINTEL or Calling Card may be bound or subject;
(iii) violate any order, writ, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body
against, or binding upon, QUINTEL or Calling Card or their respective
assets; or
(iv) violate any statute, law or regulation of any
jurisdiction.
5.10 REQUIRED APPROVALS, NOTICES AND CONSENTS.
No consent or approval of, other action by, or notice to, any
governmental body or agency, domestic or foreign, or any third party is
required in connection with the execution and delivery by QUINTEL or Calling
Card of this Agreement and the Other Documents or the consummation by QUINTEL
or Calling Card of the transactions contemplated thereby.
5.11 DISCLOSURE.
None of this Agreement, the Financial Statements, or any Schedule as
to which a representation and warranty is made by QUINTEL in this Section 5, or
any certificate, document or written to be delivered as required under this
Agreement by or on behalf of QUINTEL contains, or will contain, any untrue
statement of a material fact, or omits, or will omit, any statement of a
material fact required to be stated or necessary in order to make the
statements contained herein or therein not misleading. There is no fact known
to QUINTEL which materially and adversely affects the business, prospects or
financial condition of NL or its properties or assets, which has not been, or
will not be, set forth in this Agreement or any Schedule hereto, or in the
certificates, documents or statements in writing to be delivered at the
Closing.
ARTICLE 6: COVENANTS.
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6.1 FURTHER ASSURANCES.
The parties shall execute such documents and other papers and take
such further actions as may be reasonably required or desirable to carry out
the provisions hereof and transactions contemplated hereby.
6.2 NO BROKERS.
6.2.1 PRN and the PRN Principals represent and warrant to
QUINTEL and Calling Card that no broker, finder, agent or similar intermediary
has acted on behalf of PRN or the PRN Principals in connection with this
Agreement or the transactions contemplated hereby, and that there are no
brokerage commissions, finder's fees or similar fees or commissions payable in
connection therewith based on any agreement, arrangement or understanding with
any of them, or any action taken by any of them. PRN and the PRN Principals
agree to jointly and severally indemnify and save QUINTEL and Calling Card and
their respective officers, directors, employees and agents harmless from any
claim or demand for commission or other compensation by any broker, finder,
agent or similar intermediary claiming to have been employed by or on behalf of
PRN or the PRN Principals, and to bear the cost of legal expenses incurred in
defending against any such claim.
6.2.2 QUINTEL and Calling Card each represents and warrants
to PRN and the PRN Principals that no broker, finder, agent or similar
intermediary has acted on behalf of QUINTEL or Calling Card in connection with
this Agreement or the transactions contemplated hereby, and that there are no
brokerage commissions, finders' fees or similar fees or commissions payable in
connection therewith based on any agreement, arrangement or understanding with
QUINTEL or Calling Card or any action taken by QUINTEL or Calling Card.
QUINTEL and Calling Card agree to jointly and severally indemnify and save PRN
and its officers, directors, employees and agents and the PRN Principals
harmless from any claim or demand for commission or other compensation by any
broker, finder, agent or similar intermediary claiming to have been employed by
or on behalf of the
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QUINTEL or Calling Card, and to bear the cost of legal expenses incurred in
defending against any such claim.
ARTICLE 7: SURVIVAL OF REPRESENTATIONS; INDEMNITY.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF PRN AND THE
PRN PRINCIPALS.
Notwithstanding any right of QUINTEL or Calling Card fully to
investigate the affairs of NL, PRN and the PRN Principals and notwithstanding
any knowledge of facts determined or determinable by QUINTEL or Calling Card
pursuant to such investigation or right of investigation, QUINTEL and Calling
Card shall have the right to rely fully upon the representations and warranties
of PRN and the PRN Principals contained in this Agreement and any of the Other
Documents. All such representations and warranties and the indemnification
obligations under Section 9.2 shall survive the execution and delivery of this
Agreement and the Other Documents and the Closing hereunder for a period of
three (3) years following the Closing Date, except as to the representations
and warranties made in Section 4.4 and the obligation to indemnify as to same,
which shall survive the execution of this Agreement and the Other Documents and
the Closing hereunder until the date of expiration of the relevant federal,
state or other statute of limitations; except as to matters as to which any
Indemnitee has made a claim for indemnification or given a Claims Notice under
Section 9.5 on or prior to the expiration of the applicable period aforesaid,
in which case the right to indemnification with respect thereto shall survive
the expiration of any such period until such claim is finally resolved and any
obligations with respect thereto are fully satisfied.
7.2 OBLIGATION OF PRN AND THE PRN PRINCIPALS TO INDEMNIFY.
In addition to the indemnification provisions contained in Schedule
3.1 to this Agreement, PRN and the PRN Principals agree to jointly and
severally indemnify, defend and hold harmless
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QUINTEL and Calling Card, and their respective officers, directors, employees
and agents, and any of their successors and assigns from and against any and
all losses, liabilities, damages, deficiencies, demands, claims, actions,
judgments or causes of action, assessments, costs or expenses (including,
without limitation, interest, penalties and reasonable attorneys' fees and
disbursements) ("Claims"), whether such Claims are incurred in disputes with
PRN or the PRN Principals or involving third-party claims against the QUINTEL
or Calling Card based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation or warranty of PRN or any of
the PRN Principals contained in this Agreement.
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF QUINTEL AND
CALLING CARD.
Notwithstanding any knowledge of facts determined or determinable by
PRN pursuant to any investigation or right of investigation of the affairs of
the QUINTEL or Calling Card, PRN and the PRN Principals shall have the right to
rely fully upon the representations and warranties of the QUINTEL or Calling
Card contained in this Agreement and the Other Documents. All such
representations and warranties and the indemnification obligations under
Section 9.4 shall survive the execution and delivery of this Agreement and the
Other Documents and the Closing hereunder for a period of three (3) years
following the Closing Date; except as to matters as to which any Indemnitee has
made a claim for indemnification or given a Claims Notice under Section 9.5 on
or prior to the expiration of the applicable period aforesaid, in which case
the right to indemnification with respect thereto shall survive the expiration
of any such period until such claim is finally resolved and any obligations
with respect thereto are fully satisfied.
7.4 OBLIGATION OF QUINTEL AND CALLING CARD TO INDEMNIFY.
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In addition to the indemnification provisions contained in Schedule
3.1 to this Agreement, QUINTEL and Calling Card each agrees to indemnify,
defend and hold harmless PRN and its successors and assigns from and against
any and all Claims based upon, arising out of or otherwise in respect of any
Assumed Liability or any inaccuracy in or any breach of any representation or
warranty of QUINTEL or Calling Card contained in this Agreement.
7.5 NOTICE AND OPPORTUNITY TO DEFEND.
7.5.1 NOTICE OF ASSERTED LIABILITY.
Promptly after receipt of any party hereto (the
"Indemnitee") of notice of any demand, claim or circumstances which, with the
lapse of time, would or might give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or investigation (an
"Asserted Liability") that may result in any Claims, the Indemnitee shall
promptly give notice thereof (the "Claims Notice") to the party obligated to
provide indemnification pursuant to Section 9.2 or 9.4 (the "Indemnifying
Party"); provided, however, that the failure of any Indemnitee to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under paragraph (a) or (b), except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice. The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate the
amount (estimated, if necessary and to the extent feasible) of the Claims that
have been or may be suffered by the Indemnitee.
7.5.2 OPPORTUNITY TO DEFEND.
The Indemnifying Party may elect to compromise or defend, at
its own expense and by its own counsel, any Asserted Liability. If the
Indemnifying Party elects to compromise or defend such Asserted Liability, it
shall within thirty (30) days (or sooner, if the nature of the Asserted
Liability so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, such Asserted
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Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability at the expense
of the Indemnifying Party (if the Indemnifying Party is found obligated to
indemnify the Indemnitee with respect to the Claim). Subject to the
limitations contained in Section 9.5.3 on the obligations of the Indemnifying
Party in respect of proposed settlements, the Indemnitee shall have the right
to employ its own counsel with respect to any Asserted Liability, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
(a) the employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such action, or (b) such
Indemnifying Party shall not have, as provided above, promptly employed counsel
reasonably satisfactory to the Indemnitee to take charge of the defense of such
action, or (c) the Indemnitee shall have reasonably concluded based on an
opinion of counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to such Indemnifying
Party, in any of which events such reasonable fees and expenses shall be borne
by the Indemnifying Party and the Indemnifying Party shall not have the right
to direct the defense of such action on behalf of the Indemnitee in respect of
such different or additional defenses. If the Indemnifying Party chooses to
defend any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are necessary or
appropriate for such defense. If the Indemnifying Party elects not to assume
the defense of a Claim, it will not be obligated to pay the fees and expenses
of more than one counsel for all Indemnitees with respect to such claim, unless
in the reasonable judgment of an Indemnitee, and in the opinion of such
Indemnitee's counsel, a conflict of interest may exist between such Indemnitee
and any other of such Indemnitees with respect to such claim, in which event
the Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
7.5.3 SETTLEMENT.
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Notwithstanding the provisions of Section 9.5.2., neither the
Indemnifying Party nor the Indemnitee may settle or compromise any claim for
which indemnification has been sought and is available hereunder, over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld or delayed. If, however, the
Indemnitee refuses to consent to a bona fide offer of settlement which the
Indemnifying Party wishes to accept, the Indemnitee may continue to pursue such
matter, free of any participation by the Indemnifying Party, at the sole
expense of the Indemnitee. In such event, the obligation of the Indemnifying
Party to the Indemnitee shall be equal to the lesser of (i) the amount of the
offer of settlement which the Indemnitee refused to accept plus the costs and
expenses of the Indemnitee prior to the date the Indemnifying Party notified
the Indemnitee of the offer of settlement, or (ii) the actual out-of-pocket
amount the Indemnitee is obligated to pay as a result of the Indemnitee's
continuing to pursue such matter. No party will be required to consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
party of a release from all liability in respect to the Claim.
ARTICLE 8: MISCELLANEOUS.
8.1 EXPENSES.
Except as otherwise provided herein, the parties hereto shall pay all
of their own expenses relating to the transactions contemplated by this
Agreement the Other Documents, including, without limitation, the fees and
expenses of their respective counsel and financial advisers.
8.2 GOVERNING LAW.
The interpretation and construction of the Documents, and all matters
relating hereto, shall be governed by the law of the State of New York, U.S.A.,
without reference to its conflict of laws provisions.
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8.3 JURISDICTION.
Any judicial proceeding brought against any of the parties to this
Agreement on any dispute arising out of this Agreement or any matter related
hereto shall be brought in the courts of the State of New York in New York
County or in the United States District Court for the Southern District of New
York, and, by execution and delivery of this Agreement, each of the parties to
this Agreement accepts for itself the jurisdiction of the aforesaid courts,
irrevocably consents to the service of any and all process in any action or
proceeding by the mailing of copies of such process to such party at its
address as set forth in Section 10.7 hereafter, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
party hereto irrevocably waives to the fullest extent permitted by law any
objection that it may now or hereafter have to the laying of the venue of any
judicial proceeding brought in such courts and any claim that any such judicial
proceeding has been brought in an inconvenient forum.
8.4 "KNOWLEDGE" DEFINED.
Where any representation and warranty contained in this Agreement is
expressly qualified by reference to knowledge, information and belief of any
party, such party confirms that it has made such due and diligent inquiry as to
the matters that are the subject of such representations and warranties as
shall be reasonable under the circumstances.
8.5 DUTIES AND LIABILITIES OF ESCROWEE.
The Escrowee shall have no duties or responsibilities except those
expressly set forth herein. The Escrowee shall have no liability hereunder
except for its own gross negligence or willful misconduct. It may rely on any
notice, instruction, certificate, statement, request, consent, confirmation,
agreement or other instrument which it reasonably believes to be genuine and to
have be signed or presented by a proper person or persons. Nothing contained
in this Agreement or in the
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Other Documents shall prevent the Escrowee from representing the Purchaser as
counsel in this transaction, and to continue to represent the Purchaser as its
counsel in the future.
8.6 CAPTIONS.
The article and section captions used herein are for reference
purposes only, and shall not in any way affect the meaning or interpretation of
this Agreement.
8.7 NOTICES.
Any notice or other communications required or permitted hereunder
shall be in writing and shall be deemed effective (a) upon personal delivery,
if delivered by hand and followed by notice by mail or facsimile transmission;
(b) one day after the date of delivery by Federal Express or other nationally
recognized courier service, if delivered by priority overnight delivery between
any two points within the United States; or (c) five days after deposit in the
mails, if mailed by certified or registered mail (return receipt requested)
between any two points within the United States, and in each case of mailing,
postage prepaid, addressed to a party at its address first set forth above, or
such other address as shall be furnished in writing by like notice by any such
party.
8.8 SCHEDULES.
The Schedules to this Agreement constitute an integral part of this
Agreement and are incorporated in this Agreement as if they were set forth in
the body of this Agreement
8.9 PARTIES IN INTEREST.
This Agreement and the Other Documents and the rights and obligations
of the respective parties thereunder may not be transferred, assigned, pledged
or hypothecated by any party hereto, other than by operation of law. This
Agreement and the Other Documents shall be binding upon and
36
<PAGE> 41
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
8.10 SEVERABILITY.
In the event any provision of this Agreement or the Other Documents is
found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement or such Other Documents shall
nevertheless be binding upon the parties with the same effect though the void
or unenforceable part had been severed and deleted.
8.11 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, all of
which taken together shall constitute one instrument.
8.12 ENTIRE AGREEMENT.
This Agreement, and the Other Documents, contain the entire
understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement incorporates the terms set forth
in Section 1 of the letter agreement dated January 17, 1996 executed by
QUINTEL, Calling Card, PRN, the QUINTEL Principals and the PRN Principals and
to the extent of any inconsistency between the terms of this Agreement and the
terms of such letter agreement the terms of this Agreement shall prevail, and
this Agreement supersedes any other prior agreements and understandings between
the parties with respect to such subject matter. The provisions of Section 2
of the aforesaid letter agreement shall survive the execution and delivery of
this Agreement.
8.13 AMENDMENTS.
37
<PAGE> 42
This Agreement may not be changed orally, but only by an agreement in
writing signed by the party or parties to be charged thereby.
8.14 THIRD-PARTY BENEFICIARIES.
Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any Person other than
the parties hereto and the other persons executing this Agreement.
IN WITNESS WHEREOF, QUINTEL, Calling Card and PRN has each caused its
corporate name to be hereunto subscribed by its duly authorized officer on the
date written below.
QUINTEL ENTERTAINMENT, INC.
By:
--------------------------------------
CALLING CARD CO., INC.
By:
---------------------------------------
PSYCHIC READERS NETWORK, INC.
By:
---------------------------------------
38
<PAGE> 43
Each of the undersigned agrees to be bound by the provisions of Paragraph 3.2
and 3.3 applicable to him or her.
<TABLE>
<S> <C>
- -------------------------------------- ---------------------------------------------------
Jeffrey Schwartz Michael G. Miller
Address: Quintel Entertainment, Inc. Address: Quintel Entertainment, Inc.
One Blue Hill Plaza One Blue Hill Plaza
Pearl River, NY 10956 Pearl River, NY 10956
Fax Number: 914-620-1885 Fax Number: 914-620-1885
- -------------------------------------- ---------------------------------------------------
Jay Greenwald Claudia Newman Hirsch
Address: Quintel Entertainment, Inc. Address: Quintel Entertainment, Inc.
One Blue Hill Plaza One Blue Hill Plaza
Pearl River, NY 10956 Pearl River, NY 10956
Fax Number: 914-620-1717 Fax Number: 914-620-1717
- -------------------------------------- ---------------------------------------------------
Andrew Stollman Steven L. Feder
Address: Quintel Entertainment, Inc. Address: Psychic Reader's Network, Inc.
One Blue Hill Plaza 2455 E. Sunrise Boulevard
Pearl River, NY 10956 Fort Lauderdale, Florida 33304
Fax Number: 914-620-1717 Fax Number: 954-563-5464
- -------------------------------------- ---------------------------------------------------
Peter Stolz Thomas H. Lindsey
Address: Psychic Reader's Network, Inc. Address: Psychic Reader's Network, Inc.
2455 E. Sunrise Boulevard 2455 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304 Fort Lauderdale, Florida 33304
Fax Number: 954-563-5464 Fax Number: 954-563-5464
</TABLE>
39
<PAGE> 44
Schedule 1.1 Amended and Restated Service Agreement
<PAGE> 45
AMENDED AND RESTATED PSYCHIC READERS NETWORK
LIVE OPERATOR SERVICE AGREEMENT
AGREEMENT entered into this ____ day of ________________ 1996 by and among
PSYCHIC READERS NETWORK, INC., a Florida corporation with offices at 2455 E.
Sunrise Boulevard, Fort Lauderdale, Florida 33304 (hereafter referred to as
"PRN"), QUINTEL ENTERTAINMENT, INC., a corporation organized under the laws of
Delaware with offices at One Blue Hill Plaza, Pearl River, New York 10956
(hereafter referred to as "Quintel"), and CALLING CARD CO., INC., a corporation
organized under the laws of New York with offices at One Blue Hill Plaza, Pearl
River, New York 10956 (hereafter referred to as "CC").
WHEREAS, PRN and CC entered into an agreement dated July 7, 1995 entitled
"Psychic Readers Network Live Operator Service Agreement", which was amended by
an agreement dated May ____, 1996 (the "Service Agreement").
WHEREAS, prior to the date hereof PRN and CC each owned a fifty percent
interest in New Lauderdale L.C., a Florida limited liability company ("NL").
WHEREAS, concurrently herewith, CC's parent corporation, Quintel has issued and
delivered to PRN 3,200,000 shares of Quintel's common stock (the "Shares") in
order for Quintel's subsidiary _______________, Inc. to acquire all of PRN's
interest in NL (the "NL Interest").
WHEREAS, in further consideration for Quintel's acquisition of the NL Interest
and issuance of the Shares, PRN and CC have agreed to amend the Service
Agreement in its entirety.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
acknowledged by the parties, it is hereby agreed as follows:
9. SERVICES:
a. PRN agrees to continue to provide live psychic operator services to
CC, and to Quintel or any other subsidiary, entity or venture owned and
controlled by Quintel (hereinafter referred to as a "Quintel Affiliate"), and
to administer and supervise the provision of such services by individuals
arranged, screened and provided by PRN; hereafter Quintel or such other
subsidiary, entity or venture requesting the psychic services from PRN shall be
referred to as the "Client" and all of the foregoing services provided by PRN
to Client under this Agreement shall be referred to as the "Services".
b. Quintel, for itself and each Quintel Affiliate, agrees that PRN
shall be the exclusive provider of all live psychic operator services utilized
by Quintel and the Quintel Affiliates during the term of this Agreement
provided that PRN and the PRN Principals are not in default in the performance
of their material obligations under this Agreement and are able to provide the
amount and type of psychic Services requested by the Client.
<PAGE> 46
2. TERM: This term of this agreement will commence on the date hereof and end
on ________________, 2001, unless sooner terminated in accordance with the
provisions of this Agreement.
3. TERMINATION: This Agreement may be terminated by PRN upon thirty (30) days
prior written notice in the event that the Company is in default in the
performance of any of the Company's material obligations under this Agreement
which is not cured within such thirty (30) day period, provided, however, any
default in payment must be cured within ten (10) days after written notice of
such default is given by PRN, and if such default in payment is not cured
within such ten (10) day period, then PRN may terminate this Agreement by PRN
at the end of such ten (10) day period by notice to the Company. This
Agreement may be terminated by Quintel on behalf of the Company upon thirty
(30) days prior written notice to PRN in the event that PRN is in default in
the performance of any of PRN's material obligations under this Agreement which
is not cured within such thirty (30) day period. Any such termination by
either party shall not relieve the other of liability for obligations which
have accrued prior to the date of termination.
4. FEES: PRN's Live Psychic Fees for psychic Services provided by PRN to a
Client shall be billed by PRN at the rate of ____________________ [[unused
13,500,000 minutes @$0.17 per minute, and thereafter ]] $0.395 per minute
during the term of this Agreement.
The term "minutes" shall mean the per minute charge determined by the
accounting provided by West Interactive or other billing service bureau of
total connected minutes provided to Client by PRN. The fees due PRN shall be
paid bi-monthly upon submission of an invoice sent by fax to Client, and shall
be paid within two (2) business days after rendering of such invoice. Each
bi-monthly billing period shall begin on the fifteenth (15th) day of the month,
or the next succeeding business day thereafter. Client will wire payment in
full to PRN's bank account in accordance with wire transfer instructions
provided by PRN or pay by check delivered on the next business day following
transmittal.
It is acknowledged by PRN that in calculating the Fees under this Agreement,
PRN has provided Quintel with information concerning the expenses included by
PRN in calculating its costs in providing the Services and has included in such
costs depreciation of its computer equipment. A schedule of the computer
equipment included in such costs is annexed hereto as Schedule 1 (hereafter all
such equipment is referred to as the "Included Computer Equipment"). In
consideration for Quintel's agreement to pay the Fees at the rate provided for
in this Agreement, PRN hereby grants Quintel the option (the "Option") to
acquire the Included Computer Equipment from PRN free of all liens, claims and
encumbrances for a purchase price of One Hundred Dollars ($100.00). PRN shall
give notice to Quintel in the event that PRN purchases or acquires additional
computer equipment used in connection with the Services, and if requested to do
so by Quintel, PRN shall negotiate in good faith with Quintel concerning an
amendment to the Option provided for in this paragraph to include such
additional equipment in the Included Computer Equipment subject to the Option
and any appropriate modification to the Fees to reflect the depreciation of
such additional equipment. The Option shall be exercisable by Quintel only in
the event that this Agreement terminates for any reason other than as a result
of a default by Quintel in the performance of its material obligations in
accordance with the provisions of
2
<PAGE> 47
Section 3 of this Agreement, and if the Option is exercisable, then it may be
exercised by Quintel giving notice of such exercise to PRN (the "Exercise
Notice") not later than thirty (30) days following the termination of this
Agreement, in which event the closing of the sale and purchase of the Included
Computer Equipment (the "Option Closing") shall occur on the date identified in
the Exercise Notice which shall be not earlier than three (3) business days
following the giving of the Exercise Notice at the principal offices of Quintel
or its attorneys. At the Option Closing, PRN shall deliver or cause to be
delivered to Quintel or its nominee the Included Computer Equipment free and
clear of all liens, claims and encumbrances, Quintel shall deliver the purchase
price therefor to PRN and PRN shall execute such bills of sale and other
documents, and cause to be delivered such releases of lien as may be necessary
to convey good and marketable title to the Included Computer Equipment to
Quintel or its nominee, free and clear of all liens, claims and encumbrances.
5. WARRANTY: PRN warrants to Quintel that it will provide the Services
described in this Agreement. In no event shall PRN be liable to a Client for
any claims or demands made against Client by any third party as a result of
such party's use of the psychic Services provided by PRN to Client, except for
claims arising out of PRN's gross negligence or wilful misconduct. PRN
assumes no responsibility to Client for any interruption of Services which is
caused by malfunction or failure of equipment which does not result from PRN's
negligence or wilful misconduct, or any other circumstances beyond the control
of PRN.
6. CONTROL OF PRN: Stephen Feder ("Feder"), Thomas H. Lindsey and Peter Stolz
(collectively referred to as the "PRN Principals") acknowledge and agree by
their signatures at the end of this Agreement that Feder presently controls
PRN's operations, that it is an essential element of Quintel's agreement to
acquire the NL Interest and issue the Shares in consideration for such transfer
that Feder maintain control of PRN's operations and continue to manage the
performance by PRN of its Services under this Agreement, and Feder hereby
agrees to do so during the term and the other PRN Principals agree to continue
to permit Feder to exercise such control during the term. The PRN Principals
agree that they will not, without Quintel's consent (i) sell, pledge,
hypothecate or otherwise transfer at any time during the term of this Agreement
shares of stock of PRN which constitute in the aggregate more than forty-nine
(49%) percent or more of their shares of stock of PRN as of the date hereof, or
(ii) take any action to authorize, and PRN agrees that it will not issue
without Quintel's consent, securities of any class or securities convertible
into securities of any class, which after such issuance will result in the PRN
Principals owning in the aggregate less than fifty-one (51%) percent of the
issued and outstanding shares of stock of all classes of PRN or result in Feder
not controlling PRN.
7. RESPONSIBILITIES OF PARTIES: The respective responsibilities of Client and
PRN under this Agreement are as follows:
a. RESPONSIBILITIES OF PRN:
1. PRN will provide live psychic Services on a 24 hour a day
basis.
3
<PAGE> 48
2. In assigning psychic operators to respond to callers, PRN
will give the same priority to responding to callers to Quintel's
programs as in responding to callers to PRN's programs, and will
assign live psychic operators to answer calls to PRN and Quintel
programs on a random basis.
3. PRN will, to the best of its ability, hire only qualified
psychics who have been tested and interviewed by PRN, not "chat"
operators.
4. All live psychic operators will work out of their respective
homes or offices, not from "telemarketing rooms", unless otherwise
agreed by the parties.
5. PRN will provide the staff required to monitor and manage
the quality of the live psychics responding to calls. The ratio of
such staff to the live psychic operators shall be no less favorable
than the ratio as of the date hereof, and the level of quality control
exercised over the operations of the live psychics shall be no less
than the level in existence as of the date hereof.
6. PRN will coordinate with West Interactive, Inc. or such
other billing service bureau (hereafter West Interactive or such other
service bureau is referred to as a "service bureau") utilized by
Client to assure that the system is properly connected and operating
as expected.
7. PRN will cause its psychic operators to follow all program
scripts and instructions provided by CC to comply with all Federal,
state, local and telephone company guidelines with respect to
provision of 900, 800 line, live psychic Services.
8. PRN will obtain the name, address, telephone number and
other pertinent information which Client reasonably requests PRN to
obtain from each caller and transmit same to the service bureau as
required. The telephone numbers of the callers will be transmitted to
Client electronically on a daily basis. PRN will provide Client with
the name, address and other information obtained from the callers when
such information is entered into PRN's data base, which processing
will be completed in no less time than currently occurs (which is on
average within seven (7) days after the call occurs).
PRN shall also provide Quintel with the names and addresses
(the "PRN Names") and the telephone numbers (the "PRN Numbers") of all
callers to the telephone programs sponsored or conducted by PRN, in
addition to providing such information regarding callers to the
programs sponsored or conducted by Quintel and the Quintel Affiliates
(the "Quintel Programs") for which PRN provides Services hereunder.
The PRN Names and Numbers shall be provided to Quintel in the same
manner and at the same frequency as PRN is required to provide Quintel
with the names, addresses and telephone numbers of the callers to the
Quintel Programs.
4
<PAGE> 49
In further amplification of the provisions of Section 2(g)
of the letter agreement dated January 17, 1996 among the parties to
this Agreement, PRN and Quintel and the Quintel Affiliates shall all
have the right to make direct mail and print advertising solicitations
to the PRN Names in the conduct of their respective business
operations. Quintel and the Quintel Affiliates shall have the
exclusive right to conduct telemarketing activities of the PRN Names
and PRN Numbers, and PRN shall not conduct any telemarketing
activities in connection with the operation of its business.
9. If requested by Client, PRN will instruct its live psychic
operators to include information about Client's other programs during
the course of the response to callers to Client's programs.
10. PRN shall not terminate the live psychic service connection
and billing services provided by any service bureau without Quintel's
consent, and will not change or add a service bureau without Quintel's
consent. Concurrently herewith, PRN has delivered to Quintel an
irrevocable letter of instruction addressed to each service bureau with
which PRN is doing business, confirmed by each such service bureau,
instructing the service bureau not to terminate its services for a
Client's customers except upon the joint written instruction of PRN and
Client.
b. RESPONSIBILITIES OF CLIENT:
1. Client will follow all Federal, state, local and telephone
company guidelines with respect to provision of 900, 800 line, live
psychic services in the design of its programs.
2. Client will be responsible for the promotion of its
programs, and will provide PRN with a media schedule and call volume
expectations.
3. Client will be responsible for informing PRN at least one
(1) week in advance of any significant change in the promotion of its
programs which is expected to substantially increase or decrease call
volume.
4. Client will instruct the service bureau to provide PRN with
daily call reports.
5. In advertising psychic services for the programs utilizing
the Services provided by PRN to Client under this Agreement, Client
will describe the services provided by the programs only as live
psychic services.
8. CONFIDENTIALITY OF CLIENT INFORMATION:
a. PRN shall hold in strictest confidence, and shall not directly or
indirectly use for its own benefit, or for the benefit of anyone else, all
information relating to the transactions
5
<PAGE> 50
processed by it for each Client and all information it receives regarding the
business affairs of each Client.
b. PRN shall not reveal, divulge or make known to any person, firm,
corporation or other business organization, and shall not directly or
indirectly use for its own benefit, or for the benefit of anyone else, any
secret or confidential information used by each Client in its business,
including, without limitation, (i) pricing information, (ii) the terms of each
Client's existing contracts with suppliers, service bureaus, licensors,
performers or vendors, (iii) any information pertaining to each Client's
customers and their requirements, (iv) the programs developed by each Client
and any derivative works based thereon, and (v) any other of each Client's
trade secrets, all of which shall be collectively referred to hereafter as the
"Client Confidential Information."
c. Client Confidential information shall be held in strictest
confidence and each party shall take all reasonable and necessary steps to
maintain such confidentiality. All Client records and Client Confidential
Information shall be returned to Client upon termination of this Agreement for
any reason whatsoever.
9. CONFIDENTIALITY OF PRN INFORMATION: Each Client shall hold in strictest
confidence, not shall not reveal, divulge or make known to any person, firm,
corporation or other business organization, and shall not directly or
indirectly use for its own benefit, or for the benefit of anyone else, any
secret or confidential information used by PRN in the conduct of its business
which becomes known to Client (hereafter referred to as the "Confidential
Information"). PRN'S Confidential information shall be held in strictest
confidence and each party shall take all reasonable and necessary steps to
maintain such confidentiality. PRN acknowledges that its computer system
software operating PRN's caller distribution and psychic operators' backend
scheduling and the operations of the live operator service are not confidential
or proprietary.
10. SECURITY AGREEMENT: It is agreed that it is an essential element of
Quintel's agreement to acquire the NL Interest and issue its shares in
consideration for the transfer thereof that PRN continue to provide Quintel and
each Client with the Services at the fees described in this Agreement, and that
Feder continue to maintain control of PRN's operations and manage the
performance of its obligations under this Agreement. In order to secure such
obligations of PRN and Feder and the other PRN Principals, and the obligation
of PRN to sell Quintel or its nominee the Included Computer Equipment upon
exercise of the Option referred to in Section 4 of this Agreement (hereafter
all such obligations are referred to as the "Obligations"), PRN hereby grants
to Quintel and each Client a security interest in the following (all of which
shall be referred to as the "Collateral") (i) all of PRN's Confidential
Information, and all documents, instruments, computer software, object codes,
computer hardware, and intangibles in which such Confidential Information is
maintained, stored, or embodied, (ii) the computer system hardware and software
operating PRN's caller distribution and psychic operators' backend scheduling;
(iii) all systems, information, data, software, records and documents regarding
the operations of the live operator service and all research and development
regarding the foregoing and the business affairs of PRN, its employees,
contractors, subcontractors, subsidiaries, affiliates or agents; (iv) all
6
<PAGE> 51
agreements, arrangements or understandings between PRN and its live psychic
operators, and (v) all replacements and proceeds of the foregoing. A UCC-3
termination statement terminating the security interest in the Collateral shall
be delivered to PRN at such time as no Obligations remain to be performed.
This Agreement shall constitute a security agreement within the meaning of the
Uniform Commercial Code of Florida, New York and Delaware (collectively,
"UCC"). In the event of any breach by PRN of its obligations under this
Agreement, Quintel and each Client shall have all of the rights of a secured
creditor under the UCC. Quintel and each Client shall have the right to file
without PRN's signature a financing statement and any continuation statement or
amendment thereto necessary or advisable in order to perfect and maintain the
perfection of the foregoing security interest.
11. INDEMNIFICATION: Each party shall indemnify the other party, and its
successors and assigns, against any claim and hold the other harmless from any
liability, suits, proceedings, cost or expense (hereafter collectively referred
to as a "Claim") arising out of a breach by the party against whom
indemnification is sought of its obligations under this agreement, provided
that no party shall be indemnified against Claim arising out of that party's
wilful misconduct or gross negligence.
12. NOTICES: Any notice required or permitted to be given pursuant to this
Agreement shall be deemed given one (1) business day after delivery by a
nationally recognized overnight courier or three (3) business days after such
notice is mailed by certified mail, return receipt requested, addressed as
follows: (i) if to PRN, at 2455 E. Sunrise Boulevard, Fort Lauderdale, Florida
33304 and (ii) if to any Client, at Quintel Entertainment, Inc., One Blue Hill
Plaza, Pearl River, New York 10965, Attention: Chief Executive Officer or at
such other address as any such party shall designate by written notice to the
other party.
13. MISCELLANEOUS:
a. This agreement supersedes the agreement between the parties dated
July 7, 1995 and the amendment dated May ____, 1996.
b. PRN may not assign its rights and obligations under this Agreement
without the consent of Quintel. Quintel may assign its rights and obligations
under this Agreement to any subsidiary or affiliate controlled by Quintel, or
in connection with the sale of all or substantially all of the assets of
Quintel or another Client or a merger or consolidation of Quintel or a Client
with another entity.
c. No waiver by a party of any breach of this Agreement by the other
shall be deemed to be a waiver of any preceding or subsequent breach.
d. This agreement does not constitute a joint venture or partnership
by the parties, and each party is entering into this Agreement as a principal
and not as an agent of the other.
7
<PAGE> 52
e. If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or unenforceable any
other provisions of this Agreement, and this Agreement shall be carried out as
if such invalid or unenforceable provisions were not embodied therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
QUINTEL ENTERTAINMENT, INC.
By:
---------------------------------
CALLING CARD CO., INC.
By:
----------------------------------
PSYCHIC READERS NETWORK, INC.
By:
----------------------------------
The undersigned agree to be personally bound by the provisions of Section 6 of
the foregoing Agreement and consent as stockholders and directors of Psychic
Readers Network, Inc. to all other provisions of the foregoing Agreement.
- ------------------------- ------------------------------
Steven L. Feder Thomas H. Lindsey
- ------------------------- ------------------------------
Peter Stolz
7
<PAGE> 53
Schedule 1.8 Employment Agreement
<PAGE> 54
EMPLOYMENT AGREEMENT dated ___________,
1996 by and between CALLING
CARD CO., INC., a New York
corporation (the "Company"),
and STEVEN L. FEDER (the
"Employee").
The parties hereto desire to provide for the Employee's retention as a
Employee to the Company in accordance with the terms and provisions set forth
below:
NOW, THEREFORE, the parties agree as follows:
1. TERM.
The Company hereby retains the Employee, and the Employee agrees
to work for the Company until April 30, 2001 unless sooner terminated in
accordance with Section 7 hereof. Such period, together with the period of any
extension or renewal of such term, is referred to herein as the "Employment
Period."
2. DUTIES.
On the date hereof, the Company acquired all of the interest of
Psychic Reader's Network, Inc. ("PRN") in New Lauderdale L.C., a Florida
limited liability company ("New Lauderdale") which was owned by PRN and the
Company prior to such acquisition. During the Employment Period, the Employee
shall serve as the General Manager for the Company of the business operated by
New Lauderdale prior to the date hereof, and perform services comparable to the
services he performed with respect to New Lauderdale's business prior to the
date hereof for the businesses of the Company and its parent corporation,
Quintel Entertainment, Inc. ("Quintel"), including supervision of psychics
utilized in the telephone entertainment programs marketed by the Company,
Quintel and their respective subsidiaries and affiliates, the development of
new telephone programs, and consultation with the Company and Quintel
concerning the management and development of such entities' business and
affairs, and Employee shall perform such further duties as shall, from time to
time, be reasonably delegated or assigned to the Employee by the Board of
Directors of the Company or Quintel.
3. DEVOTION OF TIME.
During the Employment Period, the Employee shall: (i) expend not
less than fifty percent (50%) of his working time for the Company, provided
that the Company hereby acknowledges that the Employee is also employed by
Psychic Readers Network, Inc. ("PRN") and that he shall continue to devote a
portion of his working time to PRN while retained by the Company; (ii) subject
to the foregoing, devote his best efforts, energy and skill to the services of
the Company and the promotion of its interests; and (iii) not take part in
activities known by the Employee to be detrimental to the best interests of the
Company. As used herein, the term Company also refers to Quintel and its
subsidiaries and affiliates.
Any venture, new business idea, product, technology or item of
intellectual property developed by the Employee in the course of his employment
by the Company shall be the property of the Company. The Company and the
Employee recognize that because the Employee is only
<PAGE> 55
obligated to spend fifty (50%) percent of his working time in the performance
of his duties for the Company, and the balance of his working time in the
performance of duties for PRN, the Employee may become involved in the
development of new business ideas with third parties other than in connection
with his employment by the Company. Employee agrees that Quintel shall have a
right of first refusal with respect to any new business venture developed by
him with any third parties or in the management, ownership or development of
which he becomes involved (any such venture is referred to as a "New Venture").
In the event Employee becomes involved in the development of a New Venture,
Employee shall give written notice to Quintel of the nature thereof, and
Quintel, or any of its subsidiaries or affiliates shall have the right at its
option, exercised by written notice to Employee given within thirty (30) days
after receipt of Employee's notice, to negotiate the terms of such New Venture
with the other parties involved with such New Venture within the sixty (60) day
period following receipt of Employee's notice, and during such sixty (60) day
period the parties will negotiate in good faith regarding such terms. If
Quintel and such third parties are unable to reach agreement during such sixty
(60) day period, Employee may enter into such New Venture with such third
parties on terms no less favorable than the last terms, if any, proposed by
Quintel to such third parties, or if no such terms were proposed, on terms no
more favorable than the last terms, if any, proposed by such third parties to
Quintel. If Employee and the third parties do not conclude a definitive,
binding agreement with respect to the New Venture within six (6) months
thereafter, then prior to entering into an agreement with other parties with
respect to such New Venture, Employee shall again give notice to Quintel of his
determination to enter into such New Venture, and Quintel shall again have the
right of first refusal described in this paragraph with respect to the New
Venture.
4. COMPENSATION.
4.1 In consideration for the services to be performed by
the Employee during the Employment Period hereunder, the Company shall
compensate the Employee with base compensation at the following rates, paid at
the same intervals as other executive officers of the Company, during the
Employment Period:
(a) From the date of this Agreement until November 30, 1996,
the Employee shall be paid a salary at the rate of $187,500 per annum;
and
(b) With respect to each fiscal year thereafter, the Employee's
salary shall be increased by ten percent (10%) over and above his
salary for the immediately preceding fiscal year.
5. REIMBURSEMENT OF EXPENSES; ADDITIONAL BENEFITS.
5.1 The Company shall pay directly, or reimburse the
Employee for, all reasonable and necessary expenses and disbursements incurred
by him for and on behalf of the Company in the performance of his duties under
this Agreement. For such purposes, the Employee shall submit to the Company
itemized reports of such expenses in accordance with the Company's policies.
5.2 The Employee shall be entitled to paid vacations
during the Employment Period in accordance with the Company's then prevalent
practices for executive employees; provided, however, that the Employee shall
be entitled to such paid vacations for not less than four (4) weeks per annum.
2
<PAGE> 56
5.3 The Employee shall be entitled to participate in, and
to receive benefits under, any employee benefit plans of the Company
(including, without limitation, pension, profit sharing, group life insurance
and group medical insurance plans) as may exist from time to time for its
executive employees.
6. RESTRICTIVE COVENANT.
6.1 During the Employment Period and thereafter, the
Employee shall not reveal, divulge or make known to any person, firm,
corporation or other business organization, and shall not directly or
indirectly use for his own benefit, or for the benefit of anyone else, any
secret or confidential information used by the Company in its business,
including, without limitation, (i) pricing information, (ii) the terms of the
Company's existing contracts with suppliers, service bureaus or vendors (iii)
any information pertaining to the Company's customers and their requirements
and (iv) any other of the Company's trade secrets, all of which shall be
collectively referred to hereafter as the "Confidential Information."
6.2 The services of the Employee are unique,
extraordinary and essential to the business of the Company, particularly in
view of the Employee's access to the Confidential Information. Accordingly,
the Employee agrees that he will not at any time during the Employment Period
and for a period of two (2) years thereafter, without the prior written
approval of the Board of Directors of the Company, directly or indirectly,
engage in any business activity competitive with the business of the Company.
For the purposes of this Agreement any business which (i) provides telephone
entertainment services of the type provided by the Company, or (ii) which the
Company is considering or has in the past twelve months considered, or (iii)
which markets and/or operates theme related telephone service programs,
voice-mail or membership clubs pertaining to astrology, psychics, diet
services, personals or any other subject matter with which the Company is now
actively engaged in or has been engaged during the preceding twelve months, or
becomes engaged during the period in which the restrictions of this Section 6
apply, will constitute a business activity competitive with the business of the
Company. Furthermore, the Employee agrees that, during such period, he shall
not solicit, directly or indirectly, or affect to the Company's detriment any
relationship of the Company with any customer, supplier, service bureau, vendor
or employee of the Company or cause any customer, supplier, service bureau or
vendor to refrain from entrusting additional business to the Company.
As used herein, the term "customer" shall mean (i) anyone who is a customer of
the Company at the time of the alleged prohibited conduct; (ii) anyone who was
a customer of the Company at any time during the two year period immediately
preceding the alleged prohibited conduct; (iii) any prospective customers to
whom the Company had made a presentation (or similar offering of services)
within a period of 360 days immediately preceding the alleged prohibited
conduct or, if the alleged prohibited conduct occurs after the end of the
restrictive period described in the first paragraph of this Section 6.2, within
a period of 360 days immediately preceding such termination; and (iv) any
customer for which Company, renders or has provided programs or services within
the time periods set forth above.
Notwithstanding the provisions of this Section 6.2, Employee shall be permitted
to continue to render services to PRN with respect to the conduct of PRN's
existing business as of the date hereof following its transfer of its interest
in New Lauderdale to the Company in accordance with the provisions of
3
<PAGE> 57
Section 3 of this Agreement. PRN'S existing business as of the date hereof
means the business of providing pay-per-call astrology and psychics telephone
entertainment in the manner in which PRN is providing such services as of the
date hereof.
6.3 The Employee acknowledges that the business of the
Company extends beyond the geographic area of the States of New York and
Florida and accordingly, it is reasonable that the restrictive covenants set
forth above are not limited by specific geographic area but by the location of
the customers of the Company. In the event that any of the provisions of
Sections 6.1 and 6.2 hereof shall be adjudicated to exceed the time, geographic
or other limitations permitted by applicable law in any jurisdiction, then such
provision shall be deemed reformed in any such jurisdiction to the maximum
time, geographic or other limitations permitted by applicable law.
6.4 The Employee acknowledges that Company and the
Employee intend to and hereby confer jurisdiction to enforce the covenants
contained in this Agreement upon the courts of any state within the
geographical scope of such covenants. In the event that the courts of one or
more of such states shall hold such covenants wholly unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect the right of the
Company to the relief provided above in the courts of any other states within
the geographical scope of such covenants, as to breaches of such covenants in
such other respective states, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.
Notwithstanding the foregoing, no action will be commenced in more than one
jurisdiction at a time unless one or more of the provisions of this Agreement
can only be enforced if an action is brought in another jurisdiction or
jurisdictions.
6.5 As used in this Section 6, the term "Company" shall
mean and include any and all corporations, partnerships, joint ventures or
limited liability companies affiliated with the Company or Quintel, which
either now exist or which may hereafter be organized.
6.6 The Employee hereby acknowledges and agrees that, in
the event he shall violate any provisions of this Section 6 the Company will be
without an adequate remedy at law and accordingly, will be entitled to enforce
such restrictions by temporary or permanent injunctive or mandatory relief
obtained in any action or proceeding instituted in any court of competent
jurisdiction without the necessity of proving damages or posting a bond, and
without prejudice to any other remedies which it may have at law or in equity.
7. EARLIER TERMINATION.
7.1 The Employee's employment hereunder shall
automatically be terminated upon the death of the Employee or the Employee's
voluntarily leaving the employ of the Company and, in addition, may be
terminated, at the sole discretion of the Company, as follows:
(a) Upon thirty (30) days' prior written notice
by the Company, in the event of the Employee's disability as set forth in
Section 7.2 below; or
(b) Upon thirty (30) days' prior written notice
by the Company, in the event that the Company terminates the Employee's
employment hereunder for cause as set forth in Section 7.3 below.
4
<PAGE> 58
7.2 The Employee shall be deemed disabled hereunder, if
in the opinion of the Board of Directors of the Company, as confirmed by
competent medical advice, he shall become physically or mentally unable to
perform his duties for the Company hereunder and such incapacity shall have
continued for any period of six (6) consecutive months.
7.3 For purposes hereof, "cause" shall include, but not
be limited to, the following: (a) the Employee's willful malfeasance or gross
negligence; (b) any material misrepresentation or concealment of a material
fact made by the Employee in connection with this Agreement; or (c) the
material breach of any covenant made by the Employee hereunder, and the
Employee's failure to cure such conduct or event constituting "cause" within 30
days after written notice thereof.
7.4 In the event that this Agreement is terminated by the
Company without cause, the Employee shall continue to receive all payments
which would otherwise be due to him under this Agreement.
8. NO REQUIREMENT OF RELOCATION.
The Company expressly agrees that the Employee, as a condition
of his employment, need not relocate his residence from the community in which
he presently resides. Any demand or requirement by the Company that the
Employee principally perform his duties at a location or office that requires
more than an additional hour of one-way commutation time than the Employee
currently experiences shall, in the absence of the Employee's consent (which
may be withheld for any reason), constitute a termination without cause by the
Company of the Employee's engagement hereunder.
9. SERVICE AS DIRECTOR.
During the Employment Period, the Employee shall, if elected or
appointed, serve as a Director of the Company, Quintel and/or any subsidiary of
Quintel or the Company upon such terms as shall be mutually agreed upon by the
Employee and the Company.
10. KEY MAN INSURANCE.
Quintel or the Company shall have the right to obtain life
insurance on the Employee's life in such amount as either determines. Employee
shall cooperate with Quintel and the Company in applying for the policy, will
submit to a physical examination, supply all information required by the
insurance company or companies to which application is made, and execute and
deliver all necessary documents required in such connection. Quintel or the
Company, as the case may be, shall be the sole owner of the policy, be entitled
at all times to its physical possession and Quintel or the Company shall be the
beneficiary of the policy and entitled to all rights and privileges thereunder.
Quintel or the Company may at any time pledge the entire policy with the
insurance company or with others as collateral for any loan, for which Employee
shall have no responsibility or liability. Quintel or the Company shall have
the sole right to determine in their exclusive discretion whether to continue,
renew or cancel the policy, and neither Employee nor Employee's heirs,
executors, successors or assigns shall have any rights to any part of the
policy, its value or its proceeds. After the initial policy is obtained,
Employee shall cooperate with Quintel or the Company in the manner provided in
this paragraph in connection with applications to other insurance companies in
connection with additional or replacement policies.
5
<PAGE> 59
11. ASSIGNMENT.
This Agreement, as it relates to the Company's employment of the
Employee, is a personal contract and the rights and interests of the Employee
hereunder may not be sold, transferred, assigned, pledged or hypothecated,
except as otherwise set forth herein. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns,
including without limitation, any corporation or other entity into which the
Company or Quintel is merged or which acquires all of the outstanding shares of
Quintel's or the Company's capital stock, or all or substantially all of the
assets of Quintel or the Company.
12. RIGHT TO PAYMENTS.
The Employee shall not under any circumstances have any option
or right to require payments hereunder otherwise than in accordance with the
terms hereof. To the extent permitted by law, the Employee shall not have any
power of anticipation, alienation or assignment of payments contemplated
hereunder, and all rights and benefits of the Employee shall be for the sole
personal benefit of the Employee, and no other person shall acquire any right,
title or interest hereunder by reason of any sale, assignment, transfer, claim
or judgment or bankruptcy proceedings against the Employee.
13. NOTICES.
Any notice required or permitted to be given pursuant to this
Agreement shall be deemed given one (1) business day after personally delivered
or delivered by a nationally recognized overnight courier or five (5) business
days after such notice is mailed by certified mail, return receipt requested,
addressed as follows: (i) if to Employee, at 2455 E. Sunrise Boulevard, Fort
Lauderdale, Florida 33304 and (ii) if to the Company, at One Blue Hill Plaza,
Pearl River, New York 10965, Attention: Chief Executive Officer or at such
other address as any such party shall designate by written notice to the other
party. Copies of all notices shall also be provided to Feder, Kaszovitz,
Isaacson, Weber, Skala & Bass LLP, 750 Lexington Avenue, New York, New York
10022-1200.
14. GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of New York.
15. WAIVER.
The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other breach.
16. SEVERABILITY.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or unenforceable any
other provisions of this Agreement, and this Agreement shall be carried out as
if such invalid or unenforceable provisions were not embodied therein.
6
<PAGE> 60
17. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein. This
Agreement supersedes any other prior and contemporaneous agreements,
understandings, negotiations and discussions, whether written or oral, of the
parties hereto relating to the transactions contemplated by this Agreement.
This Agreement may be amended only in a writing executed by the parties hereto
affected by such amendment.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
CALLING CARD CO., INC.
By:
----------------------------------
Jeffrey L. Schwartz
----------------------------------
STEVEN L. FEDER
7
<PAGE> 61
Schedule 1.9 Escrow Agreement
<PAGE> 62
ESCROW AGREEMENT __________, 1996
Re: ACQUISITION AGREEMENT (THE "ACQUISITION AGREEMENT") BETWEEN QUINTEL
ENTERTAINMENT, INC. ("QUINTEL"), CALLING CARD CO., INC. ("CCCI") AND
PSYCHIC READERS NETWORK, INC. ("PRN") AND A PLEDGE OF SHARES AGREEMENT
BETWEEN QUINTEL, PRN, STEVEN L. FEDER ("FEDER"), THOMAS H. LINDSEY
("LINDSEY") AND PETER STOLZ ("STOLZ") ("PLEDGE AGREEMENT") OF EVEN
DATE HEREWITH.
1. The undersigned, Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
(the "Escrow Agent"), hereby acknowledges receipt of the following documents
(hereafter such documents are collectively referred to as the "Collateral")
pursuant to the provisions of the Acquisition Agreement and Pledge Agreement:
i. three (3) certificates, representing in the aggregate Four
Hundred Thousand (400,000) shares of the common stock of Quintel, in
the respective names of Feder, Lindsey and Stolz, with such three
certificates being in the following amounts:
Feder - ___________ shares
Lindsey - _______________ shares
Stolz - ______________ shares;
ii. stock powers signed in blank by Feder, Lindsey and Stolz in form
for transferring their respective shares to Quintel.
2. Capitalized terms not otherwise defined in this Agreement shall have
the meaning ascribed thereto in the Acquisition Agreement.
3. The Escrow Agent shall hold the Collateral received by it in escrow
and shall dispose of the Collateral only in accordance with the provisions of
this Agreement and the Acquisition Agreement.
4. The Escrow Agent may assume the genuineness of any document or
signature which appears to it to be genuine (whether or not original or
photocopy) if such document or signature is presented to it. The Escrow Agent
shall have no obligations other than those specifically set forth herein. The
Escrow Agent shall be entitled to rely on written instructions signed by all of
Quintel, Feder, Lindsey, Stolz and PRN with respect to the delivery of the
Collateral.
5. Any notice or other communication hereunder shall be addressed to the
parties as provided in the Acquisition Agreement.
6. Quintel, Feder, Lindsey, Stolz and PRN acknowledge that the Collateral
has been pledged to secure the obligations of Feder, Lindsey, Stolz and/or PRN
under the Acquisition Agreement and that the Collateral has been delivered to
the Escrow Agent as agent for Quintel as secured party.
7. The Escrow Agent shall not be obligated to, but may, institute legal
proceedings (which, if instituted, shall be in a court in the City and State of
New York) to determine its obligations hereunder or to seek permission to
deposit the Collateral or any portion thereof in court, upon which act the
Escrow Agent shall be relieved of any further obligations hereunder with
respect to such Collateral.
<PAGE> 63
8. The Escrow Agent shall have no liability to any party except for the
Escrow Agent's willful misconduct or gross negligence. Upon disposing of the
Collateral held by the Escrow Agent in the manner provided in this Agreement,
the Escrow Agent shall be released, discharged, and acquitted of all
obligations and liabilities hereunder and any claims or surcharges made by or
on behalf of any party to this Agreement.
9. The Escrow Agent may resign at any time on thirty (30) days' written
notice to all the parties hereto, in which event Quintel shall have the right
to name a substitute escrow agent, who shall be an attorney admitted to the
practice of law in the State of New York. If a substitute escrow agent is not
appointed at the end of such period, the Escrow Agent may appoint a substitute
escrow agent.
10. Feder, Lindsey, Stolz and PRN each acknowledge that the Escrow Agent
has acted as counsel to Quintel in connection with the negotiation and
conclusion of the Acquisition Agreement and the consummation of the
transactions contemplated thereby. In the event of any dispute between Feder,
Lindsey, Stolz and/or PRN and Quintel in connection with the Acquisition
Agreement or the transactions contemplated thereby, including the transactions
described in this Escrow Agreement, Feder, Lindsey, Stolz and PRN consent to
the Escrow Agent acting as counsel to Quintel in connection with such dispute.
11. This Agreement cannot be changed or terminated orally.
FEDER, KASZOVITZ, ISAACSON, WEBER, SKALA & BASS LLP
By:
-----------------------------
QUINTEL ENTERTAINMENT, INC. CALLING CARD CO., INC.
By: By:
----------------------------- --------------------------------
PSYCHIC READERS NETWORK, INC.
By:
-----------------------------
- -------------------------------- --------------------------------
STEVEN L. FEDER THOMAS H. LINDSEY
- --------------------------------
PETER STOLZ
<PAGE> 64
Schedule 1.15 Non-Competition and Right of First Refusal Agreements
<PAGE> 65
NON-COMPETITION AND RIGHT OF FIRST REFUSAL
AGREEMENT dated ___________, 1996 by and
between QUINTEL ENTERTAINMENT, INC., a
Delaware corporation ("Quintel") and
PSYCHIC READERS NETWORK, INC., a Florida
corporation ("PRN" or "Obligor").
__________________________________________________________________
R E C I T A L :
Quintel has concurrently with the execution and delivery of this Agreement
acquired all of the interest (the "NL Interest") in New Lauderdale L.C., a
Florida limited liability company ("New Lauderdale") owned by PRN, in
consideration for 3,200,000 shares of Quintel's common stock.
NOW, THEREFORE, in order to induce Quintel to issue its shares of stock in
consideration for the transfer of the NL Interest, and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
1. As an inducement to Quintel's acquisition of the NL Interest and
issuance of its shares in consideration for the transfer of the NL Interest,
the Obligor hereby covenants and agrees that from the date hereof through
___________, 2001 (the "Restrictive Period"), it will not, without the prior
written approval of the Board of Directors of Quintel, directly or indirectly,
engage in any business activity competitive (i) with the business of New
Lauderdale acquired by Quintel or (ii) competitive with any other business
conducted by Quintel or any of its subsidiaries or affiliates during the
Restrictive Period (Quintel and its subsidiaries and affiliates are
collectively referred to as the "Company"). The term "affiliate" shall mean
any entity or venture in which Quintel has an interest.
For the purposes of this Agreement any business which (i) provides telephone
entertainment services of the type provided by New Lauderdale or the Company,
or (ii) which the Company or New Lauderdale is considering or has in the past
twelve months considered, or (iii) which markets and/or operates theme related
telephone service programs or membership clubs pertaining to astrology,
psychics, diet services, personals or any other subject matter with which
Quintel or New Lauderdale is now actively engaged in or has been engaged during
the preceding twelve months, or becomes engaged during the Restrictive Period
will constitute a business activity competitive with the business of the
Company or New Lauderdale, as the case may be. Furthermore, the Obligor agrees
that, during such period, it shall not (i) directly or indirectly employ or
attempt to employ or assist anyone else to employ any person who is then, or at
any time during the preceding twelve months was, in the employ of the Company,
other than Stephen Feder, or (ii) solicit, directly or indirectly, or affect to
the Company's detriment any relationship of the Company with any customer,
supplier, service bureau, vendor or employee of the Company or New Lauderdale
or cause any customer, supplier,
<PAGE> 66
service bureau or vendor of the Company or New Lauderdale to refrain from
entrusting additional business to the Company or New Lauderdale.
Notwithstanding the provisions of this Section 1, Obligor shall be permitted to
continue to conduct its existing business as of the date hereof following its
transfer of the NL Interest to the Company. PRN'S existing business as of the
date hereof means the business of providing pay- per-call astrology and
psychics telephone entertainment in the manner in which PRN is providing such
services as of the date hereof.
2. As used herein, the term "customer" shall mean (i) anyone who is
a customer of the Company at the time of the alleged prohibited conduct; (ii)
anyone who was a customer of the Company or NL at any time during the two year
period immediately preceding the alleged prohibited conduct; (iii) any
prospective customers to whom the Company had made a presentation (or similar
offering of services) within a period of 360 days immediately preceding the
alleged prohibited conduct or, if the alleged prohibited conduct occurs after
the end of the Restrictive Period, within a period of 360 days immediately
preceding such termination; and (iv) any customer for which the Company renders
or has provided programs or services within the time periods set forth above.
3. As a further inducement to Quintel's acquisition of the NL
Interest and issuance of its shares in consideration for the transfer thereof,
the Obligor agrees that the Company shall have a right of first refusal with
respect to any new business venture (any such venture is referred to as a "New
Venture") developed by PRN with any third parties or in the management,
ownership or development of which it becomes involved. In the event Obligor
becomes involved in the development of a New Venture, Obligor shall give
written notice to the Quintel of the nature thereof, and the Quintel, Quintel
or any of their respective subsidiaries or affiliates shall have the right at
their option, exercised by written notice to Obligor given within thirty (30)
days after receipt of Obligor's notice, to negotiate the terms of such New
Venture with the other parties involved with such New Venture within the sixty
(60) day period following receipt of Obligor's notice, and during such sixty
(60) day period the parties will negotiate in good faith regarding such terms.
If the Quintel and such third parties are unable to reach agreement during such
sixty (60) day period, Obligor may enter into such New Venture with such third
parties on terms no less favorable than the last terms, if any, proposed by the
Quintel to such third parties, or if no such terms were proposed, on terms no
more favorable than the last terms, if any, proposed by such third parties to
the Quintel. If Obligor and the third parties do not conclude a definitive,
binding agreement with respect to the New Venture within six (6) months
thereafter, then prior to entering into an agreement with other parties with
respect to such New Venture, Obligor shall again give notice to the Quintel of
its determination to enter into such New Venture, and the Quintel shall again
have the right of first refusal described in this paragraph with respect to the
New Venture.
4. The Obligor acknowledges that the restrictive covenants above
are necessary in order to protect and maintain the asset acquired by Quintel
from PRN and to prevent the usurpation by the Obligor of all or any portion of
the asset acquired by Quintel. The Obligor acknowledges that the business of
NL and the Company extends beyond the geographic area of the States of New York
and Florida and accordingly, he is reasonable that the restrictive covenants
set forth above are not limited by specific geographic area but by the location
of the customers of the Company and NL.
<PAGE> 67
5. The Obligor acknowledges that the remedy at law for any breach
of this Agreement by the Obligor will be inadequate and that, accordingly,
Company shall, in addition to all other available remedies (including without
limitation seeking such damages as it can show it has sustained by reason of
such breach), be entitled to injunctive relief without being required to post
bond or other security and without having to prove the inadequacy of the
available remedies at law.
6. The Obligor acknowledges that the type and periods of
restriction imposed herein are fair and reasonable and are reasonably required
for the protection of the Company and New Lauderdale and are given as an
integral part of the acquisition by Quintel of the NL Interest from PRN. If
any of the covenants contained in this Agreement, or any part thereof, is
hereinafter construed to be invalid or unenforceable, the same shall not affect
the remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions. If any of the covenants contained in
this Agreement, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or geographic area of such provision and, in its reduced form, said
provision shall then be enforceable.
7. The Obligor acknowledges that Company and the Obligor intend to
and hereby confer jurisdiction to enforce the covenants contained in this
Agreement upon the courts of any state within the geographical scope of such
covenants. In the event that the courts of one or more of such states shall
hold such covenants wholly unenforceable by reason of the breadth of such scope
or otherwise, it is the intention of the parties hereto that such determination
not bar or in any way affect the right of the Company to the relief provided
above in the courts of any other states within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states,
the above covenants as they relate to each state being, for this purpose,
severable into diverse and independent covenants. Notwithstanding the
foregoing, no action will be commenced in more than one jurisdiction at a time
unless one or more of the provisions of this Agreement can only be enforced if
an action is brought in another jurisdiction or jurisdictions.
8. In order to secure its obligations under this Agreement, PRN
hereby grants the Quintel a security interest in all of PRN's Confidential
Information, and all documents, instruments, computer software, object codes,
computer hardware, and intangibles in which such Confidential Information is
maintained, stored, or embodied. The term "Confidential Information means any
secret or confidential information used by PRN in the conduct of its business,
including the computer system software operating PRN's caller distribution and
psychics' backend scheduling; the operations of the live operator service and
all confidential information and proprietary data related thereto; and any
derivative works derived therefrom, as well as research, development, trade
secrets and business affairs of PRN, its employees, contractors,
subcontractors, subsidiaries, affiliates or agents. This Agreement shall
constitute a security agreement within the meaning of the Uniform Commercial
Code of Florida, New York and Delaware (collectively, "UCC"). In the event of
any breach by PRN of its obligations under this Agreement, Quintel shall have
all of the rights of a secured creditor under the UCC. Quintel shall have the
right to file without PRN's signature a financing
3
<PAGE> 68
statement and any continuation statement or amendment thereto necessary or
advisable in order to perfect and maintain the perfection of the foregoing
security interest. A UCC-3 termination statement terminating the security
interest in the Confidential Information shall be delivered to PRN at such time
as no Obligations remain to be performed.
9. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be
performed entirely within the state of New York.
11. In the event any provision of this Agreement is found to be void
and unenforceable by a court of competent jurisdiction or arbitration panel,
the remaining provisions of this Agreement shall nevertheless be binding upon
the parties hereto with the same effect as though the void or unenforceable
part had been severed and deleted.
12. This Agreement may not be changed orally, but only by an
agreement in writing signed by the Company and PRN.
QUINTEL ENTERTAINMENT, INC.
By:
--------------------------------
Jeffrey L. Schwartz
PSYCHIC READERS NETWORK, INC.
By:
---------------------------------
4
<PAGE> 69
NON-COMPETITION AND RIGHT OF FIRST
REFUSAL AGREEMENT dated
___________, 1996 by and
between QUINTEL
ENTERTAINMENT, INC., a
Delaware corporation
("Quintel") and
________________________
("Obligor").
__________________________________________________________________
R E C I T A L :
Quintel has concurrently with the execution and delivery of this Agreement
acquired all of the interest (the "NL Interest") in New Lauderdale L.C., a
Florida limited liability company ("New Lauderdale") owned by Psychic Readers
Network, Inc., a Florida corporation of which Obligor is a shareholder, in
consideration for 3,200,000 shares of Quintel's common stock, of which
_____________ shares have been distributed to Obligor.
NOW, THEREFORE, the parties agree as follows:
1. As an inducement to Quintel's acquisition of the NL Interest and
issuance of its shares in consideration for the transfer of the NL Interest,
the Obligor hereby covenants and agrees that from the date hereof through
___________, 2001 (the "Restrictive Period"), he will not, without the prior
written approval of the Board of Directors of Quintel, directly or indirectly,
engage in any business activity competitive (i) with the business of New
Lauderdale acquired by Quintel or (ii) competitive with any other business
conducted by Quintel or any of its subsidiaries or affiliates, including New
Lauderdale during the Restrictive Period (Quintel and its subsidiaries and
affiliates are collectively referred to as the "Company"). The term
"affiliate" shall mean any entity or venture in which Quintel has an interest.
For the purposes of this Agreement any business which (i) provides telephone
entertainment services of the type provided by the Company, or (ii) which New
Lauderdale is considering or has in the past twelve months considered, or (iii)
which markets and/or operates theme related telephone service programs,
voice-mail programs or membership clubs pertaining to astrology, psychics, diet
services, personals or any other subject matter with which the Company is now
actively engaged in or has been engaged during the preceding twelve months, or
becomes engaged during the Restrictive Period will constitute a business
activity competitive with the business of the Company. Furthermore, the
Obligor agrees that, during such period, he shall not (i) directly or
indirectly employ or attempt to employ or assist anyone else to employ any
person (except on behalf of the Company) who is then, or at any time during the
preceding twelve months was, in the employ of the Company, or (ii) solicit,
directly or indirectly, or affect to the Company's detriment any relationship
of the Company with any customer, supplier, service bureau, vendor or employee
of the Company or cause any customer, supplier, service bureau or vendor of
the Company to refrain from entrusting additional business to the
<PAGE> 70
Company. Nothing herein shall prevent or limit PRN in the conduct of its
existing business as defined herein.
Notwithstanding the provisions of this Section 1, Obligor shall be permitted to
continue to render services to PRN with respect to the conduct of its existing
business as of the date hereof following PRN's transfer of the NL Interest to
the Company. PRN'S existing business as of the date hereof means the business
of providing pay-per-call astrology and psychics telephone entertainment in the
manner in which PRN is providing such services as of the date hereof.
2. As used herein, the term "customer" shall mean (i) anyone who is
a customer of the Company at the time of the alleged prohibited conduct; (ii)
anyone who was a customer of the Company at any time during the two year period
immediately preceding the alleged prohibited conduct; (iii) any prospective
customers to whom the Company had made a presentation (or similar offering of
services) within a period of 360 days immediately preceding the alleged
prohibited conduct or, if the alleged prohibited conduct occurs after the end
of the Restrictive Period, within a period of 360 days immediately preceding
such termination; and (iv) any customer for which Company, renders or has
provided programs or services within the time periods set forth above.
3. As a further inducement to Quintel's acquisition of the NL
Interest and issuance of its shares in consideration for the transfer thereof,
the Obligor agrees that the Company shall have a right of first refusal with
respect to any new business venture (any such venture is referred to as a "New
Venture") developed by him with any third parties or in the management,
ownership or development of which he becomes involved. In the event Obligor
becomes involved in the development of a New Venture, Obligor shall give
written notice to the Quintel of the nature thereof, and the Quintel, Quintel
or any of their respective subsidiaries or affiliates shall have the right at
their option, exercised by written notice to Obligor given within thirty (30)
days after receipt of Obligor's notice, to negotiate the terms of such New
Venture with the other parties involved with such New Venture within the sixty
(60) day period following receipt of Obligor's notice, and during such sixty
(60) day period the parties will negotiate in good faith regarding such terms.
If the Quintel and such third parties are unable to reach agreement during such
sixty (60) day period, Obligor may enter into such New Venture with such third
parties on terms no less favorable than the last terms, if any, proposed by the
Quintel to such third parties, or if no such terms were proposed, on terms no
more favorable than the last terms, if any, proposed by such third parties to
the Quintel. If Obligor and the third parties do not conclude a definitive,
binding agreement with respect to the New Venture within six (6) months
thereafter, then prior to entering into an agreement with other parties with
respect to such New Venture, Obligor shall again give notice to the Quintel of
his determination to enter into such New Venture, and the Quintel shall again
have the right of first refusal described in this paragraph with respect to the
New Venture.
4. The Obligor acknowledges that the restrictive covenants above
are necessary in order to protect and maintain the asset acquired by the
Quintel from PRN and to prevent the usurpation by the Obligor (an employee of
and a stockholder of PRN) of all or any portion of
<PAGE> 71
the asset acquired by Quintel. The Obligor acknowledges that the business of
the Company extends beyond the geographic area of the States of New York and
Florida and accordingly, it is reasonable that the restrictive covenants set
forth above are not limited by specific geographic area but by the location of
the customers of the Company.
5. The Obligor acknowledges that the remedy at law for any breach
of this Agreement by the Obligor will be inadequate and that, accordingly,
Company shall, in addition to all other available remedies (including without
limitation seeking such damages as it can show it has sustained by reason of
such breach), be entitled to injunctive relief without being required to post
bond or other security and without having to prove the inadequacy of the
available remedies at law.
6. The Obligor acknowledges that the type and periods of
restriction imposed herein are fair and reasonable and are reasonably required
for the protection of the Company and New Lauderdale, and are given as an
integral part of the acquisition by Quintel of the NL Interest from PRN. If
any of the covenants contained in this Agreement, or any part thereof, is
hereinafter construed to be invalid or unenforceable, the same shall not affect
the remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions. If any of the covenants contained in
this Agreement, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or geographic area of such provision and, in its reduced form, said
provision shall then be enforceable.
7. The Obligor acknowledges that Company and the Obligor intend to
and hereby confer jurisdiction to enforce the covenants contained in this
Agreement upon the courts of any state within the geographical scope of such
covenants. In the event that the courts of one or more of such states shall
hold such covenants wholly unenforceable by reason of the breadth of such scope
or otherwise, it is the intention of the parties hereto that such determination
not bar or in any way affect the right of the Company to the relief provided
above in the courts of any other states within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states,
the above covenants as they relate to each state being, for this purpose,
severable into diverse and independent covenants. Notwithstanding the
foregoing, no action will be commenced in more than one jurisdiction at a time
unless one or more of the provisions of this Agreement can only be enforced if
an action is brought in another jurisdiction or jurisdictions.
8. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
9. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be
performed entirely within New York.
3
<PAGE> 72
10. In the event any provision of this Agreement is found to be void
and unenforceable by a court of competent jurisdiction or arbitration panel,
the remaining provisions of this Agreement shall nevertheless be binding upon
the parties hereto with the same effect as though the void or unenforceable
part had been severed and deleted.
11. This Agreement may not be changed orally, but only by an
agreement in writing signed by the Company and the Obligor.
QUINTEL ENTERTAINMENT, INC.
By:
--------------------------------
Jeffrey L. Schwartz
OBLIGOR:
-------------------------------------
4
<PAGE> 73
Schedule 1.22 Registration Rights Agreement
<PAGE> 74
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated
__________________, 1996, by and among QUINTEL ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), and PSYCHIC READERS NETWORK, INC., a Florida
corporation ("PRN").
WHEREAS, PRN has sold to the Company's subsidiary its interest
in New Lauderdale L.C. in consideration of the issuance to PRN by the Company
of Three Million Two Hundred Thousand (3,200,000) shares of Common Stock, par
value $.001 per share, of the Company (the "Registrable Securities"); and
WHEREAS, PRN has distributed a portion of the Registrable
Securities to its three stockholders (PRN and/or such persons are hereinafter
referred to collectively as the "Holders" or each as a "Holder");
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein, the parties agree as follows:
1. Registration of Registrable Securities. As promptly as
practicable after the date of this Agreement, the Company will file and use its
best efforts to cause to become effective under the Securities Act of 1933, as
amended (the "Act"), a registration statement covering the Registrable
Securities to permit the public distribution, which shall include the resale on
a continuing basis, of the Registrable Securities by the Holders. The Company
will use its reasonable efforts to maintain in effect such registration
statement for (i) two (2) years following the date hereof or, if sooner, (ii)
until, in the opinion of counsel for the Company, the Registrable Securities
may be publicly sold in accordance with the provisions of Rule 144 (or any
successor or supplemental rule) under the Act or otherwise without registration
under the Act.
2. Inclusion of Other Securities in Registration Statement. The
Company shall have the right
<PAGE> 75
to include in any registration statement filed pursuant to Section 1 hereof any
other securities of the Company for sale for its own account or for the account
of any other person. If any such other securities shall be offered in an
underwritten offering, at the request of the managing underwriter, the Holders
shall sell the Registrable Securities to or through the underwriters on the
same terms as such other securities are being offered and sold by such
underwriters, and each Holder will enter into an underwriting agreement with
such underwriters which shall be substantially similar to the underwriting
agreement between the Company or such other persons selling securities and the
underwriters, provided that the Holders shall not be required to make any
representations or warranties to the underwriters other than as relate to such
Holder and such Holder's Registrable Securities.
3. Registration Procedures. In connection with the registration
of the Registrable Securities pursuant to this Agreement, the Company will as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such securities on such appropriate registration form of the
Commission as shall be selected by the Company and use its reasonable
efforts to cause such registration statement to become effective;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and current, and to comply with the provisions of
the Act with respect to the disposition of the securities covered by
such registration statement, for the period during which the Company is
required to keep the registration statement in effect as provided in
Section 1 hereof;
(c) furnish to the Holder and each underwriter, if any,
of such securities such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Act, in conformity with the
requirements of the Act, and such other documents, as such Holder or
such underwriter may reasonably request in order to facilitate the
disposition of the securities owned by such Holder, but only while the
Company is required under the provisions hereof to cause the
registration statement to remain in effect;
(d) use reasonable efforts to register or qualify the
Registrable Securities covered by such registration statement under
such securities or blue sky laws of such jurisdictions where an
exemption is not available and as the Holders of Registrable
Securities covered by such registration statement shall reasonably
request, and to take any and all other action which may be
<PAGE> 76
necessary or advisable to enable such Holders to consummate the
disposition in such jurisdictions of the Registrable Securities owned
by such Holders; provided, however, that the Company shall not for any
such purpose be required (A) to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not, but for
the requirements of this paragraph (d) be obligated to be so
qualified, (B) to conform the composition of its assets at the time to
the securities or blue sky laws of any jurisdiction, (C) to subject
itself to taxation in any such jurisdiction, or (D) to consent to
general service of process in any such jurisdiction;
(e) notify the Holder at any time when a prospectus
relating thereto is required to be delivered under the Act, of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing
(whereupon the Holder shall forthwith discontinue use of such
prospectus until receipt of notice from the Company that use of such
prospectus may be resumed or receipt of a prospectus supplement or
amendment hereinafter referred to), and, at the request of the Holder,
promptly prepare and file with the Commission and furnish to the
Holder and each underwriter, if any, a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances the existing;
(f) use reasonable efforts to list all Registrable
Securities covered by such registration statement on any national
securities exchange on which the Company's securities of the same
class are then listed or, if not so listed, to qualify for trading on
NASDAQ=NMS or NASDAQ, if eligible and if securities of the same class
are then so traded, if such securities are not already so listed or
qualified and if such listing or qualification is then permitted under
the rules of such exchange or market system.
The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such Holder and the intended method of distribution of
such Registrable Securities as the Company may from time to time reasonably
request in writing and as shall be required by law in connection therewith,
including, without limitation, notice of sales effected by such Holders under
such registration statement.
In the event that a registration statement pursuant to this Agreement
does not become effective notwithstanding the Company's compliance with the
procedures contained in this Section 3, the Company shall not be liable in any
manner whatsoever to the Holder with respect to the same.
4. Reasonable Investigation. In connection with the preparation
and filing of the registration statement pursuant to this Agreement, the
Company will give the Holders, their respective underwriters, if any, and their
respective counsel and accountants, the opportunity to participate in the
preparation of
<PAGE> 77
such registration statement, each prospectus included therein or filed with the
Commission, and, to the extent practicable, each amendment thereof or
supplement thereof, and will give each of them (provided such Holder agrees not
to use any information so obtained for any purpose other than preparation of
the registration statement except to the extent the Holders would be entitled
to receive such information without restriction as stockholders of the Company
under applicable provisions of Delaware law) such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such Holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Act.
5. Expenses. The Company will pay all expenses incident to the
Company's performance of or compliance with Section 3 of this Agreement. The
Holders will pay any and all fees and expenses of their respective counsel,
accountants and advisors, underwriters' and brokers' discounts, commissions,
fees and expenses, and transfer taxes, if any, in respect of the Registrable
Securities.
6. Indemnification.
(a) Indemnification by the Company. With respect to the
registration of Registrable Securities pursuant to this Agreement, the Company
will, and hereby does, indemnify and hold harmless each Holder, its directors,
officers, partners, agents and affiliates, if any, and each other person who
participates as an underwriter in the offering or sale of such Registrable
Securities and each other person, if any, who controls such Holder or any such
underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities, joint or several, to which such Holder or any such director,
officer, partner, agent or affiliate or participating or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
Registrable Securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
<PAGE> 78
amendment or supplement thereto, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and the Company will reimburse such
Holder and each such director, officer, partner, agent, affiliate,
participating person and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Holer or such underwriter, as
the case may be; and provided, further, that the Company shall not be liable to
the Holder or any person who participates as an underwriter in the offering or
sale of Registrable Securities or any other person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Holder's or
person's failure to send or give a copy of the final prospectus, as the same
may be then supplemented or amended, to the person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such director,
officer, partner, agent, affiliate, participating person or controlling person
and shall survive the transfer of such securities by such Holder.
(b) Indemnification by the Holder. Each Holder will
indemnify and hold harmless (in the same manner and to the same extent as set
forth in section (a) above) the Company, each director of the Company, each
officer of the Company, each other person, if any, who controls the Company
within the meaning of the Securities Act and any underwriter of the Registrable
Securities, with respect
<PAGE> 79
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Holder or such underwriter, as the case may be.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such Registrable
Securities by the Holder.
(c) Notices of Claims, etc. Promptly after receipt of
any party entitled to indemnification under this Agreement (the "Indemnitee")
of notice of any demand, claim or circumstances which, with the lapse of time,
would or might give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in any claims referred to in paragraph (a) or (b)
hereof, the Indemnitee shall promptly give notice thereof (the "Claims Notice")
to the party obligated to provide indemnification pursuant to Section 9.2 or
9.4 (the "Indemnifying Party"); provided, however, that the failure of any
Indemnitee to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under paragraph (a) or (b), except to the extent that
the Indemnifying Party is actually prejudiced by such failure to give notice.
The Claims Notice shall describe the Asserted Liability in reasonable detail,
and shall indicate the amount (estimated, if necessary and to the extent
feasible) of the Claims that have been or may be suffered by the Indemnitee.
The Indemnifying Party may elect to compromise or defend, at
its own expense and by its own counsel, any Asserted Liability. If the
Indemnifying Party elects to compromise or defend such Asserted Liability, it
shall within thirty (30) days (or sooner, if the nature of the Asserted
Liability so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement,
<PAGE> 80
the Indemnitee may pay, compromise or defend such Asserted Liability at the
expense of the Indemnifying Party (if the Indemnifying Party is found obligated
to indemnify the Indemnitee with respect to the Claim). Subject to the
limitations contained in paragraph (d) on the obligations of the Indemnifying
Party in respect of proposed settlements, the Indemnitee shall have the right
to employ its own counsel with respect to any Asserted Liability, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
(a) the employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such action, or (b) such
Indemnifying Party shall not have, as provided above, promptly employed counsel
reasonably satisfactory to the Indemnitee to take charge of the defense of such
action, or (c) the Indemnitee shall have reasonably concluded based on an
opinion of counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to such Indemnifying
Party, in any of which events such reasonable fees and expenses shall be borne
by the Indemnifying Party and the Indemnifying Party shall not have the right
to direct the defense of such action on behalf of the Indemnitee in respect of
such different or additional defenses. If the Indemnifying Party chooses to
defend any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are necessary or
appropriate for such defense. If the Indemnifying Party elects not to assume
the defense of a Claim, it will not be obligated to pay the fees and expenses
of more than one counsel for all Indemnitees with respect to such claim, unless
in the reasonable judgment of an Indemnitee, and in the opinion of such
Indemnitee's counsel, a conflict of interest may exist between such Indemnitee
and any other of such Indemnitees with respect to such claim, in which event
the Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
Neither the Indemnifying Party nor the Indemnitee may settle or
compromise any claim for which indemnification has been sought and is available
hereunder, over the objection of the other; provided, however, that consent to
settlement or compromise shall not be unreasonably withheld or delayed. If,
however, the Indemnitee refuses to consent to a bona fide offer of settlement
which the Indemnifying
<PAGE> 81
Party wishes to accept, the Indemnitee may continue to pursue such matter, free
of any participation by the Indemnifying Party, at the sole expense of the
Indemnitee. In such event, the obligation of the Indemnifying Party to the
Indemnitee shall be equal to the lesser of (i) the amount of the offer of
settlement which the Indemnitee refused to accept plus the costs and expenses
of the Indemnitee prior to the date the Indemnifying Party notified the
Indemnitee of the offer of settlement, and (ii) the actual out-of-pocket amount
the Indemnitee is obligated to pay as a result of the Indemnitee's continuing
to pursue such matter. No party will be required to consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
party of a release from all liability in respect to the Claim.
(d) Contribution. If the indemnification provided for in
this section 6 from the Indemnifying Party is unavailable to an Indemnitee
hereunder in respect of any losses, claims, damages or liabilities referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnitee,
shall contribute to the amount paid or payable by such Indemnitee as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of such Indemnifying Party and
Indemnitees in connection with the actions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations or, if the allocation provided above is not permitted by
applicable law, in such proportion as shall be appropriate to reflect the
relative benefits received by the Indemnifying Party and the Indemnitees from
the offering of the securities covered by the registration statement that gave
rise to the indemnification claim. The relative fault of such Indemnifying
Party and Indemnitees shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
Indemnifying Party or Indemnitees and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to above shall be deemed to include, subject to the
<PAGE> 82
limitations set forth in this Section 6, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. The parties hereto agree that it would not be just and equitable
if contribution pursuant to this paragraph (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this paragraph (d). No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In addition, no person shall be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such person's consent (which consent shall
not be unreasonably withheld).
7. Substitute Registration Statement on Form S-3.
Notwithstanding anything to the contrary provided herein, to the extent
permitted by the Act and the rules and regulations of the Commission
thereunder, if the Company may effect or continue in effect the registration of
Registrable Securities (during such period as the Company may be required to
keep a registration statement in effect pursuant to this Agreement) on Form S-3
(or any successor form), the Company may deregister any Registrable Securities
registered pursuant to this Agreement on a form other than Form S-3 and
remaining unsold and re-register such Registrable Securities on Form S-3 (or
any successor form).
8. Notices. All notices or communications provided for hereunder
shall be in writing (including facsimile transmission) and shall be addressed
as follows:
(a) If to the Company:
Quintel Entertainment, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attn: Jeffrey L. Schwartz,
Chief Executive Officer
Copy to:
Murray L. Skala, Esq.
Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP
750 Lexington Avenue
New York, New York 10022
<PAGE> 83
(b) If to the Holders:
c/o Psychic Readers Network, Inc.
2455 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304
Copy to:
Donn Beloff, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, Florida 33301
Notices given by mail shall be deemed to have been given no later than three
business days after the date sent, if sent by registered or certified mail,
postage repaid, and addressed to the applicable party at the address shown
above (or such other address designated by such party subsequent to the date
hereof. Notices given by facsimile or hand delivery transmission shall be
deemed to have been given when sent or delivered, if properly addressed to the
party to whom sent or delivered. Any party may, by notice to the other party
given in accordance with this Section 8, designate another address or person
for receipt of notices or communications hereunder.
9. Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties with respect to the matters
described herein, and supersedes all prior discussions, agreements and
undertakings, written or oral, of any and every nature with respect thereto.
10. Waiver and Amendments. This Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by or on behalf of the parties. No such
written instrument shall be effective unless it expressly recites that it is
intended to amend, supersede, cancel, renew or extend this Agreement or to
waive compliance with one or more of the terms hereof, as the case may be. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
<PAGE> 84
11. Governing Law. This Agreement shall be governed in all
respects, including validity, construction, interpretation and effect, by the
laws of the State of New York without giving effect to the conflict of laws
provisions thereof. To the extent permitted by law, each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United States of
America located in the City of New York for any actions, suits or proceedings
arising out of or relating to this Agreement and the transaction contemplated
hereby (and agrees not to commence any action, suit or proceeding relating
thereto except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to its respective address
set forth in Section 8 shall be effective service of process of any action,
suit or proceeding brought against it in any such court. Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transaction contemplated hereby, in the courts of the State of New York
or the Untied States of America located in the City of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
12. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. The rights of a Holder under this Agreement may not be
assigned or transferred.
13. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts which together shall constitute one and the
same instrument.
14. Further Assurances. Each party shall, at the request of any
other party hereto, at any time and from time to time following the date of
this Agreement promptly execute and deliver, or cause to be executed and
delivered, to such requesting party all such further instruments and take all
such further action as may be reasonably necessary or appropriate to confirm or
carry out the provisions and intents of this Agreement.
<PAGE> 85
15. Captions. All Section titles or captions contained in this
Agreement are for convenience only, shall not be deemed a part of this
Agreement and shall not affect the meaning or interpretation of this Agreement.
All references herein to Sections and paragraphs shall be deemed references to
such parts of this Agreement, unless the context shall otherwise require.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
QUINTEL ENTERTAINMENT, INC.
By:
---------------------------------
Name: Jeffrey L. Schwartz
Title: Chairman and
Chief Executive Officer
PSYCHIC READERS NETWORK, INC.
By:
----------------------------------
Name: Steven L. Feder
Title:
-------------------------------------
Steven L. Feder
-------------------------------------
Peter Stolz
-------------------------------------
Thomas H. Lindsey
<PAGE> 86
Schedule 2.6 Form of Earnings Distribution Note
<PAGE> 87
NEW LAUDERDALE, L.C.
PROMISSORY NOTE
$________________ __________, 1996
FOR VALUE RECEIVED, the undersigned, NEW LAUDERDALE, L.C., a Florida limited
liability company (the "Maker"), having a place of business at One Blue Hill
Plaza, Pearl River, New York 10965, hereby promises to pay to the order of
_______________________________(the "Holder"), having an address at
_____________________________________________________________ the principal sum
of _________________________________________ Dollars and ________ Cents
($_______________________), with interest thereon at the rate of
________________ (___%) per annum [the Applicable Federal Rate determined under
Section 7872 of the Internal Revenue Code].
This Note is one of a series of notes being issued to the three stockholders of
Psychic Readers Network, Inc., a Florida corporation ("PRN") in the aggregate
amount of $_______________, in payment of an amount due to PRN by Maker. This
Note shall rank pari passu with all other such notes of this series.
The principal amount outstanding under this Note shall be payable by the Maker
to the Holder commencing on ___________________________, 1996, and each month
thereafter, until the date on which all amounts outstanding under this Note
have been paid in full (the "Final Payment Date"). Such monthly installments
shall be equal to the aggregate of:
(i) A minimum payment in the amount of $___________________ [[$75,000
multiplied by the holder's percentage ownership of PRN Shares]]; and
(ii) _______________ percent [[holder's percentage ownership of PRN
Shares]] multiplied by fifty (50%) percent of the Company's cash flow
in excess of $500,000 for the month immediately preceding.
Interest shall accrue and be payable in full on the Final Payment Date.
Interest at the rate of twelve percent (12%) per annum shall accrue upon any
installment not paid when due, or, after acceleration, upon the entire balance,
until paid in full.
This Note may be prepaid in whole or in part at any time without premium or
penalty.
IT IS FURTHER EXPRESSLY AGREED, that in the event of the failure of Maker to
pay any installment due under this Note after its due date, or then the entire
amount due under this Note shall upon five (5) days written notice given to
Maker and failure to cure such failure within such five (5) day period become
immediately due and payable at the option of the Holder without further notice
or demand. The undersigned agrees to pay, in addition to the principal and
interest, all costs of collection, including attorneys' fees and disbursements.
If a law which applies to this Note, and which sets maximum rates of interest
which may be charged, is finally interpreted so that the interest collected or
to be collected pursuant to this Note exceeds the
<PAGE> 88
permitted limits, then: (i) such interest shall be reduced by the amount
necessary to reduce the interest to the permitted limit; and (ii) any sums
already collected from the person or persons as to whom such interest is
determined to have exceeded the permitted limits will be refunded to such
person or persons. The Holder may choose to make this refund by reducing the
principal amount owed under this Note or by making a direct payment to such
person or persons. If a refund reduces principal, the reduction will be
treated as a partial prepayment.
The undersigned waives presentment, demand for payment, notice of dishonor and
any or all notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Promissory Note and consents to any
or all delays, extensions of time, renewals, releases of any party to this
Promissory Note and of any available security therefor to any party to this
Promissory Note or to the actual holder thereof and any and all waivers or
modifications that may be granted or consented to by the Holder with regard to
the time of payment or with respect to any other provisions of this Note and
agrees that no such action or failure to act on the part of the Holder shall be
construed as a waiver by the Holder of, or otherwise affect, its right to avail
itself of any remedy with respect thereto.
This Note shall be governed by and construed under the law of the State of New
York. Unless applicable law requires a different method, any notice that must
be given to the undersigned under this Note will be given by delivering it or
mailing it by first class mail to the undersigned at the address set forth at
the beginning of this Note or at such other address as such person may give
notice of to the Holder. Any notice to the Holder will be given by mailing it
first class mail to the Holder at the address for the Holder set forth at the
beginning of this Note or at such other address as the Holder may give notice
of to the Maker.
Any action brought to enforce this Note may be brought in the State of
New York, and Maker hereby consents to the personal jurisdiction of the federal
and state courts located in the State of New York, and agrees that unless
applicable law requires a different method, service of process in any such
action may be made by first class mail upon the Maker at the address set forth
in the beginning of this Note or at such other address as the Maker shall
advise the Holder by written notice to the address at which payments due under
this Note are to be sent pursuant to the first paragraph of this Note.
NEW LAUDERDALE L.C.
By: CALLING CARD CO., INC., a member
By:_________________________________
2
<PAGE> 89
Schedule 3.4.1(A) Form of Section 3.4.1 Note
<PAGE> 90
PROMISSORY NOTE
$__________ ___________, 199__
FOR VALUE RECEIVED, ________________________, an individual resident of the
State of Florida residing at ______________________, Florida 33____, (the
"Maker") promises to pay to _____________________ (the "Holder"), or order, at
_____________________, or such other place as the holder hereof may from time
to time designate in writing, the principal sum of
_____________________________ ($_______) DOLLARS, with interest at an annual
rate of ________________________ (____%) percent, as follows:
(1) interest shall be payable commencing on _______, 199__ and on the
first day of each month thereafter until the due date hereunder; and
(2) the balance of principal and interest to be repaid in full within
five (5) business days after a registration statement under the
Securities Act of 1933, as amended, permitting the sale of the Maker's
shares of common stock of Quintel Entertainment, Inc. ("Quintel"),
pledged by the Maker to the Holder as a security interest pursuant to
the provisions of the Pledge of Shares Agreement (defined below),
becoming effective or, in the opinion of Quintel's counsel, the sale
of such shares becomes exempt from registration and applicable state
law requirements.
This Note is secured by a Pledge of Shares Agreement of even date herewith
between the Maker as Pledgor and the Holder as Secured Party.
IT IS FURTHER EXPRESSLY AGREED, that in the event of the failure of Maker to
(i) pay any installment of principal or interest due under this Note on its due
date, or (ii) perform its obligations or pay any amount due under the Pledge of
Shares Agreement, then the entire amount due under this Note shall, upon five
(5) days written notice given to Maker and failure to cure such failure within
such five (5) day period, become immediately due and payable at the option of
the Holder without further notice or demand.
Interest at the rate of nine percent (9%) per annum shall accrue upon any
installment not paid when due, or, after acceleration, upon the entire balance,
until paid in full.
This Note may be prepaid in whole or in part at any time without premium or
penalty.
The undersigned agrees to pay, in addition to the principal and interest, all
costs of collection, including attorneys' fees and disbursements.
If a law which applies to this Note, and which sets maximum rates of interest
which may be charged, is finally interpreted so that the interest collected or
to be collected pursuant to this Note exceeds the permitted limits, then: (i)
such interest shall be reduced by the amount necessary to reduce the interest
to the permitted limit; and (ii) any sums already collected from the person or
persons as to whom such charged is determined to have exceeded the permitted
limits will be refunded to such person or persons. The Holder may choose to
make this refund by reducing the principal amount owed under this Note or by
making a direct payment to such person or persons. If a refund reduces
principal, the reduction will
<PAGE> 91
be treated as a partial prepayment.
The undersigned waives presentment, demand for payment, notice of dishonor and
any or all notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Promissory Note and consents to any
or all delays, extensions of time, renewals, releases of any party to this
Promissory Note and of any available security therefor to any party to this
Promissory Note or to the actual holder thereof and any and all waivers or
modifications that may be granted or consented to by the Holder with regard to
the time of payment or with respect to any other provisions of this Note and
agrees that no such action or failure to act on the part of the Holder shall be
construed as a waiver by the Holder of, or otherwise affect, its right to avail
itself of any remedy with respect thereto.
This Note shall be governed by and construed under the law of the State of New
York. Unless applicable law requires a different method, any notice that must
be given to the undersigned under this Note will be given by delivering it or
mailing it by first class mail to the undersigned at the address set forth at
the beginning of this Note or at such other address as such person may give
notice of to the Holder. Any notice to the Holder will be given by mailing it
first class mail to the Holder at the address for the Holder set forth at the
beginning of this Note or at such other address as the Holder may give notice
of to the Maker.
Any action brought to enforce this Note may be brought in the State of
New York, and Maker hereby consents to the personal jurisdiction of the federal
and state courts located in the State of New York, and agrees that unless
applicable law requires a different method, service of process in any such
action may be made by first class mail upon the Maker at the address set forth
in the beginning of this Note or at such other address as the Maker shall
advise the Holder by written notice to the address at which payments due under
this Note are to be sent pursuant to the first paragraph of this Note.
If more than one person signs this Note, each person is fully and personally
obligated to keep all of the promises made in this Note, including the promise
to pay the full amount owed. Any person who is a guarantor, surety or endorser
of this Note is also obligated to perform such obligations. Any person who
takes over these obligations, including the obligations of a guarantor, surety
or endorser of this Note, is also obligated to keep all of the promises made in
this Note. The Holder may enforce its rights under this Note against each
person individually or against all of persons who sign this Note together.
This means that any one of the undersigned may be required to pay all of the
amounts owed under this Note.
____________________________
ATTEST:
- --------------------
2
<PAGE> 92
Schedule 3.4.1(B) Form of Security Agreement
<PAGE> 93
PLEDGE OF SHARES AGREEMENT
THIS AGREEMENT, made as of the ____ day of _____________ by and
between ______________ an individual residing at _____________________
(hereinafter referred to as the "Shareholder") and ________________, an
individual residing at__________________ (hereinafter referred to as the
"Secured Party").
BACKGROUND
A. The Shareholder is the owner of ___________ shares of common
stock (the "Shares") of QUINTEL ENTERTAINMENT, INC. (the "Company");
B. The Shareholder has been loaned $_____________ by the Secured
Party, with such loan evidenced by a note (the "Note"), a copy of which is
annexed hereto as Schedule A.
C. The Shareholder desires, by the execution and delivery of this
Agreement, to grant to the Secured Party on the terms and conditions contained
herein, a valid and enforceable lien on and security interest in the Shares, as
security for the due performance and the payment of the amounts due under the
Note and the obligations described in this Agreement.
ARTICLE
1. PLEDGE OF SHARES
1.1 Pledge of Shares. The Shareholder hereby grants to Secured
Party a security interest in, and assigns, transfers and pledges to Secured
Party, the Shares, together with any stock rights, subscription rights,
liquidating dividends, stock dividends, dividends paid in stock or money, new
securities or other property which the Shareholder is, or may hereafter become,
entitled to receive on account of the Shares.
1.2 Delivery of Share Certificates. The Shareholder hereby
delivers to Secured Party, and by executing this Agreement Secured Party
acknowledges receipt of, a certificate or certificates representing
__________________ (______) shares of stock of the Company (the "Share
Certificates") accompanied by a stock power which the Shareholder has duly
endorsed to make Secured Party a holder thereof.
1.3 Obligations Secured; Future Advances. The Shares shall be
referred to as the "Security".
The Security constitutes and will constitute security for the payment
as and when due of all indebtedness and the performance of all obligations
under the Note, and for the payment of costs, fees, charges, and expenses which
may be due or owing in connection therewith, all of which shall be and remain
additional liens on the Security until each and all of the same have been fully
paid, satisfied, and discharged. Hereafter all of the payment and performance
obligations described in this paragraph shall be referred to collectively as
the "Obligations".
<PAGE> 94
ARTICLE
2. WARRANTIES AND REPRESENTATIONS
The Shareholder represents and warrants that the matters contained in
each of the following paragraphs are true and correct.
2.1 Title to Shares. Except as provided in this Agreement or the
Acquisition Agreement, Shareholder owns the Shares free and clear of any liens,
security agreements, equities, options, restrictions, encumbrances or charges
whatsoever and the ownership of the Shares by Shareholder is not subject to any
other agreement, trust or adverse claim. Shareholder has lawful, valid
marketable and indefeasible title to the Shares and has full right, power and
authority, without the prior or subsequent approval of any person, governmental
body or court, to pledge, transfer, assign and deliver the Shares as provided
in this Agreement, and such delivery will convey to Secured Party a lawful,
valid, and perfected security interest in the Shares, free and clear of any
other liens, claims, encumbrances or restrictions of whatever nature.
2.2 Other Laws or Agreements. The execution, delivery and
performance of this Agreement by Shareholder, and the endorsement and delivery
of the Share Certificates will not violate (1) any provision of law, any order
of any court or other agency of government, or (2) any indenture, agreement or
other instrument to which Shareholder is a party or by which it is bound.
ARTICLE
3. COVENANTS
Shareholder and the Company covenant that each will perform the
obligations contained in each of the following paragraphs in accordance with
the terms and conditions thereof.
3.1 Recording of Pledge. To the extent that it may be required by
law or the By-Laws of the Company or upon the demand of Secured Party, the
Shareholder shall cause the Company to record the pledge of Shares created by
this Agreement in its register of shareholders or other corporate records as
appropriate in order to protect the interests of Secured Party hereunder.
3.2 Filing of Financing Statements. The Shareholder shall, at his
own cost and expense, promptly and duly execute, record and file financing
statements and this Agreement, and all other security agreements pertaining to
the Shares and all such instruments and documents of further assurances
including, but not limited to, supplemental security agreements, financing
statements and continuation statements, and take such other action, as the
Secured Party may require in order that, in Secured Party's opinion, a valid
lien on and security interest in the collateral in favor of Secured Party will
be established, perfected and continued in effect at all times. The
Shareholder hereby authorizes Secured Party to effect such recording and filing
as aforesaid (including, where permissible, the filing of any financing
statements or continuation statements without the signature of the Shareholder
and the filing
2
<PAGE> 95
of a carbon, photographic or other reproduction of the Agreement or financing
statement as a financing statement).
3.3 Further Assurances. Shareholder shall execute and deliver to
Secured Party from time to time, at Secured Party's request, such documents and
instruments, and take such action, as Secured Party may deem necessary or
proper to perfect or otherwise protect the security interests created hereby.
3.4 Defense of Security Interest. Shareholder shall appear in and
defend, without cost to Secured Party, any action or proceeding purporting to
affect the security interest hereunder or the rights or powers of Secured Party
and, when requested by Secured Party, shall commence and maintain any action or
proceeding necessary to protect such security interest and such rights or
powers, and to pay all the costs and expenses, including without limitation
attorneys, fees, which Secured Party may incur in the event that Secured Party
elects to appear in, defend or commence and maintain any such action or
proceeding.
3.5 Payment of Secured Party's Expenses. The Shareholder shall
pay, immediately and without demand, all sums expended by Secured Party in the
enforcement and protection of Secured Party's rights pursuant to this
instrument, including without limitation attorney's fees and disbursements,
with interest from date of expenditure at the rate equal to nine percent per
annum. All such sums expended shall be a lien on the Shares and shall be
deemed to be secured hereby.
3.6 Limitation. The liability of Shareholder under Sections 3.3
and 3.4 shall be limited to actions purporting to challenge the validity of the
security interest and its priority over any other liens or encumbrances.
ARTICLE
4. RIGHTS OF SECURED PARTY
In addition to those rights set forth elsewhere in this Agreement,
Secured Party has the rights contained in each of the following paragraphs.
4.1 Secured Party's Right to Act For Shareholder. If there occurs
an event of default or an event which, with the giving of notice or passage of
time, or both, would constitute an event of default hereunder, then Secured
Party has the right, but not the obligation, without notice and without in any
way releasing the Shareholder from any of the Obligations to do any or all of
the following:
(i) make the payment or do the act in such manner
and to such extent as Secured Party may deem
necessary to protect the Security;
(ii) appear in and defend any action or proceeding
purporting to affect the Security or the
rights or powers of Secured Party;
3
<PAGE> 96
(iii) pay, purchase, contest or compromise any
encumbrance, charge, or lien which in the
judgment of Secured Party appears to affect
the Security;
(iv) incur any liability and expend such amounts
as Secured Party, in its absolute discretion,
may deem necessary to accomplish any of the
matters described in (i) through (iii) above,
including without limitation paying necessary
expenses, employing counsel and paying
counsel's fees.
4.2 Receipt of Dividends. At all times while Secured Party has
possession of any of the Share Certificates hereunder, Secured Party is
entitled to receive all dividends and other distributions, whether in stock,
cash, or other property, which may be declared on or with respect to the
Shares, as additional collateral for the obligations of Shareholder secured
hereunder; provided, however, that such dividends shall be held segregated from
the other assets of Secured Party, and if in the form of cash, shall be held in
an interest bearing account at a bank. The location of any such property, and
the identity and location of any such bank shall be promptly provided to the
Shareholder. NOTWITHSTANDING THE FOREGOING, HOWEVER, until the occurrence of
an event of default as defined in Article 6 below, Shareholder shall be
entitled to receive all cash dividends which may be declared on or with respect
to the Shares.
ARTICLE
5. OBLIGATIONS OF SECURED PARTY
5.1 Return of Shares. Secured Party shall deliver to Shareholder,
or such person as Shareholder may designate, all of the Share Certificates
which Secured Party then possesses, duly endorsed for transfer, upon payment
and performance in full of all of the Obligations.
5.2 Sale of Shares. Upon receipt of written instructions from
Shareholder, Secured Party shall sell the shares and apply the net proceeds
thereof to the payment of the amounts due under the Note; provided, however,
that prior to any such sale, a registration statement including the shares
shall have been declared effective by the Securities and Exchange Commission
or, in the opinion of counsel for the Company, the shares may be publicly sold
without registration.
ARTICLE
6. DEFAULT
6.1 Events of Default. The happening of any of the following
shall constitute an event of default under this Agreement:
(i) failure to pay the principal or any installment of
interest on the Note when due or the occurrence of
any other default under the Note; or
(ii) the Shareholder defaults in any of his obligations
under this Agreement.
4
<PAGE> 97
6.2 Remedies Upon Default. If an event of default as described in
paragraph 6.1 occurs, Secured Party, after five (5) days written notice to the
Shareholder and failure to cure the default within such five (5) day period,
may at its option and in addition to all the rights and remedies of a secured
party under the Uniform Commercial Code, which rights and remedies are
cumulative and not exclusive or enforceable alternatively, successively or
concurrently, take any or all of the actions described in the following
subparagraphs, at the same time or at different times:
(i) sell, assign and deliver, grant options for,
or otherwise dispose of any part or all of
the Shares, at a public or private sale in
the manner provided in paragraph 6.3;
(ii) commence a legal action, or initiate such
other proceeding as Secured Party may decide,
on the basis of the default.
6.3 Conduct of Sale of Security. In the event that Secured Party
elects, under the provisions of paragraph 6.2, to sell any part or all of the
Security, on one or more occasions, the following shall apply with regard to
such sale in addition to those rights and remedies applicable under the Uniform
Commercial Code.
(a) The sale of any part or all of the Security shall
have been made in a commercially reasonable manner as
long as it is made in conformity with reasonable
commercial practices for the disposition of similar
property. The sale may be conducted at such place
and time, to such person, for such price, and upon
such terms as Secured Party deems best, all without
demand for performance or notice or advertisement
other than as may be required under the laws
regulating the sale of securities.
(b) If applicable law requires reasonable notice of sale
or other disposition, Shareholder hereby agrees that
the sending of ten (10) business days, notice to
Shareholder, in the manner provided in paragraph 7.2,
of the place and time of any public sale or of the
time after which any private sale or other intended
disposition is to be made shall be deemed reasonable
notice thereof.
(c) Secured Party may bid for and purchase, at any sale,
the Shares offered for sale, or any part thereof, and
thereby become the owner thereof. Secured Party may
make payment for any of the Shares so purchased by
any means.
6.4 Application of Proceeds of Sale, Deficiencies. Secured Party
may apply the cash proceeds from any sale or other disposition of the Security
firstly to the reasonable expenses of retaking, holding, preparing for sale,
and selling the Security, including without limitation broker's fees; secondly
to reasonable attorney's fees and all legal expenses, travel and other expenses
which may be incurred by Secured Party in attempting to collect the
5
<PAGE> 98
Obligations or enforce this Agreement or in the prosecution or defense of any
action or proceeding related to the subject matter of this Agreement; and
thirdly to all unpaid Obligations. Any surplus shall be paid to the
Shareholder subject to any duty of Secured Party imposed by law to the holder
of any subordinate security interest in the Security known to Secured Party.
The Shareholder shall remain liable for any deficiency.
ARTICLE
7. GENERAL PROVISIONS
7.1 Power of Attorney. To effectuate the terms and provisions
hereof, Shareholder hereby designates and appoints Secured Party and its
designees or agents as attorneys-in-fact of Shareholder irrevocably and with
power of substitution, with authority for each and every of the following acts
in the event of a default hereunder:
(i) to sell, assign and deliver, grant options
for, or otherwise dispose of any part or all
of the Shares, at public or private sale at
the option of Secured Party; and
(ii) to do all other acts and things necessary and
advisable in the sole discretion of Secured
Party to carry out and enforce this
Agreement. All acts of said attorney or
designee are hereby ratified and approved.
Said attorney or designee shall not be liable
for any acts of commission or omission or for
any error of judgment or mistake of act or
law.
This power of attorney, being coupled with an interest, is irrevocable
while any of the Obligations are due or not satisfied or fully performed.
7.2 Notices. All notices which are to be given by one party to
the other party hereunder shall be in a writing which shall be sent by
certified or registered mail, postage prepaid, return receipt requested, or by
Federal Express or Express Mail, where available, or by a means of telex or
telefax followed by a confirmation letter sent by certified or registered mail,
postage prepaid, return receipt requested, addressed to each party at the
address first written above or such other address as shall be provided in
accordance with this paragraph.
7.3 Modifications. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by
the party thereto to be bound.
7.4 Waivers. Any term or condition of this Agreement may be
waived by either party only if that party signs a writing to such effect. No
waiver of any of the provisions of this Agreement shall be deemed a waiver of
any other provision, irrespective of similarity, or shall constitute a
continuing waiver unless otherwise expressly provided. No failure or delay on
the part of Secured Party in exercising any right, power or privilege under the
Note shall operate as a waiver thereof or hereof, nor shall a single or partial
exercise preclude any other or further exercise of any other right, power or
privilege.
6
<PAGE> 99
7.5 Assignment. Secured Party may assign this Agreement or any of
its rights and powers hereunder, and transfer possession of the Shares, and, in
the event of such assignment, the assignee hereof or of such rights and powers
shall have the same rights and remedies as if originally named herein in place
of Secured Party.
7.6 Survival of Contents. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery to Secured Party of this Agreement and shall continue in full force
and effect so long as all or any portion of the indebtedness under the Note is
outstanding and unpaid or any other Obligation remains to be performed under
the Note or this Agreement.
7.7 Severability. In the event any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby, and this
Agreement shall be interpreted and construed as if such provision, to the
extent the same shall have been held invalid, illegal, or unenforceable, had
never been contained herein.
7.8 Interpretation, Headings. This Agreement shall be given its
plain and simple meaning consistent with performance thereof by the parties.
Whenever the content of this Agreement so requires, the singular shall include
the plural. The headings of the articles and paragraphs contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
7.9 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
______________________________
______________________________
7
<PAGE> 100
Schedule 3.4.1(C) Form of Guarantee
<PAGE> 101
GUARANTEE
The undersigned hereby jointly and severally guarantee prompt and full
performance and payment of all amounts due under the within Note, to the holder
hereof, and authorize any holder hereof to proceed against the undersigned, for
the full amount due including reasonable attorneys' fees and other costs of
collection, and hereby waive presentment, demand, protest, notice of protest,
notice of dishonor and any and all other notices or demands of whatever
character to which the undersigned might otherwise be entitled. The
undersigned further consent that at any time, without notice to the
undersigned, payment of any sums payable on the Note, or any of the collateral
therefore, may be renewed, compromised, extended, increased or accelerated, in
whole or in part, or any of such collateral may be exchanged, surrendered,
enforced or waived, as the holder of the Note may determine. The undersigned
further consent that the holder of this Note may apply such collateral and
direct the order or manner of sale thereof as the holder of this Note may
determine. The foregoing obligations are joint and several upon the
undersigned. The holder of this Note may, without notice, assign all or part
of this Note and Guarantee.
_________________________ __________________________
<PAGE> 102
Schedule 3.4.2 Form of Section 3.4.2 Note
<PAGE> 103
PROMISSORY NOTE
$__________ ___________, 199__
FOR VALUE RECEIVED, ________________________, an individual resident of the
State of Florida residing at _______________________, Florida ________ (the
"Maker") promises to pay to Quintel Entertainment, Inc., a Delaware corporation
(the "Holder" or "Quintel"), or order, at One Blue Hill Plaza, Pearl River, New
York 10965, or such other place as the holder hereof may from time to time
designate in writing, the principal sum of _____________________________
($_______) DOLLARS, with interest at an annual rate of ________________ (___%)
per annum [the Applicable Federal Rate determined under Section 7872 of the
Internal Revenue Code], on the earlier of the following:
(1) twenty-four months from the date hereof; or
(2) [IN THE EVENT THE PRINCIPAL SUM OF THIS NOTE WAS LOANED TO THE
MAKER PURSUANT TO SECTION 3.4.2(i) OF THE ACQUISITION AGREEMENT,
INSERT THE FOLLOWING LANGUAGE FOR THIS PARAGRAPH 2:]
"upon the date which is five (5) business days after the date on which
the closing bid price of Quintel's common stock has been at least 7
1/8 per share for five trading days during any consecutive thirty day
period after the date of such loan."
[IN THE EVENT THE PRINCIPAL SUM OF THIS NOTE WAS LOANED TO THE
MAKER PURSUANT TO SECTION 3.4.2(ii) OF THE ACQUISITION AGREEMENT,
INSERT THE FOLLOWING LANGUAGE FOR THIS PARAGRAPH 2:]
"within five (5) business days after a registration statement under
the Securities Act of 1933, as amended, permitting the sale of the
Maker's shares of Common Stock of Quintel becoming effective or, in
the opinion of Quintel's counsel, the sale of such shares is exempt
from registration and applicable state law requirements."
This Note is secured by a Pledge of Shares Agreement of even date herewith
between Maker as Pledgor and Quintel as Secured Party.
IT IS FURTHER EXPRESSLY AGREED, that in the event of the failure of Maker to
(i) pay any installment due under this Note after its due date, or (ii) perform
its obligations or pay any amount due under the Pledge of Shares Agreement,
then the entire amount due under this Note shall upon five (5) days written
notice given to Maker and failure to cure such failure within such five (5) day
period become immediately due and payable at the option of the Holder without
further notice or demand.
Interest at the rate of twelve percent (12%) per annum shall accrue upon any
installment not paid when due, or, after acceleration, upon the entire balance,
until paid in full.
This Note may be prepaid in whole or in part at any time without premium or
penalty.
The undersigned agrees to pay, in addition to the principal and interest, all
costs of collection, including attorneys' fees and disbursements.
If a law which applies to this Note, and which sets maximum rates of interest
which may be charged, is finally interpreted so that the interest collected or
to be collected pursuant to this Note exceeds the permitted limits, then: (i)
such interest shall be reduced by the amount necessary to reduce the interest
<PAGE> 104
to the permitted limit; and (ii) any sums already collected from the person or
persons as to whom such interest is determined to have exceeded the permitted
limits will be refunded to such person or persons. The Holder may choose to
make this refund by reducing the principal amount owed under this Note or by
making a direct payment to such person or persons. If a refund reduces
principal, the reduction will be treated as a partial prepayment.
The undersigned waives presentment, demand for payment, notice of dishonor and
any or all notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Promissory Note and consents to any
or all delays, extensions of time, renewals, releases of any party to this
Promissory Note and of any available security therefor to any party to this
Promissory Note or to the actual holder thereof and any and all waivers or
modifications that may be granted or consented to by the Holder with regard to
the time of payment or with respect to any other provisions of this Note and
agrees that no such action or failure to act on the part of the Holder shall be
construed as a waiver by the Holder of, or otherwise affect, its right to avail
itself of any remedy with respect thereto.
This Note shall be governed by and construed under the law of the State of New
York. Unless applicable law requires a different method, any notice that must
be given to the undersigned under this Note will be given by delivering it or
mailing it by first class mail to the undersigned at the address set forth at
the beginning of this Note or at such other address as such person may give
notice of to the Holder. Any notice to the Holder will be given by mailing it
first class mail to the Holder at the address for the Holder set forth at the
beginning of this Note or at such other address as the Holder may give notice
of to the Maker.
Any action brought to enforce this Note may be brought in the State of
New York, and Maker hereby consents to the personal jurisdiction of the federal
and state courts located in the State of New York, and agrees that unless
applicable law requires a different method, service of process in any such
action may be made by first class mail upon the Maker at the address set forth
in the beginning of this Note or at such other address as the Maker shall
advise the Holder by written notice to the address at which payments due under
this Note are to be sent pursuant to the first paragraph of this Note.
If more than one person signs this Note, each person is fully and personally
obligated to keep all of the promises made in this Note, including the promise
to pay the full amount owed. Any person who is a guarantor, surety or endorser
of this Note is also obligated to perform such obligations. Any person who
takes over these obligations, including the obligations of a guarantor, surety
or endorser of this Note, is also obligated to keep all of the promises made in
this Note. The Holder may enforce its rights under this Note against each
person individually or against all of persons who sign this Note together.
This means that any one of the undersigned may be required to pay all of the
amounts owed under this Note.
______________________________
ATTEST:
_____________________
2
<PAGE> 105
SCHEDULE 4.3.3 TO ACQUISITION AGREEMENT
MATERIAL CHANGES TO NL SINCE BALANCE SHEET DATE
Billing of New Lauderdale voice mail programs was suspended by five of the
Regional Bell Companies during the first three months of 1996 as a result of an
increased level of customer complaints and chargebacks; the marketing and
format of the voice mail programs has been modifided. Billing of voice mail
programs has been reinstated by three of the five RBOC's but billing by US West
and Bell South remains suspended.
<PAGE> 106
SCHEDULE 4.5 TO ACQUISITION AGREEMENT
LITIGATION
A class action entitled Gray v. Enhanced Services Billing, Inc. has been
commenced in Superior Court of California, Los Angeles County, against New
Lauderdale's billing service, ESBI, and ESBI has requested indemnification from
New Lauderdale; the class has not been certified, but the complaint alleges
that the plaintiffs have been billed by ESBI for club services without proper
authorization from the customer. In addition, New Lauderdale has received
notice that the offices of the attorneys general in the states of Texas,
Missouri and Idaho and the public service commission of the state of Tennessee
are conducting investigations of the company's activities in response to
customer complaints, and have requested documents from the company.
<PAGE> 1
AMENDMENT TO PSYCHIC READERS NETWORK LIVE OPERATOR SERVICE AGREEMENT
AMENDMENT entered into as of March 1, 1996 by and between PSYCHIC READERS
NETWORK, INC., a Florida corporation with offices at 2455 E. Sunrise Boulevard,
Fort Lauderdale, Florida 33304 (hereafter referred to as "PRN") and CALLING
CARD CO., INC., a corporation organized under the laws of New York with offices
at One Blue Hill Plaza, Pearl River, New York 10956 (hereafter referred to as
"CC"), amending an agreement dated July 7, 1995 entitled "Psychic Readers
Network Live Operator Service Agreement".
WHEREAS, PRN and CC entered into an agreement dated July 7, 1995 entitled
"Psychic Readers Network Live Operator Service Agreement", pursuant to which
PRN provides CC with live psychic services for use by CC in the conduct of its
telephone entertainment programs.
WHEREAS, PRN and CC wish to amend the Service Agreement in the manner set forth
below.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
acknowledged by the parties, it is hereby agreed as follows:
1. TERM: Section 2 of the Service Agreement, entitled "Terms", is amended in
its entirety as follows:
This Service Agreement will be effective until May 31, 1997.
This Agreement may be terminated by PRN upon thirty (30) days prior
written notice in the event that CC is in default in the performance
of any of CC's material obligations under this Agreement which is not
cured within such thirty (30) day period, provided, however, any
default in payment must be cured within ten (10) days after written
notice of such default is given by PRN, and if such default in payment
is not cured within such ten (10) day period, then PRN may terminate
this Agreement by PRN at the end of such ten (10) day period by notice
to CC. This Agreement may be terminated by CC upon thirty (30) days
prior written notice to PRN in the event that PRN is in default in the
performance of any of PRN's material obligations under this Agreement
which is not cured within such ten (10) day period. Any such
termination by either party shall not relieve the other of liability
for obligations which have accrued prior to the date of termination.
2. FEES: The fees payable by CC to PRN for the services provided by PRN, which
are referred to in Section 2 of the Agreement and described in Attachment B to
the Agreement are hereby amended in their entirety as follows:
Commencing as of March 1, 1996, PRN Live Psychic Fees for psychic
services provided to CC shall be billed to CC:
<PAGE> 2
at the rate of $.17 per minute for 13,500,000 minutes during the term
of this Agreement.
The term "minutes" shall mean the per minute charge determined by the
accounting provided by West Interactive or other billing service bureau of
total connected minutes provided to CC by PRN. The fees due PRN shall be paid
bi-monthly upon submission of an invoice sent by fax to CC.
3. As amended by this Amendment, the Service Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement.
CALLING CARD CO., INC.
By:_________________________________
PSYCHIC READERS NETWORK, INC.
By:_________________________________
2
