<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended MARCH 31, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
Commission file number: 0-20941
PRECISION RESPONSE CORPORATION
(Exact name of Registrant as specified in its charter)
FLORIDA 59-2194806
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1505 N.W. 167TH STREET, MIAMI, FLORIDA 33169
(Address of principal executive offices)(Zip code)
(305) 816-4600
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
ON MAY 12, 1999, THE REGISTRANT HAD 21,549,000 OUTSTANDING SHARES OF
COMMON STOCK, $0.01 PAR VALUE.
<PAGE> 2
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
INDEX
PART I.
<TABLE>
<CAPTION>
ITEM NO. PAGE(S)
- -------- -------
<S> <C>
1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
March 31, 1999 (Unaudited) and December 31, 1998..................................... 3
Consolidated Statements of Operations (Unaudited) -
Three months ended March 31, 1999 and 1998........................................... 4
Consolidated Statements of Cash Flows (Unaudited) -
Three months ended March 31, 1999 and 1998........................................... 5
Notes to Consolidated Financial Statements................................................ 6-9
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................................ 10-18
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................ 18
PART II.
1. LEGAL PROCEEDINGS......................................................................... 19
2. CHANGES IN SECURITIES AND USE OF PROCEEDS................................................. 19
6. EXHIBITS AND REPORTS ON FORM 8-K.......................................................... 20
Signatures................................................................................ 21
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
1999 DECEMBER 31,
(UNAUDITED) 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 1,087 $ 1,656
Accounts receivable, net of allowances
of $3,317 and $8,225, respectively................................. 37,453 42,771
Income taxes receivable................................................ 215 215
Deferred income taxes.................................................. 6,697 6,906
Prepaid expenses and other current assets.............................. 4,170 4,186
----------- ----------
Total current assets .......................................... 49,622 55,734
Property and equipment, net................................................ 76,333 71,414
Deferred income taxes...................................................... 4,829 5,516
Other assets............................................................... 1,046 782
----------- ----------
Total assets................................................... $ 131,830 $ 133,446
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations............................ $ 2,465 $ 2,510
Accounts payable....................................................... 11,502 16,571
Restructuring accrual.................................................. 2,525 3,244
Accrued compensation expenses.......................................... 4,211 3,108
Other accrued expenses................................................. 7,488 7,174
Customer deposits...................................................... 1,425 1,108
----------- ----------
Total current liabilities...................................... 29,616 33,715
Long-term obligations, less current maturities............................. 18,552 16,916
Restructuring accrual...................................................... 3,065 3,456
----------- ----------
Total liabilities.............................................. 51,233 54,087
----------- ----------
Commitments and contingencies.............................................. -- --
Shareholders' equity:
Common stock, $0.01 par value; 100,000,000 shares
authorized; 21,549,000 issued and outstanding...................... 215 215
Additional paid-in capital............................................. 97,179 97,179
Accumulated deficit.................................................... (16,797) (18,035)
----------- ----------
Total shareholders' equity..................................... 80,597 79,359
Total liabilities and shareholders' equity..................... $ 131,830 $ 133,446
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
REVENUES................................................................. $ 46,248 $ 40,535
----------- -----------
OPERATING EXPENSES:
Cost of services..................................................... 38,931 36,510
Selling, general and administrative expenses......................... 4,870 3,320
----------- -----------
Total operating expenses..................................... 43,801 39,830
----------- -----------
Operating income ............................................ 2,447 705
OTHER INCOME (EXPENSE):
Interest income...................................................... 23 63
Interest expense..................................................... (336) (167)
----------- -----------
INCOME BEFORE INCOME TAXES................................... 2,134 601
Income tax provision..................................................... 896 228
=========== ===========
NET INCOME .................................................. $ 1,238 $ 373
=========== ===========
NET INCOME PER COMMON SHARE:
Basic................................................................ $ 0.06 $ 0.02
=========== ===========
Diluted.............................................................. $ 0.06 $ 0.02
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic................................................................ 21,549 21,545
=========== ===========
Diluted.............................................................. 21,633 21,943
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Operating activities:
Net income.................................................................. $ 1,238 $ 373
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization........................................... 3,386 3,164
Provision for bad debts and sales allowances............................ 871 2,595
Amortization of unearned compensation................................... -- 85
Deferred income taxes................................................... 896 228
Changes in operating assets and liabilities:
Accounts receivable..................................................... 4,447 (11,213)
Income taxes receivable................................................. -- 2,741
Prepaid expenses and other current assets............................... 16 (770)
Other assets............................................................ (264) 79
Accounts payable........................................................ (5,069) (2,176)
Restructuring accrual................................................... (1,110) (1,271)
Accrued compensation expenses........................................... 1,103 (1,329)
Other accrued expenses.................................................. 314 (1,191)
Customer deposits....................................................... 317 (960)
------------- -------------
Net cash provided by (used in) operating activities................. 6,145 (9,645)
------------- -------------
Investing activities:
Purchases of property and equipment......................................... (8,305) (2,916)
Increase in restricted cash................................................. -- (3,468)
------------- -------------
Net cash used in investing activities............................... (8,305) (6,384)
------------- -------------
Financing activities:
Net proceeds from revolving credit facility................................. 2,200 5,716
Payments on long-term obligations........................................... (609) (767)
------------- -------------
Net cash provided by financing activities........................... 1,591 4,949
------------- -------------
Net decrease in cash and cash equivalents....................................... (569) (11,080)
Cash and cash equivalents at beginning of period................................ 1,656 11,080
============= =============
Cash and cash equivalents at end of period...................................... $ 1,087 $ --
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND BASIS OF PRESENTATION
Precision Response Corporation and subsidiaries (the "Company") is a
full-service provider of teleservices, Internet customer communications,
database marketing and management, and fulfillment services on an outsourced and
cosourced basis to large corporations.
The accompanying unaudited consolidated financial statements were
prepared in accordance with generally accepted accounting principles for interim
financial information and the rules and regulations of the Securities and
Exchange Commission (the "SEC"). The unaudited consolidated interim financial
information reflects all normal recurring adjustments, which are, in the opinion
of management, necessary for a fair presentation of the interim unaudited
consolidated financial statements. The balance sheet at December 31, 1998
included herein has been derived from the audited financial statements at that
date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
These interim results of operations for the three months ended March 31, 1999
and 1998 are not necessarily indicative of results that may be expected for the
full fiscal years. The unaudited consolidated financial statements contained
herein should be read in conjunction with the audited financial statements and
notes thereto contained in the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1998 filed with the SEC on March 31, 1999 (the
"1998 Form 10-K").
2. EARNINGS PER SHARE
The following reconciles the numerators and denominators of the basic
and diluted earnings per share ("EPS") computations (in thousands, except per
share data):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------
1999 1998
----------------------------- ----------------------------
NET PER NET PER
INCOME SHARES SHARE INCOME SHARES SHARE
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS:
Income available to common shareholders. $ 1,238 21,549 $ 0.06 $ 373 21,545 $ 0.02
EFFECT OF DILUTIVE SECURITIES:
Stock options........................... -- 84 -- -- 398 --
----------------------------------------------------------
DILUTED EPS:
Income available to common shareholders
and assumed exercises............... $ 1,238 21,633 $ 0.06 $ 373 21,943 $ 0.02
==========================================================
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment is comprised of both owned property and property
under capital leases, the details of which are set forth below (in thousands):
6
<PAGE> 7
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
----------------------------------- -----------------------------------
OWNED LEASED TOTAL OWNED LEASED TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Land ............................ $ 1,057 -- $ 1,057 $ 1,057 -- $ 1,057
Buildings and improvements ...... 4,878 -- 4,878 4,878 -- 4,878
Telecommunications equipment
and software .................. 21,392 $ 4,432 25,824 20,946 $ 4,432 25,378
Computer equipment and software . 37,536 5,523 43,059 33,768 5,523 39,291
Leasehold improvements .......... 11,209 -- 11,209 11,167 -- 11,167
Furniture and fixtures .......... 8,125 242 8,367 8,044 242 8,286
Vehicles ........................ 111 -- 111 111 -- 111
--------- --------- --------- --------- --------- ---------
84,308 10,197 94,505 79,971 10,197 90,168
Development in process .......... 15,376 -- 15,376 11,408 -- 11,408
--------- --------- --------- --------- --------- ---------
99,684 10,197 109,881 91,379 10,197 101,576
Less: accumulated depreciation
and amortization .............. (28,905) (4,643) (33,548) (25,943) (4,219) (30,162)
--------- --------- --------- --------- --------- ---------
$ 70,779 $ 5,554 $ 76,333 $ 65,436 $ 5,978 $ 71,414
========= ========= ========= ========= ========= =========
</TABLE>
In accordance with Statement of Position 98-1, ACCOUNTING FOR THE COSTS
OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1"), the
Company capitalizes certain costs in connection with internal use software,
which includes Precision Resolution, InfiniteAccess and IMA Advantage/Edge, and
business process reengineering associated with its initiative to implement an
Enterprise Resource Planning solution, which the Company designated the PRISM
Project. These costs will be amortized when the software is available for use or
project modules are implemented. As of March 31, 1999, $7.1 million, related to
the internal use software not yet available for use, and $7.3 million, related
to the PRISM Project modules not yet implemented, are included within
Development in process in the above table. In addition, $3.7 million related to
the PRISM Project modules, which are operational as of March 31, 1999, are
included within Computer equipment and software in the above table.
In accordance with Statement of Financial Accounting Standards No. 34,
CAPITALIZATION OF INTEREST, the Company capitalizes interest costs that are
incurred as a result of borrowings under the Company's revolving credit facility
used to partially fund the Company's PRISM Project. Total interest cost incurred
during the three months ended March 31, 1999 was $449,000, of which $336,000 was
expensed and the remaining $113,000 was capitalized and is included within
Development in process in the above table. As each module of the PRISM Project
is implemented, all associated capitalized costs, including capitalized
interest, will begin to be amortized on a straight-line basis over the module's
estimated useful life.
4. RESTRUCTURING AND OTHER NON-RECURRING SPECIAL CHARGES
During the third quarter of 1998, the Company performed an extensive
review of its operations and existing available workstation capacity. As a
result of this review, the Company initiated a restructuring and performance
enhancing initiatives plan, which centered on exiting the incentive-based
outbound teleservicing program, making adjustments to certain call centers'
workstation capacity, reducing overhead and administrative headcount and
replacing certain existing software programs utilized in its call center
operations with new customer interaction software reflective of advances in
customer care technology. In adopting this plan, the Company recorded
non-recurring restructuring and other special charges of approximately $22.1
million in the third quarter of 1998 with an after-tax impact of $13.8 million.
Of the total non-recurring restructuring and other special charges accrued in
connection with the plan, at March 31,
7
<PAGE> 8
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1999, approximately $5.3 million is included in Restructuring accrual and
$930,000 relating to other special charges is included in Other accrued expenses
in the accompanying Consolidated Balance Sheets.
As of March 31, 1999, the Company had exited the incentive-based
outbound teleservices program and terminated designated employees. The Company
had also initiated the relocation and consolidation of teleservicing programs to
effectuate the closing of one call center and the reduction in size of another
call center and the implementation of new customer interaction software
reflective of advances in customer care technology, both of which are currently
expected to be completed during the third quarter of 1999.
During the third quarter of 1997, the Company initiated a restructuring
and cost savings plan. As a result, the Company recorded a pre-tax non-recurring
special charge to earnings of approximately $26.2 million in the third quarter
of 1997 with an after-tax impact of $15.7 million. A portion of the
non-recurring special charge was an accrual of costs related to severance and
lease obligations connected with the Company's plan to reduce overhead and
consolidate administrative facilities. At March 31, 1999, approximately $300,000
of the total costs accrued is included in Restructuring accrual in the
accompanying Consolidated Balance Sheets, relating to facility consolidation
costs associated with the 1997 restructuring plan.
As of March 31, 1998, the Company had terminated designated employees
and reorganized its operational and administrative management structure in
connection with the 1997 restructuring and cost savings plan. The Company had
also initiated the relocation and consolidation of administrative office space
into unused space at an existing facility. The Company also continued to explore
opportunities to divest unused facilities during the three months ended March
31, 1998. This included termination of a lease for an unused facility whose
landlord is a corporation that is wholly owned by the Company's Chairman of the
Board. In consideration of a termination payment of approximately $82,000 on
February 28, 1998, the landlord relieved the Company of its future lease
commitments totaling approximately $161,000. The Company believes that the
amount of the termination payment was no less favorable to it than could have
been negotiated from an unaffiliated party.
The following table sets forth the details and the cumulative activity
in the restructuring accrual during the three months ended March 31, 1999 (in
thousands):
<TABLE>
<CAPTION>
ACCRUAL ACCRUAL
BALANCE AT BALANCE AT
DECEMBER 31, MARCH 31,
1998 EXPENDITURES 1999
---------------- --------------- -------------
<S> <C> <C> <C>
Severance and other employee costs............ $ 697 $ (436) $ 261
Closure and consolidation of facilities and
related exit costs.......................... 6,003 (674) 5,329
--------- --------- ---------
Total restructuring accrual........ 6,700 $ (1,110) 5,590
=========
Less: current portion.............. (3,244) (2,525)
--------- ---------
Total restructuring accrual, long-term $ 3,456 $ 3,065
========= =========
</TABLE>
8
<PAGE> 9
PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COMMITMENTS AND CONTINGENCIES
On or about August 26, 1998 a lawsuit, captioned HENRY E. FREEMAN AND
FREEMAN INDUSTRIAL ENTERPRISES CORPORATION V. PRECISION RESPONSE CORPORATION,
MARK J. GORDON, DAVID L. EPSTEIN AND RICHARD D. MONDRE (Case No. 398-CV-1895-AVC
(D. Conn)), was filed in the Superior Court of the Judicial District of
Stamford/Norwalk in the state of Connecticut. The lawsuit has since been removed
by the Company to the United States District Court for the District of
Connecticut. This lawsuit alleges that the Company breached its contracts with
the plaintiffs by allegedly failing to pay all commissions relating to certain
clients whom the plaintiffs allegedly claim they procured for the Company. The
complaint also contains claims of breach of fiduciary duty, breach of covenant
of good faith and fair dealing, civil conspiracy, fraud/fraud in the inducement,
intentional infliction of emotional distress and violations of the Connecticut
Unfair Trade Practices Act. The plaintiffs seek actual, compensatory and
punitive damages, declaratory judgement that certain contracts are invalid due
to undue influence exercised upon plaintiffs, recission of such contracts, an
accounting and interest, costs and attorneys' fees.
On November 16, 1998, the Company filed a motion (i) to dismiss for
lack of personal jurisdiction as to Richard Mondre and (ii) to dismiss for
improper venue or, in the alternative, to transfer to the U.S. District Court
for the Southern District of Florida. On that same day, the Company filed a
motion to dismiss the complaint for failure to state a cause of action.
On January 6, 1999, the plaintiffs voluntarily dismissed with prejudice
this lawsuit against Richard Mondre, which dismissal has been approved by the
Court. On or about February 12, 1999, the plaintiffs filed an Amended Complaint,
asserting the same causes of action as in the original complaint, as well as a
claim for negligent misrepresentation. The Company has filed a motion to dismiss
the Amended Complaint for failure to state a cause of action, which is currently
pending. The Company's motion to dismiss for improper venue or, in the
alternative, to transfer is also currently pending before the Court.
The case is currently in the discovery stage. The Company believes that
the plaintiffs' allegations are totally without merit and intends to defend the
lawsuit vigorously. A provision for legal defense costs has been accrued and is
included in Other accrued expenses in the accompanying Consolidated Balance
Sheets which management believes is adequate based on available information. No
other provisions have been reflected since management is unable, at this time,
to predict the ultimate outcome of this matter.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this report.
OVERVIEW AND BASIS OF PRESENTATION
The Company currently offers its customers single source, integrated
solutions for their teleservicing, Internet communications, database marketing
and management, and fulfillment needs. The Company's primary source of revenue
is teleservicing activities which are comprised of both inbound
(customer-initiated) and outbound (Company-initiated) calls. Teleservicing
revenues are generally earned for providing services on a rate-per-hour basis.
However, beginning in the third quarter of 1997, the Company had also generated
teleservicing revenues under incentive-based outbound compensation agreements
whereby the amount of revenue earned correlates to the achievement of
established targets. At the end of the third quarter of 1998, the Company made a
strategic decision to exit the incentive-based outbound programs, which was
completed during the fourth quarter of 1998. The majority of teleservicing
revenues are derived from inbound calls, which represented approximately 92% of
teleservicing revenues and 80% of total revenues for the three months ended
March 31, 1999 as compared to approximately 77% of teleservicing revenues and
56% of total revenues for the three months ended March 31, 1998. Inbound
teleservicing consists mostly of longer-term customer care and customer service
programs that tend to be more predictable than other teleservicing revenues.
Outbound teleservicing and, in particular, incentive-based outbound
teleservicing, is driven by marketing programs which change frequently relative
to inbound programs. As such, outbound teleservicing is subject to greater
variation in operating results (see "Fluctuations in Quarterly Results" below).
Commencing in 1998 and during the three months ended March 31, 1999,
the Company began strategic initiatives to capitalize on the extraordinary
growth of Internet commerce by integrating Internet technologies with the
Company's current products and services to, in effect, create multimedia
customer interaction centers. In the first quarter of 1999, the Company
continued to make advances in the development and marketing of the
Internet-based and e-commerce services offered by PRCNETCARE.COM(SM), its
recently created Internet-based customer service subsidiary. During the three
months ended March 31, 1999, its first quarter of operation, PRCNETCARE.COM
generated revenues of approximately $300,000 primarily from InfiniteAccess, the
subsidiary's newest Internet-based customer care offering.
The InfiniteAccess suite of products and services enables the Company
to integrate clients' Internet-based customer care and e-commerce activities
with the Company's existing teleservices, database marketing and management, and
fulfillment services. InfiniteAccess's current base of offerings includes: PRC
SmartMail, an automated electronic messaging response service; PRC Web On-Line,
a Web collaborative service enabling the Company's customer care associates to
interact with clients' customers live over the telephone and the Internet; PRC
Internet Fulfillment Service, an e-mail and Web-based fulfillment process that
supports e-commerce transactions; and PRC Host, a Web application hosting and
information service that enables clients to conduct e-commerce activities while
limiting their technology investments.
In addition to InfiniteAccess, the product and service offerings of
PRCNETCARE.COM include an enhanced Web-based version of Precision Resolution,
which provides solutions for record standardization and error resolution for
information transferred over the Internet.
10
<PAGE> 11
The Company is currently committed to investing and expanding its
Internet-based and e-commerce services and continues to make strategic
infrastructure and software investments as it seeks to leverage its existing
technological capabilities into a leading position in the emerging market for
interactive customer care services.
Information services provided by the database marketing and management
group typically 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.
Fulfillment services include high-speed laser and electronic document
printing, lettershop and mechanical inserting, sorting, packaging and mailing
capabilities. While fulfillment services represents a relatively small portion
of the Company's total revenues, it is an important element in the Company's
overall marketing strategy of providing its customers with a "one-stop" solution
to their telephone-based and interactive customer service and marketing needs.
RESULTS OF OPERATIONS
The following table sets forth certain statements of operations data,
as a percentage of revenues, for the periods indicated:
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------
1999 1998
----------- -----------
SELECTED OPERATING RESULTS:
Revenues................................. 100.0% 100.0%
Cost of services......................... 84.2 90.1
----------- -----------
Gross margin..................... 15.8 9.9
Selling, general and administrative
expenses............................... 10.5 8.2
----------- -----------
Operating income................. 5.3% 1.7%
=========== ===========
REVENUES
Revenues for the three months ended March 31, 1999 were $46.2 million,
an increase of $5.7 million, or 14.1%, over the comparable period of the prior
year. The principal components of revenues are teleservicing activities,
including account services (representing 88.2% and 72.5% of revenues for the
three months ended March 31, 1999 and 1998, respectively), information services
(representing 8.5% and 8.9% of revenues for the three months ended March 31,
1999 and 1998, respectively) and fulfillment services (representing 3.3% and
18.6% of revenues for the three months ended March 31, 1999 and 1998,
respectively).
The Company had eight call centers and approximately 4,300 and 4,500
workstations in operation as of March 31, 1999 and March 31, 1998, respectively.
In connection with its 1998 restructuring and performance-enhancing initiatives
plan, the Company initiated during the first quarter of 1999 its efforts to
eliminate 800 workstations in two specific call centers. As of March 31, 1999,
the Company's workstation utilization rate was approximately 80%. This compares
to a utilization rate of approximately 60% at March 31, 1998. Although
utilization automatically increases with the reduction of workstations, the
Company continues to attempt to seek the award of additional work from existing
clients and pursue new client opportunities in order to improve the utilization
of its workstations. Absent the award of any significant new business, the
Company has no immediate plans for new call centers. Alternatively, the Company
is expanding workstation capacity in its existing sites to meet current capacity
needs.
11
<PAGE> 12
During the three months ended March 31, 1999, the Company generated
revenue from several new clients. The Company commenced customer care services
for a company that markets, distributes and produces bottled and canned liquid
nonalcoholic refreshments, as well as a provider of shareholder services and a
manufacturer and provider of eyewear lenses.
Teleservicing activities, including account services, accounted for the
majority of the revenue growth during the three months ended March 31, 1999.
Revenues from teleservicing activities for the three months ended March 31, 1999
were $40.8 million, an increase of $11.4 million, or 38.8%, over the comparable
period of the prior year. Major factors contributing to the increase in
teleservicing revenues were the addition of several new programs for existing
clients as well as the addition of new clients as discussed above. Revenues from
the Company's largest client accounted for 47.4% of total revenues for the three
months ended March 31, 1999, up from 35.8% for the first three months of 1998.
Besides the Company's largest client, only one other client, representing 10.1%
of total revenues, accounted for 10% or more of total revenues for the three
months ended March 31, 1999. Generally, teleservicing revenues are earned on a
rate-per-hour basis. However, during the three months ended March 31, 1998,
approximately 17.3% of total revenues were earned under incentive-based
compensation agreements. As discussed above, the Company ceased earning revenues
under incentive-based compensation agreements during the fourth quarter of 1998.
Revenues from information services for the three months ended March 31,
1999 were $3.9 million, an increase of $0.3 million, or 9.4%, compared to the
same period of the prior year. This increase is reflective of information
services provided as a result of the addition of new clients and growth in the
Company's relationships with existing clients.
Revenues from Internet-based customer care services for the three
months ended March 31, 1999, in connection with PRCNETCARE.COM'S first quarter
of operations, were approximately $300,000 and are included in revenues from
teleservicing and information services noted above.
Revenues from fulfillment services for the three months ended March 31,
1999 were $1.5 million, a decrease of $6.0 million, or 80.0%, compared to the
same period of the prior year. Revenues from fulfillment services for the first
quarter of 1998 included fulfillment services provided in connection with the
incentive-based outbound teleservices program. As described above under
"Overview and Basis of Presentation," the Company exited the incentive-based
outbound teleservices program in the fourth quarter of 1998.
COST OF SERVICES
Cost of services generally include all direct and some indirect costs
incurred in connection with the Company's revenue-producing departments,
including, but not limited to, labor, telephone expenses directly related to
revenue-generating activities, equipment under operating leases used in the call
centers and fulfillment facility, direct overhead for all such operational
facilities, such as rent, security and insurance, and depreciation and
amortization of property and equipment used in operations. Cost of services
increased by $2.4 million, or 6.6%, to $38.9 million for the three months ended
March 31, 1999, as compared to the same period of the prior year, principally as
a result of the growth in operations. In addition, cost of services related to
PRCNETCARE.COM were approximately $575,000 for the three months ended March 31,
1999, which also contributed to the increase as no such costs were incurred
during the three months ended March 31, 1998.
12
<PAGE> 13
The decrease in cost of services, as a percentage of revenues, from
90.1% for the three months ended March 31, 1998 to 84.2% for the three months
ended March 31, 1999, was primarily attributable to the Company's less than
satisfactory operating results generated by the incentive-based outbound
teleservices program for the three months ended March 31, 1998. As described
above under "Overview and Basis of Presentation," the Company exited the
incentive-based outbound teleservices program in the fourth quarter of 1998. The
decrease is also attributable to the Company's continued improvement in the
utilization of workstation capacity.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") generally include
the costs of central services the Company provides to support and manage its
operations, including senior management, sales and marketing, human resources,
finance and management information systems functions. SG&A increased $1.6
million, or 46.7%, to $4.9 million for the three months ended March 31, 1999 as
compared to the same period of the prior year. A portion of this increase is due
to the Company's continued advances in the development and marketing of
PRCNETCARE.COM, resulting in additional SG&A of approximately $458,000 during
the three months ended March 31, 1999. The remainder of the increase is
principally due to the Company's growth in operations, the addition of certain
management positions during the fourth quarter of 1998 and the first quarter of
1999 and annual salary increases.
As a percentage of revenues, SG&A increased from 8.2% for the three
months ended March 31, 1998 to 10.5% for the three months ended March 31, 1999.
This increase is a result of the development and marketing of PRCNETCARE.COM, as
well as the addition of certain management positions during the fourth quarter
of 1998 and the first quarter of 1999 and annual salary increases.
INTEREST, NET
Interest expense, net of interest income and capitalized interest, was
$313,000 for the three months ended March 31, 1999 compared to net interest
expense of $104,000 for the comparable period of the prior year. The increase in
net interest expense is due to increased borrowings on the Company's revolving
credit facility during the three months ended March 31, 1999 as compared to
March 31, 1998.
INCOME TAXES
The Company had a deferred tax asset of $11.5 million at March 31, 1999
and $12.4 million at December 31, 1998. The net deferred tax asset in the amount
of $11.5 million at March 31, 1999 is based upon expected utilization of net
operating loss carryforwards and reversal of certain temporary differences.
Although realization is not assured, the Company believes it is more likely than
not that all of the net deferred tax asset will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced in the near
term if estimates of future taxable income during the carryforward period are
reduced. The Company will continue to review the assumptions used on a quarterly
basis and make adjustments as appropriate.
NET INCOME AND NET INCOME PER SHARE
For the three months ended March 31, 1999, net income was $1.2 million
compared to net income of $373,000 for the comparable period of 1998. Net income
per share for the three months ended March 31, 1999 and 1998, was $0.06 and
$0.02, respectively.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1999, the Company funded its operations and
capital expenditures primarily through cash flows from operations and, to a
lesser extent, bank borrowings.
At March 31, 1999, the Company had cash and cash equivalents of $1.1
million and total long-term obligations (including current maturities thereof)
of $21.0 million. Net cash provided by operating activities was $6.1 million for
the three months ended March 31, 1999 and net cash used in operating activities
was $9.6 million for the same period in the prior year. The decrease in cash
used in operating activities from the first quarter of 1999 compared to the same
period in 1998 was primarily attributable to the reduction in accounts
receivable due to increased collection efforts offset in part by a decrease in
accounts payable.
Net cash used in investing activities was $8.3 million and $6.4 million
for the three months ended March 31, 1999 and 1998, respectively. Investing
activities for the three months ended March 31, 1999 were principally for
capital expenditures. Investing activities for the three months ended March 31,
1998 included both capital expenditures and the placement of $3.5 million into
escrow for the subsequent purchase of land and a building located in Sunrise,
Florida.
Capital expenditures increased from $2.9 million for the three months
ended March 31, 1998 to $8.3 million for the same period of the current year.
Capital expenditures for the three months ended March 31, 1998 were primarily
for internal financial and operating system enhancements (the PRISM Project).
Capital expenditures for the three months ended March 31, 1999 relate primarily
to costs incurred for the PRISM Project, PRCNETCARE.COM product and service
offerings and IMA Advantage/Edge as discussed below.
During the first quarter of 1998, the Company began its implementation
of an Enterprise Resource Planning ("ERP") solution, which will allow for all
internal systems (including those related to billing, payroll, client
profitability management, human resource management and general ledger) to be
fully integrated into a common platform. The Company has designated its ERP
implementation as the PRISM Project. The PRISM Project is utilizing both
internal resources as well as outside consultants to allow for a quick and
efficient implementation. Full implementation, including software, hardware,
consulting fees, training and internal resources, will cost approximately $13.0
million and is expected to take place by the third quarter of 1999. The first
modules of the PRISM Project, human resources/payroll, general ledger, accounts
receivable and accounts payable, were placed in service during the fourth
quarter of 1998. Costs of the PRISM Project have been capitalized or charged to
earnings based upon SOP 98-1. See Note 3 -- Property and Equipment of the Notes
to Consolidated Financial Statements.
In connection with PCNETCARE.COM, beginning in 1998 and through the end
of 1999, the Company currently expects to invest in excess of $6.0 million in
developing and enhancing software products and technology infrastructure to
accommodate Internet-based interactive customer communications. In addition, the
Company is in the process of implementing IMA Advantage/Edge, a third-party
software product. The full implementation of IMA Advantage/Edge is currently
expected to cost approximately $6.0 to $7.0 million and is expected to take
place during the second quarter of 1999. See Note 3 -- Property and Equipment of
the Notes to Consolidated Financial Statements.
Net cash provided by financing activities was $1.6 million and $4.9
million for the three months ended March 31, 1999 and 1998, respectively.
Financing activities for the first quarter of 1999 and 1998 are principally
comprised of net borrowings under the Company's revolving credit facility.
14
<PAGE> 15
The Company believes that funds generated from operations, available
borrowings under the revolving credit facility and capital lease financings will
be sufficient to finance its planned capital expenditures for 1999. The
Company's long-term capital requirements 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.
YEAR 2000 ISSUE
The Year 2000 issue affects the Company's installed computer systems,
network elements, software applications and other business systems that have
time-sensitive programs, including those with embedded microprocessors, that may
not properly reflect or recognize the year 2000 and years thereafter. Because
many computers and computer applications define dates by the last two digits of
the year, "00" or other two-digit dates after the year 2000 may not be properly
identified as the year 2000 or the appropriate later year, but rather the year
1900 or a year between 1901 and 1999 (as the case may be). This error could
result in system and equipment failures or malfunctions causing disruption of
operations, including among others, a temporary inability to process calls,
transactions and information, or engage in similar normal business activities.
The Company has evaluated its installed computer systems, network
elements, software applications and other business systems that have
time-sensitive programs and has developed a plan to ensure their Year 2000
compliance. The Company has established a Year 2000 Steering Committee that
meets generally weekly to monitor the progress and status of the Company's Year
2000 plan. The Company's Year 2000 plan is divided into seven major sections:
Internal Systems and Equipment (business applications for accounting,
administration, human resources and other Company-wide applications and office
equipment, including non-information technology infrastructure in which
non-compliant software or embedded microprocessors might exist); Hardware
(Company-wide information technology architecture); Software Packages (standard
personal computer and individual software packages, such as electronic
spreadsheet and word processing software); Application Tools and Products
(products utilized by information technology development organizations to
develop and implement automated business applications); Client Applications;
Client Interfaces; and Third Party Suppliers. In order to address the Year 2000
issue and the seven major sections stated above, the Company's Year 2000 plan
involves five phases: Planning and Awareness Phase (developing a budget and
project plan); Inventory and Assessment Phase (identify systems and
applications, assess risks and prioritize efforts); Remediation Phase (repair,
replace or retire non-compliant systems or processes); Validation Phase (perform
testing of systems and processes); and Implementation Phase.
15
<PAGE> 16
The following chart outlines, by major section, the phases of the
Company's Year 2000 plan that have been completed or, if not yet completed, the
current estimated date of completion:
<TABLE>
<CAPTION>
Phases
-----------------------------------------------------------------------------------------
Planning Inventory
and and
Major Section Awareness Assessment Remediation Validation Implementation
- ----------------------------- ------------- ------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Internal Systems and
Equipment................ Completed Completed 5/99 6/99 6/99
Hardware................... Completed 5/99 3/99-6/99 6/99 6/99
Software Packages.......... Completed 7/99 8/99 8/99 8/99
Application Tools and
Products................. Completed Completed 6/99 6/99 6/99
Client Applications........ Completed 6/99 6/99 9/99 9/99
Client Interfaces.......... Completed 6/99 6/99 9/99 9/99
Third Party Suppliers...... Completed Completed 5/99 6/99 6/99
</TABLE>
Since the Year 2000 issue may also affect the systems and applications
of the Company's customers or suppliers, the Company has initiated formal
communications with its customers and suppliers to determine their overall Year
2000 readiness and the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. As part of its overall communication process, the Company has mailed
letters to all of its customers and suppliers in an effort to receive the
appropriate warranties and assurances that those parties are, or will be, Year
2000 compliant. For those responses that have not been received from customers
or suppliers, or for those responses that were received but without the
appropriate warranties and assurances that those third parties are, or will be,
Year 2000 compliant, the Company is in the process of determining if further
assurances are necessary or if the Company needs to take further action,
including the incurrence of additional costs and/or the creation of a
contingency plan with regard to any customer or supplier that the Company
believes may not be Year 2000 compliant. The final determination and creation of
a contingency plan will take place approximately June 1999. Although the Company
currently does not anticipate any material adverse impact on its operations as a
result of Year 2000 issues of its customers or suppliers, no assurance can be
given that the failure by one or more of its major suppliers or customers to
become Year 2000 compliant will not have a material adverse impact on its
operations.
The Company, pursuant to the PRISM Project, which was undertaken by the
Company for reasons unrelated to any Year 2000 issues, has expended
approximately $11.0 million of the estimated $13.0 million required to upgrade
and enhance its internal financial and administrative systems. An ancillary
benefit of the PRISM Project is that the resulting systems will be Year 2000
compliant with full implementation of all aspects of the PRISM Project expected
by the third quarter of 1999. Based upon its most recent assessment, the Company
has determined that the incremental cost of insuring that its remaining computer
systems and processes are Year 2000 compliant is expected to be approximately
$1.0 to $1.5 million. This amount will be funded as part of the Company's
budgeted expenditures during 1999. Through March 31, 1999, the Company,
exclusive of the PRISM Project, has spent approximately $426,000 on the Year
2000 issue. These amounts do not include any costs associated with the
implementation of contingency plans, if required, which have not yet been
developed. All incremental costs associated with the Year 2000 issue are being
expensed as incurred.
The extent of the Company's Year 2000 exposure, the costs of achieving
Year 2000 compliance and the time period within which the Company believes it
will achieve its Year 2000 compliance are based on management's knowledge to
date and its best estimates to date. Although the Company expects its critical
systems and applications to be Year 2000 compliant prior to any anticipated
impact on its
16
<PAGE> 17
operations, there is no guarantee that these results will be achieved. Specific
factors that give rise to this uncertainty, as well as the timing and cost of
achieving Year 2000 compliance (if at all), include, but are not limited to,
availability and cost of personnel, failure to identify and correct all Year
2000 susceptible systems and applications, non-compliance by customers,
suppliers and other third parties whose systems and operations impact the
Company, and other similar uncertainties. A reasonably possible worst case
scenario might include the failure of third parties to provide services, such as
power and telecommunication services, or the loss of the Company's automated
call distributors or dialers which could, depending on its duration, result in a
material disruption to the Company's operations and its ability to generate
revenue.
The Company has not yet developed a contingency plan; however, the
Company will continue to assess the need for a formal contingency plan and make
a determination as to the nature and scope of its contingency plan, if required,
based on the progress of the Year 2000 efforts by the Company and third parties
by June 1999.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company experiences quarterly variations in revenues, operating
margins 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 services
offered to clients, including the percentage (if any) of services provided under
incentive-based compensation agreements, and the timing of additional operating
expenses to acquire and support new business and/or in connection with new
products and services. In addition, the completion or termination of a large
customer service program or the loss or delay in the implementation of a large
customer service program or in a transfer of teleservicing-based application
software could cause the Company to experience such quarterly variations.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements (within the meaning of
Section 21E. of the Securities Exchange Act of 1934, as amended), representing
the Company's current expectations and beliefs concerning future events. When
used in this report, the words "believes," "estimates," "plans," "expects,"
"intends," "projects," "anticipates," and similar expressions as they relate to
the Company or its management are intended to identify forward-looking
statements. The actual results of the Company could differ materially from those
indicated by the forward-looking statements because of various risks and
uncertainties related to and including, without limitation, the Company's
effective and timely initiation and development of new client relationships and
programs, the maintenance of existing client relationships and programs
(particularly since the Company's agreements with its clients generally do not
assure the Company will generate a specific level of revenue, do not designate
the Company as the exclusive service provider and are terminable on short
notice), the effective completion of the implementation of the Company's
restructuring plan and performance-enhancing initiatives, the achievement of
satisfactory levels of both gross and operating margins, the opening of new
customer interaction centers in accordance with strategic plans and in a timely
and economic manner consistent with existing capacity requirements, the ability
of the Company to hire, train and retain a sufficient labor
17
<PAGE> 18
force of qualified personnel at competitive wage rates, the development and
continued enhancement of telecommunication, Internet, computer and information
technologies and operational and financial systems (including the successful and
timely completion of the implementation and installation of the PRISM Project),
the effective and timely marketing to, and level of acceptance and increased
utilization by, existing and new clients of the Company of Precision Resolution,
InfiniteAccess and other Internet products and services, technical difficulties
or errors, problems or excessive costs incurred by the Company in connection
with the completion of the development, implementation and/or future enhancement
of InfiniteAccess, Precision Resolution, and/or IMA Advantage/Edge, and/or the
integration of Internet technologies with the Company's current products and
services to create customer interaction centers and the success and acceptance
by the Company's clients thereof, the failure of the Company to cost-effectively
develop new Internet services and products or to maintain or enter into new
strategic or key business relationships in connection with the development
and/or enhancement of its Internet offerings, the over-estimation by the Company
of the level of need and demand for customer support and service through the use
of the Internet, the ability of the Company to hire, train and retain qualified
technology and other personnel in connection with its development,
implementation and/or enhancement efforts and the operations of PRCNETCARE.COM,
the compatibility of InfiniteAccess, Precision Resolution and other Internet
products and services with existing systems of the Company's clients and the
extent of the technical problems arising with respect to obtaining such
compatibility, the introduction of new competitive Internet and other products
and services in the Company's industry by other companies, the achievement by
the Company and its suppliers and customers of Year 2000 compliance in a timely
and cost efficient manner, the anticipated growth in industry trends towards
outsourcing and cosourcing of telephone and Internet based marketing and
customer service operations (particularly in the telecommunications services and
equipment, transportation, financial services, utility, consumer products and
food and beverage industries), changes in competition and the forms of direct
sales and marketing techniques, consumer interest in, and use of, the Company's
clients' products and services, general economic conditions, costs of telephone
services, financing and leasing of equipment, the adequacy of cash flows from
operations and available financing to fund capital needs and future growth,
changes in and additions to governmental rules and regulations applicable to the
Company, the realization of the Company's net deferred tax asset and other risks
set forth in this report, in the Company's other filings with the SEC and in the
Company's press releases. These risks and uncertainties are beyond the ability
of the Company to control; in many cases, the Company cannot predict the risks
and uncertainties that could cause actual results to differ materially from
those indicated by the forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the quarter ended March 31, 1999, there have been no material
changes in the information about the Company's market risk as of December 31,
1998 as set forth in Item 7A. of the 1998 Form 10-K.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of the lawsuit captioned HENRY E. FREEMAN AND FREEMAN
INDUSTRIAL ENTERPRISES CORPORATION V. PRECISION RESPONSE CORPORATION, MARK J.
GORDON, DAVID L. EPSTEIN AND RICHARD D. MONDRE (Case No. 398-CV-1895-AVC (D.
Conn)), see Note 5 - Commitments and Contingencies of the Notes to Consolidated
Financial Statements in Item 1 of Part I of this report, which Note 5 is
incorporated by reference into this Item 1 of Part II.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Recent Sales of Unregistered Securities
The Company did not issue or sell any unregistered securities during
the quarter ended March 31, 1999, although the Company granted
non-qualified stock options to purchase 25,000 shares of Common Stock
to an independent contractor pursuant to the Company's Amended and
Restated 1996 Incentive Stock Plan. The exercise price of the options
is $7.72 per share. The options have a term of four years and vest
annually over three years at a rate of 33 1/3% per year.
The foregoing stock options were granted by the Company in reliance
upon the exemption from registration available under Section 4(2) of
the Securities Act of 1933, as amended.
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------- -----------------------------------------------------------
10.1 Amendment to Employment Agreement dated as of April 1,
1999, between the Company and David L. Epstein+
10.2 Employment Agreement dated as of April 1, 1999, between the
Company and Richard D. Mondre together with Registration
Rights Agreement dated as of April 1, 1999, between the
Company and Richard D. Mondre annexed as Exhibit "A"
thereto+
10.3 Employment Agreement dated as of April 1, 1999, between the
Company and Richard N. Ferry, Jr.+
10.4 Employment Agreement dated as of April 14, 1999, between
the Company and Michael P. Miller+
27.1 Financial Data Schedule (for SEC use only)
- ------------------
+ Indicates a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1999.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRECISION RESPONSE CORPORATION
(Registrant)
By: /s/ Paul M. O'Hara
-------------------------------------
Paul M. O'Hara
Executive Vice President - Finance
and Chief Financial Officer
By: /s/ Thomas F. Jennings, Jr.
-------------------------------------
Thomas F. Jennings, Jr.
Vice President and Controller
(Principal Accounting Officer)
Dated: May 14, 1999
21
<PAGE> 1
EXHIBIT 10.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") dated and
effective as of April 1, 1999, by and between Precision Response Corporation, a
corporation organized and existing under the laws of the State of Florida
("Company"), and David L. Epstein ("Executive")
W I T N E S S E T H
WHEREAS, Company currently employs Executive pursuant to that certain
Employment Agreement dated May 15, 1996, by and between Company and Executive
(the "Agreement"); and
WHEREAS, Company and Executive desire to amend certain of the
provisions of the Employment Agreement as set forth herein.
NOW THEREFORE, the parties agree that the Agreement shall be amended
effective as of and after the date hereof as follows:
1. Paragraph 1 of the Agreement is amended and restated in its
entirety as follows:
"Company hereby employs Executive as its Chief Executive Officer
throughout the balance of 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, without limitation, those set forth in the bylaws of
Company from time to time, overall responsibility and authority for
the conduct of all operations and business of Company and the
employees of Company, and such other duties and responsibilities which
the Board of Directors of Company or Chairman of the Board 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 shall also 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 (for itself and on behalf of its successor)
agrees to cause Executive from time to time to be elected or appointed
to such corporate office.
2. Paragraph 2 of the Agreement is amended and restated in its
entirety as follows:
"Term. Subject to the provisions for earlier termination set forth in
Section 7 hereof, this Employment Agreement shall commence as of the
date hereof and shall continue until 5:00, p.m., March 31, 2002 (the
"Initial Term"), with the Initial Term to be automatically renewed and
extended for consecutive additional one year periods unless, at least
sixty (60) days prior to the expiration of the Initial Term or any one
year renewal period thereof, either party hereto delivers to the other
party hereto written notice of such party's termination of this
Agreement at the expiration of the Initial Term or any one year
renewal period thereof (as
<PAGE> 2
the case may be). The Initial Term together with any or all one year
renewal periods thereof are hereinafter collectively referred to as
the "Employment Term"."
3. For purposes of paragraphs 4 and 7(e)(ii) of the Agreement,
the Miami-Ft. Lauderdale, Florida metropolitan area shall not extend further
south than the location of Company's executive offices as of the date of this
Amendment.
4. The second sentence of paragraph 5 of the Agreement is
amended and restated in its entirety as follows:
"The Base Salary shall be increased, effective on January 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
December 31, 1998, or the previous Adjustment Date, whichever is
later."
5. Paragraph 6(a) of the Agreement is amended and restated in
its entirety as follows:
"Bonus. Executive shall receive an annual bonus in an amount to be
determined by the Compensation Committee of the Board of Directors of
Company in its sole and absolute discretion. Subject to the provisions
regarding payment upon termination or expiration of employment set
forth in Section 8 hereof, each annual bonus shall be paid on or
before March 31 of each year of the Employment Term. The bonus payable
on or before each March 31 shall be based upon the operating results
of Company and Executive's performance during the calendar year (or
the portion thereof in which Executive was employed hereunder)
immediately preceding such March 31. Each bonus shall be subject to
payroll deductions and tax withholdings in accordance with Company's
usual payroll practices and as required by law."
6. Paragraph 6(b) of the Agreement is amended by adding the
following additional sentence at the end thereof:
"Furthermore and notwithstanding anything to the contrary contained
herein, all of the outstanding options of Executive shall be fully vested and
immediately exercisable (a) no later than the date of the expiration of the
Initial Employment Term, (b) upon Executive terminating his employment as a
result of the occurrence of a Constructive Termination or (c) upon a change in
control (as such term has been generally defined with respect to grants of
options to senior executive officers of Company prior to April 1, 1999) ."
7. Paragraph 6(d) of the Agreement is amended and restated in
its entirety as follows:
"Vacations and Holidays. Executive shall be entitled to six
weeks vacation each full year of the Employment Term (prorated
for any partial year), with full compensation, which, to the
2
<PAGE> 3
extent unused, may be carried over from year to year (provided,
however, that Executive shall not be entitled to be compensated for
any unused vacation days upon termination of employment). The periods
during which Executive will be absent from work for vacation shall be
at the reasonable discretion of Company."
8. Paragraph 6 of the Agreement is amended by adding the
following new subparagraph (g) at the end thereof:
"(g) Directors' and Officers' Liability Insurance. Company will
endeavor to maintain Company's directors' and officers' liability
insurance at least at the same level of coverage as in effect as of
April 1, 1999."
9. Clause (i) of paragraph 7(c) of the Agreement is amended by
adding at the end of such clause (i) the following words: "on or with respect
to Company,"
10. The first sentence of paragraph 8(c) of the Agreement is
amended and restated in its entirety as follows:
"(c) Involuntary Termination. If Executive's employment shall be
terminated for any reason not set forth in subparagraphs 7(a) through
(d) above, or if a Constructive Termination occurs, prior to the end
of the term of this Agreement, or upon expiration of the Employment
Term pursuant to the terms of paragraph 2 hereof, 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 or expiration 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."
11. Paragraph 12 is amended to provide that notice to the
Company shall be to the attention of each of the "Chairman and General Counsel"
rather than to the "CEO and General Counsel."
12. Schedule 6(e) to the Agreement is amended to provide,
immediately following the description of the Country Club Memberships, as
follows:
"SPLIT DOLLAR PLAN
Company shall commence funding a portion of the premiums
due on two life insurance policies issued on September 1, 1995, by New
York Life Insurance Company insuring, in one policy, the lives of
Executive and his wife, Jodi A. Epstein and, in the other, the life of
Executive, pursuant to two separate written "Split Dollar" agreements
in the form executed by the two separate trusts administered for the
benefit of Mr. Epstein's family, each of which is an owner of one of
the insurance policies, and Company, as same may be amended from time
to time."
3
<PAGE> 4
13. Schedule 10 to the Agreement and the Registration Rights
Agreement dated as of May 15, 1996 between Company and Executive (the
"Registration Rights Agreement") are amended (a) to replace the incorrect
reference to "Mark J. Gordon" in Section 1.01(j) of the Registration Rights
Agreement with "David L. Epstein" and (b) to provide in Section 2.04 of the
Registration Rights Agreement that notice to the Executive shall be addressed
and sent as follows:
"David L. Epstein
3478 Derby Lane
Westin, Florida 33331,"
14. Except as otherwise specifically modified by this
Amendment, all terms, conditions and provisions of the Agreement shall remain
effective and shall continue to operate in full force throughout the entire
term of the Agreement, as amended hereby.
15. This Amendment shall be governed by and construed pursuant
to the laws of the State of Florida.
16. This Amendment may be executed in counterparts, each of
which shall be an original, but both of which together shall constitute one and
the same instrument.
THE PARTIES hereto have caused this Agreement to be duly executed as
of the day and year first above written.
PRECISION RESPONSE CORPORATION
BY: /s/ Mark J. Gordon
--------------------------------------
Mark J. Gordon, Chairman of the Board
/s/ David L. Epstein
--------------------------------------
DAVID L. EPSTEIN
4
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated and effective as of April 1, 1999, 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 D. MONDRE (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a Florida corporation engaged in interactive
customer service and marketing through the integration of its teleservicing,
Internet, database management and marketing and fulfillment capabilities;
WHEREAS, Employer desires to continue to employ Employee upon the
terms and conditions set forth below and Employee desires to continue such
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 as of the date
hereof and shall continue until 5:00, p.m., March 31, 2002 (the "Initial
Employment Term"), with the Initial Employment Term to be automatically renewed
and extended for consecutive additional one year periods unless, at least sixty
(60) days prior to the expiration of the Initial Employment Term or any one
year renewal period thereof, either party hereto delivers to the other party
hereto written notice of such party's termination of this Employment Agreement
at the expiration of the Initial Employment Term or any one year renewal period
thereof (as the case may be). The Initial Employment Term together with any or
all one year renewal periods thereof are hereinafter collectively referred to
as the "Employment Term".
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3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that Employee is
free to continue employment with Employer as contemplated herein and, except as
set forth in this Section 3, has no other written or oral obligations or
commitments of any kind or nature which would in any way interfere with
Employee's continuation 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. Notwithstanding anything herein to the contrary, the
parties recognize, acknowledge and agree that (i) Employee is also currently
employed by a professional services corporation ("RDMPA") which is associated
with the law firm of Bilzin Sumberg Dunn Price & Axelrod LLP (the "Law Firm")
in the capacity of "Of Counsel;" (ii) that Employee expects such association
(directly or indirectly through RDMPA) with the Law Firm to continue through
the end of the Employment Term; and (iii) that Employee may periodically devote
during the Employment Term certain nonmaterial amounts of time and effort to
support client relationships of the Law Firm with clients whom Employee is
familiar, but that in no event will such efforts in any way take precedence
over or in any way interfere with Employee's duties and responsibilities to
Employer assigned to him pursuant to this Employment Agreement.
4. DUTIES AND EXTENT OF SERVICES
A. Duties. Employee's duties and responsibilities
hereunder shall be those reasonably assigned to him from time to time by
Employer, consistent with the following: (i) Employee shall be an Executive
Vice President of Employer, and serve as a member of uppermost senior
management of Employer; (ii) Employer shall serve as General Counsel and
Secretary of Employer and be responsible to perform the duties usually and
customarily required of a senior executive who holds such positions; (iii)
Employee shall consult with and advise Employer's Board of Directors and senior
management with respect to all aspects of public or private offerings of debt
or equity and all financing matters generally and direct and supervise
Employer's team with respect thereto; (iv) Employee shall direct and supervise
any acquisitions or dispositions of capitol stock, businesses, assets and
facilities approved by the Board of Directors of Employer; (v) Employee shall
supervise and direct Employer's relationships with outside law firms; and (vi)
Employee shall generally consult with the Board of Directors and senior
management of Employer with respect to strategic business decisions of all
kinds and any other matters consistent with or related to any of the foregoing.
Employee shall
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report directly to Employer's Chairman of the Board, Chief Executive Officer
and Board of Directors as from time to time requested by any of the foregoing.
Subject to the provisions of Section 3, Employee shall devote substantially all
of his work efforts to perform the duties and responsibilities properly
assigned to Employee hereunder or pursuant hereto to the best of his abilities.
However, Employee may devote a reasonable amount of his time to civic,
community or charitable activities and, with the prior approval of the Chairman
of the Board or Chief Executive Officer of Employer, to serve as a director of
other corporations or in a similar capacity with other types of entities and as
a member of committees of boards of directors of such other corporations or
comparable governing bodies of such other entities and undertake other
activities not expressly mentioned in this paragraph. Employee may invest his
personal assets as he deems appropriate so long as such investments do not
interfere with Employee's performance of the duties and responsibilities
properly assigned to him pursuant to this Employment Agreement.
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 senior executives generally, provided
that copies of such rules and regulations are provided to Employee. Such rules
and regulations are all hereby incorporated by reference and made a part of
this Employment Agreement.
C. Place of Service. Employee shall render his services
initially in northern Miami-Dade County, Florida, and shall not be obligated to
maintain his office in any place other than northern Miami-Dade County (i.e.,
not any further south in Miami-Dade County than the location of Employer's
executive offices as of the date of this Employment Agreement), Broward County
or Palm Beach County, Florida; provided, however, that Employee shall be
obligated to travel as necessary to fulfill his duties and responsibilities.
5. COMPENSATION
A. Base Compensation. Subject to the provisions of
Section 9 of this Employment Agreement, Employer shall pay salary to Employee
("Salary") at a rate of $400,000 per annum through the expiration of the
Employment Term unless otherwise mutually agreed in writing by the parties
hereto. 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
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withholdings in accordance with Employer's usual practices and as required by
law.
B. Bonus Compensation. Employee shall receive an annual
bonus in an amount to be determined by the Compensation Committee of the Board
of Directors of Employer in its sole and absolute discretion (the "Bonus
Amount"). Subject to the provisions regarding payment upon termination or
expiration of employment set forth in Section 9 hereof, each annual Bonus
Amount shall be paid on or before March 31 of each year of the Employment Term.
The Bonus Amount payable on or before each March 31 shall be based upon the
operating results of Employer and Employee's performance during the calendar
year (or the portion thereof in which Employee was employed hereunder)
immediately preceding such March 31. 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.
C. Stock Option Plans. On or before December 31 of each
year (beginning December 31, 1999) during the Employment Term (or, with respect
to the final year of this Employment Agreement, upon the effective date of
termination of Employee's employment if such effective date is a date other
than December 31) (each, an "Option Grant Date"), Employer through the
Compensation Committee of Employer shall cause to be granted to Employee
options to purchase that number of shares of Employer's voting common stock
which is at least equal to five percent (5%) of the aggregate number of shares
for which options for Employer's common stock were granted since the last
Option Grant Date (or, with respect to the first Option Grant Date, since
January 1, 1999) to Employer's employees and to Employer's non-employee
directors under any stock option plans (including incentive stock option plans)
of Employer, but excluding, in calculating the aggregate number of shares for
which options were granted, any stock options awarded to Mark Gordon, David
Epstein and/or Richard N. Ferry, Jr. pursuant to a provision in their
respective employment agreements with Employer substantially the same as this
Subsection C. The terms (including price and vesting and/or exercise dates) of
the options granted to Employee shall be as determined by the Committee but
shall be comparable to the terms upon which options were generally granted to
other employees of Employer during the applicable period, subject to any
differences required under applicable tax laws with respect to incentive stock
options granted to Employee. In all events, the options granted to Employee
shall provide that Employee shall have at least ninety (90) days following
termination of Employee's employment for any reason other than death and that
Employee's personal representative or other legal representative shall have at
least one (1) year following Employee's death to
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exercise any or all of the outstanding options granted to Employee to the
extent they were exercisable on the date of such termination of employment or,
if Employee's employment is terminated for reasons other than (i) Employee's
death, Disability (as defined in Section 9.B.) or voluntary resignation (but
not Constructive Termination, as defined in Section 9.B.) or (ii) for Cause (as
defined in Section 9.B.), to exercise any or all of such outstanding options
(which shall all then be deemed exercisable and fully vested, notwithstanding
any stated vesting schedules) in full. Furthermore and notwithstanding anything
to the contrary contained herein, all of the outstanding options of Employee
shall be fully vested and immediately exercisable (a) no later than the date of
the expiration of the Initial Employment Term or (b) upon a Change in Control
(as defined in Section 9.F.).
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 and qualified and unqualified pension, profit
sharing and deferred compensation plans) as are made available by Employer from
time to time, in Employer's sole discretion, to Employer's senior executives
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.
C. Automobile. 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 his
duties, but shall not be obligated to provide Employee with an automobile.
D. Directors' and Officers' Liability Insurance. Employer
will endeavor to maintain Employer's directors' and officers' liability
insurance at least at the same level of coverage as in effect as of the date
hereof.
7. VACATIONS Employee shall be entitled to six weeks
vacation each full year of the Employment Term (prorated for any partial year),
with full compensation, which, to the extent unused, may be carried over from
year to year (provided, however, that
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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 are
reasonably 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 hereinafter defined) and receiving written notice of termination from
Employer to that effect within ninety (90) days after being deemed Disabled.
Employee may terminate Employee's employment under this Employment Agreement
without being in breach hereunder by giving written notification of (i)
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 or (ii) Constructive Termination (as hereinafter defined) of
Employee's employment under this Employment Agreement (subject to the
provisions of Section 9.B. hereof relating to Constructive Termination).
Employee's employment under this Employment Agreement shall be terminated upon
expiration of the Employment Term pursuant to Section 2 hereof.
B. Definitions of Cause, Disabled and Constructive
Termination. For purposes of this Employment Agreement, "Cause" shall mean: (i)
commission of a felony, or commission of acts of fraud, embezzlement or the
like on or with respect to Employer; (ii) habitual drunkenness during business
hours or at Employer's premises; (iii) use of illicit drugs during business
hours or at Employer's premises; (iv) abandonment of employment duties (other
than by reason of death or becoming Disabled); or (v) material breach by
Employee of this Employment Agreement having a material adverse effect on
Employer or its businesses, operations or financial condition, which breach, if
curable, is not cured by Employee within thirty (30) days following Employee's
receipt of written notice thereof (such notice shall specify in reasonable
detail the nature of the material breach and the curative steps, if
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curable, required to be taken). Employee shall be deemed "Disabled" for
purposes of this Employment Agreement (a) if 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 one hundred and twenty (120) days, or (b) if Employee is adjudicated as an
incompetent or has a guardian appointed to handle Employee's affairs. If clause
(a) above applies, Employee shall be deemed Disabled on the last day of the 120
day period. If clause (b) above applies, Employee shall be deemed Disabled on
the date of adjudication as an incompetent or the appointment of the guardian,
whichever occurs first. For purposes of this Employment Agreement,
"Constructive Termination" shall mean: (x) Employer has delegated to another or
others a material portion of Employee's duties or responsibilities provided for
in Section 4.A. hereof (and shall include, without limitation, removal of
Employee from the office of Executive Vice President, General Counsel or
Secretary, even if Employee's day-to-day duties are to remain substantially the
same), other than for Cause, and Employer fails to confirm in writing, and
implement, the reinstatement of such material portion of Employee's duties and
responsibilities and/or offices to Employee within thirty (30) days after
receipt by each of the Chairman of the Board and Chief Executive Officer of
Employer of Employee's written notice of protest (as provided in the next
sentence), (y) Employer attempts, without Employee's prior written consent, to
relocate Employee's office outside the location specified in Section 4.C.
hereof, or (z) the position of Chairman of the Board or Chief Executive Officer
of Employer becomes vacant for any reason and either (1) the vacancy is filled
by a person other than Mark J. Gordon, David Epstein, Employee or another
person not an employee of Employer immediately prior to becoming the Chairman
of the Board or Chief Executive Officer of Employer or (2) the vacancy is not
filled within sixty (60) days of the date of such vacancy. In the event of
Constructive Termination of Employee's employment under this Employment
Agreement, Employee may terminate Employee's employment, provided that he has
given written notice of protest to each of the Chairman of the Board and Chief
Executive Officer of Employer within thirty (30) days of the occurrence of the
event causing the Constructive Termination setting forth the manner in which
the Constructive Termination has occurred (and such Constructive Termination is
not timely corrected, as provided in the case of a Constructive Termination
under clause (x) of the preceding sentence).
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 Employee's employment, Employer shall
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pay to Employee, within thirty (30) days following the date of such termination
or resignation, (i) the Salary, if any, accrued and unpaid through the date of
such termination or resignation, and (ii) if the Bonus Amount of Employee for
the prior year has been declared by Employer, but not yet paid to Employee, the
Bonus Amount for such prior year, 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 or resignation; 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.
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 and Bonus
Amount, if any, accrued and unpaid through the date of termination and shall
pay and provide to Employee, Employee's legal guardian or the legal
representative of Employee's estate the amounts and items payable and to be
provided under Section 6 through the date of such 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 (except with respect to benefits which become payable
under any employee benefit plans of Employer as a result of Employee's death or
disability). In the event that death or termination of employment as a result
of Employee becoming Disabled occurs during a year and prior to any Bonus
Amount of Employee being declared by Employer for such year, the Bonus Amount
under this Subsection D. for such partial year of employment shall be prorated
through the date of such death or termination based upon the prior year's Bonus
Amount.
E. Compensation Upon Termination Without Cause or
Constructive Termination or Expiration. In the event that Employer (or its
successor) terminates Employee's employment under this Employment Agreement
without Cause (other than in connection with or in contemplation of a Change in
Control (as hereinafter defined) as provided in Subsection F. below), Employee
terminates his employment as a result of the occurrence of a Constructive
Termination to the extent and in the manner permitted hereunder or upon
expiration of the Employment Term pursuant to the terms of Section 2,
Employee's sole and exclusive compensation and remedy
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hereunder shall be to receive from Employer, and Employer shall pay to
Employee, (i) the amount of Salary and Bonus Amount, if any, accrued and unpaid
through the date of termination or expiration, and the amounts and items
payable or to be provided under Section 6 through the date of termination or
expiration, payable within thirty (30) days following the date of termination
or expiration of employment, and (ii) (A) in the case of termination without
Cause or Constructive Termination, an amount in cash equal to the sum of (1)
the Salary that Employee would have received during the greater of (x) the one
year period following the date of such termination of Employee's employment and
(y) the remainder of the Initial Employment Term (if such termination occurs
during the Initial Employment Term) and (2) $200,000 or (B) in the case of
expiration of the Employment Term pursuant to Section 2 hereof as a result of
Employer delivering to Employee a written notice of termination of this
Employment Agreement, an amount in cash equal to the Salary for one (1) full
year. Such cash amount payable under clauses (A) or (B) above shall be payable
one-half (1/2) within thirty (30) days following the date of termination of
employment or expiration and the balance (the other one-half (1/2)) payable in
equal consecutive monthly installments over the period that Employee was
entitled to be paid the Salary under clauses (A) or (B) above (as the case may
be), with the first such installment payable sixty (60) days following the date
of termination of employment or expiration and each subsequent installment
payable on the same day of each successive month until payment is made in full.
In the event that termination of employment without Cause, as a result of
Constructive Termination or upon expiration of this Employment Agreement occurs
during a year and prior to any Bonus Amount of Employee being declared by
Employer for such year, the Bonus Amount under this Subsection E. for such
partial year of employment shall be prorated through the date of such
termination based upon the prior year's Bonus Amount. Notwithstanding anything
to the contrary contained in this Subsection E., if termination of employment
without Cause, as a result of Constructive Termination or upon expiration of
this Employment Agreement occurs before a Change in Control and this Subsection
E. is followed by the parties, but within one hundred eighty (180) days
thereafter with respect to termination of employment without Cause or as a
result of Constructive Termination or within one hundred twenty (120) days
thereafter with respect to expiration of this Employment Agreement a Change in
Control occurs, then Subsection F. shall supersede this Subsection E. and the
balance of the unpaid amounts of the severance and other payments required
under Subsection F. shall be immediately (but in all events within thirty (30)
days after such Change in Control) paid by Employer (or its successor) to
Employee.
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F. Compensation Upon a Change in Control. Notwithstanding
the provisions of Subsection E. above, in the event that (i) Employer (or its
successor) terminates Employee's employment under this Employment Agreement
without Cause within one hundred eighty (180) days before or after a Change in
Control (as hereinafter defined), (ii) Employee terminates his employment to
the extent and in the manner permitted under this Employment Agreement as a
result of the occurrence of a Constructive Termination within one hundred
eighty (180) days before or after a Change in Control or (iii) Employer (or its
successor)(but not Employee) delivers to Employee a written notice of
termination pursuant to Section 2 terminating this Employment Agreement at the
expiration of the Employment Term and such expiration occurs within one hundred
and twenty (120) days before or one hundred eighty (180) days after a Change in
Control, Employee's sole and exclusive compensation and remedy hereunder shall
be to receive from Employer (or its successor), and Employer (or its successor)
shall pay to Employee within thirty (30) days following the date of termination
of employment or expiration, (a) the amount of Salary and Bonus Amount, if any,
accrued and unpaid through the date of termination of employment or expiration,
and the amounts and items payable or to be provided under Section 6 through the
date of termination of employment or expiration, and (b) a lump sum severance
payment in cash equal to 2.99 times an amount equal to the average of the sum
of the annual Salary and Bonus Amount paid to Employee each year during the
Employment Term. For purposes of this Subsection F., (1) a "Change in Control"
means that (x) neither Mark Gordon (for these purposes, counting all common
stock directly or indirectly beneficially owned by Mark Gordon's Affiliates)
nor David Epstein (for these purposes, counting all common stock directly or
indirectly beneficially owned by David Epstein's Affiliates) beneficially owns
at least 10% of the issued and outstanding common stock of Employer (or its
successor); (y) neither Mark Gordon (for these purposes, counting all common
stock directly or indirectly beneficially owned by Mark Gordon's Affiliates)
nor David Epstein (for these purposes, counting all common stock directly or
indirectly beneficially owned by David Epstein's Affiliates) is the stockholder
of Employer (or its successor) beneficially owning the highest number of issued
and outstanding shares of common stock of Employer (or its successor); or (z)
Mark Gordon and/or David Epstein do not occupy the positions of Chairman of the
Board and Chief Executive Officer of Employer (or its successor); (2)
"Affiliate" means, with respect to Mark Gordon or David Epstein, an immediate
family member of his, a trust principally for his benefit and/or the benefit of
his family members and/or lineal descendants, or a family limited partnership
or any other entity the direct or indirect beneficial or pecuniary owners of
which are principally him, his immediate family members and/or trusts or other
entities
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principally for the benefit of him, his family members and/or lineal
descendants; and (3) "Immediate family members" mean, with respect to Mark
Gordon or David Epstein, his spouse, children, parents, siblings or other
lineal descendants. For purposes of clause (a) of this Subsection F., any Bonus
Amount for a partial year of employment shall be prorated through the date of
such termination or expiration(based upon the prior year's Bonus Amount, if
any) and for purposes of clause (a) or clause (b) of this Subsection F., if
Employee has not previously earned a Bonus Amount under this Employment
Agreement, the Bonus Amount shall be deemed to be $300,000. Nothing in this
Subsection F. shall be deemed to limit Employee's rights as provided under
Subsection E. with respect to a termination without Cause or Constructive
Termination occurring more than 180 days before or more than 180 days after a
Change in Control or an expiration of this Employment Agreement occurring more
than 120 days before or more than 180 days after a Change in Control.
G. 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
examinations 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 and Internet software, 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
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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 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 or
Chief Executive Officer 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, computer or Internet software or discs, tapes or similar containers
of software, manuals, data, books, records, materials or documents of any kind
or description of Employer or related to its business for any purpose
unconnected with the 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 to be obtained by
or disclosed to Employee, and (b) the consideration payable to Employee under
this Employment Agreement, and as a material inducement to Employer to enter
into this Employment Agreement, Employee covenants and agrees that, (i) for as
long as Employee is employed by Employer and for a period of 24 months after
the date Employee ceases for any reason to be employed by Employer, Employee
shall not, directly or indirectly, (A) sell any products or services sold or
offered by Employer to any person or
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entity who is or was a client of 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 or (B) solicit the services of,
or hire, directly or indirectly, whether on Employee's own behalf or on behalf
of others, any managerial or executive employee, account manager, programmer,
information services employee (including, without limitation, network or other
information services or Internet operation employee) or database management or
marketing employee of Employer who was or is employed by Employer at any time
during the two-year period ending on the date of termination of Employee's
employment, and (ii) for as long as Employee is employed by Employer and
thereafter for the Severance Period (as hereinafter defined), Employee shall
not, directly or indirectly, engage in any venture, enterprise, activity or
business, passively or actively, as an owner, consultant, adviser, participant,
employee, agent or in any other capacity, competitive with the business of
Employer anywhere within the continental United States; provided, however, that
nothing in this Section 11 shall prohibit Employee from (w) owning as a passive
investor beneficially and/or of record less than 5% of the outstanding equity
securities of any entity whose equity securities are registered under the
Securities Exchange Act of 1934, as amended, or are listed for trading on any
United States or foreign stock exchange or (x) engaging, after termination of
Employee's employment with Employer, in the practice of law in any capacity
whatsoever (including, without limitation, as a partner, of counsel or
otherwise) with a law firm that represents a client which is a competitor of
Employer so long as Employee does not directly perform services for such
client. 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. For purposes of this Section
11, the "Severance Period" shall mean: (y) in the case of a termination of
Employee's employment as a result of Employee becoming Disabled or a
termination of Employee's employment with Cause or as a result of the
resignation of employment by Employee or in the case of the expiration of the
Employment Term resulting from the election of Employee or Employer not to
renew, a period of 12 months after the termination date of Employee's
employment with Employer; and (z) in the case of termination of Employee's
employment without Cause or as a result of the occurrence of a Constructive
Termination, the greater of (1) a period of 12 months after the termination
date of Employee's employment with Employer or (2) the remainder of the Initial
13
<PAGE> 14
Employment Term (if such termination occurs during the Initial Employment
Term).
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 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. 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 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
14
<PAGE> 15
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, acknowledgments,
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).
D. Definition of Employer. For purposes of Sections 10,
11, 12 and 13 of this Employment Agreement, the term "Employer" includes the
Employer and any parent corporation of Employer and all subsidiaries of
Employer and its parent corporation (if any).
14. REGISTRATION RIGHTS. If Employee's employment with Employer
shall terminate for any reason (whether under this Employment Agreement or
otherwise), Employee may thereafter require Employer to register any or all of
the unregistered shares of common stock that Employee (or his assigns or
affiliated entities or trusts) may then own as of the date of such termination
of employment in accordance with the provisions of the Registration Rights
Agreement attached hereto as Exhibit "A". In addition, Employee shall have the
piggyback registration rights and other rights as set forth in such
Registration Rights Agreement.
15. LAW APPLICABLE
This Employment Agreement shall be governed by and construed
pursuant to the laws of the State of Florida.
15
<PAGE> 16
16. 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 Chief Executive Officer, if mailed to Employer, and to Employee's then
current residence, if mailed to Employee, and shall be effective only upon
actual receipt by the party to whom it is given.
17. 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 other than in connection
with a merger, consolidation or similar reorganization or the sale of all or
substantially all of the assets of Employer (or its successor), Employer shall
remain liable for all of its obligations hereunder.
18. ENTIRE AGREEMENT
This Employment Agreement, together with the Registration
Rights Agreement attached hereto as Exhibit "A", constitute 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
(including, without limitations, that certain employment agreement dated as of
February 16, 1996 between the parties) concerning, the subject matter hereof
and may not be amended, modified or terminated except by a writing signed by
the parties hereto.
19. 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.
16
<PAGE> 17
20. 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.
21. 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.
22. 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.
23. INDEPENDENT COUNSEL
THE PARTIES HEREBY ACKNOWLEDGE THAT EACH OF THEM HAS HAD THE
OPPORTUNITY TO RETAIN AND TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL WITH
RESPECT TO, AND IN CONNECTION WITH ALL STAGES OF THE NEGOTIATION, PREPARATION
AND EXECUTION OF, THIS EMPLOYMENT AGREEMENT.
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/ David L. Epstein
-------------------------------------------
David L. Epstein
Chief Executive Officer
EMPLOYEE:
/s/ Richard D. Mondre
-----------------------------------------------
RICHARD D. MONDRE
17
<PAGE> 18
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is entered into effective as of the
1st day of April, 1999, by and between PRECISION RESPONSE CORPORATION, a
Florida corporation (the "Company"), and RICHARD D. MONDRE ("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 or transferees of Holder which are Holder's family members and/or
lineal descendants and/or which are trusts, limited partnerships or other
entities the direct or indirect beneficial or pecuniary owners of which are
principally Holder, Holder's family members and/or Holder's lineal descendants,
including, without limitation, shares of common stock acquired by
<PAGE> 19
any such trusts, partnerships or other entities from Holder or any such trust,
limited partnership or other entity 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 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 and accountants 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 Richard D. Mondre 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
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<PAGE> 20
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 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 Chief Executive Officer 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
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<PAGE> 21
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 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.
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<PAGE> 22
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 after the
effective date thereof 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 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, however, that the Company will not be liable in any such case
to the extent that any such claim, loss, damage,
5
<PAGE> 23
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 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
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<PAGE> 24
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.
(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
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<PAGE> 25
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 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 Company as
Holder may reasonably request in availing Holder or other owners of Registrable
Securities of any rule or regulation of the Commission (including, without
limitation, Rule 144) 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
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<PAGE> 26
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 by commercial courier service or sent
by United States certified mail, return receipt requested, postage prepaid,
addressed as follows:
<TABLE>
<S> <C>
If to Holder: Richard D. Mondre
3711 North 55th Avenue
Hollywood, Florida 33021
If to Company: Precision Response Corporation
1505 N.W. 167th Street
Miami, Florida 33169
Attn: Chairman of the Board and Chief
Executive Officer,
</TABLE>
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
9
<PAGE> 27
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 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.
Section 2.08 Attorneys' Fees. In the event that either of the
parties to this Agreement institutes suit against the other party to this
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.
Section 2.09 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 L. Epstein
Chief Executive Officer
-----------------------------------------------
RICHARD D. MONDRE
10
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated and effective as of April 1, 1999, 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 interactive
customer service and marketing through the integration of its teleservicing,
Internet, database management and marketing and fulfillment capabilities;
WHEREAS, Employer desires to continue to employ Employee upon the
terms and conditions set forth below and Employee desires to continue such
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 as of the date
hereof and shall continue until 5:00, p.m., March 31, 2002 (the "Initial
Employment Term"), with the Initial Employment Term to be automatically renewed
and extended for consecutive additional one year periods unless, at least sixty
(60) days prior to the expiration of the Initial Employment Term or any one
year renewal period thereof, either party hereto delivers to the other party
hereto written notice of such party's termination of this Employment Agreement
at the expiration of the Initial Employment Term or any one year renewal period
thereof (as the case may be). The Initial Employment Term together with any or
all one year renewal periods thereof are hereinafter collectively referred to
as the "Employment Term".
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3. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents and warrants to Employer that Employee is
free to continue 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 continuation 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.
4. DUTIES AND EXTENT OF SERVICES
A. Duties. Employee's duties and responsibilities
hereunder shall be those reasonably assigned to him from time to time by
Employer, consistent with the following: Employee shall, unless and until
otherwise determined by Employer, serve as Employer's Executive Vice
President-Business Development, and shall, subject to the direction of
Employer's Chief Executive Officer, have overall responsibility to supervise
and conduct Employer's day-to-day business development and client development
matters and such other duties and responsibilities as Employer's Chief
Executive Officer shall from time to time assign. In addition, unless and until
otherwise determined by Employer, Employee shall serve as President of
PRCNETCARE.COM, Inc., a Delaware corporation and wholly-owned subsidiary of
Employer, and shall have with respect to such subsidiary such duties and
responsibilities as are normally and customarily assigned to, and are
consistent with acting as, the President of a company. Employee shall report
directly to Employer's Chief Executive Officer. Employee shall devote
substantially all of his work efforts to perform the duties and
responsibilities properly assigned to Employee hereunder or pursuant hereto to
the best of his abilities. However, Employee may devote a reasonable amount of
his time to civic, community or charitable activities and, with the prior
approval of the Chairman of the Board or Chief Executive Officer of Employer,
to serve as a director of other corporations or in a similar capacity with
other types of entities and as a member of committees of boards of directors of
such other corporations or comparable governing bodies of such other entities
and undertake other activities not expressly mentioned in this paragraph.
Employee may invest his personal assets as he deems appropriate so long as such
investments do not interfere with Employee's performance of the duties and
responsibilities properly assigned to him pursuant to this Employment
Agreement.
B. Rules and Regulations. Employee agrees to abide by the
rules and regulations of Employer promulgated by Employer from
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time to time with respect and applicable to Employer's senior executives
generally, provided that copies of such rules and regulations are provided to
Employee. Such rules and regulations are all hereby incorporated by reference
and made a part of this Employment Agreement.
C. Place of Service. Employee shall render his services
initially in northern Miami-Dade County, Florida, and shall not be obligated to
maintain his office in any place other than northern Miami-Dade County (i.e.,
not any further south in Miami-Dade County than the location of Employer's
executive offices as of the date of this Employment Agreement), Broward County
or Palm Beach County, Florida; provided, however, that Employee shall be
obligated to travel as necessary to fulfill his duties and responsibilities.
5. COMPENSATION
A. Base Compensation. Subject to the provisions of
Section 9 of this Employment Agreement, Employer shall pay salary to Employee
("Salary") at a rate of $300,000 per annum through the expiration of the
Employment Term unless otherwise mutually agreed in writing by the parties
hereto. 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 in an amount to be determined by the Compensation Committee of the Board
of Directors of Employer in its sole and absolute discretion (the "Bonus
Amount"). Subject to the provisions regarding payment upon termination or
expiration of employment set forth in Section 9 hereof, each annual Bonus
Amount shall be paid on or before March 31 of each year of the Employment Term.
The Bonus Amount payable on or before each March 31 shall be based upon the
operating results of Employer and Employee's performance during the calendar
year (or the portion thereof in which Employee was employed hereunder)
immediately preceding such March 31. 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.
C. Stock Option Plans. On or before December 31 of each
year (beginning December 31, 1999) during the Employment Term (or, with respect
to the final year of this Employment Agreement,
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upon the effective date of termination of Employee's employment if such
effective date is a date other than December 31) (each, an "Option Grant
Date"), Employer through the Compensation Committee of Employer shall cause to
be granted to Employee options to purchase that number of shares of Employer's
voting common stock which is at least equal to five percent (5%) of the
aggregate number of shares for which options for Employer's common stock were
granted since the last Option Grant Date (or, with respect to the first Option
Grant Date, since January 1, 1999) to Employer's employees and to Employer's
non-employee directors under any stock option plans (including incentive stock
option plans) of Employer, but excluding, in calculating the aggregate number
of shares for which options were granted, any stock options awarded to Mark
Gordon, David Epstein and/or Richard D. Mondre pursuant to a provision in their
respective employment agreements with Employer substantially the same as this
Subsection C. The terms (including price and vesting and/or exercise dates) of
the options granted to Employee shall be as determined by the Committee but
shall be comparable to the terms upon which options were generally granted to
other employees of Employer during the applicable period, subject to any
differences required under applicable tax laws with respect to incentive stock
options granted to Employee. In all events, the options granted to Employee
shall provide that Employee shall have at least ninety (90) days following
termination of Employee's employment for any reason other than death and that
Employee's personal representative or other legal representative shall have at
least one (1) year following Employee's death to exercise any or all of the
outstanding options granted to Employee to the extent they were exercisable on
the date of such termination of employment or, if Employee's employment is
terminated for reasons other than (i) Employee's death, Disability (as defined
in Section 9.B.) or voluntary resignation (but not Constructive Termination, as
defined in Section 9.B.) or (ii) for Cause (as defined in Section 9.B.), to
exercise any or all of such outstanding options (which shall all then be deemed
exercisable and fully vested, notwithstanding any stated vesting schedules) in
full. Furthermore and notwithstanding anything to the contrary contained
herein, all of the outstanding options of Employee shall be fully vested and
immediately exercisable (a) no later than the date of the expiration of the
Initial Employment Term or (b) upon a Change in Control (as defined in Section
9.F.).
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 and qualified and
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unqualified pension, profit sharing and deferred compensation plans) as are
made available by Employer from time to time, in Employer's sole discretion, to
Employer's senior executives 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.
C. Automobile. 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 his
duties, but shall not be obligated to provide Employee with an automobile.
D. Directors' and Officers' Liability Insurance. Employer
will endeavor to maintain Employer's directors' and officers' liability
insurance at least at the same level of coverage as in effect as of the date
hereof.
7. VACATIONS Employee shall be entitled to six weeks
vacation each full year of the Employment Term (prorated for any partial year),
with full compensation, which, to the extent unused, may be carried over from
year to year (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 are
reasonably 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 hereinafter defined) and receiving written notice of termination from
Employer to that
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<PAGE> 6
effect within ninety (90) days after being deemed Disabled. Employee may
terminate Employee's employment under this Employment Agreement without being
in breach hereunder by giving written notification of (i) 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
or (ii) Constructive Termination (as hereinafter defined) of Employee's
employment under this Employment Agreement (subject to the provisions of
Section 9.B. hereof relating to Constructive Termination). Employee's
employment under this Employment Agreement shall be terminated upon expiration
of the Employment Term pursuant to Section 2 hereof.
B. Definitions of Cause, Disabled and Constructive
Termination. For purposes of this Employment Agreement, "Cause" shall mean: (i)
commission of a felony, or commission of acts of fraud, embezzlement or the
like on or with respect to Employer; (ii) habitual drunkenness during business
hours or at Employer's premises; (iii) use of illicit drugs during business
hours or at Employer's premises; (iv) abandonment of employment duties (other
than by reason of death or becoming Disabled); or (v) material breach by
Employee of this Employment Agreement having a material adverse effect on
Employer or its businesses, operations or financial condition, which breach, if
curable, is not cured by Employee within thirty (30) days following Employee's
receipt of written notice thereof (such notice shall specify in reasonable
detail the nature of the material breach and the curative steps, if curable,
required to be taken). Employee shall be deemed "Disabled" for purposes of this
Employment Agreement (a) if 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 one hundred and
twenty (120) days, or (b) if Employee is adjudicated as an incompetent or has a
guardian appointed to handle Employee's affairs. If clause (a) above applies,
Employee shall be deemed Disabled on the last day of the 120 day period. If
clause (b) above applies, Employee shall be deemed Disabled on the date of
adjudication as an incompetent or the appointment of the guardian, whichever
occurs first. For purposes of this Employment Agreement, "Constructive
Termination" shall mean: (x) Employer has delegated to another or others a
material portion of Employee's duties or responsibilities provided for in
Section 4.A. hereof (and shall include, without limitation, removal of Employee
from the office of Executive Vice President - Business Development of Employer
even if Employee's day-to-day duties are to remain substantially the same),
other than and excluding (1) for Cause and (2) any or all of Employee's duties
and responsibilities related to PRCNETCARE.COM, Inc. (including, without
limitation, removal of Employee from the
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<PAGE> 7
office of President of PRCNETCARE.COM, Inc.), and Employer fails to confirm in
writing, and implement, the reinstatement of such material portion of
Employee's duties and responsibilities and/or office to Employee within thirty
(30) days after receipt by each of the Chairman of the Board and Chief
Executive Officer of Employer of Employee's written notice of protest (as
provided in the next sentence), (y) Employer attempts, without Employee's prior
written consent, to relocate Employee's office outside the location specified
in Section 4.C. hereof, or (z) the position of Chairman of the Board or Chief
Executive Officer of Employer becomes vacant for any reason and either (1) the
vacancy is filled by a person other than Mark J. Gordon, David Epstein,
Employee or another person not an employee of Employer immediately prior to
becoming the Chairman of the Board or Chief Executive Officer of Employer or
(2) the vacancy is not filled within sixty (60) days of the date of such
vacancy. In the event of Constructive Termination of Employee's employment
under this Employment Agreement, Employee may terminate Employee's employment,
provided that he has given written notice of protest to each of the Chairman of
the Board and Chief Executive Officer of Employer within thirty (30) days of
the occurrence of the event causing the Constructive Termination setting forth
the manner in which the Constructive Termination has occurred (and such
Constructive Termination is not timely corrected, as provided in the case of a
Constructive Termination under clause (x) of the preceding sentence).
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 Employee's employment, Employer shall pay to Employee, within thirty (30)
days following the date of such termination or resignation, (i) the Salary, if
any, accrued and unpaid through the date of such termination or resignation,
and (ii) if the Bonus Amount of Employee for the prior year has been declared
by Employer, but not yet paid to Employee, the Bonus Amount for such prior
year, 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 or
resignation; 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.
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
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<PAGE> 8
time), within thirty (30) days following the date of Employee's death or
termination, the Salary and Bonus Amount, if any, accrued and unpaid through
the date of termination and shall pay and provide to Employee, Employee's legal
guardian or the legal representative of Employee's estate the amounts and items
payable and to be provided under Section 6 through the date of such
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 (except with respect to
benefits which become payable under any employee benefit plans of Employer as a
result of Employee's death or disability). In the event that death or
termination of employment as a result of Employee becoming Disabled occurs
during a year and prior to any Bonus Amount of Employee being declared by
Employer for such year, the Bonus Amount under this Subsection D. for such
partial year of employment shall be prorated through the date of such death or
termination based upon the prior year's Bonus Amount.
E. Compensation Upon Termination Without Cause or
Constructive Termination or Expiration. In the event that Employer (or its
successor) terminates Employee's employment under this Employment Agreement
without Cause (other than in connection with or in contemplation of a Change in
Control (as hereinafter defined) as provided in Subsection F. below), Employee
terminates his employment as a result of the occurrence of a Constructive
Termination to the extent and in the manner permitted hereunder or upon
expiration of the Employment Term pursuant to the terms of Section 2,
Employee's sole and exclusive compensation and remedy hereunder shall be to
receive from Employer, and Employer shall pay to Employee, (i) the amount of
Salary and Bonus Amount, if any, accrued and unpaid through the date of
termination or expiration, and the amounts and items payable or to be provided
under Section 6 through the date of termination or expiration, payable within
thirty (30) days following the date of termination or expiration of employment,
and (ii) (A) in the case of termination without Cause or Constructive
Termination, an amount in cash equal to the sum of (1) the Salary that Employee
would have received during the greater of (x) the one year period following the
date of such termination of Employee's employment and (y) the remainder of the
Initial Employment Term (if such termination occurs during the Initial
Employment Term) and (2) $150,000 or (B) in the case of expiration of the
Employment Term pursuant to Section 2 hereof as a result of Employer delivering
to Employee a written notice of termination of this Employment Agreement, an
amount in cash equal to the Salary for one (1) full year. Such cash amount
payable under clauses (A) or (B) above shall be payable one-half (1/2) within
thirty (30)
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<PAGE> 9
days following the date of termination of employment or expiration and the
balance (the other one-half (1/2)) payable in equal consecutive monthly
installments over the period that Employee was entitled to be paid the Salary
under clauses (A) or (B) above (as the case may be), with the first such
installment payable sixty (60) days following the date of termination of
employment or expiration and each subsequent installment payable on the same
day of each successive month until payment is made in full. In the event that
termination of employment without Cause, as a result of Constructive
Termination or upon expiration of this Employment Agreement occurs during a
year and prior to any Bonus Amount of Employee being declared by Employer for
such year, the Bonus Amount under this Subsection E. for such partial year of
employment shall be prorated through the date of such termination based upon
the prior year's Bonus Amount. Notwithstanding anything to the contrary
contained in this Subsection E., if termination of employment without Cause, as
a result of Constructive Termination or upon expiration of this Employment
Agreement occurs before a Change in Control and this Subsection E. is followed
by the parties, but within one hundred eighty (180) days thereafter with
respect to termination of employment without Cause or as a result of
Constructive Termination or within one hundred twenty (120) days thereafter
with respect to expiration of this Employment Agreement a Change in Control
occurs, then Subsection F. shall supersede this Subsection E. and the balance
of the unpaid amounts of the severance and other payments required under
Subsection F. shall be immediately (but in all events within thirty (30) days
after such Change in Control) paid by Employer (or its successor) to Employee.
F. Compensation Upon a Change in Control. Notwithstanding
the provisions of Subsection E. above, in the event that (i) Employer (or its
successor) terminates Employee's employment under this Employment Agreement
without Cause within one hundred eighty (180) days before or after a Change in
Control (as hereinafter defined), (ii) Employee terminates his employment to
the extent and in the manner permitted under this Employment Agreement as a
result of the occurrence of a Constructive Termination within one hundred
eighty (180) days before or after a Change in Control or (iii) Employer (or its
successor)(but not Employee) delivers to Employee a written notice of
termination pursuant to Section 2 terminating this Employment Agreement at the
expiration of the Employment Term and such expiration occurs within one hundred
and twenty (120) days before or one hundred eighty (180) days after a Change in
Control, Employee's sole and exclusive compensation and remedy hereunder shall
be to receive from Employer (or its successor), and Employer (or its successor)
shall pay to Employee within thirty (30) days following the date of termination
of employment or expiration, (a) the amount of Salary and Bonus
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<PAGE> 10
Amount, if any, accrued and unpaid through the date of termination of
employment or expiration, and the amounts and items payable or to be provided
under Section 6 through the date of termination of employment or expiration,
and (b) a lump sum severance payment in cash equal to 2.99 times an amount
equal to the average of the sum of the annual Salary and Bonus Amount paid to
Employee each year during the Employment Term. For purposes of this Subsection
F., (1) a "Change in Control" means that (x) neither Mark Gordon (for these
purposes, counting all common stock directly or indirectly beneficially owned
by Mark Gordon's Affiliates) nor David Epstein (for these purposes, counting
all common stock directly or indirectly beneficially owned by David Epstein's
Affiliates) beneficially owns at least 10% of the issued and outstanding common
stock of Employer (or its successor); (y) neither Mark Gordon (for these
purposes, counting all common stock directly or indirectly beneficially owned
by Mark Gordon's Affiliates) nor David Epstein (for these purposes, counting
all common stock directly or indirectly beneficially owned by David Epstein's
Affiliates) is the stockholder of Employer (or its successor) beneficially
owning the highest number of issued and outstanding shares of common stock of
Employer (or its successor); or (z) Mark Gordon and/or David Epstein do not
occupy the positions of Chairman of the Board and Chief Executive Officer of
Employer (or its successor); (2) "Affiliate" means, with respect to Mark Gordon
or David Epstein, an immediate family member of his, a trust principally for
his benefit and/or the benefit of his family members and/or lineal descendants,
or a family limited partnership or any other entity the direct or indirect
beneficial or pecuniary owners of which are principally him, his immediate
family members and/or trusts or other entities principally for the benefit of
him, his family members and/or lineal descendants; and (3) "Immediate family
members" mean, with respect to Mark Gordon or David Epstein, his spouse,
children, parents, siblings or other lineal descendants. For purposes of clause
(a) of this Subsection F., any Bonus Amount for a partial year of employment
shall be prorated through the date of such termination or expiration(based upon
the prior year's Bonus Amount, if any) and for purposes of clause (a) or clause
(b) of this Subsection F., if Employee has not previously earned a Bonus Amount
under this Employment Agreement, the Bonus Amount shall be deemed to be
$225,000. Nothing in this Subsection F. shall be deemed to limit Employee's
rights as provided under Subsection E. with respect to a termination without
Cause or Constructive Termination occurring more than 180 days before or more
than 180 days after a Change in Control or an expiration of this Employment
Agreement occurring more than 120 days before or more than 180 days after a
Change in Control.
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G. 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
examinations 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 and Internet software, 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 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 or Chief Executive Officer 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
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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, computer or Internet software or discs, tapes or similar containers
of software, manuals, data, books, records, materials or documents of any kind
or description of Employer or related to its business for any purpose
unconnected with the 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 to be obtained by
or disclosed to Employee, and (b) the consideration payable to Employee under
this Employment Agreement, and as a material inducement to Employer to enter
into this Employment Agreement, Employee covenants and agrees that, (i) for as
long as Employee is employed by Employer and for a period of 24 months after
the date Employee ceases for any reason to be employed by 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
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 or (B)
solicit the services of, or hire, directly or indirectly, whether on Employee's
own behalf or on behalf of others, any managerial or executive employee,
account manager or other sales or marketing employee, programmer, information
services employee (including, without limitation, network or other information
services or Internet operation employee) or database management or marketing
employee of Employer who was or is employed by Employer at any time during the
two-year period ending on the date of termination of Employee's employment, and
(ii) for as long as Employee is employed by Employer and thereafter for the
Severance Period (as hereinafter defined), Employee shall not, directly or
indirectly, engage in any venture, enterprise, activity or business, passively
or actively, as an owner, consultant,
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adviser, participant, employee, agent or in any other capacity, competitive
with the business of Employer anywhere within the continental United States;
provided, however, that nothing in this Section 11 shall prohibit Employee from
owning as a passive investor beneficially and/or of record less than 5% of the
outstanding equity securities of any entity whose equity securities are
registered under the Securities Exchange Act of 1934, as amended, or are listed
for trading on any United States or foreign stock exchange. 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. For purposes of this Section 11, the "Severance
Period" shall mean: (x) in the case of a termination of Employee's employment
as a result of Employee becoming Disabled or a termination of Employee's
employment with Cause or as a result of the resignation of employment by
Employee or in the case of the expiration of the Employment Term resulting from
the election of Employee or Employer not to renew, a period of 12 months after
the termination date of Employee's employment with Employer; and (y) in the
case of termination of Employee's employment without Cause or as a result of
the occurrence of a Constructive Termination, the greater of (1) a period of 12
months after the termination date of Employee's employment with Employer or (2)
the remainder of the Initial Employment Term (if such termination occurs during
the Initial Employment Term).
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 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. 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
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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 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, acknowledgments,
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).
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<PAGE> 15
D. Definition of Employer. For purposes of Sections 10,
11, 12 and 13 of this Employment Agreement, the term "Employer" includes the
Employer and any parent corporation of Employer and all subsidiaries of
Employer and its parent corporation (if any).
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 Chief Executive Officer, if mailed to Employer, and to Employee's then
current residence, if mailed to Employee, and shall be effective only upon
actual receipt by the party to whom it is given.
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 other than in connection
with a merger, consolidation or similar reorganization or the sale of all or
substantially all of the assets of Employer (or its successor), Employer shall
remain liable for all of its obligations hereunder.
17. ENTIRE AGREEMENT
This Employment Agreement, together with the Registration
Rights Agreement attached hereto as Exhibit "A", constitute 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
(including, without limitations, that certain employment agreement dated as of
May 15, 1996 between the parties, as amended by that certain Amendment to
Employment Agreement dated November 10, 1997 between the parties)
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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.
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
THE PARTIES HEREBY ACKNOWLEDGE THAT EACH OF THEM HAS HAD THE
OPPORTUNITY TO RETAIN AND TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL WITH
RESPECT TO, AND IN CONNECTION WITH ALL STAGES OF THE NEGOTIATION, PREPARATION
AND EXECUTION OF, THIS EMPLOYMENT AGREEMENT.
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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/ David L. Epstein
------------------------------------
David L. Epstein
Chief Executive Officer
EMPLOYEE:
/s/ Richard N. Ferry, Jr.
----------------------------------------
RICHARD N. FERRY, JR.
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<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 14,1999 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
MICHAEL P. MILLER (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Employer is a Florida corporation engaged in interactive
customer service and marketing through the integration of its teleservicing,
Internet, database management and marketing and fulfillment capabilities;
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
A. Subject to the provisions for earlier termination set
forth in Section 9 hereof, Employee's term of employment under this Employment
Agreement shall commence on April 26, 1999 and shall continue until 5:00, p.m.,
April 25, 2001 (the "Employment Term").
B. The Employment Term shall on April 25, 2001
automatically extend for an additional one-year period, unless prior to January
25, 2001 either party gives to the other written notice of intent not so to
renew.
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
<PAGE> 2
or commitments which would interfere with Employee's acceptance of employment
pursuant to the terms hereof or the full performance of Employee's obligations
hereunder.
4. DUTIES AND EXTENT OF SERVICES
Employee's duties and responsibilities hereunder shall be
those reasonably assigned to Employee from time to time by Employer consistent
with this Section. Employee shall, unless and until otherwise determined by
Employer, serve as Employer's Senior Vice President- Information Services
(which shall be effective upon appointment of Employee to such office by
Employer's Board of Directors) and Chief Information Officer, and shall, on an
active, full-time basis, subject to the direction of Employer's Chief Executive
Officer and President, have overall responsibility to supervise and conduct
Employer's day-to-day software, Internet and information technology
development, support and operations. Employee shall report directly to
Employer's President, or as otherwise directed from time to time by Employer's
Chief Executive Officer or President.
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 $185,000 per annum. 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 sole and
absolute discretion in a manner consistent with Employer's then current bonus
plan which may be amended from time to time, but shall not exceed forty percent
(40%) of Employee's Salary, except at the sole discretion of Employer (the
"Bonus Amount"). Each annual Bonus Amount shall be paid on or before April 30th
of each year of the Employment Term. The Bonus Amount payable on or before each
April 30th shall be based upon Employee's performance during the calendar year
immediately preceding such April 30th. 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.
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.
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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. Relocation Expenses.
(i) Employer agrees to reimburse to Employee, based on properly
documented receipts, a maximum amount of $65,000 (and further subject to the
category maximums hereinafter set forth) for the following relocation expenses
to the extent reasonably incurred by Employee in moving himself and his family
and their personal property and effects from Pacific Palisades, California to
south Florida:
(a) Up to a maximum reimbursement of $15,000 for
packing and moving household goods;
(b) Up to a maximum reimbursement of $10,000 for
airfare and automobile rental expenses incurred by Employee and his immediate
family in commuting from Pacific Palisades, California to south Florida in
connection with house hunting, employment related matters prior to commencement
of the Employment Term and after the commencement of the Employment Term for
family purposes until Employee has completed the relocation of his family to
south Florida; and
(c) Up to a maximum reimbursement of $40,000 for
temporary living expenses and other housing costs of Employee and his family
while in the process of relocating to south Florida, and for reasonable and
customary closing costs relating to the sale by Employee of his primary
residence in Pacific Palisades, California, and the purchase by Employee of a
residence in south Florida including, but not limited to, real estate
commissions and financing fees.
(ii) Upon execution of this Agreement by Employer and Employee,
Employer shall advance to Employee the sum of $20,000 for the relocation
expenses to be incurred and documented in accordance with subsection (i) of
this Section 6.C.; and
(iii) If Employee is not employed by Employer, for any reason other
than termination without Cause (as hereinafter defined), continuously for at
least the one year period commencing with Employee's first day of employment
pursuant to this Agreement, Employee shall repay Employer any and all amounts
paid to Employee for relocation expenses pursuant to subsection (i) of this
Section 6.C., up to and including $65,000.
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<PAGE> 4
7. VACATION, PERSONAL AND SICK DAYS
Employee shall be entitled to 29 days of paid time off
("PTO") for vacation, personal and sick days each full year of the Employment
Term, with full compensation (provided, however, that Employee shall not be
entitled to be compensated for any unused PTO days upon termination of
employment). The PTO days are exclusive of any Employer recognized holidays.
The periods during which Employee shall be absent from work for vacation shall
be at the reasonable discretion of Employer. In addition, any PTO days to be
used during the first ninety (90) days of the Employment Term shall require
prior approval of the President.
8. FAIR MARKET VALUE STOCK OPTIONS
Employer agrees that Employer shall, on the date Employee
commences employment hereunder, grant to Employee stock options (the "FMV Stock
Options") each to acquire one (1) share of Employer's common stock (60,000 FMV
Stock Options in total), pursuant to the Precision Response Corporation Amended
and Restated 1996 Incentive Stock Plan (the "Plan") and the Stock Option
Agreement attached as Exhibit "A" to this Employment Agreement (the "FMV Stock
Option 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 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
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<PAGE> 5
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, 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.A. and B. 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 and declared
Bonus Amount, 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 (or its successor) terminates Employee's employment under
this Employment Agreement without Cause (including, without limitation, upon a
Change in Control, as hereinafter defined), Employee's sole and exclusive
compensation and remedy hereunder shall be to receive from Employer, and
Employer shall pay and provide, (i) the amount of Salary and declared Bonus
Amount, if any, accrued and unpaid through the date of termination, and the
amounts and items payable or to be provided under Section 6.A. and B. through
the date of termination, payable within thirty (30) days following termination
of employment, (ii) the Salary that Employee would have received during the
period following termination of Employee's employment through the expiration of
the period ending on the 180th day following the date of termination of
Employee's employment or the expiration of the Employment Term (whichever is
less), as and when it would have been payable or been provided if Employee had
remained an employee of Employer for such additional 180-day period or until
expiration of the Employment Term (as applicable). Employee shall not be
entitled to the foregoing severance set forth in item (ii) above to the extent
that
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<PAGE> 6
Employee receives or is entitled to receive compensation or benefits from new
employment with respect to employment services rendered during such period. For
purposes of this Subsection E., (x) a "Change in Control" means that (1)
neither Mark Gordon (for these purposes, counting all common stock directly or
indirectly beneficially owned by Mark Gordon's Affiliates) nor David Epstein
(for these purposes, counting all common stock directly or indirectly
beneficially owned by David Epstein's Affiliates) beneficially owns at least
10% of the issued and outstanding common stock of Employer or its successor,
(2) neither Mark Gordon (for these purposes, counting all common stock directly
or indirectly beneficially owned by Mark Gordon's Affiliates) nor David Epstein
(for these purposes, counting all common stock directly or indirectly
beneficially owned by David Epstein's Affiliates) is the stockholder
beneficially owning the highest number of issued and outstanding shares of
common stock of Employer or its successor, or (3) neither Mark Gordon nor David
Epstein occupies the position of Chairman of the Board, Chief Executive Officer
or President of Employer; (y) "Affiliate" means, with respect to Mark Gordon or
David Epstein, an immediate family member of his, a trust principally for his
benefit and/or the benefit of his family members and/or lineal descendants, or
a family limited partnership or any other entity the direct or indirect
beneficial or pecuniary owners of which are, principally, him, his immediate
family members and/or trusts principally for the benefit of him, his family
members and/or lineal descendants; and (z) "Immediate family members" mean,
with respect to Mark Gordon or David Epstein, his spouse, children, parents,
siblings or other lineal descendants.
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, technology, know-how, records, products, services, cost information,
inventions, computer and Internet software, 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 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
legitimate 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. Any software, technology, know-how, trade secrets or
intellectual
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<PAGE> 7
property rights of any kind developed by Employee during the period of his
employment with Employer which in any way relate or have application or value
to Employer's business shall be the property, as between Employee and Employer,
solely of Employer.
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 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
payable to Employee under this Employment Agreement, and as a material
inducement to Employer to enter into this Employment Agreement and employ
Employee, Employee covenants and agrees that, (i) for as long as Employee is
employed by Employer and for a period of 12 months after the date Employee
ceases for any reason to be employed by Employer, Employee shall not, directly
or indirectly, (A) sell any products or services sold or offered by Employer to
any person or entity 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 or (B) solicit the services of, or hire, directly or indirectly,
whether on Employee's own behalf or on behalf of others, any managerial or
executive employee, account manager, programmer, information services employee
(including, without limitation, network or other information services or
Internet operation employee) or database management or marketing employee of
Employer who was or is employed by Employer at any time during the two-year
period ending on the date of termination of Employee's employment or the
two-year period commencing on the date of termination of Employee's employment,
or (ii) for as long as Employee is employed by Employer and for a period of 12
months after the date Employee ceases for any reason to be employed by
Employer, Employee shall not, directly or indirectly, engage in any venture,
enterprise, activity or business, passively or actively, as an owner,
consultant, adviser, participant, employee, agent or in any other capacity,
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
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<PAGE> 8
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 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 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
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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, acknowledgments,
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).
D. Definition of Employer. For purposes of Sections 10,
11, 12 and 13 of this Employment Agreement, the term "Employer" includes the
Employer and any parent corporation of Employer and all direct and indirect
subsidiaries of Employer and its parent corporation (if any).
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 sent to Employer, and to Employee's then current
residence, if sent to Employee.
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.
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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.
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.
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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/ David L. Epstein
-----------------------------------
EMPLOYEE:
/s/ Michael P. Miller
---------------------------------------
Michael P. Miller
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<PAGE> 12
EXHIBIT "A"
PRECISION RESPONSE CORPORATION
STOCK OPTION AGREEMENT
Agreement dated as of the ___ day of __________, 1999 (the "Date of
Grant") between Precision Response Corporation, a Florida corporation (and,
collectively with its subsidiaries, if any, the "Company") with its principal
office at 1505 N.W. 167th Street, Miami, Florida 33169, and Michael P. Miller
at the address set forth beneath such person's signature on the signature page
of this Agreement ("Optionee").
1. Grant of Options
The Company grants to Optionee, on the terms and conditions
set forth below, options (the "Options") to purchase up to 60,000 shares
(individually a "Share" and collectively the "Shares") of Precision Response
Corporation common stock (the "Common Stock"), par value $.01 per share, for a
price of $_____ per Share (the "Option Price"), subject to adjustment as
provided in Paragraph 3 below. Subject to the limitation set forth in the
Precision Response Corporation Amended and Restated 1996 Incentive Stock Plan,
as amended (the "Plan"), a copy of which is attached hereto and incorporated
herein by reference, that the aggregate Fair Market Value (as defined in the
Plan and as determined as of the time the option is granted) of the shares of
Common Stock with respect to which Incentive Stock Options (as defined in and
pursuant to the Plan) 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, the Options shall be designated as Incentive Stock Options to
the maximum extent permitted by law and under the Plan. To the extent that the
number of Options which vest in any calendar year pursuant to the vesting
schedule set forth below exceeds the number which may properly be designated as
Incentive Stock Options pursuant to applicable law or under the Plan, such
excess number of Options shall, pursuant to the provisions of Section 6(e) of
the Plan, be designated as Nonqualified Stock Options (as defined in and
pursuant to the Plan).
2. Terms and Conditions of Options
(a) Option Price
Subject to paragraph 3 hereof, the Option Price
shall be not less than the Fair Market Value per share of Common Stock on the
Date of Grant, but in no event less than the par value per Share.
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(b) Vesting of Options
Subject to such further limitations as are provided
for herein, the Options shall vest, if at all (and be exercisable once vested)
in the following amounts:
<TABLE>
<CAPTION>
YEAR FROM PERCENTAGE OF
DATE OF GRANT OPTIONS VESTED (%)
- ------------- ------------------
<S> <C>
One (1) year from Date of Grant 33 1/3%
Two (2) years from Date of Grant 66 2/3%
Three (3) years from Date of Grant 100%
</TABLE>
Optionee shall not become vested in any Options subsequent to the
termination of his employment regardless of any exercise period provided in
subparagraph (e) below.
(c) Term of Options
The Options may be exercised by Optionee in whole or
in part from time to time, but only during the period beginning on the date of
this Agreement and ending [seven years from the Date of Grant], subject in all
cases, however, to subparagraphs (b) and (e) of this paragraph 2, paragraph 3
and the other provisions of this Agreement and the Plan.
(d) Non-transferability of Options
Options shall not be transferable by Optionee other
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended (the "Code"), or Title I of the Employment Retirement Income
Security Act, or the rules thereunder, and, except with respect to a qualified
domestic relations order as aforesaid, may be exercised during Optionee's
lifetime only by Optionee. If any Options are exercised after Optionee's death,
the Company may require evidence reasonably satisfactory to it of the
appointment and qualification of Optionee's personal representatives and their
authority and of the right of any heir or distributee to exercise such Options.
(e) Termination of Employment
If Optionee's employment with the Company terminates
the unexercised portion of any of the Options granted under this Agreement
shall automatically and without notice terminate and become null and void at
the time of the earliest to occur of the following:
(1) The expiration of seven (7) years from the
Date of Grant;
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(2) The expiration of three months from the
date of termination of Optionee's employment by the Company (other than a
termination described in subparagraph (3), (4) or (5) below); provided, that,
if Optionee shall die during such three-month period, the time of termination
of the unexpired portion of any such Option shall be determined under the
provision of subparagraph (4) below;
(3) The expiration of one year from the date of
termination of the employment of an Optionee due to permanent and total
disability (other than a termination described in subparagraph (5) below);
(4) The expiration of eighteen (18) months
following the issuance of letters testamentary or letters of administration to
the personal representative, executor or administrator of a deceased Optionee,
if Optionee's death occurs either during his employment by the Company or
during the three-month period following the date of termination of such
employment (other than a termination described in subparagraph (5) below), but
in no event later than two years after Optionee's death;
(5) The date of termination of Optionee's
employment by the Company if such termination constitutes or is attributable to
a breach by Optionee of an employment agreement with the Company, or its
parent, if any, or if Optionee has been discharged for cause. The Compensation
Committee (the "Committee"), as provided in the Plan, shall have the right to
determine whether Optionee has been discharged for cause and the date of such
discharge, and such determination of the Committee shall be final and
conclusive.
Neither this Agreement nor any Option granted hereunder shall confer
on Optionee any right to continue in the Company's employ, or limit in any
respect the Company's right (in the absence of a specific written agreement to
the contrary) to terminate Optionee's employment at any time with or without
cause.
(f) Exercise of Options
Subject to the limitations set forth herein and the
provisions hereof, the Options may be exercised only by written notice to the
Company, at its principal business office or such other office as the Committee
may from time to time direct, which shall contain provisions consistent with
the provisions of the Plan as the Committee may from time to time prescribe and
shall specify the number of optioned Shares being purchased. Not less than one
hundred (100) shares may be purchased at any one time upon exercise of the
Options unless the number purchased is the total number then purchasable under
this Agreement. Subsequent to the grant of any Options which are not
immediately exercisable in full, the Committee, at any time before complete
termination of such Options, may accelerate the time or times at which such
Options may be exercised in whole or in part. Any notice of exercise of Options
shall be accompanied by payment of the full purchase price for the Shares being
purchased: (i) by check payable to the
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Company; or (ii) with the prior consent of the Committee, by tendering
previously acquired shares of Common Stock having a fair market value
(determined as of the date such Options are exercised and in the same manner as
the Fair Market Value of the Option Price is determined under the Plan) equal
to all of the purchase price; or (iii) by any combination of (i) and (ii). The
Company shall have no obligation to deliver the Shares being purchased pursuant
to the exercise of any Options, in whole or in part, until the aforesaid
payment in full of the purchase price therefor is received by the Company.
(g) Issuance of Shares
The exercise of Options granted hereunder is subject
to the condition that if at any time the listing, registration or qualification
of the Shares covered by the Options upon any securities exchange or under any
state or federal law is necessary as a condition of or in connection with the
purchase or delivery of Shares, the delivery of any or all Shares pursuant to
exercise of the Options may be withheld unless and until such listing,
registration or qualification shall have been effected. Optionee agrees to
comply with any and all legal requirements relating to Optionee's resale or
other disposition of any Shares acquired under this Agreement. The Committee
may require, as a condition of exercise of any Options, that Optionee
represent, in writing, that the Shares received upon exercise of the Options
are being acquired for investment and not with a view to distribution and agree
that the Shares will not be disposed of except pursuant to an effective
registration statement under the Securities Act of 1933, as amended, and only
after any required qualifications under applicable state securities laws,
unless the Company shall have received an opinion of counsel satisfactory to
the Company that such disposition is exempt from such registration and
qualification. There may be endorsed on certificates representing Shares issued
upon the exercise of Options such legends referring to the foregoing
representations or any applicable restrictions on resale as the Committee, in
its discretion, shall deem reasonably appropriate, as well as place such stop
transfer orders with its registrar and transfer agent as it deems reasonably
appropriate.
(h) Rights as a Shareholder
Optionee shall acquire none of the rights of a
shareholder of the Company under this Agreement unless and until certificates
for such Shares are issued to Optionee upon the exercise of Options.
(i) Six-Month Holding Period
Optionee acknowledges that in no event may any
Shares acquired upon exercise of any Options be sold or otherwise disposed of
until after six (6) months have elapsed from the Date of Grant except, in the
event of Optionee's death during such period, for a sale by the executors or
administrators of Optionee's estate relying on Rule 16a-2(d)(1)(i) of the
Securities Exchange Act of 1934, as amended.
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3. Adjustment Upon Changes in Capitalization, etc.
In the event of any stock split, stock dividend,
reclassification or recapitalization which changes the character or amount of
the Company's outstanding Common Stock while any portion of any Options
theretofore granted pursuant to this Agreement are outstanding but unexercised,
the Committee shall make such adjustments in the character and number of Shares
subject to such Options and in the Option Price as shall be equitable and
appropriate in order to make such Options, as nearly as may be practicable,
equivalent to such Options immediately prior to such change; provided, however,
that no such adjustment shall give any Optionee any additional benefits under
this Agreement; and provided further, that, if any such adjustment is made by
reason of a transaction described in section 424(a) of the Code, it shall be
made so as to conform to the requirements of that section and the regulations
thereunder.
If any transaction (other than a change specified in the
preceding paragraph) described in section 424(a) of the Code affects the
Company's Common Stock subject to any unexercised Option theretofore granted
hereunder (hereinafter for purposes of this paragraph 3 referred to as the "old
option"), the Committee or any surviving or acquiring corporation may take such
action as it deems appropriate, and in conformity with the requirements of that
section and the regulations thereunder, to substitute a new option for the old
option, in order to make the new option, as nearly as may be practicable,
equivalent to the old option, or to assume the old option.
If any such change or transaction shall occur, the number and
kind of Shares to be issued upon the exercise of any Options shall be adjusted
to give effect thereto.
4. Optionee Bound by Plan
Optionee hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by the terms and provisions thereof, regardless of
whether such provisions have been set forth in this Agreement. In the event of
any conflict between this Agreement and the Plan, the Plan shall govern.
5. Application of Funds
The proceeds received by the Company from the sale of Shares
subject to Options may be commingled with any other corporate funds and used
for any corporate purpose.
6. General
(a) Any communication in connection with this Agreement
shall be deemed duly given when delivered in person or mailed by certified or
registered mail, return receipt requested, to Optionee at his or her address
listed on the signature page hereof or such other address of which
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<PAGE> 17
Optionee shall have advised by similar notice, or to the Company or Committee
at the Company's then executive offices.
(b) This Agreement sets forth the parties' final and
entire agreement with respect to its subject matter, may not be changed or
terminated orally and shall be governed by and construed in accordance with the
internal law of the State of Florida. This Agreement shall bind and inure to
the benefit of Optionee, and his heirs, distributees and personal and legal
representatives, and the Company and its successors and assigns.
(c) As a condition of the granting of the Options
hereunder, Optionee agrees for Optionee and Optionee's heirs, distributees and
personal and legal representatives, that any dispute or disagreement which may
arise under or as a result of or pursuant to this Agreement shall be determined
and resolved by the Committee in its sole discretion, and any interpretation by
the Committee of the terms of this Agreement or the Plan shall be final,
binding and conclusive.
(d) Wherever from the context it appears appropriate, each
term stated in either the singular or the plural shall include the singular and
the plural, and pronouns stated in the masculine, the feminine or the neuter
gender shall include the masculine, feminine and neuter.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
OPTIONEE: PRECISION RESPONSE CORPORATION,
a Florida corporation,
By:
---------------------------------------
David Epstein, Chief Executive Officer
- --------------------------------
Michael P. Miller
Address:
-----------------------
-----------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIATED FINANCIAL
STATEMENTS AND NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,087
<SECURITIES> 0
<RECEIVABLES> 40,770
<ALLOWANCES> 3,317
<INVENTORY> 0
<CURRENT-ASSETS> 49,622
<PP&E> 109,881
<DEPRECIATION> 33,548
<TOTAL-ASSETS> 131,830
<CURRENT-LIABILITIES> 29,616
<BONDS> 18,552
0
0
<COMMON> 215
<OTHER-SE> 80,382
<TOTAL-LIABILITY-AND-EQUITY> 131,830
<SALES> 0
<TOTAL-REVENUES> 46,248
<CGS> 0
<TOTAL-COSTS> 38,931
<OTHER-EXPENSES> 3,999
<LOSS-PROVISION> 871
<INTEREST-EXPENSE> 313
<INCOME-PRETAX> 2,134
<INCOME-TAX> 896
<INCOME-CONTINUING> 1,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,238
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
