<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1996
REGISTRATION NO. 333-03209
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PRECISION RESPONSE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 7389 59-2194806
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1505 N.W. 167TH STREET
MIAMI, FLORIDA 33169
(305) 626-4600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
MARK J. GORDON
CHIEF EXECUTIVE OFFICER
PRECISION RESPONSE CORPORATION
1505 N.W. 167TH STREET
MIAMI, FLORIDA 33169
(305) 626-4600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
ALAN D. AXELROD, ESQ. ANDREW L. BLAIR, JR., ESQ.
RUBIN BAUM LEVIN SHERMAN & HOWARD L.L.C.
CONSTANT FRIEDMAN & BILZIN 633 17TH STREET, SUITE 3000
2500 FIRST UNION FINANCIAL CENTER DENVER, COLORADO 80202
200 SOUTH BISCAYNE BOULEVARD TELEPHONE: (303) 297-2900
MIAMI, FLORIDA 33131-2336
TELEPHONE: (305) 374-7580
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.............. 4,140,000 shares $16.00 $66,240,000 $22,841
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes an aggregate of 540,000 shares that the Underwriters have the
option to purchase from the Company and the Selling Shareholders to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
(3) Includes $19,034 which was previously paid.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PRECISION RESPONSE CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM AND HEADING IN FORM S-1 REGISTRATION
STATEMENT LOCATION IN PROSPECTUS
- -------------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Prospectus Summary; Distribution of S
Corporation Earnings; Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page; Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Principal and Selling Shareholders
8. Plan of Distribution....................... Outside and Inside Front Cover Pages;
Underwriting
9. Description of Securities to be
Registered................................. Prospectus Summary; Dividend Policy;
Capitalization; Description of Capital
Stock
10. Interests of Named Experts and Counsel..... Legal Matters; Independent Public
Accountants
11. Information with Respect to the
Registrant................................. Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors;
Distribution of S Corporation Earnings; Use
of Proceeds; Dividend Policy;
Capitalization; Selected Financial and
Operating Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Management;
Certain Transactions; Principal and Selling
Shareholders; Description of Capital Stock;
Shares Eligible for Future Sale;
Independent Public Accountants; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 10, 1996
3,600,000 SHARES
[PRECISION RESPONSE LOGO]
COMMON STOCK
Of the 3,600,000 shares of Common Stock offered hereby, 3,265,000 are being
sold by Precision Response Corporation and 335,000 are being sold by the Selling
Shareholders. The Company will not receive any of the proceeds from the sale of
the shares by the Selling Shareholders. See "Principal and Selling
Shareholders." A substantial portion of the net proceeds to be received by the
Company from this offering will be used to repay indebtedness and to pay a
distribution of S corporation earnings to the Company's current shareholders.
See "Use of Proceeds."
Prior to this offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $14.00 and $16.00 per share. See "Underwriting" for the factors to be
considered in determining the initial public offering price. Application has
been made to list the Common Stock for quotation on the Nasdaq National Market
under the symbol "PRRC."
---------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
- -------------------------------------------------------------------------------------------------
Total(3)..................... $ $ $ $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting offering expenses estimated at $600,000, all of which will
be paid by the Company.
(3) The Company and the Selling Shareholders have granted the Underwriters a
30-day option to purchase up to 190,000 and 350,000 additional shares of
Common Stock, respectively, solely to cover over-allotments, if any. See
"Principal and Selling Shareholders." If this option is exercised in full,
the total Price to Public, Underwriting Discounts and Commissions, Proceeds
to Company and Proceeds to Selling Shareholders will be $ ,
$ , $ and $ , respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the Underwriters subject to prior
sale, when, as and if delivered to and accepted by them, and are subject to the
right of the Underwriters to withdraw, cancel, or modify such offer and to
reject any order in whole or in part. It is expected that delivery of the shares
of Common Stock will be made on or about , 1996.
DAIN BOSWORTH INCORPORATED FURMAN SELZ
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 4
[PRECISION RESPONSE LOGO]
PRC IS A LEADING FULL SERVICE PROVIDER
OF TELEPHONE-BASED MARKETING
AND CUSTOMER SERVICE SOLUTIONS
ON AN OUTSOURCED BASIS
TO LARGE CORPORATIONS
TELESERVICES
Most of PRC's teleservicing activities involve responding
to inbound calls from its clients' customers. By the end of
June 1996, PRC will be operating approximately 2,100
workstations in six call centers capable of handling 30
million calls per month. The Company expects to add two
additional call centers and approximately 900 additional
workstations in the second half of 1996.
[Photograph depicting PRC customer service representatives]
[Photograph depicting PRC On-Line
screen]
DATABASE
MARKETING AND
MANAGEMENT
The Company helps its clients more
effectively target marketing
programs and designs customer
service programs which capture
information useful in the client's
marketing efforts. PRC On-Line, the
Company's proprietary software
application, allows PRC clients to
review their programs' progress on
line, in real time.
[Photograph depicting fulfillment
operations]
FULFILLMENT
Fulfillment services include high-speed
laser and electronic document printing,
lettershop and mechanical inserting,
sorting, packaging and mailing
capabilities. These services enable PRC
to support its clients' full-service
marketing and customer service programs.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Financial Statements and
notes thereto appearing elsewhere in this Prospectus. See "Risk Factors" for
information prospective investors should consider. All references in this
Prospectus to "PRC" or the "Company" refer to Precision Response Corporation.
Except as otherwise indicated, all information in this Prospectus (i) has been
adjusted to reflect a recently completed 127,350-for-1 stock split of the
outstanding Common Stock by way of a share dividend and (ii) assumes no exercise
of the Underwriters' over-allotment option. See "Underwriting."
THE COMPANY
PRC is a leading full-service provider of telephone-based marketing and
customer service solutions on an outsourced basis to large corporations. Through
the integration of its teleservicing, database marketing and management, and
fulfillment capabilities, the Company is able to provide a "one-stop" solution
to meet its clients' needs. The Company believes that its one-stop solution
approach, combined with its sophisticated use of advanced technology, provide a
distinct competitive advantage in attracting clients seeking to cost-effectively
contact or service prospective or existing customers. The Company's ongoing
clients include several divisions of AT&T Corp., British Airways plc, Taco Bell
Corp., Ryder Truck Rental, Inc. and FTD, Inc. New clients expected to contribute
to 1996 revenues include United Parcel Service of America, Inc., DirecTV, Pizza
Hut Inc. and Video Guide.
PRC's revenues increased 101.4% to $30.2 million for 1995. For the first
quarter of 1996, revenues increased 97.1% to $11.6 million from $5.9 million for
the comparable quarter of 1995. Since 1993, the Company has focused primarily on
customer service programs for large corporations with significant ongoing
teleservicing needs. As a result, most of the Company's teleservicing activities
involve inbound (customer initiated) calls rather than outbound (PRC initiated)
calls. For the first quarter of 1996, 82.2% of the Company's teleservicing
revenues were from inbound calls. By the end of June 1996, the Company will be
operating approximately 2,100 workstations in six telephone call centers capable
of handling up to 30 million calls per month and expects to add two additional
call centers and approximately 900 additional workstations in the second half of
1996.
The telephone-based marketing and customer service industry has experienced
substantial growth over the past ten years. Telephone-based direct marketing
expenditures increased from an estimated $34 billion in 1984 to an estimated $77
billion in 1994. The Company believes that only a small percentage of those 1994
expenditures was for outsourced services. The Company expects that large
companies increasingly will outsource telephone-based marketing and customer
service activities in order to focus internal resources on their core
competencies and to improve the quality and cost-effectiveness of their
marketing and customer service efforts by using the expertise and specialized
capability of larger-scale teleservices providers. The Company also believes
that organizations with superior customer service and sophisticated, advanced
technology, such as PRC, will particularly benefit from this outsourcing trend.
PRC's objective is to become the premier full-service provider of
telephone-based marketing and customer service solutions. The Company's strategy
for achieving this objective is to offer high-quality, fully integrated services
to its clients which are customized to address each client's unique needs, and
to improve the quality and cost-effectiveness of the client's marketing and
customer service operations. The Company believes it possesses, and is
enhancing, a number of competitive strengths that will help it achieve its
objective, including:
- "One-Stop" Solutions Through Fully Integrated Services. The Company's
integration of teleservicing, database marketing and management, and
fulfillment services as part of a one-stop solution provides a
cost-effective and efficient method for its clients to manage their
growing direct marketing and customer service needs. The Company is
typically involved in all stages of formulating, designing and
implementing its clients' marketing and customer service programs. PRC
believes that this solution-oriented, value-added approach to addressing
its clients' needs distinguishes PRC from its competitors and plays a
vital role in the Company's ability to attract and retain clients.
- Advanced Technology. The Company's sophisticated use of advanced
technology enables it to develop and deliver solutions to its clients'
complex marketing and customer service needs. Through the efforts of its
information services group comprised of over 100 information systems
specialists, the Company has designed comprehensive systems that allow it
to rapidly develop and implement application software for each client's
program and to integrate the Company's centrally managed wide
3
<PAGE> 6
area network with the client's management information systems. PRC has
also developed specialized software programs, CCPro and PRC On-Line, which
more cost-effectively utilize the Company's hardware capabilities and also
provide a seamless interaction with its clients' systems.
- Rapid Deployment of Call Centers. PRC has the ability to have a call
center fully operational in approximately 60 days, as demonstrated by the
recent openings of a 225 workstation call center and a 410 workstation
call center in April 1996 and the planned opening of a 480 workstation
call center in June 1996. The Company plans in advance of the actual need
for new call centers by maintaining a list of prospective sites that can
be leased on short notice and have been pre-qualified in terms of the
availability of necessary utilities and parking, suitability for build-out
as a call center and access to a suitable labor pool. This ability to
rapidly expand its capacity has enabled the Company to provide rapid
response to its clients' needs and to compete effectively for new business
opportunities.
- Long-Term Client Relationships. The Company seeks to develop long-term
client relationships by becoming an integral part of its clients' overall
marketing and customer service efforts. Account services teams, comprised
of representatives of the teleservices, information services and
fulfillment departments, work closely with each client to formulate,
design and implement the client's program. This close working relationship
positions PRC as a strategic partner with its clients.
- Strong Commitment to Quality. PRC strives to achieve the highest quality
standards in the industry. Approximately 80% of PRC's customer service
representatives are full-time, which the Company believes results in
greater stability and quality in the workforce. The Company utilizes a
rigorous screening process for new hires and extensive classroom and
on-the-job training programs. Each representative's performance is
monitored regularly by a quality assurance team, and the client commitment
team ensures that the Company fulfills its commitments in connection with
each client program in a timely manner. Because PRC's services involve
direct contact with its clients' customers, the Company's commitment to
quality is critical to its ability to attract and retain clients.
PRC's operations are organized to effectively provide one-stop solutions to
its clients' marketing and customer service needs. Each client program is
managed by an account services manager who is generally dedicated to a single
client. The account services manager assembles a team from the teleservices,
information services and fulfillment operating groups which is assigned
responsibility for a program throughout its term. This team works with the
client to formulate and design a marketing or customer service program tailored
to achieve that client's objectives. In implementing the program, the account
services team is supported by the human resources department which carefully
selects the customer service representatives for that particular program. In
addition, the quality assurance and client commitment teams monitor the program
to ensure that it is carried out in accordance with specifications.
The Company is a Florida corporation and its principal executive office is
located at 1505 N.W. 167th Street, Miami, Florida 33169. Its telephone number is
(305) 626-4600.
THE OFFERING
Common Stock offered by the Company..... 3,265,000 shares
Common Stock offered by the Selling
Shareholders............................ 335,000 shares
Common Stock to be outstanding after
this offering........................... 16,000,000 shares(1)
Use of proceeds by the Company.......... To repay indebtedness, to pay a
distribution of S corporation
earnings to the Company's current
shareholders, and for general
corporate purposes, including call
center expansion and working
capital.
Proposed Nasdaq Stock Market symbol..... PRRC
- ---------------
(1) Excludes 263,250 shares of Common Stock issuable upon exercise of stock
options to be granted under the Company's Employee Stock Plan on the date
of this Prospectus, of which options for 21,000 shares will have exercise
prices of $.01 per share and options for 242,250 shares will have exercise
prices equal to the initial public offering price. Also excludes 1,311,750
additional shares of Common Stock reserved for future issuance under the
Company's Stock Plans. See "Management -- Employee Stock Plan and Director
Stock Plan" and Note 11 of Notes to Financial Statements.
4
<PAGE> 7
SUMMARY FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $16,206 $16,107 $18,218 $14,998 $30,204 $5,910 $11,649
Operating income (loss)......... 1,955 725 265 (81) 1,828 532 890
Net income (loss) as
reported(1)................... 1,849 539 (246) (372) 1,456 451 754
Pro forma net income
(loss)(1)..................... 1,132 292 (200) (286) 837 267 442
Pro forma net income (loss)
per share(1)(2)............... $ 0.09 $ 0.02 $ (0.02) $ (0.02) $ 0.07(3) $ 0.02 $ 0.03(3)
Weighted average number of
shares of common stock
outstanding(2)................ 12,735,000 12,735,000 12,735,000 12,735,000 12,862,061(4) 12,735,000 12,862,061(4)
NUMBER OF WORKSTATIONS
(AT END OF PERIOD).............. 120 320 320 320 550 550 984(5)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED(6)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................................... $ 3,327 $ 40,354
Total assets.............................................................................. 15,922 52,499
Short-term obligations(7)................................................................. 1,029 579
Long-term obligations, less current maturities............................................ 5,894 529
Shareholders' equity...................................................................... 3,414 45,595
</TABLE>
- ---------------
(1) Prior to this offering, the Company was an S corporation and not subject to
Federal and Florida corporate income taxes. The statement of operations
data reflects a pro forma provision (benefit) for income taxes as if the
Company were subject to Federal and Florida corporate income taxes for all
periods. This pro forma provision (benefit) for income taxes is computed
using a combined Federal and state tax rate of 37.6%. See Note 10 of Notes
to Financial Statements.
(2) See Note 10 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net
income (loss) per share.
(3) Supplemental pro forma net income per share would have been $0.08 per share
and $0.04 per share for the year ended December 31, 1995 and the three
months ended March 31, 1996, respectively, giving effect to the use of a
portion of the net proceeds of this offering to repay the Company's bank
borrowings at January 1, 1995, and assuming an increase in the number of
weighted average shares outstanding to 13,057,395.
(4) As required by generally accepted accounting principles, the weighted
average number of shares outstanding for these periods includes 127,061
shares which are not actually outstanding. This number is equal to the
number of shares which, when multiplied by the assumed initial public
offering price of $15.00 per share, would have been sufficient to replace
the amount of the Dividend (see "Distribution of S Corporation Earnings")
in excess of pro forma earnings for the twelve months ended March 31, 1996.
(5) As of June 1, 1996, the Company operated five call centers with 1,619
workstations and expects to open an additional call center with 480
workstations in June 1996. In the second half of 1996, the Company expects
to add two more call centers and approximately 900 additional workstations.
(6) Adjusted to give effect to the conversion of the Company to a C corporation,
the payment of net amount due from shareholders upon completion of the
offering, the sale of the Common Stock offered by the Company hereby (at
the assumed initial public offering price of $15.00 per share) and the
application of the estimated net proceeds therefrom as set forth under "Use
of Proceeds." See Note 10 of Notes to Financial Statements.
(7) Short-term obligations consist of current maturities of long-term
obligations, which include notes payable, installment loans and capital
leases.
5
<PAGE> 8
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing any of the shares of Common Stock offered
hereby.
FACTORS AFFECTING ABILITY TO MANAGE AND SUSTAIN GROWTH
The Company has experienced rapid growth over the last five quarters and
anticipates continued growth to be driven primarily by industry trends towards
outsourcing of telephone-based marketing and customer service operations and
increased sales by the Company to new and existing clients and in new markets.
Future growth will depend on a number of factors, including the effective and
timely initiation and development of client relationships, opening of new call
centers, and recruitment, motivation and retention of qualified personnel.
Sustaining growth will also require the continuing enhancement of operational
and financial systems and will require additional management, operational and
financial resources. There can be no assurance that the Company will be able to
manage its expanding operations effectively or that it will be able to maintain
or accelerate its growth. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
RELIANCE ON MAJOR CLIENTS AND KEY INDUSTRIES
A substantial portion of the Company's revenue is generated from relatively
few clients and the loss of a significant client or clients could have a
materially adverse effect on the Company. The Company's five and two largest
clients collectively accounted for 77.0% and 59.4%, respectively, of the
Company's total revenues in 1995, and 76.5% and 66.2%, respectively, of the
Company's total revenues for the first three months of 1996. The Company's
largest client in 1995 and the first three months of 1996 was AT&T. The Company
conducts business with several divisions of AT&T, which the Company considers to
be separate clients. AT&T's various divisions, in the aggregate, accounted for
approximately 42.1% and 61.3% of the Company's total revenues during 1995 and
the first quarter of 1996, respectively. Many of the Company's clients are
concentrated in the telecommunications, transportation, consumer products and
food and beverage industries. A trend in any of these industries not to use, or
to reduce their use of, outsourced telephone-based marketing, customer service,
database marketing and management, and fulfillment services could have a
materially adverse effect on the Company's business. The Company generally
operates under contracts which may be terminated on short notice. See
"Business."
COMPETITIVE AND FRAGMENTED INDUSTRY; POTENTIAL FUTURE COMPETING TECHNOLOGIES AND
TRENDS
The industry in which the Company competes is very competitive and highly
fragmented. PRC's competitors range in size from very small firms offering
special applications and short term projects to large independent firms and the
in-house operations of many clients and potential clients. A number of
competitors have capabilities and resources equal to, or greater than, the
Company's. Some of the Company's services also compete with other forms of
direct marketing such as television, radio, on-line services as well as the
Internet, and other marketing media. There can be no assurance that, as the
Company's industry continues to evolve, additional competitors with greater
resources than the Company will not enter the industry (or particular segments
of the industry) or that the Company's clients will not choose to conduct more
of their telephone-based marketing or customer service activities internally.
See "Business -- Competition."
The telemarketing industry has grown significantly over the past ten years.
The development of new forms of direct sales and marketing techniques, such as
interactive home shopping through television, computer networks and other media,
could have an adverse effect on the demand for the Company's services. In
addition, the increased use of new telephone-based technologies, such as
interactive voice response systems, could reduce the demand for certain of the
Company's offerings. Moreover, the effectiveness of marketing by telephone could
also decrease as a result of consumer saturation and increased consumer
resistance to this direct marketing tool. Although the Company attempts to
monitor industry trends and respond accordingly,
6
<PAGE> 9
there can be no assurance that the Company will be able to anticipate and
successfully respond to such trends in a timely manner. See "Business."
DEPENDENCE ON LABOR FORCE
The Company's industry is very labor intensive and has experienced high
personnel turnover. Many of the Company's employees receive modest hourly wages.
Although the Company believes that its turnover rate is low compared to its
competitors, the teleservicing industry in general has a relatively high
turnover rate. A higher turnover rate among the Company's employees would
increase the Company's recruiting and training costs and decrease operating
efficiencies and productivity. Some of the Company's operations, particularly
its technical help desk, frequent flyer program and technology-based inbound
customer service, require specially trained employees. Growth in the Company's
business will require it to recruit and train qualified personnel at an
accelerated rate from time to time. There can be no assurance that the Company
will be able to continue to hire, train and retain a sufficient labor force of
qualified employees. A significant portion of the Company's costs consists of
wages to hourly workers. An increase in hourly wages, costs of employee benefits
or employment taxes could materially adversely effect the Company. See
"Business -- Personnel and Training."
RELIANCE ON TECHNOLOGY
The Company has invested significantly in sophisticated and specialized
telecommunications and computer technology, and has focused on the application
of this technology to provide customized solutions to meet its clients' needs.
The Company anticipates that it will be necessary to continue to select, invest
in and develop new and enhanced technology on a timely basis in the future in
order to maintain its competitiveness. The Company's future success will also
depend in part on its ability to continue to develop information technology
solutions which keep pace with evolving industry standards and changing client
demands. There can be no assurance that the Company will be successful in
anticipating technological changes or in selecting and developing new and
enhanced information technology on a timely basis. Although the Company believes
that its systems are among the most advanced in the industry, its technological
advantage arises from the sophisticated application of technology that is
readily available to or could legally be duplicated by its competitors. There
can be no assurance that this technological advantage can be maintained. In
addition, the Company's business is highly dependent on its computer and
telephone equipment and software systems, and the temporary or permanent loss of
such equipment or systems, through casualty or operating malfunction, could have
a materially adverse effect on the Company's business. The Company's business is
not materially dependent on its ability to protect any intellectual property.
See "Business -- Business Strategy" and "-- Technology."
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees such as Mark
J. Gordon and David L. Epstein, its Chief Executive Officer and President,
respectively. While the Company has employment agreements with certain of its
key personnel, there can be no assurance that the Company will be able to retain
the services of such key personnel. The Company does not maintain key person
insurance policies with respect to its key personnel. The loss of key personnel
could have a materially adverse effect on the Company. In order to support its
growth, the Company will be required to effectively recruit, develop and retain
additional qualified management personnel. See "Management."
DEPENDENCE ON TELEPHONE SERVICE
The Company's business is materially dependent on service provided by
various local and long distance telephone companies. A significant increase in
the cost of telephone services that is not recoverable through an increase in
the price of the Company's services, or any significant interruption in
telephone services, could have a materially adverse impact on the Company's
business and operating margins.
7
<PAGE> 10
GOVERNMENT REGULATION
The Company's industry has become subject to an increasing amount of
Federal and state regulation in the past five years. The Rules of the Federal
Communications Commission (the "FCC") under the Federal Telephone Consumer
Protection Act of 1991, among other things, limit the hours during which
telemarketers may call consumers and prohibit the use of automated telephone
dialing equipment to call certain telephone numbers. The Federal Telemarketing
and Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA") broadly
authorizes the Federal Trade Commission (the "FTC") to issue regulations
prohibiting misrepresentation in telephone sales. In August 1995, the FTC issued
regulations under the TCFAPA which, among other things, require certain price,
warranty, refund and payment disclosures when placing telephone solicitation
calls and specifically address other perceived telemarketing abuses in the
offering of prizes and the sale of business opportunities or investments.
Violation of these FCC and FTC rules can result in the imposition of civil
penalties. The Company's operating procedures comply with the telephone
solicitation rules of the FCC and FTC. However, there can be no assurance that
additional Federal or state legislation, or changes in regulatory
implementation, would not limit the activities of the Company or its clients in
the future or significantly increase the cost of regulatory compliance.
Several of the industries in which the Company's clients operate are
subject to varying degrees of government regulation. Generally, compliance with
these regulations is the responsibility of the Company's clients. However, the
Company could be subject to a variety of enforcement or private actions for its
failure or the failure of its clients to comply with such regulations. See
"Business -- Government Regulation."
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced and expects to continue to experience quarterly
variations in revenues and operating income as a result of many factors,
including the timing of clients' marketing campaigns and customer service
programs, the timing of additional selling, general and administrative expenses
to acquire and support new business and changes in the Company's revenue mix
among its various service offerings. In connection with certain contracts, the
Company could incur costs in periods prior to recognizing revenue under those
contracts. In addition, the Company must plan its operating expenditures based
on revenue forecasts, and a revenue shortfall below such forecast in any quarter
would likely adversely affect the Company's operating results for that quarter.
The effects of seasonality on PRC's business have historically been obscured by
its growing revenues. However, the Company's business tends to be slower in the
first and third quarters due to client marketing programs which are typically
slower in the post-holiday and summer months. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Results."
FUTURE CAPITAL NEEDS
The Company believes that funds generated from operations, together with
the net proceeds of this offering and available borrowings, will be sufficient
to meet working capital needs at least through 1997. The Company's long term
capital requirements beyond 1997 will depend on many factors, including, but not
limited to, the rate at which the Company expands its business. To the extent
that the funds generated from the sources described above are insufficient to
fund the Company's activities in the short or long term, the Company would need
to raise additional funds through public or private financings. No assurance can
be given that additional financing will be available or that, if available, it
will be available on terms favorable to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market for
the Common Stock will develop or be sustained following this offering. The
initial public offering price of the Common Stock offered hereby will be
determined by negotiations among the Company, the Selling Shareholders and the
Representatives of the Underwriters and
8
<PAGE> 11
may bear no relationship to the trading prices of the Common Stock after this
offering. See "Underwriting" for a description of certain factors to be
considered in determining the initial public offering price for the Common
Stock. The trading price of the Common Stock could be subject to significant
fluctuations in response to actual or anticipated variations in the Company's
quarterly operating results and other factors, such as the introduction of new
services or technologies by the Company or its competitors, changes in other
conditions or trends in the Company's industry or in the industries of any of
the Company's significant clients, changes in governmental regulation, changes
in securities analysts' estimates of the Company's, or its competitors' or
industry's, future performance or general market conditions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results." General market price declines or market
volatility in the future, or future declines or volatility in the prices of
stock for companies in the Company's industry or sector, could also affect the
market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Sale of substantial amounts of Common Stock in the public market after this
offering could adversely affect the market price of the Common Stock. Upon
closing of this offering, the Company will have a total of 16,000,000 shares of
Common Stock outstanding. Of these shares, the 3,600,000 shares offered hereby
(4,140,000 shares if the Underwriters' over-allotment option is exercised in
full) will be freely tradable without restriction under the Securities Act of
1933, as amended (the "Securities Act"). All of the remaining 12,400,000 shares
are "restricted securities" as defined by Rule 144 promulgated under the
Securities Act. Beginning 180 days after the date of this Prospectus, upon the
expiration of lock-up agreements with the Underwriters, 11,126,500 of these
shares will be available for sale in the public market subject to compliance
with Rule 144 volume and other requirements. The remaining 1,273,500 shares of
restricted securities will be eligible for sale beginning in February 1998, in
compliance with Rule 144 volume and other requirements. The Company intends to
register on Form S-8 the 1,575,000 shares of Common Stock reserved for issuance
under the Stock Plans. On the date of this Prospectus, the Company will grant
options to purchase 263,250 shares under the Employee Stock Plan, none of which
will be immediately exercisable. In connection with their employment agreements
with the Company, Messrs. Gordon, Epstein, Mondre and Murray have been granted
certain rights with respect to the registration of their Common Stock under the
Securities Act. If the Company proposes to register any of its securities under
the Securities Act, Messrs. Gordon, Epstein, Mondre and Murray are entitled to
include at the Company's expense all or a portion of their shares therein,
subject to certain conditions. Messrs. Gordon and Epstein may also require the
Company to register all or a portion of their shares under the Securities Act at
the Company's expense in the event of the termination of their employment for
any reason, subject to certain conditions. See "Management -- Employee Stock
Plan and Director Stock Plan," "Principal and Selling Shareholders," "Shares
Eligible for Future Sale" and "Underwriting."
CONTROL BY AND BENEFITS TO OFFICERS AND DIRECTORS
Following completion of this offering, Mark J. Gordon and David L. Epstein,
the Company's Chief Executive Officer and President, respectively, will
beneficially own 46.6% and 30.9%, respectively, of the outstanding Common Stock
(44.2% and 30.2% if the Underwriters' over-allotment option is exercised in
full). As a result, Mr. Gordon and Mr. Epstein will continue to be able to elect
the entire Board of Directors of the Company and to control the outcome of all
other matters requiring action by its shareholders. Such voting concentration
may have the effect of discouraging, delaying or preventing a change in control
of the Company. See "Management" and "Principal and Selling Shareholders." A
substantial portion of the net proceeds to be received by the Company in this
offering will be used to pay a distribution of S corporation earnings to the
Company's current shareholders, all of whom are officers and directors or
affiliates of officers and directors (including Mr. Gordon and Mr. Epstein), and
to repay certain indebtedness, some of which is guaranteed by Mr. Gordon and Mr.
Epstein. See "Distribution of S Corporation Earnings," "Use of Proceeds" and
"Management -- Compensation Committee Interlocks and Insider Participation." Mr.
Gordon and Mr. Epstein are also Selling Shareholders in this offering. See
"Principal and Selling Shareholders."
9
<PAGE> 12
CERTAIN FLORIDA STATUTORY PROVISIONS
The State of Florida has enacted legislation that may deter or frustrate
takeovers of Florida corporations. The Florida Control Share Act generally
provides that shares acquired in excess of certain specified thresholds will not
possess any voting rights unless such voting rights are approved by a majority
vote of a corporation's disinterested shareholders. The Florida Affiliated
Transactions Act generally requires supermajority approval by disinterested
shareholders of certain specified transactions between a public corporation and
holders of more than 10% of the outstanding voting shares of the corporation (or
their affiliates). Florida law also authorizes the Company to indemnify the
Company's directors, officers, employees and agents. The Company has adopted a
charter and by-law with such an indemnity and has entered into indemnification
agreements with all of its executive officers and directors. See "Description of
Capital Stock -- Certain Statutory Provisions" and "Management -- Limitation of
Liability and Indemnification Matters."
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Articles of Incorporation (the "Articles") and Bylaws (the
"Bylaws") contain certain provisions that could discourage potential takeover
attempts and make attempts by the Company's shareholders to change management
more difficult. Such provisions include the requirement that the Company's
shareholders follow an advance notification procedure for certain shareholder
nominations of candidates for the Board of Directors and for new business to be
conducted at any meeting of the shareholders. The Articles also provide that
special meetings of the shareholders may only be called by the Board of
Directors or the holders of not less than 50% of all votes entitled to be cast
on any issue to be considered at the special meeting. The Articles further
require that any actions by the shareholders of the Company may be taken only
upon the vote of the shareholders at a meeting and may not be taken by written
consent. In addition, the Articles allow the Board of Directors to issue up to
25,000,000 shares of preferred stock and to fix the rights, privileges and
preferences of those shares without any further vote or action by the
shareholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued by the Company in the future. While the Company has no
present intention to issue preferred stock, any such issuance could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company. See "Description of Capital
Stock -- Certain Charter and Bylaw Provisions."
DILUTION
Investors purchasing Common Stock in this offering will experience
immediate and substantial dilution of $12.15 in the net tangible book value per
share of Common Stock (based on an assumed initial public offering price of
$15.00 per share). See "Dilution."
10
<PAGE> 13
DISTRIBUTION OF S CORPORATION EARNINGS
Prior to this offering the Company was treated for Federal and Florida
income tax purposes as an S corporation under the Internal Revenue Code of 1986,
as amended (the "Code"), and comparable state tax laws. As a result, earnings of
the Company have been taxed for Federal and Florida income tax purposes directly
to the shareholders of the Company, rather than to the Company. In connection
with this offering, the Company will be converted from an S corporation to a C
corporation under the Code. Prior to consummation of this offering, the
Company's Board of Directors intends to declare a cash dividend payable to the
current shareholders of the Company (the "Dividend"). The Dividend will be equal
to the Company's estimate of its accumulated taxable income prior to conversion
to a C corporation, to the extent such taxable income has not previously been
distributed. If the Company had been converted to a C corporation on March 31,
1996, the Company estimates, based on its earnings through the first three
months of 1996, the Dividend would have equaled approximately $2.9 million. The
actual amount of the Dividend will depend upon the Company's earnings prior to
its conversion to a C corporation (which will not occur until completion of this
offering), and is expected to be materially higher than $2.9 million. A portion
of the net proceeds to be received by the Company from this offering will be
used to pay the Dividend.
The Company and its current shareholders are parties to an S Corporation
Tax Allocation and Indemnification Agreement (the "Tax Agreement") relating to
their respective income tax liabilities. The Tax Agreement indemnifies the
shareholders for any adjustments causing an increase in the shareholders'
Federal and state income tax liability (including interest and penalties)
related to the Company's tax years prior to the consummation of this offering,
unless such adjustments result in or are related to a corresponding decrease in
the shareholders' Federal and state income tax liability with respect to another
S corporation taxable year. Subject to certain limitations, the Tax Agreement
also provides that the Company will be indemnified by the shareholders with
respect to Federal and state income taxes (plus interest and penalties) shifted
from an S corporation taxable year to a Company taxable year subsequent to the
consummation of this offering. The Tax Agreement further provides that to the
extent that the accumulated taxable income of the Company prior to its
conversion to a C corporation, as subsequently established in connection with
the filing of the Company's tax return for the Company's short S corporation tax
year, is less than the Dividend, the shareholders who receive the Dividend will
make a payment equal to such difference to the Company, and if such accumulated
taxable income is greater than the Dividend, the Company will make an additional
distribution equal to such difference to such shareholders, in either case, with
interest thereon. Any payment made by the Company to the shareholders pursuant
to the Tax Agreement may be considered by the Internal Revenue Service or the
state taxing authorities to be nondeductible by the Company for income tax
purposes. See Note 10 of Notes to Financial Statements.
11
<PAGE> 14
USE OF PROCEEDS
The net proceeds to be received by the Company from this offering are
estimated to be approximately $44.9 million, assuming an initial public offering
price of $15.00 per share and after deducting estimated underwriting discounts
and offering expenses. The Company will not receive any proceeds from the sale
of Common Stock by the Selling Shareholders.
The principal purpose of this offering is to provide the additional capital
needed to support the Company's continued expansion and growth. The Company will
use a portion of the net proceeds of this offering to repay all amounts
outstanding under the Company's three-year, $15 million revolving credit
facility (which had an outstanding balance as of June 1, 1996 of approximately
$8.4 million) and various installment loans (which had an aggregate balance as
of June 1, 1996 of approximately $964,000) and to pay the Dividend. The proceeds
from the revolving credit facility and the installment loans were used to
finance the expansion of the Company's operations, including acquisitions of
facilities and equipment, and for general working capital purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Notes 4 and 5 of Notes to
Financial Statements for a discussion of the terms of the revolving credit
facility and various installment loans and "Distribution of S Corporation
Earnings" for a discussion of the Dividend. The balance of the net proceeds will
be used for general corporate purposes, including call center expansion and
working capital. The Company's capital expenditures for 1996 are expected to be
approximately $16.0 million, including approximately $8.5 million for the two
new call centers the Company expects to open in the second half of 1996. Pending
such uses, the Company intends to invest the net proceeds of this offering in
short-term interest-bearing instruments.
DIVIDEND POLICY
The Company currently intends to retain future earnings to finance its
growth and development and therefore does not anticipate paying any cash
dividends in the foreseeable future. In addition, the Company's revolving credit
facility restricts the payment of cash dividends by the Company. Payment of any
future dividends will depend upon the future earnings and capital requirements
of the Company and other factors which the Board of Directors considers
appropriate. No dividends were paid to the shareholders in 1993, 1994 and 1995.
For certain information regarding the Dividend to be paid by the Company in
1996, see "Distribution of S Corporation Earnings."
12
<PAGE> 15
CAPITALIZATION
The following table sets forth the current maturities of long-term
obligations and capitalization of the Company (i) at March 31, 1996, (ii) pro
forma to give effect to the conversion of the Company to a C corporation, the
accrual of the Dividend and the receipt of net amounts due from shareholders
upon completion of this offering (see Note 10 of Notes to Financial Statements),
and (iii) pro forma as adjusted to reflect the receipt and application of the
net proceeds from the issuance and sale by the Company of 3,265,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$15.00 per share. See "Use of Proceeds." This table should be read in
conjunction with the Company's Financial Statements and notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term obligations...................... $1,029 $ 1,029 $ 579
====== ======= =======
Long-term obligations, less current maturities................... $5,894 $ 5,894 $ 529
------ ------- -------
Shareholders' equity:
Preferred Stock, $0.01 par value per share, 25 million shares
authorized, none issued and outstanding..................... -- -- --
Common Stock, $0.01 par value per share, 100 million shares
authorized; 12,735,000 shares issued and outstanding actual
and pro forma; and 16,000,000 shares issued and outstanding
pro forma as adjusted(1).................................... 127 127 160
Additional paid-in capital..................................... 72 72 44,985
Retained earnings.............................................. 3,578 450 450
Due from shareholders, net..................................... (363) -- --
------ ------- -------
Total shareholders' equity............................. 3,414 649 45,595
------ ------- -------
Total capitalization................................. $9,308 $ 6,543 $46,124
====== ======= =======
</TABLE>
- ---------------
(1) Excludes 263,250 shares of Common Stock issuable upon exercise of stock
options to be granted under the Company's Employee Stock Plan on the date
of this Prospectus, of which options for 21,000 shares will have exercise
prices of $0.01 per share and options for 242,250 shares will have exercise
prices equal to the initial public offering price. Also excludes 1,311,750
additional shares of Common Stock reserved for future issuance under the
Company's Stock Plans. See "Management -- Employee Stock Plan and Director
Stock Plan" and Note 11 of Notes to Financial Statements.
13
<PAGE> 16
DILUTION
The net tangible book value of the Company at March 31, 1996, was
approximately $3.4 million or $0.27 per share of Common Stock. Net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding. Net
tangible book value dilution per share represents the difference between the
amount paid by purchasers of Common Stock in this offering and the pro forma net
tangible book value per share of Common Stock immediately after completion of
this offering.
After giving effect to the conversion of the Company to a C corporation as
though the conversion had occurred on March 31, 1996 (see Note 10 of Notes to
Financial Statements), including accrual of the Dividend (which would have been
approximately $2.9 million as of March 31, 1996), the receipt of net amounts due
from shareholders of approximately $363,000 and recording a net deferred tax
liability of $211,000, the Company's pro forma net tangible book value at March
31, 1996, prior to completion of this offering, would have been approximately
$649,000 or $0.05 per share of Common Stock. After giving effect to the sale of
the shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $15.00 per share, and the application by the Company of
the estimated net proceeds therefrom, the pro forma net tangible book value of
the Company as of March 31, 1996, would have been approximately $45.6 million or
$2.85 per share. This represents an immediate increase in pro forma net tangible
book value of $2.80 per share to existing shareholders and an immediate dilution
of $12.15 per share to new shareholders purchasing Common Stock in this
offering. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $15.00
Net tangible book value per share at March 31, 1996................ $ 0.27
Decrease in net tangible book value attributable to payment of the
Dividend(1)..................................................... (0.23)
Increase in net tangible book value attributable to the receipt of
$363,000 due from shareholders(1)............................... 0.03
Decrease in net tangible book value attributable to establishment
of $211,000 net deferred tax liability(1)....................... (0.02)
------
Pro forma net tangible book value per share prior to this offering... 0.05
Increase per share attributable to new shareholders.................. 2.80
------
Pro forma net tangible book value per share after this offering(2)... 2.85
------
Total net tangible book value dilution per share to new
shareholders(3).................................................... $12.15
======
</TABLE>
- ---------------
(1) See Note 10 of Notes to Financial Statements.
(2) Excludes 263,250 shares of Common Stock issuable upon exercise of stock
options to be granted under the Company's Employee Stock Plan on the date
of this Prospectus, of which options for 21,000 shares will have exercise
prices of $0.01 per share and options for 242,250 shares will have exercise
prices equal to the initial public offering price. See
"Management -- Employee Stock Plan and Director Stock Plan" and Note 11 of
Notes to Financial Statements.
(3) Total net tangible book value dilution per share to new shareholders would
be $12.02 if the underwriters' over-allotment option is exercised in full.
14
<PAGE> 17
SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial and operating data are qualified by
reference to and should be read in conjunction with the Company's Financial
Statements and notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The statement of operations data presented below for 1995 and the
balance sheet data as of December 31, 1995 have been derived from the Company's
Financial Statements included elsewhere in this Prospectus, which have been
audited by Coopers & Lybrand L.L.P. The statement of operations data presented
below for 1994 and 1993 and the balance sheet data as of December 31, 1994 have
been derived from the Company's Financial Statements included elsewhere in this
Prospectus, which have been audited by Gurland & Goldberg, P.A. The statement of
operations data presented below for 1992 and 1991 and the balance sheet data as
of December 31, 1993, 1992 and 1991 have been derived from audited financial
statements not included herein. The statement of operations data for each of the
three-month periods ended March 31, 1995 and 1996 and the balance sheet data as
of March 31, 1996 have been derived from the unaudited Financial Statements of
the Company included elsewhere in this Prospectus. Such unaudited financial
statements have been reviewed by Coopers & Lybrand L.L.P. In the opinion of
management, the unaudited financial statements include all normal and recurring
adjustments that management considers necessary for a fair presentation of the
results for such periods. The selected financial and operating data for the
three months ended March 31, 1996 are not necessarily indicative of the results
to be expected for 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................... $16,206 $16,107 $18,218 $14,998 $30,204 $5,910 $11,649
---------- ---------- ---------- ---------- ---------- ---------- ----------
Cost of services.................. 8,712 7,759 10,675 9,070 18,372 3,465 7,120
Preoperating costs................ -- -- -- -- 573 -- 174
Selling, general and
administrative
expenses........................ 5,539 7,623 7,278 6,009 9,431 1,913 3,465
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses.......... 14,251 15,382 17,953 15,079 28,376 5,378 10,759
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)........... 1,955 725 265 (81) 1,828 532 890
Interest expense.................. 106 150 197 292 372 81 136
Gain (loss) on disposal of
assets.......................... -- (36) (314) 1 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) as
reported(1)..................... 1,849 539 (246) (372) 1,456 451 754
Pro forma provision (benefit) for
income taxes(1)................. 717 247 (46) (86) 619 184 312
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pro forma net income (loss)(1).... $ 1,132 $ 292 $ (200) $ (286) $ 837 $ 267 $ 442
========= ========= ========= ========= ========= ========= =========
Pro forma net income (loss) per
share(1)(2)..................... $ 0.09 $ 0.02 $ (0.02) $ (0.02) $ 0.07(3) $ 0.02 $ 0.03(3)
========= ========= ========= ========= ========= ========= =========
Weighted average number of shares
of common stock
outstanding(2).................. 12,735,000 12,735,000 12,735,000 12,735,000 12,862,061(4) 12,735,000 12,862,061(4)
========= ========= ========= ========= ========= ========= =========
NUMBER OF WORKSTATIONS
(AT END OF PERIOD)................ 120 320 320 320 550 550 984(5)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
-------------------------------------------- --------------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(6)
------ ------ ------ ------- ------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)...................... $ 961 $ (11) $ 160 $(1,423) $ 1,365 $ 3,327 $ 40,354
Total assets................................... 5,148 6,392 7,933 7,737 12,713 15,922 52,499
Short-term obligations(7)...................... 296 1,128 2,084 2,499 1,182 1,029 579
Long-term obligations, less current
maturities................................... 737 776 1,565 1,020 3,924 5,894 529
Shareholders' equity........................... 2,147 2,186 1,940 1,474 2,816 3,414 45,595
</TABLE>
15
<PAGE> 18
- ---------------
(1) Prior to this offering, the Company was an S corporation and not subject to
Federal and Florida corporate income taxes. The statement of operations data
reflects a pro forma provision (benefit) for income taxes as if the Company
were subject to Federal and Florida corporate income taxes for all periods.
This pro forma provision (benefit) for income taxes is computed using a
combined Federal and state tax rate of 37.6%. See Note 10 of Notes to
Financial Statements.
(2) See Note 10 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net income
(loss) per share.
(3) Supplemental pro forma net income per share would have been $0.08 per share
and $0.04 per share for the year ended December 31, 1995 and the three
months ended March 31, 1996, respectively, giving effect to the use of a
portion of the net proceeds of this offering to repay the Company's bank
borrowings at January 1, 1995, and assuming an increase in the number of
weighted average shares outstanding to 13,057,395.
(4) As required by generally accepted accounting principles, the weighted
average number of shares outstanding for these periods includes 127,061
shares which are not actually outstanding. This number is equal to the
number of shares which, when multiplied by the assumed initial public
offering price of $15.00 per share, would have been sufficient to replace
the amount of the Dividend (see "Distribution of S Corporation Earnings") in
excess of pro forma earnings for the twelve months ended March 31, 1996.
(5) As of June 1, 1996, the Company operated five call centers with 1,619
workstations and expects to open an additional call center with 480
workstations in June 1996. In the second half of 1996, the Company expects
to add two more call centers and approximately 900 additional workstations.
(6) Adjusted to give effect to the conversion of the Company to a C corporation,
the payment of net amount due from shareholders upon completion of this
offering, the sale of the Common Stock offered by the Company hereby (at the
assumed initial public offering price of $15.00 per share) and the
application of the estimated net proceeds therefrom as set forth under "Use
of Proceeds." See Note 10 of Notes to Financial Statements.
(7) Short-term obligations consist of short-term debt, if applicable, and
current maturities of long-term obligations, which include notes payable,
installment loans and capital leases.
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's results of operations and its
liquidity and capital resources should be read in conjunction with "Selected
Financial and Operating Data" and the Financial Statements of the Company and
related notes thereto appearing elsewhere in this Prospectus.
OVERVIEW
PRC was incorporated in 1982 as a fulfillment company. In order to better
serve the marketing and customer service needs of its clients, the Company
expanded its services to include database marketing and management in 1984, and
began offering teleservices in 1988. Over the next five years, PRC's
teleservices activities grew dramatically as a result of the Company's work with
The Upjohn Company's national marketing program for its Rogaine product. This
single program represented 70.7%, 65.2% and 36.5% of the Company's total
revenues for 1991, 1992 and 1993, respectively.
In 1993, the Company made a strategic decision to focus on becoming a
full-service provider of integrated services in order to attract large corporate
clients with a variety of ongoing telephone-based marketing and customer service
needs. The Company believed that this strategy would position it as a strategic
partner with its clients and lead to the establishment of long-term
relationships. To implement its strategy, the Company made significant
investments in management, personnel, systems, facilities and equipment. Since
1993, investments in systems, facilities and equipment, including the value of
all leased equipment, have amounted to approximately $11.0 million.
In 1994, The Upjohn Company effected a change in its marketing strategy for
the Rogaine product and elected not to extend its program with the Company.
However, the Company continued to expand services to existing clients and to
attract new clients. For clients other than The Upjohn Company, the Company's
total revenues grew from $11.6 million for 1993 to $30.2 million for 1995.
Today PRC offers its customers single source, integrated solutions for
their teleservicing, database marketing and management, and fulfillment needs.
The Company focuses its teleservicing activities on inbound (customer initiated)
calls. Approximately 92.3% of the Company's 1995 teleservicing revenues (and
approximately 62.3% of PRC's overall revenues) were derived from inbound calls.
Prior to this offering, the Company elected to be treated for Federal and
Florida income tax purposes as an S corporation under the Code and comparable
state tax laws. As a result, earnings of the Company have been taxed for Federal
and Florida income tax purposes directly to the shareholders of the Company,
rather than to the Company. In connection with this offering, the Company will
convert from an S corporation to a C corporation under the Code. The statement
of operations data for all periods includes a provision (benefit) for Federal
and state income taxes as if the Company were subject to Federal and Florida
corporate income taxes for all periods. This pro forma provision (benefit) is
computed using a combined Federal and state tax rate of 37.6%. See "Distribution
of S Corporation Earnings" and Note 10 of Notes to Financial Statements.
17
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth statement of operations data as a percentage
of revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services................................. 58.6 60.5 60.8 58.6 61.1
Preoperating costs............................... -- -- 1.9 -- 1.5
Selling, general and administrative expenses..... 40.0 40.1 31.2 32.4 29.7
----- ----- ----- ----- -----
Operating income (loss).......................... 1.4 (0.6) 6.1 9.0 7.7
Interest expense................................. 1.1 1.9 1.2 1.4 1.2
Gain (loss) on disposal of assets................ (1.7) -- -- -- --
----- ----- ----- ----- -----
Net income (loss) as reported(1)................. (1.4) (2.5) 4.9 7.6 6.5
Pro forma provision (benefit) for income
taxes(1)....................................... (0.3) (0.6) 2.1 3.1 2.7
----- ----- ----- ----- -----
Pro forma net income (loss)(1)................... (1.1)% (1.9)% 2.8% 4.5% 3.8%
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) Prior to this offering, the Company was an S corporation and not subject to
Federal and Florida corporate income taxes. The statement of operations
data reflects a pro forma provision (benefit) for income taxes as if the
Company were subject to Federal and Florida corporate income taxes for all
periods. This pro forma provision (benefit) for income taxes is computed
using a combined Federal and state tax rate of 37.6%. See Note 10 of Notes
to Financial Statements.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
Revenues. Revenues increased $5.7 million, or 97.1%, to $11.6 million for
the first three months of 1996 from $5.9 million for the comparable period of
1995. Teleservicing activities, principally inbound services, accounted for the
majority of the change with an increase in revenues of $4.5 million, or 128.6%,
to $8.0 million for the first quarter of 1996 from $3.5 million for the
comparable quarter of 1995. The teleservicing growth was primarily a result of
increased activity from existing clients, principally in the telecommunications
industry. Revenues for information services in conjunction with teleservicing
activities increased $600,000, or 42.9%, to $2.0 million for the first three
months of 1996 from $1.4 million for the comparable period of 1995. Information
services include the design, development and implementation of software
applications for use in a particular client program and the integration of the
Company's systems with those of its clients.
Cost of Services. Cost of services represents labor and telephone expenses
directly related to revenue generating activities as well as each department's
management salaries and equipment depreciation. Cost of services increased to
$7.1 million for the first quarter of 1996 from $3.5 million for the comparable
period of 1995, an increase of $3.6 million, or 105.5%, primarily as a result of
new employees to staff expanded operations. As a percentage of revenues, cost of
services increased to 61.1% for the first three months of 1996 from 58.6% for
the comparable period of 1995. This increase was attributable primarily to
volume pricing for large teleservicing programs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses represent the cost of central services the Company
provides to support and manage its departmental activities, including senior
management, facilities expenses (including operating leases), and other support
functions such as sales and marketing, human resources and accounting. Selling,
general and administrative expenses increased $1.6 million, or 81.1%, to $3.5
million for the first quarter of 1996 from $1.9 million for the comparable
period of 1995, primarily as a result of increased expenses attributable to new
facilities as well as additional staff to support the Company's higher calling
volumes in 1996. As a percentage of revenues, however, these expenses decreased
to 29.7% for the three months of 1996 from 32.4% for the comparable period of
1995. This percentage decrease was directly attributable to increased revenues
without a commensurate increase in expenses.
18
<PAGE> 21
Preoperating Costs. Preoperating costs include certain incremental costs
incurred at a facility prior to the actual commencement of operations, including
rent, new-hire salaries and expenses for utilities, equipment leases and
security. The costs incurred for the first three months of 1996 primarily relate
to the opening of a 410 workstation call center in April 1996.
Interest Expense. Interest expense increased slightly to $136,000, or 1.2%
of revenues, for the first quarter of 1996 from $81,000, or 1.4% of revenues,
for the comparable period of 1995. This increase reflected higher average
outstanding borrowings, which were used to finance working capital needs, to
open new facilities and to purchase related equipment, and higher interest
rates.
Pro Forma Net Income. Pro forma net income increased 65.3% to $441,000, or
3.8% of revenues, for the first three months of 1996 compared to pro forma net
income of $267,000, or 4.5% of revenues, for the comparable period of 1995. Pro
forma net income includes a provision for Federal and state income taxes. See
Note 10 of Notes to Financial Statements.
1995 COMPARED TO 1994
Revenues. Revenues increased $15.2 million, or 101.4%, to $30.2 million
for 1995 from $15.0 million for 1994. Teleservicing activities, principally
inbound services, accounted for the majority of the change with an increase in
revenues of $12.5 million, or 160.3%, to $20.3 million for 1995 from $7.8
million for 1994. The teleservicing growth was primarily a result of increased
activity from existing clients, principally in the transportation industry, and
the addition of new clients in the telecommunications industry. Revenues for
information services in conjunction with teleservicing activities also increased
$2.2 million, or 73.3%, to $5.2 million for 1995 from $3.0 million for 1994.
Cost of Services. Cost of services increased to $18.4 million for 1995
from $9.1 million for 1994, an increase of $9.3 million, or 102.6%, primarily as
a result of new employees to staff expanded operations. As a percentage of
revenues, cost of services was 60.8% for 1995 and 60.5% for 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.4 million, or 56.7%, to $9.4 million for
1995 from $6.0 million for 1994, primarily as a result of increased
administrative and recruiting costs necessary to support the Company's growth,
as well as increased salaries for additional sales and marketing personnel. As a
percentage of revenues, however, these expenses decreased to 31.2% for 1995 from
40.1% for 1994. This percentage decrease was primarily attributable to
management and related costs being unusually high relative to revenues in 1994
as the Company was positioning itself for anticipated growth by expanding its
management team.
Preoperating Costs. Preoperating costs incurred in 1995 primarily relate
to the opening of a 434 workstation call center in January 1996.
Interest Expense. Interest expense increased slightly to $372,000, or 1.2%
of revenues, for 1995 from $292,000, or 1.9% of revenues, for 1994. This
increase reflected higher average outstanding borrowings which were used to
finance working capital needs, to open new facilities and to purchase related
equipment.
Pro Forma Net Income. Pro forma net income increased to $837,000, or 2.8%
of revenues, for 1995 compared to pro forma net loss of $286,000, or 1.9% of
revenues, for 1994. Pro forma net income (loss) includes a provision (benefit)
for Federal and state income taxes. See Note 10 of Notes to Financial
Statements.
1994 COMPARED TO 1993
Revenues. Revenues decreased $3.2 million, or 17.7%, to $15.0 million for
1994 from $18.2 million for 1993. The change is principally due to the loss of
revenues ($5.7 million from 1993) associated with the discontinuance of The
Upjohn Company's Rogaine program with the Company due to a change in marketing
strategy. This program, which began in 1988, was completed in early 1994.
Revenues from clients other than
19
<PAGE> 22
The Upjohn Company increased $2.5 million, or 21.6%, to $14.1 million for 1994
from $11.6 million for 1993. Revenues from teleservicing activities, principally
inbound services, for clients other than The Upjohn Company increased $1.1
million, or 17.1%, to $7.3 million for 1994 from $6.2 million for 1993. The
teleservicing growth was primarily a result of increased activity from existing
clients, principally in the food and beverage industry, as well as from the
addition of new clients in the transportation and financial services industries.
Revenues for information services and account services in conjunction with
teleservicing activities from clients other than The Upjohn Company also
increased $1.2 million, or 38.1%, to $4.2 million for 1994 from $3.0 million for
1993.
Cost of Services. Cost of services decreased to $9.1 million for 1994 from
$10.7 million for 1993, a decrease of $1.6 million, or 15.0%. As a percentage of
revenues, cost of services was 60.5% in 1994 and 58.6% in 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.3 million, or 17.4%, to $6.0 million for
1994 from $7.3 million for 1993, primarily as a result of a decrease in
compensation paid to shareholders in their capacities as employees of the
Company in 1994 and expenses incurred in 1993 associated with the winding down
of The Upjohn Company's Rogaine program with the Company. This decrease was
partially offset by an increase in costs associated with several senior level
management personnel as the Company positioned itself for growth. As a
percentage of revenues, these expenses remained relatively constant.
Interest Expense. Interest expense increased slightly to $292,000, or 1.9%
of revenues, for 1994 from $197,000, or 1.1% of revenues, for 1993. This
increase reflected higher average outstanding borrowings which were used to
finance working capital needs and to purchase computer and telecommunications
equipment.
Pro Forma Net Income. Pro forma net loss increased 43.0% to $286,000, or
1.9% of revenues, for 1994 compared to pro forma net loss of $200,000, or 1.1%
of revenues, for 1993. Pro forma net loss includes a benefit for Federal and
state income taxes. See Note 10 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have historically been cash flow
from operating activities, bank borrowings and capital lease financing. In May
1996, the Company entered into a new three-year, $15 million revolving credit
facility, under which the Company may borrow up to 85% of eligible accounts
receivable. During the first year of this facility, the Company may borrow
(subject to the $15 million aggregate limit) an amount not to exceed $2.5
million unrelated to the level of accounts receivable (the "overformula
advance") for a period of one year from the closing date of the loan. The credit
facility accrues interest at the Company's option at the prime rate plus 0.5% or
the LIBOR rate plus 3%; the overformula advance accrues interest at the prime
rate plus 1%. The credit facility is primarily collateralized by accounts
receivable. The Company is required to maintain certain financial covenants,
including minimum tangible net worth and earnings, to limit capital expenditure
to no more than $11 million per year and to limit additional indebtedness. The
Company does not believe that these limitations on capital expenditures and
indebtedness will restrain its ability to grow. The Company is also restricted
from paying dividends except for tax distributions to its shareholders in
connection with S corporation earnings and distributions in connection with the
termination of its S corporation status. The initial borrowings under this
credit facility were used to retire the $5.7 million outstanding balance under
the Company's previous credit facility and a note payable with an outstanding
balance of approximately $250,000. For information about the Company's previous
and existing borrowings, see Notes 4 and 5 of Notes to Financial Statements.
Capital expenditures, including capital lease financings, were $2.6
million, $2.0 million and $1.6 million for 1995, 1994 and 1993, respectively.
The Company expects capital expenditures to approximate $16.0 million for 1996,
including approximately $8.5 million for the two call centers the Company
expects to open in the second half of 1996. Capital expenditures for the first
quarter of 1996 were approximately $887,000. Historically, capital expenditures
have been, and future expenditures are anticipated to be, primarily for
facilities and equipment to support expansion of PRC's operations.
20
<PAGE> 23
The Company believes that funds generated from operations, the net proceeds
of this offering, availability under its new revolving credit facility and lease
financing will be sufficient to finance its current and anticipated operations
and planned capital expenditures at least through 1997. The Company's long term
capital requirements beyond 1997 will depend on many factors, including, but not
limited to, the rate at which the Company expands its business. To the extent
that the funds generated from the sources described above are insufficient to
fund the Company's activities in the short or long term, the Company would need
to raise additional funds through public or private financings. No assurance can
be given that additional financing will be available or that, if available, it
will be available on terms favorable to the Company.
The following table sets forth certain information from the Company's
statement of cash flows for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities..................................... $ (880) $ 2,264 $ 600 $ 309 $ (990)
Net cash used in investing activities............ (1,230) (1,474) (1,578) (356) (479)
Net cash provided by (used in) financing
activities..................................... 1,755 (223) 458 (322) 1,254
</TABLE>
Cash used in operating activities was $990,000 for the first quarter of
1996. This was the result of $1.1 million of income before depreciation and
amortization offset by $2.1 million of changes in operating assets and
liabilities. The additional working capital was principally related to the
increase in accounts receivable resulting from the increase in revenues over the
same period. Cash used in investing activities for the first three months of
1996 was $479,000, primarily related to the purchase of computer and
telecommunications equipment. Cash provided by financing activities for the
first quarter of 1996 was $1.3 million, reflecting revolving credit facility
borrowings to fund working capital needs.
Cash provided by operating activities was $309,000 for the first quarter of
1995. This was the result of $714,000 of income before depreciation and
amortization, offset by $405,000 of changes in operating assets and liabilities.
Cash used in investing activities for the first three months of 1995 was
$356,000, primarily related to the purchase of computer and telecommunications
equipment. Cash used in financing activities for the first quarter of 1995 was
$322,000, reflecting repayments on long-term obligations.
Cash provided by operating activities was $600,000 for 1995, reflecting
$2.6 million of income before depreciation and amortization, offset by $2.0
million of changes in operating assets and liabilities. The additional working
capital was principally related to the increase in accounts receivable resulting
from the increase in revenues over the same period. Cash used in investing
activities for 1995 was $1.6 million, primarily related to the purchase of
telecommunications equipment, and, to a lesser extent, computers and leasehold
improvements. Cash provided by financing activities for 1995 was $458,000,
reflecting revolving credit facility and other bank borrowings to fund working
capital needs and capital expenditure requirements.
Cash provided by operating activities was $2.3 million for 1994, reflecting
$423,000 of income before depreciation and amortization, plus $1.9 million of
changes in operating assets and liabilities. The working capital change was
principally related to the decrease in accounts receivable resulting from the
decrease in revenues over the same period. Cash used in investing activities for
1994 was $1.5 million, primarily related to the purchase of computer equipment
and, to a lesser extent, telecommunications equipment and leasehold
improvements. Cash used in financing activities for 1994 was $223,000,
reflecting net repayments of long-term obligations.
Cash used in operating activities was $880,000 for 1993, reflecting $1.6
million of changes in operating assets and liabilities, offset by $726,000 of
income before depreciation and amortization and loss on disposal of assets. The
additional working capital was principally related to the increase in accounts
receivable resulting from the increase in revenues over the same period. Cash
used in investing activities for 1993 was $1.2 million, primarily related to the
purchase of computer equipment. Cash provided by financing activities for 1993
was $1.8 million, reflecting revolving credit facility and other bank borrowings
to fund working capital needs and capital expenditure requirements.
21
<PAGE> 24
INFLATION
Inflation has not had a material impact upon operating results, and the
Company does not expect it to have such an impact in the future. However, there
can be no assurance that the Company's business will not be affected by
inflation in the future.
QUARTERLY RESULTS
The Company has experienced and expects to continue to experience quarterly
variations in revenues and operating income principally as a result of the
timing of clients' marketing campaigns and customer service programs, the
commencement of new contracts, changes in the Company's revenue mix among its
various service offerings, construction and start-up of new call centers and the
timing of additional selling, general and administrative expenses to acquire and
support such new business. While the effects of seasonality on PRC's business
often are obscured by the addition of new clients and growing revenues, the
Company's business tends to be slower in the first and third quarters of its
fiscal year because client marketing and customer service programs are typically
slower in the post-holiday and summer months.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued two financial
accounting standards ("FAS") which became effective January 1, 1996. The
standards are FAS 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and FAS 123, "Accounting for
Stock-Based Compensation."
FAS 121 requires that long-lived assets, such as property and equipment,
and certain identifiable intangibles to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss, based on
the fair value of the asset, should be recognized if the expected future cash
flows (undiscounted and without interest charges) resulting from the use and
eventual disposition of the asset is less than the carrying amount of the asset.
Based on the Company's current operating results and circumstances, FAS 121 is
not expected to impact its financial position or results of operations.
FAS 123 establishes a fair value based method of accounting for stock-based
compensation plans. It encourages, but does not require, entities to adopt that
method in place of current practice. The standard also requires pro forma
disclosures of results and earnings per share even if the new accounting method
is not adopted. The Company does not expect to adopt the non-mandatory
provisions of FAS 123. Accordingly, the standard will not impact the Company's
financial position or results of operations.
22
<PAGE> 25
BUSINESS
GENERAL
PRC is a leading full-service provider of telephone-based marketing and
customer service solutions on an outsourced basis to large corporations. Through
the integration of its teleservicing, database marketing and management, and
fulfillment capabilities, the Company is able to provide a "one-stop" solution
to meet its clients' needs. The Company believes that its one-stop solution
approach, combined with its sophisticated use of advanced technology, provide a
distinct competitive advantage in attracting clients seeking to cost-effectively
contact or service prospective or existing customers. The Company's ongoing
clients include several divisions of AT&T Corp., British Airways plc, Taco Bell
Corp., Ryder Truck Rental, Inc. and FTD, Inc. New clients expected to contribute
to 1996 revenues include United Parcel Service of America, Inc., DirecTV, Pizza
Hut Inc. and Video Guide.
PRC's revenues increased 101.4% to $30.2 million for 1995. For the first
quarter of 1996, revenues increased 97.1% to $11.6 million from $5.9 million for
the comparable quarter of 1995. Since 1993, the Company has focused primarily on
customer service programs for large corporations with significant ongoing
teleservicing needs. As a result, most of the Company's teleservicing activities
involve inbound (customer initiated) calls rather than outbound (PRC initiated)
calls. For the first quarter of 1996, 82.2% of the Company's teleservicing
revenues were from inbound calls. By the end of June 1996, the Company will be
operating approximately 2,100 workstations in six telephone call centers capable
of handling up to 30 million calls per month and expects to add two additional
call centers and approximately 900 additional workstations in the second half of
1996.
INDUSTRY OVERVIEW
The telephone-based marketing and customer service industry has experienced
substantial growth over the past ten years. Telephone-based direct marketing
expenditures increased from an estimated $34 billion in 1984 to an estimated $77
billion in 1994. Telephone contact with customers is increasing as more
companies realize its benefits, including high response rates, low cost per
transaction and direct interaction with customers, which allows on-line access
to detailed customer or product information and immediate response to customer
inquiries. With the proliferation of toll-free "800" and "888" numbers, the
telephone is becoming a principal means of providing customer service.
The Company believes that only a small percentage of the $77 billion in
teleservicing expenditures in 1994 was for outsourced services. The Company
expects that large companies increasingly will outsource these activities in
order to focus internal resources on their core competencies and to improve the
quality and cost-effectiveness of their marketing and customer service efforts
by using the experience and specialized capabilities of larger-scale
teleservices providers. The Company also believes that organizations with
superior customer service and sophisticated, advanced technology, such as PRC,
will particularly benefit from this outsourcing trend.
The teleservices industry has evolved over the last ten years from
primarily single-facility, low-technology environments to large, full-service
organizations with multi-location, high-volume call centers. This evolution has
resulted primarily from the development of sophisticated computer and
telecommunications equipment and software which enable teleservices providers to
implement large-scale, professional programs. However, the industry remains
highly fragmented and is comprised of a large number of in-house operations and
independent companies. Many of these organizations provide only a limited number
of services.
BUSINESS STRATEGY
PRC's objective is to become the premier full-service provider of
telephone-based marketing and customer service solutions. The Company's strategy
for achieving this objective is to offer high-quality, fully integrated services
to its clients which are customized to address each client's unique needs and to
improve the quality and cost-effectiveness of the client's marketing and
customer service operations. The Company
23
<PAGE> 26
believes it possesses, and is enhancing, a number of competitive strengths that
will help it achieve its objective, including:
- "One-Stop" Solutions Through Fully Integrated Services. The Company's
integration of teleservicing, database marketing and management, and
fulfillment services as part of a one-stop solution provides a
cost-effective and efficient method for its clients to manage their
growing direct marketing and customer service needs. The Company is
typically involved in all stages of formulating, designing and
implementing its clients' marketing and customer service programs. PRC
believes that this solution-oriented, value-added approach to addressing
its clients' needs distinguishes PRC from its competitors and plays a
vital role in the Company's ability to attract and retain clients.
- Advanced Technology. The Company's sophisticated use of advanced
technology enables it to develop and deliver solutions to its clients'
complex marketing and customer service needs. Through the efforts of its
information services group comprised of over 100 information systems
specialists, the Company has designed comprehensive systems that allow it
to rapidly develop and implement application software for each client's
program and to integrate the Company's centrally managed wide area network
with the client's management information systems. PRC has also developed
specialized software programs, CCPro and PRC On-Line, which more
cost-effectively utilize the Company's hardware capabilities and also
provide a seamless interaction with its clients' systems. CCPro, a call
management software program jointly developed with an unaffiliated
software development company, is able to predict when an overflow of
inbound calls is imminent and automatically redirects inbound calls to
outbound customer service representatives working on universal
workstations. PRC On-Line, a proprietary software package, allows PRC
clients to review their programs on line, in real time to obtain
comprehensive trend analyses and to instantly alter program parameters.
- Rapid Deployment of Call Centers. PRC has the ability to have a call
center fully operational in approximately 60 days, as demonstrated by the
recent openings of a 225 workstation call center and a 410 workstation
call center in April 1996 and the planned opening of a 480 workstation
call center in June 1996. The Company plans in advance of the actual need
for new call centers by maintaining a list of prospective sites that can
be leased on short notice and have been pre-qualified in terms of the
availability of necessary utilities and parking, suitability for build-out
as a call center and access to a suitable labor pool. This ability to
rapidly expand its capacity has enabled the Company to provide rapid
response to its clients' needs and to compete effectively for new business
opportunities. In the second half of 1996, the Company expects to add two
new call centers and approximately 900 additional universal workstations.
- Long-Term Client Relationships. The Company seeks to develop long-term
client relationships by becoming an integral part of its clients' overall
marketing and customer service efforts. Account services teams, comprised
of representatives of the teleservices, information services and
fulfillment departments, work closely with each client to formulate,
design and implement the client's program. This close working relationship
positions PRC as a strategic partner with its clients.
- Strong Commitment to Quality. PRC strives to achieve the highest quality
standards in the industry. Approximately 80% of PRC's customer service
representatives are full-time, which the Company believes results in
greater stability and quality in the workforce. The Company has developed
a rigorous screening process for new hires. All new representatives
participate in extensive classroom and on-the-job training programs
lasting up to five weeks. After training, each representative's
performance is monitored regularly through on-site supervision, remote and
on-site call monitoring and on-line performance tracking. The Company's
client commitment team ensures that the Company fulfills its commitments
in connection with each client program in a timely manner. Because PRC's
services involve direct contact with its client's customers, the Company's
commitment to quality is critical to its ability to attract and retain
clients.
OPERATIONS OVERVIEW
PRC's operations are organized to effectively provide one-stop solutions to
its clients' marketing and customer service needs. Each client program is
managed by an account services manager who is generally
24
<PAGE> 27
dedicated to a single client. The account services manager assembles a team from
the teleservices, information services and fulfillment operating groups which is
assigned responsibility for a program throughout its term. This team works with
the client to formulate and design a marketing or customer service program
tailored to achieve that client's objectives. In implementing the program, the
account services team is supported by the human resources department which
carefully selects the customer service representatives for that particular
program. In addition, the quality assurance and client commitment teams monitor
the program to ensure that it is carried out in accordance with specifications.
The Company believes that its integrated team approach and solution-oriented
focus provide PRC with a distinct competitive advantage.
Program Formulation and Design. PRC's account services team works with the
client to formulate a marketing and customer service program suited to the
client's needs. The information services group uses its substantial expertise in
rapid application development and effective systems integration to help clients
more effectively target marketing programs, resulting in higher response rates
and profitability, and to design customer service programs which capture
information useful in the client's customer retention programs and other
marketing operations. PRC offers a wide array of services, including
formulating, designing and customizing database architecture, programming,
demographic and psychographic profiling, and scripting. For 1995 and the first
quarter of 1996, account services and information services were 23.0% and 22.6%
of the Company's total revenues, respectively.
Program Implementation. PRC's account services team works with the
teleservices and fulfillment operating groups to implement the client's
marketing or customer service program. Teleservicing operations involve direct
communication with the clients' customers through inbound (customer initiated)
or outbound (PRC initiated) calls. For 1995, teleservices accounted for 67.3% of
the Company's total revenues. Of this amount, 92.3% resulted from inbound calls.
For the first quarter of 1996, teleservices accounted for 68.5% of the Company's
total revenues, of which 82.2% resulted from inbound calls.
In handling inbound calls, the Company's customer service representatives
respond to a variety of customer requests, including inquiries, complaints,
direct mail responses and order processing. The customer typically calls a
toll-free "800" number to request product or service information, place an order
for a product or service, or obtain assistance regarding a previous order or
purchase (including "help line" support). PRC's automated call distributors and
digital switches identify each inbound call by "800" number and route the call
to a PRC representative trained for that client's program. Simultaneously with
receipt of the call, the representative's computer screen displays customer,
product and service information relevant to the call.
PRC's outbound services include conducting customer satisfaction and
preference surveys and cross-selling client products, as well as providing
pro-active customer management with the goal of increased sales and enhanced
customer retention. In almost all cases, outbound calls are made to existing
customers of the client or to respond to customer initiated inquiries. The
Company's outbound call management system utilizes predictive dialers which
automatically dial the telephone numbers, determine if a live connection is made
and present connected calls to a customer service representative who has been
trained specifically for the client's program. The customer's name, other
information about the customer and the program script simultaneously appear on
the customer service representative's computer screen. The representative then
uses the script to take an order for the client's product or service or to
request information for addition to the client's database.
The Company's teleservicing operations have been greatly enhanced by the
use of universal workstation technology. Universal workstations allow the
customer service representative to automatically handle either inbound or
outbound calls as the demand dictates. The Company's call management software
program, CCPro, predicts when an overflow of inbound calls is imminent and
automatically directs inbound calls to customer service representatives working
on universal workstations who would otherwise be handling outbound calls. This
ensures that calls from existing customers or prospective customers are answered
promptly. It also increases efficiency from the client's standpoint by allowing
the customer service representative (for whose services the client generally
pays by the hour) to be productive with either inbound or outbound calls. As of
May 1, 1996, over 90% of the Company's workstations were universal workstations
and the Company expects that all workstations added in the future will be
universal.
25
<PAGE> 28
Information obtained during a customer call by the PRC customer service
representative is captured by the Company's database marketing and management
systems. This information is used by PRC to ensure high quality performance and
to provide fulfillment services if necessary. PRC's database marketing and
management technology also enables the Company to seamlessly connect with its
clients' systems and thus deliver on-line, real-time program information. PRC's
clients accessing this information through PRC On-Line or other reports to
obtain comprehensive trend analyses are able to monitor, evaluate and alter
program parameters as necessary to improve effectiveness.
Fulfillment services include high-speed laser and electronic document
printing, lettershop, and mechanical inserting, sorting, packaging and mailing
capabilities. While fulfillment services represent a relatively small portion of
the Company's revenues, they enable the Company to support full-service
marketing and customer service programs by managing and fulfilling requests for
literature, pharmaceutical products and other specialty items and by permitting
the rapid distribution of client marketing information. For 1995 and the first
quarter of 1996, fulfillment accounted for 9.3% and 8.7%, respectively, of the
Company's total revenues.
Quality Assurance. PRC maintains its strong commitment to quality through
its quality assurance and client commitment teams. Within each of PRC's
operating divisions the quality assurance teams monitor performance to ensure
that the Company's services are delivered at a level of quality that meets the
Company's and client's standards. For example, in the teleservicing department,
the quality assurance team monitors customer service representatives in order to
maintain quality and efficiency, including compliance with the client's script
and number and length of calls handled. The client commitment team functions on
a company-wide basis to audit the fulfillment of the Company's commitments to
the client with respect to each program.
Client Reporting. Data derived from marketing and customer service
programs are a source of valuable information to PRC's clients in evaluating
ongoing programs and planning and designing future programs. PRC has developed
technologies and reporting procedures that effectively convert raw data gathered
during the course of the program into useful information upon which clients can
base strategic decisions and more effectively respond to customer needs and
inquiries. PRC's proprietary software product, PRC On-Line, allows clients to
monitor their programs on line, in real time to obtain comprehensive trend
analyses and modify program parameters as necessary. In addition, PRC provides
clients with customized reports in printed form, electronic mail,
computer-to-computer transmission, disk, tape and on-line.
TECHNOLOGY
PRC's sophisticated use of advanced technology enables it to develop and
deliver solutions to its clients' complex marketing and customer service needs.
The Company's information services group, which includes over 100 information
systems specialists, has developed the Company's call management and database
marketing and management systems. The information services group uses this
platform to design and implement application software for each client's program.
The Company believes that its platform is among the most advanced in the
industry and provides a significant competitive advantage in attracting new
business. Since 1993, investments in these systems, including the value of
leased equipment, have amounted to approximately $8.7 million.
The Company utilizes a UNIX-based open architecture system comprised of
multiple computer systems which, in conjunction with its rapid application tool
for user interface development, allows PRC to expand capacity from a PC-class
computer to a mainframe without rewriting software, and provides flexibility in
designing applications tailored to the clients' needs. In conjunction with the
Company's use of Oracle and Sybase database applications, the UNIX-based open
architecture system permits the Company to seamlessly interact with many
different types of client systems and permits the utilization of a "hub and
spoke" configuration to electronically link each call center's system to the
Company's operational headquarters, resulting in a centrally managed wide area
network. PRC also utilizes computer-telephone integration and universal
workstation technologies as part of its wide area network. All PRC hardware is
attached to an uninterruptable power supply designed for protection against
outages or any data loss due to power variations, as well as a diesel generator
to assure an uninterrupted power source. The Company believes that the integrity
26
<PAGE> 29
of client information is more than adequately protected by its data security
system and its off-site disaster back-up storage facilities.
PRC On-Line. The Company's proprietary software application, PRC On-Line,
allows its clients to review their programs' progress on line, in real time to
obtain comprehensive trend analyses and to instantly alter program parameters.
The Company believes that the capabilities of its PRC On-Line software
application provide it with a significant competitive advantage, particularly
with large, sophisticated marketing-oriented companies. The increased
communication and control provided by PRC On-Line allows clients to utilize
PRC's services as a seamless extension of their in-house marketing and customer
services operations.
CCPro. The Company's call management software program, CCPro, enables the
Company to more efficiently utilize its universal workstations. CCPro
encompasses all aspects of call management, including predictive dialing,
outbound call management, call routing and dynamic reallocation between inbound
and outbound calls. CCPro is able to predict when an overflow of inbound calls
is imminent and automatically directs these calls to available outbound
operators. PRC has a non-exclusive, perpetual, worldwide license to use CCPro,
which it developed in conjunction with an unaffiliated software development
company. Because this software is available to the Company on a royalty-free
basis, the Company believes its cost per workstation is significantly less than
its competitors who license third-party software.
PERSONNEL AND TRAINING
PRC believes that its rigorous approach to hiring and training its
employees is a key component of its ability to provide high quality service. The
Company carefully selects the locations for its call centers based on
demographic studies in order to ensure the availability of an adequate and
qualified pool of potential employees. Its hiring procedures are designed to
ensure that only the most qualified candidates are offered employment. The
Company offers extensive classroom and on-the-job training programs for its
personnel, including instruction on the businesses of PRC's clients and proper
telephone sales and customer service techniques. Each new customer service
representative receives up to five weeks of training, which provides the skills
training he or she needs to work on a specific, dedicated client program. The
Company offers a benefits package to all full-time employees after six months of
employment. The Company believes that such a careful selection process results
in a high quality, dedicated work force. As of May 1, 1996, the Company had
1,749 full-time employees and 66 part-time personnel, of which 1,452 of the
full-time employees and all of the part-time personnel were customer service
representatives. The Company believes that its percentage of full-time customer
service representatives is high relative to its competitors, and that this
results in greater stability and quality in its workforce. None of PRC's
employees is subject to a collective bargaining agreement. The Company considers
its relations with its employees to be good.
SALES AND MARKETING
The Company believes its reputation for providing high quality, one-stop
solutions has enabled it to obtain new business through requests for proposals,
client referrals and cross-selling to existing clients. In addition, the
Company's sales and marketing group actively pursues new business opportunities
by identifying companies and industries which can benefit from the Company's
services. Working with the information services group, the sales and marketing
team is able to demonstrate to prospective clients its rapid application
development and effective systems integration capabilities to meet the proposed
program objectives. The Company has hired, and continues to seek to hire, sales
and marketing personnel with significant industry experience in order to take
advantage of their expertise and established relationships.
CLIENT RELATIONSHIPS
The Company seeks to develop and maintain long-term relationships with its
clients. PRC targets those companies which have the potential for generating
recurring revenues due to the magnitude of their marketing programs or customer
service departments. PRC believes that its clients view it as a strategic
partner and a valuable resource in formulating, designing and implementing their
marketing and customer service programs. As of May 1, 1996, the Company provided
its services to over 40 clients in industries such as telecommunica-
27
<PAGE> 30
tions, transportation, consumer products and food and beverage. The Company's
ongoing clients include several divisions of AT&T Corp., British Airways plc,
Taco Bell Corp., Ryder Truck Rental, Inc. and FTD, Inc. New clients expected to
contribute to 1996 revenues include United Parcel Service of America, Inc.,
DirecTV, Pizza Hut Inc. and Video Guide. The Company's five and two largest
clients accounted for 77.0% and 59.4%, respectively, of its total revenues for
1995, and 76.5% and 66.2%, respectively, of total revenues for the first quarter
of 1996. Revenues generated by the various divisions of AT&T, the Company's
largest client, accounted for 42.1% of revenues for 1995 and 61.3% of revenues
for the first quarter of 1996. Revenues from Ryder Truck Rental, Inc. accounted
for 17.3% of total revenues for 1995, but no client other than AT&T accounted
for 10% or more of total revenues for the first quarter of 1996.
Although the Company enters into written contracts with its clients,
generally either party retains the right to terminate on varying periods of
prior notice. Contracts typically encompass all aspects of the Company's
relationship with the client, with all charges set forth in one document. The
Company's teleservicing charges are usually based either on a fixed hourly fee
for dedicated service or on a transaction (i.e., number of calls completed)
basis for shared environments. Charges for database marketing and management
services are based on an hourly rate or on the volume of information stored.
Fulfillment service charges are typically assessed on a transaction basis, with
an additional charge for warehousing products. The Company assesses separate
charges for program design, development and implementation, database design and
management, training or retraining of personnel, processing and access fees and
account services, where appropriate.
COMPETITION
The industry in which PRC operates is very competitive and highly
fragmented. PRC's competitors range in size from very small firms offering
specialized applications and short-term projects, to large independent firms and
the in-house operations of many clients and potential clients. In-house
teleservicing and customer service organizations comprise the largest segment of
the industry. The market includes non-captive teleservicing and customer service
operations such as APAC TeleServices, Inc., ITI Marketing Services, Inc.,
MATRIXX Marketing Inc., SITEL Corporation, TeleServices Resources and West
Telemarketing Corporation. In addition, some of PRC's services also compete with
other forms of direct marketing such as mailhouses, television, radio and
on-line services as well as the Internet. PRC believes that the principal
competitive factors in its industry are a reputation for quality, sales and
marketing results, price, technological expertise, and the ability to promptly
provide clients with customized and creative solutions and approaches to their
marketing and customer service needs. The Company believes that it competes
favorably with other companies with respect to the foregoing factors for
large-scale, ongoing marketing and customer service programs where the principal
competitive factor is quality. The Company has not chosen to compete for high-
volume outbound marketing programs where the principal competitive factor is
price. A number of competitors currently have capabilities and resources greater
than PRC's, which might competitively disadvantage PRC in bidding for very large
programs.
GOVERNMENT REGULATION
Telephone sales practices are regulated at both the Federal and state
level. The rules of the Federal Communications Commission (the "FCC") under the
Federal Telephone Consumer Protection Act of 1991 (the "TCPA") prohibit the
initiation of telephone solicitations to residential subscribers before 8:00
a.m. or after 9:00 p.m., local time, and prohibit the use of automated telephone
dialing equipment to call certain telephone numbers. In addition, the FCC rules
require telemarketers to have procedures in place to maintain lists of
residential customers who do not want to receive telephone solicitations and to
avoid making calls to those customers. The FCC rules also prohibit the use of
pre-recorded or artificial voice calls to consumers (with limited exceptions)
and advertising via telephone facsimile machines. Violation of these FCC rules
may result in the imposition of injuctive relief or monetary damages.
The Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of
1994 (the "TCFAPA") broadly authorizes the Federal Trade Commission to issue
regulations prohibiting misrepresentation in telephone sales. In August 1995,
the FTC issued rules under the TCFAPA. These rules set forth disclosure
28
<PAGE> 31
requirements for telemarketers when placing calls, prohibit deceptive
telemarketing acts or practices during solicitation, provide guidelines on
collecting payments by check and credit cards, provide restrictions on abusive
telephone solicitation practices and promulgate certain record keeping
requirements. Violation of these FTC rules may also result in the imposition of
injuctive relief or monetary damages.
The Company believes that it is in compliance with the TCPA and the FCC
rules thereunder and with the FTC's rules under the TCFAPA. The Company trains
its customer service representatives to comply with the FTC and FCC rules and
programs its call management system to avoid telephone calls during restricted
hours or to individuals maintained on PRC's "do-not-call" list.
Most states have enacted or are considering legislation to regulate
telephone solicitations. For example some states require telemarketers to be
licensed by state regulatory agencies prior to soliciting purchasers within that
state. Additionally, telephone sales in certain states cannot be final unless a
written contract is delivered to and signed by the buyer and may be cancelled
within three business days. At least one state also prohibits telemarketers from
requiring credit card payment and several other states require certain
telemarketers to obtain licenses and post bonds. Penalties for violation of
these state telemarketing regulations vary from state to state and include civil
as well as criminal penalties. From time to time, bills are introduced in
Congress which, if enacted, would regulate the use of credit information. The
Company cannot predict whether this legislation will be enacted and what effect,
if any, it would have on the Company or its industry.
The industries served by the Company are also subject to varying degrees of
government regulation. The Company works closely with its clients and their
advisors to develop the scripts to be used by PRC in connection with making
consumer contacts. In connection with its fulfillment service, the Company holds
complimentary drug distributor and prescription drug wholesaler permits issued
by the State of Florida allowing the Company to handle and distribute drugs to
doctors and pharmacists. The Company generally requires its clients to indemnify
PRC against claims and expenses arising with respect to the Company's services
performed on its clients' behalf. The Company has never been held responsible
for the regulatory noncompliance by a client.
FACILITIES
The Company's corporate headquarters are located in Miami, Florida in
leased facilities consisting of 56,745 square feet of office space.
Approximately 53,745 square feet of the corporate office space are leased, while
the remaining 3,000 square feet are subleased. The primary leases terminate in
1997, with the Company holding the option to extend for two three-year terms.
The sublease also terminates in 1997, with the Company holding the option to
renew for three three-year terms. The Company's fulfillment operations are
located in a separate leased facility in Miami, Florida consisting of 47,577
square feet. This lease expires in 2001 and the Company has the option to extend
the lease for one five-year term.
The Company leases the facilities listed below for its call centers, all of
which are located in Florida:
<TABLE>
<CAPTION>
CURRENT NUMBER
OF
LOCATION OPENING DATE WORKSTATIONS
------------------------------------------------------ ------------ --------------
<S> <C> <C>
4300 N.W. 135th St., Miami............................ May 1988 120
1505 N.W. 167th St., Miami (site of headquarters)..... July 1992 430
14261 Industrial Way, Miami Lakes..................... January 1996 434
1525 N.W. 167th St., Miami............................ April 1996 225
11975 S.W. 140th Terrace, Miami....................... April 1996 410
5166 E. Colonial Dr., Orlando......................... June 1996 480
------
Total....................................... 2,099
======
</TABLE>
Of the total number of workstations listed above, 1,949 are universal
workstations which can be used for both inbound and outbound calls. The numbers
in the table do not include workstations used for training.
The leases for these facilities generally expire between 1997 and 2005, and
all leases contain renewal options. The Company also leases additional
facilities incidental to its operations. The Company believes that its
29
<PAGE> 32
existing facilities are suitable and adequate for its current operations, but
additional facilities will be required to support growth. The Company further
believes that suitable space will be available as needed to expand its business
on commercially reasonable terms. In addition to the facilities list above, the
Company anticipates that it will open two new call centers and add approximately
900 universal workstations in the second half of 1996. See
"Management -- Compensation Committee Interlocks and Insider Participation" and
Note 7 of Notes to Financial Statements.
LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings that, individually or
in the aggregate, management believes will have a material adverse effect on the
Company or its operations if decided adversely to the Company.
30
<PAGE> 33
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- --- -------------------------------------------------------
<S> <C> <C>
Mark J. Gordon 48 Chairman of the Board and Chief Executive Officer
David L. Epstein 32 President and Director
James F. Murray 43 Chief Operating Officer and Director
Richard D. Mondre 51 Executive Vice President, General Counsel, Secretary
and Director
Richard N. Ferry, Jr. 44 Senior Vice President -- Business Development
Thomas C. Teper 34 Vice President -- Facilities Acquisition and
Development
Joseph E. Gillis 39 Chief Financial Officer and Treasurer
</TABLE>
The following sets forth the background of each of the Company's executive
officers and directors, including the principal occupation of those individuals
for the past five years:
Mark J. Gordon joined the Company in 1984 and became a director at
that time. Mr. Gordon has served as the Company's Chief Executive Officer
since 1985.
David L. Epstein joined the Company in 1982, was named Executive Vice
President in 1984, and has served as its President since 1985. He became a
director of the Company in April 1996.
James F. Murray joined the Company in November 1993 as its Chief
Operating Officer and was named a director in May 1996. From November 1988
to November 1993, Mr. Murray was the Executive Vice President in charge of
overall operations of Altman Development Company, a large multi-family
residential real estate development and management company. Mr. Murray is a
Certified Public Accountant.
Richard D. Mondre joined the Company in March 1996 as its Executive
Vice President, General Counsel and Secretary. He became a director of the
Company in May 1996. From January 1983 to March 1996, Mr. Mondre was a
partner at the law firm of Rubin Baum Levin Constant Friedman & Bilzin,
which serves as the Company's regular outside counsel. Mr. Mondre remains
"Of Counsel" to that law firm.
Richard N. Ferry, Jr. joined the Company in November 1994 as its Vice
President -- Business Development and was appointed a Senior Vice President
in that position in May 1996. From November 1993 to November 1994, Mr.
Ferry was a principal of Virtual Marketing International, providing
consulting services to a number of companies, including many of the
Company's competitors, in the teleservicing and direct marketing
industries. From November 1991 to November 1993, Mr. Ferry was the Director
of Marketing Services at Century Telecommunications, a provider of
telephone services, and from September 1984 until November 1991, Mr. Ferry
was the Vice President of Operations for Advanced Telemarketing Corp., a
provider of teleservices.
Thomas C. Teper joined the Company in May 1990 as the Vice President
of Finance and Chief Financial Officer. Mr. Teper was appointed Vice
President of Corporate Planning and Development in January 1994 and Vice
President -- Facilities Acquisition and Development in May 1996. Mr. Teper
is a Certified Public Accountant.
Joseph E. Gillis joined the Company in November 1994 as its Chief
Financial Officer and Treasurer. From October 1993 until joining the
Company, Mr. Gillis was the Chief Financial Officer of William Schneider,
Inc., a jewelry manufacturer. From June 1989 to October 1993, Mr. Gillis
was the Vice President of Finance for the Vertical Blind Division of Hunter
Douglas, Inc., a manufacturer of window coverings, or its predecessor,
Profile Corporation. Mr. Gillis is a Certified Public Accountant.
31
<PAGE> 34
INDEPENDENT DIRECTORS; COMMITTEES
The Company intends to add two independent members to its Board of
Directors within 90 days after the date of this Prospectus.
The Company's Board of Directors will establish an Audit Committee, a
majority of the members of which will be independent directors, and a
Compensation Committee, all the members of which will be independent directors.
The Audit Committee will recommend the annual engagement of the Company's
auditors, with whom the Audit Committee will review the scope of audit and
non-audit assignments, related fees, the accounting principles used by the
Company in financial reporting, internal financial auditing procedures and the
adequacy of the Company's internal control procedures. The Compensation
Committee will determine executive officers' salaries and bonuses and will
administer the Company's Stock Plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee during its last completed
year. The compensation of the Company's executive officers was determined by Mr.
Gordon, as the Company's sole director, for this period.
The Company's facility at 4300 N.W. 135th Street, Miami, as well as two
additional facilities located at 4250 N.W. 135th Street, Miami, and 13180 N.W.
43rd Avenue, Miami (both of the latter facilities are currently used for
warehouse space), are leased to the Company by a corporation, of which Mr.
Gordon is the sole shareholder. Prior to May 1, 1996, such facilities were
leased to the Company on a month-to-month basis. Rent expenses under this
arrangement amounted to approximately $345,000, $211,000 and $194,000 for 1993,
1994 and 1995, respectively. In May 1996, the Company entered into written
leases for such facilities. The leases commenced on May 1, 1996 and run for a
term of five years with the Company holding a five-year renewal option. The
aggregate monthly rents for these three properties is approximately $23,000. The
Company believes that the rents payable under these leases are no less favorable
to it than could be obtained from unaffiliated parties. See Note 7 of Notes to
Financial Statements.
The Company has guaranteed mortgage loans of the affiliated corporation
(mentioned above) which is owned by Mr. Gordon and which leases property to the
Company. Mr. Gordon has agreed to indemnify the Company for any losses incurred
by reason of such guaranty. As of May 1, 1996, the outstanding principal
balances on these three loans were approximately $888,000, $167,000 and
$151,000, respectively, and the monthly payment amounts were approximately
$9,000, $2,000 and $2,000, respectively. The largest outstanding balances for
these loans for 1993, 1994 and 1995 were $1.4 million, $1.4 million and $1.3
million, respectively. See Note 7 of Notes to Financial Statements.
The Company subleases its facility at 11975 S.W. 140th Terrace, Miami, from
a partnership owned jointly by Messrs. Gordon and Epstein. The term of this
sublease expires in January 1999 and the monthly rental obligation is
approximately $13,000 for 1996, $14,000 for 1997 and $15,000 for 1998. The
property is subleased to the Company on the same terms as the primary lease with
an unaffiliated party. The affiliated partnership holds an option to purchase
the property. The Company also subleases a parking facility adjacent to the
11975 S.W. 140th Terrace facility from the same affiliated partnership. This
sublease also expires in January 1999 and the monthly rental obligation is
approximately $2,000 plus one-twelfth of the applicable real estate taxes. This
property is also subleased to the Company on the same terms as the primary
lease. The Company was originally the lessee under both primary leases, but
assigned its interest to the partnership in May 1996 for nominal consideration.
The Company has also entered into a net lease with the aforementioned
partnership for an additional parking area to be effective when the partnership
acquires the parking area. The acquisition is expected to occur in June 1996.
The term of the lease will expire five years from the date of the acquisition
and the monthly rental obligation will be approximately $2,500. The Company
believes that the rents payable under these subleases and the net lease, when
effective, are, or will be, no less favorable than could be obtained from
unaffiliated parties. See Note 7 of Notes to Financial Statements.
Nu World Realty, Inc. ("Nu World"), a company which is owned by a relative
of Mr. Gordon, has acted, and will continue to act, as a co-broker in
transactions pursuant to which the Company leases some of its
32
<PAGE> 35
facilities. Mr. Gordon is licensed to act as a real estate salesperson for Nu
World and receives a portion of the commissions payable to Nu World. From
January 1, 1993 to May 1, 1996, Nu World had earned approximately $89,000 in
commissions from the lessors in connection with these lease transactions, of
which Mr. Gordon was paid approximately $46,000. The Company has paid no portion
of these commissions and believes that the brokerage fees paid in connection
with these lease transactions are consistent with industry standards.
A portion of the drawings under the Company's new three-year, $15 million
credit facility was used to repay the approximate outstanding amount of $5.7
million under the Company's $5.8 million revolving credit facility which was to
expire on May 30, 1996, and a bank note payable in the approximate outstanding
amount of $250,000 scheduled to mature in October 1996. The $5.8 million credit
facility was guaranteed by Messrs. Gordon and Epstein and the bank note was
guaranteed by Mr. Gordon. A portion of the proceeds of this offering will be
used to repay all outstanding amounts under various installment loans guaranteed
by Messrs. Gordon and/or Epstein. The aggregate outstanding amounts under these
loans as of June 1, 1996 was approximately $800,000. See Notes 4 and 5 of Notes
to Financial Statements.
For information concerning the Dividend to be paid by the Company to its
current shareholders in 1996 and the Tax Agreement to be entered into between
the Company and its current shareholders, see "Distribution of S Corporation
Earnings."
The Company has from time to time advanced amounts to Messrs. Gordon and
Epstein. Such advances have been made on an interest-free basis. During 1993,
1994 and 1995, the largest amount of such advances to Mr. Gordon was
approximately $78,000, $105,000 and $216,000, respectively. The outstanding
balance at March 31, 1996 was approximately $295,000. The largest amount of
advances to Mr. Epstein during 1993, 1994 and 1995 was approximately $126,000,
$105,000 and $127,000, respectively. The outstanding balance owed by Mr. Epstein
at March 31, 1996 was approximately $206,000. As of March 31, 1996, the Company
was indebted to Mr. Gordon and Mr. Epstein for approximately $32,000 and
$105,000, respectively. These advances were represented by notes paying interest
at 6% per annum. The net amount owed to the Company by Mr. Gordon and Mr.
Epstein will be repaid concurrently with the closing of this offering. See Note
7 of Notes to Financial Statements.
DIRECTOR COMPENSATION
Prior to this Offering, directors have not received compensation for acting
as such. After this offering, directors who are not employees or officers of the
Company will receive a quarterly retainer of $1,500 and will receive $500 for
attendance at each meeting of the Board of Directors or committee thereof. Such
directors will also receive an option to purchase 2,500 shares of Common Stock
upon initial election and upon each re-election as a director at the Company's
annual meeting of shareholders. Directors may also be reimbursed for certain
expenses in connection with attendance at Board and committee meetings. Other
than with respect to reimbursement of expenses, directors who are employees or
officers of the Company will not receive additional compensation for service as
a director. See "Employee Stock Plan and Director Stock Plan."
EMPLOYMENT AGREEMENTS
Mark J. Gordon and David L. Epstein. Each of Mr. Gordon and Mr. Epstein
has an employment agreement with the Company, the terms of which are
substantially similar. The initial employment term is the period from July 1,
1996 to June 30, 2001, but is subject to annual renewal thereafter. However, the
employee may terminate the agreement at any time on 30 days notice. Each has a
minimum base salary of $425,000 per annum (adjusted for inflation) subject to
increase by the Compensation Committee. An annual bonus is payable based on
criteria to be agreed upon by the Compensation Committee and the employee at the
beginning of each year. No such criteria have yet been established. Each
agreement provides for the annual grant of stock options in a number to be
determined by the Compensation Committee, but for no fewer than 5% of the
aggregate number of shares for which options were granted under the Stock Plans
during the year. Each has certain piggyback and demand registration rights. See
"Shares Eligible for Future Sale." If either Mr. Gordon's or Mr. Epstein's
employment is terminated by death, disability or voluntary resignation, the
33
<PAGE> 36
employee is entitled to severance equal to 18 months salary, bonus and benefits,
and if employment is terminated by the Company without cause (as defined in the
agreements), the terminated individual is entitled to severance equal to salary,
bonus and benefits for the balance of the contract term or three years,
whichever is longer.
Richard D. Mondre. Mr. Mondre's employment agreement extends to March 31,
1999, and provides for minimum annual compensation of $400,000, subject to
increase by the Compensation Committee based on Company performance and other
factors. If Mr. Mondre's employment is terminated by the Company during the term
of the contract without cause, he will be entitled to severance equal to the
compensation and benefits payable over the balance of the term, not to exceed
$450,000. If a change in control has occurred, the $450,000 cap does not apply.
A change in control generally means that neither Mr. Gordon nor Mr. Epstein
controls the Company. Mr. Mondre is granted piggyback registration rights for
his Company stock. See "Shares Eligible for Future Sale." He is authorized to
remain "Of Counsel" to Rubin Baum Levin Constant Friedman & Bilzin as long as
his duties in that capacity do not interfere with his performance under the
employment agreement.
James F. Murray. Mr. Murray's employment agreement extends to March 31,
1999 and provides for a base annual salary of $200,000 plus an annual bonus
equal to 1% of the Company's pre-tax net income for 1996, 1997 and 1998. If Mr.
Murray's employment is terminated by the Company during the term of the contract
without cause, he will be entitled to severance equal to the compensation and
benefits payable over the balance of the term, not to exceed $300,000. Mr.
Murray is granted piggyback registration rights for his Company stock. See
"Shares Eligible for Future Sale."
Richard N. Ferry, Jr. Mr. Ferry's employment agreement extends for three
years to June 30, 1999 and provides for a base annual salary of $175,000 in the
first year, with incremental increases of $25,000 for each of the next two
years. An annual bonus is payable based on Mr. Ferry's performance. On the date
of this Prospectus, Mr. Ferry will be granted an option to purchase 36,000
shares of Common Stock at an exercise price per share equal to the initial
public offering price of the Common Stock offered hereby, and an option to
purchase 21,000 shares at an exercise price of $.01 per share. These options
will vest one third on January 5, 1997, 1998 and 1999. If Mr. Ferry's employment
is terminated by the Company during the term of the contract without cause, he
will be entitled to severance equal to his compensation and benefits for 180
days from the date of termination.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all compensation
paid or earned for services rendered to the Company in 1995 by the chief
executive officer and its four other most highly compensated executive officers
whose aggregate annual compensation exceeded $100,000 (together, the "Named
Executive Officers"). No bonus was paid to any Named Executive Officer during
1995. The Company does not have a pension plan or a long-term incentive plan,
has not issued any restricted stock awards and has not granted any stock options
or stock appreciation rights prior to this offering. The value of all
perquisites and other personal benefits received by each Named Executive Officer
did not exceed 10% of the Named Executive Officer's total annual salary.
34
<PAGE> 37
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY COMPENSATION(1)
---------------------------------------------------- ------------------- ---------------
<S> <C> <C>
Mark J. Gordon, Chief Executive Officer............. $ 281,496 $ 4,172
David L. Epstein, President......................... 276,635 14,981
James F. Murray, Chief Operating Officer............ 148,185 --
Richard N. Ferry, Jr., Vice President, Business
Development....................................... 122,294 --
Thomas C. Teper, Vice President, Corporate Planning
and Development................................... 120,370 2,421
</TABLE>
- ---------------
(1) Consists of premiums on life and disability insurance policies.
EMPLOYEE STOCK PLAN AND DIRECTOR STOCK PLAN
The Company has adopted a 1996 Incentive Stock Plan (the "Employee Stock
Plan") and a 1996 Nonemployee Director Stock Option Plan (the "Director Stock
Plan"; together with the Employee Stock Plan, the "Stock Plans"). Officers, key
employees and nonemployee consultants may be granted stock options, stock
appreciation rights, stock awards, performance shares and performance units
under the Employee Stock Plan. The Company has reserved 1,500,000 shares of
Common Stock for issuance under the Employee Stock Plan and 75,000 shares of
Common Stock for issuance under the Director Stock Plan, subject in each case to
antidilution adjustments.
The Director Stock Plan will provide for annual grants of a non-qualified
stock option to each nonemployee director of the Company. The option will allow
such directors to purchase 2,500 shares of Common Stock at an exercise price
equal to the fair market value of the Common Stock on the date of grant. These
options will have a term of ten years and vest in equal installments over three
years.
Prior to the establishment of the Compensation Committee (the "Committee")
of the Board of Directors, the Employee Stock Plan will be administered by the
Board of Directors of the Company. Upon completion of this offering, the
Employee Stock Plan will be administered by the Committee, whose members must
qualify as "disinterested persons" (as such term is defined under Rule 16b-3 of
the Securities Exchange Act of 1934, as amended). The Board of Directors or
Committee will be authorized to determine, among other things, the key employees
to whom, and the times at which, options and other benefits are to be granted,
the number of shares subject to each option, the applicable vesting schedule and
the exercise price (provided that, except for 50,000 shares which may be granted
at an exercise price as low as $.01 per share, the exercise price may not be
less than 85% of fair market value of the Common Stock at the date of grant).
The Board of Directors or Committee will also determine the treatment to be
afforded to a participant in the Employee Stock Plan in the event of termination
of employment for any reason, including death, disability or retirement. Under
the Employee Stock Plan the maximum term of an incentive stock option is ten
years and the maximum term of a nonqualified stock option is fifteen years.
The Board of Directors has the power to amend the Stock Plans from time to
time. Shareholder approval of an amendment is only required to the extent that
it is necessary to maintain the Stock Plans' status as protected plans under
applicable securities laws or the Employee Stock Plan's status as a qualified
plan under applicable tax laws.
Prior to this offering, no options had been granted under the Company's
Stock Plans. On the date of this Prospectus, Richard N. Ferry, Jr., the
Company's Senior Vice President -- Business Development, will be granted two
options to purchase 36,000 and 21,000 shares, respectively, under the Employee
Stock Plan. The options granted to Mr. Ferry will vest in equal installments
over three years and will have a total term of seven years. The option for
21,000 shares will have an exercise price of $.01 per share and the option for
36,000 shares will have an exercise price equal to the initial public offering
price. Options to purchase an
35
<PAGE> 38
aggregate of 206,250 shares will be granted under the Employee Stock Plan to 132
other employees of the Company (including Thomas C. Teper, the Company's Vice
President -- Facilities Acquisition and Development, who will be granted an
option to purchase 20,000 shares, and Joseph E. Gillis, the Company's Chief
Financial Officer and Treasurer, who will be granted an option to purchase
10,000 shares). These options will have an exercise price equal to the initial
public offering price of the Common Stock offered hereby, will vest at the rate
of 20% per year and will have a total term of seven years.
PROFIT SHARING PLAN
The Board of Directors of the Company has adopted a Profit Sharing Plan
(the "Profit Sharing Plan"). Under the terms of this plan, the Company makes
elective contributions to the Profit Sharing Plan, the allocation of which is
based on salary. All employees are eligible for participation in the plan on the
January 1 nearest the attainment of age 21 and completion of two years of
service with the Company. The Company did not contribute to the Profit Sharing
Plan for the year ended December 31, 1995.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles contain a provision eliminating the personal
liability of its directors for monetary damages resulting from breaches of their
fiduciary duty to the extent permitted by the Business Corporation Act of
Florida. This provision in the Articles does not eliminate the duty of care and,
in appropriate circumstances, equitable remedies such as an injunction or other
forms of non-monetary relief would remain available under Florida law. Each
director will continue to be subject to liability for breach of a director's
duty of loyalty to the Company or its shareholders, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for any transaction from which the director derived an improper personal benefit
and for improper distributions to shareholders. This provision also does not
affect a director's responsibilities under any other laws, such as the Federal
securities laws or state or Federal environmental laws.
The Company's Articles and Bylaws provide that the Company will indemnify
its directors and officers, and may indemnify its employees and other agents, to
the fullest extent permitted by law. The Company's Bylaws also permit it to
secure insurance on behalf of any person it is required or permitted to
indemnify for any liability arising out of his or her actions in such capacity,
regardless of whether the Articles and Bylaws would permit indemnification. The
Company intends to maintain liability insurance for its directors and officers.
The Company has entered into agreements to indemnify its directors and its
executive officers, in addition to the indemnification provided for in the
Company's Articles and Bylaws. These agreements, among other things, indemnify
the Company's directors and such officers for all direct and indirect expenses
and costs (including, without limitation, all reasonable attorneys' fees and
related disbursements, other out of pocket costs and reasonable compensation for
time spent by such persons for which they are not otherwise compensated by the
Company or any third person) and liabilities of any type whatsoever (including,
but not limited to, judgments, fines and amounts paid in settlement) actually
and reasonably incurred by such person in connection with either the
investigation, defense, settlement or appeal of any threatened, pending or
completed action, suit or other proceeding, including any action by or in the
right of the corporation, arising out of such person's services as a director,
officer, employee or other agent of the Company, any subsidiary of the Company
or any other company or enterprise to which the person provides services at the
request of the Company. The Company believes that these provisions and
agreements are necessary to attract and retain talented and experienced
directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
36
<PAGE> 39
CERTAIN TRANSACTIONS
For a discussion of certain transactions between the Company, on the one
hand, and Mr. Gordon, Mr. Epstein or their respective affiliates, on the other
hand, see "Management -- Compensation Committee Interlocks and Insider
Participation." For information concerning the Dividend to be paid by the
Company to its current shareholders in 1996 and the Tax Agreement to be entered
into between the Company and its current shareholders, see "Distribution of S
Corporation Earnings."
Richard D. Mondre, the Company's Executive Vice President, General Counsel
and Secretary and a director, was a Partner of Rubin Baum Levin Constant
Friedman & Bilzin ("Rubin Baum") until immediately prior to joining the Company
in March 1996 and remains "Of Counsel" to that firm. Rubin Baum has acted as the
Company's regular outside legal counsel since 1987. The total fees and costs
paid by the Company to Rubin Baum in 1993, 1994, 1995 and the first four months
of 1996 were approximately $171,000, $191,000, $210,000 and $72,000,
respectively. The Company believes that the fees paid to Rubin Baum are no less
favorable than could be obtained from other comparable law firms in the area.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of June 1, 1996 and as adjusted for the sale of the
shares offered hereby by (i) each shareholder of the Company prior to this
offering; (ii) each director of the Company; (iii) each Named Executive Officer;
and (iv) all directors and executive officers of the Company as a group. The
table also reflects the number of shares to be sold by the Selling Shareholders.
Except as otherwise indicated, the Company believes that the beneficial owners
of the Common Stock listed below, based on information provided by such owners,
have sole investment and voting power with respect to such shares. The address
of each of the shareholders named below is the Company's principal executive
office.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING(1)
----------------------- BEING -----------------------
NAME NUMBER PERCENT(2) OFFERED(1) NUMBER PERCENT(2)
- ------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mark J. Gordon(3)(7)(8)............. 7,641,000 60.0% 185,000 7,456,000 46.6%
David L. Epstein(4)(7)(8)........... 5,094,000 40.0 150,000 4,944,000 30.9
Richard D. Mondre(5)(7)(8).......... 3,820,500 30.0 -- 3,820,500 23.9
James F. Murray(6)(7)(8)............ 636,750 5.0 -- 636,750 4.0
Richard N. Ferry, Jr.(9)............ -- -- -- -- --
Thomas C. Teper(9).................. -- -- -- -- --
All executive officers and directors
as a group (7 persons)(10)........ 12,735,000 100.0 335,000 12,400,000 77.5
</TABLE>
- ---------------
(1) Messrs. Gordon and Epstein are offering shares directly owned by them.
Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 540,000 additional shares, of which up to 190,000
shares will be sold by the Company and up to 350,000 shares will be sold by
the Selling Shareholders. If the over-allotment option is exercised in
full, Mr. Gordon could sell an additional 300,000 shares directly owned by
him and the Jason Howard Gordon PRC Trust and the Stacey Lynn Gordon PRC
Trust each could sell 25,000 shares owned by them, reducing the percentage
of shares beneficially owned by Messrs. Gordon, Epstein and Mondre to
44.2%, 30.2% and 23.3%, respectively. Any shares sold pursuant to the
over-allotment option will first be sold by Mr. Gordon then, to the extent
the option is exercised for more than Mr. Gordon's shares, pro rata by the
two trusts and finally, if the option is exercised for more than Mr.
Gordon's and the trusts' shares, by the Company. See footnotes (4) and (5)
below.
(2) Percentage of beneficial ownership is based on 12,735,000 shares of Common
Stock outstanding as of the date of this Prospectus, and 16,000,000 shares
of Common Stock to be outstanding after completion of this offering.
(3) Includes 477,562.5 shares beneficially owned by Mr. Mondre and 477,562.5
shares beneficially owned by Mr. Murray but as to which, pursuant to voting
trust agreements between Mr. Gordon and each of Messrs. Mondre and Murray,
Mr. Gordon has voting control. Such voting trust agreements continue
37
<PAGE> 40
until February 2006, subject to earlier termination in certain
circumstances, and give Mr. Gordon absolute discretion in voting the
shares. See "Description of Capital Stock -- Shareholder and Voting Trust
Agreements." Also includes 636,750 shares as to which Mr. Gordon shares the
voting and dispositive duties as co-trustee under the David Epstein 1995
Grantor Trust, a trust created by Mr. Epstein for the benefit of his
children.
(4) Includes 159,187.5 shares beneficially owned by Mr. Mondre and 159,187.5
shares beneficially owned by Mr. Murray but as to which, pursuant to voting
trust agreements between Mr. Epstein and each of Messrs. Mondre and Murray,
Mr. Epstein has voting control. Such voting trust agreements continue until
February 2006, subject to earlier termination in certain circumstances, and
give Mr. Epstein absolute discretion in voting the shares. See "Description
of Capital Stock -- Shareholder and Voting Trust Agreements." Also includes
1,273,500 and 1,273,500 shares, respectively, as to which Mr. Epstein
shares the voting and dispositive duties as co-trustee under the Jason
Howard Gordon PRC Trust and the Stacy Lynn Gordon PRC Trust, trusts created
for the benefit of Mr. Gordon's children.
(5) Includes 636,750 shares beneficially owned by Mr. Mondre which are subject
to voting trust agreements described in (3) and (4) above. Also includes
1,273,500, 1,273,500 and 636,750 shares, respectively, as to which Mr.
Mondre shares the voting and dispositive duties as co-trustee under the
Jason Howard Gordon PRC Trust, the Stacy Lynn Gordon PRC Trust and the
David Epstein 1995 Grantor Trust.
(6) All of the shares beneficially owned by Mr. Murray are subject to the
voting trust agreements described in (3) and (4) above.
(7) Mr. Gordon and Mr. Epstein each has the right to acquire some or all of the
other's shares in certain circumstances pursuant to a shareholder agreement
and each has certain rights to acquire shares owned by Messrs. Mondre and
Murray pursuant to shareholder agreements. For a more detailed description
of these rights, see "Description of Capital Stock -- Shareholder and
Voting Trust Agreements."
(8) Immediately prior to the date of this Prospectus, each of Messrs. Gordon,
Epstein, Mondre and Murray currently expects to transfer a certain number
of shares to a family limited partnership in which each such person will be
the sole general partner and either a member of his family or a trust for
the benefit of members of his family will be the sole limited partner. The
shares transferred by Messrs. Mondre and Murray will be released from the
voting trust and shareholder agreements described herein, thereby resulting
in a reduction in the number of shares beneficially owned by Messrs. Gordon
and Epstein by 112,500 and 37,500 shares, respectively.
(9) Excludes options to be granted on the date of this Prospectus. See
"Employee Stock Plan and Director Stock Plan."
(10) See other footnotes above.
38
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 125 million shares,
of which 100 million shares are Common Stock, par value $.01 per share, and 25
million shares are preferred stock, par value $.01 per share. As of the date of
this Prospectus, after giving effect to the recently completed 127,350-for-1
stock split by way of a share dividend, there were 12,735,000 shares of Common
Stock outstanding held of record by nine shareholders, and no preferred stock
outstanding. See "Principal and Selling Shareholders." After completion of this
offering 16,000,000 shares of Common Stock will be issued and outstanding.
The following description of the capital stock of the Company and certain
provisions of the Company's Articles and Bylaws is a summary and is qualified in
its entirety by the provisions of the Articles and Bylaws, which have been filed
as exhibits to the Company's Registration Statement, of which this Prospectus is
a part.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the Common Stock
to be sold by the Company in this offering will be, validly issued, fully paid
and nonassessable. Subject to the rights of holders of preferred stock, the
holders of outstanding Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the Board
of Directors may from time to time determine. See "Dividend Policy." The shares
of Common Stock are neither redeemable nor convertible, and the holders thereof
have no preemptive or subscription rights to purchase any securities of the
Company. Upon liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to receive, pro-rata, the assets of the Company
which are legally available for distribution, after payment of all debts and
other liabilities and subject to the prior rights of any holders of preferred
stock then outstanding. Each outstanding share of Common Stock is entitled to
one vote on all matters submitted to a vote of shareholders. There is no
cumulative voting in the election of Directors.
PREFERRED STOCK
The Company's Articles authorize the Board of Directors to issue the
preferred stock in classes or series and to establish the designations,
preferences, qualifications, limitations or restrictions of any class or series
with respect to the rate and nature of dividends, the amounts payable upon
liquidation, the price and terms and conditions on which shares may be redeemed,
the terms and conditions for conversion or exchange into any other class or
series of shares, voting and preemptive rights and other terms. The Company may
issue, without approval of the holders of Common Stock, preferred stock which
has voting, dividend or liquidation rights superior to the Common Stock and
which may adversely affect the rights of holders of Common Stock. The issuance
of preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and could have the effect
of discouraging, delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any preferred stock.
SHAREHOLDER AND VOTING TRUST AGREEMENTS
Mr. Gordon and Mr. Epstein are parties to a shareholder agreement which
grants to each the right to purchase some or all of the other's shares upon the
death or total incapacity of the other or the involuntary transfer of the
other's shares, and a right of first refusal on any shares proposed to be sold
to a third party.
Mr. Mondre and Mr. Murray acquired their shares of the Company's common
stock 75% from Mr. Gordon and 25% from Mr. Epstein in February 1996 at a price
of $0.71 per share. Under the agreements entered into at the time of the
acquisition, Mr. Mondre and Mr. Murray cannot sell or otherwise dispose of such
shares prior to April 1, 1999 without the consent of Mr. Gordon and Mr. Epstein,
subject to certain exceptions including a change in control, termination of
employment without cause, a sale of the Company, a sale of shares in a public
offering and death or disability (subject to the repurchase rights of Mr. Gordon
and Mr. Epstein described below). Mr. Gordon and Mr. Epstein have the right to
repurchase at the acquisition price some or all of Mr. Mondre's or Mr. Murray's
shares in certain circumstances including death or
39
<PAGE> 42
disability prior to April 1, 1997 or resignation or termination of employment
for cause during the three-year term of their employment agreements.
Pursuant to voting trust agreements entered into at the time of acquisition
of the shares, each of Mr. Gordon and Mr. Epstein retained the right to vote the
shares sold by him to Mr. Mondre and Mr. Murray until February, 2006, subject to
earlier termination in certain events. The voting trusts terminate with respect
to any shares permitted to be sold by either Mr. Mondre or Mr. Murray under the
applicable shareholder agreement described above and terminate completely upon
the death of the voting trustee or upon a change in control.
CERTAIN STATUTORY PROVISIONS
The Company is subject to Sections 607.0901 and 607.0902 of the Florida
Business Corporation Act. In general, Section 607.0901 restricts the ability of
a greater than 10% shareholder of a company to engage in a wide range of
specified transactions between such company and such shareholder or a person or
entity controlled by or controlling such shareholder. The statute provides that
such a transaction must be approved by the affirmative vote of the holders of
two-thirds of such company's voting shares, unless it is approved by a majority
of the disinterested directors. Section 607.0902 restricts the ability of a
third party to effect an unsolicited change in control of a company. In general,
the statute provides that shares acquired in a transaction which effects a
certain threshold change in the ownership of a company's voting shares (a
"control share acquisition") have the same voting rights as shares held by the
acquiring person prior to the acquisition only to the extent granted by a
resolution adopted by shareholders in a prescribed manner. These statutory
provisions may have an anti-takeover effect by deterring unsolicited offers or
delaying changes in control or management of the Company.
CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Articles and Bylaws contain a number of provisions related to
corporate governance and to the rights of shareholders. In particular, the
Bylaws provide that shareholders are required to follow an advance notification
procedure for certain shareholder nominations of candidates for the Board of
Directors and for certain other shareholder business to be conducted at any
meeting of the shareholders. The Articles provide that special meetings of the
shareholders may only be called by the Board of Directors or by holders of not
less than 50% of the outstanding voting shares of the Company. The Articles
further require that any actions to be taken by the shareholders of the Company
may be taken only upon the vote of the shareholders at a meeting and may not be
taken by written consent. The existence of these provisions in the Company's
Articles and Bylaws may have the effect of discouraging a change in control of
the Company and limiting shareholder participation in certain transactions or
circumstances by limiting shareholders' participation to annual and special
meetings of shareholders and making such participation contingent upon adherence
to certain prescribed procedures. The affirmative vote of the holders of a least
66 2/3% of the outstanding capital stock is required to amend or repeal these
provisions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
40
<PAGE> 43
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock.
Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, could depress the prevailing market
price of the Common Stock.
Upon the closing of this offering, the Company will have 16,000,000 shares
of Common Stock outstanding. Of these shares, the 3,600,000 shares offered
hereby will be freely tradable without restriction or registration under the
Securities Act, except for any shares purchased by an affiliate of the Company
(in general, a person who has a control relationship with the Company), which
will be subject to the limitations of Rule 144 promulgated under the Securities
Act. All of the remaining 12,400,000 outstanding shares of Common Stock are
deemed to be "restricted securities," as that term is defined in Rule 144.
Beginning 180 days after the date of this Prospectus, upon the expiration of
lock-up agreements with the Underwriters (described below), 11,126,500 of these
shares will be available for sale subject to compliance with Rule 144 volume and
other requirements. The remaining 1,273,500 shares of restricted securities will
be eligible for sale beginning in February 1998, in compliance with Rule 144
volume and other requirements.
All holders of Common Stock of the Company have agreed for a period of 180
days after the date of this Prospectus that they will not sell, consent to sell
or otherwise dispose of any shares of Common Stock, any options or warrants to
purchase shares of Common Stock, or any shares convertible into or exchangeable
for shares of Common Stock, owned directly by such persons or with respect to
which they have the power of disposition, without the prior written consent of
Dain Bosworth Incorporated. See "Underwriting."
In general, under Rule 144 as currently in effect, beginning 90 days after
this offering, any person (or persons whose shares are aggregated) who owns
shares that were last acquired from the issuer or an affiliate of the issuer at
least two years prior to a proposed sale is entitled to sell, within any
three-month period, a number of shares which does not exceed the greater of 1%
of the then-outstanding shares of the Company's Common Stock (160,000 shares
immediately after this offering) or the average weekly trading volume of the
Company's Common Stock in the over-the-counter market during the four calendar
weeks preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission (the "Commission"). Sales under Rule 144 may
also be subject to certain manner of sale provisions, notice requirements and
the availability of current public information about the Company. Any person (or
persons whose shares are aggregated) who is not deemed to have been an affiliate
of the Company at any time during the three months preceding a proposed sale,
and who owns restricted securities that were last acquired from the issuer or an
affiliate of the issuer at least three years prior to a proposed sale, is
entitled to sell such shares under Rule 144(k) without regard to the volume
limitation, manner of sale provisions, public information requirements or notice
requirements.
The Company is authorized to issue up to 1,575,000 shares of Common Stock
under the Stock Plans. See "Management -- Employee Stock Plan and Director Stock
Plan." The Company intends to file one or more registration statements on Form
S-8 under the Securities Act covering these shares of Common Stock promptly
following the closing of this offering. Shares registered under such
registration statement will, subject to Rule 144 volume limitations applicable
to affiliates, be available for sale in the open market, subject to vesting
restrictions and the lock-up arrangements described above.
No predictions can be made of the effect, if any, that the availability of
shares for sale or the actual sale of shares will have on market prices
prevailing from time to time.
In connection with their employment agreements with the Company, Messrs.
Gordon, Epstein, Mondre and Murray have been granted certain rights with respect
to the registration of their Common Stock under the Securities Act. If the
Company proposes to register any of its securities under the Securities Act,
Messrs. Gordon, Epstein, Mondre and Murray are entitled to notice of such
registration and are entitled to include at the Company's expense all or a
portion of their shares therein, subject to certain conditions. Messrs. Gordon
and Epstein may also require the Company to register all or a portion of their
shares under the Securities Act at the Company's expense in the event of their
termination of employment for any reason, subject to certain conditions.
41
<PAGE> 44
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for which Dain Bosworth Incorporated and Furman Selz
LLC are acting as representatives (the "Representatives"), have severally agreed
to purchase from the Company and the Selling Shareholders the shares of Common
Stock offered hereby. Each Underwriter will purchase the number of shares set
forth opposite its name below, and will purchase such shares at the price to
public, less the underwriting discounts and commissions set forth on the cover
page of this Prospectus.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
Dain Bosworth Incorporated...................................
Furman Selz LLC..............................................
----------
Total.............................................. 3,600,000
==========
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligations are
subject to conditions precedent and that the Underwriters are committed to
purchase all shares of Common Stock offered hereby (other than those covered by
the over-allotment option described below) if the Underwriters purchase any
shares. The Representatives have advised the Company and the Selling
Shareholders that the several Underwriters may offer the shares of Common Stock
directly to the public at the price to public set forth on the cover page of
this Prospectus and to certain dealers at the price to public less a concession
not exceeding $ per share. The Underwriters may allow, and such dealers
may re-allow, a concession not exceeding $ per share to other dealers.
After the shares of Common Stock are released for sale to the public, the
Representatives may change the initial price to public and other selling terms.
The Company and the Selling Shareholders have granted to the Underwriters
an option, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 540,000 additional shares of the Common Stock
(190,000 shares from the Company and 350,000 from the Selling Shareholders), at
the price to public, less the underwriting discounts and commissions set forth
on the cover page of this Prospectus. See footnote 1 to the table under
"Principal and Selling Shareholders." The Underwriters may purchase these shares
solely to cover over-allotments, if any, in connection with the sale of Common
Stock offered hereby. If the Underwriters exercise the over-allotment option,
the Underwriters will purchase additional shares in approximately the same
proportion as those in the above table.
The Underwriting Agreement provides that the Company, the Selling
Shareholders and the Underwriters will indemnify each other against certain
liabilities, including liabilities under the Act, in connection with this
offering. Prior to this offering, the Company paid Dain Bosworth Incorporated
approximately $18,000 for financial consulting services and related expenses.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
The Company and all of its current shareholders, directors and executive
officers have agreed not to offer, sell, grant an option to purchase or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of Dain Bosworth
Incorporated. This restriction does not prevent the Company from granting
options under the Stock Plans or issuing unregistered
42
<PAGE> 45
securities in a merger, consolidation, acquisition, joint venture or other
arrangement as long as those securities are not registered under the Securities
Act prior to the end of the 180-day period.
Prior to this offering, there has been no public market for the Common
Stock. The price to public will be determined by agreement among the Company,
the Selling Shareholders and the Representatives. In determining the price to
public, the Company, the Selling Shareholders and the Representatives will
consider, among other things, the history of and prospects for the industry in
which the Company operates, past and present operations and earnings of the
Company and the trend of such earnings, the qualifications of the Company's
management, the general condition of the securities markets at the time of this
offering and the market prices for other publicly traded companies.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby are being passed upon for the Company by Rubin Baum Levin
Constant Friedman & Bilzin ("Rubin Baum"), Miami, Florida. Richard D. Mondre,
the Company's Executive Vice President, General Counsel and Secretary and a
director, is currently "Of Counsel" to Rubin Baum and was previously a Partner
at that firm. See "Certain Transactions." Sherman & Howard L.L.C., Denver,
Colorado, is acting as counsel for the Underwriters in connection with certain
legal matters relating to the sale of the Common Stock offered hereby.
INDEPENDENT PUBLIC ACCOUNTANTS
The balance sheet as of December 31, 1995, and the statements of
operations, shareholders' equity, and cash flows for the year ended December 31,
1995, included in this Prospectus, have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent public accountants, given on the
authority of that firm as experts in auditing and accounting. With respect to
the unaudited interim financial information for the three-month periods ended
March 31, 1996 and 1995, included in this Prospectus, the independent
accountants have reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate report included herein states that they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of Section 11 of the
Securities Act for their report on the unaudited interim financial information
because that report is not a "report" or a "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Securities Act.
The financial statements of the Company as of December 31, 1993 and 1994
and for each of the two years in the period ended December 31, 1994 included in
this Prospectus have been audited by Gurland & Goldberg, P.A., independent
public accountants, as indicated in their report with respect thereto, and are
included in reliance upon the authority of said firm as experts in accounting
and auditing.
On December 27, 1995, the Company changed its accountants from Gurland &
Goldberg, P.A. to Coopers & Lybrand L.L.P. The decision to dismiss its former
accountants was approved by the Board of Directors in anticipation of the
Company's initial public offering. The reports of the Company's accountants have
never contained an adverse report or disclaimer of opinion, and have never been
qualified as to uncertainty, audit scope or accounting principles. The Company
has never had any disagreements with its former accountants.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain
43
<PAGE> 46
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement.
Statements made in the Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete; with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
may be inspected, without charge, at the public reference facilities maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at 500 West Madison Street,
Chicago, IL 60661, and 7 World Trade Center, New York, New York 10048. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
44
<PAGE> 47
PRECISION RESPONSE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Report of Independent Accountants -- Coopers & Lybrand L.L.P.......................... F-2
Independent Auditors' Report -- Gurland & Goldberg, P.A............................... F-3
Review Report of Independent Accountants -- Coopers & Lybrand L.L.P................... F-4
Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996.................... F-5
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and the
three-month periods ended March 31, 1995 and 1996................................... F-6
Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and
1995 and the
three-month period ended March 31, 1996............................................. F-7
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and the
three-month periods ended March 31, 1995 and 1996................................... F-8
Notes to Financial Statements......................................................... F-9
</TABLE>
F-1
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Precision Response Corporation
We have audited the balance sheet of Precision Response Corporation as of
December 31, 1995 and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Precision Response
Corporation as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 11, 1996, except for the second paragraph
of Note 4 as to which the date is May 1, 1996
and Note 11 as to which the date is May 31, 1996
F-2
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
Board of Directors
Precision Response Corporation
Miami, Florida
We have audited the balance sheet of Precision Response Corporation as of
December 31, 1994 and the related statements of operations, shareholders'
equity, and cash flows for the years ended December 31, 1993 and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Precision Response
Corporation as of December 31, 1994, and the results of its operations and its
cash flows for the years ended December 31, 1993 and 1994, in conformity with
generally accepted accounting principles.
/s/ Gurland & Goldberg, P.A.
GURLAND & GOLDBERG, P.A.
Hallandale, Florida
March 17, 1995, except for paragraphs one and two
of Note 11 as to which the date is May 31, 1996
F-3
<PAGE> 50
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Precision Response Corporation
We have reviewed the accompanying balance sheet of Precision Response
Corporation as of March 31, 1996 and the related statements of operations,
shareholders' equity, and cash flows for the three-month periods ended March 31,
1995 and 1996. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Miami, Florida
April 29, 1996, except for the second paragraph
of Note 4 as to which the date is May 1, 1996
and Note 11 as to which the date is May 31, 1996
F-4
<PAGE> 51
PRECISION RESPONSE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, MARCH 31,
------------------------ MARCH 31, 1996
1994 1995 1996 (NOTE 10)
---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 787,609 $ 266,794 $ 51,393 $ 51,393
Accounts receivable, less allowance for
doubtful accounts of $97,000, $60,000,
$75,000 and $75,000, respectively....... 2,616,030 6,616,844 9,588,723 9,588,723
Prepaid expenses and other current
assets.................................. 417,810 454,867 300,905 300,905
---------- ----------- ----------- -----------
Total current assets............... 3,821,449 7,338,505 9,941,021 9,941,021
Property and equipment, net.................. 3,834,129 5,283,832 5,845,347 5,845,347
Other assets................................. 81,788 90,925 135,360 135,360
---------- ----------- ----------- -----------
Total assets....................... $7,737,366 $12,713,262 $15,921,728 $15,921,728
========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loan...................... $1,500,000 $ -- $ -- $ --
Current maturities of long-term
obligations............................. 999,013 1,181,846 1,028,669 1,028,669
Accounts payable........................... 1,411,666 2,130,808 3,007,979 3,007,979
Accrued compensation expenses.............. 601,178 1,326,960 1,165,037 1,165,037
Other accrued expenses..................... 313,210 777,104 744,400 744,400
Customer deposits and other................ 419,071 556,388 667,500 667,500
Distribution payable to shareholders....... -- -- -- 2,553,895
---------- ----------- ----------- -----------
Total current liabilities.......... 5,244,138 5,973,106 6,613,585 9,167,480
Revolving credit loan...................... -- 2,995,593 4,745,593 4,745,593
Long-term obligations, less current
maturities.............................. 1,019,665 928,542 1,148,840 1,148,840
Deferred income taxes...................... -- -- -- 211,000
---------- ----------- ----------- -----------
Total liabilities.................. 6,263,803 9,897,241 12,508,018 15,272,913
---------- ----------- ----------- -----------
Commitments (Notes 7 and 9)
Shareholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized,
12,735,000 issued and outstanding..... 127,350 127,350 127,350 127,350
Additional paid-in capital.............. 72,095 72,095 72,095 72,095
Retained earnings....................... 1,367,959 2,823,646 3,577,370 449,370
Due from shareholders, net.............. (93,841) (207,070) (363,105) --
---------- ----------- ----------- -----------
Total shareholders' equity......... 1,473,563 2,816,021 3,413,710 648,815
---------- ----------- ----------- -----------
Total liabilities and shareholders'
equity........................... $7,737,366 $12,713,262 $15,921,728 $15,921,728
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 52
PRECISION RESPONSE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... $18,218,377 $14,997,663 $30,203,989 $5,909,824 $11,648,811
----------- ----------- ----------- ---------- -----------
Operating expenses:
Cost of services............... 10,674,980 9,070,327 18,371,577 3,465,352 7,119,857
Preoperating costs............. -- -- 573,081 -- 174,112
Selling, general and
administrative expenses..... 7,278,748 6,008,741 9,431,551 1,912,854 3,464,683
----------- ----------- ----------- ---------- -----------
Total operating
expenses............. 17,953,728 15,079,068 28,376,209 5,378,206 10,758,652
----------- ----------- ----------- ---------- -----------
Operating income (loss).......... 264,649 (81,405) 1,827,780 531,618 890,159
Interest expense................. 197,216 292,146 372,093 80,551 136,435
Gain (loss) on disposal of
assets......................... (313,743) 1,251 -- -- --
----------- ----------- ----------- ---------- -----------
Net income (loss)................ $ (246,310) $ (372,300) $ 1,455,687 $ 451,067 $ 753,724
========== ========== ========== ========= ==========
Pro Forma Data (Unaudited)
(Note 10):
Net income (loss) per above.... $ (246,310) $ (372,300) $ 1,455,687 $ 451,067 $ 753,724
Pro forma provision (benefit)
for income taxes relating to
S Corporation............... (45,907) (86,018) 618,931 183,926 312,253
----------- ----------- ----------- ---------- -----------
Pro forma net income (loss).... $ (200,403) $ (286,282) $ 836,756 $ 267,141 $ 441,471
========== ========== ========== ========= ==========
Pro forma net income (loss) per
common share................ $ (0.02) $ (0.02) $ 0.07 $ 0.02 $ 0.03
========== ========== ========== ========= ==========
Weighted average number of
common shares outstanding... 12,735,000 12,735,000 12,862,061 12,735,000 12,862,061
========== ========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 53
PRECISION RESPONSE CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- PAID-IN RETAINED DUE FROM
SHARES AMOUNT CAPITAL EARNINGS SHAREHOLDERS, NET TOTAL
---------- -------- ------- ---------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992.................... 12,735,000 $127,350 $72,095 $1,986,569 $ -- $2,186,014
Net loss.................. (246,310) (246,310)
---------- -------- ------- ---------- ----------------- ----------
Balance at December 31,
1993.................... 12,735,000 127,350 72,095 1,740,259 -- 1,939,704
Net advances to
shareholders............ (93,841) (93,841)
Net loss.................. (372,300) (372,300)
---------- -------- ------- ---------- ----------------- ----------
Balance at December 31,
1994.................... 12,735,000 127,350 72,095 1,367,959 (93,841) 1,473,563
Net advances to
shareholders............ (113,229) (113,229)
Net income................ 1,455,687 1,455,687
---------- -------- ------- ---------- ----------------- ----------
Balance at December 31,
1995.................... 12,735,000 127,350 72,095 2,823,646 (207,070) 2,816,021
Net advances to
shareholders
(Unaudited)............. (156,035) (156,035)
Net income (Unaudited).... 753,724 753,724
---------- -------- ------- ---------- ----------------- ----------
Balance at March 31, 1996
(Unaudited)............. 12,735,000 $127,350 $72,095 $3,577,370 $(363,105) $3,413,710
========== ======== ======= ========== ================= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 54
PRECISION RESPONSE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................... $ (246,310) $ (372,300) $ 1,455,687 $ 451,067 $ 753,724
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization......... 657,585 795,124 1,145,099 262,973 325,175
Loss on disposal of assets............ 313,743 -- -- -- --
Changes in operating assets and
liabilities:
Accounts receivable................... (1,406,620) 1,267,639 (4,000,814) (1,474,478) (2,971,879)
Prepaid expenses and other current
assets.............................. (118,512) 66,627 (37,057) 137,666 153,962
Other assets.......................... (113,071) 107,105 (9,137) 16,131 (44,435)
Accounts payable...................... 317,783 247,798 719,142 770,723 877,171
Accrued compensation expenses......... 77,774 93,178 725,782 (47,055) (161,923)
Other accrued expenses................ 142,071 38,806 463,894 256,811 (32,704)
Customer deposits and other........... (504,659) 20,058 137,317 (64,526) 111,112
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities........... (880,216) 2,264,035 599,913 309,312 (989,797)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment...... (1,230,442) (1,473,783) (1,578,344) (356,039) (479,354)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities..................... (1,230,442) (1,473,783) (1,578,344) (356,039) (479,354)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from revolving credit loan..... 450,000 300,000 1,495,593 40,000 1,750,000
Proceeds from long-term obligations..... 1,865,795 516,700 250,000 -- --
Payments on long-term obligations....... (561,020) (946,328) (1,174,748) (264,453) (340,215)
Net advances to shareholders............ -- (93,841) (113,229) (97,442) (156,035)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities........... 1,754,775 (223,469) 457,616 (321,895) 1,253,750
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................. (355,883) 566,783 (520,815) (368,622) (215,401)
Cash and cash equivalents at beginning of
period.................................. 576,709 220,826 787,609 787,609 266,794
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period.................................. $ 220,826 $ 787,609 $ 266,794 $ 418,987 $ 51,393
============ ============ ============ ============ ============
Supplemental cash flow information:
Cash paid for interest.................. $ 202,949 $ 292,146 $ 372,093 $ 80,551 $ 136,435
============ ============ ============ ============ ============
Supplemental schedule of noncash investing
and financing activities:
Installment loans and capital lease
obligations........................... $ 388,905 $ 516,700 $ 1,016,458 $ -- $ 407,336
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 55
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. OPERATIONS AND ORGANIZATION
Precision Response Corporation (the "Company") is a full-service provider
of teleservicing, database marketing and management, and fulfillment services on
an outsourced basis to large corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these financial statements:
Interim Financial Statements
The financial statements for the three-months ended March 31, 1995 and
1996, and all related footnote information for those periods, are unaudited and
reflect all normal and recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position,
operating results and cash flows for the interim periods. The results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of the results to be achieved for the entire fiscal year ending
December 31, 1996.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The Company places
its temporary cash investments with high credit quality financial institutions.
At times, such investments may be in excess of the federally insured limits.
Revenue Recognition
The Company recognizes revenues as services are performed, generally based
upon time incurred.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Major renewals and improvements are capitalized and charged to
expense through depreciation. Depreciation is determined using the straight-line
method over the estimated useful lives of the respective assets. Equipment
recorded under capital leases and leasehold improvements are amortized on a
straight-line basis over the shorter of the estimated useful life of the assets
or the lease term. Estimated useful lives are principally five years. Upon sale
or retirement, the related cost and accumulated depreciation are removed from
the accounts, and any gain or loss is recorded in the statement of operations.
Depreciation of property and equipment has been computed using the
straight-line method since 1994. Depreciation of property and equipment in prior
years was computed using accelerated methods. The new method of depreciation is
a generally accepted method used in the industry, and it is believed the new
method will cause the Company's operating results to be more comparable with
operating results of other companies in the industry. In connection with the
proposed filing of a registration of the Company's securities, all prior periods
have been retroactively restated to reflect this accounting change.
F-9
<PAGE> 56
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Preoperating Costs
The Company expenses as incurred certain incremental costs incurred prior
to opening facilities used in its operations. The costs include certain rent,
new-hire salaries and expenses for utilities, equipment leases and security
incurred at a facility prior to the actual commencement of operations.
Income Taxes
During the period covered by these financial statements, the Company
elected to be treated as an S corporation under the Internal Revenue Code. In
lieu of corporate income taxes, the shareholders of an S corporation are taxed
on the Company's taxable income. Therefore, no provision or liability for
federal and state income taxes has been included in the financial statements.
See Note 10 of Notes to Financial Statements for a discussion of the Company's
termination of its S Corporation election in connection with a proposed public
offering of its common stock and the related unaudited pro forma data.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Telecommunications equipment................ $ 1,111,878 $ 2,187,254 $ 2,274,548
Production equipment........................ 683,384 707,014 713,644
Computer equipment.......................... 2,496,956 3,076,808 3,091,166
Leasehold improvements...................... 924,960 1,463,913 1,924,325
Furniture and fixtures...................... 619,342 985,778 1,305,411
Automobiles................................. 134,470 140,126 142,297
----------- ----------- -----------
5,970,990 8,560,893 9,451,391
Accumulated depreciation and amortization... (2,136,861) (3,277,061) (3,606,044)
----------- ----------- -----------
$ 3,834,129 $ 5,283,832 $ 5,845,347
========== ========== ==========
</TABLE>
Property and equipment includes the following leased property under capital
leases:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Telecommunications equipment.................. $ 633,519 $1,363,238 $ 1,363,220
Computer equipment............................ 590,525 1,090,265 1,119,169
Furniture and fixtures........................ 30,325 30,325 30,325
---------- ---------- -----------
1,254,369 2,483,828 2,512,714
Accumulated amortization...................... (431,163) (877,861) (1,296,088)
---------- ---------- -----------
$ 823,206 $1,605,967 $ 1,216,626
========= ========= ==========
</TABLE>
4. REVOLVING CREDIT LOAN AGREEMENT
The Company has a bank revolving credit loan agreement which provides for
maximum borrowings of $5,750,000 at March 31, 1996 ($4,250,000 and $2,500,000 at
December 31, 1995 and 1994, respectively), subject to collateral availability,
with principal due on May 30, 1996. At December 31, 1995 and March 31, 1996, the
unused portion of the line of credit was approximately $769,000 and $1,004,000,
respectively, based upon available collateral. Interest, payable monthly,
accrues on borrowings under the revolving line of credit at 1 to 1 1/2% over the
prime rate (9.5% at December 31, 1994, 9.25% at December 31, 1995 and 9.75% at
March 31, 1996). The line of credit is collateralized by accounts receivable,
equipment and other assets of the
F-10
<PAGE> 57
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company and is guaranteed by certain of the Company's shareholders. The
agreement contains restrictive covenants which, among other things, require the
maintenance of certain financial ratios, restrict future indebtedness and limit
capital expenditures and the amount of compensation and distributions to the
Company's shareholders. The limitation on distributions is based upon the amount
of income taxes payable by the shareholders on the Company's income.
On May 1, 1996, the Company entered into a new three-year senior revolving
credit facility in the aggregate principal amount of $15 million. Borrowing
availability is based upon a percentage of eligible accounts receivable. The
facility also allows the Company to borrow an amount not to exceed $2.5 million
in excess of the borrowing base (the "overformula advance") for a period of one
year from the closing date of the loan subject to the $15 million aggregate
limit. The facility accrues interest at the Company's option based on the prime
rate plus .5% or the LIBOR rate plus 3%; the overformula advance accrues
interest at the prime rate plus 1%. The facility is primarily collateralized by
accounts receivable. The Company is required to maintain certain financial
covenants, including minimum tangible net worth and earnings, to limit capital
expenditures to no more than $11 million per year and to limit additional
indebtedness. The Company is also restricted from paying dividends except for
tax distributions to its shareholders in connection with S corporation earnings
and distributions in connection with the termination of S corporation status
(see Note 10). A portion of the borrowings available to the Company pursuant to
this agreement were used to retire the Company's existing short-term bank
revolving credit loan. Accordingly, the amounts outstanding under the bank
revolving credit loan as of December 31, 1995 and March 31, 1996 have been
reflected as a long-term liability in the accompanying financial statements.
5. OTHER LONG-TERM OBLIGATIONS
Other long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Capital lease obligations, interest rates ranging
from 7.5% to 11.2%; payable through 2000....... $ 793,768 $ 1,246,183 $ 1,108,403
Note payable, interest rate at the bank's prime
rate plus one-half of one percent; payable in
monthly installments of principal and interest
of $41,667 through 1996; collateralized by
certain property and equipment. In addition,
the Company must meet certain reporting
requirements and restrictive debt covenants,
including, but not limited to a pre-established
tangible net worth and a funded debt to
tangible net worth ratio. The note is also
guaranteed by the Company's majority
shareholder.................................... 916,667 416,667 291,667
Installment loans, interest rates of 9.75% to
12%; payable in monthly installments through
1997; collateralized by certain property and
equipment. These loans are guaranteed by one or
both of the Company's majority shareholders.... 308,243 447,538 777,439
---------- ----------- -----------
2,018,678 2,110,388 2,177,509
Current maturities of long-term obligations...... (999,013) (1,181,846) (1,028,669)
---------- ----------- -----------
$1,019,665 $ 928,542 $ 1,148,840
========= ========== ==========
</TABLE>
F-11
<PAGE> 58
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Other long-term obligations, as of December 31, 1995, mature as follows:
<TABLE>
<CAPTION>
NOTE
PAYABLE AND
CAPITAL INSTALLMENT
YEAR ENDING DECEMBER 31, LEASES LOANS TOTAL
--------------------------------------------------- ---------- ----------- ----------
<S> <C> <C> <C>
1996............................................... $ 683,733 $ 600,023 $1,283,756
1997............................................... 322,057 184,514 506,571
1998............................................... 261,917 79,668 341,585
1999............................................... 153,631 -- 153,631
2000............................................... 20,942 -- 20,942
---------- ----------- ----------
Total minimum payments................... 1,442,280 864,205 2,306,485
Less amount representing interest.................. 196,097 -- 196,097
---------- ----------- ----------
Present value of net minimum payments.............. $1,246,183 $ 864,205 $2,110,388
========= ========= =========
</TABLE>
Based on the borrowing rates available to the Company for bank loans with
similar terms and average maturities, the fair value of debt approximates
carrying value.
6. PROFIT SHARING PLAN
The Company has adopted a profit sharing plan which covers substantially
all employees who have been employed for at least two years. The contributions,
determined at the discretion of the Board of Directors, were $20,000 and $15,000
for 1993 and 1994, respectively. For the year ended December 31, 1995 and for
the three-month periods ended March 31, 1995 and 1996, there were no
contributions.
7. RELATED PARTY TRANSACTIONS
The Company leases certain real property, on a month-to-month basis, from a
corporation that is wholly owned by the Company's majority shareholder. Rent
expense under this lease amounted to $345,000, $211,000 and $194,000 for 1993,
1994 and 1995, respectively. For the three-month periods ended March 31, 1995
and 1996, rent expense amounted to $48,000 and $52,000, respectively. Subsequent
to December 31, 1995, the Company entered into various lease agreements with the
related party corporation for this real property providing for aggregate annual
rentals of approximately $272,000. The primary lease term is five years with a
renewal option for an additional five-year period. The Company also subleases
another facility and a parking lot from a partnership owned jointly by certain
of its shareholders. The term of these subleases expires in January, 1999 with
annual rentals aggregating approximately $185,000.
The Company has guaranteed mortgage loans of the corporate affiliate along
with the guarantees of its majority shareholder. At December 31, 1994 and 1995
and March 31, 1996, the outstanding balance on the loans were $1,309,258,
$1,222,362 and $1,208,079, respectively. Subsequent to December 31, 1995, the
Company's majority shareholder agreed to indemnify the Company as to its
guarantee obligation on the loans.
Amounts shown as due from shareholders represent advances ($93,841,
$343,070 and $500,055 as of December 31, 1994 and 1995 and March 31, 1996,
respectively) offset by notes payable to shareholders ($136,000 and $136,950 as
of December 31, 1995 and March 31, 1996, respectively). Advances are non-
interest bearing and are due by December 31, 1996. Notes payable to shareholders
bear interest at six percent and are payable on demand.
8. SIGNIFICANT CLIENTS
A significant portion of the Company's business is dependent upon several
large clients. For the years ended December 31, 1993, 1994 and 1995 and the
three-month periods ended March 31, 1995 and 1996, the
F-12
<PAGE> 59
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
five largest clients accounted for approximately 63%, 50%, 77%, 72%, and 77% of
revenues, respectively. As of December 31, 1994 and 1995 and March 31, 1996,
approximately 27%, 77% and 76%, respectively, of the Company's accounts
receivable were from these clients. Accounts receivable represents the Company's
greatest concentration of credit risk and is subject to the financial conditions
of its largest clients. The Company does not require collateral or other
security to support clients' receivables. The Company conducts periodic reviews
of its clients' financial conditions and vendor payment practices to minimize
collection risks on trade accounts receivable.
During the years ended December 31, 1993, 1994, and 1995, and the
three-month periods ended March 31, 1995 and 1996, certain clients individually
accounted for more than 10% of the Company's revenue:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
---------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(% OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C>
Company A......................................... 37% * * * *
Company B ........................................ * 12% 42% 24% 61%
Company C ........................................ * * 17 24 *
Company D......................................... * 13 * 13 *
Company E ........................................ * 11 * * *
</TABLE>
- ---------------
* Accounted for less than 10% of total revenues for the period indicated
9. COMMITMENTS
The Company operates primarily in leased facilities with terms ranging from
two to 10 years. Minimum future annual rentals on noncancelable operating
leases, including the annual rentals due on the related party leases referred to
in Note 7, for the five years subsequent to 1995 and in the aggregate are as
follows:
<TABLE>
<S> <C>
1996.................................................................... $ 2,037,000
1997.................................................................... 1,585,000
1998.................................................................... 1,529,000
1999.................................................................... 1,220,000
2000.................................................................... 942,000
Thereafter.............................................................. 3,198,000
-----------
$10,511,000
==========
</TABLE>
Rent expense for these operating leases totaled $516,000, $622,000 and
$776,000 for 1993, 1994 and 1995, respectively. For the three-month periods
ended March 31, 1995 and 1996, rent expense totaled $169,000 and $620,000,
respectively.
10. PRO FORMA DISCLOSURES (UNAUDITED)
Pro Forma Income Taxes
The Company has filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission covering a proposed initial public offering
of common stock (the "Offering") at an estimated offering price of $15.00 per
share.
As described in Note 2, the Company has elected to be taxed as an S
corporation under the provisions of the Internal Revenue Code. Assuming the
completion of the Offering, the Company will terminate its S corporation
election and will accordingly become subject to federal and state income taxes.
Upon termination of the S corporation election, deferred income taxes reflecting
the tax effect of temporary
F-13
<PAGE> 60
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
differences between the Company's financial statement and tax bases of certain
assets and liabilities will become a net liability of the Company and will be
reflected on the balance sheet with a corresponding nonrecurring expense in the
statement of operations for the first calendar quarter following the Offering.
Deferred taxes relate primarily to accounts receivable, accrued expenses and
property and equipment. The amount of such deferred tax liability computed using
the asset and liability method of accounting for deferred income taxes
approximates $157,000 and $211,000 at December 31, 1995 and March 31, 1996,
respectively.
The pro forma data in the statement of operations provides information as
if the Company had been treated as a C corporation for income tax purposes for
all periods presented. The following unaudited pro forma information reflects
the reconciliation between the statutory provision for income taxes and the
actual provision relating to the incremental income tax expense that the Company
would have incurred if it had been subject to federal and state income taxes.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income tax at federal statutory rate....... $(86,209) $(130,305) $509,490 $157,873 $263,803
State taxes, net of federal benefit........ (4,361) (8,172) 58,800 17,473 29,665
Nondeductible expenses..................... 44,663 52,459 50,641 8,580 18,785
-------- --------- -------- -------- --------
Pro forma provision (benefit) for income
taxes.................................... $(45,907) $ (86,018) $618,931 $183,926 $312,253
======== ========= ======== ======== ========
</TABLE>
The pro forma provision for income taxes, as calculated above, assumed
combined federal and state income tax rates of 37.6%.
The Company and its current shareholders are parties to an S Corporation
Tax Allocation and Indemnification Agreement (the "Tax Agreement") relating to
their respective income tax liabilities. The Tax Agreement indemnifies the
shareholders for any adjustments causing an increase in the shareholders'
Federal and state income tax liability (including interest and penalties)
related to the Company's tax years prior to the consummation of the Offering,
unless such adjustments result in or are related to a corresponding decrease in
the shareholders' federal and state income tax liability with respect to another
S corporation taxable year. Subject to certain limitations, the Tax Agreement
also provides that the Company will be indemnified by the shareholders with
respect to federal and state income taxes (plus interest and penalties) shifted
from an S corporation taxable year to a Company taxable year subsequent to the
consummation of the Offering.
Prior to consummation of the Offering, the Company's Board of Directors
intends to declare a cash dividend payable to the current shareholders of the
Company (the "Dividend"). The Dividend will be equal to the Company's estimate
of its cumulative taxable income prior to the conversion to a C corporation, to
the extent such taxable income has not previously been distributed. The Company
currently estimates that if the Company had been converted to a C corporation as
of March 31, 1996, the Dividend would have equaled $2,917,000. The Tax Agreement
also provides that to the extent such undistributed taxable income of the
Company, as subsequently established in connection with the filing of the
Company's tax return for the Company's short S corporation tax year, is less
than the Dividend, such shareholders will make a payment equal to such
difference to the Company, and if such undistributed taxable income is greater
than the Dividend, the Company will make an additional distribution equal to
such difference to such shareholders, in either case with interest thereon.
Any payment made by the Company to the shareholders pursuant to the Tax
Agreement may be considered by the Internal Revenue Service or the state taxing
authorities to be nondeductible by the Company for income tax purposes.
F-14
<PAGE> 61
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The pro forma data in the Balance Sheet provides information as if the
Company had terminated its S corporation election, declared the Dividend and
recorded the deferred income tax liability as of March 31, 1996. The Dividend
amount of $2,917,000 has been reflected as a distribution payable to
shareholders in the amount of $2,553,895 net of a repayment by shareholders of
$363,105 due to the Company. The pro forma data does not give effect to the
receipt of any proceeds from the Offering or earnings from March 31, 1996
through the date of termination of the S corporation election.
Pro Forma Net Income (Loss) Per Share
Pro forma net income (loss) per share amounts have been computed based upon
the weighted average number of common shares outstanding during each period. For
1995 and the interim period of 1996, pro forma per share data also gives effect
to the increase in the number of shares which, when multiplied by the offering
price, would have been sufficient to replace the amount of the Dividend in
excess of pro forma earnings for the twelve months ended March 31, 1996.
11. COMMON STOCK, PREFERRED STOCK AND STOCK OPTION PLANS
On May 1, 1996, the Company's shareholders approved an increase in the
number of authorized shares of common stock from 100 shares to 100 million
shares and a reduction in the par value per share of common stock from $1 to
$.01. The Company also authorized 25 million shares, par value $.01, of
preferred stock.
On May 31, 1996, the Company declared a share dividend of an aggregate of
12,734,900 shares of common stock, $.01 par value, immediately payable to its
shareholders of record in order to effect the equivalent of a 127,350-for-1
stock split to increase the number of shares of common stock outstanding from
100 shares to 12,735,000 shares. Shareholders' equity has been restated to give
retroactive recognition to the stock split in prior periods by reclassifying
from retained earnings to common stock the par value of the additional shares
arising from the split. All applicable share and per share data have been
adjusted for the stock split.
In February 1996, the Company's principal shareholders sold 10% of their
shares of Common Stock to two of the Company's executive officers at the then
fair market value of $0.71 per share.
On May 31, 1996, the Company adopted the 1996 Incentive Stock Plan (the
"Employee Stock Plan") and the 1996 Nonemployee Director Stock Option Plan (the
"Director Stock Plan"; together with the Employee Stock Plan, the "Stock
Plans"). Officers, key employees and nonemployee consultants may be granted
stock options, stock appreciation rights, stock awards, performance shares and
performance units under the Employee Stock Plan. The Company has reserved
1,500,000 shares of Common Stock for issuance under the Employee Stock Plan and
75,000 shares of Common Stock for issuance under the Director Stock Plan,
subject in each case to antidilution adjustments.
The Director Stock Plan will provide for annual grants of non-qualified
stock options to each nonemployee director of the Company. The options will
allow such directors to annually purchase up to 2,500 shares of Common Stock at
an exercise price equal to the fair market value of the Common Stock on the date
of grant. These options will have a term of ten years and vest in equal
installments over three years.
Prior to the establishment of a Compensation Committee (the "Committee") of
the Board of Directors, the Employee Stock Plan will be administered by the
Board of Directors of the Company. The Board of Directors or the Committee will
be authorized to determine, among other things, the key employees to whom, and
the times at which, options and other benefits are to be granted, the number of
shares subject to each option, the applicable vesting schedule and the exercise
price. The Board of Directors or the Committee will also determine the treatment
to be afforded to a participant in the Employee Stock Plan in the event of
termination of employment for any reason, including death, disability or
retirement. Under the Employee Stock Plan the maximum term of an incentive stock
option is ten years and the maximum term of a nonqualified stock option is
fifteen years.
F-15
<PAGE> 62
PRECISION RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Board of Directors has the power to amend the Stock Plans from time to
time. Shareholder approval of an amendment is only required to the extent that
it is necessary to maintain the Stock Plans' status as protected plans under
applicable securities laws or the Employee Stock Plan's status as a qualified
plan under applicable tax laws.
No options have been granted under the Company's Stock Plans prior to the
Offering. Upon consummation of the Offering, an executive officer of the Company
will be granted two options to purchase 36,000 and 21,000 shares, respectively,
under the Employee Stock Plan. The options granted to the executive officer
mentioned above will vest in equal installments over three years and will have a
total term of seven years. The option for 21,000 shares will have an exercise
price of $0.01 per share and the option for 36,000 shares will have an exercise
price equal to the initial public offering price. Options to purchase an
aggregate of 206,250 shares will be granted under the Employee Stock Plan to 132
other employees of the Company. These options will have an exercise price equal
to the initial public offering price of the Common Stock offered hereby, will
vest at the rate of 20% per year and will have a total term of seven years.
The Company will measure compensation expense for the Stock Plans using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Under this method,
compensation expense is measured as the difference between the quoted market
price of the stock and the amount to be paid for the stock.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123") which became effective January 1, 1996. Under the
provisions of FAS 123, companies can elect to account for stock-based
compensation plans using a fair-value-based method or continue measuring
compensation expense for those plans using the intrinsic value method prescribed
in APB 25. FAS 123 requires that companies electing to continue using the
intrinsic value method must make pro forma disclosures of net income and
earnings per share as if the fair-value-based method of accounting had been
applied. The adoption of FAS 123 will be reflected in the Company's 1996
financial statements.
As the Company expects to account for stock-based compensation using the
intrinsic value method, FAS 123 will not have an impact on the Company's results
of operations or financial position.
F-16
<PAGE> 63
PRECISION RESPONSE LOGO
[8 PHOTOGRAPH MONTAGE OF PRC EMPLOYEES ENGAGED IN VARIOUS ACTIVITIES]
<PAGE> 64
---------------------------------------------------
---------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 6
Distribution of S Corporation
Earnings.............................. 11
Use of Proceeds......................... 12
Dividend Policy......................... 12
Capitalization.......................... 13
Dilution................................ 14
Selected Financial and Operating Data... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations......................... 17
Business................................ 23
Management.............................. 31
Certain Transactions.................... 37
Principal and Selling Shareholders...... 37
Description of Capital Stock............ 39
Shares Eligible for Future Sale......... 41
Underwriting............................ 42
Legal Matters........................... 43
Independent Public Accountants.......... 43
Additional Information.................. 43
Index to Financial Statements........... F-1
</TABLE>
---------------------
UNTIL , 1996 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
3,600,000 SHARES
PRECISION RESPONSE LOGO
COMMON STOCK
---------------
PROSPECTUS
---------------
DAIN BOSWORTH INC.
FURMAN SELZ
, 1996
---------------------------------------------------
---------------------------------------------------
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses of the issuance and distribution
of the securities being registered, all of which will be paid by the Company.
<TABLE>
<S> <C>
SEC registration fee.............................................................. $ 22,841
NASD filing fee................................................................... 7,124
Nasdaq National Market application fee............................................ 50,000*
Fees and expenses of counsel...................................................... 175,000*
Fees and expenses of accountants.................................................. 125,000*
Printing expenses................................................................. 125,000*
Transfer agent and registrar fees................................................. 3,500
Blue sky fees and expenses........................................................ 10,000*
Miscellaneous..................................................................... 81,535
--------
Total................................................................... $600,000*
========
</TABLE>
- ---------------
* Estimated.
The Company intends to pay all expenses of registration, issuance and
distribution, excluding underwriters' discounts and commissions, with respect to
the shares being sold by the Selling Shareholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850 of the Florida Business Corporation Act (the "Statute")
sets forth conditions and limitations governing the indemnification of officers,
directors, and other persons.
Article TWELFTH of the Articles of Incorporation (the "Articles") and
Article IX of the Bylaws (the "Bylaws") of the Company, copies of which are
filed as Exhibits 3.1 and 3.2, contain certain indemnification provisions
adopted pursuant to authority contained in the Statute. The Articles contain a
provision eliminating the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Statute. Under the Bylaws, the company will indemnify any person who is
or was a director, officer, employee, or agent of the Company or who is or was
serving at the request of the Company as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other enterprise
against: (a) liability incurred in connection with any proceeding (other than an
action by or in the right of the Company) to which such person was or is a party
by reason of acting in any such capacity, and (b) expenses and amounts paid in
settlement (not exceeding, in the judgment of the Company's board of directors,
the estimated expense of litigating the proceeding to conclusion) actually and
reasonably incurred in connection with the defense or settlement of any
proceeding by or in the right of the Company to procure a judgment in its favor
to which such person was or is a party by reason of acting in any such capacity,
provided that: (i) such person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Company and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful; and (ii) no indemnification shall be made in
respect of any claim, issue, or matter in any proceeding by or in the right of
the Company as to which such person shall have been adjudged to be liable
unless, and only to the extent that, the court in which such proceeding was
brought, or any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper. For purposes of
Article IX of the Bylaws: (A) the term "expenses" includes counsel fees,
including those for appeal; (B) the term "liability" includes obligations to pay
a judgment, settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding; and (C) the term
II-1
<PAGE> 66
"proceeding" includes any threatened, pending, or completed action, suit, or
other type of proceeding, whether civil, criminal, administrative, or
investigative, and whether formal or informal.
Under the Bylaws, to the extent a director, officer, employee, or agent of
the Company has been successful on the merits or otherwise in defense of any
proceeding described above, or in the defense of any claim, issue, or matter
therein, such person shall be indemnified against expenses actually and
reasonably incurred by him in connection therewith. For all other
indemnification which may be provided under the Bylaws in connection with any
proceeding, unless made pursuant to a determination by a court, indemnification
shall be made only as authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the director, officer,
employee or agent has met the applicable standard of conduct set forth in the
Bylaws, which determination shall be made: (a) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
proceeding; (b) if such quorum is not obtainable, or even if obtainable, by
majority vote of a committee duly designated by the board of directors
consisting solely of two or more directors not at the time parties to the
proceeding; (c) by independent legal counsel selected by the board of directors
or a committee thereof as prescribed by the Statute; or (d) by the shareholders
by majority vote of a quorum consisting of shareholders who were not parties to
such proceeding or if such a quorum is not obtainable, by a majority vote of
shareholders who were not parties to such proceeding. Evaluation as to
reasonableness of expenses and authorization of indemnification must be made in
the same manner as the determination that indemnification is permissible, except
that if the determination of permissibility is made by independent legal
counsel, then the board of directors or the committee thereof which appointed
such legal counsel must evaluate the reasonableness of expenses. The Bylaws also
permit the Company to pay expenses incurred by its officers, directors,
employees, and agents in advance of the final disposition of a proceeding,
provided that the Company may advance expenses to a director or officer only
after receiving an undertaking by or on behalf of such director or officer to
repay such amount if he is ultimately found not to be entitled to
indemnification pursuant to the Bylaws.
The Company has entered into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Articles and Bylaws. These agreements, among other things, indemnify
the Company's directors and officers for all direct and indirect expenses and
costs (including, without limitation, all reasonable attorneys' fees and related
disbursements, other out of pocket costs and reasonable compensation for time
spent by such persons for which they are not otherwise compensated by the
Company or any third person) and liabilities of any type whatsoever (including,
but not limited to, judgments, fines and amounts paid in settlement) actually
and reasonably incurred by such person in connection with either the
investigation, defense, settlement or appeal of any threatened, pending or
completed action, suit or other proceeding, including any action by or in the
right of the corporation, arising out of such person's services as a director,
officer, employee or other agent of the Company, any subsidiary of the Company
or any other company or enterprise to which the person provides services at the
request of the Company. The Company believes that these provisions and
agreements are necessary to attract and retain talented and experienced
directors and officers.
The Company currently intends to obtain liability insurance for the benefit
of its directors and officers.
Under the terms of the Underwriting Agreement, the Underwriters have agreed
to indemnify, under certain conditions, the Company, its directors, certain of
its officers and persons who control the Company within the meaning of the
Securities Act against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has not issued or sold any securities within the past three
years.
II-2
<PAGE> 67
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Articles of Incorporation of Precision Response Corporation.*
3.2 -- Bylaws of Precision Response Corporation.*
5.1 -- Opinion of Rubin Baum Levin Constant Friedman & Bilzin regarding legality of Common
Stock.
9.1 -- Voting Trust Agreement, dated as of February 16, 1996, between Richard Mondre and
Mark Gordon.
9.2 -- Voting Trust Agreement, dated as of February 16, 1996, between Richard Mondre and
David Epstein.
9.3 -- Voting Trust Agreement, dated as of February 16, 1996, between James Murray and
Mark Gordon.
9.4 -- Voting Trust Agreement, dated as of February 16, 1996, between James Murray and
David Epstein.
10.1 -- Precision Response Corporation 1996 Incentive Stock Plan.
10.2 -- Precision Response Corporation 1996 Nonemployee Director Stock Option Plan.
10.3 -- Precision Response Corporation Profit Sharing Plan.*
10.4 -- Employment Agreement with Mark Gordon.
10.5 -- Employment Agreement with David Epstein.
10.6 -- Employment Agreement with Richard Mondre.*
10.7 -- Employment Agreement with James Murray.*
10.8 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between Richard
Mondre and Mark Gordon, as amended effective as of February 16, 1996.**
10.9 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between Richard
Mondre and David Epstein, as amended effective as of February 16, 1996.**
10.10 -- Agreement, dated February 16, 1996, among Richard Mondre, Mark Gordon and David
Epstein.*
10.11 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between James
Murray and Mark Gordon, as amended effective as of February 16, 1996.**
10.12 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between James
Murray and David Epstein, as amended effective as of February 16, 1996.**
10.13 -- Agreement, dated February 16, 1996, among James Murray, Mark Gordon and David
Epstein.*
10.14 -- Stockholder Agreement, dated May 10, 1996, between Mark Gordon and David Epstein.
10.15 -- S Corporation Tax Allocation and Indemnification Agreement.
10.16 -- Loan and Security Agreement, dated as of May 1, 1996, between Precision Response
Corporation and Heller Financial, Inc. (without exhibits and schedules).*
10.17 -- Form of Indemnification Agreement.*
10.18 -- Net Lease, dated May 1, 1996, between MJG Properties, Inc. and Precision Response
Corporation (13180 N.W. 43rd Avenue lease).*
10.19 -- Net Lease, dated May 1, 1996, between MJG Properties, Inc. and Precision Response
Corporation (4250 N.W. 135th Street lease).*
10.20 -- Net Lease, dated May 1, 1996, between MJG Properties, Inc. and Precision Response
Corporation (4300 N.W. 135th Street lease).*
10.21 -- Lease Agreement and Option to Purchase Real Property, dated January 23, 1996,
between Burger King Corporation and Precision Response Corporation (without
schedules).*
10.22 -- Assignment of Lease, dated as of April 18, 1996, between Precision Response
Corporation and Deerwood Realty Partners, Ltd.*
10.23 -- Sublease, dated May 1, 1996, between Precision Response Corporation and Deerwood
Realty Partners, Ltd.*
10.24 -- Lease, dated January 25, 1996, between Donald V. Mariutto and Eugene L. Mariutto,
and Precision Response Corporation.*
10.25 -- Assignment of Lease, dated April 30, 1996, between Precision Response Corporation
and Deerwood Realty Partners, Ltd.*
</TABLE>
II-3
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <S> <C>
10.26 -- Sublease, dated May 1, 1996, between Precision Response Corporation and Deerwood
Realty Partners, Ltd.*
10.27 -- Registration Rights Agreement, dated May 15, 1996, between Precision Response
Corporation and Mark Gordon.
10.28 -- Registration Rights Agreement, dated May 15, 1996, between Precision Response
Corporation and David Epstein.
10.29 -- Employment Agreement with Richard Ferry, Jr.
10.30 -- Net Lease, dated May 1, 1996, between Deerwood Realty Partners, Ltd. and Precision
Response Corporation.
11.1 -- Statement Regarding Computation of Per Share Earnings.
15.1 -- Letter from Coopers & Lybrand L.L.P. regarding Unaudited Interim Financial
Information.
16.1 -- Letter from Gurland & Goldberg, P.A., regarding change in Certifying Accountant.*
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Gurland & Goldberg, P.A.
23.3 -- Consent of Rubin Baum Levin Constant Friedman & Bilzin (included in Exhibit 5.1).
24.1 -- Power of Attorney (included with the signature page to the Registration
Statement).*
27.1 -- Restated Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** Original agreement was previously filed. Only the amendment is filed
herewith.
(b) FINANCIAL STATEMENT SCHEDULES:
<TABLE>
<S> <C>
Report of Independent Accountants -- Coopers & Lybrand L.L.P................... S-1
Independent Auditors' Report -- Gurland & Goldberg, P.A........................ S-2
Schedule II -- Valuation and Qualifying Accounts............................... S-3
</TABLE>
All other financial statement schedules have been omitted because they are
not applicable or because the information that would be included in such
schedules is included elsewhere in the Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to provide to the
representative of the Underwriters at the closings specified in the Underwriting
Agreement certificates in such denominations and registered in such names as
required by such representative to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, (i) the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective and (ii) each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and this offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Miami, Florida on
the 10th day of June, 1996.
PRECISION RESPONSE CORPORATION
By: /s/ MARK J. GORDON
------------------------------------
Mark J. Gordon
Chairman of the Board of Directors
and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- --------------
<C> <S> <C>
/s/ MARK J. GORDON Chairman of the Board and Chief June 10, 1996
- --------------------------------------------- Executive Officer (Principal
Mark J. Gordon Executive Officer)
/s/ JOSEPH E. GILLIS Chief Financial Officer June 10, 1996
- --------------------------------------------- (Principal Financial and
Joseph E. Gillis Accounting Officer)
/s/ DAVID L. EPSTEIN Director June 10, 1996
- ---------------------------------------------
David L. Epstein
/s/ RICHARD D. MONDRE Director June 10, 1996
- ---------------------------------------------
Richard D. Mondre
/s/ JAMES F. MURRAY Director June 10, 1996
- ---------------------------------------------
James F. Murray
</TABLE>
II-5
<PAGE> 70
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Precision Response Corporation
In connection with our audit of the financial statements of Precision
Response Corporation as of December 31, 1995 and for the year then ended which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16(b) herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 11, 1996
S-1
<PAGE> 71
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Precision Response Corporation
In connection with our audits of the financial statements of Precision
Response Corporation as of December 31, 1994 and for the years ended December
31, 1993 and 1994, which financial statements are included in the Prospectus, we
have also audited the financial statement schedule listed in Item 16(b) herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included herein.
/s/ Gurland & Goldberg, P.A.
GURLAND & GOLDBERG, P.A.
Hallandale, Florida
March 17, 1995
S-2
<PAGE> 72
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
PRECISION RESPONSE CORPORATION
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO
BEGINNING COSTS AND ENDING
DESCRIPTION BALANCE EXPENSES(1) DEDUCTIONS(2) BALANCE
- --------------------------------------------------- --------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for doubtful accounts and sales
allowances.................................... $ 300,000 $ 7,834 $ 257,834 $50,000
Year ended December 31, 1994
Allowance for doubtful accounts and sales
allowance..................................... 50,000 104,722 57,722 97,000
Year ended December 31, 1995
Allowance for doubtful accounts and sales
allowances.................................... 97,000 364,748 401,748 60,000
</TABLE>
- ---------------
(1) Accounts charged to bad debt and sales credits during fiscal year 1995
amounted to $10,000 and $354,748, respectively.
(2) Deductions represent customer accounts written-off and sales credits.
S-3
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------ ----
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement*...............................................
3.1 -- Articles of Incorporation of Precision Response Corporation*..................
3.2 -- Bylaws of Precision Response Corporation*.....................................
5.1 -- Opinion of Rubin Baum Levin Constant Friedman & Bilzin regarding legality of
Common Stock..................................................................
9.1 -- Voting Trust Agreement, dated as of February 16, 1996, between Richard Mondre
and Mark Gordon...............................................................
9.2 -- Voting Trust Agreement, dated as of February 16, 1996, between Richard Mondre
and David Epstein.............................................................
9.3 -- Voting Trust Agreement, dated as of February 16, 1996, between James Murray
and Mark Gordon...............................................................
9.4 -- Voting Trust Agreement, dated as of February 16, 1996, between James Murray
and David Epstein.............................................................
10.1 -- Precision Response Corporation 1996 Incentive Stock Plan......................
10.2 -- Precision Response Corporation 1996 Nonemployee Director Stock Option Plan....
10.3 -- Precision Response Corporation Profit Sharing Plan*...........................
10.4 -- Employment Agreement with Mark Gordon.........................................
10.5 -- Employment Agreement with David Epstein.......................................
10.6 -- Employment Agreement with Richard Mondre*.....................................
10.7 -- Employment Agreement with James Murray*.......................................
10.8 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between
Richard Mondre and Mark Gordon, as amended effective as of February 16,
1996**........................................................................
10.9 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between
Richard Mondre and David Epstein, as amended effective as of February 16,
1996**........................................................................
10.10 -- Agreement, dated February 16, 1996, among Richard Mondre, Mark Gordon and
David Epstein*................................................................
10.11 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between
James Murray and Mark Gordon, as amended effective as of February 16,
1996**........................................................................
10.12 -- Stock Purchase and Shareholder Agreement, dated February 16, 1996, between
James Murray and David Epstein, as amended effective as of February 16,
1996**........................................................................
10.13 -- Agreement, dated February 16, 1996, among James Murray, Mark Gordon and David
Epstein*......................................................................
10.14 -- Stockholder Agreement, dated May 10, 1996, between Mark Gordon and David
Epstein.......................................................................
10.15 -- S Corporation Tax Allocation and Indemnification Agreement....................
10.16 -- Loan and Security Agreement, dated as of May 1, 1996, between Precision
Response Corporation and Heller Financial, Inc. (without exhibits and
schedules)*...................................................................
10.17 -- Form of Indemnification Agreement*............................................
10.18 -- Net Lease, dated May 1, 1996, between MJG Properties, Inc. and Precision
Response Corporation (13180 N.W. 43rd Avenue lease)*..........................
10.19 -- Net Lease, dated May 1, 1996, between MJG Properties, Inc. and Precision
Response Corporation (4250 N.W. 135th Street lease)*..........................
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------ ----
<C> <C> <S> <C>
10.20 -- Net Lease, dated May 1, 1996, between MJG Properties, Inc. and Precision
Response Corporation (4300 N.W. 135th Street lease)*..........................
10.21 -- Lease Agreement and Option to Purchase Real Property, dated January 23, 1996,
between Burger King Corporation and Precision Response Corporation (without
schedules)*...................................................................
10.22 -- Assignment of Lease, dated as of April 18, 1996, between Precision Response
Corporation and Deerwood Realty Partners, Ltd.*...............................
10.23 -- Sublease, dated May 1, 1996, between Precision Response Corporation and
Deerwood Realty Partners, Ltd.*...............................................
10.24 -- Lease, dated January 25, 1996, between Donald V. Mariutto and Eugene L.
Mariutto, and Precision Response Corporation*.................................
10.25 -- Assignment of Lease, dated April 30, 1996, between Precision Response
Corporation and Deerwood Realty Partners, Ltd.*...............................
10.26 -- Sublease, dated May 1, 1996, between Precision Response Corporation and
Deerwood Realty Partners, Ltd.*...............................................
10.27 -- Registration Rights Agreement, dated May 15, 1996, between Precision Response
Corporation and Mark Gordon...................................................
10.28 -- Registration Rights Agreement, dated May 15, 1996, between Precision Response
Corporation and David Epstein.................................................
10.29 -- Employment Agreement with Richard Ferry, Jr...................................
10.30 -- Net Lease, dated May 1, 1996, between Deerwood Realty Partners, Ltd. and
Precision Response Corporation................................................
11.1 -- Statement Regarding Computation of Per Share Earnings.........................
15.1 -- Letter from Coopers & Lybrand L.L.P. regarding Unaudited Interim Financial
Information...................................................................
16.1 -- Letter from Gurland & Goldberg, P.A., regarding change in Certifying
Accountant*...................................................................
23.1 -- Consent of Coopers & Lybrand L.L.P............................................
23.2 -- Consent of Gurland & Goldberg, P.A............................................
23.3 -- Consent of Rubin Baum Levin Constant Friedman & Bilzin (included in Exhibit
5.1)..........................................................................
24.1 -- Power of Attorney (included with the signature page to the Registration
Statement)*...................................................................
27.1 -- Restated Financial Data Schedule..............................................
</TABLE>
- ---------------
* Previously filed.
** Original agreement was previously filed. Only the amendment is filed
herewith.
<PAGE> 1
EXHIBIT 5.1
RUBIN BAUM LEVIN CONSTANT FRIEDMAN & BILZIN
A Partnership Including Professional Associations
2500 FIRST UNION FINANCIAL CENTER
MIAMI, FLORIDA 33131-2336
TELEPHONE: (305) 374-7580
TELECOPIER: (305) 374-7593
June 10, 1996
Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Re: Registration Statement on Form S-1
Dear Ladies and Gentlemen:
In connection with the Registration Statement on Form S-1 (No.
333-03209), as amended (the "Registration Statement"), initially filed on May
6, 1996, by Precision Response Corporation, a Florida corporation (the
"Company"), with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
promulgated thereunder (the "Rules"), you have requested us to furnish you our
opinion as to the legality of the 4,140,000 shares (including 540,000 shares
subject to the over-allotment option) of common stock, par value $.01 per
share, of the Company (the "Shares") being registered thereunder.
For the purpose of rendering our opinion, we have reviewed (a) the
Registration Statement and the exhibits thereto; (b) the Amended and Restated
Articles of Incorporation and the Amended and Restated Bylaws of the Company;
and (c) certain records of the Company's corporate proceedings as reflected in
its minute books. In our examination, we have assumed the genuineness of
signatures, the authenticity of all documents submitted to us as originals and
the conformity with the originals of all documents submitted to us as copies
thereof. In addition, we have made such other examinations of law and fact as
we considered necessary in order to form a basis for the opinion hereinafter
expressed.
Based on the foregoing, we are of the opinion that the Shares have been
duly and validly authorized and are (or, in the case of the 3,455,000 Shares
being registered for sale by the Company, when such Shares are issued and
delivered by the Company and paid for as contemplated in the Registration
Statement, will be) validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and further consent to the use of our name wherever
appearing in the Registration Statement, including any Prospectus constituting
a part thereof, and any amendments thereto. In giving this consent we do not
thereby admit that we come within the category of persons whose consent is
required by the Act or the Rules.
Very truly yours,
/s/ Rubin Baum Levin Constant Friedman & Bilzin
RUBIN BAUM LEVIN CONSTANT FRIEDMAN & BILZIN
<PAGE> 1
EXHIBIT 9.1
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT ("Agreement"), dated as of February 16, 1996,
by and between RICHARD D. MONDRE ("Mondre") and MARK J. GORDON, as voting
trustee and not as an individual (the "Voting Trustee").
Preliminary Statement
Reference is made to the Stock Purchase and Shareholder Agreement
pursuant to which this Agreement is executed and delivered ("Purchase
Agreement") between Mondre and Voting Trustee. Capitalized terms used herein,
which are not defined herein, shall have the respective meanings ascribed to
them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the covenants made in the Purchase
Agreement, and in order to induce Voting Trustee to consummate the transactions
contemplated by the Purchase Agreement, Mondre hereby makes the following
covenants and agreements to and with the Voting Trustee.
1. Creation of Voting Trust. Mondre acknowledges that he has
made subject to this Agreement, and Mondre shall deposit and deliver, and
hereby irrevocably assigns, to the Voting Trustee, all of the Purchased Stock
owned by him. The Voting Trustee shall cause to be issued to and in the name
of Mondre a Voting Trust Certificate representing the Purchased Stock so
received by the Voting Trustee. Mondre shall execute and deliver to the
Voting Trustee such instruments of transfer as the Voting Trustees may
reasonably require in order to effectuate and confirm the assignment and
deposit referred to above.
2. Powers of Voting Trustee. During the term of this Agreement
and the continuance of the voting trust created under this Agreement, the
Voting Trustee shall possess and be entitled to exercise in respect of the
Purchased Stock from time to time subject hereto all rights of voting and
abstaining from voting or otherwise to participate in stockholders actions in
all matters relating to Precision Response Corporation, a Florida corporation
(the "Company"), and shall, without any limitation whatever, be free to
exercise his own discretion in so doing, including the election of the Voting
Trustee or his nominees as directors or officers, or both, of the Company.
3. Voting Trust Certificates and Permitted Transfers.
(a) Each Voting Trust Certificate issued hereunder shall
be substantially in the form of Schedule "I" hereto, or in such
<PAGE> 2
other form as may from time to time be adopted by the Voting Trustee, and shall
be signed by the Voting Trustee. Subject to the terms hereof, a Voting Trust
Certificate issued by the Voting Trustee and so signed shall entitle the
registered holder thereof upon the termination of this Agreement (or upon the
permitted sale of Purchased Stock from time to time as hereinafter provided in
accordance with the terms of this Agreement), to receive in accordance with the
provisions hereof a share certificate or certificates for the number of shares
or Purchased Stock (or lower number, if requested pursuant to a permitted sale)
represented thereby, and in the meantime to the rights in respect of such
Purchased Stock provided in this Agreement.
(b) Subject to the terms of the Purchase Agreement, the
Stock Pledge Agreement and all other agreements executed in connection
therewith, Mondre shall, provided that no default under the Purchase Agreement,
the Stock Pledge Agreement or any other agreement executed in connection
therewith has occurred and is continuing, be released from the trust created
hereby in connection with any sale of such Purchased Stock by Mondre in a sale
transaction which is permitted by the Purchase Agreement, the Stock Pledge
Agreement, any other agreements existing which restrict transferability of the
Purchased Stock, and applicable law (a "Permitted Sale"). In order to
effectuate a Permitted Sale, Mondre shall give the Voting Trustee at least
three (3) business days advance written notice of his desire to enter into a
Permitted Sale, specifying the exact number of shares of Purchased Stock that
shall be subject to the Permitted Sale. Upon the execution of the Permitted
Sale, Mondre shall deliver or cause the applicable broker to send to the Voting
Trustee by facsimile transmission, personal delivery or commercial courier
service, with confirmation by telephone, a written confirmation of execution of
the Permitted Sale ("Permitted Sale Confirmation"). Upon receipt of the
Permitted Sale Confirmation, the Voting Trustee shall as soon as is
practicable, but not later than three (3) days thereafter, cause the
appropriate stock certificate(s) and Voting Trust Certificate(s) to be issued,
reissued and/or cancelled in whole or in part as necessary to deliver to Mondre
or the applicable broker a stock certificate (legended, if required in the
Company's opinion) issued in the name of Mondre or his permitted assignee for
the number of shares of Purchased Stock specified in the Permitted Sale
Confirmation, and, if necessary, a Voting Trust Certificate to replace the
Voting Trust Certificate(s) cancelled in connection with the Permitted Sale
covering the balance of any shares of Purchased Stock covered by the cancelled
Voting Trust Certificate(s) which are not part of the Permitted Sale. Mondre
shall, together with the aforementioned three-day notice to the Voting Trustee,
deliver to the Voting Trustee his Voting Trust Certificate(s) covering at least
the number of shares of Purchased Stock sought to be transferred in the
Permitted Sale, endorsed in
2
<PAGE> 3
such manner and/or accompanied by such other instruments of transfer as the
Voting Trustee may reasonably require so that the Voting Trustee may undertake
the procedures set forth in the preceding sentence. The Voting Trustee or the
Company may require Mondre to execute and deliver, in connection with any
purported Permitted Sale, such affidavits and other assurances to the effect
that what is proposed by Mondre is in fact a Permitted Sale. In the event of
transfers of the Purchased Stock for estate planning purposes or upon Mondre's
death permitted by the Purchase Agreement (a "Permitted Transfer"), such
Purchased Stock shall remain subject to the voting trust created hereby and
Mondre's Voting Trust Certificate shall be transferable to the transferee as
set forth in Section 5 below. Except as set forth in the preceding sentence,
Voting Trust Certificates are not transferable in any circumstances.
4. Recapitalization. In the event of the subdivision,
consolidation, change (by stock split or dividend or otherwise), classification
or reclassification at any time of any shares of Purchased Stock at such time
subject to the voting trust hereby created into a higher or lower number of
shares of the Company or into a different class of shares of the Company, or in
the event of the conversion of such shares upon the amalgamation of the Company
with any other company or companies, the Voting Trust Certificate representing
the same shall thereafter represent the numbers and classes of shares resulting
from such subdivision, consolidation, change, classification, reclassification
or conversion until such Voting Trust Certificate is exchanged for a new Voting
Trust Certificate correctly describing the securities represented thereby.
5. Successors. To the extent that the beneficial ownership of
shares of Purchased Stock subject hereto is transferred pursuant to a Permitted
Transfer or otherwise is transferred by operation of law, the person becoming
entitled to a Voting Trust Certificate in consequence thereof shall be
entitled, upon surrender of the Voting Trust Certificate and production of such
evidence of the right of such person as the Voting Trustee shall then
reasonably require, and upon compliance with the requirements of all applicable
laws including payment of a sum equal to all applicable security transfer taxes
(if any) payable in respect thereof, to one or more Voting Trust Certificates
in the name of such person in lieu of the Voting Trust Certificate so
surrendered, with a replacement Voting Trust Certificate covering any
beneficial ownership of Purchased Stock not so transferred to be issued to
Mondre.
6. Loss or Destruction of Voting Trust Certificates. In the
event of the mutilation of any Voting Trust Certificate, the Voting Trustee may
upon surrender thereof cause to be issued a replacement Voting Trust
Certificate. In the event of the loss, destruction or
3
<PAGE> 4
theft of any Voting Trust Certificate, the Voting Trustee may cause to be
issued a replacement Voting Trust Certificate upon production of such evidence
of such loss, destruction or theft and such indemnity as the Voting Trustee may
in his discretion reasonably require.
7. Third Parties. The Voting Trustee shall be entitled at all
times to treat and consider for all purposes the registered holder of a Voting
Trust Certificate as the holder and legal and beneficial owner thereof and of
the beneficial interest in the Purchased Stock represented thereby and shall
not be required to take notice of any interest, trust or claim of any third
party.
8. Distributions. Subject to the provisions of Section 9 hereof,
the registered holder of a Voting Trust Certificate, upon any cash or property
distribution (other than as described in Section 4 above) by the Company
(including without limitation any cash dividend or cash redemption payment) to
its stockholders in respect of the Company's capital stock shall be entitled to
receive from the Voting Trustee such holder's pro rata share of such
distribution, provided that the Voting Trustee may deduct therefrom any amount
he may be lawfully required to withhold and account for in respect of taxes.
Notwithstanding the foregoing provisions of this Section 8, where any such
distribution by the Company constitutes a final cash or property distribution
(either by way of redemption or otherwise, but excluding any distribution
described in Section 4 above) in respect of any shares of the capital stock of
the Company represented by a Voting Trust Certificate, the Voting Trustee shall
not be required to make any distribution under this Section 8 to the holder of
such Voting Trust Certificate until surrender thereof.
9. Registered Holder. Any distribution or partial distribution
to a holder of a Voting Trust Certificate under the provisions of Section 8
hereof by the Voting Trustee shall be made to the registered holder of such
Voting Trust Certificate at the time of such distribution or partial
distribution (unless otherwise directed in writing by such registered holder)
whether or not such registered holder was the registered holder thereof at the
time the money or property so distributed was received by the Voting Trustee.
10. Cancellation of Certificates. All Voting Trust Certificates
surrendered pursuant to the provisions hereof shall be cancelled, subject to
the obligation of the Voting Trustee to issue replacement Voting Trust
Certificate(s) or Voting Trust Certificate(s) representing the balance of any
shares of Purchased Stock not included in a Permitted Sale or Permitted
Transfer as contemplated by this Agreement.
4
<PAGE> 5
11. Limitations on Liability of Voting Trustee. By way of
supplement to, and not in lieu of, the provisions of any law affording
protection or powers to trustees and notwithstanding any law or principle of
law to the contrary it is agreed that:
(a) neither the Voting Trustee nor any nominee of the
Voting Trustee shall be under any liability or responsibility by reason of any
loss or damage arising in consequence of any mistake or error of law or fact or
any matter or thing done or omitted to be done under or in relation to this
Agreement whatever except to the extent such loss or damage is in consequence
of his own wilful wrongful act, wilful wrongful neglect or wilful default;
(b) in relation to this Agreement the Voting Trustee may
take the opinion or advice of any counsel or other expert, and shall not be
responsible for any loss occasioned by acting or failing to act thereon, except
as provided in subsection (a) of this Section 11; and
(c) the Voting Trustee or any firm or corporation in
which he may be a member, shareholder, officer or director or with which he may
have any other connection may deal with the Company or with its shares or with
Voting Trust Certificates representing the same in any manner whatever as fully
as though he were not a Voting Trustee.
12. Dissolution of Voting Trust. The voting trust created under
this Agreement shall dissolve on the earliest of the following dates:
(a) the tenth anniversary of the date hereof;
(b) the date of a Change In Control;
(c) the date when the Voting Trustee shall execute a
written instrument so declaring or shall resign in writing; or
(d) the date when no shares of Purchased Stock remain
subject to the voting trust created hereby.
Thereafter, the Voting Trustee shall (except for a dissolution under subsection
(c)) notify all registered holders of Voting Trust Certificates of such
dissolution. Such notice shall fix a place or places and a day (which shall be
within fifteen days thereafter) at which and on and after which any registered
holder of a Voting Trust Certificate may, on surrender thereof, receive a share
certificate or certificates for the shares represented thereby. Upon such
dissolution the rights of the holders of Voting Trust Certificates shall be
confined to the rights provided by this Section 12 and the right to receive
their proportionate interest or
5
<PAGE> 6
interests in any other property then subject to the trust hereof and not
theretofore distributed; provided that the register or registers of the Voting
Trust Certificate holders shall be kept open by the Voting Trustee for thirty
days after such dissolution to enable surrenders of Voting Trust Certificates.
At any time after thirty days following the day upon which Voting Trust
Certificates may first be surrendered pursuant to the said notice and after
distribution or payment of all other property (if any) held upon the trust
hereof the Voting Trustee may close such registers and transfer the shares
represented by unsurrendered Voting Trust Certificates to the Company's stock
transfer agent for transfer to the respective registered holders of the Voting
Trust Certificates representing the same or their lawful permitted assigns
against surrender of such Voting Trust Certificates, whereupon this Agreement
shall terminate and the Voting Trustee shall be under no further obligation to
such holders, provided that the provisions of Section 11 shall survive.
13. Governing Law. Notwithstanding any law or principle of law to
the contrary and regardless of the domicile or residence of any Voting Trustee
or any nominee thereof or Mondre, this Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
14. Amendments and Waivers. The parties may, by written agreement
signed by the parties, modify any of the covenants or agreements or extend the
time for the performance of any of the obligations contained in this Agreement
or in any document delivered pursuant to this Agreement. Any party may waive,
by written instrument signed by such party, compliance by another party with
any of its obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. This Agreement may be amended only by written
instrument signed by the parties hereto.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
16. Notices. Any notice, request or other document to be given
hereunder to a party shall be given in the manner required by the Purchase
Agreement.
17. Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
6
<PAGE> 7
18. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
20. Entire Agreement. This Agreement, together with the Purchase
Agreement and the Exhibits thereto and the agreements and instruments delivered
pursuant hereto or thereto, contain the entire agreement between the parties
hereto, and supersede all prior agreements and undertakings between or among
the parties hereto relating to the subject matter hereof and thereof.
21. Gender. With respect to the language of this Agreement, the
use of the masculine gender shall include the feminine and neuter, and the use
of the neuter shall include the masculine and/or feminine, in each case, as the
context reasonably requires.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
/s/ Richard D. Mondre
-----------------------
RICHARD D. MONDRE
VOTING TRUSTEE:
/s/ Mark J. Gordon
- ---------------------------------
MARK J. GORDON, as Voting Trustee
and not individually
7
<PAGE> 8
SCHEDULE "I"
CERTIFICATE NO. _____
VOTING TRUST CERTIFICATE
IN RESPECT OF SHARES OF COMMON STOCK
OF
PRECISION RESPONSE CORPORATION (THE "COMPANY")
(INCORPORATED UNDER THE LAWS OF FLORIDA)
THIS CERTIFIES THAT, following the dissolution of the voting trust
under, or otherwise in accordance with the terms of, a certain Voting Trust
Agreement (the "Agreement") dated as of the 16th day of February, 1996 and made
by and between Richard D. Mondre and Mark Gordon as the original Voting Trustee
thereunder,
________________________________________________________________________________
(Name)
who is the registered holder of this Voting Trust Certificate, will, on
surrender hereof, be entitled to receive, except as otherwise provided in the
Agreement, a stock certificate or certificates for ___________________________
shares of common stock with a par value of $1.00 per share (United States
currency) in the capital of the Company, or such number of shares of such other
class of the capital stock of the Company as this Voting Trust Certificate may
then represent in accordance with the terms of the Agreement, be entitled to
receive payment of the amount of any distribution received in cash by the
Voting Trustee in respect of the shares or any thereof represented hereby to
the extent not theretofore distributed by the Voting Trustee in accordance with
the terms of the Agreement and to have the rights provided by the Agreement in
respect of any dividend or other distribution received other than in cash by
the Voting Trustee in respect of such shares.
This Voting Trust Certificate is issued under and pursuant to, and the
rights of the holder or holders hereof and of the Voting Trustee are subject to
and limited by, the terms of the Agreement, an executed copy of which is on
file and open to inspection at all reasonable times by holders of Voting Trust
Certificates at the offices of the Company at 1505 Northwest 167th Street,
Miami, Florida 33169.
This Voting Trust Certificate and the beneficial interest under the
Agreement in all or any of the shares represented hereby are, subject to the
restrictions on transferability which under the
<PAGE> 9
Agreement or applicable law exist or may from time to time exist, transferable
only by the registered holder hereof, in person or by duly authorized attorney,
on the books kept by the Voting Trustee at the aforesaid offices, upon
surrender of this Voting Trust Certificate duly endorsed and/or accompanied by
a sufficient instrument of transfer duly executed by the registered holder
hereof or the attorney of such registered holder with proof satisfactory to the
Voting Trustee of such due execution and, where applicable, of the appointment
of such attorney, and payment of a sum equal to all applicable security
transfer taxes (if any) payable in respect of such transfer.
The Voting Trustee is entitled at all times to treat and consider for
all purposes the registered holder hereof as the holder and legal and
beneficial owner hereof and of the beneficial interest under the Agreement in
the shares represented hereby and is not required to take notice of any
interest, trust or claim of any third party.
The voting trust under the Agreement will be dissolved on February 15,
2006, unless sooner dissolved in accordance with the provisions of the
Agreement.
IN WITNESS WHEREOF, the Voting Trustee has signed this certificate.
Date of Issuance:
------------------------------
---------------------------------------
MARK J. GORDON, as Voting Trustee and
not individually
-2-
<PAGE> 1
EXHIBIT 9.2
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT ("Agreement"), dated as of February 16, 1996,
by and between RICHARD D. MONDRE ("Mondre") and DAVID EPSTEIN, as voting
trustee and not as an individual (the "Voting Trustee").
Preliminary Statement
Reference is made to the Stock Purchase and Shareholder Agreement
pursuant to which this Agreement is executed and delivered ("Purchase
Agreement") between Mondre and Voting Trustee. Capitalized terms used herein,
which are not defined herein, shall have the respective meanings ascribed to
them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the covenants made in the Purchase
Agreement, and in order to induce Voting Trustee to consummate the transactions
contemplated by the Purchase Agreement, Mondre hereby makes the following
covenants and agreements to and with the Voting Trustee.
1. Creation of Voting Trust. Mondre acknowledges that he has
made subject to this Agreement, and Mondre shall deposit and deliver, and
hereby irrevocably assigns, to the Voting Trustee, all of the Purchased Stock
owned by him. The Voting Trustee shall cause to be issued to and in the name
of Mondre a Voting Trust Certificate representing the Purchased Stock so
received by the Voting Trustee. Mondre shall execute and deliver to the
Voting Trustee such instruments of transfer as the Voting Trustees may
reasonably require in order to effectuate and confirm the assignment and
deposit referred to above.
2. Powers of Voting Trustee. During the term of this Agreement
and the continuance of the voting trust created under this Agreement, the
Voting Trustee shall possess and be entitled to exercise in respect of the
Purchased Stock from time to time subject hereto all rights of voting and
abstaining from voting or otherwise to participate in stockholders actions in
all matters relating to Precision Response Corporation, a Florida corporation
(the "Company"), and shall, without any limitation whatever, be free to
exercise his own discretion in so doing, including the election of the Voting
Trustee or his nominees as directors or officers, or both, of the Company.
3. Voting Trust Certificates and Permitted Transfers.
(a) Each Voting Trust Certificate issued hereunder shall
be substantially in the form of Schedule "I" hereto, or in such
<PAGE> 2
other form as may from time to time be adopted by the Voting Trustee, and shall
be signed by the Voting Trustee. Subject to the terms hereof, a Voting Trust
Certificate issued by the Voting Trustee and so signed shall entitle the
registered holder thereof upon the termination of this Agreement (or upon the
permitted sale of Purchased Stock from time to time as hereinafter provided in
accordance with the terms of this Agreement), to receive in accordance with the
provisions hereof a share certificate or certificates for the number of shares
or Purchased Stock (or lower number, if requested pursuant to a permitted sale)
represented thereby, and in the meantime to the rights in respect of such
Purchased Stock provided in this Agreement.
(b) Subject to the terms of the Purchase Agreement, the
Stock Pledge Agreement and all other agreements executed in connection
therewith, Mondre shall, provided that no default under the Purchase Agreement,
the Stock Pledge Agreement or any other agreement executed in connection
therewith has occurred and is continuing, be released from the trust created
hereby in connection with any sale of such Purchased Stock by Mondre in a sale
transaction which is permitted by the Purchase Agreement, the Stock Pledge
Agreement, any other agreements existing which restrict transferability of the
Purchased Stock, and applicable law (a "Permitted Sale"). In order to
effectuate a Permitted Sale, Mondre shall give the Voting Trustee at least
three (3) business days advance written notice of his desire to enter into a
Permitted Sale, specifying the exact number of shares of Purchased Stock that
shall be subject to the Permitted Sale. Upon the execution of the Permitted
Sale, Mondre shall deliver or cause the applicable broker to send to the Voting
Trustee by facsimile transmission, personal delivery or commercial courier
service, with confirmation by telephone, a written confirmation of execution of
the Permitted Sale ("Permitted Sale Confirmation"). Upon receipt of the
Permitted Sale Confirmation, the Voting Trustee shall as soon as is
practicable, but not later than three (3) days thereafter, cause the
appropriate stock certificate(s) and Voting Trust Certificate(s) to be issued,
reissued and/or cancelled in whole or in part as necessary to deliver to Mondre
or the applicable broker a stock certificate (legended, if required in the
Company's opinion) issued in the name of Mondre or his permitted assignee for
the number of shares of Purchased Stock specified in the Permitted Sale
Confirmation, and, if necessary, a Voting Trust Certificate to replace the
Voting Trust Certificate(s) cancelled in connection with the Permitted Sale
covering the balance of any shares of Purchased Stock covered by the cancelled
Voting Trust Certificate(s) which are not part of the Permitted Sale. Mondre
shall, together with the aforementioned three-day notice to the Voting Trustee,
deliver to the Voting Trustee his Voting Trust Certificate(s) covering at least
the number of shares of Purchased Stock sought to be transferred in the
Permitted Sale, endorsed in
2
<PAGE> 3
such manner and/or accompanied by such other instruments of transfer as the
Voting Trustee may reasonably require so that the Voting Trustee may undertake
the procedures set forth in the preceding sentence. The Voting Trustee or the
Company may require Mondre to execute and deliver, in connection with any
purported Permitted Sale, such affidavits and other assurances to the effect
that what is proposed by Mondre is in fact a Permitted Sale. In the event of
transfers of the Purchased Stock for estate planning purposes or upon Mondre's
death permitted by the Purchase Agreement (a "Permitted Transfer"), such
Purchased Stock shall remain subject to the voting trust created hereby and
Mondre's Voting Trust Certificate shall be transferable to the transferee as
set forth in Section 5 below. Except as set forth in the preceding sentence,
Voting Trust Certificates are not transferable in any circumstances.
4. Recapitalization. In the event of the subdivision,
consolidation, change (by stock split or dividend or otherwise), classification
or reclassification at any time of any shares of Purchased Stock at such time
subject to the voting trust hereby created into a higher or lower number of
shares of the Company or into a different class of shares of the Company, or in
the event of the conversion of such shares upon the amalgamation of the Company
with any other company or companies, the Voting Trust Certificate representing
the same shall thereafter represent the numbers and classes of shares resulting
from such subdivision, consolidation, change, classification, reclassification
or conversion until such Voting Trust Certificate is exchanged for a new Voting
Trust Certificate correctly describing the securities represented thereby.
5. Successors. To the extent that the beneficial ownership of
shares of Purchased Stock subject hereto is transferred pursuant to a Permitted
Transfer or otherwise is transferred by operation of law, the person becoming
entitled to a Voting Trust Certificate in consequence thereof shall be
entitled, upon surrender of the Voting Trust Certificate and production of such
evidence of the right of such person as the Voting Trustee shall then
reasonably require, and upon compliance with the requirements of all applicable
laws including payment of a sum equal to all applicable security transfer taxes
(if any) payable in respect thereof, to one or more Voting Trust Certificates
in the name of such person in lieu of the Voting Trust Certificate so
surrendered, with a replacement Voting Trust Certificate covering any
beneficial ownership of Purchased Stock not so transferred to be issued to
Mondre.
6. Loss or Destruction of Voting Trust Certificates. In the
event of the mutilation of any Voting Trust Certificate, the Voting Trustee may
upon surrender thereof cause to be issued a replacement Voting Trust
Certificate. In the event of the loss, destruction or
3
<PAGE> 4
theft of any Voting Trust Certificate, the Voting Trustee may cause to be
issued a replacement Voting Trust Certificate upon production of such evidence
of such loss, destruction or theft and such indemnity as the Voting Trustee may
in his discretion reasonably require.
7. Third Parties. The Voting Trustee shall be entitled at all
times to treat and consider for all purposes the registered holder of a Voting
Trust Certificate as the holder and legal and beneficial owner thereof and of
the beneficial interest in the Purchased Stock represented thereby and shall
not be required to take notice of any interest, trust or claim of any third
party.
8. Distributions. Subject to the provisions of Section 9 hereof,
the registered holder of a Voting Trust Certificate, upon any cash or property
distribution (other than as described in Section 4 above) by the Company
(including without limitation any cash dividend or cash redemption payment) to
its stockholders in respect of the Company's capital stock shall be entitled to
receive from the Voting Trustee such holder's pro rata share of such
distribution, provided that the Voting Trustee may deduct therefrom any amount
he may be lawfully required to withhold and account for in respect of taxes.
Notwithstanding the foregoing provisions of this Section 8, where any such
distribution by the Company constitutes a final cash or property distribution
(either by way of redemption or otherwise, but excluding any distribution
described in Section 4 above) in respect of any shares of the capital stock of
the Company represented by a Voting Trust Certificate, the Voting Trustee shall
not be required to make any distribution under this Section 8 to the holder of
such Voting Trust Certificate until surrender thereof.
9. Registered Holder. Any distribution or partial distribution
to a holder of a Voting Trust Certificate under the provisions of Section 8
hereof by the Voting Trustee shall be made to the registered holder of such
Voting Trust Certificate at the time of such distribution or partial
distribution (unless otherwise directed in writing by such registered holder)
whether or not such registered holder was the registered holder thereof at the
time the money or property so distributed was received by the Voting Trustee.
10. Cancellation of Certificates. All Voting Trust Certificates
surrendered pursuant to the provisions hereof shall be cancelled, subject to
the obligation of the Voting Trustee to issue replacement Voting Trust
Certificate(s) or Voting Trust Certificate(s) representing the balance of any
shares of Purchased Stock not included in a Permitted Sale or Permitted
Transfer as contemplated by this Agreement.
4
<PAGE> 5
11. Limitations on Liability of Voting Trustee. By way of
supplement to, and not in lieu of, the provisions of any law affording
protection or powers to trustees and notwithstanding any law or principle of
law to the contrary it is agreed that:
(a) neither the Voting Trustee nor any nominee of the
Voting Trustee shall be under any liability or responsibility by reason of any
loss or damage arising in consequence of any mistake or error of law or fact or
any matter or thing done or omitted to be done under or in relation to this
Agreement whatever except to the extent such loss or damage is in consequence
of his own wilful wrongful act, wilful wrongful neglect or wilful default;
(b) in relation to this Agreement the Voting Trustee may
take the opinion or advice of any counsel or other expert, and shall not be
responsible for any loss occasioned by acting or failing to act thereon, except
as provided in subsection (a) of this Section 11; and
(c) the Voting Trustee or any firm or corporation in
which he may be a member, shareholder, officer or director or with which he may
have any other connection may deal with the Company or with its shares or with
Voting Trust Certificates representing the same in any manner whatever as fully
as though he were not a Voting Trustee.
12. Dissolution of Voting Trust. The voting trust created under
this Agreement shall dissolve on the earliest of the following dates:
(a) the tenth anniversary of the date hereof;
(b) the date of a Change In Control;
(c) the date when the Voting Trustee shall execute a
written instrument so declaring or shall resign in writing; or
(d) the date when no shares of Purchased Stock remain
subject to the voting trust created hereby.
Thereafter, the Voting Trustee shall (except for a dissolution under subsection
(c)) notify all registered holders of Voting Trust Certificates of such
dissolution. Such notice shall fix a place or places and a day (which shall be
within fifteen days thereafter) at which and on and after which any registered
holder of a Voting Trust Certificate may, on surrender thereof, receive a share
certificate or certificates for the shares represented thereby. Upon such
dissolution the rights of the holders of Voting Trust Certificates shall be
confined to the rights provided by this Section 12 and the right to receive
their proportionate interest or
5
<PAGE> 6
interests in any other property then subject to the trust hereof and not
theretofore distributed; provided that the register or registers of the Voting
Trust Certificate holders shall be kept open by the Voting Trustee for thirty
days after such dissolution to enable surrenders of Voting Trust Certificates.
At any time after thirty days following the day upon which Voting Trust
Certificates may first be surrendered pursuant to the said notice and after
distribution or payment of all other property (if any) held upon the trust
hereof the Voting Trustee may close such registers and transfer the shares
represented by unsurrendered Voting Trust Certificates to the Company's stock
transfer agent for transfer to the respective registered holders of the Voting
Trust Certificates representing the same or their lawful permitted assigns
against surrender of such Voting Trust Certificates, whereupon this Agreement
shall terminate and the Voting Trustee shall be under no further obligation to
such holders, provided that the provisions of Section 11 shall survive.
13. Governing Law. Notwithstanding any law or principle of law to
the contrary and regardless of the domicile or residence of any Voting Trustee
or any nominee thereof or Mondre, this Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
14. Amendments and Waivers. The parties may, by written agreement
signed by the parties, modify any of the covenants or agreements or extend the
time for the performance of any of the obligations contained in this Agreement
or in any document delivered pursuant to this Agreement. Any party may waive,
by written instrument signed by such party, compliance by another party with
any of its obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. This Agreement may be amended only by written
instrument signed by the parties hereto.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
16. Notices. Any notice, request or other document to be given
hereunder to a party shall be given in the manner required by the Purchase
Agreement.
17. Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
6
<PAGE> 7
18. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
20. Entire Agreement. This Agreement, together with the Purchase
Agreement and the Exhibits thereto and the agreements and instruments delivered
pursuant hereto or thereto, contain the entire agreement between the parties
hereto, and supersede all prior agreements and undertakings between or among
the parties hereto relating to the subject matter hereof and thereof.
21. Gender. With respect to the language of this Agreement, the
use of the masculine gender shall include the feminine and neuter, and the use
of the neuter shall include the masculine and/or feminine, in each case, as the
context reasonably requires.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
/s/ Richard D. Mondre
------------------------
RICHARD D. MONDRE
VOTING TRUSTEE:
/s/ David Epstein
- ---------------------------------
DAVID EPSTEIN, as Voting Trustee
and not individually
7
<PAGE> 8
SCHEDULE "I"
CERTIFICATE NO. _____
VOTING TRUST CERTIFICATE
IN RESPECT OF SHARES OF COMMON STOCK
OF
PRECISION RESPONSE CORPORATION (THE "COMPANY")
(INCORPORATED UNDER THE LAWS OF FLORIDA)
THIS CERTIFIES THAT, following the dissolution of the voting trust
under, or otherwise in accordance with the terms of, a certain Voting Trust
Agreement (the "Agreement") dated as of the 16th day of February, 1996 and made
by and between Richard D. Mondre and David Epstein as the original Voting
Trustee thereunder,
________________________________________________________________________________
(Name)
who is the registered holder of this Voting Trust Certificate, will, on
surrender hereof, be entitled to receive, except as otherwise provided in the
Agreement, a stock certificate or certificates for ___________________________
shares of common stock with a par value of $1.00 per share (United States
currency) in the capital of the Company, or such number of shares of such other
class of the capital stock of the Company as this Voting Trust Certificate may
then represent in accordance with the terms of the Agreement, be entitled to
receive payment of the amount of any distribution received in cash by the
Voting Trustee in respect of the shares or any thereof represented hereby to
the extent not theretofore distributed by the Voting Trustee in accordance with
the terms of the Agreement and to have the rights provided by the Agreement in
respect of any dividend or other distribution received other than in cash by
the Voting Trustee in respect of such shares.
This Voting Trust Certificate is issued under and pursuant to, and the
rights of the holder or holders hereof and of the Voting Trustee are subject to
and limited by, the terms of the Agreement, an executed copy of which is on
file and open to inspection at all reasonable times by holders of Voting Trust
Certificates at the offices of the Company at 1505 Northwest 167th Street,
Miami, Florida 33169.
This Voting Trust Certificate and the beneficial interest under the
Agreement in all or any of the shares represented hereby are, subject to the
restrictions on transferability which under the
<PAGE> 9
Agreement or applicable law exist or may from time to time exist, transferable
only by the registered holder hereof, in person or by duly authorized attorney,
on the books kept by the Voting Trustee at the aforesaid offices, upon
surrender of this Voting Trust Certificate duly endorsed and/or accompanied by
a sufficient instrument of transfer duly executed by the registered holder
hereof or the attorney of such registered holder with proof satisfactory to the
Voting Trustee of such due execution and, where applicable, of the appointment
of such attorney, and payment of a sum equal to all applicable security
transfer taxes (if any) payable in respect of such transfer.
The Voting Trustee is entitled at all times to treat and consider for
all purposes the registered holder hereof as the holder and legal and
beneficial owner hereof and of the beneficial interest under the Agreement in
the shares represented hereby and is not required to take notice of any
interest, trust or claim of any third party.
The voting trust under the Agreement will be dissolved on February 15,
2006, unless sooner dissolved in accordance with the provisions of the
Agreement.
IN WITNESS WHEREOF, the Voting Trustee has signed this certificate.
Date of Issuance:
-------------------------------
---------------------------------------
DAVID EPSTEIN, as Voting Trustee and
not individually
-2-
<PAGE> 1
EXHIBIT 9.3
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT ("Agreement"), dated as of February 16, 1996,
by and between JAMES MURRAY ("Murray") and MARK J. GORDON, as voting trustee
and not as an individual (the "Voting Trustee").
Preliminary Statement
Reference is made to the Stock Purchase and Shareholder Agreement
pursuant to which this Agreement is executed and delivered ("Purchase
Agreement") between Murray and Voting Trustee. Capitalized terms used herein,
which are not defined herein, shall have the respective meanings ascribed to
them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the covenants made in the Purchase
Agreement, and in order to induce Voting Trustee to consummate the transactions
contemplated by the Purchase Agreement, Murray hereby makes the following
covenants and agreements to and with the Voting Trustee.
1. Creation of Voting Trust. Murray acknowledges that he has
made subject to this Agreement, and Murray shall deposit and deliver, and
hereby irrevocably assigns, to the Voting Trustee, all of the Purchased Stock
owned by him. The Voting Trustee shall cause to be issued to and in the name
of Murray a Voting Trust Certificate representing the Purchased Stock so
received by the Voting Trustee. Murray shall execute and deliver to the
Voting Trustee such instruments of transfer as the Voting Trustees may
reasonably require in order to effectuate and confirm the assignment and
deposit referred to above.
2. Powers of Voting Trustee. During the term of this Agreement
and the continuance of the voting trust created under this Agreement, the
Voting Trustee shall possess and be entitled to exercise in respect of the
Purchased Stock from time to time subject hereto all rights of voting and
abstaining from voting or otherwise to participate in stockholders actions in
all matters relating to Precision Response Corporation, a Florida corporation
(the "Company"), and shall, without any limitation whatever, be free to
exercise his own discretion in so doing, including the election of the Voting
Trustee or his nominees as directors or officers, or both, of the Company.
3. Voting Trust Certificates and Permitted Transfers.
(a) Each Voting Trust Certificate issued hereunder shall
be substantially in the form of Schedule "I" hereto, or in such other form as
may from time to time be adopted by the Voting
<PAGE> 2
Trustee, and shall be signed by the Voting Trustee. Subject to the terms
hereof, a Voting Trust Certificate issued by the Voting Trustee and so signed
shall entitle the registered holder thereof upon the termination of this
Agreement (or upon the permitted sale of Purchased Stock from time to time as
hereinafter provided in accordance with the terms of this Agreement), to
receive in accordance with the provisions hereof a share certificate or
certificates for the number of shares or Purchased Stock (or lower number, if
requested pursuant to a permitted sale) represented thereby, and in the
meantime to the rights in respect of such Purchased Stock provided in this
Agreement.
(b) Subject to the terms of the Purchase Agreement, the
Stock Pledge Agreement and all other agreements executed in connection
therewith, Murray shall, provided that no default under the Purchase Agreement,
the Stock Pledge Agreement or any other agreement executed in connection
therewith has occurred and is continuing, be released from the trust created
hereby in connection with any sale of such Purchased Stock by Murray in a sale
transaction which is permitted by the Purchase Agreement, the Stock Pledge
Agreement, any other agreements existing which restrict transferability of the
Purchased Stock, and applicable law (a "Permitted Sale"). In order to
effectuate a Permitted Sale, Murray shall give the Voting Trustee at least
three (3) business days advance written notice of his desire to enter into a
Permitted Sale, specifying the exact number of shares of Purchased Stock that
shall be subject to the Permitted Sale. Upon the execution of the Permitted
Sale, Murray shall deliver or cause the applicable broker to send to the Voting
Trustee by facsimile transmission, personal delivery or commercial courier
service, with confirmation by telephone, a written confirmation of execution of
the Permitted Sale ("Permitted Sale Confirmation"). Upon receipt of the
Permitted Sale Confirmation, the Voting Trustee shall as soon as is
practicable, but not later than three (3) days thereafter, cause the
appropriate stock certificate(s) and Voting Trust Certificate(s) to be issued,
reissued and/or cancelled in whole or in part as necessary to deliver to Murray
or the applicable broker a stock certificate (legended, if required in the
Company's opinion) issued in the name of Murray or his permitted assignee for
the number of shares of Purchased Stock specified in the Permitted Sale
Confirmation, and, if necessary, a Voting Trust Certificate to replace the
Voting Trust Certificate(s) cancelled in connection with the Permitted Sale
covering the balance of any shares of Purchased Stock covered by the cancelled
Voting Trust Certificate(s) which are not part of the Permitted Sale. Murray
shall, together with the aforementioned three-day notice to the Voting Trustee,
deliver to the Voting Trustee his Voting Trust Certificate(s) covering at least
the number of shares of Purchased Stock sought to be transferred in the
Permitted Sale, endorsed in such manner and/or accompanied by such other
instruments of
2
<PAGE> 3
transfer as the Voting Trustee may reasonably require so that the Voting
Trustee may undertake the procedures set forth in the preceding sentence. The
Voting Trustee or the Company may require Murray to execute and deliver, in
connection with any purported Permitted Sale, such affidavits and other
assurances to the effect that what is proposed by Murray is in fact a Permitted
Sale. In the event of transfers of the Purchased Stock for estate planning
purposes or upon Murray's death permitted by the Purchase Agreement (a
"Permitted Transfer"), such Purchased Stock shall remain subject to the voting
trust created hereby and Murray's Voting Trust Certificate shall be
transferable to the transferee as set forth in Section 5 below. Except as set
forth in the preceding sentence, Voting Trust Certificates are not transferable
in any circumstances.
4. Recapitalization. In the event of the subdivision,
consolidation, change (by stock split or dividend or otherwise), classification
or reclassification at any time of any shares of Purchased Stock at such time
subject to the voting trust hereby created into a higher or lower number of
shares of the Company or into a different class of shares of the Company, or in
the event of the conversion of such shares upon the amalgamation of the Company
with any other company or companies, the Voting Trust Certificate representing
the same shall thereafter represent the numbers and classes of shares resulting
from such subdivision, consolidation, change, classification, reclassification
or conversion until such Voting Trust Certificate is exchanged for a new Voting
Trust Certificate correctly describing the securities represented thereby.
5. Successors. To the extent that the beneficial ownership of
shares of Purchased Stock subject hereto is transferred pursuant to a Permitted
Transfer or otherwise is transferred by operation of law, the person becoming
entitled to a Voting Trust Certificate in consequence thereof shall be
entitled, upon surrender of the Voting Trust Certificate and production of such
evidence of the right of such person as the Voting Trustee shall then
reasonably require, and upon compliance with the requirements of all applicable
laws including payment of a sum equal to all applicable security transfer taxes
(if any) payable in respect thereof, to one or more Voting Trust Certificates
in the name of such person in lieu of the Voting Trust Certificate so
surrendered, with a replacement Voting Trust Certificate covering any
beneficial ownership of Purchased Stock not so transferred to be issued to
Murray.
6. Loss or Destruction of Voting Trust Certificates. In the
event of the mutilation of any Voting Trust Certificate, the Voting Trustee may
upon surrender thereof cause to be issued a replacement Voting Trust
Certificate. In the event of the loss, destruction or theft of any Voting
Trust Certificate, the Voting Trustee may cause
3
<PAGE> 4
to be issued a replacement Voting Trust Certificate upon production of such
evidence of such loss, destruction or theft and such indemnity as the Voting
Trustee may in his discretion reasonably require.
7. Third Parties. The Voting Trustee shall be entitled at all
times to treat and consider for all purposes the registered holder of a Voting
Trust Certificate as the holder and legal and beneficial owner thereof and of
the beneficial interest in the Purchased Stock represented thereby and shall
not be required to take notice of any interest, trust or claim of any third
party.
8. Distributions. Subject to the provisions of Section 9 hereof,
the registered holder of a Voting Trust Certificate, upon any cash or property
distribution (other than as described in Section 4 above) by the Company
(including without limitation any cash dividend or cash redemption payment) to
its stockholders in respect of the Company's capital stock shall be entitled to
receive from the Voting Trustee such holder's pro rata share of such
distribution, provided that the Voting Trustee may deduct therefrom any amount
he may be lawfully required to withhold and account for in respect of taxes.
Notwithstanding the foregoing provisions of this Section 8, where any such
distribution by the Company constitutes a final cash or property distribution
(either by way of redemption or otherwise, but excluding any distribution
described in Section 4 above) in respect of any shares of the capital stock of
the Company represented by a Voting Trust Certificate, the Voting Trustee shall
not be required to make any distribution under this Section 8 to the holder of
such Voting Trust Certificate until surrender thereof.
9. Registered Holder. Any distribution or partial distribution
to a holder of a Voting Trust Certificate under the provisions of Section 8
hereof by the Voting Trustee shall be made to the registered holder of such
Voting Trust Certificate at the time of such distribution or partial
distribution (unless otherwise directed in writing by such registered holder)
whether or not such registered holder was the registered holder thereof at the
time the money or property so distributed was received by the Voting Trustee.
10. Cancellation of Certificates. All Voting Trust Certificates
surrendered pursuant to the provisions hereof shall be cancelled, subject to
the obligation of the Voting Trustee to issue replacement Voting Trust
Certificate(s) or Voting Trust Certificate(s) representing the balance of any
shares of Purchased Stock not included in a Permitted Sale or Permitted
Transfer as contemplated by this Agreement.
4
<PAGE> 5
11. Limitations on Liability of Voting Trustee. By way of
supplement to, and not in lieu of, the provisions of any law affording
protection or powers to trustees and notwithstanding any law or principle of
law to the contrary it is agreed that:
(a) neither the Voting Trustee nor any nominee of the
Voting Trustee shall be under any liability or responsibility by reason of any
loss or damage arising in consequence of any mistake or error of law or fact or
any matter or thing done or omitted to be done under or in relation to this
Agreement whatever except to the extent such loss or damage is in consequence
of his own wilful wrongful act, wilful wrongful neglect or wilful default;
(b) in relation to this Agreement the Voting Trustee may
take the opinion or advice of any counsel or other expert, and shall not be
responsible for any loss occasioned by acting or failing to act thereon, except
as provided in subsection (a) of this Section 11; and
(c) the Voting Trustee or any firm or corporation in
which he may be a member, shareholder, officer or director or with which he may
have any other connection may deal with the Company or with its shares or with
Voting Trust Certificates representing the same in any manner whatever as fully
as though he were not a Voting Trustee.
12. Dissolution of Voting Trust. The voting trust created under
this Agreement shall dissolve on the earliest of the following dates:
(a) the tenth anniversary of the date hereof;
(b) the date of a Change In Control;
(c) the date when the Voting Trustee shall execute a
written instrument so declaring or shall resign in writing; or
(d) the date when no shares of Purchased Stock remain
subject to the voting trust created hereby.
Thereafter, the Voting Trustee shall (except for a dissolution under subsection
(c)) notify all registered holders of Voting Trust Certificates of such
dissolution. Such notice shall fix a place or places and a day (which shall be
within fifteen days thereafter) at which and on and after which any registered
holder of a Voting Trust Certificate may, on surrender thereof, receive a share
certificate or certificates for the shares represented thereby. Upon such
dissolution the rights of the holders of Voting Trust Certificates shall be
confined to the rights provided by this Section 12 and the right to receive
their proportionate interest or
5
<PAGE> 6
interests in any other property then subject to the trust hereof and not
theretofore distributed; provided that the register or registers of the Voting
Trust Certificate holders shall be kept open by the Voting Trustee for thirty
days after such dissolution to enable surrenders of Voting Trust Certificates.
At any time after thirty days following the day upon which Voting Trust
Certificates may first be surrendered pursuant to the said notice and after
distribution or payment of all other property (if any) held upon the trust
hereof the Voting Trustee may close such registers and transfer the shares
represented by unsurrendered Voting Trust Certificates to the Company's stock
transfer agent for transfer to the respective registered holders of the Voting
Trust Certificates representing the same or their lawful permitted assigns
against surrender of such Voting Trust Certificates, whereupon this Agreement
shall terminate and the Voting Trustee shall be under no further obligation to
such holders, provided that the provisions of Section 11 shall survive.
13. Governing Law. Notwithstanding any law or principle of law to
the contrary and regardless of the domicile or residence of any Voting Trustee
or any nominee thereof or Murray, this Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
14. Amendments and Waivers. The parties may, by written agreement
signed by the parties, modify any of the covenants or agreements or extend the
time for the performance of any of the obligations contained in this Agreement
or in any document delivered pursuant to this Agreement. Any party may waive,
by written instrument signed by such party, compliance by another party with
any of its obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. This Agreement may be amended only by written
instrument signed by the parties hereto.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
16. Notices. Any notice, request or other document to be given
hereunder to a party shall be given in the manner required by the Purchase
Agreement.
17. Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
6
<PAGE> 7
18. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
20. Entire Agreement. This Agreement, together with the Purchase
Agreement and the Exhibits thereto and the agreements and instruments delivered
pursuant hereto or thereto, contain the entire agreement between the parties
hereto, and supersede all prior agreements and undertakings between or among
the parties hereto relating to the subject matter hereof and thereof.
21. Gender. With respect to the language of this Agreement, the
use of the masculine gender shall include the feminine and neuter, and the use
of the neuter shall include the masculine and/or feminine, in each case, as the
context reasonably requires.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
/s/ James Murray
--------------------
JAMES MURRAY
VOTING TRUSTEE:
/s/ Mark J. Gordon
- -----------------------------------
MARK J. GORDON, as Voting Trustee
and not individually
7
<PAGE> 8
SCHEDULE "I"
CERTIFICATE NO. _____
VOTING TRUST CERTIFICATE
IN RESPECT OF SHARES OF COMMON STOCK
OF
PRECISION RESPONSE CORPORATION (THE "COMPANY")
(INCORPORATED UNDER THE LAWS OF FLORIDA)
THIS CERTIFIES THAT, following the dissolution of the voting trust
under, or otherwise in accordance with the terms of, a certain Voting Trust
Agreement (the "Agreement") dated as of the 16th day of February, 1996 and made
by and between James Murray and Mark Gordon as the original Voting Trustee
thereunder,
________________________________________________________________________________
(Name)
who is the registered holder of this Voting Trust Certificate, will, on
surrender hereof, be entitled to receive, except as otherwise provided in the
Agreement, a stock certificate or certificates for ___________________________
shares of common stock with a par value of $1.00 per share (United States
currency) in the capital of the Company, or such number of shares of such other
class of the capital stock of the Company as this Voting Trust Certificate may
then represent in accordance with the terms of the Agreement, be entitled to
receive payment of the amount of any distribution received in cash by the
Voting Trustee in respect of the shares or any thereof represented hereby to
the extent not theretofore distributed by the Voting Trustee in accordance with
the terms of the Agreement and to have the rights provided by the Agreement in
respect of any dividend or other distribution received other than in cash by
the Voting Trustee in respect of such shares.
This Voting Trust Certificate is issued under and pursuant to, and the
rights of the holder or holders hereof and of the Voting Trustee are subject to
and limited by, the terms of the Agreement, an executed copy of which is on
file and open to inspection at all reasonable times by holders of Voting Trust
Certificates at the offices of the Company at 1505 Northwest 167th Street,
Miami, Florida 33169.
This Voting Trust Certificate and the beneficial interest under the
Agreement in all or any of the shares represented hereby are, subject to the
restrictions on transferability which under the
<PAGE> 9
Agreement or applicable law exist or may from time to time exist, transferable
only by the registered holder hereof, in person or by duly authorized attorney,
on the books kept by the Voting Trustee at the aforesaid offices, upon
surrender of this Voting Trust Certificate duly endorsed and/or accompanied by
a sufficient instrument of transfer duly executed by the registered holder
hereof or the attorney of such registered holder with proof satisfactory to the
Voting Trustee of such due execution and, where applicable, of the appointment
of such attorney, and payment of a sum equal to all applicable security
transfer taxes (if any) payable in respect of such transfer.
The Voting Trustee is entitled at all times to treat and consider for
all purposes the registered holder hereof as the holder and legal and
beneficial owner hereof and of the beneficial interest under the Agreement in
the shares represented hereby and is not required to take notice of any
interest, trust or claim of any third party.
The voting trust under the Agreement will be dissolved on February 15,
2006, unless sooner dissolved in accordance with the provisions of the
Agreement.
IN WITNESS WHEREOF, the Voting Trustee has signed this certificate.
Date of Issuance:
------------------------------
--------------------------------------
MARK J. GORDON, as Voting Trustee and
not individually
-2-
<PAGE> 1
EXHIBIT 9.4
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT ("Agreement"), dated as of February 16, 1996,
by and between JAMES MURRAY ("Murray") and DAVID EPSTEIN, as voting trustee and
not as an individual (the "Voting Trustee").
Preliminary Statement
Reference is made to the Stock Purchase and Shareholder Agreement
pursuant to which this Agreement is executed and delivered ("Purchase
Agreement") between Murray and Voting Trustee. Capitalized terms used herein,
which are not defined herein, shall have the respective meanings ascribed to
them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the covenants made in the Purchase
Agreement, and in order to induce Voting Trustee to consummate the transactions
contemplated by the Purchase Agreement, Murray hereby makes the following
covenants and agreements to and with the Voting Trustee.
1. Creation of Voting Trust. Murray acknowledges that he has
made subject to this Agreement, and Murray shall deposit and deliver, and
hereby irrevocably assigns, to the Voting Trustee, all of the Purchased Stock
owned by him. The Voting Trustee shall cause to be issued to and in the name
of Murray a Voting Trust Certificate representing the Purchased Stock so
received by the Voting Trustee. Murray shall execute and deliver to the
Voting Trustee such instruments of transfer as the Voting Trustees may
reasonably require in order to effectuate and confirm the assignment and
deposit referred to above.
2. Powers of Voting Trustee. During the term of this Agreement
and the continuance of the voting trust created under this Agreement, the
Voting Trustee shall possess and be entitled to exercise in respect of the
Purchased Stock from time to time subject hereto all rights of voting and
abstaining from voting or otherwise to participate in stockholders actions in
all matters relating to Precision Response Corporation, a Florida corporation
(the "Company"), and shall, without any limitation whatever, be free to
exercise his own discretion in so doing, including the election of the Voting
Trustee or his nominees as directors or officers, or both, of the Company.
3. Voting Trust Certificates and Permitted Transfers.
(a) Each Voting Trust Certificate issued hereunder shall
be substantially in the form of Schedule "I" hereto, or in such other form as
may from time to time be adopted by the Voting
<PAGE> 2
Trustee, and shall be signed by the Voting Trustee. Subject to the terms
hereof, a Voting Trust Certificate issued by the Voting Trustee and so signed
shall entitle the registered holder thereof upon the termination of this
Agreement (or upon the permitted sale of Purchased Stock from time to time as
hereinafter provided in accordance with the terms of this Agreement), to
receive in accordance with the provisions hereof a share certificate or
certificates for the number of shares or Purchased Stock (or lower number, if
requested pursuant to a permitted sale) represented thereby, and in the
meantime to the rights in respect of such Purchased Stock provided in this
Agreement.
(b) Subject to the terms of the Purchase Agreement, the
Stock Pledge Agreement and all other agreements executed in connection
therewith, Murray shall, provided that no default under the Purchase Agreement,
the Stock Pledge Agreement or any other agreement executed in connection
therewith has occurred and is continuing, be released from the trust created
hereby in connection with any sale of such Purchased Stock by Murray in a sale
transaction which is permitted by the Purchase Agreement, the Stock Pledge
Agreement, any other agreements existing which restrict transferability of the
Purchased Stock, and applicable law (a "Permitted Sale"). In order to
effectuate a Permitted Sale, Murray shall give the Voting Trustee at least
three (3) business days advance written notice of his desire to enter into a
Permitted Sale, specifying the exact number of shares of Purchased Stock that
shall be subject to the Permitted Sale. Upon the execution of the Permitted
Sale, Murray shall deliver or cause the applicable broker to send to the Voting
Trustee by facsimile transmission, personal delivery or commercial courier
service, with confirmation by telephone, a written confirmation of execution of
the Permitted Sale ("Permitted Sale Confirmation"). Upon receipt of the
Permitted Sale Confirmation, the Voting Trustee shall as soon as is
practicable, but not later than three (3) days thereafter, cause the
appropriate stock certificate(s) and Voting Trust Certificate(s) to be issued,
reissued and/or cancelled in whole or in part as necessary to deliver to Murray
or the applicable broker a stock certificate (legended, if required in the
Company's opinion) issued in the name of Murray or his permitted assignee for
the number of shares of Purchased Stock specified in the Permitted Sale
Confirmation, and, if necessary, a Voting Trust Certificate to replace the
Voting Trust Certificate(s) cancelled in connection with the Permitted Sale
covering the balance of any shares of Purchased Stock covered by the cancelled
Voting Trust Certificate(s) which are not part of the Permitted Sale. Murray
shall, together with the aforementioned three-day notice to the Voting Trustee,
deliver to the Voting Trustee his Voting Trust Certificate(s) covering at least
the number of shares of Purchased Stock sought to be transferred in the
Permitted Sale, endorsed in such manner and/or accompanied by such other
instruments of
2
<PAGE> 3
transfer as the Voting Trustee may reasonably require so that the Voting
Trustee may undertake the procedures set forth in the preceding sentence. The
Voting Trustee or the Company may require Murray to execute and deliver, in
connection with any purported Permitted Sale, such affidavits and other
assurances to the effect that what is proposed by Murray is in fact a Permitted
Sale. In the event of transfers of the Purchased Stock for estate planning
purposes or upon Murray's death permitted by the Purchase Agreement (a
"Permitted Transfer"), such Purchased Stock shall remain subject to the voting
trust created hereby and Murray's Voting Trust Certificate shall be
transferable to the transferee as set forth in Section 5 below. Except as set
forth in the preceding sentence, Voting Trust Certificates are not transferable
in any circumstances.
4. Recapitalization. In the event of the subdivision,
consolidation, change (by stock split or dividend or otherwise), classification
or reclassification at any time of any shares of Purchased Stock at such time
subject to the voting trust hereby created into a higher or lower number of
shares of the Company or into a different class of shares of the Company, or in
the event of the conversion of such shares upon the amalgamation of the Company
with any other company or companies, the Voting Trust Certificate representing
the same shall thereafter represent the numbers and classes of shares resulting
from such subdivision, consolidation, change, classification, reclassification
or conversion until such Voting Trust Certificate is exchanged for a new Voting
Trust Certificate correctly describing the securities represented thereby.
5. Successors. To the extent that the beneficial ownership of
shares of Purchased Stock subject hereto is transferred pursuant to a Permitted
Transfer or otherwise is transferred by operation of law, the person becoming
entitled to a Voting Trust Certificate in consequence thereof shall be
entitled, upon surrender of the Voting Trust Certificate and production of such
evidence of the right of such person as the Voting Trustee shall then
reasonably require, and upon compliance with the requirements of all applicable
laws including payment of a sum equal to all applicable security transfer taxes
(if any) payable in respect thereof, to one or more Voting Trust Certificates
in the name of such person in lieu of the Voting Trust Certificate so
surrendered, with a replacement Voting Trust Certificate covering any
beneficial ownership of Purchased Stock not so transferred to be issued to
Murray.
6. Loss or Destruction of Voting Trust Certificates. In the
event of the mutilation of any Voting Trust Certificate, the Voting Trustee may
upon surrender thereof cause to be issued a replacement Voting Trust
Certificate. In the event of the loss, destruction or theft of any Voting
Trust Certificate, the Voting Trustee may cause
3
<PAGE> 4
to be issued a replacement Voting Trust Certificate upon production of such
evidence of such loss, destruction or theft and such indemnity as the Voting
Trustee may in his discretion reasonably require.
7. Third Parties. The Voting Trustee shall be entitled at all
times to treat and consider for all purposes the registered holder of a Voting
Trust Certificate as the holder and legal and beneficial owner thereof and of
the beneficial interest in the Purchased Stock represented thereby and shall
not be required to take notice of any interest, trust or claim of any third
party.
8. Distributions. Subject to the provisions of Section 9 hereof,
the registered holder of a Voting Trust Certificate, upon any cash or property
distribution (other than as described in Section 4 above) by the Company
(including without limitation any cash dividend or cash redemption payment) to
its stockholders in respect of the Company's capital stock shall be entitled to
receive from the Voting Trustee such holder's pro rata share of such
distribution, provided that the Voting Trustee may deduct therefrom any amount
he may be lawfully required to withhold and account for in respect of taxes.
Notwithstanding the foregoing provisions of this Section 8, where any such
distribution by the Company constitutes a final cash or property distribution
(either by way of redemption or otherwise, but excluding any distribution
described in Section 4 above) in respect of any shares of the capital stock of
the Company represented by a Voting Trust Certificate, the Voting Trustee shall
not be required to make any distribution under this Section 8 to the holder of
such Voting Trust Certificate until surrender thereof.
9. Registered Holder. Any distribution or partial distribution
to a holder of a Voting Trust Certificate under the provisions of Section 8
hereof by the Voting Trustee shall be made to the registered holder of such
Voting Trust Certificate at the time of such distribution or partial
distribution (unless otherwise directed in writing by such registered holder)
whether or not such registered holder was the registered holder thereof at the
time the money or property so distributed was received by the Voting Trustee.
10. Cancellation of Certificates. All Voting Trust Certificates
surrendered pursuant to the provisions hereof shall be cancelled, subject to
the obligation of the Voting Trustee to issue replacement Voting Trust
Certificate(s) or Voting Trust Certificate(s) representing the balance of any
shares of Purchased Stock not included in a Permitted Sale or Permitted
Transfer as contemplated by this Agreement.
4
<PAGE> 5
11. Limitations on Liability of Voting Trustee. By way of
supplement to, and not in lieu of, the provisions of any law affording
protection or powers to trustees and notwithstanding any law or principle of
law to the contrary it is agreed that:
(a) neither the Voting Trustee nor any nominee of the
Voting Trustee shall be under any liability or responsibility by reason of any
loss or damage arising in consequence of any mistake or error of law or fact or
any matter or thing done or omitted to be done under or in relation to this
Agreement whatever except to the extent such loss or damage is in consequence
of his own wilful wrongful act, wilful wrongful neglect or wilful default;
(b) in relation to this Agreement the Voting Trustee may
take the opinion or advice of any counsel or other expert, and shall not be
responsible for any loss occasioned by acting or failing to act thereon, except
as provided in subsection (a) of this Section 11; and
(c) the Voting Trustee or any firm or corporation in
which he may be a member, shareholder, officer or director or with which he may
have any other connection may deal with the Company or with its shares or with
Voting Trust Certificates representing the same in any manner whatever as fully
as though he were not a Voting Trustee.
12. Dissolution of Voting Trust. The voting trust created under
this Agreement shall dissolve on the earliest of the following dates:
(a) the tenth anniversary of the date hereof;
(b) the date of a Change In Control;
(c) the date when the Voting Trustee shall execute a
written instrument so declaring or shall resign in writing; or
(d) the date when no shares of Purchased Stock remain
subject to the voting trust created hereby.
Thereafter, the Voting Trustee shall (except for a dissolution under subsection
(c)) notify all registered holders of Voting Trust Certificates of such
dissolution. Such notice shall fix a place or places and a day (which shall be
within fifteen days thereafter) at which and on and after which any registered
holder of a Voting Trust Certificate may, on surrender thereof, receive a share
certificate or certificates for the shares represented thereby. Upon such
dissolution the rights of the holders of Voting Trust Certificates shall be
confined to the rights provided by this Section 12 and the right to receive
their proportionate interest or
5
<PAGE> 6
interests in any other property then subject to the trust hereof and not
theretofore distributed; provided that the register or registers of the Voting
Trust Certificate holders shall be kept open by the Voting Trustee for thirty
days after such dissolution to enable surrenders of Voting Trust Certificates.
At any time after thirty days following the day upon which Voting Trust
Certificates may first be surrendered pursuant to the said notice and after
distribution or payment of all other property (if any) held upon the trust
hereof the Voting Trustee may close such registers and transfer the shares
represented by unsurrendered Voting Trust Certificates to the Company's stock
transfer agent for transfer to the respective registered holders of the Voting
Trust Certificates representing the same or their lawful permitted assigns
against surrender of such Voting Trust Certificates, whereupon this Agreement
shall terminate and the Voting Trustee shall be under no further obligation to
such holders, provided that the provisions of Section 11 shall survive.
13. Governing Law. Notwithstanding any law or principle of law to
the contrary and regardless of the domicile or residence of any Voting Trustee
or any nominee thereof or Murray, this Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
14. Amendments and Waivers. The parties may, by written agreement
signed by the parties, modify any of the covenants or agreements or extend the
time for the performance of any of the obligations contained in this Agreement
or in any document delivered pursuant to this Agreement. Any party may waive,
by written instrument signed by such party, compliance by another party with
any of its obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. This Agreement may be amended only by written
instrument signed by the parties hereto.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
16. Notices. Any notice, request or other document to be given
hereunder to a party shall be given in the manner required by the Purchase
Agreement.
17. Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
6
<PAGE> 7
18. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
20. Entire Agreement. This Agreement, together with the Purchase
Agreement and the Exhibits thereto and the agreements and instruments delivered
pursuant hereto or thereto, contain the entire agreement between the parties
hereto, and supersede all prior agreements and undertakings between or among
the parties hereto relating to the subject matter hereof and thereof.
21. Gender. With respect to the language of this Agreement, the
use of the masculine gender shall include the feminine and neuter, and the use
of the neuter shall include the masculine and/or feminine, in each case, as the
context reasonably requires.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
/s/ James Murray
------------------
JAMES MURRAY
VOTING TRUSTEE:
/s/ David Epstein
- ----------------------------------
DAVID EPSTEIN, as Voting Trustee
and not individually
7
<PAGE> 8
SCHEDULE "I"
CERTIFICATE NO. _____
VOTING TRUST CERTIFICATE
IN RESPECT OF SHARES OF COMMON STOCK
OF
PRECISION RESPONSE CORPORATION (THE "COMPANY")
(INCORPORATED UNDER THE LAWS OF FLORIDA)
THIS CERTIFIES THAT, following the dissolution of the voting trust
under, or otherwise in accordance with the terms of, a certain Voting Trust
Agreement (the "Agreement") dated as of the 16th day of February, 1996 and made
by and between James Murray and David Epstein as the original Voting Trustee
thereunder,
________________________________________________________________________________
(Name)
who is the registered holder of this Voting Trust Certificate, will, on
surrender hereof, be entitled to receive, except as otherwise provided in the
Agreement, a stock certificate or certificates for ___________________________
shares of common stock with a par value of $1.00 per share (United States
currency) in the capital of the Company, or such number of shares of such other
class of the capital stock of the Company as this Voting Trust Certificate may
then represent in accordance with the terms of the Agreement, be entitled to
receive payment of the amount of any distribution received in cash by the
Voting Trustee in respect of the shares or any thereof represented hereby to
the extent not theretofore distributed by the Voting Trustee in accordance with
the terms of the Agreement and to have the rights provided by the Agreement in
respect of any dividend or other distribution received other than in cash by
the Voting Trustee in respect of such shares.
This Voting Trust Certificate is issued under and pursuant to, and the
rights of the holder or holders hereof and of the Voting Trustee are subject to
and limited by, the terms of the Agreement, an executed copy of which is on
file and open to inspection at all reasonable times by holders of Voting Trust
Certificates at the offices of the Company at 1505 Northwest 167th Street,
Miami, Florida 33169.
This Voting Trust Certificate and the beneficial interest under the
Agreement in all or any of the shares represented hereby are, subject to the
restrictions on transferability which under the
<PAGE> 9
Agreement or applicable law exist or may from time to time exist, transferable
only by the registered holder hereof, in person or by duly authorized attorney,
on the books kept by the Voting Trustee at the aforesaid offices, upon
surrender of this Voting Trust Certificate duly endorsed and/or accompanied by
a sufficient instrument of transfer duly executed by the registered holder
hereof or the attorney of such registered holder with proof satisfactory to the
Voting Trustee of such due execution and, where applicable, of the appointment
of such attorney, and payment of a sum equal to all applicable security
transfer taxes (if any) payable in respect of such transfer.
The Voting Trustee is entitled at all times to treat and consider for
all purposes the registered holder hereof as the holder and legal and
beneficial owner hereof and of the beneficial interest under the Agreement in
the shares represented hereby and is not required to take notice of any
interest, trust or claim of any third party.
The voting trust under the Agreement will be dissolved on February 15,
2006, unless sooner dissolved in accordance with the provisions of the
Agreement.
IN WITNESS WHEREOF, the Voting Trustee has signed this certificate.
Date of Issuance:
------------------------------
---------------------------------------
DAVID EPSTEIN, as Voting Trustee and
not individually
-2-
<PAGE> 1
EXHIBIT 10.1
PRECISION RESPONSE CORPORATION
1996 INCENTIVE STOCK PLAN
1. PURPOSE. The PRECISION RESPONSE CORPORATION 1996 Incentive
Stock Plan (the "Plan") is intended to provide incentives which will attract
and retain highly competent persons as officers and key employees of PRECISION
RESPONSE CORPORATION and its subsidiaries (the "Company"), as well as
independent contractors providing consulting or advisory services to the
Company, by providing them opportunities to acquire the Company's common stock,
$.01 value per share ("Common Shares") or to receive monetary payments based on
the value of such shares pursuant to the Awards described in Paragraph 4 below.
2. ADMINISTRATION. Prior to the date, if any, upon which the
Company becomes subject to the Securities Exchange Act of 1934 (the "Act"), the
Plan shall be administered by the Board of Directors of the Company (the
"Board") or a committee appointed by the Board. After the date, if any, upon
which the Company becomes subject to the Act, the Plan will be administered by
the Compensation Committee (the administrator of the Plan, initially the Board
and thereafter the Compensation Committee, if and when the Company becomes
subject to the Act, shall be referred to hereinafter as the "Committee")
appointed by the Board from among its members provided, however, that as long
as Common Shares are registered under the Act, members of the Committee must
qualify as "disinterested persons" within the meaning of Securities and
Exchange Commission Regulation Section 240.16b-3. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause), and appoint
new members in substitution therefor, and fill vacancies however caused;
provided, however, that at no time shall a Committee of less than two members
of the Board administer the Plan, and provided further, that all members of the
Committee if it consists of only two members must be "disinterested persons."
The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Awards (as
hereinafter defined) granted hereunder as it deems necessary or advisable. All
determinations and interpretations made by the Board and Committee shall be
binding and conclusive on all participants and their legal representatives. No
member of the Board, no member of the Committee and no employee of the Company
shall be liable for any act or failure to act hereunder, by any other member or
employee or by any agent to whom duties in connection with the administration
<PAGE> 2
of this Plan have been delegated or, except in circumstances involving such
person's bad faith, gross negligence or fraud, for any act or failure to act by
the member or employee.
3. PARTICIPANTS. Participants will consist of such officers and
key employees or prospective key employees (conditioned upon, and effective not
earlier than his becoming an employee) of the Company, and independent
contractors providing consulting or advisory services to the Company, as the
Committee in its sole discretion determines to be significantly responsible for
the success and future growth and profitability of the Company and whom the
Committee may designate from time to time to receive Awards under the Plan.
Designation of a participant in any year shall not require the Committee to
designate such person to receive an Award in any other year or, once
designated, to receive the same type or amount of Awards as granted to the
participant in any year. The Committee shall consider such factors as it deems
pertinent in selecting participants and in determining the type and amount of
their respective Awards.
4. TYPES OF AWARDS. Awards under the Plan may be granted in any
one or a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c)
Stock Awards, (d) Performance Shares, and (e) Performance Units, all as
described below (collectively "Awards").
5. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for
issuance under the Plan an aggregate of 1,500,000 Common Shares, which may be
authorized but unissued shares. Any shares subject to Stock Options or Stock
Appreciation Rights or issued under such options or rights or as Stock Awards
may thereafter be subject to new options, rights or awards under this Plan if
there is a lapse, expiration or termination of any such options or rights prior
to issuance of the shares or the payment of the equivalent or if shares are
issued under such options or rights or as such awards and thereafter are
reacquired by the Company pursuant to rights reserved by the Company upon
issuance thereof.
6. STOCK OPTIONS. Stock Options will consist of awards from the
Company, in the form of agreements, which will enable the holder to purchase a
specific number of Common Shares, at set terms and at a fixed purchase price.
Stock Options may be "incentive stock options" ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or Stock Options which do not constitute Incentive Stock
Options ("Nonqualified Stock Options"). The Committee will have the authority
to grant to any participant one or more Incentive Stock Options, Nonqualified
Stock Options, or both types of Stock Options (in each case with or without
Stock Appreciation Rights). Each Stock Option shall be subject to such terms
and conditions
2
<PAGE> 3
consistent with the Plan as the Committee may impose from time to time, subject
to the following limitations:
(a) EXERCISE PRICE. Each Stock Option granted hereunder
shall have such per-share exercise price as the Committee may determine at the
date of grant provided, however, that the per-share exercise price for
Incentive Stock Options shall not be less than 100% of the Fair Market Value
(as hereinafter defined) of the Common Shares on the date the option is granted
and provided further that the per-share exercise price for Nonqualified Stock
Options shall not be less than 85% of the Fair Market Value of the Common
Shares on the date the option is granted. Notwithstanding the foregoing, the
Committee may grant Nonqualified Stock Options for up to 50,000 Common Shares
for a per-share exercise price equal to and/or in excess of $.01 per share.
(b) PAYMENT OF EXERCISE PRICE. The option exercise price
may be paid by check or, in the discretion of the Committee, by the delivery of
Common Shares of the Company then owned by the participant or a combination of
methods of payment; provided, however, that option agreements may provide that
payment of the exercise price by delivery of Common Shares of the Company then
owned by the participant may be made only if such payment does not result in a
charge to earnings for financial accounting purposes as determined by the
Committee. In the discretion of the Committee, if Common Shares are readily
tradeable on a national securities exchange or other market system at the time
of option exercise, payment may also be made by delivering a properly executed
exercise notice to the Company together with a copy of irrevocable instructions
to a broker to deliver promptly to the Company the amount of sale or loan
proceeds to pay the exercise price. To facilitate the foregoing, the Company
may enter into agreements for coordinated procedures with one or more brokerage
firms.
(c) EXERCISE PERIOD. Stock Options granted under the
Plan will be exercisable at such times and subject to such terms and conditions
as shall be determined by the Committee. In addition, Nonqualified Stock
Options shall not be exercisable later than fifteen years after the date they
are granted and Incentive Stock Options shall not be exercisable later than ten
years after the date they are granted. All Stock Options shall terminate at
such earlier times and upon such conditions or circumstances as the Committee
shall in its discretion set forth in such option at the date of grant.
(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive
Stock Options may be granted only to participants who are employees of the
Company or one of its subsidiaries (within the meaning of Section 424(f) of the
Code) at the date of grant. The aggregate Fair Market Value (determined as of
the time the option is granted)
3
<PAGE> 4
of the Common Shares with respect to which Incentive Stock Options are
exercisable for the first time by a participant during any calendar year (under
all option plans of the Company) shall not exceed $100,000. Incentive Stock
Options may not be granted to any participant who, at the time of grant, owns
stock possessing (after the application of the attribution rules of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company, unless the option price is fixed at not less
than 110% of the Fair Market Value of the Common Shares on the date of grant
and the exercise of such option is prohibited by its terms after the expiration
of five years from the date of grant of such option.
(e) Redesignation as Nonqualified Stock Options. Options
designated as Incentive Stock Options that fail to continue to meet the
requirements of Section 422 of the Code shall be redesignated as Nonqualified
Stock Options for Federal income tax purposes automatically without further
action by the Committee on the date of such failure to continue to meet the
requirements of Section 422 of the Code.
(f) Limitation of Rights in Shares. The recipient of a
Stock Option shall not be deemed for any purpose to be a shareholder of the
Company with respect to any of the shares subject thereto except to the extent
that the Stock Option shall have been exercised and, in addition, a certificate
shall have been issued and delivered to the participant.
7. Stock Appreciation Rights. The Committee may, in its
discretion, grant Stock Appreciation Rights to the holders of any Stock Options
granted hereunder. In addition, Stock Appreciation Rights may be granted
independently of and without relation to Stock Options. Each Stock
Appreciation Right shall be subject to such terms and conditions consistent
with the Plan as the Committee shall impose from time to time, including the
following:
(a) A Stock Appreciation Right relating to a Nonqualified
Stock Option may be made part of such option at the time of its grant or at any
time thereafter up to six months prior to its expiration, and a Stock
Appreciation Right relating to an Incentive Stock Option may be made part of
such option only at the time of its grant.
(b) Each Stock Appreciation Right will entitle the holder
to elect in lieu of exercising the Stock Option to receive the appreciation in
the Fair Market Value of the shares subject thereto up to the date the right is
exercised. In the case of a right issued in relation to a Stock Option, such
appreciation
4
<PAGE> 5
shall be measured from not less than the option price and in the case of a
right issued independently of any Stock Option, such appreciation shall be
measured from not less than 85% of the Fair Market Value of the Common Shares
on the date the right is granted. Payment of such appreciation shall be made
in cash or in Common Shares, or a combination thereof, as set forth in the
Award, but no Stock Appreciation Right shall entitle the holder to receive,
upon exercise thereof, more than the number of Common Shares (or cash of equal
value) with respect to which the right is granted.
(c) Each Stock Appreciation Right will be exercisable at
the times and to the extent set forth therein, but no Stock Appreciation Right
may be exercisable earlier than six months after the date it was granted or
later than the earlier of (i) the term of the related Stock Option, if any, or
(ii) fifteen years after it was granted. Exercise of a Stock Appreciation
Right shall reduce the number of shares issuable under the Plan (and the
related Stock Option, if any) by the number of shares with respect to which the
right is exercised.
8. Stock Awards. Stock Awards will consist of Common Shares
transferred to participants without other payment therefor or payment at less
than Fair Market Value as additional compensation for services to the Company.
Stock Awards shall be subject to such terms and conditions as the Committee
determines appropriate, including, without limitation, restrictions on the sale
or other disposition of such shares and rights of the Company to reacquire such
shares for no consideration upon termination of the participant's employment
within specified periods. The Committee may require the participant to deliver
a duly signed stock power, endorsed in blank, relating to the Common Shares
covered by such an Award. The Committee may also require that the stock
certificates evidencing such shares be held in custody until the restrictions
thereon shall have lapsed. The participant shall have, with respect to the
Common Shares subject to a Stock Award, all of the rights of a holder of Common
Shares of the Company, including the right to receive dividends and to vote the
shares.
9. Performance Shares.
(a) Performance Shares may be awarded either alone or in
addition to other Awards granted under this Plan and shall consist of the right
to receive Common Shares or cash of an equivalent value at the end of a
specified Performance Period (defined below). The Committee shall determine
the participants to whom and the time or times at which Performance Shares
shall be awarded, the number of Performance Shares to be awarded to any person,
the duration of the period (the "Performance Period") during which, and the
conditions under which, receipt of the Common Shares will be deferred, and the
other terms and conditions of the Award in addition to those set forth in this
Section 9. The Committee may condition the grant of Performance Shares upon
the attainment of
5
<PAGE> 6
specified performance goals or such other factors or criteria as the Committee
shall determine.
(b) Performance Shares awarded pursuant to this Section 9
shall be subject to the following terms and conditions:
(i) Unless otherwise determined by the
Committee at the time of the grant of the Award, amounts equal to any
dividends declared during the Performance Period with respect to the
number of Common Shares covered by a Performance Share Award will not
be paid to the participant.
(ii) Subject to the provisions of the
Performance Share Award and this Plan, at the expiration of the
Performance Period, share certificates and/or cash of an equivalent
value (as the Committee may determine) shall be delivered to the
participant, or his or her legal representative, in a number equal to
the vested shares covered by the Performance Share Award.
(iii) Subject to the applicable provisions
of the Performance Share Award and this Plan, upon termination of a
participant's employment with the Company for any reason during the
Performance Period for a given Performance Share Award, the
Performance Shares in question will vest or be forfeited in accordance
with the terms and conditions established by the Committee.
10. Performance Units.
(a) Performance Units may be awarded either alone or in
addition to other Awards granted under this Plan and shall consist of the right
to receive a fixed dollar amount, payable in cash or Common Shares or a
combination of both. The Committee shall determine the participants to whom
and the time or times at which Performance Units shall be awarded, the duration
of Performance Units to be awarded to any person, the duration of the period
(the "Performance Cycle") during which, and the conditions under which, a
participant's right to Performance Units will be vested, the ability of
participants to defer the receipt of payment of such Performance Units, and the
other terms and conditions of the Award in addition to those set forth in this
Section 10. The Committee may condition the vesting of Performance Units upon
the attainment of specified performance goals or such other factors or criteria
as the Committee shall determine.
(b) The Performance Units awarded pursuant to this
Section 10 shall be subject to the following terms and conditions:
6
<PAGE> 7
(i) At the expiration of the Performance
Cycle, the Committee shall determine the extent to which the
performance goals have been achieved, and the percentage of the
Performance Units of each participant that have vested.
(ii) Subject to the applicable provisions
of the Performance Unit Award and this Plan, at the expiration of the
Performance Cycle, cash and/or share certificates of an equivalent
value (as the Committee may determine) shall be delivered to the
participant, or his or her legal representative, in payment of the
vested Performance Units covered by the Performance Unit Award.
(iii) Subject to the applicable provisions
of the Performance Unit Award and this Plan, upon termination of a
participant's employment with the Company for any reason during the
Performance Cycle for a given Performance Unit Award, the Performance
Units in question will vest or be forfeited in accordance with the
terms and conditions established by the Committee.
11. Adjustment Provisions.
(a) If the Company shall at any time change the number of
issued Common Shares without new consideration to the Company (such as by stock
dividend, stock split, recapitalization, reorganization, exchange of shares,
liquidation, combination or other change in corporate structure affecting the
Common Shares) or make a distribution of cash or property which has a
substantial impact on the value of issued Common Shares, the total number of
shares available for Awards under this Plan shall be appropriately adjusted and
the number of shares covered by each outstanding Award and the reference price
or Fair Market Value for each outstanding Award shall be adjusted so that the
net value of such Award shall not be changed.
(b) In the case of any sale of assets, merger,
consolidation, combination or other corporate reorganization or restructuring
of the Company with or into another corporation which results in the
outstanding Common Shares being converted into or exchanged for different
securities, cash or other property, or any combination thereof (an
"Acquisition"), subject to the provisions of this Plan and any limitation
applicable to the Award:
(i) any participant to whom a Stock
Option has been granted shall have the right thereafter and during the
term of the Stock Option to receive upon exercise thereof the
Acquisition Consideration (as defined below) receivable upon the
Acquisition by a holder of the number of Common Shares which might
have been obtained upon exercise of the Stock
7
<PAGE> 8
Option or portion thereof, as the case may be, immediately prior to
the Acquisition;
(ii) any participant to whom a Stock
Appreciation Right has been granted shall have the right thereafter
and during the term of such right to receive upon exercise thereof the
difference on the exercise date between the aggregate Fair Market
Value of the Acquisition Consideration receivable upon such
acquisition by a holder of the number of Common Shares which are
covered by such right and the aggregate reference price of such right;
and
(iii) any participant to whom Performance
Shares or Performance Units have been awarded shall have the right
thereafter and during the term of the Award, upon fulfillment of the
terms of the Award, to receive on the date or dates set forth in the
Award, the Acquisition Consideration receivable upon the Acquisition
by a holder of the number of Common Shares which are covered by the
Award.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof
receivable in respect of one Common Share upon consummation of an
Acquisition.
(c) Notwithstanding any other provision of this Plan, the
Committee may authorize the issuance, continuation or assumption of Awards or
provide for other equitable adjustments after changes in the Common Shares
resulting from any other merger, consolidation, sale of assets, acquisition of
property or stock, recapitalization, reorganization or similar occurrence upon
such terms and conditions as it may deem equitable and appropriate.
(d) In the event that another corporation or business
entity is being acquired by the Company, and the Company assumes outstanding
employee stock options and/or stock appreciation rights and/or the obligation
to make future grants of options or rights to employees of the acquired entity,
the aggregate number of Common Shares available for Awards under this Plan
shall be increased accordingly.
12. Nontransferability.
(a) Each Award granted under the Plan to a participant
shall not be transferable by him otherwise than required by law or by will or
the laws of descent and distribution, and shall be exercisable, during his
lifetime, only by him. In the event of the death of a participant while the
participant is rendering services to the Company, each Stock Option or Stock
Appreciation Right theretofore granted to him shall be exercisable during such
period
8
<PAGE> 9
after his death as the Committee shall in its discretion set forth in such
option or right at the date of grant (but not beyond the stated duration of the
option or right) and then only:
(i) By the executor or administrator of the
estate of the deceased participant or the person or persons to whom
the deceased participant's rights under the Stock Option or Stock
Appreciation Right shall pass by will or the laws of descent and
distribution; and
(ii) To the extent that the deceased participant
was entitled to do so at the date of his death.
(b) Notwithstanding Section 12(a), in the discretion of
the Committee, Awards granted hereunder may be transferred to members of the
participant's immediate family (which for purposes of this Plan shall be
limited to the participant's children, grandchildren and spouse), or to one or
more trusts for the benefit of such immediate family members or partnerships in
which such immediate family members and/or trusts are the only partners, but
only if the Award expressly so provides.
13. Other Provisions. Awards under the Plan may also be subject
to such other provisions (whether or not applicable to any other Awards under
the Plan) as the Committee determines appropriate, including without
limitation, provisions for the installment purchase of Common Shares under
Stock Options, provisions for the installment exercise of Stock Appreciation
Rights, provisions to assist the participant in financing the acquisition of
Common Shares, provisions for the forfeiture of, or restrictions on resale or
other disposition of, Shares acquired under any form of Award, provisions for
the acceleration of exercisability or vesting of Awards in the event of a
change of control of the Company or other reasons, provisions for the payment
of the value of Awards to participants in the event of a change of control of
the Company or other reasons, or provisions to comply with Federal and state
securities laws, or setting forth understandings or conditions as to the
participant's employment in addition to those specifically provided for under
the Plan.
14. Fair Market Value. For purposes of this Plan and any Awards
hereunder, Fair Market value of Common Shares shall be the mean between the
highest and lowest sale prices for the Company's Common Shares as reported on
the NASDAQ National Market (or such other consolidated transaction reporting
system on which such Common Shares are primarily traded) on the date
immediately preceding the date of grant (or on the next preceding trading date
if Common Shares were not traded on the date immediately preceding the date of
grant), provided, however, that if the Company's Common Shares are not at any
time readily tradeable on a national
9
<PAGE> 10
securities exchange or other market system, Fair Market Value shall mean the
amount determined in good faith by the Committee as the fair market value of
the Common Shares of the Company.
15. Withholding. All payments or distributions made pursuant to
the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding requirements. If the
Company proposes or is required to distribute Common Shares pursuant to the
Plan, it may require the recipient to remit to it an amount sufficient to
satisfy such tax withholding requirements prior to the delivery of any
certificates for such Common Shares. The Committee may, in its discretion and
subject to such rules as it may adopt, permit an optionee or Award or right
holder to pay all or a portion of the federal, state and local withholding
taxes arising in connection with (a) the exercise of a Nonqualified Stock
Option or a Stock Appreciation Right, (b) the receipt or vesting of Stock
Awards, or (c) the receipt of Common Shares upon the expiration of the
Performance Period or the Performance Cycle, respectively, with respect to any
Performance Shares or Performance Units, by electing to have the Company
withhold Common Shares having a Fair Market Value equal to the amount to be
withheld.
16. Tenure. A participant's right, if any, to continue to serve
the Company as an officer, employee, independent contractor, or otherwise,
shall not be enlarged or otherwise affected by such individual's designation as
a participant under the Plan, nor shall this Plan in any way interfere with the
right of the Company, subject to the terms of any separate employment agreement
to the contrary, at any time to terminate such employment or to increase or
decrease the compensation of the participant from the rate in existence at the
time of the grant of an Award.
17. Duration, Amendment and Termination. No Award shall be
granted after May 30, 2006 (the "Expiration Date"); provided, however, that the
terms and conditions applicable to any Award granted prior to such date may
thereafter be amended or modified by mutual agreement between the Company and
the participant or such other persons as may then have an interest therein.
Also, by mutual agreement between the Company and a participant hereunder,
under this Plan or under any other present or future plan of the Company,
Awards may be granted to such participant in substitution and exchange for, and
in cancellation of, any Awards previously granted such participant under this
Plan, or any other present or future plan of the Company. The Board may amend
the Plan from time to time or terminate the Plan at any time. However, no
action authorized by this Section 17 shall reduce the amount of any existing
Award or change the terms and conditions thereof without the participant's
consent. The approval of the Company's shareholders will be required for any
amendment to the
10
<PAGE> 11
Plan which would (i) change the class of persons eligible for the grant of
Stock Options, as specified in Section 3 or otherwise materially modify the
requirements as to eligibility for participation in the Plan, (ii) increase the
maximum number of shares subject to Stock Options, as specified in Section 5
(unless made pursuant to the provisions of Section 11) or (iii) materially
increase the benefits accruing to participants under the Plan, within the
meaning of Rule 16b-3 promulgated under Act. With respect to persons subject
to Section 16 of the Act, transactions under the Plan are intended to comply
with all applicable conditions of Rule 16b-3 or its successors under the Act.
To the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 to be stated therein, such provision
(other than one relating to eligibility requirements, or the price and amount
of Awards) shall be deemed automatically to be incorporated by reference into
the Plan insofar as participants subject to Section 16 of the Act are
concerned.
18. Governing Law. This Plan and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of Florida (regardless of the law that might otherwise govern under
applicable Florida principles of conflict of laws).
19. Shareholder Approval. The Plan was adopted by the Board of
the Company and approved by the Company's shareholders on May 31, 1996.
11
<PAGE> 1
EXHIBIT 10.2
PRECISION RESPONSE CORPORATION
1996 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. PRECISION RESPONSE CORPORATION, a Florida
corporation (the "Company"), hereby adopts the 1996 Nonemployee Director Stock
Option Plan (the "Plan"). The purpose of the Plan is to attract and retain
outstanding individuals to serve as members of the Board of Directors of the
Company by providing such persons opportunities to acquire common stock, $.01
par value, of the Company ("Common Shares"), thereby strengthening the
mutuality of interest between such persons and the Company's shareholders.
2. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for
issuance under the Plan an aggregate of Seventy-Five Thousand (75,000) Common
Shares, which may be authorized but unissued shares. If there is a lapse,
expiration, termination or cancellation of any option granted under this Plan,
all unissued shares subject to or reserved for such option may again be used
for new options granted under this Plan.
3. PARTICIPATION. Participation in this Plan is limited to
members of the Board of Directors who are not salaried officers or employees of
the Company or any of its direct or indirect subsidiaries (a "Nonemployee
Director" or "Participant").
4. OPTIONS TO BE GRANTED UNDER THE PLAN. Effective on the date
of a Nonemployee Director's initial election to the Board of Directors and upon
each re-election of such Nonemployee Director to the Board of Directors at the
Company's annual meeting of shareholders ("Annual Meeting"), each Nonemployee
Director will automatically be awarded a nonqualified stock option (the
"option") to purchase Two Thousand Five Hundred (2,500) Common Shares provided,
however, a Nonemployee Director shall not be granted an Option upon re-election
to the Board of Directors at the Annual Meeting if such Nonemployee Director
was already granted an Option in the previous twelve (12) month period upon his
or her initial election to the Board of Directors.
5. OPTION EXERCISE PRICE. Each option granted under this Plan
shall be exercisable at an option price equal to 100% of the Fair Market Value
(defined below) of the Common Shares on the date of grant hereunder.
6. LIMITATIONS ON EXERCISE. Any option granted under this Plan
may be exercised (in accordance with Section 7 hereof) in whole or in part,
from time to time after the date granted, subject to the following limitations:
<PAGE> 2
(a) No option granted hereunder may be exercised during
the first year following the date such option was granted. Thereafter, each
option may be exercised:
(i) to a maximum cumulative extent of one-third
(1/3) of the total shares covered by the option on or after the first
anniversary of the date the option was granted;
(ii) to a maximum cumulative extent of two-thirds
(2/3) of the total shares covered by the option on or after the second
anniversary of the date the option was granted; and
(iii) to a maximum cumulative extent of 100% of the
total shares covered by the option on or after the third anniversary
of the date the option was granted.
(b) Notwithstanding the limitations of Section 6(a)
above, any option granted under this Plan shall become fully exercisable upon
the death of the Nonemployee Director while serving on the Board of Directors
or upon the Retirement (as hereinafter defined) of the Nonemployee Director if
such death or Retirement occurs on or after the first anniversary of the date
such option was issued. For these purposes, "Retirement" means a Nonemployee
Director's termination of service as a member of the Board of Directors after
age 70 or at any time with the consent of the Board of Directors.
(c) Any option granted under this Plan may not be
exercised after the earliest to occur of any of the following events:
(i) more than ninety (90) days after termination of
any Nonemployee Director's service as a member of the Board of
Directors for any reason other than death or Retirement (and then only
to the extent that the Nonemployee Director could have exercised such
option on the date of termination);
(ii) more than one hundred eighty (180) days after a
Nonemployee Director's Retirement from the Board of Directors (and
then only to the extent that the Nonemployee Director could have
exercised such option on the date of Retirement, after giving effect
to Section 6(b) above);
(iii) more than twelve (12) months after death of a
Nonemployee Director (and then only to the extent that the Nonemployee
Director could have exercised suchoption on the date of death, after
giving effect to Section 6(b) above); or
2
<PAGE> 3
(iv) more than ten (10) years from the date the
option is granted.
7. METHOD AND TIME OF EXERCISE: DELIVERY OF CERTIFICATES. Any
option granted under this Plan shall be deemed exercised on the date written
notice of exercise is received by the Secretary of the Company at the Company's
corporate headquarters. Such notice shall be accompanied by: (i) a check
payable to the Company for the purchase price of the shares to be purchased; or
(ii) delivery of Common Shares owned by the Participant for at least six months
whose Fair Market Value on the date of exercise equals the purchase price of
the shares to be purchased; or (iii) any combination of the foregoing.
8. NONTRANSFERABILITY. Any option granted under this Plan shall
not be transferable other than as required by law or by will or the laws of
descent and distribution, and shall be exercisable, during the Participant's
lifetime, only by the Participant or the Participant's guardian or legal
representative. If a Nonemployee Director dies during the option period, any
option granted to such Participant may be exercised by his estate or the person
to whom the option passes by will or the laws of descent and distribution, but
only in accordance with Section 6 above. Notwithstanding the foregoing, an
option will automatically become transferable to the Participant's immediate
family or trusts or family partnerships for the benefit of such persons if and
to the extent the Securities and Exchange Commission specifically removes the
transferability restrictions from Securities and Exchange Commission Rule 16b-3
("Rule 16b-3").
9. OTHER PROVISIONS; SECURITIES REGISTRATION. The grant of any
option under the Plan may also be subject to other provisions as counsel to the
Company deems appropriate, including, without limitation, such provisions as
may be appropriate to comply with federal or state securities laws and stock
listing requirements.
10. DEFINITION OF FAIR MARKET VALUE. The term "Fair Market Value"
shall mean, as of any date, the mean between the highest and lowest sale prices
of the Common Shares as reported on the NASDAQ National Market (or such other
consolidated transaction reporting system on which such Common Shares are
primarily traded) on the date immediately preceding the date of grant, or if
such Common Shares were not traded on such day, then the next preceding day on
which the shares were traded, all as reported by such source as the Board of
Directors may select.
11. ADJUSTMENT PROVISIONS. If the Company shall at any time
change the number of issued Common Shares without new consideration to the
Company (such as by stock dividend or stock split), the total number of shares
reserved for issuance under this Plan and the number
3
<PAGE> 4
of shares covered by each outstanding option and the exercise price thereunder
shall be automatically adjusted so that the aggregate consideration payable to
the Company and the value of each option shall not be changed. If, during the
term of any option granted under this Plan, the Common Shares shall be changed
into another kind of stock, securities, cash or other property whether as a
result of reorganization, sale, merger, consolidation, or other similar
transaction, the Board of Directors shall cause adequate provision to be made
whereby the Participants shall thereafter be entitled to receive, upon the due
exercise of any outstanding options, the stock, securities, cash or other
property the Participants would have been entitled to receive immediately prior
to the effective date of any such transaction for Common Shares which could
have been acquired through the exercise of such options.
12. AMENDMENT OR DISCONTINUATION OF PLAN. The Board of Directors
may amend the Plan at any time or suspend or discontinue the Plan at any time,
but no such action shall adversely affect any outstanding option; provided that
this Plan may not be amended more frequently than once every six months and no
amendment shall be adopted which would result in any Nonemployee Director
losing his or her status as a "disinterested" administrator under Rule 16b-3
with respect to any employee benefit plan of the Company or result in the Plan
losing its status as a protected plan under Rule 16b-3.
13. GOVERNING LAW. This Plan and the options granted hereunder
shall be governed and construed in accordance with the laws of the State of
Florida (regardless of the law that might otherwise govern under applicable
Florida principles of conflicts of laws).
14. SHAREHOLDER APPROVAL. The Plan was adopted by the Board of
Directors and approved by the shareholders of the Company on May 31, 1996.
4
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
Employment Agreement made as of the 15th day of May, 1996, between
PRECISION RESPONSE CORPORATION, a Florida corporation ("Company"), and MARK J.
GORDON ("Executive").
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Duties. Company hereby employs Executive as
its Chairman of the Board and Chief Executive Officer throughout the term of
this Agreement and agrees to cause Executive from time to time to be elected or
appointed to such corporate offices or positions. Executive accepts such
employment. The duties and responsibilities of Executive shall include duties
and responsibilities consistent with Executive's corporate offices and
positions, including those set forth in the bylaws of Company from time to
time, overall responsibility for the development and implementation of
Company's business plans and strategies, and such other duties and
responsibilities which the Board of Directors of Company from time to time may
reasonably assign to Executive consistent with the foregoing. Unless otherwise
determined by agreement of Executive and the Board of Directors of Company,
Executive also shall serve in the same corporate offices or positions with
Company's subsidiaries (and Company's successor, in the event of any corporate
reorganization) throughout the term of this Agreement, and shall have the same
duties and responsibilities with respect to such subsidiaries (and such
successor) as he has with respect to Company, but without additional
compensation, and Company agrees to cause Executive from time to time to be
elected or appointed to such corporate offices or positions.
2. Term. The term of this Agreement shall begin July 1, 1996 and
shall continue thereafter without interruption through June 30, 2001 (the
"Initial Term"); provided, however, commencing on July 1, 2001, and on each
July 1 thereafter through and including July 1, 2005, Executive's employment
term under this Agreement shall automatically be extended by an additional
consecutive twelve (12) month period, unless (a) either party gives the other
written notice of his or its decision not to renew at least sixty (60) days
prior to the applicable July 1st date, or (b) Executive's employment is sooner
terminated in accordance with this Agreement.
3. Work Efforts - Other Activities. During the term of this
Agreement, Executive shall devote substantially all of his work efforts to the
business and affairs of Company responsibilities assigned to him pursuant to
this Agreement. However, Executive may devote a reasonable amount of his time
to civic, community or charitable activities and, with the prior approval of
the Board of Directors of Company, to serve as a director of other corporations
and other activities not expressly mentioned in this paragraph. Executive may
invest his personal assets as he deems appropriate so long as such investments
do not interfere with Executive's
<PAGE> 2
performance of the duties and responsibilities assigned to him pursuant to this
Agreement.
4. Place of Employment. Company's executive offices, including
the office of Executive, shall be located in Dade or Broward County, Florida
during the term of this Agreement, and Executive will not be required to
relocate or transfer his office from the immediate vicinity of the Miami-Ft.
Lauderdale, Florida metropolitan area. Company shall furnish Executive with
offices, secretarial and other support services consistent with those currently
provided and such other facilities and services at such locations as may be
reasonably required to permit Executive to conveniently fulfill the duties of
his employment.
5. Base Salary. For all services to be rendered by Executive
pursuant to this Agreement, Company agrees to pay Executive during the term of
this Agreement a base annual salary (the "Base Salary") of not less than the
greater of (a) the base salary established for Executive by Company's
Compensation Committee (the "Committee"), and (b) $425,000. The Base Salary
shall be increased, effective on July 1st of each year during Executive's
employment (the "Adjustment Date") by an amount at least equal to the
percentage increase in the U.S. Department of Labor Consumer Price Index (All
Items) for all Urban Consumers, U.S. City Average, 1982-1984 - 100 (the
"Index") since July 1, 1996, or the previous Adjustment Date, whichever is
later. The adjustment shall be determined no later than three (3) months after
the Adjustment Date for which the adjustment applies. At no time will the Base
Salary, as adjusted, be decreased by a decline of the Index. The Base Salary
shall be paid in periodic installments in accordance with Company's regular
payroll practices.
6. Additional Compensation.
(a) Bonus. Within thirty (30) days after the Committee
had been appointed, Executive and the Committee shall mutually agree upon the
criteria upon which a bonus for Executive for fiscal year 1996 is to be based.
Within sixty (60) days prior to the commencement of each fiscal year thereafter
during the term of this Agreement, Executive and the Committee shall mutually
agree upon the criteria upon which a bonus for Executive for such fiscal year
is to be based. A bonus shall be awarded to Executive for each fiscal year in
accordance with the mutually agreed criteria, unless Executive and the
Committee agree that the bonus shall be awarded on some other basis in which
case a bonus shall be awarded on such other basis as they have mutually agreed.
The Company shall pay such awarded bonus to Executive in cash within thirty
(30) days after it is awarded by the Committee (and no later than ninety (90)
days after the end of the fiscal year for which such bonus is awarded) unless
otherwise agreed to by Executive and Company in advance of the award.
2
<PAGE> 3
(b) Stock Option Plans. On or before December 31 of each
year (beginning December 31, 1996) during the term of this Agreement (or, with
respect to the final year of this Agreement, upon the effective date of
termination of Executive's employment if such effective date is a date other
than December 31) (each, an "Option Grant Date"), Company through the Committee
shall cause to be granted to Executive options to purchase that number of
shares of Company's voting common stock which is at least equal to five percent
(5%) of the aggregate number of shares for which options for Company stock were
granted since the last Option Grant Date (or, with respect to the first Option
Grant Date, since June 1, 1996) to Company's employees and to Company's
non-employee directors under any stock option plans (including incentive stock
option plans) of Company. The terms (including price and exercise dates) of
the options granted to Executive shall be as determined by the Committee but
shall be comparable to the terms upon which options were generally granted to
other employees of Company during the applicable period, subject to any
differences required under applicable tax laws with respect to incentive stock
options granted to Executive. In all events, the options granted to Executive
shall provide that Executive shall have at least ninety (90) days following
termination of Executive's employment under this Agreement for any reason other
than death, and that Executive's personal representative or other legal
representative shall have at least one (1) year following Executive's death, to
exercise any or all of the outstanding options granted to Executive to the
extent they were exercisable on the date of such termination of employment or,
if Executive's employment is terminated other than pursuant to paragraph 7(a),
(b), (c) or (d), to exercise any or all of such outstanding options (which
shall all then be deemed exercisable, notwithstanding any stated vesting
schedules) in full.
(c) Benefit Plans. During the term of this Agreement,
Company shall provide to Executive and his eligible dependents at Company's
expense individual or group medical, hospital, dental, long-term disability
insurance and life insurance coverage, in each case at least as favorable as
those coverages provided to the other senior executive officers of Company or
its subsidiaries. Executive shall also be entitled to participate in such other
benefit plans and programs which Company or its subsidiaries from time to time
may make available to its employees generally or to some or all of its other
senior executive officers.
(d) Vacations and Holidays. During the term of this
Agreement, Executive shall be entitled to paid vacations, holidays and time off
as are consistent with past practice and custom for Company's senior executive
officers.
(e) Other Benefits and Allowances. During the term of
this Agreement, Executive shall receive the benefits or allowances described in
the attached Schedule 6(e).
3
<PAGE> 4
(f) Expenses. During the term of this Agreement,
Executive shall be entitled to prompt reimbursement by Company of all
reasonable ordinary and necessary travel, entertainment and other expenses
incurred by Executive (in accordance with the policies and procedures
established by Company for its senior executive officers) in the performance of
his duties and responsibilities under this Agreement, provided that Executive
shall promptly account for such expenses in accordance with Company policies
and procedures, which may include itemized accountings.
7. Termination of Employment.
(a) Death. Executive's employment under this Agreement
shall terminate upon his death.
(b) Disability. If Executive becomes incapable by reason
of physical injury, disease or mental illness from substantially performing his
duties under this Agreement for a continuous period of six (6) months or for
more than one hundred eighty (180) days in the aggregate during any twelve (12)
month period (a "Disability Period"), then Company may terminate Executive's
employment under this Agreement.
(c) Cause. Company may terminate Executive's employment
under this Agreement for cause; provided however, for purposes of this
Agreement, "cause" shall mean only (i) Executive's confession or conviction of
felonious theft, fraud, embezzlement or any other felony involving dishonesty
or moral turpitude, (ii) dishonest or bad faith conduct on the part of
Executive which is materially and demonstrably contrary to material interests
of Company and which is materially and demonstrably detrimental to Company, or
(iii) Executive's failure to comply with a lawful written directive of the
Board of Directors of Company material to Executive's duties and Executive
shall fail to comply with such written directive within thirty (30) days after
his receipt of a written notice from the Board of Directors of Company setting
forth in reasonable detail the particulars necessary for reasonable compliance.
Termination shall occur thirty (30) days after "cause" is established. In no
event shall the results of Company's operations or any business judgment made
by Executive constitute an independent basis for termination for cause of
Executive's employment under this Agreement.
(d) Voluntary Resignation. Executive may voluntarily
resign from Company's employ at any time upon at least thirty (30) days' prior
written notice of the effective date of such resignation.
(e) Constructive Termination. In the event of Company's
Constructive Termination (as defined below) of Executive's employment,
Executive may terminate his employment, provided that he has given written
notice of protest to the Board Of Directors
4
<PAGE> 5
setting forth the manner in which he has been constructively terminated (and
such Constructive Termination is not timely corrected, as provided in the
definition of Constructive Termination below). In the event of a Constructive
Termination, Executive shall be excused from further performance of all duties
and obligations hereunder, and shall have the rights specified in Section 8(c).
"Constructive Termination" for purposes hereof shall mean that (i) Company has
delegated to another or others one or more of Executive's duties described in
paragraph 1 (and shall include removal of Executive from the office of Chairman
of the Board or Chief Executive Officer, even if Executive's day-to-day duties
are to remain substantially the same), other than for cause as defined in
Section 7(c), and Company fails to confirm to Executive in writing, and
implement, the reinstatement of such duty (or duties) and/or office(s) to
Executive within (30) days after receipt by the Board of Directors of
Executive's written notice of protest, or (ii) Company has, without Executive's
prior written consent, moved its executive offices from the Miami-Ft.
Lauderdale, Florida metropolitan area.
8. Payments Upon Termination of Employment.
(a) Death, Disability, Voluntary Termination. In the
event Executive's employment shall terminate voluntarily or by reason of death
or disability prior to the end of the term of this Agreement, Executive, his
legal representative or beneficiary, as the case may be, shall be entitled to
receive within thirty (30) days after the date of termination a cash amount
equal to eighteen (18) months of Executive's Base Salary, bonuses and other
compensation and benefits provided for in this Agreement. Any compensation
otherwise payable under this subparagraph, however, shall be reduced by an
amount equal to the net payments Executive is entitled to receive for the same
period by reason of any Company-paid disability benefit plans or social
security disability income. For purposes of computing the aggregate bonuses
payable under this subparagraph 8(a), such aggregate bonuses shall be equal to
the product of (i) highest annual bonus earned by Executive hereunder or
$350,000, whichever is higher, and (ii) one and one-half (1.5).
(b) Termination for Cause. In the event Executive's
employment shall be terminated "for cause" as described in paragraph 7(c) prior
to the end of the term of this Agreement, Executive shall be entitled to
receive within thirty (30) days after the date of termination a cash amount
equal to his Base Salary, bonuses and other compensation and benefits up to the
date of termination. Any bonuses for a partial year of employment shall be
prorated through date of termination (based upon the prior year's annual
bonus).
(c) Involuntary Termination. If Executive's employment
shall be terminated for any reason not set forth in subparagraphs
5
<PAGE> 6
7(a) - (d) above, or if a Constructive Termination occurs, prior to the end of
the term of this Agreement, then (without limiting any other rights or claims
which Executive may have against Company or others) Executive shall be entitled
to receive within thirty (30) days after the date of termination a cash amount
equal to three (3) full years of Executive's Base Salary, bonuses and other
compensation and benefits provided for in this Agreement, or, if more, the Base
Salary, bonuses and other compensation and benefits provided for in this
Agreement from the date of such termination through the end of the Initial
Term. For purposes of computing the aggregate bonuses payable under this
subparagraph 8(c), such aggregate bonuses shall be equal to the product of (i)
the highest annual bonus earned by Executive hereunder or $350,000, whichever
is higher, and (ii) three (3), or, if higher, the number of whole and/or
partial employment years, inclusive of the then current employment year,
remaining through the end of the Initial Term.
9. Notice of Termination. Any termination of Executive's
employment by Company shall be communicated in a written Notice of Termination
to Executive. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice from the Board of Directors, signed by each Director who has
voted in favor of giving the Notice of Termination, which shall indicate the
specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
10. Registration Rights. If Executive's employment with Company
shall terminate for any reason (whether under this Agreement or otherwise),
Executive may thereafter require Company to register any or all of the
unregistered shares of common stock that Executive (or his assigns or
family-related affiliates) may then own as of the date of such termination of
employment in accordance with the provisions of the "Registration Rights
Agreement" attached as Schedule 10.
11. Successor and Assigns. This Agreement and all rights under
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the parties hereto and their respective personal or legal
representatives, executors, administrators, heirs, distributees, devisees,
legatees, successors and assigns. This Agreement is personal in nature, and,
except as set forth in paragraph 13, neither of the parties to this Agreement
shall, without the prior written consent of the other, assign or transfer this
Agreement or any right or obligation under this Agreement to any person or
entity.
12. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement shall be deemed to be properly
given if delivered personally or sent by United
6
<PAGE> 7
States certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive: Mark J. Gordon
3715 N.E. 214th Terrace
Aventura, Florida 33180
If to Company: Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Attn: President and General Counsel
or to such other address as either party may have furnished to the other party
in writing in accordance with this paragraph. Such notices or other
communications shall be effective only upon receipt. Notices also may be given
by facsimile and in such case shall be deemed to be properly given when sent so
long as the sender uses reasonable efforts to confirm and does confirm the
receiver's receipt of the facsimile transmission.
13. Merger, Etc. of Company. If during the term of this Agreement
all or substantially all of the assets and business of Company are disposed of
by merger, consolidation, sale of assets, or otherwise, then Company may elect
either:
(a) to assign this Agreement and all of Company's rights
and obligations under this Agreement to the acquiring or surviving entity,
provided that such acquiring or surviving entity shall assume in writing, in a
manner reasonably satisfactory to Executive, all of the obligations of Company
under this Agreement; and provided further that Company shall remain liable for
the performance of its obligations under this Agreement in the event of an
unjustified failure of the acquiring entity to perform its obligations under
this Agreement; or
(b) in addition to its other rights of termination set
forth in paragraph 7, to terminate this Agreement upon at least thirty (30)
days prior written notice to Executive and the payment to Executive of all of
the compensation and benefits provided for in subparagraph 8(c).
14. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and is signed by Executive and an officer of Company
(other than Executive) so authorized by the Board of Directors of Company. No
waiver by either party to this Agreement at any time of any breach by the other
party of, or compliance by the other party with, any condition or provision of
this Agreement to be performed by the other party shall be deemed to be a
waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with
7
<PAGE> 8
respect to the subject matter of this Agreement have been made by either party
that are not expressly set forth in this Agreement.
15. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, and such other provisions shall
remain of full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
17. Headings. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.
18. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws, and not the
conflicts of law principles, of the State of Florida.
19. Dispute Resolution. Any claim by Executive or Company
arising from or in connection with this Agreement, whether based on contract,
tort, common law, equity, statute, regulation, order, or otherwise (a
"Dispute"), shall be resolved as follows:
(a) Such Dispute shall be submitted to mandatory and
binding arbitration at the election of either Executive or Company (the
"Disputing Party"). Except as otherwise provided in this paragraph 19, the
arbitration shall be pursuant to the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA").
(b) To initiate the arbitration, the Disputing Party
shall notify the other party in writing within thirty (30) days after the
occurrence of the event or events which give rise to the Dispute (the
"Arbitration Demand"), which shall (i) describe in reasonable detail the nature
of the Dispute, (ii) state the amount of any claim, (iii) specify the requested
relief, and (iv) name an arbitrator who (A) has been licensed to practice law
in the U.S. for at least ten (10) years, (B) has no relationship to either
Executive or Company, and (C) is experienced in representing clients in
connection with employment-related disputes (the "Basic Qualifications").
Within fifteen (15) days after the other party's receipt of the Arbitration
Demand, such other party shall serve on the Disputing Party a written statement
(i) answering the claims set forth in the Arbitration Demand and including any
affirmative defenses of such party, (ii) asserting any counterclaim, which
shall (A) describe in reasonable detail the nature of the Dispute relating to
the counterclaim, (B) state the amount of the counterclaim, and (C) specify the
requested relief, and (iii)
8
<PAGE> 9
naming a second arbitrator satisfying the Basic Qualifications. Promptly, but
in any event within five (5) days thereafter, the two (2) arbitrators so named
shall select a third neutral arbitrator from a list provided by the AAA of
potential arbitrators who satisfy the Basic Qualifications and who have no past
or present relationship with either of the parties' counsel, except as
otherwise disclosed in writing to and approved by the parties. The arbitration
will be heard by a panel of the three (3) arbitrators so chosen (the
"Arbitration Panel"), with the third arbitrator so chosen serving as the
chairperson of the Arbitration Panel. Decisions of a majority of the members of
the Arbitration Panel shall be determinative.
(c) The arbitration hearing shall be held in Miami,
Florida. The Arbitration Panel is specifically authorized to render partial or
full summary judgment as provided for in the Federal Rules of Civil Procedure.
The Arbitration Panel will have no power or authority, under the Commercial
Arbitration Rules of the AAA or otherwise, to relieve the parties from their
agreement hereunder to arbitrate or otherwise to amend or disregard any
provision of this Agreement, including, without limitation, the provisions of
this paragraph 19.
(d) If an arbitrator refuses or is unable to proceed with
arbitration proceedings as called for by this paragraph 19, such arbitrator
shall be replaced by the party who selected such arbitrator or, if such
arbitrator was selected by the two (2) party-appointed arbitrators, by such two
(2) party-appointed arbitrators' selecting a new third arbitrator in accordance
with subparagraph 19(b), in either case within five (5) days after such
declining or withdrawing arbitrator has given notice of refusal or inability to
proceed. Each such replacement arbitrator shall satisfy the Basic
Qualifications. If an arbitrator is replaced pursuant to this subparagraph
19(d) after the arbitration hearing has commenced, then a rehearing shall take
place in accordance with the Commercial Arbitration Rules of the AAA.
(e) Within five (5) days after the closing of the
arbitration hearing, the Arbitration Panel shall prepare and distribute to the
parties a writing setting forth the Arbitration Panel's finding of facts and
conclusions of law relating to the Dispute, including the reason for the giving
or denial of any award. The findings and conclusions and the award, if any,
shall be deemed to be confidential information.
(f) The Arbitration Panel is instructed to schedule
promptly all discovery and other procedural steps and otherwise to assume case
management initiative and control to effect an efficient and expeditious
resolution of the Dispute. The Arbitration Panel is authorized to issue
monetary sanctions against either party if, upon a showing of good cause, such
party is unreasonably delaying the proceeding.
9
<PAGE> 10
(g) Any award rendered by the Arbitration Panel will be
final, conclusive and binding upon the parties, and any judgment on such award
may be entered and enforced in any court of competent jurisdiction.
(h) Each party will bear one-half of all fees, costs and
expenses of the arbitrators, and, notwithstanding any law to the contrary, each
party will bear all of the fees, costs and expenses of its own attorneys,
experts and witnesses. However, in connection with any judicial proceeding to
compel arbitration pursuant to this Agreement or to enforce any award rendered
by the Arbitration Panel, the prevailing party in such a proceeding will be
entitled to recover reasonable attorneys' fees and expenses incurred in
connection with such proceedings, including appeals and fees and expenses
incurred in preparation for such proceedings, in addition to any other relief
to which such party may be entitled.
(i) Nothing contained in the preceding provisions of this
paragraph 19 shall be construed to prevent either party from seeking from a
court a temporary restraining order or other injunctive relief pending final
resolution of a Dispute pursuant to this paragraph 19.
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
as of the date first above written.
PRECISION RESPONSE CORPORATION, a
Florida corporation
By: /s/ David Epstein
----------------------------
David Epstein, President
/s/ Mark J. Gordon
-------------------------------
MARK J. GORDON
10
<PAGE> 11
SCHEDULE 6(E)
CAR
Company shall provide Executive with a new luxury automobile not less
often than every three (3) years at least equal in quality to Executive's
current Company automobile.
COUNTRY CLUB MEMBERSHIPS
Company shall pay all fees and expenses associated with membership in
two (2) country clubs, including golfing privileges.
<PAGE> 12
SCHEDULE 10
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is entered into as of the 15th day
of May, 1996, by and between PRECISION RESPONSE CORPORATION, a Florida
corporation (the "Company"), and MARK J. GORDON ("Holder").
WHEREAS, the Company and Holder have entered into an Employment
Agreement as of the date hereof (the "Employment Agreement") and, as partial
consideration therefor, the Company has agreed to provide Holder certain demand
and piggyback registration rights with respect to Holder's stock in Company,
which may be exercised by Holder following certain events.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
(c) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Shares" shall mean any and all of the shares of
common stock of the Company currently held or hereafter acquired from time to
time (including, but not limited to, through exercise of stock options) by
Holder or any assigns of Holder which are trusts or limited partnerships or
other entities the beneficial owners of which are principally Holder, Holder's
family members, and/or Holder's lineal descendants, including shares acquired
by any such trusts, partnerships or other entities from Holder prior to the
date hereof.
(e) "Registrable Securities" shall mean any of the
following shares which have not been sold to the public or which have not lost
their registration rights as provided herein: (i) the
<PAGE> 13
Shares and (ii) any shares of common stock of the Company, and any securities
of the Company or any other corporation, issued as a dividend or other
distribution with respect to or in replacement of or exchange for the Shares.
(f) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
(g) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Article I hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration, but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company, but excluding the
Selling Expenses.
(h) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities and all fees and expenses of legal counsel for Holder.
(i) "Triggering Event" shall mean the termination of
Holder's employment with Company for any reason (under the Employment Agreement
or otherwise).
(j) "Holder" shall mean Mark J. Gordon or, in the event
of his legal incapacity, his legal guardian, or, in the event of his death, the
personal representative(s) of his estate or the beneficiary(ies) of his estate
as designated by such personal representative(s).
Section 1.02 Demand Registration Rights.
(a) Request for Registration. If within ninety (90) days
after the date of the Triggering Event (or within one (1) year after the date
of the Triggering Event if the Triggering Event is Holder's death) the Company
receives a written request from Holder that the Company effect a registration
with respect to all or a part of the Registrable Securities (provided that if
less than 25% of the Registrable Securities are to be registered such
securities shall have an aggregate proposed offering price to the public of at
least $500,000), the Company will as soon as practicable thereafter use its
diligent best efforts to effect all such registrations, qualifications,
listings or compliances (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliances
with
2
<PAGE> 14
applicable requirements or regulations and listing of the Registrable
Securities on a stock exchange or the NASDAQ Stock Market) as may be so
requested and as would permit or facilitate the sale and distribution of all of
such Registrable Securities as are specified in such request. The Company
shall file a registration statement as soon as practicable after receipt of the
request of Holder but in any event within sixty (60) days of receipt following
such request; provided, however, that if the Company shall furnish to Holder a
certificate signed by the then Chairman of the Board of Directors of the
Company or the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company it would be seriously detrimental to
the Company and its shareholders for such registration statement to be filed on
or before the date filing would be required, and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period ending not more than one hundred twenty
(120) days following receipt of the request for registration.
(b) Underwriting. If the Holder intends that the
Registrable Securities covered by its request be distributed by means of an
underwriting, it shall so advise the Company as a part of its request made
pursuant to this Section 1.02. In such event, the Company shall (together with
Holder) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Holder. If the
underwriter has not limited the number of Registrable Securities to be
underwritten, the Company may include securities for its own account in such
registration if Holder so agrees.
Section 1.03 Piggyback Registration Rights.
(a) Notice of Proposed Registration. If at any time or
from time to time prior to, on or after a Triggering Event the Company shall
determine to register any of its common stock, other than (i) a registration
relating solely to employee benefit plans on Form S-8 or similar forms which
may be promulgated in the future, or (ii) a registration on Form S-4 or similar
forms which may be promulgated in the future relating solely to a Commission
Rule 145 transaction, the Company will:
(i) promptly give Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws and other state
compliances), and in any underwriting involved therein, all
the Registrable Securities specified in a written request or
requests made within thirty (30) days after receipt of such
written notice from the Company by Holder, except as set forth
in Section 1.03(b).
3
<PAGE> 15
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise Holder as a part of the written
notice given pursuant to Section 1.03(a)(i). In such event, the right of
Holder to registration of the Registrable Securities pursuant to this Section
1.03 shall be conditioned upon Holder's participation in such underwriting and
the inclusion of the specified Registrable Securities in the underwriting.
Holder shall in such case (together with the Company) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 1.03, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the amount of Registrable Securities to be included in
the registration and underwriting; provided, however, without the prior written
consent of Holder, the number of Registrable Securities to be included in such
registration and underwriting shall not be reduced to less than 50% of the
Registrable Securities sought by Holder to be included therein. If Holder
disapproves of the terms of any such underwriting, it may elect to withdraw the
Registrable Securities therefrom by written notice to the Company and the
underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded from such registration.
Section 1.04 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Sections 1.02 or 1.03 shall be borne by the Company. All Selling
Expenses shall be borne by Holder.
Section 1.05 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will, upon request, inform Holder as to the status
of each such registration, qualification and compliance. At its expense the
Company will:
(a) keep such registration, and any qualification or
compliance under state securities laws which the Company determines (or is
required) to obtain, effective for a period of one hundred eighty (180) days or
until the distribution of the Registrable Securities described in the
registration statement relating thereto has been completed, whichever first
occurs; and
(b) furnish such number of prospectuses and other
documents incident thereto as Holder or any underwriter from time to time may
reasonably request.
Section 1.06 Indemnification.
(a) The Company will indemnify Holder and each owner of
Registrable Securities, and their respective legal counsel and
4
<PAGE> 16
accountants, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration, qualification or
compliance contemplated by this Agreement (whether or not Registrable
Securities are included in the registration), or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse Holder and each owner of Registrable Securities, and their
respective legal counsel and accountants, and each such underwriter and each
person who controls any such underwriter, for any legal and other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement (or
omission) made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by or on behalf of
Holder or another owner of Registrable Securities and stated to be specifically
for use therein.
(b) Holder will, if Registrable Securities are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, and each of its directors, officers,
legal counsel and accountants, each underwriter, if any, of the Company's
securities covered by such a registration statement, and each person who
controls the Company or such underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or 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 will reimburse the Company and such
directors, officers, legal counsel, accountants, persons, underwriters or
control persons for any legal and other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to
5
<PAGE> 17
the extent, but only to the extent, that such untrue statement (or omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by or on behalf of Holder and
stated to be specifically for use therein. Notwithstanding any of the
foregoing to the contrary, Holder's maximum indemnity obligation, inclusive of
reimbursement of costs, fees, and expenses, shall be the total net proceeds
received by Holder and such other owners of Registrable Securities to which
Holder's demand or request for registration relates from the sale of such
Registrable Securities pursuant to the registration demanded or requested.
(c) A party entitled to indemnification under this
Section 1.06 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
each such claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to provide notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Agreement except to the
extent such failure is prejudicial to the Indemnifying Party in defending such
claim or litigation. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment, or enter into any settlement which does not
include as an unconditional term thereof the execution and delivery by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
(d) If the indemnification provided for in this Section
1.06 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense, taking into account relevant
equitable considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
6
<PAGE> 18
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall be controlling.
Section 1.07 Lockup Agreement. In consideration for the Company
agreeing to its obligations under this Article I, Holder agrees in connection
with any firmly underwritten public offering of the Company's common stock,
upon request of the Company or the underwriters managing such offering, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any of Holder's Registrable Securities (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to
exceed 30 days) from the effective date of such registration as the Company or
the underwriters may specify; provided, however, that Holder shall have no
obligation to enter into the agreement described herein unless all executive
officers and directors of the Company and all other holders of more than 5% of
the Company's outstanding common stock enter into similar agreements.
Section 1.08 Information by Holder. Holder shall furnish or cause to
be furnished to the Company such information regarding Holder and other owners
of Registrable Securities and the distribution of proceeds by Holder and such
owners as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in Section 1.02 or 1.03 of this Agreement.
Section 1.09 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which at any time
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) so long as any unregistered Registrable Securities
are owned or held, furnish to Holder forthwith upon request a
7
<PAGE> 19
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 and of the Securities Act and Exchange Act, a
copy of the most recent annual or quarterly report of the Company and such
other reports and documents of the Company as Holder may reasonably request in
availing Holder or other owners of Registrable Securities of any rule or
regulation of the Commission allowing the sale of any such securities without
registration.
Section 1.10 Transfer of Registration Rights. The rights to cause the
Company to register the Registrable Securities granted to Holder by the Company
under Sections 1.02 and 1.03 may be assigned by Holder to not more than five
additional transferees or assignees of any of Holder's Registrable Securities,
provided that the Company is given written notice by Holder at the time of, or
within a reasonable time after, said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to
which such registration rights are being assigned, provided further that no
such assignment shall increase the number of registrations that the Company may
be required to effect under this Agreement.
ARTICLE II
MISCELLANEOUS
Section 2.01 Amendment. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by Holder and the Company.
Section 2.02 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Florida without regard to its conflicts of
laws principles.
Section 2.03 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04 Notices. For purposes of this Agreement, notices and
other communications provided for in this Agreement shall be deemed to be
properly given if delivered personally or sent by United States certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Executive: Mark J. Gordon
3715 N.E. 214th Terrace
Aventura, Florida 33180
8
<PAGE> 20
If to Company: Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Attn: President and General Counsel
or to such other address as either party may have furnished to the other party
in writing in accordance with this paragraph. Such notices or other
communications shall be effective only upon receipt. Notices also may be given
by facsimile and in such case shall be deemed to be properly given when sent so
long as the sender uses reasonable efforts to confirm and does confirm the
receiver's receipt of the facsimile transmission.
Section 2.05 Severability. If any provision of this Agreement shall
be judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 2.06 Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
PRECISION RESPONSE CORPORATION
By:
-------------------------------------
David Epstein, President
----------------------------------------
MARK J. GORDON
9
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
Employment Agreement made as of the 15th day of May, 1996, between
PRECISION RESPONSE CORPORATION, a Florida corporation ("Company"), and DAVID
EPSTEIN ("Executive").
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Duties. Company hereby employs Executive as
its President throughout the term of this Agreement and agrees to cause
Executive from time to time to be elected or appointed to such corporate
office. Executive accepts such employment. The duties and responsibilities of
Executive shall include duties and responsibilities consistent with Executive's
corporate office, including those set forth in the bylaws of Company from time
to time, overall responsibility, subject to the direction of the Chief
Executive Officer of Company, for the conduct of all operations and business of
Company, and such other duties and responsibilities which the Board of
Directors of Company or Chief Executive Officer from time to time may
reasonably assign to Executive consistent with the foregoing. Unless otherwise
determined by agreement of Executive and the Board of Directors of Company,
Executive also shall serve in the same corporate office with Company's
subsidiaries (and Company's successor, in the event of any corporate
reorganization) throughout the term of this Agreement, and shall have the same
duties and responsibilities with respect to such subsidiaries (and such
successor) as he has with respect to Company, but without additional
compensation, and Company agrees to cause Executive from time to time to be
elected or appointed to such corporate office.
2. Term. The term of this Agreement shall begin July 1, 1996 and
shall continue thereafter without interruption through June 30, 2001 (the
"Initial Term"); provided, however, commencing on July 1, 2001, and on each
July 1 thereafter through and including July 1, 2005, Executive's employment
term under this Agreement shall automatically be extended by an additional
consecutive twelve (12) month period, unless (a) either party gives the other
written notice of his or its decision not to renew at least sixty (60) days
prior to the applicable July 1st date, or (b) Executive's employment is sooner
terminated in accordance with this Agreement.
3. Work Efforts - Other Activities. During the term of this
Agreement, Executive shall devote substantially all of his work efforts to the
business and affairs of Company responsibilities assigned to him pursuant to
this Agreement. However, Executive may devote a reasonable amount of his time
to civic, community or charitable activities and, with the prior approval of
the Board of Directors of Company, to serve as a director of other corporations
and other activities not expressly mentioned in this paragraph. Executive may
invest his personal assets as he deems appropriate so long as such investments
do not interfere with Executive's
<PAGE> 2
performance of the duties and responsibilities assigned to him pursuant to this
Agreement.
4. Place of Employment. Company's executive offices, including
the office of Executive, shall be located in Dade or Broward County, Florida
during the term of this Agreement, and Executive will not be required to
relocate or transfer his office from the immediate vicinity of the Miami-Ft.
Lauderdale, Florida metropolitan area. Company shall furnish Executive with
offices, secretarial and other support services consistent with those currently
provided and such other facilities and services at such locations as may be
reasonably required to permit Executive to conveniently fulfill the duties of
his employment.
5. Base Salary. For all services to be rendered by Executive
pursuant to this Agreement, Company agrees to pay Executive during the term of
this Agreement a base annual salary (the "Base Salary") of not less than the
greater of (a) the base salary established for Executive by Company's
Compensation Committee (the "Committee"), and (b) $425,000. The Base Salary
shall be increased, effective on July 1st of each year during Executive's
employment (the "Adjustment Date") by an amount at least equal to the
percentage increase in the U.S. Department of Labor Consumer Price Index (All
Items) for all Urban Consumers, U.S. City Average, 1982-1984 - 100 (the
"Index") since July 1, 1996, or the previous Adjustment Date, whichever is
later. The adjustment shall be determined no later than three (3) months after
the Adjustment Date for which the adjustment applies. At no time will the Base
Salary, as adjusted, be decreased by a decline of the Index. The Base Salary
shall be paid in periodic installments in accordance with Company's regular
payroll practices.
6. Additional Compensation.
(a) Bonus. Within thirty (30) days after the Committee
had been appointed, Executive and the Committee shall mutually agree upon the
criteria upon which a bonus for Executive for fiscal year 1996 is to be based.
Within sixty (60) days prior to the commencement of each fiscal year thereafter
during the term of this Agreement, Executive and the Committee shall mutually
agree upon the criteria upon which a bonus for Executive for such fiscal year
is to be based. A bonus shall be awarded to Executive for each fiscal year in
accordance with the mutually agreed criteria, unless Executive and the
Committee agree that the bonus shall be awarded on some other basis in which
case a bonus shall be awarded on such other basis as they have mutually agreed.
The Company shall pay such awarded bonus to Executive in cash within thirty
(30) days after it is awarded by the Committee (and no later than ninety (90)
days after the end of the fiscal year for which such bonus is awarded) unless
otherwise agreed to by Executive and Company in advance of the award.
2
<PAGE> 3
(b) Stock Option Plans. On or before December 31 of each
year (beginning December 31, 1996) during the term of this Agreement (or, with
respect to the final year of this Agreement, upon the effective date of
termination of Executive's employment if such effective date is a date other
than December 31) (each, an "Option Grant Date"), Company through the Committee
shall cause to be granted to Executive options to purchase that number of
shares of Company's voting common stock which is at least equal to five percent
(5%) of the aggregate number of shares for which options for Company stock were
granted since the last Option Grant Date (or, with respect to the first Option
Grant Date, since June 1, 1996) to Company's employees and to Company's
non-employee directors under any stock option plans (including incentive stock
option plans) of Company. The terms (including price and exercise dates) of
the options granted to Executive shall be as determined by the Committee but
shall be comparable to the terms upon which options were generally granted to
other employees of Company during the applicable period, subject to any
differences required under applicable tax laws with respect to incentive stock
options granted to Executive. In all events, the options granted to Executive
shall provide that Executive shall have at least ninety (90) days following
termination of Executive's employment under this Agreement for any reason other
than death, and that Executive's personal representative or other legal
representative shall have at least one (1) year following Executive's death, to
exercise any or all of the outstanding options granted to Executive to the
extent they were exercisable on the date of such termination of employment or,
if Executive's employment is terminated other than pursuant to paragraph 7(a),
(b), (c) or (d), to exercise any or all of such outstanding options (which
shall all then be deemed exercisable, notwithstanding any stated vesting
schedules) in full.
(c) Benefit Plans. During the term of this Agreement,
Company shall provide to Executive and his eligible dependents at Company's
expense individual or group medical, hospital, dental, long-term disability
insurance and life insurance coverage, in each case at least as favorable as
those coverages provided to the other senior executive officers of Company or
its subsidiaries. Executive shall also be entitled to participate in such other
benefit plans and programs which Company or its subsidiaries from time to time
may make available to its employees generally or to some or all of its other
senior executive officers.
(d) Vacations and Holidays. During the term of this
Agreement, Executive shall be entitled to paid vacations, holidays and time off
as are consistent with past practice and custom for Company's senior executive
officers.
(e) Other Benefits and Allowances. During the term of
this Agreement, Executive shall receive the benefits or allowances described in
the attached Schedule 6(e).
3
<PAGE> 4
(f) Expenses. During the term of this Agreement,
Executive shall be entitled to prompt reimbursement by Company of all
reasonable ordinary and necessary travel, entertainment and other expenses
incurred by Executive (in accordance with the policies and procedures
established by Company for its senior executive officers) in the performance of
his duties and responsibilities under this Agreement, provided that Executive
shall promptly account for such expenses in accordance with Company policies
and procedures, which may include itemized accountings.
7. Termination of Employment.
(a) Death. Executive's employment under this Agreement
shall terminate upon his death.
(b) Disability. If Executive becomes incapable by reason
of physical injury, disease or mental illness from substantially performing his
duties under this Agreement for a continuous period of six (6) months or for
more than one hundred eighty (180) days in the aggregate during any twelve (12)
month period (a "Disability Period"), then Company may terminate Executive's
employment under this Agreement.
(c) Cause. Company may terminate Executive's employment
under this Agreement for cause; provided however, for purposes of this
Agreement, "cause" shall mean only (i) Executive's confession or conviction of
felonious theft, fraud, embezzlement or any other felony involving dishonesty
or moral turpitude, (ii) dishonest or bad faith conduct on the part of
Executive which is materially and demonstrably contrary to material interests
of Company and which is materially and demonstrably detrimental to Company, or
(iii) Executive's failure to comply with a lawful written directive of the
Board of Directors of Company material to Executive's duties and Executive
shall fail to comply with such written directive within thirty (30) days after
his receipt of a written notice from the Board of Directors of Company setting
forth in reasonable detail the particulars necessary for reasonable compliance.
Termination shall occur thirty (30) days after "cause" is established. In no
event shall the results of Company's operations or any business judgment made
by Executive constitute an independent basis for termination for cause of
Executive's employment under this Agreement.
(d) Voluntary Resignation. Executive may voluntarily
resign from Company's employ at any time upon at least thirty (30) days' prior
written notice of the effective date of such resignation.
(e) Constructive Termination. In the event of Company's
Constructive Termination (as defined below) of Executive's employment,
Executive may terminate his employment, provided that he has given written
notice of protest to the Board Of Directors
4
<PAGE> 5
setting forth the manner in which he has been constructively terminated (and
such Constructive Termination is not timely corrected, as provided in the
definition of Constructive Termination below). In the event of a Constructive
Termination, Executive shall be excused from further performance of all duties
and obligations hereunder, and shall have the rights specified in Section 8(c).
"Constructive Termination" for purposes hereof shall mean that (i) Company has
delegated to another or others one or more of Executive's duties described in
paragraph 1 (and shall include removal of Executive from the office of
President, unless he is made Chief Executive Officer or Chairman of the Board,
or both, in lieu thereof, even if Executive's day-to-day duties are to remain
substantially the same), other than for cause as defined in Section 7(c), and
Company fails to confirm to Executive in writing, and implement, the
reinstatement of such duty (or duties) and/or office(s) to Executive within
(30) days after receipt by the Board of Directors of Executive's written notice
of protest, or (ii) Company has, without Executive's prior written consent,
moved its executive offices from the Miami-Ft. Lauderdale, Florida metropolitan
area.
8. Payments Upon Termination of Employment.
(a) Death, Disability, Voluntary Termination. In the
event Executive's employment shall terminate voluntarily or by reason of death
or disability prior to the end of the term of this Agreement, Executive, his
legal representative or beneficiary, as the case may be, shall be entitled to
receive within thirty (30) days after the date of termination a cash amount
equal to eighteen (18) months of Executive's Base Salary, bonuses and other
compensation and benefits provided for in this Agreement. Any compensation
otherwise payable under this subparagraph, however, shall be reduced by an
amount equal to the net payments Executive is entitled to receive for the same
period by reason of any Company-paid disability benefit plans or social
security disability income. For purposes of computing the aggregate bonuses
payable under this subparagraph 8(a), such aggregate bonuses shall be equal to
the product of (i) highest annual bonus earned by Executive hereunder or
$350,000, whichever is higher, and (ii) one and one-half (1.5).
(b) Termination for Cause. In the event Executive's
employment shall be terminated "for cause" as described in paragraph 7(c) prior
to the end of the term of this Agreement, Executive shall be entitled to
receive within thirty (30) days after the date of termination a cash amount
equal to his Base Salary, bonuses and other compensation and benefits up to the
date of termination. Any bonuses for a partial year of employment shall be
prorated through date of termination (based upon the prior year's annual
bonus).
5
<PAGE> 6
(c) Involuntary Termination. If Executive's employment
shall be terminated for any reason not set forth in subparagraphs 7(a) - (d)
above, or if a Constructive Termination occurs, prior to the end of the term of
this Agreement, then (without limiting any other rights or claims which
Executive may have against Company or others) Executive shall be entitled to
receive within thirty (30) days after the date of termination a cash amount
equal to three (3) full years of Executive's Base Salary, bonuses and other
compensation and benefits provided for in this Agreement, or, if more, the Base
Salary, bonuses and other compensation and benefits provided for in this
Agreement from the date of such termination through the end of the Initial
Term. For purposes of computing the aggregate bonuses payable under this
subparagraph 8(c), such aggregate bonuses shall be equal to the product of (i)
the highest annual bonus earned by Executive hereunder or $350,000, whichever
is higher, and (ii) three (3), or, if higher, the number of whole and/or
partial employment years, inclusive of the then current employment year,
remaining through the end of the Initial Term.
9. Notice of Termination. Any termination of Executive's
employment by Company shall be communicated in a written Notice of Termination
to Executive. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice from the Board of Directors, signed by each Director who has
voted in favor of giving the Notice of Termination, which shall indicate the
specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
10. Registration Rights. If Executive's employment with Company
shall terminate for any reason (whether under this Agreement or otherwise),
Executive may thereafter require Company to register any or all of the
unregistered shares of common stock that Executive (or his assigns or
family-related affiliates) may then own as of the date of such termination of
employment in accordance with the provisions of the "Registration Rights
Agreement" attached as Schedule 10.
11. Successor and Assigns. This Agreement and all rights under
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the parties hereto and their respective personal or legal
representatives, executors, administrators, heirs, distributees, devisees,
legatees, successors and assigns. This Agreement is personal in nature, and,
except as set forth in paragraph 13, neither of the parties to this Agreement
shall, without the prior written consent of the other, assign or transfer this
Agreement or any right or obligation under this Agreement to any person or
entity.
12. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement shall be deemed
6
<PAGE> 7
to be properly given if delivered personally or sent by United States certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to Executive: David Epstein
2957 Westbrook
Ft. Lauderdale, Florida 33332
If to Company: Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Attn: CEO and General Counsel
or to such other address as either party may have furnished to the other party
in writing in accordance with this paragraph. Such notices or other
communications shall be effective only upon receipt. Notices also may be given
by facsimile and in such case shall be deemed to be properly given when sent so
long as the sender uses reasonable efforts to confirm and does confirm the
receiver's receipt of the facsimile transmission.
13. Merger, Etc. of Company. If during the term of this Agreement
all or substantially all of the assets and business of Company are disposed of
by merger, consolidation, sale of assets, or otherwise, then Company may elect
either:
(a) to assign this Agreement and all of Company's rights
and obligations under this Agreement to the acquiring or surviving entity,
provided that such acquiring or surviving entity shall assume in writing, in a
manner reasonably satisfactory to Executive, all of the obligations of Company
under this Agreement; and provided further that Company shall remain liable for
the performance of its obligations under this Agreement in the event of an
unjustified failure of the acquiring entity to perform its obligations under
this Agreement; or
(b) in addition to its other rights of termination set
forth in paragraph 7, to terminate this Agreement upon at least thirty (30)
days prior written notice to Executive and the payment to Executive of all of
the compensation and benefits provided for in subparagraph 8(c).
14. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and is signed by Executive and an officer of Company
(other than Executive) so authorized by the Board of Directors of Company. No
waiver by either party to this Agreement at any time of any breach by the other
party of, or compliance by the other party with, any condition or provision of
this Agreement to be performed by the other party shall be deemed to be a
waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or
7
<PAGE> 8
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement.
15. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, and such other provisions shall
remain of full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
17. Headings. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.
18. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws, and not the
conflicts of law principles, of the State of Florida.
19. Dispute Resolution. Any claim by Executive or Company
arising from or in connection with this Agreement, whether based on contract,
tort, common law, equity, statute, regulation, order, or otherwise (a
"Dispute"), shall be resolved as follows:
(a) Such Dispute shall be submitted to mandatory and
binding arbitration at the election of either Executive or Company (the
"Disputing Party"). Except as otherwise provided in this paragraph 19, the
arbitration shall be pursuant to the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA").
(b) To initiate the arbitration, the Disputing Party
shall notify the other party in writing within thirty (30) days after the
occurrence of the event or events which give rise to the Dispute (the
"Arbitration Demand"), which shall (i) describe in reasonable detail the nature
of the Dispute, (ii) state the amount of any claim, (iii) specify the requested
relief, and (iv) name an arbitrator who (A) has been licensed to practice law
in the U.S. for at least ten (10) years, (B) has no relationship to either
Executive or Company, and (C) is experienced in representing clients in
connection with employment-related disputes (the "Basic Qualifications").
Within fifteen (15) days after the other party's receipt of the Arbitration
Demand, such other party shall serve on the Disputing Party a written statement
(i) answering the claims set forth in the Arbitration Demand and including any
affirmative defenses of such party, (ii) asserting any counterclaim, which
shall (A) describe in reasonable detail the nature of the Dispute relating to
the counterclaim, (B) state the amount of the
8
<PAGE> 9
counterclaim, and (C) specify the requested relief, and (iii) naming a second
arbitrator satisfying the Basic Qualifications. Promptly, but in any event
within five (5) days thereafter, the two (2) arbitrators so named shall select
a third neutral arbitrator from a list provided by the AAA of potential
arbitrators who satisfy the Basic Qualifications and who have no past or
present relationship with either of the parties' counsel, except as otherwise
disclosed in writing to and approved by the parties. The arbitration will be
heard by a panel of the three (3) arbitrators so chosen (the "Arbitration
Panel"), with the third arbitrator so chosen serving as the chairperson of the
Arbitration Panel. Decisions of a majority of the members of the Arbitration
Panel shall be determinative.
(c) The arbitration hearing shall be held in Miami,
Florida. The Arbitration Panel is specifically authorized to render partial or
full summary judgment as provided for in the Federal Rules of Civil Procedure.
The Arbitration Panel will have no power or authority, under the Commercial
Arbitration Rules of the AAA or otherwise, to relieve the parties from their
agreement hereunder to arbitrate or otherwise to amend or disregard any
provision of this Agreement, including, without limitation, the provisions of
this paragraph 19.
(d) If an arbitrator refuses or is unable to proceed with
arbitration proceedings as called for by this paragraph 19, such arbitrator
shall be replaced by the party who selected such arbitrator or, if such
arbitrator was selected by the two (2) party-appointed arbitrators, by such two
(2) party-appointed arbitrators' selecting a new third arbitrator in accordance
with subparagraph 19(b), in either case within five (5) days after such
declining or withdrawing arbitrator has given notice of refusal or inability to
proceed. Each such replacement arbitrator shall satisfy the Basic
Qualifications. If an arbitrator is replaced pursuant to this subparagraph
19(d) after the arbitration hearing has commenced, then a rehearing shall take
place in accordance with the Commercial Arbitration Rules of the AAA.
(e) Within five (5) days after the closing of the
arbitration hearing, the Arbitration Panel shall prepare and distribute to the
parties a writing setting forth the Arbitration Panel's finding of facts and
conclusions of law relating to the Dispute, including the reason for the giving
or denial of any award. The findings and conclusions and the award, if any,
shall be deemed to be confidential information.
(f) The Arbitration Panel is instructed to schedule
promptly all discovery and other procedural steps and otherwise to assume case
management initiative and control to effect an efficient and expeditious
resolution of the Dispute. The Arbitration Panel is authorized to issue
monetary sanctions against
9
<PAGE> 10
either party if, upon a showing of good cause, such party is unreasonably
delaying the proceeding.
(g) Any award rendered by the Arbitration Panel will be
final, conclusive and binding upon the parties, and any judgment on such award
may be entered and enforced in any court of competent jurisdiction.
(h) Each party will bear one-half of all fees, costs and
expenses of the arbitrators, and, notwithstanding any law to the contrary, each
party will bear all of the fees, costs and expenses of its own attorneys,
experts and witnesses. However, in connection with any judicial proceeding to
compel arbitration pursuant to this Agreement or to enforce any award rendered
by the Arbitration Panel, the prevailing party in such a proceeding will be
entitled to recover reasonable attorneys' fees and expenses incurred in
connection with such proceedings, including appeals and fees and expenses
incurred in preparation for such proceedings, in addition to any other relief
to which such party may be entitled.
(i) Nothing contained in the preceding provisions of this
paragraph 19 shall be construed to prevent either party from seeking from a
court a temporary restraining order or other injunctive relief pending final
resolution of a Dispute pursuant to this paragraph 19.
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
as of the date first above written.
PRECISION RESPONSE CORPORATION, a
Florida corporation
By: /s/ Mark J. Gordon
-------------------------
Mark J. Gordon, CEO
/s/ David Epstein
---------------------------
DAVID EPSTEIN
10
<PAGE> 11
SCHEDULE 6(E)
CAR
Company shall provide Executive with a new luxury automobile not less
often than every three (3) years at least equal in quality to Executive's
current Company automobile.
COUNTRY CLUB MEMBERSHIPS
Company shall pay all fees and expenses associated with membership in
two (2) country clubs, including golfing privileges.
<PAGE> 12
SCHEDULE 10
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is entered into as of the 15th day
of May, 1996, by and between PRECISION RESPONSE CORPORATION, a Florida
corporation (the "Company"), and DAVID EPSTEIN ("Holder").
WHEREAS, the Company and Holder have entered into an Employment
Agreement as of the date hereof (the "Employment Agreement") and, as partial
consideration therefor, the Company has agreed to provide Holder certain demand
and piggyback registration rights with respect to Holder's stock in Company,
which may be exercised by Holder following certain events.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
(c) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Shares" shall mean any and all of the shares of
common stock of the Company currently held or hereafter acquired from time to
time (including, but not limited to, through exercise of stock options) by
Holder or any assigns of Holder which are trusts or limited partnerships or
other entities the beneficial owners of which are principally Holder, Holder's
family members, and/or Holder's lineal descendants, including shares acquired
by any such trusts, partnerships or other entities from Holder prior to the
date hereof.
(e) "Registrable Securities" shall mean any of the
following shares which have not been sold to the public or which have not lost
their registration rights as provided herein: (i) the
<PAGE> 13
Shares and (ii) any shares of common stock of the Company, and any securities
of the Company or any other corporation, issued as a dividend or other
distribution with respect to or in replacement of or exchange for the Shares.
(f) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
(g) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Article I hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration, but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company, but excluding the
Selling Expenses.
(h) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities and all fees and expenses of legal counsel for Holder.
(i) "Triggering Event" shall mean the termination of
Holder's employment with Company for any reason (under the Employment Agreement
or otherwise).
(j) "Holder" shall mean Mark J. Gordon or, in the event
of his legal incapacity, his legal guardian, or, in the event of his death, the
personal representative(s) of his estate or the beneficiary(ies) of his estate
as designated by such personal representative(s).
Section 1.02 Demand Registration Rights.
(a) Request for Registration. If within ninety (90) days
after the date of the Triggering Event (or within one (1) year after the date
of the Triggering Event if the Triggering Event is Holder's death) the Company
receives a written request from Holder that the Company effect a registration
with respect to all or a part of the Registrable Securities (provided that if
less than 25% of the Registrable Securities are to be registered such
securities shall have an aggregate proposed offering price to the public of at
least $500,000), the Company will as soon as practicable thereafter use its
diligent best efforts to effect all such registrations, qualifications,
listings or compliances (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliances
with
2
<PAGE> 14
applicable requirements or regulations and listing of the Registrable
Securities on a stock exchange or the NASDAQ Stock Market) as may be so
requested and as would permit or facilitate the sale and distribution of all of
such Registrable Securities as are specified in such request. The Company
shall file a registration statement as soon as practicable after receipt of the
request of Holder but in any event within sixty (60) days of receipt following
such request; provided, however, that if the Company shall furnish to Holder a
certificate signed by the then Chairman of the Board of Directors of the
Company or the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company it would be seriously detrimental to
the Company and its shareholders for such registration statement to be filed on
or before the date filing would be required, and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period ending not more than one hundred twenty
(120) days following receipt of the request for registration.
(b) Underwriting. If the Holder intends that the
Registrable Securities covered by its request be distributed by means of an
underwriting, it shall so advise the Company as a part of its request made
pursuant to this Section 1.02. In such event, the Company shall (together with
Holder) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Holder. If the
underwriter has not limited the number of Registrable Securities to be
underwritten, the Company may include securities for its own account in such
registration if Holder so agrees.
Section 1.03 Piggyback Registration Rights.
(a) Notice of Proposed Registration. If at any time or
from time to time prior to, on or after a Triggering Event the Company shall
determine to register any of its common stock, other than (i) a registration
relating solely to employee benefit plans on Form S-8 or similar forms which
may be promulgated in the future, or (ii) a registration on Form S-4 or similar
forms which may be promulgated in the future relating solely to a Commission
Rule 145 transaction, the Company will:
(i) promptly give Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws and other state
compliances), and in any underwriting involved therein, all
the Registrable Securities specified in a written request or
requests made within thirty (30) days after receipt of such
written notice from the Company by Holder, except as set forth
in Section 1.03(b).
3
<PAGE> 15
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise Holder as a part of the written
notice given pursuant to Section 1.03(a)(i). In such event, the right of
Holder to registration of the Registrable Securities pursuant to this Section
1.03 shall be conditioned upon Holder's participation in such underwriting and
the inclusion of the specified Registrable Securities in the underwriting.
Holder shall in such case (together with the Company) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 1.03, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the amount of Registrable Securities to be included in
the registration and underwriting; provided, however, without the prior written
consent of Holder, the number of Registrable Securities to be included in such
registration and underwriting shall not be reduced to less than 50% of the
Registrable Securities sought by Holder to be included therein. If Holder
disapproves of the terms of any such underwriting, it may elect to withdraw the
Registrable Securities therefrom by written notice to the Company and the
underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded from such registration.
Section 1.04 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Sections 1.02 or 1.03 shall be borne by the Company. All Selling
Expenses shall be borne by Holder.
Section 1.05 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will, upon request, inform Holder as to the status
of each such registration, qualification and compliance. At its expense the
Company will:
(a) keep such registration, and any qualification or
compliance under state securities laws which the Company determines (or is
required) to obtain, effective for a period of one hundred eighty (180) days or
until the distribution of the Registrable Securities described in the
registration statement relating thereto has been completed, whichever first
occurs; and
(b) furnish such number of prospectuses and other
documents incident thereto as Holder or any underwriter from time to time may
reasonably request.
Section 1.06 Indemnification.
(a) The Company will indemnify Holder and each owner of
Registrable Securities, and their respective legal counsel and
4
<PAGE> 16
accountants, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration, qualification or
compliance contemplated by this Agreement (whether or not Registrable
Securities are included in the registration), or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse Holder and each owner of Registrable Securities, and their
respective legal counsel and accountants, and each such underwriter and each
person who controls any such underwriter, for any legal and other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement (or
omission) made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by or on behalf of
Holder or another owner of Registrable Securities and stated to be specifically
for use therein.
(b) Holder will, if Registrable Securities are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, and each of its directors, officers,
legal counsel and accountants, each underwriter, if any, of the Company's
securities covered by such a registration statement, and each person who
controls the Company or such underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or 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 will reimburse the Company and such
directors, officers, legal counsel, accountants, persons, underwriters or
control persons for any legal and other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to
5
<PAGE> 17
the extent, but only to the extent, that such untrue statement (or omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by or on behalf of Holder and
stated to be specifically for use therein. Notwithstanding any of the
foregoing to the contrary, Holder's maximum indemnity obligation, inclusive of
reimbursement of costs, fees, and expenses, shall be the total net proceeds
received by Holder and such other owners of Registrable Securities to which
Holder's demand or request for registration relates from the sale of such
Registrable Securities pursuant to the registration demanded or requested.
(c) A party entitled to indemnification under this
Section 1.06 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
each such claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to provide notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Agreement except to the
extent such failure is prejudicial to the Indemnifying Party in defending such
claim or litigation. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment, or enter into any settlement which does not
include as an unconditional term thereof the execution and delivery by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
(d) If the indemnification provided for in this Section
1.06 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense, taking into account relevant
equitable considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
6
<PAGE> 18
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall be controlling.
Section 1.07 Lockup Agreement. In consideration for the Company
agreeing to its obligations under this Article I, Holder agrees in connection
with any firmly underwritten public offering of the Company's common stock,
upon request of the Company or the underwriters managing such offering, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any of Holder's Registrable Securities (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to
exceed 30 days) from the effective date of such registration as the Company or
the underwriters may specify; provided, however, that Holder shall have no
obligation to enter into the agreement described herein unless all executive
officers and directors of the Company and all other holders of more than 5% of
the Company's outstanding common stock enter into similar agreements.
Section 1.08 Information by Holder. Holder shall furnish or cause to
be furnished to the Company such information regarding Holder and other owners
of Registrable Securities and the distribution of proceeds by Holder and such
owners as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in Section 1.02 or 1.03 of this Agreement.
Section 1.09 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which at any time
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) so long as any unregistered Registrable Securities
are owned or held, furnish to Holder forthwith upon request a
7
<PAGE> 19
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 and of the Securities Act and Exchange Act, a
copy of the most recent annual or quarterly report of the Company and such
other reports and documents of the Company as Holder may reasonably request in
availing Holder or other owners of Registrable Securities of any rule or
regulation of the Commission allowing the sale of any such securities without
registration.
Section 1.10 Transfer of Registration Rights. The rights to cause the
Company to register the Registrable Securities granted to Holder by the Company
under Sections 1.02 and 1.03 may be assigned by Holder to not more than five
additional transferees or assignees of any of Holder's Registrable Securities,
provided that the Company is given written notice by Holder at the time of, or
within a reasonable time after, said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to
which such registration rights are being assigned, provided further that no
such assignment shall increase the number of registrations that the Company may
be required to effect under this Agreement.
ARTICLE II
MISCELLANEOUS
Section 2.01 Amendment. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by Holder and the Company.
Section 2.02 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Florida without regard to its conflicts of
laws principles.
Section 2.03 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04 Notices. For purposes of this Agreement, notices and
other communications provided for in this Agreement shall be deemed to be
properly given if delivered personally or sent by United States certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Executive: Mark J. Gordon
3715 N.E. 214th Terrace
Aventura, Florida 33180
8
<PAGE> 20
If to Company: Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Attn: President and General Counsel
or to such other address as either party may have furnished to the other party
in writing in accordance with this paragraph. Such notices or other
communications shall be effective only upon receipt. Notices also may be given
by facsimile and in such case shall be deemed to be properly given when sent so
long as the sender uses reasonable efforts to confirm and does confirm the
receiver's receipt of the facsimile transmission.
Section 2.05 Severability. If any provision of this Agreement shall
be judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 2.06 Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
PRECISION RESPONSE CORPORATION
By:
------------------------------------
Mark J. Gordon, CEO
---------------------------------------
DAVID EPSTEIN
9
<PAGE> 1
EXHIBIT 10.8
FIRST AMENDMENT TO
STOCK PURCHASE AND SHAREHOLDER AGREEMENT
FIRST AMENDMENT, dated as of February 16, 1996, by and between MARK J.
GORDON ("Seller") and RICHARD D. MONDRE ("Purchaser").
Preliminary Statement
Seller and Purchaser are parties to that certain Stock Purchase and
Shareholder Agreement dated as of February 16, 1996 (the "Original Agreement").
The parties have determined that with regard to distributions in connection
with the termination of the Corporation's status as an "S" corporation for
income tax purposes, the parties would receive such distributions in respect of
the Corporation's Accumulated Adjustments Account (as defined and described in
the Internal Revenue Code of 1986, as amended) in amounts disproportionate to
the intent of the transaction set forth in the Original Agreement.
Accordingly, the parties have agreed to correct such error by amending the
Purchase Price as set forth below. Capitalized terms used herein, which are
not defined herein, shall have the respective meanings ascribed to them in the
Original Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Preliminary Statement. The Preliminary Statement is true and
correct in all material respects, and constitutes a part of this Agreement.
2. Adjustment to Purchase Price. The Purchase Price is hereby
increased by an amount equal to the amount that would have been received by
Seller attributable to the Purchased Stock if the Corporation's Accumulated
Adjustments Account was distributed in its entirety on February 16, 1996
(immediately prior to the purchase thereof by Purchaser), after giving effect
to all adjustments to the Accumulated Adjustments Account properly made through
such date. Such additional purchase price shall be payable in cash if, as and
when the Accumulated Adjustments Account is distributed. Accordingly, no
modifications to the Purchase Price Note or Stock Pledge Agreement shall be
made or deemed made, except that the obligation of Purchaser to pay such
additional purchase price shall be, and hereby is, secured by the lien of the
Stock Pledge Agreement.
3. No Other Amendments. Except as set forth herein, the Original
Agreement has not been modified and remains of full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first above written.
/s/ Mark J. Gordon
------------------------------
MARK J. GORDON
/s/ Richard D. Mondre
------------------------------
RICHARD D. MONDRE
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT TO
STOCK PURCHASE AND SHAREHOLDER AGREEMENT
FIRST AMENDMENT, dated as of February 16, 1996, by and between DAVID
EPSTEIN ("Seller") and RICHARD D. MONDRE ("Purchaser").
Preliminary Statement
Seller and Purchaser are parties to that certain Stock Purchase and
Shareholder Agreement dated as of February 16, 1996 (the "Original Agreement").
The parties have determined that with regard to distributions in connection
with the termination of the Corporation's status as an "S" corporation for
income tax purposes, the parties would receive such distributions in respect of
the Corporation's Accumulated Adjustments Account (as defined and described in
the Internal Revenue Code of 1986, as amended) in amounts disproportionate to
the intent of the transaction set forth in the Original Agreement.
Accordingly, the parties have agreed to correct such error by amending the
Purchase Price as set forth below. Capitalized terms used herein, which are
not defined herein, shall have the respective meanings ascribed to them in the
Original Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Preliminary Statement. The Preliminary Statement is true and
correct in all material respects, and constitutes a part of this Agreement.
2. Adjustment to Purchase Price. The Purchase Price is hereby
increased by an amount equal to the amount that would have been received by
Seller attributable to the Purchased Stock if the Corporation's Accumulated
Adjustments Account was distributed in its entirety on February 16, 1996
(immediately prior to the purchase thereof by Purchaser), after giving effect
to all adjustments to the Accumulated Adjustments Account properly made through
such date. Such additional purchase price shall be payable in cash if, as and
when the Accumulated Adjustments Account is distributed. Accordingly, no
modifications to the Purchase Price Note or Stock Pledge Agreement shall be
made or deemed made, except that the obligation of Purchaser to pay such
additional purchase price shall be, and hereby is, secured by the lien of the
Stock Pledge Agreement.
3. No Other Amendments. Except as set forth herein, the Original
Agreement has not been modified and remains of full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first above written.
/s/ David Epstein
-----------------------------
DAVID EPSTEIN
/s/ Richard D. Mondre
-----------------------------
RICHARD D. MONDRE
<PAGE> 1
EXHIBIT 10.11
FIRST AMENDMENT TO
STOCK PURCHASE AND SHAREHOLDER AGREEMENT
FIRST AMENDMENT, dated as of February 16, 1996, by and between MARK J.
GORDON ("Seller") and JAMES MURRAY ("Purchaser").
Preliminary Statement
Seller and Purchaser are parties to that certain Stock Purchase and
Shareholder Agreement dated as of February 16, 1996 (the "Original Agreement").
The parties have determined that with regard to distributions in connection
with the termination of the Corporation's status as an "S" corporation for
income tax purposes, the parties would receive such distributions in respect of
the Corporation's Accumulated Adjustments Account (as defined and described in
the Internal Revenue Code of 1986, as amended) in amounts disproportionate to
the intent of the transaction set forth in the Original Agreement.
Accordingly, the parties have agreed to correct such error by amending the
Purchase Price as set forth below. Capitalized terms used herein, which are
not defined herein, shall have the respective meanings ascribed to them in the
Original Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Preliminary Statement. The Preliminary Statement is true and
correct in all material respects, and constitutes a part of this Agreement.
2. Adjustment to Purchase Price. The Purchase Price is hereby
increased by an amount equal to the amount that would have been received by
Seller attributable to the Purchased Stock if the Corporation's Accumulated
Adjustments Account was distributed in its entirety on February 16, 1996
(immediately prior to the purchase thereof by Purchaser), after giving effect
to all adjustments to the Accumulated Adjustments Account properly made through
such date. Such additional purchase price shall be payable in cash if, as and
when the Accumulated Adjustments Account is distributed. Accordingly, no
modifications to the Purchase Price Note or Stock Pledge Agreement shall be
made or deemed made, except that the obligation of Purchaser to pay such
additional purchase price shall be, and hereby is, secured by the lien of the
Stock Pledge Agreement.
3. No Other Amendments. Except as set forth herein, the Original
Agreement has not been modified and remains of full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first above written.
/s/ Mark J. Gordon
------------------------------
MARK J. GORDON
/s/ James Murray
------------------------------
JAMES MURRAY
<PAGE> 1
EXHIBIT 10.12
FIRST AMENDMENT TO
STOCK PURCHASE AND SHAREHOLDER AGREEMENT
FIRST AMENDMENT, dated as of February 16, 1996, by and between DAVID
EPSTEIN ("Seller") and JAMES MURRAY ("Purchaser").
Preliminary Statement
Seller and Purchaser are parties to that certain Stock Purchase and
Shareholder Agreement dated as of February 16, 1996 (the "Original Agreement").
The parties have determined that with regard to distributions in connection
with the termination of the Corporation's status as an "S" corporation for
income tax purposes, the parties would receive such distributions in respect of
the Corporation's Accumulated Adjustments Account (as defined and described in
the Internal Revenue Code of 1986, as amended) in amounts disproportionate to
the intent of the transaction set forth in the Original Agreement.
Accordingly, the parties have agreed to correct such error by amending the
Purchase Price as set forth below. Capitalized terms used herein, which are
not defined herein, shall have the respective meanings ascribed to them in the
Original Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Preliminary Statement. The Preliminary Statement is true and
correct in all material respects, and constitutes a part of this Agreement.
2. Adjustment to Purchase Price. The Purchase Price is hereby
increased by an amount equal to the amount that would have been received by
Seller attributable to the Purchased Stock if the Corporation's Accumulated
Adjustments Account was distributed in its entirety on February 16, 1996
(immediately prior to the purchase thereof by Purchaser), after giving effect
to all adjustments to the Accumulated Adjustments Account properly made through
such date. Such additional purchase price shall be payable in cash if, as and
when the Accumulated Adjustments Account is distributed. Accordingly, no
modifications to the Purchase Price Note or Stock Pledge Agreement shall be
made or deemed made, except that the obligation of Purchaser to pay such
additional purchase price shall be, and hereby is, secured by the lien of the
Stock Pledge Agreement.
3. No Other Amendments. Except as set forth herein, the Original
Agreement has not been modified and remains of full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first above written.
/s/ David Epstein
------------------------------
DAVID EPSTEIN
/s/ James Murray
------------------------------
JAMES MURRAY
<PAGE> 1
EXHIBIT 10.14
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of the 10th day of
May, 1996, by and between MARK J. GORDON ("Gordon") and DAVID L. EPSTEIN
("Epstein") (Gordon and Epstein are sometimes individually referred to as a
"Stockholder" and collectively referred to as the "Stockholders").
Preliminary Statement
Each of the Stockholders owns a substantial number of shares of the
common stock, of the par value of $1.00 per share (the "Common Stock"), of
Precision Response Corporation, a Florida corporation (the "Corporation") (the
shares of issued and outstanding Common Stock owned by the Stockholders from
time to time, other than Unrestricted Shares, as defined below, are referred to
as the "Shares"). The Stockholders desire, pursuant to Sections 607.0731 and
607.0732, Florida Statutes, and the law of contracts generally, to enter into
certain agreements and to set forth certain rights and obligations between
themselves pertaining to (i) certain restrictions on the transferability of the
Shares, and (ii) rights and obligations to purchase and sell Shares under
certain circumstances.
NOW, THEREFORE, in consideration of the premises aforesaid, all of the
covenants, agreements, terms and conditions hereinafter set forth and other
good and valuable consideration paid by each of the parties to the other, the
receipt and sufficiency of which are conclusively acknowledged, the parties
covenant and agree as follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following capitalized terms
shall have the respective meanings ascribed to them below:
(A) "Closing Date" shall mean the first business day of
the month following the month in which an Election Notice to purchase Shares is
given by a Remaining Stockholder pursuant to Section 4(A), (B) or (C) of this
Agreement, or, with respect to a purchase which matches an Offeror's offer
pursuant to Section 3, the later of (i) the closing date specified in the
Offeror's offer with respect to a purchase by a Remaining Stockholder of Shares
pursuant to Section 3, and (ii) the 75th day (or, if not a business day, the
first business day thereafter) following the delivery of the Transfer Notice
pursuant to Section 3, or, with respect to a purchase of Shares proposed as a
144 Sale pursuant to Section 3, the 15th day (or, if not a business day, the
first business day thereafter) following the date on which the Transfer Notice
is given.
(B) "Disabled" shall mean, with respect to a Stockholder,
the medical certification of such Stockholder as mentally incompetent,
"brain-dead," permanently comatose, etc., or
<PAGE> 2
the appointment by a court of a legal guardian to represent such Stockholder's
interests as the result of mental incompetency or other permanent disability or
incapacity of such Stockholder.
(C) "Election Notice" shall mean, as applicable, a notice
to purchase Shares given by the Remaining Stockholder pursuant to Section 3 or
Section 4(A) or (B) or (C).
(D) "Purchase Price" shall mean, as it relates to a
purchase of Shares pursuant to an Election Notice given by a Remaining
Stockholder pursuant to Section 4 of this Agreement, an amount equal to the
product of (i) the average last sale price of a share of Common Stock on the
NASDAQ Stock Market or other stock market or exchange on which the Common Stock
is trading (or the average of the high bid and low ask prices if the Common
Stock is not then trading on the NASDAQ Stock Market or other market or
exchange) over the five-day trading period ending on the trading day next
preceding the date of death, the Stockholder becoming Disabled or the
Involuntary Transfer, as the case may be, or the first anniversary of such
trading day, whichever is higher, and (ii) the number of Shares to be purchased
pursuant to the Election Notice, and shall mean, with respect to a purchase as
a result of a proposed 144 Sale, such average price over the five-day trading
period ending on the date the Transfer Notice is given (or the immediately
preceding trading day if such date is not a trading day), payable in cash on
the Closing Date.
(E) "Remaining Stockholder" shall mean, as the context
requires, (i) the Stockholder who is not seeking to sell all or a portion of
his Shares, as described in Section 3, (ii) the Stockholder who has not died,
as described in Section 4(A), (iii) the Stockholder who is not Disabled, as
described in Section 4(B), or (iv) the Stockholder whose Shares have not been
involuntarily transferred, as described in Section 4(C).
(F) "Transferee" shall mean any person or entity,
governmental or nongovernmental, who acquires any Shares or any interest in any
Shares from a Stockholder by any means whatsoever, including, without
limitation, as a trustee or legal or personal representative of a Stockholder,
pursuant to a last will and testament or the laws of intestacy, by gift,
through foreclosure or other creditor action, pursuant to bankruptcy or
insolvency proceedings, by a sale or other voluntary disposition, by judicial
decree or order of any kind (including pursuant to separation or divorce
proceedings or settlements), by any other involuntary transfer, or through any
other transfer effected by operation of law.
(G) "Unrestricted Shares" shall mean (i) any shares of
Common Stock owned by either Stockholder on the date hereof as a trustee or
other fiduciary, including as a voting trustee, and any shares transferred by
either Stockholder to family limited partnerships, family trusts or similar
entities in connection with
2
<PAGE> 3
or within a reasonable time following the Corporation's contemplated initial
public offering of its Common Stock, and (ii) any shares of Common Stock
hereafter acquired by either Stockholder in an open-market transaction
(including any shares of Common Stock so acquired by any Transferee under
Section 2(B)(i) or (iii) or by any other Transferee who may hold Shares subject
to this Agreement).
2. RESTRICTIONS ON TRANSFER OR DISPOSITION OF STOCK.
(A) Rights of Transferees In General. Each Transferee
shall, unless this Agreement expressly provides otherwise, hold any Shares or
interest in the Shares subject to all of the provisions of this Agreement, and
shall be bound by all provisions of this Agreement (including the obligations
herein to sell such Shares to the Remaining Stockholder), and shall make no
further transfers except as expressly permitted under this Agreement.
(B) Restrictions on Disposition of Shares or Interests
Therein. No Stockholder may transfer, sell, give, donate, assign, pledge
(other than the existing pledge by Epstein in favor of Gordon), hypothecate,
alienate or otherwise dispose of any of his Shares or any interest in his
Shares except:
(i) Subject to the provisions of Section
4(A) or (B) hereof, by way of bequest or inheritance upon death or transfer to
a legal guardian or representative upon disability, in which event the
Transferee(s) of the Shares shall be subject to the obligation to sell such
Shares so acquired to the Remaining Stockholder if required under Section 4(A)
or (B) (provided that to the extent the Remaining Stockholder does not exercise
his right to purchase such Shares, such Shares shall, in the hands of such
Transferee(s), then be unrestricted by this Agreement);
(ii) By way of bona fide sale or 144 Sale
(as defined below) made in accordance with Section 3 below;
(iii) By way of inter vivos gift, in which
event the Transferee(s) of the Shares shall hold such Shares subject to the
provisions of this Section 2 and Section 3, and subject to the provisions of
Section 4 (with respect to which the death or disability of the transferor
shall remain the event which triggers the Remaining Stockholder's purchase
option); or
(iv) Pursuant to a registration under any
registration rights agreement(s) now or hereafter in effect between a
Stockholder and the Corporation, or pursuant to any other registered offering
in which both Stockholders are registering Shares for sale to the public (in
which event Transferees may purchase and own such registered Shares
unrestricted by this Agreement).
3
<PAGE> 4
Unless this Agreement is complied with fully, any
purported sale, transfer or other transaction shall be ineffective, null and
void and of no force or effect, ab initio. So long as this Agreement shall
remain in force, there shall be inscribed conspicuously upon each certificate
representing any Shares the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CERTAIN STOCKHOLDERS AGREEMENT AND ALL AMENDMENTS THERETO,
COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION, AND ANY SALE, BEQUEST, PLEDGE ENCUMBRANCE,
MORTGAGE, TRANSFER, GIFT, ASSIGNMENT, DISTRIBUTION OR OTHER
DISPOSITION OF THIS CERTIFICATE IN VIOLATION OF SAID AGREEMENT
SHALL BE INVALID AND NULL AND VOID AND OF NO FORCE OR EFFECT.
3. BONA FIDE SALE TO AN UNRELATED THIRD PARTY.
(A) Sale of Shares. A Stockholder may sell all or any
portion of his Shares, for consideration consisting solely of cash, cash
equivalents, marketable securities and/or notes (the "Permitted
Consideration"), pursuant to a bona fide offer to purchase all or a portion of
his Shares from an unrelated third party, or pursuant to a 144 Sale (as defined
below), subject to the restrictions and rights set forth in this Section 3.
(B) First Refusal. If a Stockholder shall receive a bona
fide offer to purchase all or a portion of his Shares for the Permitted
Consideration from an unrelated third party (the "Offeror") or desires to sell
some of his Shares pursuant to Rule 144 under the Securities Act of 1933, as
amended, through a licensed securities broker (a "144 Sale"), such Stockholder
(the "Transferring Stockholder") shall serve a notice (the "Transfer Notice")
upon the other Stockholder (the "Remaining Stockholder"). The Transfer Notice
shall set forth the exact terms of the offer so received from the Offeror
(including the price per Share being offered and the closing date for the
purchase), together with a copy of such offer, and shall state the desire of
the Transferring Stockholder to sell such Shares to the Offeror on such terms
and conditions, or the Transferring Stockholder's intention to complete a 144
Sale, specifying the number of Shares to be sold, as the case may be. Within
45 days following the giving of the Transfer Notice with respect to an Offeror
transaction, and within three business days following the giving of the
Transfer Notice with respect to a proposed 144 Sale, the Remaining Stockholder
shall give notice to the Transferring Stockholder ("Election Notice") electing
one of the following alternatives: (a) to consent to the sale to the Offeror
or the 144 Sale (in which event the sale may be completed and the Shares sold
shall be transferred free of all restrictions imposed by this Agreement,
provided that the sale must close within 30 days following the closing date
specified in the Offeror's
4
<PAGE> 5
offer, or within ten (10) days of the Transfer Notice if a 144 Sale (as
applicable), failing which the offer or proposed 144 Sale shall then again be
subject to the Remaining Stockholder's election rights under this Section 3),
or (b) to purchase all of the Shares subject to the Offeror's offer or proposed
144 Sale at the purchase price specified in the Transfer Notice and on the
other terms and conditions contained in the Offeror's offer, if an Offeror
transaction, or at the Purchase Price, if a 144 Sale, in which event the
purchase shall be consummated in accordance with the provisions of Section 5
below.
4. BUY-OUT UPON THE DEATH OR PERMANENT DISABILITY OF A
STOCKHOLDER OR UPON AN INVOLUNTARY TRANSFER OF SHARES.
(A) Buy-Out Upon Death. In the event a Stockholder shall
die (a "Deceased Stockholder"), upon the election of the other Stockholder (the
"Remaining Stockholder"), which must be made within one year following the date
of death by giving written notice ("Election Notice") to the personal
representative of the estate of the Deceased Stockholder (or the devisee or
inheritor of the Shares, if title to same has been passed to such person in the
estate proceedings), the estate, personal representative, devisee or heir (as
the case may be) of such Deceased Stockholder shall be obligated to sell, and
the Remaining Stockholder shall be obligated to purchase, for the Purchase
Price, in cash, all or a portion (as designated by the Remaining Stockholder)
of the Shares previously owned by the Deceased Stockholder. The Remaining
Stockholder is under no obligation to make an election to purchase any of such
Shares.
(B) Buy-Out Upon Permanent Disability. If a Stockholder
becomes Disabled (a "Disabled Stockholder"), upon the election of the other
Stockholder (the "Remaining Stockholder"), which must be made within one year
following the date the Disabled Stockholder is deemed Disabled by giving
written notice (the "Election Notice") to the Disabled Stockholder or his legal
representative, such Disabled Stockholder or his legal representative shall
have the obligation to sell, and the Remaining Stockholder shall have the
obligation to purchase, for the Purchase Price, in cash, all or a portion (as
designated by the Remaining Stockholder) of the Disabled Stockholder's Shares.
The Remaining Stockholder is under no obligation to make an election to
purchase any of the Disabled Stockholder's Shares.
(C) Buy-Out Following an Involuntary Transfer. In the
event that, notwithstanding the restrictions contained in this Agreement, all
or any of the Shares of a Stockholder are involuntarily transferred to any
Transferee due to, or as a result of, without limitation, foreclosure or other
creditor action, the bankruptcy or insolvency of a Stockholder, by judicial
order or decree of any kind (including, without limitation, a separation or
divorce decree or similar decree or order), or other involuntary transfer or
transfer by operation of law (other than pursuant to
5
<PAGE> 6
the death or disability of a Stockholder, which are covered under Sections 4(A)
and 4(B) respectively) (as the case may be, an "Involuntary Transfer"), the
other Stockholder (the "Remaining Stockholder") shall have the right, at any
time within the one-year period following the date of the Involuntary Transfer,
to purchase all or any portion (as designated by the Remaining Stockholder) of
the Shares so transferred from the Transferee, for the Purchase Price, in cash,
by giving written notice to that effect ("Election Notice") to the Transferee.
The Remaining Stockholder is under no obligation to make such election.
5. CLOSING.
If, pursuant to an Election Notice served pursuant to Section
3 or Section 4 of this Agreement, the Remaining Stockholder has elected to
purchase Shares, a closing of such purchase (a "Closing") shall take place at
the offices of the Corporation on the Closing Date. At any such Closing:
(A) Stock Certificates. The seller of the Shares shall
deliver or cause to be delivered to the purchaser certificates representing the
Shares to be sold pursuant hereto, duly endorsed in blank or accompanied by
stock powers endorsed in blank, with signature(s) guaranteed, and accompanied
by any requisite transfer tax stamps.
(B) Payment of Purchase Price. The purchaser shall (i)
pay to the seller the Purchase Price or other consideration required under
Section 3 (as applicable) in the manner required, and (ii) deliver any other
documents required to be delivered to the purchaser. In the event that the
Closing Date occurs prior to the one-year anniversary of the death, disability
or Involuntary Transfer event (with respect to a purchase under Section 4), the
Purchase Price payable on the Closing Date shall be the one calculated with
reference to the date of death, disability or Involuntary Transfer; provided,
however, if the Purchase Price is ultimately determined to be the amount
calculated with respect to the first anniversary thereof, within 30 days
following such first anniversary the purchaser shall pay to the seller, in
cash, the additional amount required fully to pay the Purchase Price. If the
Closing Date is prior to such first anniversary, the purchased Shares will be
placed in escrow with the Corporation's general outside counsel, pursuant to an
escrow agreement in form and content reasonably acceptable to all parties,
pending the payment of additional Purchase Price, if any, and, if the purchaser
breaches its obligation to pay any such additional Purchase Price, all of the
purchased Shares shall be voted for all purposes as directed by the seller, it
being agreed that such voting agreement shall be specifically enforceable, and
such voting agreement shall be evidenced by such documentation as may be
reasonably required by the seller.
6
<PAGE> 7
(C) Settlement of Outstanding Loans. There shall be
repaid in full, whether or not then due, all unrepaid loans which theretofore
shall have been made by the Remaining Stockholder to the other Stockholder, and
vice versa, and all unpaid interest, if any, which shall have accrued thereon.
(D) Consents. The Remaining Stockholder and the other
Stockholder or Transferee (as applicable) shall use their collective best
efforts to obtain all required consents, if any, of lenders, lessors and other
third parties to the sale transaction in question, and, to the extent that,
despite such best efforts, such consents cannot be obtained, the parties shall
cooperate with one another to agree on any reasonable arrangement that would
fulfill, to the extent possible, the intent of such sale transaction.
6. TERMINATION.
This Agreement and the rights and obligations of, and
restrictions placed on, and the undertakings agreed to by, the Stockholders
hereunder shall terminate and become null and void immediately upon the
occurrence of any of the following:
(A) A final decree of bankruptcy against, or a
dissolution (other than for failing to file an annual report) of, the
Corporation; or
(B) A Stockholder becoming the owner of all of the
Shares; or
(C) The execution of an instrument by both of the
Stockholders pursuant to which such parties agree to terminate this Agreement;
or
(D) The death and/or becoming Disabled of both of the
Stockholders within a 90-day period; or
(E) The date on which the sum of the aggregate number of
shares of Common Stock owned by the Stockholders, immediate family members of
the Stockholders, trusts or other entities the beneficiaries of which are
principally either of the Stockholders and/or their respective family members
or lineal descendants, and shares of Common Stock the power of which to vote is
vested in either of the Stockholders represents less than 40% of the issued and
outstanding capital voting stock of the Corporation.
7. NOTICES.
All notices, demands, requests, consents and approvals which
may or are required to be given or made pursuant to any provision of this
Agreement shall be given or made in writing and shall be served personally or
mailed by prepaid certified or registered mail, return receipt requested, to
the address of each of the parties hereto as set forth beneath their respective
7
<PAGE> 8
signatures on the execution page(s) of this Agreement or such other address as
any of the parties may from time to time advise the other parties hereto by
notice in writing. The date of receipt of any such notice, demand, request,
consent or approval shall be deemed to be the date of giving of such notice,
demand, request, consent or approval if delivered personally, or if mailed, as
aforesaid, the third (3rd) day of business following the date of such mailing.
8. GOVERNING LAW.
The parties acknowledge that this Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Florida from time to time obtaining.
9. MISCELLANEOUS.
(A) Shares. All references in this Agreement to the
Shares shall be deemed to include (i) all subsequent acquisitions of shares of
the capital stock of the Corporation by any of the Stockholders and (ii) the
acquisition of shares of capital stock by the Stockholders pursuant to any
stock dividend, split-up, recapitalization, combination or exchange of shares,
merger, consolidation, acquisition of property or stock, separation,
reorganization or the like, occurring after the date hereof, as a result of
which shares of any class shall be issued in respect of the Shares, or the
Shares shall be changed into the same or a different number of shares of the
same or another class or classes of stock. Any transfer of Shares or any
interest therein in violation of this Agreement is void ab initio.
(B) Final Agreement. This Agreement constitutes the
entire final agreement between the parties with respect to, and, as more
particularly set forth in Section 12 below, supersedes any and all prior
agreements among the parties hereto both oral and written concerning, the
subject matter hereof and may not be amended, modified or terminated except by
a writing signed by the parties hereto.
(C) Successors and Assigns. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties
hereto and their respective administrators, legal representatives, nominees,
heirs, successors and permitted assigns and transferees, subject, however, to
all limitations and restrictions placed upon Transferees under this Agreement.
If any Transferee shall acquire any Shares in any manner, whether by operation
or law or otherwise, such Shares shall be held subject to all of the terms of
this Agreement and, by taking and holding such Shares, such Transferee shall be
deemed conclusively to have agreed to be bound by and to perform all of the
terms of this Agreement.
(D) Severability. If any provision of, or restriction
contained in, this Agreement shall be held to be invalid or
8
<PAGE> 9
unenforceable, and is not reformed by a court of competent jurisdiction (which
the court is hereby urged to do in lieu of striking a provision entirely), such
invalidity or unenforceability shall attach only to such provision and shall
not in any way affect or render invalid or unenforceable any other provision of
this Agreement, and this Agreement shall be carried out as if such invalid or
unenforceable provision were not contained herein.
(E) Counterparts. This Agreement may be executed in any
number of counterparts, all of which together shall constitute one and the same
instrument.
(F) Waivers. A waiver of any breach or violation of any
term, provision or covenant contained herein shall not be deemed a continuing
waiver or a waiver of any future or past breach or violation. No oral waiver
shall be binding.
(G) Usage. Wherever in this Agreement the masculine
gender is used, it shall be deemed to include the feminine or neuter, and the
use of the singular or plural shall be deemed to include the other, in each
case, as the context requires.
(H) Further Assurances. Each party hereto covenants and
agrees with the other that each of them shall upon the reasonable request of
the other do, execute or cause to be made, done or executed all such further
and lawful acts, deeds, things, devices, agreements, instruments and assurances
whatsoever for the better or more perfect and absolute performance of the
terms, conditions and provisions of this Agreement.
10. LEGAL REPRESENTATION.
Each of the Stockholders acknowledges and agrees that he has
been advised of the importance of retaining independent legal counsel to
represent his interests in connection with the preparation, negotiation,
execution and delivery of this Agreement.
11. PRELIMINARY STATEMENT.
The parties agree that the Preliminary Statement set forth at
the head of this Agreement is true and correct and constitutes a part of this
Agreement.
12. PRIOR AGREEMENTS.
All agreements between the parties existing as of the date
hereof, insofar (but only insofar) as they relate to rights or obligations on
the part of either Stockholder to purchase or sell Shares from or to the other
Stockholder, or for the Corporation to purchase the Shares of a Stockholder,
are hereby superseded by this Agreement. All other provisions of any such
existing agreements, including any provisions providing for the acceleration of
purchase money indebtedness owed by Epstein to Gordon (which are intended to
9
<PAGE> 10
be, and hereby are, affirmed in Section 5(C) of this Agreement), shall remain
of full force and effect.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
/s/ Mark J. Gordon
-------------------------
MARK J. GORDON
Address: 3715 N.E. 214th Terrace
Aventura, Florida 33180
/s/ David L. Epstein
--------------------------
DAVID L. EPSTEIN
Address: 2957 Westbrook
Ft. Lauderdale, Florida 33332
ACKNOWLEDGED AND ACCEPTED:
PRECISION RESPONSE CORPORATION
By: /s/ Mark J. Gordon
----------------------
Mark J. Gordon, CEO
10
<PAGE> 1
EXHIBIT 10.15
S CORPORATION TAX ALLOCATION
AND INDEMNIFICATION AGREEMENT
THIS S CORPORATION TAX ALLOCATION AND INDEMNIFICATION AGREEMENT (the
"Agreement") is made and entered into this 31st, day of May, 1996 between
PRECISION RESPONSE CORPORATION, a Florida corporation (the "Company"), and MARK
J. GORDON, DAVID EPSTEIN, RICHARD D. MONDRE, JAMES MURRAY, THE STACY LYNN
GORDON PRC TRUST, THE JASON HOWARD GORDON PRC TRUST, THE DAVID EPSTEIN 1995
GRANTOR TRUST and GAIL GORDON (collectively, the "Stockholders") (the Company
and the Stockholders are hereinafter referred to individually as a "party" and
collectively as the "parties").
W I T N E S S E T H
WHEREAS, the Company contemplates a public offering of its stock in
order to raise additional equity capital for the purpose of expanding the
operations of the business, reducing indebtedness of the Company, making
payment of an S Corporation distribution and other corporate purposes (the
"Public Offering");
WHEREAS, upon completion of such Public Offering, the Company plans to
distribute a dividend to the Stockholders in an amount equal to the Company's
undistributed Accumulated Adjustments Account as defined in Section 1368(e)(1)
of the Code (as hereinafter defined) as of the close of the Short S Year (as
hereinafter defined),
WHEREAS, the Company and the Stockholders have entered into this
Agreement as a condition to the foregoing distribution and the contemplated
Public Offering;
WHEREAS, from its inception through December 31, 1987, the Company was
taxed as a C corporation (as defined in the Code), and the Company became an S
corporation (as defined in section 1361 of the Code) on January 1, 1988 and
will continue to be an S corporation until the Termination Date (as hereinafter
defined), after which it will again be taxed as a C corporation;
WHEREAS, the Stockholders currently are the only stockholders of the
Company, and will continue to be so until the closing of the Public Offering
(the "Closing"); and
WHEREAS, the Company and the Stockholders wish to provide for a tax
allocation and indemnification agreement in connection with the Company's
termination as an S corporation.
NOW, THEREFORE, the parties agree as follows:
<PAGE> 2
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings:
"C Short Year" means that portion of the S Termination Year of the
Company defined in Section 1362(e)(1)(B) of the Code.
"Code" means the Internal Revenue Code of 1986, as amended.
"S Corporation Period" means the period commencing January 1, 1988 and
ending on the Termination Date.
"S Corporation Taxable Income" means the taxable income of the Company
from all sources during the S Corporation Period.
"S Short Year" means that portion of the S Termination Year of the
Company defined in Section 1362(e)(1)(A) of the Code.
"S Termination Year" shall have the meaning set forth in Section
1362(e)(4) of the Code.
"Termination Date" means the date on which the S corporation status of
the Company is terminated pursuant to section 1362(d)(1) of the Code.
ARTICLE 2
ELECTION TO TERMINATE; S TERMINATION YEAR
2.1 Termination of S Status. The parties intend to terminate the
Company's status as an S corporation by electing to do so under Code Section
1362(d)(1).
2.2 Effective Date. Pursuant to Section 1362(d)(1) of the Code,
the election to terminate the Company's status as an S corporation shall be
effective on the date immediately preceding the date of the Public Offering
which shall be the "Termination Date".
2.3 S Termination Year. The Company's fiscal year in which the S
corporation status of the Company is terminated will be an S Termination Year
for federal tax purposes.
2.4 S Short Year. Pursuant to Section 1362(e)(1) of the Code, the
S Termination Year of the Company shall be divided into two short taxable
years: an S Short Year and a C Short Year. The S Short Year of the Company
shall be that portion of the Company's S Termination Year beginning on the
first day of such fiscal year and ending on the day immediately preceding the
Termination Date. For federal income tax purposes, the Company will be treated
as an S corporation during its S Short Year.
2
<PAGE> 3
2.5 C Short Year. Pursuant to Section 1362(e)(1)(B) of the Code,
that portion of the S Termination Year of the Company beginning on the
Termination Date and ending on the last day of the 1996 fiscal year, shall be
the C Short Year of the Company. For federal income tax purposes, the Company
will be taxed as a C corporation during its C Short Year.
ARTICLE 3
ALLOCATION OF INCOME
3.1 Allocation Election. The Company intends to allocate tax
items to its S Short Year and C Short Year pursuant to the method contained in
Section 1362(e)(3) of the Code, but may allocate pursuant to any other
permitted method under Section 1362(e) of the Code.
ARTICLE 4
TAXES
4.1 Liability for Taxes Incurred During S Corporation Years
Including S Short Year. The Stockholders, severally and not jointly, covenant
and agree that they shall pay any and all taxes attributable to their allocable
shares of taxable income of the Company they are required to pay for all
taxable periods (or that portion of any period including the S Short Year)
during which the Company was an S corporation.
4.2 Liability for Taxes Incurred During C Corporation Years
Including C Short Years. The Company covenants and agrees that the Company
shall pay any and all taxes attributable to taxable income of the Company
required to be paid by the Company for the C Short Year and all taxable periods
thereafter during which the Company is a C corporation.
4.3 Company's Indemnification for Tax Liabilities. The Company
hereby agrees to indemnify, defend and hold harmless each Stockholder from and
against any and all losses, liabilities, obligations, damages, impositions,
assessments, fines, deficiencies, costs and expenses, including without
limitation, attorneys' and accountants' fees and expenses, with respect to all
federal and state income taxes of any kind whatsoever (computed at the highest
federal and/or state income tax rate in effect for the year of adjustment)
including interest, penalties and additions to taxes, imposed upon a
Stockholder as a result of any final determination of an adjustment (by reason
of an amended return, claim for refund, audit or otherwise) including any
increase in items of income or gain or any decrease in items of loss, deduction
or credit, reported to such stockholder by the Company with respect to the
Company's S Corporation Period, but such adjustment or change shall not include
(i) an adjustment or change which results in an increase in an item of income
or gain reported to a
3
<PAGE> 4
Stockholder by the Company with respect to one or more of the taxable years
falling within the Company's S Corporation Period and a corresponding decrease
in an item of income or gain with respect to one or more of the other taxable
years falling within the Company's S Corporation Period; or (ii) an adjustment
or change which results in a decrease in an item of loss, deduction or credit
reported to a Stockholder by the Company with respect to one or more of the
taxable years falling within the Company's S Corporation Period and a
corresponding increase in an item of loss, deduction or credit with respect to
one or more of the other taxable years falling within the Company's S
Corporation Period. Any such payment to a Stockholder pursuant to this Section
4.3 shall be made on a "grossed-up" basis, so that in the event any amount
received hereunder by a Stockholder constitutes taxable income to such
Stockholder, the amount of such payment hereunder shall be computed so that the
Stockholder receives full indemnification hereunder on an after-tax basis.
The Company acknowledges further that it shall be solely responsible
for any federal, state and local taxes (including interest and penalties, if
any) relating to the Built-In Gains tax imposed by Section 1374 of the Code and
the tax on Excess Passive Investment Income imposed by Section 1375 of the
Code.
4.4 Stockholders' Indemnification for Tax Liabilities. The
Stockholders, severally (according to the percentage of the outstanding shares
of the Company's Common Stock owned by each Stockholder for the years of
adjustment) and not jointly, hereby agree to indemnify, defend and hold
harmless the Company from and against all liability with respect to all federal
and state income taxes of any kind whatsoever (computed at the highest federal
and/or state income tax rate in effect for the year of adjustment) including
interest, penalties and additions to taxes resulting from any final
determination of an adjustment (by reason of an amended return, claim for
refund, audit or otherwise) to the Stockholders' taxable income resulting in a
decrease in the Stockholders' S corporation taxable income and a corresponding
increase in the federal or state, as the case may be, income tax liability
payable by the Company. Notwithstanding the foregoing, the amount of the
payments made by a Stockholder pursuant to this Section 4.4 shall not exceed an
amount, if any, by which (i) the amount of the reduction in the federal and
state income tax liability and interest thereon of the Stockholder which
results from the shifting of S corporation taxable income to a C corporation
taxable year of the Company, exceeds (ii) all reasonable costs incurred by the
Stockholder reasonably attributable to securing such reduction in tax
liability.
4.5 Payments. The Stockholders or the Company, as the case may
be, shall make any payment required under this Agreement within thirty (30)
calendar days after receipt of notice from the other party that a payment is
due by such party to the appropriate taxing authority.
4
<PAGE> 5
4.6 Subrogation. The party (or parties) providing the indemnity
under either Section 4.3 or Section 4.4 (defined solely for purposes of this
Section 4.6 as the "Indemnifying Party") shall be subrogated to all rights of
recovery (the "Subrogation Claims") that the party (or parties) being
indemnified under Section 4.3 or Section 4.4, respectively (defined solely for
purposes of this Section 4.6 as the "Indemnified Party"), may have against any
person or organization in respect of the tax liabilities for which the
Indemnifying Party is providing indemnity. Such right of subrogation shall not
exceed the amount paid by the Indemnifying Party to the Indemnified Party. The
Indemnified Party shall execute and deliver instruments and papers and do
whatever else is reasonably necessary to secure such rights of subrogation for
the Indemnifying Party. The Indemnified Party shall provide all reasonable
assistance as requested by the Indemnifying Party in order for the Indemnifying
Party to pursue the Subrogation Claims. The Indemnified Party shall do nothing
after any Subrogation Claim arises to prejudice the rights of the Indemnifying
Party.
4.7 Payments After Post-Termination Transition Period. If any
Stockholder is required to include any payment received pursuant to this
Agreement after the expiration of the "post-termination transition period" (as
defined in Section 1377(b) of the Code) in computing his gross income in a tax
return, other than any payment made under Section 4.3 where the Stockholder
failed to give the Company timely notice to allow the Company to make such
payment prior to the expiration of the "post-termination transition period",
then (i) the Stockholder shall notify the Company of such inclusion in income,
and (ii) in addition to all other payments made under this Agreement, the
Company shall also pay to the Stockholder an amount which, when added to the
payment so included, will place the recipient Stockholder in the same net
after-tax position that he would have been in had the payment not been so
included.
4.8 Notices of Audits and Adjustments.
(a) If any Stockholder receives notice of an intention by
a taxing authority to audit any return of the Stockholder that includes any
item of income, gain, deduction, loss or credit reported by the Company with
respect to the Company's S Corporation Period, such Stockholder shall inform
the Company, in writing, of the audit promptly after receipt of such notice.
If any Stockholder receives notice from a taxing authority of any proposed
adjustment for which the Company may be required to indemnify the Stockholder
hereunder (a "Proposed Adjustment"), the Stockholder shall give notice to the
Company of the Proposed Adjustment promptly after receipt of such notice from a
taxing authority. Upon receipt of such notice from a Stockholder, the Company
may, by in turn giving prompt written notice to each of the Stockholders,
request that the Stockholders contest such Proposed Adjustment. If the Company
shall request that any Proposed Adjustment be contested, then the Stockholders
shall, at the Company's expense,
5
<PAGE> 6
contest the Proposed Adjustment or permit the Company and its representatives,
at the Company's request and expense, to contest the Proposed Adjustment
(including pursuing all administrative and judicial appeals and processes).
The Company shall pay to the Stockholders on demand all costs and expenses
(including attorneys' and accountants' fees) that the Stockholders may incur in
contesting such Proposed Adjustments. No Stockholder shall make, accept or
enter into a settlement or other compromise with respect to any taxes
indemnified hereunder, or forego or terminate any proceeding undertaken
hereunder without the consent of the Company, which consent shall not be
unreasonably withheld.
(b) If the Company receives notice of an intention by a
taxing authority to audit any return of the Company that includes any item of
income, gain, deductions, loss or credit reported by the Company with respect
to the period during which the Company was a S corporation, the Company shall
inform the Stockholders, in writing, of the audit promptly after receipt of
such notice. If the Company receives notice from a taxing authority of any
proposed adjustment for which any of the Stockholders may be required to
indemnify the Company hereunder (a "Company Proposed Adjustment"), the Company
shall give notice to each of the Stockholders of the Company Proposed
Adjustment promptly after receipt of such notice from a taxing authority. Upon
receipt of such notice from the Company, any of the Stockholders may, by in
turn giving prompt written notice to the Company, request that the Company
contest such Company Proposed Adjustment. If any of the Stockholders shall
request that any Company Proposed Adjustment be contested, then the Company
shall contest the Company Proposed Adjustment (including pursuing all
administrative and judicial appeals and processes) at the Company's expense and
shall permit the Stockholder to participate in such proceeding. The Company
shall not make, accept or enter into a settlement or other compromise with
respect to any taxes indemnified hereunder, or forego or terminate any
proceeding undertaken hereunder without the consent of the Stockholders, which
consent shall not be unreasonably withheld.
ARTICLE 5
DISTRIBUTIONS
5.1 Distribution of Accumulated Adjustments Account. Prior to the
consummation of the Public Offering, the Company's board of directors shall
declare a cash dividend (the "Special Dividend") payable to the Stockholders.
The Special Dividend will be equal to the Company's estimated accumulated
adjustments account (as the term is defined in Section 1368 of the Code) (the
"AAA") as of the Termination Date. The Company agrees to pay the Special
Dividend to the Stockholders promptly following the Public Offering and that:
(a) if the Special Dividend exceeds the AAA as finally determined by the
Company's accountants in the course of preparing the Company's tax returns for
the 1996 year (the "Final AAA"), such excess shall be paid by the Stockholders
to the Company, and (b) if
6
<PAGE> 7
the Final AAA exceeds the Special Dividend, such excess shall be paid by the
Company to the Stockholders, in either case, within thirty (30) days of the
date of such determination and together with interest thereon, at the
Applicable Federal Rate (as defined in Section 1274 of the Code) in effect as
of the date of such payment, for the period from the date the Special Dividend
was paid to the date of such payment. The Final AAA shall be determined by the
Company's tax return for the Company's S Short Year in a manner consistent with
prior practice.
ARTICLE 6
MISCELLANEOUS
6.1 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute one instrument representing the
Agreement between the parties hereto.
6.2 Construction of Terms. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
6.3 Cost of Enforcement; Interest. If, within thirty (30) days
after demand to comply with the obligations of one of the parties to this
Agreement served in writing on the other, compliance or reasonable assurance of
compliance is not forthcoming, and the other party engages the services of an
attorney to enforce rights under this Agreement, the prevailing party in any
action shall be entitled to recover all reasonable costs and expenses
(including reasonable fees of attorneys and legal assistants, whenever
incurred, whether before trial or appellate proceeding, at trial, on appeal or
otherwise).
6.4 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Florida,
other than those provisions relating to the conflict of laws of different
jurisdictions if the effect of the application of such provisions would be to
cause the laws of a jurisdiction other than Florida to apply hereto.
6.5 Jurisdiction; Venue. The parties agree that jurisdiction for
any litigation arising out of this Agreement or any document delivered in
connection herewith shall be in Miami, Florida.
6.6 Notices; All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when received, if personally delivered; when transmitted, if
transmitted by electronic fax, telecopy or similar electronic transmission
method; the day after it is sent, if sent by recognized expedited delivery
service; and
7
<PAGE> 8
five days after it is sent, if mailed, first class mail, postage prepaid. In
each case notice shall be sent to the parties at 1505 Northwest 167th Street,
Fourth Floor, Miami, Florida 33169, or to such other address as any party
shall have specified by notice in writing to the other parties.
6.7 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written agreement executed by all of the
parties hereto.
6.8 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, nor is this Agreement intended to confer upon any other person except
the parties any rights or remedies hereunder.
6.9 Interpretation. The title, article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
6.10 Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be illegal, invalid or
unenforceable in any respect, the same shall not in any respect affect the
validity, legality, or enforceability of the remainder of this Agreement, and
the parties shall use their best efforts to replace such illegal, invalid or
unenforceable provisions with an enforceable provision approximating, to the
extent possible, the original intent of the parties.
6.11 Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no representations, promises, warranties,
covenants, or undertakings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and the understandings
between the parties with respect to such subject matter.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PRECISION RESPONSE CORPORATION,
a Florida corporation
By: /s/ Mark J. Gordon
----------------------------
Name: Mark J. Gordon
----------------------------
Title: Chief Executive Officer
----------------------------
/s/ Mark J. Gordon
---------------------------------
MARK J. GORDON
/s/ David Epstein
---------------------------------
DAVID EPSTEIN
/s/ Richard D. Mondre
---------------------------------
RICHARD D. MONDRE
/s/ James Murray
---------------------------------
JAMES MURRAY
THE STACY LYNN GORDON PRC TRUST
By: /s/ Richard D. Mondre
------------------------------
RICHARD D. MONDRE, AS
CO-TRUSTEE
By: /s/ David Epstein
------------------------------
DAVID EPSTEIN, AS CO-TRUSTEE
THE JASON HOWARD GORDON PRC
TRUST
By: /s/ Richard D. Mondre
------------------------------
RICHARD D. MONDRE, AS
CO-TRUSTEE
By: /s/ David Epstein
------------------------------
DAVID EPSTEIN, AS CO-TRUSTEE
THE DAVID EPSTEIN 1995 GRANTOR
TRUST
By: /s/ Mark Gordon
------------------------------
MARK GORDON, AS CO-TRUSTEE
By: /s/ Richard D. Mondre
--------------------------------
RICHARD D. MONDRE, AS CO-TRUSTEE
/s/ Gail Gordon
-----------------------------------
GAIL GORDON
9
<PAGE> 1
EXHIBIT 10.27
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is entered into as of the 15th day
of May, 1996, by and between PRECISION RESPONSE CORPORATION, a Florida
corporation (the "Company"), and MARK J. GORDON ("Holder").
WHEREAS, the Company and Holder have entered into an Employment
Agreement as of the date hereof (the "Employment Agreement") and, as partial
consideration therefor, the Company has agreed to provide Holder certain demand
and piggyback registration rights with respect to Holder's stock in Company,
which may be exercised by Holder following certain events.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
(c) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Shares" shall mean any and all of the shares of
common stock of the Company currently held or hereafter acquired from time to
time (including, but not limited to, through exercise of stock options) by
Holder or any assigns of Holder which are trusts or limited partnerships or
other entities the beneficial owners of which are principally Holder, Holder's
family members, and/or Holder's lineal descendants, including shares acquired
by any such trusts, partnerships or other entities from Holder prior to the
date hereof.
(e) "Registrable Securities" shall mean any of the
following shares which have not been sold to the public or which have not lost
their registration rights as provided herein: (i) the Shares and (ii) any
shares of common stock of the Company, and any securities of the Company or any
other corporation, issued as a
<PAGE> 2
dividend or other distribution with respect to or in replacement of or exchange
for the Shares.
(f) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
(g) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Article I hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration, but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company, but excluding the
Selling Expenses.
(h) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities and all fees and expenses of legal counsel for Holder.
(i) "Triggering Event" shall mean the termination of
Holder's employment with Company for any reason (under the Employment Agreement
or otherwise).
(j) "Holder" shall mean Mark J. Gordon or, in the event
of his legal incapacity, his legal guardian, or, in the event of his death, the
personal representative(s) of his estate or the beneficiary(ies) of his estate
as designated by such personal representative(s).
Section 1.02 Demand Registration Rights.
(a) Request for Registration. If within ninety (90) days
after the date of the Triggering Event (or within one (1) year after the date
of the Triggering Event if the Triggering Event is Holder's death) the Company
receives a written request from Holder that the Company effect a registration
with respect to all or a part of the Registrable Securities (provided that if
less than 25% of the Registrable Securities are to be registered such
securities shall have an aggregate proposed offering price to the public of at
least $500,000), the Company will as soon as practicable thereafter use its
diligent best efforts to effect all such registrations, qualifications,
listings or compliances (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliances
with applicable requirements or regulations and listing of the Registrable
Securities on a stock exchange or the NASDAQ Stock
2
<PAGE> 3
Market) as may be so requested and as would permit or facilitate the sale and
distribution of all of such Registrable Securities as are specified in such
request. The Company shall file a registration statement as soon as
practicable after receipt of the request of Holder but in any event within
sixty (60) days of receipt following such request; provided, however, that if
the Company shall furnish to Holder a certificate signed by the then Chairman
of the Board of Directors of the Company or the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed on or before the date filing would
be required, and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period ending not more than one hundred twenty (120) days following
receipt of the request for registration.
(b) Underwriting. If the Holder intends that the
Registrable Securities covered by its request be distributed by means of an
underwriting, it shall so advise the Company as a part of its request made
pursuant to this Section 1.02. In such event, the Company shall (together with
Holder) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Holder. If the
underwriter has not limited the number of Registrable Securities to be
underwritten, the Company may include securities for its own account in such
registration if Holder so agrees.
Section 1.03 Piggyback Registration Rights.
(a) Notice of Proposed Registration. If at any time or
from time to time prior to, on or after a Triggering Event the Company shall
determine to register any of its common stock, other than (i) a registration
relating solely to employee benefit plans on Form S-8 or similar forms which
may be promulgated in the future, or (ii) a registration on Form S-4 or similar
forms which may be promulgated in the future relating solely to a Commission
Rule 145 transaction, the Company will:
(i) promptly give Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws and other state
compliances), and in any underwriting involved therein, all
the Registrable Securities specified in a written request or
requests made within thirty (30) days after receipt of such
written notice from the Company by Holder, except as set forth
in Section 1.03(b).
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise Holder as a part of
3
<PAGE> 4
the written notice given pursuant to Section 1.03(a)(i). In such event, the
right of Holder to registration of the Registrable Securities pursuant to this
Section 1.03 shall be conditioned upon Holder's participation in such
underwriting and the inclusion of the specified Registrable Securities in the
underwriting. Holder shall in such case (together with the Company) enter into
an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding
any other provision of this Section 1.03, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the amount of Registrable Securities to
be included in the registration and underwriting; provided, however, without
the prior written consent of Holder, the number of Registrable Securities to be
included in such registration and underwriting shall not be reduced to less
than 50% of the Registrable Securities sought by Holder to be included therein.
If Holder disapproves of the terms of any such underwriting, it may elect to
withdraw the Registrable Securities therefrom by written notice to the Company
and the underwriter. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded from such registration.
Section 1.04 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Sections 1.02 or 1.03 shall be borne by the Company. All Selling
Expenses shall be borne by Holder.
Section 1.05 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will, upon request, inform Holder as to the status
of each such registration, qualification and compliance. At its expense the
Company will:
(a) keep such registration, and any qualification or
compliance under state securities laws which the Company determines (or is
required) to obtain, effective for a period of one hundred eighty (180) days or
until the distribution of the Registrable Securities described in the
registration statement relating thereto has been completed, whichever first
occurs; and
(b) furnish such number of prospectuses and other
documents incident thereto as Holder or any underwriter from time to time may
reasonably request.
Section 1.06 Indemnification.
(a) The Company will indemnify Holder and each owner of
Registrable Securities, and their respective legal counsel and accountants, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and
4
<PAGE> 5
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereof, incident to any
registration, qualification or compliance contemplated by this Agreement
(whether or not Registrable Securities are included in the registration), or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse Holder and each owner of Registrable
Securities, and their respective legal counsel and accountants, and each such
underwriter and each person who controls any such underwriter, for any legal
and other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or omission) made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by or on
behalf of Holder or another owner of Registrable Securities and stated to be
specifically for use therein.
(b) Holder will, if Registrable Securities are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, and each of its directors, officers,
legal counsel and accountants, each underwriter, if any, of the Company's
securities covered by such a registration statement, and each person who
controls the Company or such underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or 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 will reimburse the Company and such
directors, officers, legal counsel, accountants, persons, underwriters or
control persons for any legal and other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
5
<PAGE> 6
conformity with written information furnished to the Company by an instrument
duly executed by or on behalf of Holder and stated to be specifically for use
therein. Notwithstanding any of the foregoing to the contrary, Holder's
maximum indemnity obligation, inclusive of reimbursement of costs, fees, and
expenses, shall be the total net proceeds received by Holder and such other
owners of Registrable Securities to which Holder's demand or request for
registration relates from the sale of such Registrable Securities pursuant to
the registration demanded or requested.
(c) A party entitled to indemnification under this
Section 1.06 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
each such claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to provide notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Agreement except to the
extent such failure is prejudicial to the Indemnifying Party in defending such
claim or litigation. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment, or enter into any settlement which does not
include as an unconditional term thereof the execution and delivery by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
(d) If the indemnification provided for in this Section
1.06 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense, taking into account relevant
equitable considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
6
<PAGE> 7
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall be controlling.
Section 1.07 Lockup Agreement. In consideration for the Company
agreeing to its obligations under this Article I, Holder agrees in connection
with any firmly underwritten public offering of the Company's common stock,
upon request of the Company or the underwriters managing such offering, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any of Holder's Registrable Securities (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to
exceed 30 days) from the effective date of such registration as the Company or
the underwriters may specify; provided, however, that Holder shall have no
obligation to enter into the agreement described herein unless all executive
officers and directors of the Company and all other holders of more than 5% of
the Company's outstanding common stock enter into similar agreements.
Section 1.08 Information by Holder. Holder shall furnish or cause to
be furnished to the Company such information regarding Holder and other owners
of Registrable Securities and the distribution of proceeds by Holder and such
owners as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in Section 1.02 or 1.03 of this Agreement.
Section 1.09 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which at any time
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) so long as any unregistered Registrable Securities
are owned or held, furnish to Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said
Rule 144 and of the Securities Act and Exchange Act, a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
of the
7
<PAGE> 8
Company as Holder may reasonably request in availing Holder or other owners of
Registrable Securities of any rule or regulation of the Commission allowing the
sale of any such securities without registration.
Section 1.10 Transfer of Registration Rights. The rights to cause the
Company to register the Registrable Securities granted to Holder by the Company
under Sections 1.02 and 1.03 may be assigned by Holder to not more than five
additional transferees or assignees of any of Holder's Registrable Securities,
provided that the Company is given written notice by Holder at the time of, or
within a reasonable time after, said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to
which such registration rights are being assigned, provided further that no
such assignment shall increase the number of registrations that the Company may
be required to effect under this Agreement.
ARTICLE II
MISCELLANEOUS
Section 2.01 Amendment. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by Holder and the Company.
Section 2.02 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Florida without regard to its conflicts of
laws principles.
Section 2.03 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04 Notices. For purposes of this Agreement, notices and
other communications provided for in this Agreement shall be deemed to be
properly given if delivered personally or sent by United States certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Executive: Mark J. Gordon
3715 N.E. 214th Terrace
Aventura, Florida 33180
If to Com Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Attn: President and General Counsel
8
<PAGE> 9
or to such other address as either party may have furnished to the other party
in writing in accordance with this paragraph. Such notices or other
communications shall be effective only upon receipt. Notices also may be given
by facsimile and in such case shall be deemed to be properly given when sent so
long as the sender uses reasonable efforts to confirm and does confirm the
receiver's receipt of the facsimile transmission.
Section 2.05 Severability. If any provision of this Agreement shall
be judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 2.06 Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
PRECISION RESPONSE CORPORATION
By: /s/ David Epstein
--------------------------
David Epstein, President
/s/ Mark J. Gordon
-----------------------------
MARK J. GORDON
9
<PAGE> 1
EXHIBIT 10.28
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is entered into as of the 15th day
of May, 1996, by and between PRECISION RESPONSE CORPORATION, a Florida
corporation (the "Company"), and DAVID EPSTEIN ("Holder").
WHEREAS, the Company and Holder have entered into an Employment
Agreement as of the date hereof (the "Employment Agreement") and, as partial
consideration therefor, the Company has agreed to provide Holder certain demand
and piggyback registration rights with respect to Holder's stock in Company,
which may be exercised by Holder following certain events.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
(c) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Shares" shall mean any and all of the shares of
common stock of the Company currently held or hereafter acquired from time to
time (including, but not limited to, through exercise of stock options) by
Holder or any assigns of Holder which are trusts or limited partnerships or
other entities the beneficial owners of which are principally Holder, Holder's
family members, and/or Holder's lineal descendants, including shares acquired
by any such trusts, partnerships or other entities from Holder prior to the
date hereof.
(e) "Registrable Securities" shall mean any of the
following shares which have not been sold to the public or which have not lost
their registration rights as provided herein: (i) the Shares and (ii) any
shares of common stock of the Company, and any securities of the Company or any
other corporation, issued as a
<PAGE> 2
dividend or other distribution with respect to or in replacement of or exchange
for the Shares.
(f) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
(g) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Article I hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration, but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company, but excluding the
Selling Expenses.
(h) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities and all fees and expenses of legal counsel for Holder.
(i) "Triggering Event" shall mean the termination of
Holder's employment with Company for any reason (under the Employment Agreement
or otherwise).
(j) "Holder" shall mean Mark J. Gordon or, in the event
of his legal incapacity, his legal guardian, or, in the event of his death, the
personal representative(s) of his estate or the beneficiary(ies) of his estate
as designated by such personal representative(s).
Section 1.02 Demand Registration Rights.
(a) Request for Registration. If within ninety (90) days
after the date of the Triggering Event (or within one (1) year after the date
of the Triggering Event if the Triggering Event is Holder's death) the Company
receives a written request from Holder that the Company effect a registration
with respect to all or a part of the Registrable Securities (provided that if
less than 25% of the Registrable Securities are to be registered such
securities shall have an aggregate proposed offering price to the public of at
least $500,000), the Company will as soon as practicable thereafter use its
diligent best efforts to effect all such registrations, qualifications,
listings or compliances (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliances
with applicable requirements or regulations and listing of the Registrable
Securities on a stock exchange or the NASDAQ Stock
2
<PAGE> 3
Market) as may be so requested and as would permit or facilitate the sale and
distribution of all of such Registrable Securities as are specified in such
request. The Company shall file a registration statement as soon as
practicable after receipt of the request of Holder but in any event within
sixty (60) days of receipt following such request; provided, however, that if
the Company shall furnish to Holder a certificate signed by the then Chairman
of the Board of Directors of the Company or the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed on or before the date filing would
be required, and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period ending not more than one hundred twenty (120) days following
receipt of the request for registration.
(b) Underwriting. If the Holder intends that the
Registrable Securities covered by its request be distributed by means of an
underwriting, it shall so advise the Company as a part of its request made
pursuant to this Section 1.02. In such event, the Company shall (together with
Holder) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Holder. If the
underwriter has not limited the number of Registrable Securities to be
underwritten, the Company may include securities for its own account in such
registration if Holder so agrees.
Section 1.03 Piggyback Registration Rights.
(a) Notice of Proposed Registration. If at any time or
from time to time prior to, on or after a Triggering Event the Company shall
determine to register any of its common stock, other than (i) a registration
relating solely to employee benefit plans on Form S-8 or similar forms which
may be promulgated in the future, or (ii) a registration on Form S-4 or similar
forms which may be promulgated in the future relating solely to a Commission
Rule 145 transaction, the Company will:
(i) promptly give Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws and other state
compliances), and in any underwriting involved therein, all
the Registrable Securities specified in a written request or
requests made within thirty (30) days after receipt of such
written notice from the Company by Holder, except as set forth
in Section 1.03(b).
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise Holder as a part of
3
<PAGE> 4
the written notice given pursuant to Section 1.03(a)(i). In such event, the
right of Holder to registration of the Registrable Securities pursuant to this
Section 1.03 shall be conditioned upon Holder's participation in such
underwriting and the inclusion of the specified Registrable Securities in the
underwriting. Holder shall in such case (together with the Company) enter into
an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding
any other provision of this Section 1.03, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the amount of Registrable Securities to
be included in the registration and underwriting; provided, however, without
the prior written consent of Holder, the number of Registrable Securities to be
included in such registration and underwriting shall not be reduced to less
than 50% of the Registrable Securities sought by Holder to be included therein.
If Holder disapproves of the terms of any such underwriting, it may elect to
withdraw the Registrable Securities therefrom by written notice to the Company
and the underwriter. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded from such registration.
Section 1.04 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Sections 1.02 or 1.03 shall be borne by the Company. All Selling
Expenses shall be borne by Holder.
Section 1.05 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will, upon request, inform Holder as to the status
of each such registration, qualification and compliance. At its expense the
Company will:
(a) keep such registration, and any qualification or
compliance under state securities laws which the Company determines (or is
required) to obtain, effective for a period of one hundred eighty (180) days or
until the distribution of the Registrable Securities described in the
registration statement relating thereto has been completed, whichever first
occurs; and
(b) furnish such number of prospectuses and other
documents incident thereto as Holder or any underwriter from time to time may
reasonably request.
Section 1.06 Indemnification.
(a) The Company will indemnify Holder and each owner of
Registrable Securities, and their respective legal counsel and accountants, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and
4
<PAGE> 5
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereof, incident to any
registration, qualification or compliance contemplated by this Agreement
(whether or not Registrable Securities are included in the registration), or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse Holder and each owner of Registrable
Securities, and their respective legal counsel and accountants, and each such
underwriter and each person who controls any such underwriter, for any legal
and other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or omission) made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by or on
behalf of Holder or another owner of Registrable Securities and stated to be
specifically for use therein.
(b) Holder will, if Registrable Securities are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, and each of its directors, officers,
legal counsel and accountants, each underwriter, if any, of the Company's
securities covered by such a registration statement, and each person who
controls the Company or such underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or 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 will reimburse the Company and such
directors, officers, legal counsel, accountants, persons, underwriters or
control persons for any legal and other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
5
<PAGE> 6
conformity with written information furnished to the Company by an instrument
duly executed by or on behalf of Holder and stated to be specifically for use
therein. Notwithstanding any of the foregoing to the contrary, Holder's
maximum indemnity obligation, inclusive of reimbursement of costs, fees, and
expenses, shall be the total net proceeds received by Holder and such other
owners of Registrable Securities to which Holder's demand or request for
registration relates from the sale of such Registrable Securities pursuant to
the registration demanded or requested.
(c) A party entitled to indemnification under this
Section 1.06 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
each such claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to provide notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Agreement except to the
extent such failure is prejudicial to the Indemnifying Party in defending such
claim or litigation. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment, or enter into any settlement which does not
include as an unconditional term thereof the execution and delivery by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
(d) If the indemnification provided for in this Section
1.06 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense, taking into account relevant
equitable considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
6
<PAGE> 7
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall be controlling.
Section 1.07 Lockup Agreement. In consideration for the Company
agreeing to its obligations under this Article I, Holder agrees in connection
with any firmly underwritten public offering of the Company's common stock,
upon request of the Company or the underwriters managing such offering, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any of Holder's Registrable Securities (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to
exceed 30 days) from the effective date of such registration as the Company or
the underwriters may specify; provided, however, that Holder shall have no
obligation to enter into the agreement described herein unless all executive
officers and directors of the Company and all other holders of more than 5% of
the Company's outstanding common stock enter into similar agreements.
Section 1.08 Information by Holder. Holder shall furnish or cause to
be furnished to the Company such information regarding Holder and other owners
of Registrable Securities and the distribution of proceeds by Holder and such
owners as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in Section 1.02 or 1.03 of this Agreement.
Section 1.09 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which at any time
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) so long as any unregistered Registrable Securities
are owned or held, furnish to Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said
Rule 144 and of the Securities Act and Exchange Act, a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
of the
7
<PAGE> 8
Company as Holder may reasonably request in availing Holder or other owners of
Registrable Securities of any rule or regulation of the Commission allowing the
sale of any such securities without registration.
Section 1.10 Transfer of Registration Rights. The rights to cause the
Company to register the Registrable Securities granted to Holder by the Company
under Sections 1.02 and 1.03 may be assigned by Holder to not more than five
additional transferees or assignees of any of Holder's Registrable Securities,
provided that the Company is given written notice by Holder at the time of, or
within a reasonable time after, said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to
which such registration rights are being assigned, provided further that no
such assignment shall increase the number of registrations that the Company may
be required to effect under this Agreement.
ARTICLE II
MISCELLANEOUS
Section 2.01 Amendment. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by Holder and the Company.
Section 2.02 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Florida without regard to its conflicts of
laws principles.
Section 2.03 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04 Notices. For purposes of this Agreement, notices and
other communications provided for in this Agreement shall be deemed to be
properly given if delivered personally or sent by United States certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Executive: Mark J. Gordon
3715 N.E. 214th Terrace
Aventura, Florida 33180
If to Company: Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Attn: President and General Counsel
8
<PAGE> 9
or to such other address as either party may have furnished to the other party
in writing in accordance with this paragraph. Such notices or other
communications shall be effective only upon receipt. Notices also may be given
by facsimile and in such case shall be deemed to be properly given when sent so
long as the sender uses reasonable efforts to confirm and does confirm the
receiver's receipt of the facsimile transmission.
Section 2.05 Severability. If any provision of this Agreement shall
be judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 2.06 Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
PRECISION RESPONSE CORPORATION
By: /s/ Mark J. Gordon
---------------------
Mark J. Gordon, CEO
/s/ David Epstein
------------------------
DAVID EPSTEIN
9
<PAGE> 1
EXHIBIT 10.29
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 15, 1996, by and between
PRECISION RESPONSE CORPORATION, a corporation organized and existing under the
laws of the State of Florida (hereinafter referred to as "Employer"), and
RICHARD N. FERRY, JR. (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a Florida corporation engaged in the
teleservicing, database management and marketing and fulfillment business;
WHEREAS, Employer desires to employ Employee upon the terms and
conditions set forth below and Employee desires to accept employment upon such
terms and conditions; and
WHEREAS, Employer and Employee desire to set forth in writing the
terms and conditions of their agreements and understandings with respect to
Employee's employment by Employer.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee, and Employee hereby accepts
employment by Employer, upon the terms and conditions set forth in this
Employment Agreement.
2. TERM
Subject to the provisions for earlier termination set forth in
Section 9 hereof, this Employment Agreement shall commence on July 1, 1996 and
shall continue until 5:00, p.m., June 30, 1999 (the "Employment Term").
3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that Employee is
free to accept employment with Employer as contemplated herein and has no other
written or oral obligations or commitments of any kind or nature which would in
any way interfere with Employee's acceptance of employment pursuant to the
terms hereof or the full performance of Employee's obligations hereunder or the
exercise of Employee's best efforts in Employee's employment hereunder or which
would otherwise pose any conflict of interest.
<PAGE> 2
4. DUTIES AND EXTENT OF SERVICES
A. Duties. Employee's duties and responsibilities
hereunder shall be those reasonably assigned to Employee from time to time by
Employer, consistent with the following: Employee shall, unless and until
otherwise determined by Employer, serve as Employer's Senior Vice
President-Business Development, and shall, subject to the direction of
Employer's Chief Executive Officer and President, have overall responsibility
to supervise and conduct Employer's day-to-day business development, sales and
marketing operations, including client service and client relations matters.
Employee shall report directly to Employer's President, or as otherwise
directed from time to time by Employer's Chief Executive Officer or President.
Employee agrees to devote Employee's full and exclusive time, skill, attention
and energy diligently and competently to perform the duties and
responsibilities properly assigned to Employee hereunder, or pursuant hereto.
B. Rules and Regulations. Employee agrees to abide by
the rules and regulations of Employer promulgated by Employer from time to time
with respect and applicable to Employer's similarly-situated employees
generally, which are all hereby incorporated by reference and made a part of
this Employment Agreement.
5. COMPENSATION
A. Base Compensation. Subject to the provisions of
Section 9 of this Employment Agreement, Employer shall pay salary to Employee
("Salary") based upon the rate of $175,000 per annum for the first year of the
Employment Term, $200,000 per annum for the second year of the Employment Term,
and $225,000 per annum for the third year of the Employment Term. Employer may
decide, in its sole discretion, to increase (but not to decrease) the Salary at
any time during the Employment Term. Salary shall be payable in accordance
with Employer's normal payroll practices for its employees and shall be subject
to payroll deductions and tax withholdings in accordance with Employer's usual
practices and as required by law.
B. Bonus Compensation. Employee shall receive an annual
bonus the amount of which shall be determined by Employer in its discretion
(the "Bonus Amount"). The Bonus Amount payable on or before each March 31
shall be based upon Employee's performance during the entire calendar year
immediately preceding such March 31. Each annual Bonus Amount shall be paid on
or before March 31 of each year of the Employment Term. Each Bonus Amount
shall be subject to payroll deductions and tax withholdings in accordance with
Employer's usual payroll practices and as required by law.
2
<PAGE> 3
6. FRINGE BENEFITS AND EXPENSES
A. Employee Benefits. Employee shall be entitled to
such benefits and fringe benefits (such as individual and family health,
dental, life and disability insurance) as are made available by Employer from
time to time, in Employer's sole discretion, to all other similarly-situated
employees generally.
B. Expenses. Employer shall reimburse Employee for
Employee's reasonable out-of-pocket costs and expenses incurred in connection
with the performance of Employee's duties and responsibilities hereunder,
subject to Employee's presentation of appropriate documentation and, if
requested, justification therefor, and provided that the types and amounts of
expenses incurred are consistent with, in Employer's judgment, Employer's
policies and practices.
C. Auto. Employer shall provide to Employee an
automobile allowance of $850.00 per month during the Employment Term in order
to defray Employee's automobile expenses incurred in the performance of
Employee's duties, but shall not be obligated to provide Employee with an
automobile.
D. Fair Market Value Stock Options. Employer agrees
that Employer shall grant to Employee 36,000 stock options (the "FMV Stock
Options") each to acquire one (1) share of Employer's common stock (36,000 FMV
Stock Options in total), pursuant to the Precision Response Corporation 1996
Incentive Stock Plan (the "Plan"). The FMV Stock Options shall be granted if,
and only if, and as and when, Employer's registration statement pursuant to
which it intends to make an initial public offering of its common stock (the
"IPO") becomes effective and such effective date is on or before August 31,
1996, and only if the number of shares of Employer's common stock outstanding
immediately prior to the IPO is at least 12,000,000. The purchase price per
share at which all of the FMV Stock Options may be exercised shall be the price
per share at which such common stock is offered pursuant to the IPO. The FMV
Stock Options shall be exercisable, once vested, and subject to earlier
termination, over the seven-year period commencing on the date the FMV Stock
Options are granted. The right to exercise the FMV Stock Options shall vest as
follows: (i) 12,000 of the FMV Stock Options shall vest and become exercisable
on January 5, 1997; (ii) an additional 12,000 of the FMV Stock Options shall
vest and become exercisable on January 5, 1998; and (iii) the remaining 12,000
of the FMV Stock Options shall vest and become exercisable on January 5, 1999.
All unvested FMV Stock Options shall expire automatically on the date Employee
voluntarily or involuntarily (other than by reason of death or disability)
leaves the employ of Employer and all then vested FMV Stock Options shall be
exercisable by Employee within the 30-day period following termination of
employment. In the event employment is terminated due to
3
<PAGE> 4
Employee's death or Employee becoming Disabled, or, if a change in control of
Employer (as defined in the FMV Stock Option Agreement, as defined below)
occurs, Employee or Employee's legal representative shall have the right to
exercise all then vested and unvested FMV Stock Options (which shall, in any of
such events, all then automatically vest) during such period following death or
disability or change in control and on such terms as are set forth in the FMV
Stock Option Agreement. All other terms and conditions of the FMV Stock
Options shall be as set forth in the Plan and the FMV Stock Option Agreement
and shall conform to Employer's policies and guidelines with respect to such
types of stock options granted pursuant to the Plan to employees of similar
status. The grant of the FMV Stock Options shall be subject to the approval of
Employer's compensation committee of the Board of Directors or, if no such
committee exists and is not required to exist, the approval of Employer's Board
of Directors, and shall be evidenced by an agreement in form and content
acceptable to Employer (the "FMV Stock Option Agreement").
E. Other Stock Options. Employer agrees that Employer
shall grant to Employee an additional 21,000 stock options pursuant to the Plan
(the "Non-FMV Stock Options") each to acquire one (1) share of Employer's
common stock (21,000 Non-FMV Stock Options in total). The Non-FMV Stock
Options shall be granted if, and only if, and as and when, Employer's
registration statement pursuant to which it intends to make the IPO becomes
effective and such effective date is on or before August 31, 1996, and only if
the number of shares of Employer's common stock outstanding immediately prior
to the IPO is at least 12,000,000. The purchase price per share at which all
of the Non-FMV Stock Options may be exercised shall be $.01 per share. The
Non-FMV Stock Options shall be exercisable, once vested, and subject to earlier
termination, over the seven-year period commencing on the date the Non-FMV
Stock Options are granted. The right to exercise the Non-FMV Stock Options
shall vest as follows: (i) 7,000 of the Non-FMV Stock Options shall vest and
become exercisable on January 5, 1997; (ii) an additional 7,000 of the Non-FMV
Stock Options shall vest and become exercisable on January 5, 1998; and (iii)
the remaining 7,000 of the Non-FMV Stock Options shall vest and become
exercisable on January 5, 1999. All unvested Non-FMV Stock Options shall
expire automatically on the date Employee voluntarily or involuntarily (other
than by reason of death or disability) leaves the employ of Employer and all
then vested Non-FMV Stock Options shall be exercisable by Employee within the
30-day period following termination of employment. In the event employment is
terminated due to Employee's death or Employee becoming Disabled, or, if a
change in control of Employer (as defined in the Non-FMV Stock Option
Agreement, as defined below) occurs, Employee or Employee's legal
representative shall have the right to exercise all then vested and unvested
Non-FMV Stock Options (which shall, in any of such events, all then
automatically vest) during such period
4
<PAGE> 5
following death or disability or change in control and on such terms as are set
forth in the Non-FMV Stock Option Agreement. All other terms and conditions of
the Non-FMV Stock Options shall be as set forth in the Plan and the Non- FMV
Stock Option Agreement and shall conform to Employer's policies and guidelines
with respect to such types of stock options granted to employees of similar
status. The grant of the Non-FMV Stock Options shall be subject to the
approval of Employer's compensation committee of the Board of Directors or, if
no such committee exists and is not required to exist, the approval of
Employer's Board of Directors, and shall be evidenced by an agreement in form
and content acceptable to Employer (the "Non-FMV Stock Option Agreement").
7. VACATIONS
Employee shall be entitled to five (5) weeks vacation each
full year of the Employment Term, with full compensation (provided, however,
that Employee shall not be entitled to be compensated for any unused vacation
days upon termination of employment). The periods during which Employee will
be absent from work for vacation shall be at the reasonable discretion of
Employer.
8. FACILITIES
Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, supplies and personnel as it
reasonably deems necessary for Employee's performance of Employee's duties and
responsibilities under this Employment Agreement.
9. TERMINATION OF EMPLOYMENT
A. Termination Events. Employee's employment under this
Employment Agreement may be terminated by Employer only as follows: with or
without Cause (as hereinafter defined), effective upon the delivery of written
notice to Employee; upon Employee's death; or upon Employee becoming Disabled
(as later defined) and receiving written notice of termination from Employer to
that effect. Employee may terminate Employee's employment under this
Employment Agreement without being in breach hereunder by giving written
notification of Employee's resignation to Employer which shall specify a
resignation date no earlier than ninety (90) days following the date of
delivery of such notice of resignation.
B. Definitions of Cause and Disabled. For purposes of
this Employment Agreement, "Cause" shall mean and include: (i) commission of a
felony, or commission of acts of fraud, dishonesty, or the like; (ii) habitual
drunkenness during business hours or at Employer's premises; (iii) illicit use
of drugs during business hours or at Employer's premises; (iv) abandonment of
employment
5
<PAGE> 6
duties; (v) negligence in the performance of employment duties; (vi) an act or
omission on the part of Employee not directed by Employer which results in or
contributes to Employer being sanctioned or penalized by any governmental or
quasi-governmental authority or body, or any stock exchange or body regulating
or governing publicly-traded companies (including the NASD); (vii)
insubordination; or (viii) breach by Employee of this Employment Agreement
which, if curable, is not cured by Employee within ten (10) days following
Employee's receipt of written notice thereof. Employee shall be deemed
"Disabled" for purposes of this Agreement (a) if, in the reasonable judgment of
Employer, Employee is unable, due to physical, mental or emotional illness or
injury, to perform substantially all of Employee's duties and responsibilities
for Employer for a continuous period of ninety (90) days, or (b) if Employee is
adjudicated as an incompetent or has a guardian appointed to handle Employee's
affairs.
C. Effect of Termination For Cause or Employee's
Resignation. In the event that Employee's employment under this Employment
Agreement is terminated by Employer with Cause, or because Employee resigns
from or quits Employee's employment, Employer shall pay to Employee, within
thirty (30) days following the date of such termination or resignation, subject
to Employer's right to set off any damages resulting from Employee's
termination with Cause or resignation effected without giving the required
notice, the Salary, if any, accrued and unpaid through the date of termination,
and shall pay and provide to Employee the amounts and items payable and to be
provided under Section 6 through the date of such termination; and Employee
shall not be entitled to any other compensation, remuneration or other sums
provided for in this Employment Agreement or to which Employee might otherwise
be entitled hereunder or at law or in equity, including, without limitation,
any accrued or unpaid Bonus Amount.
D. Compensation Upon Death or Disability. Upon the
death of Employee, or termination of employment because Employee is Disabled,
Employer shall pay to Employee, Employee's legal guardian or the legal
representative of Employee's estate (or heir as designated by the legal
representative of Employee's estate at such time), within thirty (30) days
following the date of Employee's death or termination, the Salary, if any,
accrued and unpaid through the date of termination; and Employee (or such legal
guardian, legal representative or any heirs) shall not be entitled to any other
compensation, remuneration or other sums provided for in this Employment
Agreement or to which Employee might otherwise be entitled hereunder or at law
or in equity.
E. Compensation Upon Termination Without Cause. In the
event that Employer terminates Employee's employment under this Employment
Agreement without Cause, Employee's sole and exclusive compensation and remedy
hereunder shall be to receive from
6
<PAGE> 7
Employer, and Employer shall pay and provide, (i) the amount of Salary, if any,
accrued and unpaid through the date of termination, and the amounts and items
payable and to be provided under Section 6 through the date of termination,
payable within thirty (30) days following termination of employment, and (ii)
the Salary and the amounts and items payable and to be provided under Section 6
that Employee would have received during the period following termination
through the expiration of the period ending on the 180th day following the date
of termination of Employee's employment, as and when it would have been payable
or provided if Employee had remained an employee of Employer for such
additional 180-day period. Employee shall not be entitled to the foregoing
severance to the extent that Employee receives or is entitled to receive
compensation and/or benefits from new employment with respect to employment
services rendered during such 180-day period.
F. Key-Man Insurance. In the event that Employer has
obtained or obtains a key-man insurance policy (the "Policy") on the life of
Employee, Employer shall be the sole owner thereof and all proceeds payable in
respect thereof shall be the property solely of Employer. In the event that
Employee's employment terminates for any reason other than Employee's death,
Employee may request that the Policy be assigned to Employee by giving written
notice to Employer to that effect. Subject to obtaining any requisite consent
from the insurer, Employer shall, if Employee has so requested, assign the
Policy to Employee subject to Employee's reimbursement to Employer of any
premiums paid by Employer which relate to any period following the date of
termination of Employee's employment, and the cash value, if any, of the
Policy. In the event that Employer desires to obtain any such Policy, Employee
shall fully cooperate in Employer's efforts, including submitting to medical
exams and tests and executing and delivering applications and information
statements.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. Confidential Information. Employee acknowledges that
Employee has been informed by Employer of Employer's policy to maintain as
secret and confidential all information and materials relating to (i) the
financial condition, operations, business and interests of Employer, (ii) the
systems, know-how, records, products, services, cost information, inventions,
computer software programs, marketing and sales techniques and/or programs,
methods, methodologies, manuals, lists and other trade secrets from time to
time acquired, sold, developed, maintained and/or used by Employer, and (iii)
the nature and terms of Employer's relationships with its clients, suppliers,
lenders, underwriters, vendors, consultants, independent contractors,
attorneys, accountants and employees (all such information and materials being
hereinafter collectively referred to as "Confidential Information"). Employee
further acknowledges that such Confidential Information is of great value
7
<PAGE> 8
to Employer and has been developed by Employer as a result of substantial
effort and expense. Therefore, Employee understands that it is reasonably
necessary to protect Employer's good will, trade secrets and business interests
that Employee agree and, accordingly, Employee does hereby agree, that Employee
will not directly or indirectly (except where authorized by the Board of
Directors, Chairman of the Board, Chief Executive Officer or President of
Employer for the benefit of Employer and/or as required in the course of
employment) at any time hereafter divulge or disclose for any purpose to any
persons, firms, corporations or other entities (hereinafter referred to
collectively as "Third Parties"), or use or cause or authorize any Third
Parties to use, any such Confidential Information, except as otherwise required
by law.
B. Employer's Materials. In accordance with the
foregoing, Employee furthermore agrees that (i) Employee will at no time retain
or remove from the premises of Employer any products, prototypes, drawings,
notebooks, software programs or discs, tapes or similar containers of software,
manuals, data, books, records, materials or documents of any kind or
description for any purpose unconnected with the strict performance of
Employee's duties with Employer and (ii) upon the cessation or termination of
Employee's employment with Employer for any reason, Employee shall forthwith
deliver or cause to be delivered up to Employer any and all drawings,
notebooks, software programs or discs, tapes or similar containers of software,
manuals, data, books, records, materials and other documents and materials in
Employee's possession or under Employee's control relating to any Confidential
Information or any other material or thing which is the property of Employer.
11. COVENANT-NOT-TO-COMPETE
In view of (a) the Confidential Information known to and to be
obtained by or disclosed to Employee, and (b) the consideration paid and
payable to Employee under this Employment Agreement, and as a material
inducement to Employer to enter into this Employment Agreement, the FMV Stock
Option Agreement and the Non-FMV Stock Option Agreement, Employee covenants and
agrees that, for as long as Employee is employed by Employer and for a period
of two (2) years after the later of (i) the date Employee ceases for any reason
to be employed by Employer and (ii) the date Employee ceases to receive any
Salary (as severance pay or otherwise) from Employer, Employee shall not,
directly or indirectly, (A) sell any products or services sold or offered by
Employer to any person or entity who is or was a client of Employer at any time
during Employee's employment with Employer and for or to whom Employer is
performing services or selling products or for or to whom Employer has
performed services or sold products at any time during the one-year period
ending on Employee's termination of employment, (B) solicit the services of, or
hire, directly or indirectly, whether
8
<PAGE> 9
on Employee's own behalf or on behalf of others, any managerial or executive
employee or account manager or programmer of Employer or who was employed by
Employer at any time during the period commencing one year prior to the
commencement of the Employment Term and ending on the date of termination of
Employee's employment, or (C) in any capacity engage in any venture,
enterprise, activity or business, passively or actively, as an owner,
consultant, adviser, participant, employee or agent, competitive with the
business of Employer anywhere within the continental United States. Employee
acknowledges that the business of Employer is national in scope, that one can
effectively compete with such business from anywhere in the continental United
States, and that, therefore, such geographical area of restriction is
reasonable in the circumstances to protect Employer's trade secrets and other
legitimate business interests.
12. EMPLOYER'S REMEDIES FOR BREACH OF SECTIONS 10 AND 11
Employee covenants and agrees that if Employee shall violate
or breach any of Employee's covenants or agreements provided for in Section 10
or 11 hereof, Employer shall be entitled to an accounting and repayment of all
profits, compensation, commissions, remunerations and benefits which Employee
directly or indirectly has realized and realizes as a result of, growing out of
or in connection with any such violation or breach. In addition, in the event
of a breach or violation or threatened or imminent breach or violation of any
provisions of Section 10 or 11 hereof, Employer shall be entitled to a
temporary and permanent injunction or any other appropriate decree of specific
performance or equitable relief (without being required to post bond or other
security) from a court of competent jurisdiction in order to prevent, prohibit
or restrain any such breach or violation or threatened or imminent breach or
violation by Employee, by Employee's partners, agents, representatives,
servants, employers or employees and/or by any Third Parties. Employer shall
be entitled to such injunctive or other equitable relief in addition to any
ascertainable damages which are suffered, together with reasonable attorneys'
and paralegals' fees and costs and other costs incurred in connection with any
such litigation, both before and at trial and at all tribunal levels. It is
understood that resort by Employer to such injunctive or other equitable relief
shall not be deemed to waive or to limit in any respect any other rights or
remedies which Employer may have with respect to such breach or violation.
13. REASONABLENESS OF RESTRICTIONS
A. Reasonableness. Employee acknowledges that any
breach or violation of Section 10 or 11 hereof will cause irreparable injury
and damage and incalculable harm to Employer and that it would be very
difficult or impossible to measure all of the
9
<PAGE> 10
damages resulting from any such breach or violation. Employee further
acknowledges that Employee has carefully read and considered the provisions of
Sections 10, 11 and 12 hereof and, having done so, agrees that the restrictions
and remedies set forth in such Sections (including, but not limited to, the
time period, geographical and types of restrictions imposed) are fair and
reasonable and are reasonably required for the protection of the business,
trade secrets, interests and good will of Employer.
B. Severability. Employee understands and intends that
each provision and restriction agreed to by Employee in Sections 10, 11 and 12
hereof shall be construed as separate and divisible from every other provision
and restriction. In the event that any one of the provisions of, or
restrictions in, Sections 10, 11 and/or 12 hereof shall be held to be invalid
or unenforceable, and is not reformed by a court of competent jurisdiction
(which a court, in lieu of striking a provision entirely, is urged by the
parties to do), the remaining provisions thereof and restrictions therein shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable provisions or restrictions had not been included. In the event
that any such provision relating to time period, geographical and/or type of
restriction shall be declared by a court of competent jurisdiction to exceed
the maximum or permissible time period, geographical or type of restriction
such court deems reasonable and enforceable, said time period, geographical
and/or type of restriction shall be deemed to become and shall thereafter be
the maximum time period or geographical area and/or type of restriction which
such court deems reasonable and enforceable.
C. Survivability. The restrictions, acknowledgements,
covenants and agreements of Employee set forth in Sections 10, 11, 12 and 13 of
this Employment Agreement shall survive any termination of this Employment
Agreement or of Employee's employment (for any reason, including expiration of
the Employment Term).
14. LAW APPLICABLE
This Employment Agreement shall be governed by and construed
pursuant to the laws of the State of Florida.
15. NOTICES
Any notices required or permitted to be given pursuant to this
Employment Agreement shall be sufficient if in writing, and delivered
personally, by commercial courier service or sent by certified mail, return
receipt requested, and sent to Employer's executive offices, to the attention
of the President, if mailed to Employer, and to Employee's then current
residence, if mailed to Employee.
10
<PAGE> 11
16. SUCCESSION
This Employment Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
heirs, assignees and/or successors in interest of any kind whatever; provided,
however, that Employee acknowledges and agrees that Employee cannot assign or
delegate any of Employee's rights, duties, responsibilities or obligations
hereunder to any other person or entity. Employer shall have the right to
assign its rights and delegate its duties under this Employment Agreement,
provided that, in the event of any such assignment, Employer shall remain
liable for all of its obligations hereunder.
17. ENTIRE AGREEMENT
This Employment Agreement constitutes the entire final
agreement between the parties with respect to, and supersedes any and all prior
and contemporaneous agreements between the parties hereto both oral and written
concerning, the subject matter hereof and may not be amended, modified or
terminated except by a writing signed by the parties hereto.
18. SEVERABILITY
If any provision of this Employment Agreement shall be held to
be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision and shall not in any way affect or render invalid or unenforceable
any other provision of this Employment Agreement, and this Employment Agreement
shall be carried out as if such invalid or unenforceable provision were not
herein contained.
19. NO WAIVER
A waiver of any breach or violation of any term, provision or
covenant herein contained shall not be deemed a continuing waiver or a waiver
of any future or past breach or violation. No oral waiver shall be binding.
20. ATTORNEYS' FEES
In the event that either of the parties to this Employment
Agreement institutes suit against the other party to this Employment Agreement
to enforce or declare any of their respective rights hereunder, the prevailing
party in such action shall be entitled to recover from the other party all
reasonable costs thereof, including reasonable attorneys' and paralegals' fees
and costs incurred before and at trial and at all tribunal levels, and whether
or not suit or any other proceeding is instituted.
11
<PAGE> 12
21. COUNTERPARTS
This Employment Agreement may be executed in counterparts,
each of which shall be an original, but both of which together shall constitute
one and the same instrument.
22. INDEPENDENT COUNSEL
EMPLOYER STRONGLY RECOMMENDS TO EMPLOYEE THAT EMPLOYEE RETAIN
INDEPENDENT LEGAL COUNSEL TO ADVISE EMPLOYEE WITH RESPECT TO THIS EMPLOYMENT
AGREEMENT BEFORE EMPLOYEE SIGNS IT.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the day and year first above written.
EMPLOYER:
PRECISION RESPONSE CORPORATION, a
Florida corporation
By: /s/ Mark J. Gordon
--------------------------------
Mark J. Gordon, Chief Executive
Officer
EMPLOYEE:
/s/ Richard N. Ferry, Jr.
------------------------------------
RICHARD N. FERRY, JR.
12
<PAGE> 1
EXHIBIT 10.30
NET LEASE
DEERWOOD PARK OF INDUSTRY, LOT #8
THIS LEASE AGREEMENT ("Lease") made as of the 1st day of May, 1996 by
and between Deerwood Realty Partners, Ltd., having an address at 1505 N.W.
167th Street, Miami, Florida 33169 ("Landlord") and Precision Response
Corporation, having an address at 1505 N.W. 167th Street, Miami, Florida 33169
("Tenant").
ARTICLE 1
PREMISES; TERM; DEFINITIONS
SECTION 1.1 PREMISES. Landlord demises and leases to Tenant, and
Tenant leases and takes from Landlord, premises legally described on Exhibit
"A" ("Premises").
SECTION 1.2 TERM. The term of the Lease ("Lease Term") shall
commence as of the date of the acquisition of the Premises by Landlord
("Commencement Date") and shall expire on the last day of the month following
the fifth anniversary of the Commencement Date. Tenant has one option to
extend the Lease Term for a period of five years on the same terms as are
contained in this Lease other than the right of further extension. In no event
shall the Lease Term be extended beyond 10 years and 30 days from the
Commencement Date. Any exercise of Tenant's option to extend the Lease Term
shall be effective only if made at least 240 days prior to the then termination
date of the Lease provided Tenant is not in default under this Lease at the
time of exercise of such option and at the time of commencement of the extended
term. Time shall be of the essence by the latest date upon which Tenant may
exercise its option. Upon the exercise of the option, the phrase "Lease Term"
shall mean the term of this Lease as extended by the exercise of such option.
SECTION 1.3 DEFINITIONS. As used in this Lease, the following terms
shall have the meanings set forth below:
(a) "Interest Rate" means the lesser of (i) the maximum
rate per annum permitted to be collected from the Party obligated for payment
or (ii) 18% per annum.
(b) "Lease Year" means a period of 365 consecutive days
(366 in any leap year); the first Lease Year shall commence on the first day of
the month following the Commencement Date and each Lease Year thereafter shall
commence on an anniversary of the first Lease Year.
(c) "Legal Requirements" includes: all ordinances,
orders, rules, regulations and requirements of all federal, state and municipal
governments, courts; rules and regulations of the Insurance Service Office, any
insurance rating organization or other body exercising similar functions; and
the provisions of applicable insurance policies in effect with respect to the
Premises.
(d) "Mortgage" means any mortgage, deed of trust or
security instrument which creates a lien on or interest in the Premises.
<PAGE> 2
(e) "Mortgagee" shall mean the holder of any Mortgage.
(f) "Parties" shall mean both, and "Party" shall mean
either, Landlord and Tenant.
(g) "Tenant" shall mean the party named as tenant in this
Lease and any party succeeding to the interest of Tenant in this Lease in
accordance with its provisions.
ARTICLE 2
RENT
SECTION 2.1 RENT AND ADDITIONAL RENT. Tenant covenants and agrees to
pay to Landlord at the address of Landlord specified in or furnished pursuant
to the terms of this Lease, during the Lease Term: rental at the rate of
$30,000.00 per annum in monthly installments of $2,500.00 in advance on the
first day of each month ("Rent"); together with costs, expenses and other
payments which Tenant, by virtue of any of the provisions of this Lease,
assumes or agrees to pay ("Additional Rent"). The Rent and Additional Rent
shall be paid to Landlord without notice, demand, abatement, deduction, or
set-off. Any installment of Rent or Additional Rent not paid when due shall
thereafter bear, as a "late charge", interest at the Interest Rate. Such late
charge shall be deemed to be Additional Rent. In the event that the
Commencement Date or expiration date of this Lease is on a date other than the
first day and last day respectively of any month, then the Rent for such month
shall be prorated.
SECTION 2.2 COST OF LIVING ADJUSTMENT. For the period beginning with
the commencement of the second Lease Year and on the commencement of each Lease
Year thereafter, Rent shall be subject to an increase in proportion to the
increase in the U.S. Bureau of Labor Statistics, Consumer Price Index for Urban
Wage Earners and Clerical Employees (all items, U.S. City Average 1982-84=100)
("Index"). Rent for each Lease Year beginning with the second Lease Year shall
be computed by multiplying the Rent payable for the immediately preceding year
("Prior Year Rent") by a fraction, the numerator of which shall be the amount
of the Index as of the month of February immediately prior to the Lease Year
for which an adjustment is being made ("Current Index") and the denominator of
which is the Index as of February of the immediately prior year ("Prior
Index"). The computation expressed in formula terms is as follows:
New Rent = Prior Year Rent x Current Index
-------------
Prior Index.
Should the Index be discontinued, Landlord and Tenant shall agree on a
substitute index or formula having the same general acceptance as to use and
reliability as the Index. If the Parties are unable to agree to a substituted
index, then the same shall be submitted to arbitration pursuant to and in
accordance with the rules of the American Arbitration Association in Dade
County, Florida. This provision shall apply during any extension of the Term
pursuant to Section 1.2.
SECTION 2.3 NET LEASE. It is the purpose and intent of Landlord and
Tenant that the Rent and Additional Rent shall be absolutely net to Landlord
during the entire Lease Term. To such end, any and all costs, expenses and
obligations of every kind and nature whatsoever (except interest and
2
<PAGE> 3
principal payable under any Mortgage) relating to the Premises which may arise
or may become due during the Lease Term shall be paid by Tenant and Landlord
shall be indemnified and saved harmless by Tenant from and against the same.
No abatement, diminution or reduction of Rent or Additional Rent, or any other
charges or compensation shall be claimed by or allowed to Tenant, or any
persons claiming under Tenant, under any circumstances, whether for
inconvenience, discomfort, interruption of business or otherwise, arising from
the making of alterations, changes, additions, improvements or repairs to the
Premises or any part thereof by virtue or because of any present or future
Legal Requirements, or by virtue or arising from, and during, the restoration
of the Premises after destruction or damage by fire or other cause or by any
taking or condemnation of the Premises.
ARTICLE 3
IMPOSITIONS
SECTION 3.1 TENANT'S OBLIGATION. Tenant shall pay when due all of the
following, referred to collectively as "Impositions" and individually as an
"Imposition": (a) all real estate taxes, special or general assessments, water
and sewer rents and other all governmental charges of whatever nature, imposed
against the Premises, any Personal Property or any rent; (b) all sales, use and
similar taxes which at any time may be levied, assessed or payable on account
of the leasing or use of the Premises; and (c) all charges for utilities
(including water, sewer, garbage and electricity) and communications services
rendered to or used on the Premises. The provisions of this Section shall not
require Tenant to pay any municipal, state or federal income taxes assessed
against Landlord or any municipal, state or federal capital levy, estate,
succession, inheritance, franchise or transfer taxes of Landlord. Should any
assessments be payable in installments, Tenant may pay same in installments.
Tenant shall furnish to Landlord bills of the appropriate taxing authority
respecting any Imposition marked "PAID" or otherwise reflecting and evidencing
that the same has been paid. If there is any change in the system of taxation
which is in substitution for, or in addition to, the present system and should
any governmental authority having jurisdiction over all or any portion of the
Premises impose a tax and/or assessment of any kind or any nature upon,
against, measured by or with respect to the rentals payable to Landlord under
this Lease or with respect to the ownership of the Premises by Landlord (or any
individual or entity forming the Landlord), then such tax and/or assessment
shall be deemed to constitute "Impositions" for the purposes of this Lease and
for which Tenant is responsible. Impositions payable for the tax year in which
this Lease commences and/or expires shall be prorated between Landlord and
Tenant.
SECTION 3.2 RIGHT TO CONTEST. Tenant may contest or review any
Impositions provided (a) Tenant deposits with Landlord such security as
Landlord reasonably requests, (b) such contest is conducted in good faith and
would not subject the Premises to the danger of being lost or forfeited and (c)
such contest would not subject Landlord to any fine or penalty.
SECTION 3.3 ESCROWS. If, under any Mortgage, there is a provision
requiring advance deposits of Impositions with such Mortgagee, then Tenant
agrees to make such deposits. In the event no Mortgage requires deposits for
Impositions, Landlord may require Tenant to make such payments to Landlord at
any time during the Lease Term. Upon demand from Landlord, Tenant agrees to
deposit with Landlord, on the first day of each and every month during so much
of the Lease Term as this Section is operative, one-twelfth of the Impositions
demanded by Landlord, on the first day of each and every month during so much
of the Lease Term as this Section is operative, and shall deposit,
3
<PAGE> 4
at least 30 days prior to the due date for any such Impositions, such
additional deposit may be necessary so that Landlord shall have received from
Tenant amounts sufficient to pay such Impositions in full when due. The
deposits required under this Section 3.3 shall be deemed Additional Rent.
SECTION 3.4 REDUCTIONS IN ASSESSED VALUE.
(a) Tenant shall have a right to seek a reduction in the
valuation of the Premises assessed for tax purposes and to prosecute any action
or proceeding in connection therewith. Provided this Lease is in full force
and effect, Tenant shall be authorized to collect and retain any tax refund
obtained by virtue of reduction in the valuation of the Premises by Tenant's
efforts. Landlord shall not be required to join in any such proceedings unless
the provisions of any law, rule or regulation in effect at the time shall
require that such proceedings be brought by and/or in the name of Landlord or
any owner of the Premises, in which event Landlord shall join in such
proceedings or permit the same to be brought in Landlord's name. Landlord
shall not be subject to any liability for the payment of any costs or expenses
in connection with any such proceedings and Tenant shall indemnify and same
harmless Landlord from any such costs, expenses and attorneys' fees.
(b) Landlord may, if Landlord desires, endeavor at any
time or times to obtain a lowering of the assessed valuation upon the Premises
for the purpose of reducing taxes. Tenant will cooperate in effecting such a
reduction and will pay the costs of such up to an amount equal to the tax
savings.
ARTICLE 4
SURRENDER
SECTION 4.1 CONDITION OF PREMISES. Tenant shall on the last day of
the Lease Term or upon an earlier termination of this Lease, or upon any
re-entry into the Premises pursuant to Article 18, surrender the Premises to
Landlord without delay in good order, condition and repair, reasonable wear and
tear excepted. The Premises shall be surrendered free and clear of all liens
and encumbrances other than those, if any, created by Landlord, and without any
payment or allowance for any personalty on the Land at the time of the
surrender, whether or not the same, or any part thereof, shall have been paid
for or purchased by Tenant.
SECTION 4.2 TENANT'S PROPERTY. Any personal property, fixtures and
furnishings of Tenant remaining on the Premises after Tenant vacates may, at
the option of Landlord, be deemed to have been abandoned by Tenant and either
may be retained by Landlord as Landlord's property or be disposed of without
accountability in any manner as Landlord may see fit. Tenant shall be entitled
to remove Tenant's personal property if Tenant repairs all damage caused by
such removal. Landlord shall not be responsible for any loss or damage
occurring to any property owned by Tenant or any occupant of the Premises.
ARTICLE 5
INSURANCE
4
<PAGE> 5
SECTION 5.1 SCOPE OF COVERAGE. During the Lease Term, Tenant shall
continuously and at all times provide and keep in force:
(a) insurance against liability for personal injury and
property damage in such amounts as Landlord may from time to time reasonably
require, but in no event less than $3,000,000 for personal injury and $500,000
for property damage;
(b) workmen's compensation insurance during such time as
any work is being performed on the Premises;
(c) such other insurance, coverage and amounts as may
from time to time by required by Landlord which other insurance shall insure
against such other insurable hazards as at the time are commonly insured
against in the case of premises similarly situated.
SECTION 5.2 REQUIRED PROVISIONS. All insurance provided by Tenant
shall be carried in favor of Landlord, Tenant, all Mortgagees and any other
party or parties designated by Landlord, as their respective interests may
appear. Hazard insurance shall provide that loss, if any, shall be payable to
the holder of a Mortgage under a standard mortgagee clause. All insurance shall
be taken in such responsible companies and such forms of policies as Landlord
shall approve. The original insurance policies shall be delivered to Landlord,
or, when requested, to the holder of any Mortgage, in which case copies of the
policies or certificates of such insurance shall be delivered by Tenant to
Landlord. Each of the policies shall contain (i) the agreement of the insurer
to give Landlord and Mortgagee, if any, at least 30 days notice prior to
cancellation or change in said policies or any one of them, (ii) waiver of
subrogation rights against Landlord by Tenant's insurers, (iii) agreement that
said policies are primary and non-contributing with any insurance that may be
carried by Landlord, (iv) a statement that the insurance shall not be
invalidated should any insured waive in writing prior to any loss any or all
right of recovery against any party for loss accruing to the property described
in the insurance policy, and (v) a provision that no act or omission of Tenant
shall affect or limit the obligation of the insurance company to pay the amount
of any loss sustained. Tenant shall procure policies for all such insurance for
a period of not less than one year and shall deliver to Landlord and/or
Landlord's designee evidence of the payment of premiums. Tenant shall procure
renewals from time to time at least 60 days prior to expiration of any policy.
Upon the expiration of the Lease Term, provided Tenant shall not then be in
default under this Lease, Landlord shall apportion and pay to Tenant the
unearned premiums on all transferable insurance then carried by Tenant as
required by this Article 5.
SECTION 5.3 ESCROW. If, under any Mortgage, there is a provision
requiring advance deposits for insurance premiums for insurance maintained with
respect to the Premises, then Tenant agrees to make such deposits to Landlord.
In the event no Mortgage requires such deposits Landlord may, upon demand,
require the same at any time during the Lease Term. Upon such demand, Tenant
agrees to deposit with Landlord, on the first day of each month, during so much
of the Lease Term as this Section is operative, one-twelfth of the insurance
premiums for insurance then in effect and, at least 30 days prior to the due
date for payment, the amount of any premiums necessary to keep the insurance
required in full force and effect after allowance for amounts previously
deposited.
ARTICLE 6
5
<PAGE> 6
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
If Tenant at any time fails to fulfill any of Tenant's obligations,
including, without limitation, maintenance or delivery of any of the insurance
policies required by Article 5, or should Tenant fail to make any other payment
or perform any other act on Tenant's part to be made or performed, then
Landlord, after 10 days' notice to Tenant (or without notice in case of an
emergency) and without waiving or releasing Tenant from any obligation in this
Lease, may (but shall be under no obligation to) make any other payment or
perform any other act on Tenant's part to be made or performed under this Lease
and enter the Premises for such purpose. All costs and expenses incurred by
Landlord for such performance, including reasonable attorneys' fees, together
with interest thereon at the Interest Rate from the respective dates of
Landlord's payment, shall constitute Additional Rent and shall be paid by
Tenant to Landlord on demand.
ARTICLE 7
MAINTENANCE AND REPAIR
SECTION 7.1 TENANT'S OBLIGATION. Throughout the Lease Term, and
notwithstanding any Legal Requirements requiring Landlord to maintain and
repair the Premises (which such requirements are expressly waived by Tenant),
Tenant will maintain the Premises in good condition and repair, subject to
ordinary wear and tear, and in a safe and clean condition. Tenant will make all
necessary or desirable repairs, exterior, structural, non-structural, ordinary,
extraordinary and foreseeable and unforeseeable. Upon the commencement of any
work or alteration or repair, Tenant shall provide Landlord notice of same and
Landlord shall be permitted to post on and affix to the Premises proper notice
of non-responsibility. All repairs made by Tenant shall be, to the extent
possible, identical or superior in quality, value and class to the original
work. Tenant shall comply with the provisions of Article 9 in making repairs
as if they were Alterations. The term "repairs" shall include, but not be
limited to, all necessary replacements, renewals, alterations, additions and
betterments to the Premises.
SECTION 7.2 AS IS CONDITION. Landlord shall not be required to (i)
furnish any services or facilities to the Premises. Tenant assumes the full and
sole responsibility for the condition, operation, repair, replacement,
maintenance and management of the Premises. Tenant accepts the Premises "as is"
subject to existing zoning, existing state of title, any Mortgage and existing
condition of the Premises. Tenant waives any defects in the Premises and any
failure by Landlord to deliver the Premises in good condition.
ARTICLE 8
COMPLIANCE; HAZARDOUS MATERIALS
SECTION 8.1 COMPLIANCE WITH LEGAL REQUIREMENTS. Tenant will
promptly comply with all present and future Legal Requirements, foreseen or
unforeseen, ordinary as well as extraordinary, which may be applicable to the
Premises or to the use or manner of use of the Premises or to the owners,
tenants or occupants thereof, whether or not such Legal Requirements shall
necessitate structural changes or improvements or interfere with the use and
enjoyment of the Premises.
6
<PAGE> 7
SECTION 8.2 HAZARDOUS MATERIALS. Tenant shall not, without
the prior consent of Landlord, cause or permit, knowingly or unknowingly, any
Hazardous Material to be brought or remain upon, kept, used, discharged,
leaked, or emitted in or about, or treated at the Premises. "Hazardous
Material" means any hazardous, toxic or radioactive substance, material, matter
or waste which is or becomes regulated by any federal, state or local law,
ordinance, order, rule, regulation, code or any other governmental restriction
or requirement, and shall include asbestos, petroleum products and those items
included within the terms "Hazardous Substance" and "Hazardous Waste" as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et
seq. To obtain Landlord's consent, Tenant shall prepare an "Environmental
Audit" for Landlord's review. Such Environmental Audit shall list: (1) the
name(s) of each Hazardous Material and a Material Safety Data Sheet (MSDS) as
required by the Occupational Safety and Health Act; (2) the volume proposed to
be used, stored and/or treated at the Premises (monthly); (3) the purpose of
such Hazardous Material; (4) the proposed on-premises storage location(s); (5)
the name(s) of the proposed off-premises disposal entity; and (6) an emergency
preparedness plan in the event of a release. Additionally, the Environmental
Audit shall include copies of all required federal, state, and local permits
concerning or related to the proposed use, storage, or treatment of any
Hazardous Material at the Premises. Tenant shall submit a new Environmental
Audit whenever it proposes to use, store, or treat a new Hazardous Material at
the Premises or when the volume of existing Hazardous Materials to be used,
stored, or treated at the Premises expands by 10% during any 30 day period. If
Landlord, in its reasonable judgment, finds the Environmental Audit acceptable,
then Landlord shall deliver to Tenant Landlord's consent. Notwithstanding such
consent, Landlord may revoke its consent upon: (1) Tenant's failure to remain
in full compliance with applicable environmental permits and/or any other
requirements under any federal, state, or local law, ordinance, order, rule,
regulation, code or any other governmental restriction or requirement
(including but not limited to CERCLA and RCRA), related to environmental
safety, human health, or employee safety; (2) Tenant's business operations pose
or potentially pose a human health risk to other Tenants; or (3) Tenant expands
its use, storage, or treatment of any Hazardous Material in a manner
inconsistent with the safe operation of a shopping center. Should Landlord
consent to Tenant bringing, using, storing or treating any Hazardous Material
in or upon the Premises, Tenant shall strictly obey and adhere to any and all
federal, state or local laws, ordinances, orders, rules, regulations, codes or
any other governmental restrictions or requirements (including but not limited
to CERCLA and RCRA), which in any way regulate, govern or impact Tenant's
possession, use, storage, treatment or disposal of said Hazardous Material. In
addition, Tenant represents and warrants to Landlord that (1) Tenant shall
apply for and remain in compliance with any and all federal, state or local
permits in regard to any Hazardous Material; (2) Tenant shall report to any and
all applicable governmental authorities any release of reportable quantities of
any Hazardous Material as required by any and all federal, state or local laws,
ordinances, orders, rules, regulations, codes or any other governmental
restrictions or requirements; (3) Tenant, within 5 days of receipt, shall send
Landlord a copy of any notice, order, inspection report, or other document
issued by any governmental authority relevant to Tenant's compliance status
with environmental or health and safety laws; and, (4) Tenant shall remove from
the Premises all Hazardous Materials at the termination of this Lease.
In addition to, and in no way limiting, Tenant's duties and
obligations as set forth in this Lease, should Tenant breach any of its duties
and obligations as set forth in this Section, or if the presence of any
Hazardous Material on the Premises results in contamination of the Premises,
any
7
<PAGE> 8
land other than the Land, the atmosphere, or any water or waterway (including
groundwater), or if contamination of the Premises by any Hazardous Material
otherwise occurs for which Tenant is otherwise legally liable to Landlord for
resulting damages, Tenant shall indemnify, save harmless and, at Landlord's
option and with attorneys approved by Landlord, defend Landlord, and its
contractors, agents, employees, partners, officers, directors, and mortgagees,
if any, from any and all claims, demands, damages, expenses, fees, costs,
fines, penalties, suits, proceedings, actions, causes of action, and losses of
any and every kind and nature (including, without limitation, diminution in
value of the Premises, damages for the loss or restriction on use of the
rentable or usable space or of any amenity of the Premises and sums paid in
settlement of claims and for attorney's fees, consultant fees and expert fees,
which may arise during or after the Lease Term or any extension thereof as a
result of such contamination). This includes, without limitation, costs and
expenses, incurred in connection with any investigation of site conditions or
any cleanup, remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision because the
presence of any Hazardous Material on or about the Premises, or because of the
presence of any Hazardous Material anywhere else which originated or otherwise
emanated from Tenant or the Premises. Without limiting the foregoing, if the
presence of any Hazardous Material on or about the Premises caused or permitted
by Tenant results in any contamination of the Premises, Tenant shall, at its
sole expense, promptly take all actions and expense as are necessary to return
the Premises and/or the Center to the condition existing prior to the
introduction of any such Hazardous Material to the Premises; provided, however,
that Landlord's approval of such actions shall first be obtained.
ARTICLE 9
ALTERATIONS
SECTION 9.1 ALTERATIONS. Tenant shall have the right, at any
time and from time to time during the Lease Term, to make changes, alterations
improvements and additions (collectively and individually referred to as
"Alterations") in or to the Premises, provided Tenant shall first secure the
prior consent of Landlord and the holder of any Mortgage requiring consent.
Landlord may withhold Landlord's consent to any Alterations in Landlord's
unfettered discretion. Notwithstanding the preceding sentence, Tenant may
improve the Premises for use as a parking area by grading, compacting and
graveling or paving the Premises. All Alterations are and shall be deemed to
immediately become part of the Premises subject to compliance with the
following conditions:
(a) Except as indicated in this section, no Alterations
shall be undertaken without the prior consent of Landlord and the holder of any
Mortgage requiring consent. Landlord may withhold Landlord's consent to
structural changes, including changes in the plumbing, heating, cooling and
electrical systems, in Landlord's complete discretion but Landlord shall not
unreasonably withhold Landlord's consent to nonstructural changes. Should any
dispute between the Parties arise regarding whether a given change is
structural or nonstructural, the determination of Landlord on the issue shall
be final.
(b) No Alterations shall be undertaken until Tenant shall
have procured and paid for all required permits and authorizations of all
municipal departments and governmental subdivisions having jurisdiction.
Landlord shall join in the application for such permits or authorizations
whenever such action is necessary, but shall be indemnified and held harmless
from
8
<PAGE> 9
and against any and all loss, expense, liability and attorneys' fees resulting
from Landlord's joinder in such application.
(c) Except for construction of the parking area described
above, any structural or nonstructural Alterations involving an estimated cost
of more than $20,000.00 shall be conducted under the supervision of an
architect or engineer selected by Tenant and approved by Landlord (such
approval not to be unreasonably withheld). No structural Alterations shall be
made except in accordance with detailed plans and specifications and cost
estimates prepared and approved in writing by such architect or engineer and by
Landlord.
(d) Any Alterations shall, when completed, be of such a
character as not to reduce the value of the Premises below its value
immediately prior to such Alterations.
(e) Any Alterations shall be made promptly and in a
first-class and workmanlike manner and in compliance with all applicable Legal
Requirements.
(f) The cost of such Alterations shall be paid promptly
so that the Premises shall at all times be free of liens for labor and material
supplied or claimed to have been supplied to the Premises.
(g) Tenant shall maintain during the period of such
Alterations workmen's compensation insurance covering all persons employed in
connection with the work being performed and contractor's liability insurance
for the mutual benefit of Tenant and Landlord with limits of not less than
$2,000,000 in the event of bodily injury to one person, $5,000,000 in the event
of bodily injury to any number of persons in any one occurrence, and $500,00
for property damage. All such insurance shall be issued by a company or
companies approved by Landlord, such approval not to be unreasonably withheld.
All policies or certificates therefor, together with evidence satisfactory to
Landlord of payment of premiums shall be delivered to Landlord, or, when
appropriate, to any Mortgagee, in which case copies of the policies or
certificates of such insurance shall be delivered by Tenant to Landlord.
ARTICLE 10
DISCHARGE OF LIENS
SECTION 10.1 NO LIENS. Tenant will not create or permit to be created
or to remain and will discharge any lien, encumbrance of charge which might be
or become a lien, encumbrance of charge upon any part of the Premises. Tenant
will not suffer any other matter or thing whereby Landlord's estate, right and
interest in the Premises might be impaired. Tenant shall not encumber, pledge
or otherwise mortgage Tenant's interest in the Premises or in this Lease and
shall not pledge any Personalty. If any construction lien is filed against any
part of the Premises, Tenant, within 30 days after notice of the filing, will
cause it to be discharged of record by payment, deposit, bond, order of a court
of competent jurisdiction or otherwise. Should Tenant fail to cause such lien
to be discharged within such period, then, in addition to any other right or
remedy, Landlord may, but shall not be obligated to, discharge the same either
by payment of the amount claimed due or by deposit or by bonding proceedings.
In such event, Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
pay the amount of
9
<PAGE> 10
the judgment in favor of the lienor with interest, costs and allowances. Any
amount so paid by Landlord, and all costs and expenses incurred by Landlord in
connection therewith, together with interest at the Interest Rate from the
respective dates of payment by Landlord, shall constitute Additional Rent
payable by Tenant to Landlord on demand.
SECTION 10.2 NOTICE OF NON-RESPONSIBILITY. Nothing in this Lease
shall be deemed or construed in any way as constituting the consent or request
of Landlord, express or implied, by inference or otherwise, to any contractor,
subcontractor, laborer or material man for any specific improvements,
alteration to or repair of the Premises or any part thereof, nor as giving
Tenant any right, power or authority to contract for or permit the rendering of
any services or the furnishing of any materials that would give rise to the
filing of any lien against the Premises.
ARTICLE 11
USE OF PREMISES
SECTION 11.1 PERMITTED USE. Tenant shall use the Premises solely as a
parking lot for its telemarketing business located at the Deerwood Park of
Industry and related lawful purposes. Tenant will not suffer any act to be
done or any condition to exist on any part of the Premises, or any article to
be brought thereon, which (i) may be dangerous, unless safeguarded as required
by law, (ii) may, in law, constitute a nuisance, public or private, (iii) may
make void or voidable any insurance then in force, or (iv) may in any way
endanger the continued use of the Premises for retail purposes. Tenant shall
not use or permit the use of the Premises or any part thereof for any purpose
which in the reasonable opinion of Landlord would adversely affect their then
value or character.
SECTION 11.2 NO DEDICATION. Tenant shall not suffer or permit any
portion of the Premises to be used by the public as such, without restriction,
or in such manner as might reasonably make possible a claim or claims of
adverse usage or adverse possession by the public, as such, or of implied
dedication of the Premises.
ARTICLE 12
ASSIGNMENT AND SUBLETTING
SECTION 12.1 CONSENT REQUIRED. Tenant shall not have the right to
assign this Lease or sublet the Premises at any time without prior consent of
Landlord, which consent may be withheld in Landlord's sole and unfettered
discretion.
SECTION 12.2 TENANT'S OBLIGATION. In the event Landlord consents to
any sublease, Tenant will perform and observe all of the terms to be performed
or observed by Tenant as sublandlord under all present and future subleases.
Tenant will indemnify and hold Landlord harmless from any and all liabilities,
claims and causes of action arising under any sublease. Tenant assumes and
shall be responsible for and liable for all acts and omissions on the part of
any sublessee, and any violation of any of the terms, of this Lease, whether by
act or omission, by any sublessee shall constitute a violation and breach by
Tenant. Landlord's consent to any assignment or sublease shall not be deemed
of waiver of the requirement of Landlord's consent to any further assignment or
subletting.
10
<PAGE> 11
SECTION 12.3 ASSIGNMENT OF SUBLEASES. As additional security to
Landlord under this Lease, Tenant assigns to Landlord, subject to prior
assignments in favor of holders of any existing Mortgage, (i) all of Tenant's
right, title and interest in and to all subleases now or subsequently in effect
and (ii) all rents due or to become due thereon. This assignment is
conditional and not to become operative until the occurrence of an Event of
Default. Upon such occurrence, Landlord shall apply any net amount actually
collected and received by it from subtenants to the Rent and Additional Rent
due under this Lease. No collection of such amounts by Landlord from any
assignee or sublessee shall constitute a waiver of any of the provisions of
this Lease or an acceptance of the assignee or sublessee as a tenant or a
release of Tenant from performance by Tenant of its obligations under this
Lease. Tenant will not directly or indirectly collect or accept any payment or
rent under any sublease more than one month in advance of the date when the
same shall become due. Upon the expiration of the Lease Term or sooner
termination of this Lease, Tenant shall forthwith pay to Landlord the then
amount of any sublessee's prepaid rents, security deposits and accrued interest
thereon, if any, which have been received therefor by Tenant and have not been
theretofore applied to defaults in accordance with the respective subleases,
and shall also assign and deliver to Landlord all then existing subleases.
Tenant agrees to indemnify and save Landlord harmless from and against any
claim or lien against Landlord or the Premises for the return of any security
deposits under any subleases, unless such securities have been turned over to
Landlord pursuant to this Section. Tenant may bring proceedings against any
sublessee in Tenant's own name and in the name of Landlord, provided, however,
that Landlord incurs no cost or expenses thereby.
ARTICLE 13
INDEMNIFICATION OF LANDLORD
SECTION 13.1 INDEMNITY BY TENANT. Tenant will indemnify and save
harmless Landlord against and from all liabilities, obligations, damages,
penalties, claims, costs, charges and expenses, including reasonable attorneys'
fees, which may be imposed upon, incurred by or asserted against Landlord or
which involve Landlord directly or indirectly during the Lease Term for: (a)
any work or thing done in, on or about the Premises; (b) any use, non-use,
possession, occupation, condition, operation, maintenance or management of the
Premises; (c) any negligence on the part of Tenant or any of its agents,
contractors, servants, employees, licensees, invitees, tenants or occupants;
(d) any injury or death to any person or damage to or loss of property
occurring in, on or about the Premises; and (e) any failure on the part of
Tenant to perform or comply with any provisions of this Lease.
SECTION 13.2 DEFENSE OF LANDLORD. If any action or proceeding is
brought against Landlord by reason of any claim described in Section 13.1,
Tenant, upon notice from Landlord, will either defend such action or proceeding
with counsel approved by Landlord, such approval not to be unreasonably
withheld, or satisfy the claim.
ARTICLE 14
DAMAGE OR DESTRUCTION
SECTION 14.1 TERMINATION OR RESTORATION. If the Premises shall be
destroyed or damaged by fire or other casualty of any kind (including any
casualty for which insurance was not obtained or obtainable), including any
damage caused by Tenant, Tenant shall give Landlord immediate notice and
promptly repair, and restore the Premises. If Tenant is not in default,
Landlord shall make
11
<PAGE> 12
available all proceeds received by Landlord under insurance policies covering
such loss provided for in Article 5 on such terms as Landlord shall reasonably
determine. Landlord shall disburse the proceeds to such parties making the
repairs as restoration shall progress, or to Tenant if Tenant shall make or pay
for such repairs or rebuilding. If the insurance proceeds are insufficient to
repair or rebuild, Tenant shall nevertheless provide and pay the additional
sums required. Any excess proceeds shall be paid to Landlord. Landlord's
agreement to make available insurance proceeds shall be subject to the rights
of any Mortgagee, including, without limitation, the right to apply all or part
of such insurance proceeds towards its Mortgage.
SECTION 14.2 EFFECT ON LEASE. Except as otherwise specifically
provided, this Lease shall not terminate or be affected in any manner by reason
of damage or destruction to the Premises, the untenantability of the Premises
or any other reason whatsoever. Tenant waives any rights now or subsequently
conferred upon Tenant by statute or otherwise to quit or surrender this Lease
or the Premises, or to any suspension, diminution, abatement or reduction of
rent on account of any such destruction or damage.
ARTICLE 15
CONDEMNATION
SECTION 15.1 If the whole or substantially all of the Premises shall be
taken or condemned by any competent authority by the exercise of any right of
eminent domain or in condemnation proceedings ("Taking"), then this Lease and
the Lease Term shall cease and terminate as of the date upon which title vests
in such authority. The Rent shall be apportioned and paid up to said date. For
the purpose of this Article "substantially all of the Premises" shall be deemed
to have been taken or condemned if the portion not taken, would not, if
repaired or reconstructed, constitute a complete rentable parking lot building
with space approximately similar to that existing on the date hereof to enable
the conduct of business substantially as it is now being conducted as of this
date.
SECTION 15.2 WAIVER OF CLAIMS TO AWARD. All awards for such Taking
shall be paid to Landlord. Tenant shall not be entitled to any part of any
award and Tenant waives any claim for the "bonus" value of Tenant's leasehold
interest, loss of business, or any other claim Tenant might be able to assert
against Landlord or the condemning authority by reason of such Taking.
SECTION 15.3 PARTIAL CONDEMNATION. In the event of a partial Taking
not involving substantially all of the Premises, the Rent and Additional Rent
thereafter due and payable shall not be reduced or abated. Tenant shall
proceed diligently to repair and restore any remaining part of the Premises not
so taken so that the latter shall be a complete parking lot in first-class
condition and repair. Provided Tenant is not in default this Lease, Landlord
agrees to make available the award received, less all necessary and proper
expenses paid or incurred in the Taking, for the cost of repair and restoring
for use and occupancy the part of the Premises not so taken. The repairs shall
be done in accordance with and subject to the provisions of Article 9; the
award shall be disbursed in the manner set forth in Article 14 with respect to
insurance proceeds. Any balance of the award thereafter remaining shall be the
sole and exclusive property of Landlord. Landlord's agreements contained in
this Section shall be subject to the rights of any Mortgagee, including,
without limitation, the right to apply all or part of such award toward its
Mortgage. In the event of any such application, Tenant shall nevertheless
repair and restore the Premises as provided in this Section.
12
<PAGE> 13
SECTION 15.4 TEMPORARY TAKING. If the temporary use of the whole or
any part of the Premises shall be taken at any time during the Lease Term for
any public or quasi-public purpose by any lawful power or authority, by the
exercise of the right of condemnation or of eminent domain, or by agreement
between Tenant and those authorized to exercise such right, Tenant shall give
prompt notice thereof to Landlord and the Lease Term shall not be reduced or
affected in any way. Tenant shall continue to pay in full the Rent and
Additional Rent. Tenant shall be entitled to, and shall receive the entire
award for such Taking (whether paid by way of damages, rent or otherwise)
unless the period of occupation and use by the sovereign shall extend beyond
the Lease Term, in which case the award made for such Taking shall be
apportioned between Landlord and Tenant. Any award payable to Tenant shall be
held by Landlord in a separate account as security for Tenant's performance of
Tenant's obligations under this Lease and shall be applied monthly to payment
of Rent and Additional Rent. At the termination of any such use or occupation
of the Premises by the sovereign all damages and awards therefor arising out of
the failure of the sovereign all damages and awards therefor arising out of the
failure of the sovereign to repair and restore the Premises at the expiration
of the such temporary Taking. Any recovery or sum received by Tenant as an
award or compensation for physical damage to the Premises caused by and during
the temporary Taking shall be deemed a trust fund held by the party who
receives the same, to be used exclusively for the purpose of repairing or
restoring such damage, any excess to be retained by Landlord.
ARTICLE 16
SUBORDINATION
This Lease and the rights of Tenant are subordinate to any Mortgage
now or subsequently affecting the Premises and any renewals, extensions,
modifications, or replacements thereof. This subordination shall be automatic
and self-operative. Tenant shall, on demand, at any time or times, execute,
acknowledge and deliver to Landlord any and all instruments requested to
confirm, acknowledge or perfect such subordination.
ARTICLE 17
INSPECTION BY LANDLORD
SECTION 17.1 ACCESS. Tenant will permit Landlord and Landlord's
authorized representatives to enter the Premises at all reasonable times for
the purpose of (i) inspecting, (ii) making any necessary repairs and performing
any work that may be necessary by reason of Tenant's failure to make any
repairs or perform any work and (iii) performing any tests or environmental
audits, including without limitation, any Phase 2 environmental audit.
Landlord shall not be under any duty to do any such work and performance by
Landlord shall not constitute a waiver of Tenant's default in failing to
perform the same. The costs of any tests and/or environmental audits shall be
paid by Tenant if they disclose a condition requiring repair, replacement or
remediation.
SECTION 17.2 RIGHT TO EXHIBIT PREMISES. Landlord shall have the
right to enter the Premises at all reasonable times during usual business hours
at any time during the Lease Term for the purpose of showing the same to
prospective purchasers, lessees, mortgagees or others.
SECTION 17.3 EXCLUSIVE CONTROL. Tenant is and shall be in exclusive
control and possession of the Premises. Landlord shall in no event be liable
for any injury or damage to any
13
<PAGE> 14
property or to persons on or about the Premises, nor for any injury or damage
to any property of Tenant, or of any other person. The provisions permitting
Landlord to enter and inspect the Premises are made for the purpose of enabling
Landlord to determine whether Tenant is complying with the Lease and to render
performance upon Tenant's failure.
ARTICLE 18
DEFAULT; CONDITIONAL LIMITATIONS; NO WAIVER
SECTION 18.1 EVENTS OF DEFAULT. Each of the following shall be an
Event of Default:
(a) A decree or order by a court or determination by an
appropriate regulatory or governmental agency that Tenant is bankrupt or
insolvent, or Tenant's instituting of proceedings to be adjudged a voluntary
bankrupt, or consenting to the filing of a bankruptcy proceeding against
Tenant, or Tenant's invoking any law for the aid of debtors, or consenting to
the filing of any such petition, or making an assignment for the benefit of
creditors, or admitting in writing Tenant's inability to pay its debts
generally as they become due;
(b) If Tenant fails to pay Landlord any rent or
Additional Rent under this Lease as and when the same become due and payable;
(c) If Tenant shall fail to make any deposit required
under Articles 3 or 5 as and when the same shall become due and payable;
(d) If Tenant fails to perform any of the other
obligation of Tenant other than those specified in this Article, and in any
such case non-performance continues for a period of 30 days after notice to
Tenant, or, if such performance cannot be reasonably performed within such 30
day period, Tenant fails to commence such performance within such 30 day period
or thereafter fails to diligently proceed therewith to completion;
(e) If Tenant vacates or abandons the Premises;
(f) If this Lease or the estate of Tenant hereunder is
transferred to or pass to any other person or party, or if the Premises are
sublet;
(g) If a levy under execution or attachment is made
against Tenant and Tenant's property and such execution or attachment is not
vacated or removed by court order, bonding or otherwise within a period of 30
days thereafter.
SECTION 18.2 REMEDIES OF LANDLORD. Upon the happening of any Event of
Default, Landlord may, at any time thereafter, give notice to Tenant specifying
such Event or Events of Default, and stating that this Lease and the Lease
Term, or Tenant's right to possess the Premises, shall expire and terminate on
a date specified which shall be at least 3 days after the giving of such
notice. Upon the date specified in such notice, subject to the provisions of
Section 18.3, this Lease and the Lease Term, or Tenant's right to possess the
Premises, shall expire and terminate as if that date were the expiration date
specified in this Lease. Upon occurrence of an Event of a Default, Landlord
may, at Landlord's option take any one or more of the following actions: (i)
bring eviction proceedings against Tenant
14
<PAGE> 15
and distraint on Tenant's property, but if the proceeding is terminated,
Landlord may, upon any subsequent default, commence successive eviction
proceedings and enter successive judgments for possession of the Premises; (ii)
re-enter and repossess the Premises, and Tenant agrees to immediately surrender
the same to Landlord but upon re-entry Tenant shall remain liable to Landlord
for a sum equal to all Rent and Additional Rent for the remainder of the Lease
Term; (iii) if Landlord reenters, repair and alter the Premises as Landlord
deems advisable and/or relet the Premises for the any part of the remainder of
the term or for a longer period, in Landlord's name or as agent of Tenant; and
(iv) Landlord may declare all Rent and Additional Rent due or to become due for
the entire Lease Term immediately due and payable and accelerate same so that
the full amount of all such rent shall become immediately due and payable by
Tenant and paid to Landlord upon demand; (v) Landlord may collect all unpaid
Rent and Additional Rent by distress or otherwise; and (vi) Landlord may take
any and all other action and pursue all other rights and remedies provided at
law or under this Lease. Landlord shall in no way be responsible or liable for
any failure to relet the Premises or any part thereof, or for any failure to
collect any rent due on any such reletting, though Landlord agrees to exercise
due diligence to relet the Premises. Such reletting shall be in Landlord's sole
discretion and Landlord shall not be required to accept any tenant or any
tenant offered by Tenant or observe any instructions given by Tenant concerning
such reletting. If Landlord does relet, the amount collected or received as a
result of such reletting, shall be applied first to reimburse Landlord for the
cost of retaking, repossession, repairing and/or altering the Premises, and the
cost and expense of removing all persons and property therefrom, then to
reimburse Landlord for the cost of securing any new tenants, and, if Landlord
shall maintain and operate the Premises, the cost of operating and maintaining
the Premises, and finally Landlord may retain any balance remaining on account
of the liability of Tenant to Landlord for the sum equal to all Rent and
Additional Rent unpaid by Tenant for the remainder of the Lease Term, it being
understood and agreed that no reentry by Landlord, whether had or taken under
eviction proceedings or otherwise, shall absolve or discharge Tenant from
liability under this Lease.
SECTION 18.3 DEFICIENCIES. Should Landlord relet the Premises, and
should any amount collected by Landlord from such reletting be insufficient to
fully pay to Landlord a sum equal to all Rent and Additional Rent, the balance
or deficiency shall be paid by Tenant on the day that each rental payment is
due and payable by the new tenant. Tenant shall be and remain liable for any
deficiency. The right of Landlord to recover from Tenant any deficiency or a
sum equal to all Rent and Additional Rent, if there shall be reletting, shall
survive the issuance of any dispossessory warrant or other termination of this
Lease, and Landlord shall be entitled to retain any surplus. Landlord shall
have the election, in place and instead of holding Tenant liable for any
deficiency, to recover against Tenant as damages for loss of the bargain and
not as a penalty in addition to any other damages becoming due under Article
18, an aggregate sum which, at the time of termination of this Lease or
recovery of possession of the Premises by Landlord, as the case may be,
represents the then present worth based upon a discount rate used by investors
in the market place for similar type properties, of the aggregate of the Rent
and Additional Rent that would have accrued for the balance of the Lease Term.
SECTION 18.4 WAIVER. Tenant, for and on behalf of itself, and all
persons claiming by, through or under Tenant, waives any and all right of
redemption, of reentry, of repossession or to restore the operation of this
Lease in case Tenant shall be dispossessed by judgment or by warrant of any
court or judge or in case of reentry or repossession by Landlord or in case of
any expiration
15
<PAGE> 16
or termination of this Lease. Landlord and Tenant, so far as permitted by law,
waive and will waive trial by jury in any action, proceeding or counterclaim
brought by either of the Parties against the other on any matters whatsoever
arising out of or in any way connected with this Lease, the relationship of
landlord and tenant, Tenant's use or occupancy of the Premises or any claim of
injury or damage. The terms "enter", "reenter", "entry" or "reentry", as used
in this Lease are not restricted to their technical legal meaning.
SECTION 18.5 NO WAIVER. No failure by Landlord to insist upon the
strict performance of any term of this Lease or to exercise any right or remedy
upon a breach, and no acceptance of full or partial rent during the continuance
of any such breach, shall constitute a waiver of any term. No waiver,
modification or supplement of any portion of this Lease or any breach shall be
effective unless in a written instrument executed by the Party against whom
enforcement is sought. Each right and remedy of Landlord shall be cumulative
and shall be in addition to every other right or remedy provided for in this
Lease or now or hereafter existing at law. The exercise by Landlord of any one
or more of the rights or remedies shall not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies. If Tenant defaults
in the performance of any of the terms of this Lease and Landlord places the
enforcement of this Lease in the hands of an attorney, or files suit upon the
same, Tenant agrees to pay to Landlord reasonable attorney fees, which shall
constitute Additional Rent and shall be collectible as such.
SECTION 18.6 SAME REMEDIES AS RENT. If Tenant fails to pay any
Additional Rent when due, Landlord shall have (in addition to all other rights
and remedies) all the rights and remedies provided this Lease or by law for
non-payment of Rent.
ARTICLE 19
NOTICES
Whenever this Lease provides herein that notice, demand, request,
consent, approval or other communication (collectively "Communication") shall
or may be given to or by, or served upon, either of the Parties by the other,
each such Communication shall be in writing and, any law or statute to the
contrary notwithstanding, shall be effective for any purpose if given or served
by registered or certified mail, postage prepaid, return receipt requested,
Federal Express (or other air delivery service) as follows:
(a) If by Landlord: to Tenant addressed to Tenant at the
address of the Premises or at such other address as Tenant may from time to
time designate by notice given to Landlord as provided in this Article.
(b) If by Tenant: to Landlord addressed to Landlord at
the address on page 1 or at such other address as Landlord may from time to
time designate by notice given to Tenant as provided in this Article.
Every Communication shall be deemed to have been given or served at the time
that the same shall be deposited in the United States mails, postage prepaid,
in the manner aforesaid or if given otherwise, then upon receipt but if receipt
is refused, then upon the date delivery would otherwise have been made. Nothing
contained in this Article shall be construed to preclude personal service of
16
<PAGE> 17
any notice, demand, request, approval or other communication in the same manner
that personal service of a summons or other legal process may be made.
ARTICLE 20
MISCELLANEOUS
SECTION 20.1 USE OF CERTAIN WORDS. The words "herein", "hereinafter",
"hereof" and "hereunder" in this Lease refer to this Lease as a whole and not
merely to the particular article, section or subsection in which such words
appear, unless the context otherwise requires.
SECTION 20.2 CAPTIONS. The captions of this Lease are for convenience
and reference only and in no way define, limit or describe the scope or intent
of this Lease, nor in any way affect this Lease.
SECTION 20.3 COST OF PERFORMANCE. Whenever it is indicated in this
Lease that Landlord or Tenant may, shall or will perform any act then such act
shall be performed at the sole cost and expense of the performing Party.
SECTION 20.4 ENTIRE AGREEMENT. This Lease contains the entire
agreement between the Parties and cannot be changed or terminated orally, but
only by an instrument in writing executed by the Party against whom enforcement
of any waiver, change, modification or discharge is sought.
SECTION 20.5 TIME OF ESSENCE. Time is of the essence of this Lease and
this applies to all terms and conditions contained therein.
SECTION 20.6 SUCCESSOR AND ASSIGNS. The agreements, terms, covenants
and conditions contained in this Lease shall bind and inure to the benefit of
the Parties and their respective heirs, personal representatives, successors
and, except as otherwise provided this Lease, their assigns.
SECTION 20.7 ESTOPPEL CERTIFICATES. Tenant shall, within 10 days
after receipt of request from Landlord, execute, acknowledge and deliver to
Landlord or any Mortgagee or any proposed purchaser or Mortgagee of the
Premises, without charge, a duly executed recordable certificate certifying
that this Lease is valid and subsisting and in full force and effect and
unmodified, or if modified, stating such modification, whether there are any
offsets or defenses which Tenant then may have and such other information
regarding the status of this Lease as may be reasonably requested.
SECTION 20.8 COMPLIANCE WITH MORTGAGES. As a condition of this
Lease, Tenant agrees that it will not create or permit to be created any
condition or do or permit to be done any act or thing which may be prohibited
by the terms of any Mortgage, notwithstanding anything in this Lease to the
contrary. Except for payment of principal or interest, Tenant shall comply with
all of the obligations of the owner of the Premises under any existing
Mortgage, including, without limitation, insurance requirements.
SECTION 20.9 INVALIDITY OF CERTAIN PROVISIONS. If any provision of
this Lease or its application to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or its
application to persons or circumstances other than those as to which
17
<PAGE> 18
it is held invalid or unenforceable, shall not be affected and each term and
provision of this Lease shall be valid and shall be enforced to the fullest
extent permitted by law.
SECTION 20.10 LANDLORD EXCULPATION. Notwithstanding anything to the
contrary in this Lease, neither Landlord nor any party beneficially interested
in the Property shall have any personal liability for any matter in connection
with this Lease or its obligations as owner of the Premises except to the
extent of its interest in the Premises. Tenant will not institute, seek or
enforce any personal or deficiency judgment against Landlord or any of
Landlord's officers, directors, shareholders or partners or their property,
except the Premises, which shall be available to satisfy any such judgment.
SECTION 20.11 RADON. In accordance with the requirements of Florida
Statutes Section 404.056(6), the following notice is given to Tenant:
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon
that exceed federal and state guidelines have been found in buildings
in Florida. Additional information regarding radon and radon testing
may be obtained from your County Public Health Unit.
18
<PAGE> 19
IN WITNESS WHEREOF, the Parties have executed this Lease the day and
year first above written.
Signed, sealed and delivered LANDLORD
in the presence of:
DEERWOOD REALTY PARTNERS,
LTD., a Florida limited
partnership
Sign: /s/ JoAnn M. Bogdnasky
- ------------------------------
Print Name: JoAnn M. Bogdansky
By: DEERWOOD REALTY
PARTNERS, INC., a
Florida corporation,
General Partner
Sign: /s/ Susan M. Wigton
- ------------------------------
Print Name: Susan M. Wigton
(As to Assignee)
By: /s/ Mark J. Gordon
-------------------------
Mark J. Gordon,
President
TENANT
PRECISION RESPONSE
CORPORATION
/s/ JoAnn M. Bogdansky
- ------------------------------
Print Name: JoAnn M. Bogdansky
/s/ Susan M. Wigton
- ------------------------------
Print Name: Susan M. Wigton By: /s/ David Epstein
-------------------------
David Epstein, President
19
<PAGE> 20
EXHIBIT "A"
PREMISES
LEGAL DESCRIPTION
Deerwood Park of Industry, Lot #8
Lot 8, Block 3, Deerwood Park of Industry, Section 1, Plat Book 118,
Page 31 of the Public Records of Dade County, Florida.
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PRO FORMA PER SHARE EARNINGS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Pro forma net income (loss).......... $(200,403) $(286,282) $836,756 $267,141 $441,471
========== ========== ========== ========== ==========
Weighted average number of shares of
Common Stock outstanding:
Actual shares...................... 12,735,000 12,735,000 12,735,000 12,735,000 12,735,000
Additional shares required to
replace the planned distribution
to shareholders in excess of pro
forma earnings for the twelve
months ended March 31,
1996(1)......................... 0 0 127,061 0 127,061
---------- ---------- ---------- ---------- ----------
12,735,000 12,735,000 12,862,061 12,735,000 12,862,061
========== ========== ========== ========== ==========
Pro forma net income (loss) per share
of Common Stock.................... $(0.02) $(0.02) $0.07 $0.02 $0.03
------ ------ ----- ----- -----
------ ------ ----- ----- -----
</TABLE>
- ---------------
(1) Pursuant to Staff Accounting Bulletin Topic 1:B.3., additional shares
calculated as follows:
<TABLE>
<S> <C>
Planned distribution to shareholders......................................... $2,917,000
Less pro forma earnings for the twelve months ended March 31, 1996........... 1,011,086
----------
Planned distribution to shareholders in excess of earnings for the twelve
months ended March 31, 1996................................................ $1,905,914
=========
Estimated offering price per share........................................... $15.00
------
------
Number of shares of Common Stock required to replace the amount of the
planned distribution to shareholders in excess of earnings for the twelve
months ended March 31, 1996................................................ 127,061
=========
</TABLE>
<PAGE> 1
EXHIBIT 15.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Precision Response Corporation
Amendment No. 1 to Registration Statement on Form S-1 (File
No. 333-03209)
We are aware that our report, dated April 29, 1996, except for the second
paragraph of Note 4 as to which the date is May 1, 1996 and Note 11 as to which
the date is May 31, 1996, on our review of interim financial information of
Precision Response Corporation for the three month periods ended March 31, 1996
and 1995 is included in this Amendment No. 1 to the Registration Statement.
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Miami, Florida
June 10, 1996
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-03209) of our report dated March 11, 1996,
except for the second paragraph of Note 4 as to which the date is May 1, 1996
and Note 11 as to which the date is May 31, 1996, on our audit of the financial
statements and financial statement schedule of Precision Response Corporation.
We also consent to the reference to our firm under the captions "Selected
Financial and Operating Data" and "Independent Public Accountants."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Miami, Florida
June 10, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-03209) of our report dated March 17, 1995,
except for paragraphs one and two of Note 11 as to which the date is May 31,
1996, on our audits of the financial statements and financial statement schedule
of Precision Response Corporation. We also consent to the reference to our firm
under the captions "Selected Financial and Operating Data" and "Independent
Public Accountants."
/s/ Gurland & Goldberg, P.A.
GURLAND & GOLDBERG, P.A.
Hallandale, Florida
June 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information from the Company's
financial statements as of and for the year ended December 31, 1995 and the
three-month period ended March 31, 1996 and is qualified in its entirety by
reference to such financial statements. The schedule has been restated for a
127,350-for-one stock split effected in the form of a share dividend.
</LEGEND>
<RESTATED>
<S> <C> <C>
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 266794 51393
<SECURITIES> 0 0
<RECEIVABLES> 6676844 9663723
<ALLOWANCES> 60000 75000
<INVENTORY> 0 0
<CURRENT-ASSETS> 7338505 9941021
<PP&E> 8560893 9451391
<DEPRECIATION> 3277061 3606044
<TOTAL-ASSETS> 12713262 15921728
<CURRENT-LIABILITIES> 5973106 6613585
<BONDS> 3924135 5894433
0 0
0 0
<COMMON> 127350 127350
<OTHER-SE> 2688671 3286360
<TOTAL-LIABILITY-AND-EQUITY> 12713262 15921728
<SALES> 0 0
<TOTAL-REVENUES> 30203989 11648811
<CGS> 0 0
<TOTAL-COSTS> 18371577 7119857
<OTHER-EXPENSES> 573081 174112
<LOSS-PROVISION> 364748 15000
<INTEREST-EXPENSE> 372093 136435
<INCOME-PRETAX> 1455687 753724
<INCOME-TAX> 618931<F1> 312253<F1>
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 836756<F2> 441471<F2>
<EPS-PRIMARY> 0.07<F2> 0.03<F2>
<EPS-DILUTED> 0.07<F2> 0.03<F2>
<FN>
<F1> Represents pro forma provision for income taxes relating to S corporation.
See Note 10 of Notes to Financial Statements.
<F2> Amounts are presented on a pro forma basis assuming conversion from an S
corporation. See Note 10 of Notes to Financial Statements.
</FN>
</TABLE>
