Agreement and Plan of Merger - Cross Media Marketing Corp. and Preferred Consumer Marketing Inc.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CROSS MEDIA MARKETING CORPORATION
CROSS MEDIA CONSUMER MARKETING CORPORATION (a Delaware corporation)
PREFERRED CONSUMER MARKETING, INC. (a Florida corporation)
and
THE STOCKHOLDER
of
PREFERRED CONSUMER MARKETING, INC.
Dated as of January 4, 2002
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TABLE OF CONTENTS
Page
1. Definitions...............................................................1
1.1 "Accounting Protocol"..............................................1
1.2 "Adjusted 2001 EBITDA".............................................1
1.3 "Affiliate"........................................................1
1.4 "Bank Account".....................................................2
1.5 "Business".........................................................2
1.6 "Cash Portion".....................................................2
1.7 "Consentors".......................................................2
1.8 "Contracts"........................................................2
1.9 "Current Market Price".............................................2
1.10 "Dividend Notes"...................................................2
1.11 "Dividend Note Amount".............................................2
1.12 "Dividends Payable"................................................2
1.13 "Effective Date"...................................................3
1.14 "Effective Date Indebtedness"......................................3
1.15 "Effective Time"...................................................3
1.16 "Employment Agreements"............................................3
1.17 "Fleet Financing"..................................................3
1.18 "Government License"...............................................3
1.19 "Intellectual Property Assets".....................................3
1.20 "knowledge"........................................................3
1.21 "Liens"............................................................3
1.22 "Material Adverse Effect"..........................................3
1.23 "Merger Deadline"..................................................3
1.24 "Negotiable Purchase Note".........................................3
1.25 "NSI Merger Agreement".............................................4
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TABLE OF CONTENTS
(continued)
Page
1.26 "NSI Merger Consideration".........................................4
1.27 "NSI Merger Sub"...................................................4
1.28 "NSI Surviving Corporation"........................................4
1.29 "Overage"..........................................................4
1.30 "Parent Common Stock"..............................................4
1.31 "Parent Disclosure Schedule".......................................4
1.32 "Parent Parties"...................................................4
1.33 "PCM Common Stock".................................................4
1.34 "PCM Disclosure Schedule"..........................................4
1.35 "PCM Surviving Corporation"........................................4
1.36 "Permitted Transferees"............................................4
1.37 "Permitted Liens"..................................................4
1.38 "Pironti Account"..................................................4
1.39 "Pironti Loan Amount"..............................................4
1.40 "Purchase Note"....................................................5
1.41 "Purchase Note Letter of Credit"...................................5
1.42 "Registration Rights Agreements"...................................5
1.43 "SEC Reports"......................................................5
1.44 "Security Agreement"...............................................5
1.45 "Share"............................................................5
1.46 "Stockholder"......................................................5
1.47 "Third Party Liabilities"..........................................5
1.48 "2001 EBITDA"......................................................5
1.49 "2001 EBITDA Distributions"........................................5
1.50 "2002 EBITDA"......................................................6
1.51 Commonly used terms................................................6
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TABLE OF CONTENTS
(continued)
Page
2. The Merger................................................................6
2.1 The PCM Merger.....................................................6
2.2 Effective Time.....................................................7
2.3 Effect of the PCM Merger...........................................7
2.4 Articles of Incorporation; By-laws.................................7
2.5 Directors and Officers.............................................7
2.6 Effect on Securities, Etc..........................................8
2.7 Method of Payment..................................................8
2.8 Determination of PCM Merger Consideration..........................8
2.9 Dispute Notice....................................................10
3. Representations and Warranties of PCM and the Stockholder................11
3.1 Organization and Qualification; Absence of Subsidiaries...........11
3.2 Articles of Incorporation and By-laws.............................12
3.3 Capitalization....................................................12
3.4 Ownership of PCM Common Stock; Voting.............................12
3.5 Authorization; Binding Agreement..................................12
3.6 No Conflict; Required Filings and Consents........................12
3.7 Compliance; Permits...............................................13
3.8 Financial Statements..............................................14
3.9 Absence of Certain Changes or Events..............................15
3.10 Insolvency........................................................17
3.11 Absence of Litigation.............................................17
3.12 Properties........................................................18
3.13 Contracts, etc....................................................18
3.14 Dealings with Officers, Directors, and Affiliates; Etc............20
3.15 Bank Accounts and Powers of Attorney..............................20
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TABLE OF CONTENTS
(continued)
Page
3.16 Employees.........................................................20
3.17 Employee Benefit Plans............................................22
3.18 Restrictions on Business Activities...............................25
3.19 Title to Property.................................................25
3.20 Taxes.............................................................25
3.21 Environmental Matters.............................................27
3.22 Intellectual Property.............................................28
3.23 Insurance.........................................................29
3.24 Brokers, etc......................................................29
4. Representations and Warranties of Parent and PCM Merger Sub..............29
4.1 Organization and Good Standing....................................29
4.2 Articles of Incorporation and By-laws.............................29
4.3 Capitalization....................................................30
4.4 Authorization; Binding Agreement..................................30
4.5 Governmental Approvals............................................31
4.6 No Violations.....................................................31
4.7 Brokers, etc......................................................32
4.8 Insolvency........................................................32
4.9 Restriction on Business Activities................................32
4.10 SEC Filings; Financial Statements.................................32
4.11 No Prior Activities...............................................33
5. Covenants of PCM and the Stockholder.....................................33
5.1 Access to Information.............................................33
5.2 Conduct of Business by PCM Pending the Effective Time.............33
5.3 Notification of Certain Matters...................................36
5.4 No Solicitation...................................................36
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TABLE OF CONTENTS
(continued)
Page
5.5 Reasonable Best Efforts...........................................37
5.6 Non-competition...................................................37
6. Mutual Covenants.........................................................39
6.1 Consents; Approvals...............................................39
6.2 Expenses..........................................................40
6.3 Public Announcements..............................................40
6.4 Conveyance Taxes, etc.............................................40
6.5 Taxes and Cooperation on Tax Matters..............................40
6.6 Further Action....................................................41
6.7 Purchase Note Letter of Credit....................................41
7. Conditions to the Merger.................................................43
7.1 Conditions to Obligation of Each Party to Effect the Merger.......43
7.2 Additional Conditions to Obligations of Parent and PCM
Merger Sub........................................................43
7.3 Additional Conditions to Obligation of PCM and Pironti............45
8. Termination..............................................................46
8.1 Termination.......................................................46
8.2 Effect of Termination.............................................48
9. Indemnification..........................................................48
9.1 Indemnification by the Stockholder................................48
9.2 Indemnification by Parent.........................................50
9.3 Assumption of Defense.............................................51
9.4 Non-Assumption of Defense.........................................52
9.5 Indemnified Party's Cooperation as to Proceedings.................52
9.6 Limitation on Losses..............................................52
9.7 Dispute Resolution................................................54
9.8 Setoff............................................................55
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TABLE OF CONTENTS
(continued)
Page
9.9 Option to Make Part Payment in Stock..............................56
10. Miscellaneous............................................................56
10.1 Representations, Warranties, Covenants, etc.......................56
10.2 Disclosures.......................................................56
10.3 Notices...........................................................56
10.4 Amendment.........................................................58
10.5 Waiver............................................................58
10.6 Headings..........................................................58
10.7 Severability......................................................58
10.8 Entire Agreement..................................................58
10.9 Assignment........................................................58
10.10 Parties in Interest...............................................58
10.12 Governing Law; Jurisdiction.......................................59
10.13 WAIVER OF JURY TRIAL..............................................59
10.14 Execution and Delivery............................................59
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of January
4, 2002, and is by and among CROSS MEDIA MARKETING CORPORATION (the "Parent"), a
Delaware corporation, Cross Media Consumer Marketing Corporation, a Delaware
corporation and a direct, wholly-owned subsidiary of Parent ("PCM Merger Sub"),
PREFERRED CONSUMER MARKETING, INC., a Florida corporation ("PCM"), and Anthony
R. Pironti, the stockholder of PCM (in his individual capacity, "Pironti" and in
his capacity as the stockholder of NSI, the "Stockholder"). Parent, PCM Merger
Sub, PCM, and the Stockholder are sometimes referred to herein individually as a
"Party" and collectively as the "Parties."
RECITALS
A. The respective Boards of Directors of Parent, PCM Merger Sub and PCM
have each approved the merger (the "PCM Merger") of PCM Merger Sub with and into
PCM, upon the terms and subject to the conditions set forth herein and in
accordance with the applicable provisions of the Florida Business Corporation
Act (the "FBCA");
B. Pursuant to the Merger, each outstanding share (each, a "Share") of
PCM's Common Stock, $0.01 par value (the "PCM Common Stock"), shall be converted
into the right to receive a pro rata portion of the PCM Merger Consideration (as
defined in Section 2.6), upon the terms and subject to the conditions set forth
herein; and
C. The Board of Directors of PCM has approved and resolved to recommend
approval of the PCM Merger to the Stockholders, and has determined that the
consideration to be paid for each Share in the PCM Merger is fair to and in the
best interest of the Stockholders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties herein contained and subject to the
terms and conditions herein set forth, the Parties hereby agree as follows:
1. Definitions.
1.1 "Accounting Protocol" means those accounting conventions and practices
described in Schedule 1.1.
1.2 "Adjusted 2001 EBITDA" means the 2001 EBITDA reduced by the Joint
Ventures' 2001 EBITDA (as defined in the NSI Merger Agreement).
1.3 "Affiliate" means, as to any Party, a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Party. For purposes of this definition,
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise.
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1.4 "Bank Account" means any bank account at a bank located within the
United States, which Stockholder shall designate to Parent and NSI Surviving
Corporation.
1.5 "Business" means the business of direct marketing of consumer goods and
services, whether through Sunday magazines, consumer magazines, free standing
inserts, direct response TV, credit card billing statements, direct mail
including electronic mail, package inserts, outbound telemarketing, catalogue
mailings or otherwise.
1.6 "Cash Portion" means the payments to be made in cash hereunder and
under the NSI Merger Agreement, namely the amounts set forth in Sections 2.7(ii)
and 7.3(g) hereof.
1.7 "Consentors" means USA Weekend, Inc. and Parade Publications, Inc.
1.8 "Contracts" has the meaning set forth in Section 3.13.
1.9 "Current Market Price" means the average of the daily market prices of
the Parent Common Stock for the twenty (20) consecutive trading days immediately
preceding the date hereof. The market price for each such trading day shall be:
(i) if the Parent Common Stock is listed or admitted to trading on any
securities exchange, the closing price, regular way, on such day, or if no sale
takes place on such day, the average of the closing bid and asked price on such
day; (ii) if the Parent Common Stock is not then listed or admitted to trading
on any securities exchange but is listed on The NASDAQ Stock Market, the last
reported sale price on such day on The NASDAQ Stock Market, or if no sale takes
place on such day, the average of the last reported bid and asked prices on such
day, as reported by The NASDAQ Stock Market; or (iii) if the Parent Common Stock
is not then listed or admitted to trading on any securities exchange or on The
NASDAQ Stock Market, the average of the reported high bid and low asked prices
on such day, as reported by the OTC Bulletin Board, (the "OTCBB") if the Common
Stock is quoted on the OTCBB, or a reputable quotation service, or a newspaper
of general circulation service in the Borough of Manhattan, City and State of
New York, customarily published on each business day, designated by PCM, or if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than ten
(10) days prior to the date in question) for which prices have been so reported.
1.10 "Dividend Notes" mean the non-interest bearing promissory notes issued
by NSI and PCM in satisfaction of dividends declared by NSI and PCM,
respectively, other than in respect of 2001 EBITDA or 2002 EBITDA.
1.11 "Dividend Note Amount" means the amounts owing in respect of the
Dividend Notes.
1.12 "Dividends Payable" means dividends declared by NSI and PCM, but
unpaid as of the Effective Date, in an amount up to the sum of (i) the extent to
which the 2001 EBITDA exceeds the 2001 EBITDA Distributions, (ii) the 2002
EBITDA and (iii) $450,000, other than as reflected by the Dividend Notes.
1.13 "Effective Date" means the date on which the Effective Time occurs.
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1.14 "Effective Date Indebtedness" means the aggregate amount of principal,
premium, if any, and accrued and unpaid interest on all outstanding indebtedness
of NSI and PCM to banks or other financial institutions as of the Effective
Date, reduced by all cash on hand, but, for the avoidance of doubt, excluding
(i) the Pironti Loan Amount, (ii) the Dividend Note Amount and (iii) the
Dividends Payable.
1.15 "Effective Time" has the meaning set forth in Section 2.2.
1.16 "Employment Agreements" means the employment agreements by and between
the NSI Surviving Corporation on the one hand and each of Pironti and the
Permitted Transferees on the other in the forms set forth in Exhibit A hereto.
1.17 "Fleet Financing" means the financing arrangement to be provided by
Fleet National Bank on behalf of PCM Surviving Corporation and NSI Surviving
Corporation generally in accordance with the terms described on Schedule 1.15,
but in any event having a principal balance outstanding at any one time not in
excess of $3 million.
1.18 "Government License" means any governmental right, privilege,
authority, franchise, license, permit or certificate of PCM necessary or useful
in connection with the conduct of the Business.
1.19 "Intellectual Property Assets" has the meaning set forth in Section
3.22.
1.20 "knowledge" means the actual knowledge of, in the case of PCM, Pironti
or either of the Permitted Transferees, or, in the case of Parent and/or PCM
Merger Sub, Richard Kaufman or Ronald Altbach.
1.21 "Liens" means any and all mortgages, pledges, security interests,
liens, claims, charges or other restrictions or encumbrances of every nature and
description whatsoever.
1.22 "Material Adverse Effect" means any change, effect, or circumstance
that is or would reasonably be expected to be materially adverse to the
business, assets (including intangible assets), financial condition, results of
operations, or prospects of a given person; provided that none of the foregoing
shall constitute a Material Adverse Effect unless it is specific to PCM and, by
way of example, not generally applicable to the economy as a whole or to the
industry in which the Business operates as a whole. For purposes of this
Agreement, the term "prospects" shall mean, at any time, results of future
operations which are reasonably foreseeable based upon the facts and
circumstances in existence at such time.
1.23 "Merger Deadline" means January 25, 2002.
1.24 "Negotiable Purchase Note" means the promissory note in the form of
Exhibit B, which shall be identical in form to the Purchase Note (including
being secured by the Purchase Note Letter of Credit and the Security Agreement),
except that it shall not be subject to the offset provisions of Section 9.8
below or of Section 9.8 of the NSI Merger Agreement.
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1.25 "NSI Merger Agreement" means the Agreement and Plan of Merger, of even
date herewith, by and among National Syndications, Inc., a New York corporation,
NSI Merger Sub, Parent and Pironti.
1.26 "NSI Merger Consideration" has the meaning assigned to such term in
the NSI Merger Agreement.
1.27 "NSI Merger Sub" means Cross Media Marketing Syndications Corporation,
a Delaware corporation that is a direct, wholly-owned subsidiary of Parent.
1.28 "NSI Surviving Corporation" has the meaning assigned to such term in
the NSI Merger Agreement.
1.29 "Overage" means an amount equal to the sum of (i) 2001 EBITDA and (ii)
2002 EBITDA, reduced by the amount of any 2001 EBITDA Distributions and, for the
avoidance of doubt, reduced by the Dividends Payable. The Overage may be a
positive or a negative number.
1.30 "Parent Common Stock" means the common stock of Parent, par value
$.001 per share.
1.31 "Parent Disclosure Schedule" means the written disclosure schedule
heretofore delivered by Parent and PCM Merger Sub to PCM and the Stockholders.
1.32 "Parent Parties" means Parent, PCM Surviving Corporation and NSI
Surviving Corporation.
1.33 "PCM Common Stock" has the meaning set forth in Recital B.
1.34 "PCM Disclosure Schedule" means the written disclosure schedule
heretofore delivered by PCM and the Stockholders to Parent and PCM Merger Sub.
1.35 "PCM Surviving Corporation" has the meaning set forth in Section 2.1.
1.36 "Permitted Transferees" means Jess Joseph and Randall Gouse.
1.37 "Permitted Liens" means all liens specifically set forth in Schedule
1.37.
1.38 "Pironti Account" means Pironti's bank account at a bank located
within the United States, which Pironti shall designate to Parent and PCM Merger
Sub.
1.39 "Pironti Loan Amount" means the lesser of: (a) the principal, accrued
and unpaid interest and premium, if any, on outstanding indebtedness of NSI and
PCM to Pironti as of the Effective Date and (b) $1,500,000; provided that the
Pironti Loan Amount shall not include the Dividend Note Amount or the Dividends
Payable.
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1.40 "Purchase Note" means the promissory note to be issued as a component
of the payment of the PCM Merger Consideration in the form of Exhibit C. The
Purchase Note shall be secured by the Purchase Note Letter of Credit and by the
Security Agreement.
1.41 "Purchase Note Letter of Credit" shall be a letter of credit in the
form of Exhibit D to be issued by a bank reasonably satisfactory to Stockholder.
1.42 "Registration Rights Agreements" means the Registration Rights
Agreements by and between Parent on the one hand and each of the Stockholders on
the other, in the form set forth in Exhibit E hereto.
1.43 "SEC Reports" has the meaning set forth in Section 4.10(a).
1.44 "Security Agreement" means a security agreement in form reasonably
satisfactory to the Stockholder and Parent pursuant to which the Stockholder is
granted a security interest in all tangible and intangible assets of PCM
Surviving Corporation and NSI Surviving Corporation (as well as all other assets
associated with the conduct following the Effective Date of the businesses
previously conducted by PCM and NSI as security for the obligations under the
Purchase Note and the Negotiable Purchase Note, junior in priority only to
security interests held therein in connection with, and subject to such
subordination agreements as may be reasonably required in respect of, the Fleet
Financing. The Security Agreement shall provide that the Stockholder shall
release his security interests contained therein upon delivery of the Purchase
Note Letter of Credit in the Full Note Amount.
1.45 "Share" has the meaning set forth in Recital B.
1.46 "Stockholder" means Pironti.
1.47 "Third Party Liabilities" means liabilities of NSI and PCM to third
parties arising on account of acts, events or omissions occurring prior to the
Effective Time (i) the amounts of which were not deducted in arriving at 2001
EBITDA, and (ii) that were not disclosed as such in the Financial Statements or
in this Agreement or the NSI Merger Agreement.
1.48 "2001 EBITDA" means the sum of (x) the combined net income of NSI and
PCM for the fiscal year ended December 31, 2001, plus (y) all amounts deducted
in computing such net income in respect of: (1) interest expense, (2) corporate
income tax expense, and (3) depreciation and amortization expense, subject in
all events to those adjustments set forth on the Accounting Protocol with
respect to 2001 EBITDA, including the Joint Ventures' 2001 EBITDA (as defined in
the NSI Merger Agreement).
1.49 "2001 EBITDA Distributions" means any distributions by NSI and PCM on
account of 2001 EBITDA.
1.50 "2002 EBITDA" means the sum of (x) the combined net income of NSI and
PCM for the period from and including January 1, 2002 through and including the
Effective Date, plus (y) all amounts deducted in computing such net income in
respect of: (1) interest expense, (2)
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corporate income tax expense, and (3) depreciation and amortization expense, all
as determined in accordance with the Accounting Protocol.
1.51 Commonly used terms. Unless the context clearly indicates otherwise,
the terms below mean the following:
(a) "business day" means any day other than a day on which banks in
New York are required or authorized to be closed;
(b) "dollars" or "$" means United States dollars;
(c) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended);
(d) "subsidiary" or "subsidiaries" of a person means any corporation,
partnership, limited liability company, or other legal entity of which such
person (either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such legal
entity;
(e) "hereof", "herein" and "hereinafter" refer to this Agreement;
(f) "including" means including, without limitation (whether or not so
expressed);
(g) references to Sections, Recitals, Exhibits, and Schedules mean,
respectively, Sections, Recitals, Exhibits, and Schedules of this
Agreement;
(h) words denoting the singular include the plural and vice versa; and
(i) "it" or "its" or words denoting any gender include all genders.
2. The Merger
2.1 The PCM Merger. At the Effective Time, and subject to and upon the
terms and conditions of this Agreement and the FBCA, PCM Merger Sub shall be
merged with and into PCM, the separate corporate existence of PCM Merger Sub
shall cease, and PCM shall continue as the surviving corporation (hereinafter
sometimes referred to as the "PCM Surviving Corporation") and the separate
corporate existence of PCM with all of its rights, privileges, immunities and
franchises shall continue unaffected by the PCM Merger. The PCM Merger shall
have the effect specified in Section 607.1106 of the FBCA.
2.2 Effective Time. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, on January
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11, 2002, or as promptly as practicable thereafter as the conditions set forth
in Section 7 have been satisfied or waived, the parties hereto shall cause the
PCM Merger to be consummated by filing articles of merger as contemplated by the
FBCA in substantially the form of Exhibit F (the "Articles of Merger"), together
with any required related certificates, with the Department of State of the
State of Florida as provided in Section 607.1105 of the FBCA; provided that if
the Closing does not occur on January 11, 2002, it shall take place on such
business day on or prior to the Merger Deadline following satisfaction or waiver
of the foregoing conditions as specified by the Stockholder. The PCM Merger
shall become effective at the time specified in the Certificate of Merger (the
"Effective Time"). Prior to such filing, a closing (the "Closing") shall be held
at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New
York, NY, unless another time or place is agreed to in writing by the parties
hereto.
2.3 Effect of the PCM Merger. At the Effective Time, the effect of the PCM
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the FBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of PCM and PCM Merger Sub shall vest in the
PCM Surviving Corporation, and all debts, liabilities and duties of PCM and PCM
Merger Sub shall become the debts, liabilities and duties of the PCM Surviving
Corporation. The name of the PCM Surviving Corporation shall be Preferred
Consumer Marketing, Inc.
2.4 Articles of Incorporation; By-laws.
(a) Articles of Incorporation. Unless otherwise determined by Parent
prior to the Effective Time, at the Effective Time, the Articles of
Incorporation of PCM Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the PCM Surviving
Corporation until thereafter amended as provided by the Delaware General
Corporate Law ("DGCL") and such Articles of Incorporation.
(b) By-laws. Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the By-laws of PCM Merger Sub, as in
effect immediately prior to the Effective Time, shall be the By-laws of the
PCM Surviving Corporation until thereafter amended as provided in the DGCL,
the Articles of Incorporation of the PCM Surviving Corporation and such
By-laws.
2.5 Directors and Officers. The directors of PCM Merger Sub immediately
prior to the Effective Time shall be the initial directors of the PCM Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the PCM Surviving Corporation, and the initial
officers of the PCM Surviving Corporation shall be as set forth on Schedule 2.5,
in each case until their respective successors are duly elected or appointed and
qualified.
2.6 Effect on Securities, Etc. At the Effective Time, by virtue of the PCM
Merger and without any action on the part of Parent, PCM Merger Sub, PCM or the
holders of any securities of PCM:
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(a) Conversion of Securities. Each Share issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive a pro rata portion of the PCM Merger Consideration. As used
herein, "PCM Merger Consideration" means the amount by which (1) 3.6 times
Adjusted 2001 EBITDA, exceeds (2) the sum of: (A) the NSI Merger
Consideration; plus (B) the Effective Date Indebtedness; plus (C) the
Dividend Note Amount.
(b) Cancellation. Each Share held in the treasury of PCM immediately
prior to the Effective Time shall cease to be outstanding, be canceled and
retired without payment of any consideration therefor and cease to exist.
(c) Capital Stock of PCM Merger Sub. Each share of common stock,
$0.001 par value per share, of PCM Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of
common stock, $0.001 par value, of the PCM Surviving Corporation.
2.7 Method of Payment. The PCM Merger Consideration shall be paid as
follows:
(i) twenty three percent (23%) of the amount by which (1) 3.6
times Adjusted 2001 EBITDA, exceeds (2) the Effective Date
Indebtedness, will be evidenced by the Purchase Note, and
(ii) the balance of the PCM Merger Consideration shall be paid by
wire transfer of immediately available funds to the Stockholder
Account.
2.8 Determination of PCM Merger Consideration.
(a) Initial determination of PCM Merger Consideration. The Parties
will confer in advance of the Effective Date to estimate in good faith the
amount of the PCM Merger Consideration and the Overage (the "Estimated PCM
Merger Consideration") and the various components thereof. Such estimates
will be the basis for the payments to be made to Pironti and the
Stockholder on the Effective Date pursuant to Sections 2.7 and 7.3(g)
hereof and Sections 2.7 and 7.3(f) of the NSI Merger Agreement and shall be
subject to subsequent adjustment as provided in the further provisions of
this Section 2.8.
(b) Final Determination of PCM Consideration and Overage.
(i) As promptly as practicable following the Effective Time,
Parent Parties shall prepare financial statements of NSI and PCM for
the fiscal year ending December 31, 2001, which financial statements
shall be prepared in accordance with the Accounting Protocol. Such
financial statements will be audited by Marks, Paneth & Shron,
independent public accountants for NSI and PCM (the "Audited 2001
Financial Statements"). Parent Parties shall permit the Stockholder
and his designees with unlimited access to the accountants, to the
books and records utilized in the preparation of the Audited 2001
Financial
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Statements and to the work papers respecting such Statements and shall
direct such accountants to respond to any inquiries relating thereto.
(ii) Parent Parties shall determine 2001 EBITDA, 2001 Adjusted
EBITDA and therefore, the PCM Merger Consideration, the Overage and
the respective amounts of the other payments made to the Stockholder
or Pironti pursuant to Section 7.3(g) hereof and Sections 2.7 and
7.3(f) of the NSI Merger Agreement, based upon the Audited 2001
Financial Statements and the applicable provisions of this Agreement
(including the Accounting Protocol) and shall provide a copy of such
Audited 2001 Financial Statements and report on such determination
(the "EBITDA Statement") to Stockholder, together with the basis for
such calculation and a certificate from Marks, Paneth & Shron, stating
that they have reviewed this Agreement and the NSI Merger Agreement
and the definitions herein relating to such calculation and that,
after conducting their audit of the Audited 2001 Financial Statements
and reviewing such calculation, it is their view that such amounts
have been calculated in accordance with the requirements of this
Section and that such calculation is accurate. In the event the
Stockholder or Parent Parties have any dispute respecting the EBITDA
Statement, they shall follow the procedures set forth in Section 2.9.
(c) Adjustments. If it is necessary to adjust the payment made to the
Stockholder or Pironti on the Effective Date pursuant to Subsection (b)
above, Section 7.3(g) hereof, or Section 7.3(f) of the NSI Merger
Agreement, any such required adjustment (the "Adjustment") shall be made
not later than five (5) days following the final determination thereof, as
the same may be extended pursuant to Section 2.9 hereof (such day, the
"Adjustment Date"), as follows:
(i) If the PCM Merger Consideration is greater than the Estimated
PCM Merger Consideration, (A) the Purchase Note shall be amended and
restated by increasing the principal amount thereof by forty six
percent (46%) of such Adjustment, (B) the Negotiable Purchase Note
shall be amended and restated by increasing the principal amount
thereof by fifty four percent (54%) of such Adjustment and (C) PCM
Corporation shall make a cash payment to the Stockholder in the amount
of the extent to which payments on such Notes by PCM Surviving
Corporation to the Stockholder between the Effective Date and the
Adjustment Date were lower than they should have been, retroactive to
the Effective Date.
(ii) If the PCM Merger Consideration is less than the Estimated
PCM Merger Consideration, (A) the Purchase Note shall be amended and
restated by reducing the principal amount thereof by forty six percent
(46%) of such Adjustment, (B) the Negotiable Purchase Note shall be
amended and restated by reducing the principal amount thereof by fifty
four percent (54%) of such Adjustment and (C) the Stockholder shall
make a cash payment to PCM Surviving Corporation in the amount of the
extent to which payments by PCM
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Surviving Corporation to the Stockholder between the Effective Date
and the Adjustment Date were higher than they should have been,
retroactive to the Effective Date. In the event that the net amount of
any downward adjustment exceeds the outstanding principal balance of
the Purchase Note or the Negotiable Purchase Note, as the case may, as
of the Adjustment Date, then such excess shall be applied as a
reduction to the other Note, in the fashion described above, and the
Stockholder shall, on the Adjustment Date, surrender the applicable
Note to PCM Surviving Corporation for cancellation. In the event such
downward adjustment also exceeds the principal balance of such other
Note, the Stockholder shall, on the Adjustment Date, surrender such
other Note to PCM Surviving Corporation for cancellation and shall pay
PCM Surviving Corporation an amount equal to the amount by which the
net amount of such downward adjustment exceeds such outstanding
principal balance. In addition, the Stockholder shall make a cash
payment to PCM Surviving Corporation in the amount of the extent to
which payments on such Notes by PCM Surviving Corporation to the
Stockholder between the Effective Date and the Adjustment Date were
higher than they should have been, retroactive to the Effective Date,
together with interest on such amount computed at a rate of 7% per
annum to the date of such payment.
(iii) If the aggregate amount of the payment made to Pironti and
Stockholder on the Effective Date pursuant to Section 7.3(g) hereof
and Section 7.3(f) of the NSI Merger Agreement is greater or lesser
than the amount of such payment as determined in accordance with
Section 2.8(b), the Negotiable Purchase Note shall be amended, or
further amended, and restated in the manner described in paragraph (i)
or (ii) above, as applicable (and if applicable a further cash payment
of principal and interest shall be made to give effect to such
adjustment).
2.9 Dispute Notice. If the Stockholder disagrees with any matter set forth
in the EBITDA Statement, he shall provide Parent, or if Parent disagrees with
any matter set forth in the EBITDA Statement, it shall provide the Stockholder,
with notice of such disagreement setting forth in reasonable detail the nature
and basis of such disagreement, his or its view, as the case may be, as to the
correct amount of any adjustment of 2001 EBITDA or 2001 Adjusted EBITDA or any
other component of a payment to the Stockholder pursuant to this Agreement or
the NSI Merger Agreement (such amount, the "Proposed Adjustment," such notice, a
"Dispute Notice" and the party giving such Dispute Notice, the "Disputing
Party"). The Stockholder shall provide Parent with a Dispute Notice, if
applicable, within twenty (20) days after his receipt of the EBITDA Statement
and Parent shall provide the Stockholder with a Dispute Notice, if applicable,
concurrently with the delivery of the EBITDA Statement; provided, that the
foregoing twenty (20) day notice may be extended as the Stockholder may
reasonably request if he or his designees have been denied the access described
in Section 2.8(b) above. Parent and the Stockholder may both be Disputing
Parties if they both give Dispute Notices in accordance with this Section. If
the Stockholder does not deliver a Dispute Notice within such twenty (20) day
(or extended) period, the Stockholder shall be deemed to have agreed with the
matters set
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forth in the EBITDA Statement and if Parent does not deliver a Dispute Notice
concurrently with delivery of the EBITDA Statement, Parent shall be deemed to
have agreed with the matters set forth in the EBITDA Statement. If the Disputing
Party timely provides a Dispute Notice to the Party entitled to receive such
notice, then: (a) the representatives of Parent and the Stockholder
("Representatives") shall meet promptly and attempt in good faith to resolve any
differences. If the Representatives cannot mutually resolve such disagreement
within ten (10) days after the delivery of the Dispute Notice, such dispute
promptly shall be submitted for resolution to a recognizable and reputable
certified public accounting firm that is mutually acceptable to the
Representatives. Such accounting firm promptly shall resolve the matters that
are in disagreement among the Parties as set forth in the Dispute Notice in
accordance with the terms of this Agreement, and promptly shall deliver its
determination in writing to Parent the Stockholder (the "Accountants'
Determination"). The fees and expenses of such accounting firm in respect of
each dispute shall be shared pro rata as between the Parent and the Stockholder
on the basis of the percentage difference between such accounting firm's
conclusion and the amount set forth in the EBITDA Statement and the amount set
forth in the Dispute Notice. The determination of such accounting firm shall be
final and binding upon all of the Parties to this Agreement. Anything herein to
the contrary notwithstanding, in the event of any dispute subject to this
Section 2.9, the adjustment and/or payment subject to the dispute shall not be
due until the fifth day following the delivery of the Accountants' Determination
as provided herein.
3. Representations and Warranties of PCM and the Stockholder. PCM and the
Stockholder hereby, jointly and severally, represent and warrant to Parent and
PCM Merger Sub as follows:
3.1 Organization and Qualification; Absence of Subsidiaries. PCM is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has the requisite corporate power and authority
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on the Business as it is now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power or authority would not reasonably be expected to have a Material Adverse
Effect. PCM is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary. PCM does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
3.2 Articles of Incorporation and By-laws. PCM has heretofore made
available to Parent a complete and correct copy of its Articles of Incorporation
and By-laws as amended to date (the "PCM Charter Documents"). Such PCM Charter
Documents are in full force and effect. PCM is not in violation of any of the
provisions of its Articles of Incorporation or By-laws or equivalent
organizational documents, except for violations of the documents which do not
and are not reasonably likely to materially interfere with the operations of
such entity.
3.3 Capitalization. The authorized capital stock of PCM consists solely of
1,000 shares of PCM Common Stock, 100 shares of which are issued and
outstanding, all of which are validly
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issued, fully paid, and nonassessable. Except as set forth in Section 3.3 of the
PCM Disclosure Schedule, there are no options, warrants, or other rights,
agreements, arrangements or commitments of any character binding on PCM relating
to the issued or unissued capital stock of PCM or obligating PCM to issue or
sell any shares of capital stock of, or other equity interests in, PCM. There
are no obligations, contingent or otherwise, of PCM to repurchase, redeem, or
otherwise acquire any shares of PCM Common Stock.
3.4 Ownership of PCM Common Stock; Voting. Except as set forth in Section
3.4 of the PCM Disclosure Schedule, the Stockholder is the sole holder of record
of and has good and valid title to all issued and outstanding shares of PCM
Common Stock, free and clear of all Liens. Except as set forth in Section 3.4 of
the PCM Disclosure Schedule, there are no agreements or understandings in effect
with the Stockholder or with any other person with respect to the voting,
transfer, disposition or registration under the Securities Act of 1933, as
amended, of any shares of the PCM Common Stock.
3.5 Authorization; Binding Agreement. PCM has all necessary corporate power
and authority, and the Stockholder has the legal capacity, to execute and
deliver this Agreement and to perform its and his obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by PCM and the consummation by PCM of the transactions
contemplated hereby (including the Merger) have been duly and validly authorized
by all necessary corporate action, including stockholder approval, and no other
corporate proceedings on the part of PCM are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
filing of the appropriate documents with respect to the PCM Merger in accordance
with the FBCA). As of the date hereof, the Board of Directors of PCM has
determined that it is advisable and in the best interest of the Stockholder for
PCM to enter into this Agreement and to consummate the PCM Merger upon the terms
and subject to the conditions of this Agreement. This Agreement has been duly
and validly executed and delivered by PCM and the Stockholder and, assuming the
due authorization, execution and delivery hereof by Parent and PCM Merger Sub,
constitutes a legal, valid and binding obligation of PCM and the Stockholder,
enforceable against PCM and the Stockholder in accordance with its terms.
3.6 No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 3.6(a) of the PCM Disclosure
Schedule, the execution and delivery of this Agreement by PCM does not, and
the performance of this Agreement by PCM will not, (i) conflict with or
violate the Articles of Incorporation or By-laws of PCM, (ii) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable
to PCM or by which its or properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default), or impair PCM's rights or
alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on (including a right to
purchase) any of the properties or assets of PCM pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license,
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permit, franchise or other instrument or obligation to which PCM is a party
or by which PCM or its properties is bound or affected, except, in the case
of clauses (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(b) Except as set forth in Section 3.6(b) of the PCM Disclosure
Schedule, the execution and delivery of this Agreement by PCM does not, and
the performance of this Agreement by PCM will not, require any consent,
approval, authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, domestic or foreign (each, a
"Governmental Authority"), except (i) for applicable requirements, if any,
of the Exchange Act and state securities laws ("Blue Sky Laws") and the
filing and recordation of appropriate merger or other documents as required
by the FBCA, (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or materially delay consummation of the PCM Merger, or
otherwise prevent or materially delay PCM from performing its material
obligations under this Agreement, or would not otherwise reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect, or (iii) as to which any necessary consents, approvals,
authorizations, permits, filings or notifications have heretofore been
obtained or filed, as the case may be, by PCM; provided, however, that no
representation or warranty is made under this Section 3.6(b) as to the
requirement to make any filing pursuant to the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act, as
amended, and the rules and regulations thereunder (the "HSR Act").
(c) The "acquired person" (as defined in the HSR Act) that includes
PCM with respect to the transactions contemplated under the Merger
Agreement does not have total assets or annual net sales of $100,000,000 as
determined in accordance with the HSR Act.
3.7 Compliance; Permits.
(a) Except as disclosed in Section 3.7(a) of the PCM Disclosure
Schedule, PCM is not in conflict with, or in default or violation of, (i)
any law, rule, regulation, order, judgment or decree applicable to PCM or
by which its properties is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which PCM is a party or by which PCM
or its respective properties is bound or affected.
(b) Except as disclosed in Section 3.7(b) of the PCM Disclosure
Schedule, PCM holds all permits, licenses, easements, variances,
exemptions, consents, certificates, orders and approvals from governmental
authorities which are material to the operation of the Business as it is
now being conducted (collectively, the "PCM Permits"). PCM is in compliance
with the terms of PCM Permits.
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3.8 Financial Statements. PCM has heretofore delivered to Parent complete
and correct copies of the following financial statements (collectively, the
"Financial Statements"), all of which have been prepared from the books and
records of PCM and, to PCM's knowledge, the Financial Statements fairly present
in all material respects the financial condition of PCM as at their respective
dates and the results of PCM's operations for the periods covered thereby: (x)
an audited balance sheet at December 31, 1999, and audited statements of income,
cash flow and shareholders' equity of PCM for the fiscal year then ended; (y) an
audited balance sheet at December 31, 2000 (the "Last Audited Balance Sheet")
and audited statements of income, cash flow and shareholders' equity of PCM for
the fiscal year then ended; and (z) an unaudited balance sheet (the "Interim
Balance Sheet") of PCM as at September 30, 2001 (the "Interim Balance Sheet
Date") and statements of income and cash flow for the nine months then ended. To
the knowledge of PCM and the Stockholder, and except as disclosed in Section 3.8
of the PCM Disclosure Schedule:
(a) No such statements of income contain any items of special or
nonrecurring revenue or income or any revenue or income generated other
than in connection with the Business or other than in the ordinary course
of business, except as expressly specified therein;
(b) Except as and to the extent reflected or reserved against on the
Last Audited Balance Sheet or the Interim Balance Sheet or specifically set
forth on Section 3.8(b) of the PCM Disclosure Schedule and except for
liabilities incurred since the Interim Balance Sheet Date in the ordinary
course of PCM's business, PCM does not have any liabilities, debts or
obligations (whether absolute, accrued, contingent or otherwise) of the
type required to be included on a balance sheet prepared in accordance with
GAAP. Section 3.8(b) of the PCM Disclosure Schedule lists, for each item
identified, the lender or other obligee and, in the case of guarantees and
other contingent liabilities, the beneficiary of such obligations;
(c) All receivables of PCM (including accounts receivable, loans
receivable and advances that are reflected in the Interim Balance Sheet,
and all such receivables that arose or arise thereafter and on or prior to
the Effective Time), have arisen or will have arisen only from bona fide
transactions in the ordinary course of business and shall be fully
collectible at the aggregate recorded amounts thereof (except to the extent
of appropriate reserves established in accordance with GAAP and the
Accounting Protocol) and are not and will not be subject to defense,
counterclaim, or offset; and
(d) All items of supplies and other consumables reflected on the
Interim Balance Sheet, and all such items of supplies and other consumables
that are acquired thereafter and prior to the Effective Time, are or will
be useable in the ordinary course of business. PCM has and will through the
Effective Time maintain a sufficient but not an excessive quantity of each
type of such supplies and other consumables in order to meet the normal
requirements of its business and operations.
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3.9 Absence of Certain Changes or Events. Except as set forth in Section
3.9 of the PCM Disclosure Schedule, since December 31, 2000, PCM has conducted
its business in the ordinary course and PCM has not:
(a) amended or otherwise modified its Articles of Incorporation or
By-Laws;
(b) made any material change in its accounting methods, principles, or
practices (other than changes required by GAAP after the date of this
Agreement);
(c) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in the ordinary
course of business and consistent with prior practice;
(d) subjected to any Lien (other than Permitted Liens) or other
restriction any of its properties, business or assets;
(e) discharged or satisfied any Lien, discharged, satisfied or paid
any obligation or liability, absolute, accrued, contingent or otherwise,
whether due or to become due, other than current liabilities shown on the
Interim Balance Sheet and current liabilities incurred since December 31,
2000 in the ordinary course of business and consistent with prior practice
(in each case other than for the benefit of any Affiliate);
(f) sold, transferred, leased to others or otherwise disposed of any
properties or assets or purchased, leased from others or otherwise acquired
any properties or assets except in the ordinary course of business;
(g) cancelled or compromised any debt or claim or waived or released
any right of substantial value;
(h) terminated or received any notice of termination of any contract,
lease, license, or other agreement or any Governmental License, or suffered
any damage, destruction or loss (whether or not covered by insurance), or
otherwise become aware of any event that, in any case or in the aggregate,
has had or is reasonably likely to result in a Material Adverse Effect;
(i) had any material change in its relations with its employees or
agents or any material customer or supplier or terminated services to any
customer other than in the ordinary course of business consistent with past
practice;
(j) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any United States or
foreign license, patent, copyright, trademark, trade name, service mark,
brand mark, brand name, invention or similar rights or with respect to any
know-how, or modified any existing rights with respect thereto;
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(k) made any change in the rate of compensation, commission, bonus, or
other remuneration payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra compensation, pension, or
severance or vacation pay, to any shareholder, director, officer, employee,
distributor, or agent of PCM except in the ordinary course of business (and
except with respect to the Stockholder and the Permitted Transferees)
consistent with prior practice and not in contemplation of the transactions
contemplated by this Agreement;
(l) made any increase in or commitment to increase any employee
benefits, adopted or made any commitment to adopt any additional employee
benefit plan or made any contribution, other than regularly scheduled
contributions, to any employee benefit plan;
(m) engaged in any transaction with any shareholder, director,
officer, employee, salesman, distributor or agent of PCM (other than (i)
normal compensation and other fees earned in their capacity as such in
accordance with past practice, (ii) transactions in the ordinary course of
business not involving an expenditure in excess of an aggregate of $1,000
per individual, (iii) transactions in accordance with the provisions of
Contracts or made any loans or advances to any director, officer, employee,
salesman, distributor or agent other than travel and entertainment advances
in the ordinary course of business consistent with prior practice, and (iv)
transactions with the Stockholder and the Permitted Transferees expressly
contemplated by this Agreement and the NSI Merger Agreement;
(n) made any capital expenditures or capital additions or betterments
in excess of $20,000 in any individual case, or in excess of $100,000 in
the aggregate;
(o) lost the employment services of any key employees of PCM;
(p) made any loan or advance to any person other than travel and other
similar routine advances in the ordinary course of business consistent with
past practice, or acquired any capital stock or other securities of any
other corporation or any ownership interest in any other business
enterprise;
(q) changed its banking or safe deposit arrangements;
(r) instituted, settled or agreed to settle any litigation, action or
proceeding before any court or governmental body relating to PCM or its
properties or assets;
(s) failed to replenish its consumables, supplies or inventory in a
normal and customary manner consistent with its prior practice and prudent
business practices prevailing in the industry, or made any purchase
commitment in excess of the normal, ordinary and usual requirements of its
business or at any price in excess of the then current market price or upon
terms and conditions more onerous than those usual and customary in the
industry, or made any change in its selling, pricing, receivables
collection, advertising or personnel practices;
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(t) entered into any transaction, contract or commitment other than in
the ordinary course of business consistent with its prior practice;
(u) made any new elections or changed any current elections with
respect to Taxes or compromised any United States federal, state, local or
non United States Tax liability; or
(v) changed any accounting practices or principles utilized in the
preparation of the Financial Statements, including, without limitation, any
changes or modifications relating to the general ledger accounts of PCM, as
presently maintained;
(w) suffered any change, event or condition that, in any case or in
the aggregate, has had or is reasonably likely to result in a Material
Adverse Effect; or
(x) entered into any agreement or made any commitment to take any of
the types of action described in subparagraphs (a) through (w) above.
For purposes of this Section 3.9, no action by PCM involving, or for the direct
or indirect benefit of, any Affiliate other than NSI shall be considered an
action in the ordinary course of business.
3.10 Insolvency. PCM is not insolvent, and as of the Effective Time PCM
will not, by virtue of consummation of the transactions contemplated by this
Agreement or otherwise, be or be rendered insolvent, as such term is defined
under bankruptcy law (including Title 11 of the United States Code) or the
fraudulent conveyances statutes or laws of any of the jurisdictions in which PCM
does business or in which any of its assets are located.
3.11 Absence of Litigation. Except as set forth in Section 3.11 of the PCM
Disclosure Schedule or arising out of transactions contemplated by this
Agreement, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of PCM, overtly threatened against PCM, or any
properties or rights of PCM, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign.
3.12 Properties.
(a) Section 3.12(a) of the PCM Disclosure Schedule contains a complete
and correct list of all real property owned, leased or licensed by PCM,
together with a copy of each lease, sublease, license or any other
instrument under which PCM claims or holds such leasehold or other interest
or the right to the use thereof or pursuant to which PCM has assigned,
sublet or granted any rights therein.
(b) Except as set forth in Section 3.12(b) of the PCM Disclosure
Schedule, the material personal property owned or leased by PCM or used in
its business, taken in the aggregate, is in good operating condition and
repair, normal wear and tear excepted, and is suitable for the purpose for
which it is utilized, and there does not exist any condition that
materially interferes with the economic value or use of such personal
property.
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3.13 Contracts, etc.
(a) Set forth on Section 3.13(a) of the PCM Disclosure Schedule is a
complete and correct list of each of the following written or oral
contracts, agreements, Government Licenses and other instruments or
documents to which PCM is a party or by which PCM or its properties or
assets are bound:
(i) each service or other similar type of agreement under which
services are provided by any other person to PCM calling for payments
in excess of $10,000 per year (except for agreements having a term of
less than 12 months or cancelable without penalty on less than 60 days
notice);
(ii) each agreement that restricts the operation of the business
of PCM as presently conducted and each agreement that restricts the
ability of PCM to retain agents or distributors or to solicit
customers or employees;
(iii) each agreement with an Affiliate;
(iv) each lease (as lessor, lessee, sublessor or sublessee) of
any real property;
(v) each lease (as lessor, lessee, sublessor or sublessee) of any
tangible personal property or assets (except for leases calling for
payments of less than $10,000 per year or having a term of less than
12 months or cancelable without penalty on less than 60 days notice);
(vi) each agreement under which services are provided by PCM to
any material customer calling for payments in excess of $10,000 per
year (except for agreements having a term of less than 12 months or
cancelable without penalty on less than 60 days notice);
(vii) each written agreement for the purchase of supplies or
products which calls for performance by PCM over a period of more than
90 days or with respect to which there exists an aggregate future
liability of PCM in excess of $20,000 (except for agreements
cancelable without penalty on less than 90 days notice);
(viii) each agreement under which any money has been or may be
borrowed or loaned or any note, bond, indenture or other evidence of
indebtedness has been issued or assumed (other than those under which
there remain no ongoing obligations of PCM), and each guaranty of any
evidence of indebtedness or other obligation, or of the net worth, of
any person (other than endorsements for the purpose of collection in
the ordinary course of business);
(ix) each mortgage, deed of trust, security agreement, purchase
money agreement, conditional sales contract or capital lease;
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(x) each partnership, joint venture or similar agreement;
(xi) each agreement of which PCM has knowledge that restricts the
competitive activities of PCM's employees;
(xii) each agreement to make unpaid capital expenditures in
excess of $20,000; and
(xiii) each other agreement having an indefinite term or a term
of more than one (1) year (other than those that are terminable at
will or upon not more than 30 days' notice by PCM without penalty) or
requiring payments by PCM of more than $10,000 per year.
(b) A complete and correct copy of each written agreement, lease,
license, mortgage, deed of trust, instrument, contract or other type of
document and descriptions of the material terms of each oral agreement,
license, contract, or other type of document required to be disclosed
pursuant to Section 3.13(a) has been delivered to Parent.
(c) Each agreement, lease, license, mortgage, deed of trust,
instrument, contract or other type of document required to be disclosed
pursuant to Sections 3.12(a), 3.13(a), 3.16(b)or 3.22(e) to which PCM is a
party or by which PCM or its properties or assets are bound (collectively,
the "Contracts") is valid, binding, and in full force and effect, is
enforceable by PCM in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and by general
principles of equity, and will be enforceable in accordance with its terms
by the PCM Surviving Corporation after the Effective Time. PCM is not (with
or without the lapse of time or the giving of notice, or both) in material
breach of or in material default under any of the Contracts, and, to the
knowledge of PCM, no other party to any of the Contracts is (with or
without the lapse of time or the giving of notice, or both) in material
breach of or in material default under any of the Contracts. For the
purposes of this Section 3.13(c), the terms "material breach" and "material
default" include any breach or default which would give the other party to
a Contract the right to terminate such Contract (including the right to
terminate following notice and the opportunity to cure).
3.14 Dealings with Officers, Directors, and Affiliates; Etc. Except as set
forth in Section 3.14 of the PCM Disclosure Schedule, (a) no Affiliate has any
interest in any property or assets (whether real or personal, tangible or
intangible) owned or leased by PCM or otherwise utilized by PCM in the conduct
of its business; (b) has any direct or indirect interest of any nature whatever
in any person that competes with, conducts any business similar to, has any
present (or contemplated) arrangement or agreement (including, without
limitation, arrangements regarding the shared use of personnel or facilities)
with (whether as a customer or supplier or otherwise), or is involved in any way
with, PCM; (c) PCM owes no amount to any Affiliate; and (d) no Affiliate owes
any amount to PCM.
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3.15 Bank Accounts and Powers of Attorney. Set forth in Section 3.15 of the
PCM Disclosure Schedule is an accurate and complete list showing (a) the name
and address of each bank or other financial institution in which PCM has an
account, the number of any such account and the names of all persons authorized
to draw thereon, identifying each such account to which any customer of PCM has
been directed to make payment, including "lockbox" accounts and (b) the names of
all persons, if any, holding powers of attorney from PCM and a summary statement
of the terms thereof.
3.16 Employees.
(a) Except as set forth in Section 3.16 of the PCM Disclosure
Schedule:
(i) To the knowledge of PCM, no employee, distributor, or sales
agent of PCM on the date hereof intends to terminate its relationship
with PCM or does not intend to continue such relationship with PCM
Surviving Corporation after the Effective Time.
(ii) PCM is in compliance with all applicable laws, agreements
and contracts relating to employment, employment practices, wages,
hours, collective bargaining, immigration, disability, civil rights,
safety and health, workers' compensation and pay equity, or otherwise
relating to the terms and conditions of employment, including, but not
limited to, any obligation to engage in affirmative action, all laws
relating to employee compensation matters, and PCM has filed all
appropriate forms (including Immigration and Naturalization Service
Form I-9) required by any relevant governmental authority.
(iii) No collective bargaining agreement with respect to the
business of PCM is currently in effect or being negotiated. PCM has no
obligation to negotiate any such collective bargaining agreement, and
PCM has no knowledge that the employees of PCM desire to be covered by
a collective bargaining agreement.
(iv) There are no strikes, slowdowns or work stoppages pending
or, to the knowledge of PCM, threatened with respect to the employees
of PCM, nor has any such strike, slowdown or work stoppage occurred
or, to the knowledge of PCM, been threatened. There is no
representation claim or petition pending before the National Labor
Relations Board or any state or local labor agency and, to the
knowledge of PCM, no question concerning representation has been
raised or threatened respecting the employees of PCM.
(v) To the knowledge of PCM, there are no complaints or charges
against PCM pending before the National Labor Relations Board or any
state or local labor agency and, to the knowledge of PCM, no person
has threatened to file any complaint or charge against PCM with any
such board or agency.
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(vi) To the knowledge of PCM, no charges with respect to or
relating to the business of PCM or any Affiliate are pending before
the Equal Employment Opportunity Commission, or any state or local
agency responsible for the prevention of unlawful employment
practices.
(vii) Neither PCM nor any Affiliate has received notice of the
intent of any federal, state, local or foreign agency responsible for
the enforcement of labor or employment laws to conduct an
investigation of PCM, and, to the knowledge of PCM, no such
investigation is in progress.
(viii) Section 3.16(a)(viii) of the PCM Disclosure Schedule
accurately sets forth all unpaid severance which, as of the date of
this Agreement, is due or claimed in writing to be due from PCM to any
person whose employment with PCM was terminated.
(ix) Schedule 3.16(a)(ix) accurately sets forth a salary review
schedule listing as of September 30, 2001 the name, annual base salary
or annualized wages and a brief job description of each employee of
PCM. No such employee renders services for the benefit of any
Affiliate. No employee of any Affiliate renders services to PCM.
(b) Section 3.16(b) of the PCM Disclosure Schedule contains (i) a
complete and correct list of all written or oral employment, management,
consulting or other agreements with any persons employed or retained by PCM
(including independent consultants and commission agents); (ii) the names
of all employees or former employees of PCM who are receiving or are
entitled to receive at any time continuing payments of any kind after
termination of employment, together with the annual amounts payable to each
of such employees and the duration of such payments; (iii) all officers of
PCM who have executed a non-competition agreement with PCM; and (iv) all
plans, programs, agreements and other arrangements of PCM respecting its
employees that contain change of control provisions. Complete and correct
copies of all written documents and descriptions of the material terms and
conditions of oral agreements required to be disclosed under this Section
3.16(b) have been delivered to Parent.
3.17 Employee Benefit Plans.
(a) Section 3.17(a) of the PCM Disclosure Schedule sets forth all
"employee pension benefit plans" (as defined in Section 3(2) of ERISA), all
medical, disability, life insurance and other "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA), and all other employee
benefit plans, programs or arrangements, including, without limitation, any
bonus, stock option, stock purchase or other equity-based compensation
arrangements, incentive, deferred compensation, supplemental retirement,
severance, disability, vacation, cafeteria and other similar employee
benefit plans, policies, programs, agreements or arrangements (whether
written or otherwise), including those which contain change of control
provisions or pending change of control provisions, in any case that (i)
are maintained or contributed to (or to which there was an
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obligation to contribute) by PCM, or (ii) were formerly maintained or
contributed to (or to which there was an obligation to contribute), by
either PCM or any subsidiary, as well each plan with respect to which PCM,
a subsidiary or any other entity (whether or not incorporated), which is a
member of a controlled group including PCM or which is under common control
with PCM within the meaning of Section 414(b), (c) or (m) of the Code (a
"PCM ERISA Affiliate"), if PCM or any PCM ERISA Affiliate has or could have
any liability with respect to any such plan, whether direct or indirect or
actual or contingent (including, without limitation, any liability arising
out of an indemnification, guarantee, hold harmless or similar agreement)
("PCM Employee Plans").
(b) PCM has made available to Parent, prior to the date of this
Agreement, copies of (i) each such written PCM Employee Plan (or a written
description of any PCM Employee Plan which is not written) and all related
trust agreements, insurance and other contracts (including policies),
summary plan descriptions, summaries of material modifications and
communications distributed to plan participants, (ii) the three most recent
annual reports on Form 5500 series, with accompanying schedules and
attachments, filed with respect to each PCM Employee Plan required to make
such a filing, (iii) the latest reports which have been filed with the
Department of Labor with respect to each PCM Employee Plan required to make
such filing and (iv) the most recent favorable determination letters issued
for each PCM Employee Plan and related trust which is intended to be
qualified under Section 401(a) of the Code (and, if an application for such
determination is pending, a copy of the application for such
determination).
(c) None of the PCM Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person (except as
necessary to comply with Section 4980B of the Code ("COBRA")).
(d) (i) No party in interest or disqualified person (as defined in
Section 3(14) of ERISA and Section 4975 of the Code) has at any time
engaged in a transaction with respect to any PCM Employee Plan which could
subject PCM or any PCM ERISA Affiliate, directly or indirectly, to a tax,
penalty, or other liability for prohibited transactions under ERISA or
Section 4975 of the Code; (ii) no fiduciary (as defined in Section 3(21) of
ERISA) with respect to any PCM Employee Plan, or for whose conduct PCM
could have any liability (by reason of indemnities or otherwise), has
breached any of the responsibilities or obligations imposed upon the
fiduciary under Title I of ERISA; and (iii) no fiduciary of any PCM
Employee Plan has breached any of the responsibilities or obligations
imposed upon fiduciaries under Title I of ERISA, which breach would
reasonably be expected to result in any liability to PCM or any PCM ERISA
Affiliate.
(e) (i) All PCM Employee Plans have been established and maintained
substantially in accordance with their terms and have operated in
compliance with the requirements of applicable law (including but not
limited to the applicable notification and other requirements of COBRA, the
Health Insurance Portability and Accountability Act of 1996, the Newborns'
and Mothers' Health Protection Act of 1996, the Mental Health Parity Act of
1996, and the Women's Health and Cancer Rights Act of 1998), and
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may by their terms be amended and/or terminated at any time to the greatest
extent permitted by applicable law, and PCM has performed all obligations
required to be performed by it under, is not in default under or violation
of, and has no knowledge of any default or violation by any other party to,
any of the PCM Employee Plans; (ii) each PCM Employee Plan which is
intended to be qualified under Section 401(a) of the Code is the subject of
a favorable determination letter from the IRS, and, to PCM's knowledge,
nothing has occurred which may reasonably be expected to impair such
determination; and (iii) all contributions required to be made with respect
to any PCM Employee Plan have been made on or before their due dates
(including any extensions thereof) and all such amounts accrued but not yet
paid have been properly recorded in the books of PCM and reflected in the
financial books of PCM.
(f) (i) Other than routine claims for benefits made in the ordinary
course of the operation of the PCM Employee Plans, there are no pending,
nor to PCM's knowledge any threatened, claims, investigations or causes of
action with respect to any PCM Employee Plan, whether made by a participant
or beneficiary of such a plan, a governmental agency or otherwise, against
PCM, any PCM director, officer or employee, any PCM Employee Plan or any
fiduciary of a PCM Employee Plan; and (ii) there are no communications to
any employee, former employee or any other person who may be entitled to
benefits under any PCM Employee Plan that are inconsistent with any
provision of any PCM Employee Plan.
(g) No PCM Employee Plan is or ever was subject to Section 302 of
ERISA, Section 412 of the Code or Title IV of ERISA and no PCM Employee
Plan is or ever was a "multiemployer plan" as defined in Section 3(37) of
ERISA or a "multiple employer plan" as defined in Section 3(40) of ERISA.
With respect to any PCM Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the 30
day notice requirement has been waived under the regulations to Section
4043 of ERISA) has occurred nor would the consummation of the transactions
contemplated hereby (including the execution of this Agreement) constitute
a reportable event for which the 30-day requirement has not been waived.
Neither PCM nor any PCM ERISA Affiliate has incurred or reasonably expects
to incur and no facts or conditions exist as a result of which PCM or a PCM
ERISA Affiliate could incur any liability under Title IV of ERISA
including, without limitation, with respect to an event described in
Section 4201, 4204 or 4212 of ERISA (or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under which PCM or a PCM
ERISA Affiliate has agreed or is required to indemnify any person against
such liability). The Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any such PCM Employee Plan, and no such
plan has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA and Section 412 of the Code, whether or not waived,
and no extensions of any amortization period within the meaning of Section
412 of the Code or Section 302 of ERISA been applied for with respect
thereto. With respect to each multiemployer plan, Section 3.17(g) of the
PCM Disclosure Schedule specifies the "withdrawal liability" within the
meaning of Section 4201 of ERISA that PCM or a PCM ERISA Affiliate would
have incurred had PCM or such PCM ERISA Affiliate effected a
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"complete withdrawal" (within the meaning of Section 4203 of ERISA) as of a
recent date specified in Section 3.17(g) of the PCM Disclosure Schedule.
(h) PCM has never maintained an employee stock ownership plan (within
the meaning of Section 4975(e)(7) of the Code) or any other PCM Employee
Plan that invests in PCM stock.
(i) Since December 31, 1999, PCM has not proposed nor agreed to any
increase in benefits under any PCM Employee Plan (or the creation of new
benefits) or change in employee coverage which would materially increase
the benefits under or the expense of maintaining any PCM Employee Plan.
(j) PCM has no current liability based upon, arising out of or
relating to the classification of any individual as an independent
contractor or "leased employee" (within the meaning of Section 414(n) of
the Code) rather than as an employee, and no facts exist as a result of
which PCM could have any such liability.
(k) The consummation of the transactions contemplated hereby, either
alone or in combination with another event, will not result in (i) any
payment (including, without limitation, severance, unemployment
compensation or bonus payments) becoming due to any director, officer,
employee or consultant of PCM, (ii) any increase in the amount of
compensation or benefits payable in respect of any director, officer,
employee or consultant of PCM, (iii) any acceleration of the vesting or
timing of payment of any benefits or compensation payable in respect of any
director, officer, employee or consultant of PCM or (iv) any "parachute
payment" within the meaning of Section 280G of the Code in respect of any
director, officer, employee or consultant of PCM. No PCM Employee Plan
provides benefits or payments contingent upon, triggered by, or increased
as a result of a change in the ownership or effective control of PCM.
3.18 Restrictions on Business Activities. Except for this Agreement or as
set forth in Section 3.18 of the PCM Disclosure Schedule, to the knowledge of
PCM, there is no agreement, judgment, injunction, order or decree binding upon
PCM which has or would reasonably be expected to have the effect of prohibiting
or impairing the conduct of business by PCM as currently conducted by PCM,
except for any prohibition or impairment as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
3.19 Title to Property. Except as set forth in Section 3.19 of the PCM
Disclosure Schedule, PCM has good title to all of its real properties and other
assets, free and clear of all liens, charges and encumbrances, except for
Permitted Liens and liens for taxes not yet due and payable and Liens which
secure indebtedness reflected in the Interim Balance Sheet; and, all leases
pursuant to which PCM leases from others amounts of real or personal property,
are in good standing, valid and effective in accordance with their respective
terms, and there is not, to the best knowledge of PCM, under any of such leases,
any existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default).
3.20 Taxes.
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(a) PCM has timely and accurately filed, or caused to be timely and
accurately filed, in all material respects, all Tax Returns (as hereinafter
defined) required to be filed by it, and has paid, collected or withheld,
or caused to be paid, collected or withheld, in all material respects, all
amounts of Taxes (as hereinafter defined) required to be paid, collected or
withheld, including, without limitation, Taxes due in connection with the
transfer of shares to the Permitted Transferees pursuant to Section 5.2(b),
other than such Taxes for which adequate reserves in the Interim Balance
Sheet have been established or which are being contested in good faith. PCM
has made or will make provision for all Taxes payable by it with respect to
any pre-Effective Date period which have not been paid prior to the
Effective Date. Except as set forth in Section 3.20 of the PCM Disclosure
Schedule, there are no claims or assessments pending against PCM for any
alleged deficiency in any Tax, there are no pending or, to PCM's knowledge,
threatened audits or investigations for or relating to any liability in
respect of any Taxes, and PCM has not been notified in writing of any
proposed Tax claims or assessments against PCM (other than in each case,
claims or assessments for which adequate reserves in the Interim Balance
Sheet have been established or which are being contested in good faith or
are immaterial in amount). PCM has not executed any waivers or extensions
of any applicable statute of limitations to assess any amount of Taxes. PCM
has not been audited by the IRS for any taxable year. There are no
outstanding requests by PCM for any extension of time within which to file
any Tax Return or within which to pay any amount of Taxes shown to be due
on any Tax Return. There are no liens for Taxes on the assets of PCM except
for statutory liens for current Taxes not yet due and payable. Except as
set forth in Section 3.20(a) of the PCM Disclosure Schedule, (i) PCM is not
liable for Taxes of any other person, is not currently under any
contractual obligation to indemnify any person with respect to Taxes
(except for customary agreements to indemnify lenders or security holders
in respect of taxes other than income taxes), and is not a party to any tax
sharing agreement or any other agreement providing for payments by PCM with
respect to Taxes; (ii) PCM has never been a member of an affiliated group
within the meaning of Section 1504 of the Code or filed or been included in
a combined, consolidated or unitary Tax Return; (iii) PCM has not entered
into any sale leaseback or any leveraged lease transaction; (iv) PCM will
not be required to include any adjustment in taxable income for any period
ending after the Effective Date under Section 481 of the Code (or under any
similar provision of the Tax laws of any jurisdiction) as a result of a
change in method of accounting or otherwise; (v) PCM is not a party to any
joint venture, partnership or other arrangement or contract which is or is
reasonably likely to be treated as a partnership for federal income tax
purposes; (vi) none of PCM's property is treated as owned by another person
for federal income tax purposes or as "tax exempt use property" within the
meaning of Section 168 of the Code; (vii) there are no private letter
rulings in respect of any Tax pending between PCM and any taxing authority;
(viii) PCM is not a party to any agreement, contract, arrangement or plan
that would result (taking into account the transactions contemplated by
this Agreement), separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code;
(ix) PCM has qualified for and properly elected S Corporation Status within
the meaning of Section 1361(a)(1) of the Code (and any corresponding
provisions of applicable state law) since October 1992 or the date of
inception, for federal
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and applicable state income tax purposes and shall maintain such S
Corporation Status until the Effective Time; (x) PCM is not liable with
respect to any indebtedness the interest of which is not deductible for
applicable federal, foreign, state or local income tax purposes; (xi) PCM
is not a "consenting corporation" under Section 341(f) of the Code or any
corresponding provision of state, local or foreign law; and (xii) PCM is
not, and has not been a United States real property holding corporation as
defined in Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(b) For purposes of this Agreement, the term "Tax" shall mean any
United States federal, state, local, non-United States or provincial
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, alternative or add-on minimum, ad valorem, transfer or
excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge imposed by any Governmental Authority, together with
any interest, penalty, additions to tax, and additional amounts imposed
with respect thereto. The term "Tax Return" shall mean a report, return or
other information (including any attached schedules or any amendments to
such report, return or other information) required to be supplied to or
filed with a Governmental Authority with respect to any Tax, including an
information return, claim for refund, amended return or declaration or
estimated Tax.
3.21 Environmental Matters.
(a) Except as set forth in Section 3.21(a) to the PCM Disclosure
Schedule, the operations of PCM are in compliance with applicable
Environmental Laws (as hereinafter defined), which compliance includes the
possession by PCM of all permits and governmental authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof.
(b) Except as set forth in Section 3.21(b) of the PCM Disclosure
Schedule, there are no Environmental Claims (as hereinafter defined),
including claims based on "arranger liability," pending or, to the
knowledge of PCM, threatened in writing against PCM or against any person
or entity whose liability for any Environmental Claim PCM has retained or
assumed.
(c) Except as set forth on Section 3.21(c) of the PCM Disclosure
Schedule, there are no past or present actions, circumstances, conditions,
events or incidents, including the release, emission, discharge, presence
or disposal of any Materials of Environmental Concern (as hereinafter
defined), that are reasonably likely to form the basis of any Environmental
Claim against PCM or against any person or entity whose liability for any
Environmental Claim PCM has retained or assumed.
(d) Except as set forth in Section 3.21(d) of the PCM Disclosure
Schedule, there are no off-site locations where PCM has stored, disposed or
arranged for the disposal of Materials of Environmental Concern which have
been listed on the National Priority List,
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or any analogous state site list, and PCM has not been notified that it is
a potentially responsible party at any such location.
(e) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, action, cause of
action, investigation or written notice by any person or entity
alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from the presence, or
release into the environment, of any Material of Environmental Concern
at any location, whether or not owned or operated by PCM.
(ii) "Environmental Laws" means all United States federal, state,
local and non-United States laws, regulations, codes and ordinances,
relating to pollution or protection of human health and the
environment (including ambient air, surface water, ground water, land
surface or sub-surface strata), including but not limited to CERCLA,
RCRA, TSCA, OSHA, the Clean Air Act, the Clean Water Act, each as
amended or supplemented, and any applicable transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals,
pollutants, contaminants, hazardous materials, hazardous substances
and hazardous wastes, medical waste, toxic substances, petroleum and
petroleum products, asbestos-containing materials, polychlorinated
biphenyls, and any other chemicals, pollutants or substances regulated
under any Environmental Law.
3.22 Intellectual Property.
(a) As used herein, the term "Intellectual Property Assets" shall mean
all worldwide intellectual property rights, including, without limitation,
patents, trademarks, service marks and copyrights, and registrations and
applications therefor, trade names, common law marks, know-how, trade
secrets, computer software programs and proprietary information. As used
herein, "PCM Intellectual Property Assets" shall mean the Intellectual
Property Assets used or owned by PCM.
(b) Except as set forth in Section 3.22(b) of the PCM Disclosure
Schedule, PCM owns, or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property Assets that are used in
the business of PCM as currently conducted, without conflict with the
rights of others.
(c) Except as disclosed in Section 3.22(c) of the PCM Disclosure
Schedule, no claims (i) are currently pending or, to the knowledge of PCM,
are threatened by any person with respect to PCM Intellectual Property
Assets, or (ii) are currently pending or, to the knowledge of PCM,
threatened by any person with respect to the Intellectual
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Property Assets of a third party (the "Third Party Intellectual Property
Assets") to the extent arising out of any use, reproduction or distribution
of such Third Party Intellectual Property Assets by or through PCM.
(d) Except as disclosed in Section 3.22(d) of the PCM Disclosure
Schedule, PCM does not know of any valid grounds for any bona fide claim to
the effect that the manufacture, sale, licensing or use of any product now
used, sold or licensed or proposed for use, sale, license by PCM infringes
on any Third Party Intellectual Property Assets.
(e) Section 3.22(e) of the PCM Disclosure Schedule sets forth a list
of (i) all patents and patent applications owned by PCM worldwide; (ii) all
trademark and service mark registrations and all trademark and service mark
applications, common law trademarks, trade dress and slogans, and all trade
names owned by PCM worldwide; (iii) all copyright registrations and
copyright applications owned by PCM worldwide; and (iv) all licenses owned
by PCM in which PCM is (A) a licensor with respect to any of the patents,
trademarks, service marks, trade names or copyrights listed in Section
3.22(e) of the PCM Disclosure Schedule; or (B) a licensee of any other
person's patents, trade names, trademarks, service marks or copyrights
except for any licenses of software programs that are commercially
available "off the shelf." PCM has heretofore made available to Parent
complete and correct copies of all agreements required to be disclosed
pursuant to the preceding clause (iv). Except as disclosed in Section
3.22(e)(v) of the PCM Disclosure Schedule, PCM has made all necessary
filings and recordations to protect and maintain its interest in the
patents, patent applications, trademark and service mark registrations,
trademark and service mark applications, copyright registrations and
copyright applications and licenses set forth in Section 3.22(e) of the PCM
Disclosure Schedule.
(f) Except as set forth in Section 3.22(e)(v) or 3.22(f) of the PCM
Disclosure Schedule: (i) each patent, patent application, trademark or
service mark registration, and trademark or service mark application and
copyright registration or copyright application of PCM is valid and
subsisting and (ii) each license of PCM Intellectual Property Assets listed
on Section 3.22(e) of the PCM Disclosure Schedule is valid, subsisting and
enforceable.
(g) Except as set forth in Section 3.22(g) of the PCM Disclosure
Schedule, there is no unauthorized use, infringement or misappropriation of
any of PCM's Intellectual Property Assets by any third party, including any
employee, former employee, independent contractor or consultant of PCM.
3.23 Insurance. Except as disclosed in Section 3.23 of the PCM Disclosure
Schedule, all fire and casualty, general liability, business interruption,
product liability and sprinkler and water damage insurance policies maintained
by PCM are with reputable insurance carriers, provide coverage appropriate in
character and amount for the businesses of PCM and its properties and assets.
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3.24 Brokers, etc. None of the Stockholder, PCM, and its officers or
directors has employed any broker, finder, or financial advisor or otherwise
incurred any liability for any brokerage fees, commissions or financial
advisors' or finders' fees in connection with the transactions contemplated
hereby.
4. Representations and Warranties of Parent and PCM Merger Sub. Parent and PCM
Merger Sub hereby, jointly and severally, represent and warrant to PCM and the
Stockholder as follows:
4.1 Organization and Good Standing. Each of Parent and PCM Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
4.2 Articles of Incorporation and By-laws. Parent has heretofore made
available to PCM a complete and correct copy of its Certificate of Incorporation
and By-laws as amended to date (the "Parent Charter Documents"). Such Parent
Charter Documents are in full force and effect. Parent is not in violation of
any of the provisions of its Articles of Incorporation or By-laws or equivalent
organizational documents, except for violations of the documents which do not
and are not reasonably likely to materially interfere with the operations of
such entity.
4.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of Parent
consists of 40,000,000 shares of Common Stock, par value $.001 per share
("Parent Common Stock"), and 10,000,000 shares of Preferred Stock, par
value $.001 per share ("Preferred Stock"). As of December 17, 2001,
12,482,056 shares of Parent Common Stock, all of which are validly issued,
fully paid and non-assessable, and no shares of Preferred Stock were issued
and outstanding; as of December 17, 2001, warrants to purchase 2,176,430
shares of Parent Common Stock were outstanding or approved for issuance by
Parent's Board of Directors; and as of December 17, 2001, 1,839,400 shares
of Parent Common Stock were reserved for issuance upon exercise of stock
options issued under Parent's stock option plans. No material change in
such capitalization has occurred since such dates, respectively, other than
as a result of the exercise of options or warrants outstanding as of such
dates. Except as set forth in Section 4.3(a) of the Parent Disclosure
Schedule or the Parent SEC Reports or as contemplated by this Agreement,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character binding on Parent or any of its subsidiaries
relating to the issued or unissued capital stock of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue or
sell any shares of capital stock of, or other equity interests in, Parent
or any of its subsidiaries. Except as set forth in Section 4.3(a) of the
Parent Disclosure Schedule, all of the outstanding shares of capital stock
(other than directors' qualifying shares) of each of Parent's subsidiaries
is duly authorized, validly issued, fully paid and nonassessable, and all
such shares (other than directors' qualifying shares and a de minimis
number of shares owned by employees of such subsidiaries) are owned by
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Parent or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever. The authorized
capital stock of PCM Merger Sub consists of 1,000 shares of common stock,
par value $0.001 per share, all of which are duly authorized, and of which
100 shares are issued. All such issued shares are validly issued, fully
paid and non-assessable and free of any preemptive rights in respect
thereof and all of the outstanding shares of which are owned by Parent.
(b) The shares of Parent Common Stock to be issued pursuant to the PCM
Merger will be duly authorized, validly issued, fully paid, and
nonassessable, and shall be subject to registration according to the terms
and conditions of the Registration Rights Agreement.
4.4 Authorization; Binding Agreement. Each of Parent and PCM Merger Sub has
all necessary corporate power and authority to execute and deliver this
Agreement (and, in the case of Parent, the Registration Rights Agreements) and
to consummate the transactions contemplated hereby and thereby, as applicable.
The execution and delivery of this Agreement (and, in the case of Parent, the
Registration Rights Agreements), and the consummation by Parent and PCM Merger
Sub of the transactions contemplated hereby and thereby, as applicable
(including the Merger), have been duly and validly authorized by the Boards of
Directors of Parent and PCM Merger Sub, as applicable, and no other corporate
proceedings on the part of Parent or PCM Merger Sub are necessary to authorize
the execution and delivery of this Agreement (and, in the case of Parent, the
Registration Rights Agreements) or to consummate the transactions contemplated
hereby and thereby, as applicable. This Agreement (and, in the case of Parent,
the Registration Rights Agreements) have been duly and validly executed and
delivered by Parent and PCM Merger Sub and, assuming due authorization,
execution, and delivery by PCM and the Stockholders, constitute the legal, valid
and binding obligations of Parent and PCM Merger Sub, as applicable, enforceable
against Parent and PCM Merger Sub, as applicable, in accordance with its terms.
The Registration Rights Agreements have been duly and validly executed and
delivered by Parent and, assuming due authorization, execution, and delivery by
PCM and the Stockholders, constitute the legal, valid and binding obligations of
Parent enforceable against Parent in accordance with its terms.
4.5 Governmental Approvals. No Consent from or with any Governmental
Authority on the part of Parent or PCM Merger Sub is required in connection with
the execution or delivery by Parent and PCM Merger Sub of this Agreement or the
consummation by Parent and PCM Merger Sub of the transactions contemplated
hereby other than such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and the filing and recordation of
appropriate merger or other documents as required by the FBCA; provided,
however, that no representation or warranty is made under this Section 4.5 as to
the requirement to make any filing pursuant to the pre-merger notification
requirements of the HSR Act.
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4.6 No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and compliance by Parent
and PCM Merger Sub with any of the provisions hereof will not (i) conflict with
or result in any breach of any provision of the Certificate of Incorporation or
By-laws or other governing instruments of Parent or PCM Merger Sub, (ii) require
any Consent under or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of, any material note, bond, mortgage, indenture, contract, lease,
license, agreement or instrument to which Parent or PCM Merger Sub is a party or
by which Parent or PCM Merger Sub or any of their respective assets or
properties are subject, (iii) result in the creation or imposition of any
material lien or encumbrance of any kind upon any of the assets of Parent or PCM
Merger Sub, other than liens or encumbrances granted in connection with the
proposed financing of the transactions contemplated hereby and by the NSI Merger
Agreement and the concurrent refinancing of existing senior debt of Parent and
its subsidiaries, or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in Section 4.5, violate any Law to which Parent or PCM
Merger Sub or their respective assets or properties are subject, except in any
such case for any such conflicts, violations, breaches, defaults or other
occurrences that would not prevent or delay consummation of the transactions
contemplated hereunder, or otherwise materially and adversely affect the ability
of Parent or PCM Merger Sub to perform their respective obligations under this
Agreement.
4.7 Brokers, etc. None of Parent, PCM Merger Sub or their respective
officers or directors has employed any broker, finder, or financial advisor or
otherwise incurred any liability for any brokerage fees, commissions or
financial advisors' or finders' fees in connection with the transactions
contemplated hereby.
4.8 Insolvency. Neither Parent nor PCM Merger Sub is insolvent, and as of
the Effective Date neither Parent nor PCM Merger Sub will, by virtue of
consummation of the transactions contemplated by this Agreement or otherwise, be
or be rendered insolvent, as such term is defined under bankruptcy law
(including Title 11 of the United States Code) or the fraudulent conveyances
statutes or laws of any of the jurisdictions in which Parent or PCM Merger Sub
does business or in which either of their respective assets are located.
4.9 Restriction on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon Parent or PCM Merger Sub that has or
would reasonably be expected to have the effect of prohibiting or impairing the
conduct of the Business following the Effective Date.
4.10 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed with the SEC since January 1, 2000 through the date of this Agreement
(collectively, the "SEC Reports"). The SEC Reports (i) were prepared in all
material respects in accordance with the requirements of the Securities Act
of 1933, as amended, or the Exchange Act of 1934, as amended, as the case
may be, and (ii) did not at the time they were filed (or if amended
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or superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the SEC Reports has been
prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or in
the SEC Reports), and each fairly presents in all material respects the
consolidated financial position of Parent and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
(c) Except as set forth on Section 4.10(c)of the Parent Disclosure
Schedule (and any supplements thereto), since the date of the financial
statements contained in the last SEC Report filed by Parent there has been
no event or occurrence relating to Parent or any of its subsidiaries which,
in the reasonable judgment of Parent will be required to be disclosed in an
SEC Report or which would have a Material Adverse Effect on Parent and
which has not been disclosed to PCM and the Stockholder either in a
Schedule to this Agreement (including supplements thereto) or in an SEC
Report.
4.11 No Prior Activities. Except for (a) obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby
(including any financing in connection therewith) and (b) obligations or
liabilities pursuant to the Agreement and Plan of Merger, dated August 29, 2000,
among Parent, PCM Merger Sub, PCM and the Stockholder (which agreement was
subsequently terminated by the parties thereto), PCM Merger Sub has not incurred
any obligations or liabilities and has not engaged in any business or activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any person or entity.
5. Covenants of PCM and the Stockholder. PCM and the Stockholder, jointly and
severally, hereby covenant and agree as follows:
5.1 Access to Information. Upon reasonable notice and subject to
restrictions contained in confidentiality agreements to which PCM is subject
(from which it shall use reasonable efforts to be released), PCM shall furnish
promptly to Parent all information concerning its business, properties and
personnel as Parent may reasonably request, and it shall make available to
Parent the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of PCM's business, properties and personnel as
Parent may reasonably request; provided that prior to the Effective Time, (i)
Parent shall maintain the confidentiality of any and all information obtained in
accordance with the [Confidentiality Agreement dated January 14, 2000], and (ii)
in any event, all such activities shall be undertaken in a manner reasonably
acceptable to PCM so as not to interfere with the normal course operations of
the Business.
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5.2 Conduct of Business by PCM Pending the Effective Time. PCM covenants
and agrees that, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, unless Parent shall otherwise agree in writing, PCM shall
conduct the Business only in, and PCM shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
PCM shall use commercially reasonable efforts to preserve substantially intact
the business organization of PCM, to keep available the services of the present
officers, employees and consultants of PCM and to preserve the present
relationships of PCM with customers, suppliers and other persons with which PCM
has significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, PCM shall not, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, and except as set forth in Section 5.2
of the PCM Disclosure Schedule, directly or indirectly do, or propose to do, any
of the following without the prior written consent of Parent, which in the case
of clauses (c), (d)(iv), (e), (f), (h) or (i) will not be unreasonably withheld
or delayed:
(a) amend or otherwise change PCM's Articles of Incorporation or
By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including, without limitation, any
phantom interest) in PCM; provided, however, that to allow PCM and Pironti
to fulfill their obligations to the Permitted Transferees under the
Restated Disposition Participation Agreements, dated as of May 15, 1997,
with each Permitted Transferee, Pironti may transfer 10% of his Shares to
each Permitted Transferee or PCM may issue to each Permitted Transferee 10%
of the issued and outstanding PCM Common Stock; provided, further, that PCM
shall withhold and pay over to the applicable taxing authority all amounts
required to be withheld and shall pay all Taxes required to be paid in
connection with such transfer;
(c) sell, pledge, dispose of or encumber any assets of PCM (except for
(i) sales of assets in the ordinary course of business and in a manner
consistent with past practice, (ii) dispositions of obsolete or worthless
assets, and (iii) sales of immaterial assets to non-Affiliates of PCM not
in excess of $100,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock other than (x) dividends or
other distributions paid out of available cash of PCM after giving effect
to reserves for accrued and unpaid Taxes as contemplated by Section
3.20(a), or (y) in respect of the Dividend Notes, and (z) in respect of the
Dividends Payable, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock, (iii) except as required by the terms of any security as in effect
on the date hereof and set forth in Section 5.2(d) of the PCM Disclosure
Schedule, amend
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the terms or change the period of exercisability of, purchase, repurchase,
redeem or otherwise acquire, or permit any subsidiary to amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, any of its securities including shares of PCM Common
Stock, or any option, warrant or right, directly or indirectly, to acquire
any such securities, or propose to do any of the foregoing, or (iv) settle,
pay or discharge any claim, suit or other action brought or threatened
against PCM with respect to or arising out of a shareholder equity interest
in PCM;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof other than those listed on Section 5.2(e) of the PCM
Disclosure Schedule; (ii) incur any indebtedness for borrowed money, or
issue any debt securities or assume, guarantee or endorse or otherwise as
an accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business
consistent with past practice and in an aggregate amount not to exceed
$20,000 and except for indebtedness permitted pursuant to clause (v) below;
(iii) authorize any capital expenditures or purchases of fixed assets which
are, in the aggregate, in excess of $25,000; (iv) enter into or materially
amend any contract, agreement, commitment or arrangement to effect any of
the matters prohibited by this Section 5.2(e); or (v) permit aggregate
outstanding indebtedness of NSI and PCM to Pironti at any time to exceed
$1,500,000 and the Dividend Note Amount and Dividends Payable or aggregate
outstanding indebtedness of NSI and PCM to banks and other financial
institutions at any time to exceed $3,000,000;
(f) increase the compensation or severance payable or to become
payable to its directors, officers or employees, except for increases in
salary or wages of employees of PCM (who are not directors or executive
officers of PCM) in accordance with past practices and except for any
amounts payable to the Pironti or the Permitted Transferees, or grant any
severance or termination pay (except to make payments required to be made
under obligations existing on the date hereof in accordance with the terms
of such obligations) to, or enter into any employment or severance
agreement, with any new employee of PCM, except for an agreement entered
into in the ordinary course of business and providing for annual base and
bonus compensation not to exceed $100,000, or establish, adopt, enter into
or amend any collective bargaining agreement, PCM Employee Plan, trust,
fund, policy or arrangement for the benefit of any current or former
directors, officers or employees or any of their beneficiaries, except, in
each case, as may be required by law or as would not result in a material
increase in the cost of maintaining such collective bargaining agreement,
PCM Employee Plan, trust, fund, policy or arrangement;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except as required by a change in GAAP occurring after the
date hereof;
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(h) make any new election or change any current election with respect
to Taxes or settle or compromise any United States federal, state, local or
non-United States tax liability;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $10,000 in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in PCM's financial
statements prior to the date of this Agreement or incurred in the ordinary
course of business and consistent with past practice;
(j) permit any accounts payable to remain unpaid for more than thirty
days past the date on which such accounts payable are due under PCM's
standard accounts payable payment practices with the applicable account
creditors; and
(k) take, or agree in writing or otherwise to take, any of the actions
described in clauses (a) through (j) above, or any action which would make
any of the representations or warranties of PCM contained in this Agreement
untrue or incorrect or prevent PCM from performing or cause PCM not to
perform its covenants hereunder.
5.3 Notification of Certain Matters. Between the date hereof and the
Effective Time PCM shall give prompt written notice to Parent, and Parent shall
give prompt written notice to PCM, of (i) the occurrence or nonoccurrence
subsequent to the date hereof of any event the occurrence or nonoccurrence of
which would reasonably be expected to cause any representation or warranty of
such party contained in this Agreement to be materially untrue or inaccurate,
(ii) any failure of (A) PCM or the Stockholder or (B) Parent or PCM Merger Sub,
as the case may be, materially to comply with or satisfy, or the occurrence or
nonoccurrence of any event, the occurrence or nonoccurrence of which would
reasonably be expected to cause the failure by such party materially to comply
with or satisfy, any covenant, condition or agreement to be complied with or
satisfied by it hereunder. Should any of the foregoing facts or conditions
described in this Section 5.3 require any change in the PCM Disclosure Schedule
or Parent Disclosure Schedule if such Disclosure Schedule were dated the date of
the occurrence or discovery of any such fact or condition, PCM and the
Stockholder shall promptly deliver to Parent, or Parent shall promptly deliver
to PCM and the Stockholder, a supplement to the applicable Disclosure Schedule
specifying such change and stating specifically which of the representations
contained herein and which section of such Disclosure Schedule such change
relates to. If the PCM Merger occurs, then any such changes disclosed in writing
in accordance with this Section 5.3 shall be deemed not to constitute a breach
of the stated representation for purposes of the indemnification provisions of
Section 9.1 or 9.2, as the case may be.
5.4 No Solicitation.
(a) PCM shall not, directly or indirectly, through any officer,
director, employee, representative or agent of PCM, solicit or encourage
the initiation of (including by way of furnishing information) any
inquiries or proposals regarding any merger, sale of assets,
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sale of shares of capital stock (including without limitation by way of a
tender offer) or similar transactions involving PCM.
(b) PCM shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent
and PCM Merger Sub) conducted heretofore with respect to any of the
foregoing. PCM agrees not to release any third party from the
confidentiality and standstill provisions of any agreement to which PCM is
a party.
(c) PCM shall ensure that the officers and directors of PCM and any
investment banker or other advisor or representative retained by PCM are
aware of the restrictions described in this Section 5.4.
5.5 Reasonable Best Efforts. Subject to and upon the terms and conditions
of this Agreement, during the period from the date hereof to the Effective Time,
PCM and the Stockholder shall use their reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things proper, necessary or advisable under applicable law and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, the obtaining of governmental and third party
consents. The Parties will provide to each other the necessary information to
effect the foregoing.
5.6 Non-competition.
(a) In addition to the other definitions set forth in this Agreement,
for purposes of this Section 5.6, the following terms shall have the
following meanings:
"Competitive Activity" means any activity (whether undertaken or
engaged in as a proprietor, partner, shareholder, owner, member,
employer, employee, independent contractor, venturer or otherwise)
which engages in the business of buying so-called "filler space" from
USA Weekend or Parade magazine generally as described in NSI's
contracts with such companies.
"Competitor" means any Person, other than a member of Parent
Company Group, which at any time during the Restriction Period engages
in any Competitive Activity.
"Control" means, with respect to any Person, (i) the beneficial
ownership of more than 50% of the outstanding voting securities of
such Person or (ii) the power, directly or indirectly, by proxy,
voting trust or otherwise, to elect a majority of the outstanding
directors, trustees or other managing persons of such Person.
"Parent Company Group" means Parent, each Person that Parent
directly or indirectly Controls or that Controls Parent and each
Person that any such Person directly or indirectly Controls.
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"Person" means an individual, partnership, corporation, trust,
estate, association, limited liability company, governmental authority
or other entity.
"Personnel" means any and all employees, contractors, agents,
consultants or other Persons rendering services to a member of the
Parent Company Group, for compensation in any form.
"Restricted Area" means the United States, Canada, and their
respective territories and possessions, except that the Restricted
Area shall be worldwide with respect to any Competitive Activity
involving the Internet, the World Wide Web, telemarketing, telephony
or other electronic or similar media.
"Restriction Period" means the period of time (subject to
extension pursuant to Section 5.6(e) below), commencing on the
Effective Date and expiring on the earlier of (x) the fifth
anniversary of the Effective Date or (y) the second anniversary of the
termination of Pironti's employment.
(b) During the Restriction Period, Pironti shall not, directly or
indirectly, whether as a sole practitioner, owner, partner, shareholder,
investor, employee, employer, venturer, independent contractor, consultant
or other participant, (i) own, manage, invest in or acquire any economic
stake or interest in any Person involved in a Competitive Activity, (ii)
derive economic benefit from or with respect to any Competitive Activity or
(iii) otherwise engage or participate in any manner whatsoever in any
Competitive Activity; provided, however, this Section 5.6 shall not
restrict Pironti from owning less than 2% of the publicly traded debt or
equity securities issued by a corporation or other entity or from having
any other passive investment that creates no conflict of loyalty or
interest with any duty owed to Parent Company Group. Pironti shall be
deemed to have derived economic benefit in violation of this Section 5.6
if, among other things, any of his compensation or income is in any way
related to any Competitive Activity conducted by any Person. Further,
during the Restriction Period, Pironti shall not directly or indirectly
advance, cooperate in or help or aid any Competitor in the conduct of any
Competitive Activity.
(c) During the Restriction Period, Pironti shall not, directly or
indirectly, recruit, solicit or otherwise induce or influence any Personnel
of Parent Company Group to discontinue, reduce the extent of, discourage
the development of or otherwise harm such Personnel's relationship or
commitment to Parent Company Group. Conduct prohibited under this Section
5.6(c) shall include, without limitation, employing, seeking to employ or
causing, aiding, inducing or influencing a Competitor to employ or seek to
employ any Personnel of Parent Company Group.
(d) Each of the parties acknowledges that the provisions and
restrictions of this Section 5.6 are reasonable and necessary for the
protection of the legitimate interests of the Parent Company Group. Each of
the parties further acknowledges that the provisions and restrictions of
this Section 5.6 are unique and that any breach or threatened breach of any
of such provisions or restrictions will provide the Parent
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Company Group with no adequate remedy at law, and the result will be
irreparable harm to the Parent Company Group. Therefore, the parties hereto
agree that upon a breach or threatened breach of the provisions or
restrictions of this Section 5.6, the Parent Company Group shall be
entitled, in addition to any other rights and remedies which may be
available to it, to institute and maintain proceedings at law or in equity,
to recover damages, to obtain an equitable accounting of all earnings,
profits or other benefits resulting from such breach or threatened breach
and to obtain specific performance or a temporary and permanent injunction.
(e) If Pironti violates any restrictive covenant contained herein and
a member of the Parent Company Group institutes action for equitable
relief, such member, as a result of the time involved in obtaining such
relief, shall not be deprived of the benefit of the full Restriction
Period. Accordingly, the Restriction Period shall be deemed to have the
duration specified in Section 5.6(a), computed from and commencing on the
date on which relief is granted by a final order from which there is no
appeal, but reduced, if applicable, by the length of time between the date
the Restriction Period commenced and the date of the first violation of any
restrictive covenant by Pironti.
(f) Each of the provisions hereof including, without limitation, the
periods of time, geographic areas and types and scopes of duties of, and
restrictions on the activities of, the parties hereto specified herein are
and are intended to be divisible, and if any portion thereof (including any
sentence, clause or word) shall be held contrary to law or invalid or
unenforceable in any respect in any jurisdiction, or as to one or more
periods of time, areas or business activities or any part thereof, the
remaining provisions shall not be affected but shall remain in full force
and effect, and any such invalid or unenforceable provision shall be
deemed, without further action on the part of any party hereto or other
Person, modified and amended to the minimum extent necessary to render the
same valid and enforceable in such jurisdiction.
(g) Pironti acknowledges and agrees that (i) compliance with the
restrictive covenants set forth herein would not prevent him from earning a
living that involves his training and skills without relocating, but only
from engaging in unfair competition with, misappropriating a corporate
opportunity of, or otherwise unfairly harming the Parent Company Group and
(ii) the restrictive covenants set forth herein are intended to provide a
minimum level of protection necessary to protect the legitimate interests
of the Parent Company Group. In addition, the parties acknowledge that
nothing herein is intended to or shall, limit, replace or otherwise affect
any other rights or remedies at law or in equity for protection against
unfair competition with, misappropriation of corporate opportunities of, or
defamation of the Parent Company Group, or for protection of any other
rights or interest of the Parent Company Group.
6. Mutual Covenants. Each of the Parties hereby covenants and agrees, as to
itself or himself, as follows:
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6.1 Consents; Approvals. PCM and Parent shall each use their good faith
efforts to obtain all consents, waivers, approvals, authorizations or orders
(including, without limitation, all governmental and regulatory rulings and
approvals), and PCM and Parent shall make all filings (including, without
limitation, all filings with governmental or regulatory agencies) required in
connection with the authorization, execution and delivery of this Agreement by
PCM and Parent and the consummation by them of the transactions contemplated
hereby (including, as to PCM, the consents of the Consentors to the Merger).
6.2 Expenses. Except as set forth in Section 6.4, each Party shall pay all
costs and expenses incurred by such Party in connection with the transactions
contemplated by this Agreement, whether or not the transactions contemplated
hereby are consummated (provided that Pironti shall pay the expenses of PCM if
such transactions are consummated).
6.3 Public Announcements. The Parties shall consult with each other before
issuing any press release or making any written public statement or filing with
respect to the PCM Merger or this Agreement and shall not issue any such press
release or make any such public statement or filing without the prior consent of
the other Parties, which shall not be unreasonably withheld; provided, however,
that each Party may, without the prior consent of any other, issue such press
release or make such public statement or filing as may upon the advice of
counsel be required by law, but only after providing the other Parties with
notice of such intent promptly upon reaching the conclusion that any such
release, statement, or filing is required.
6.4 Conveyance Taxes, etc.. All Taxes (other than income or similar
Shareholder Taxes), and all recording, registration, or other fees which become
payable in connection with the transactions contemplated hereby shall be paid
one half by Parent and one half by the Stockholder. Parent, the PCM Surviving
Corporation, and Pironti shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications, or other documents
regarding any such Taxes or fees.
6.5 Taxes and Cooperation on Tax Matters.
(a) Parent shall permit Pironti to cause the PCM Surviving Corporation
to prepare and timely file all Tax Returns and amendments thereto required
to be filed by or for PCM for all taxable periods ending on or before the
Effective Date. Parent shall be given a reasonable opportunity to review
and comment upon such Tax Returns and amendments thereto. Parent shall
cause the PCM Surviving Corporation to file, and shall control, any Tax
Returns required to be filed by PCM Surviving Corporation for taxable
periods ending after the Effective Date. Parent shall not, without the
prior written consent of Pironti, which consent shall not be unreasonably
withheld or delayed, amend any income Tax Return of PCM for any taxable
period ending on or before the Effective Date.
(b) The Stockholder shall be liable for all Shareholder Taxes of PCM
for any taxable year or taxable period ending on or prior to the Effective
Date or which includes the Effective Date. For the purposes hereof,
"Shareholder Taxes" means (i) any federal, state, local or foreign income,
franchise, capital stock, net worth, capital, profits or
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similar Tax (including, the Tax imposed by Section 1374 of the Code or any
corresponding or similar provision of state, local or foreign Tax law) or
assessment or deficiency with respect thereto (including all interest and
penalties thereon and additional thereto) and (ii) any Taxes required to be
paid or withheld in connection with the transfer or issuance of shares to
the Permitted Transferees pursuant to Section 5.2 hereof.
(c) The Stockholder shall (i) duly include in his federal and state
income tax returns all items of income, gain, loss, deduction, or credit
attributable to the S Short Year (as hereinafter defined) in a manner
consistent with Federal Tax Form 1120S and the schedules thereto (and the
corresponding state income tax forms and schedules) to be filed by him with
respect to such period; and (ii) pay any and all Shareholder Taxes required
to be paid for all taxable years, including the taxable year that includes
the S Short Year, that are attributable to him. For purposes of this
provision, the "S Short Year" means the S Corporation tax year of PCM that
ends on the Effective Date as a result of the Merger.
(d) The Stockholder and Parent shall provide each other with such
cooperation and information as any of them may reasonably request in
connection with tax matters, including the preparation of tax returns, tax
audits, and litigation. The requesting party shall reimburse the other
party for all direct out-of-pocket expenses incurred by such other party.
6.6 Further Action. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall use all commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and otherwise to satisfy or
cause to be satisfied all conditions precedent to the obligations of the other
Party under this Agreement. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the PCM Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
PCM and PCM Merger Sub, the officers and directors of PCM and PCM Merger Sub
immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action. Nothing contained in this Agreement shall require
Parent to divest, abandon, or take similar action with respect to any assets
(tangible or intangible) of Parent, PCM, or any of Parent's subsidiaries.
6.7 Purchase Note Letter of Credit. Notwithstanding anything contained
herein to the contrary, the parties hereto acknowledge that, at the Closing, the
Purchase Note Letter of Credit may only be in the face amount of $1 million,
i.e. less than the principal amounts of the Purchase Note and the Negotiable
Purchase Note. In recognition thereof, the parties have agreed to the following:
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(a) Completion of Letter of Credit. Following the Closing, Parent
shall seek to increase the face amount of the Purchase Note Letter of
Credit to the full aggregate principal amounts of the Purchase Note and the
Negotiable Purchase Note (such aggregate amounts being the "Full Note
Amount").
(i) If for any reason the face amount of the Purchase Note Letter
of Credit shall not have been increased to the Full Note Amount on or
before the three month anniversary of the Effective Date, Parent shall
pay and deliver to the Stockholder 50,000 Parent Shares, which Shares
shall immediately and thereupon become subject to the Registration
Rights Agreement.
(ii) If for any reason the face amount of the Purchase Note
Letter of Credit shall not have been increased to the Full Note Amount
on or before the 6 month anniversary of the Effective Date, Parent
shall pay and deliver to the Stockholder $450,000 in cash.
(iii) If for any reason (x) the face amount of the Purchase Note
Letter of Credit shall not have been increased to the Full Note Amount
on or before one day after the 6 month anniversary of the Effective
Date or (y) Parent shall have failed to satisfy its obligations under
subsections (i) or (ii) above, the holders of the Purchase Note and of
the Negotiable Purchase Note, those having the Stockholder JV
Entitlements under the NSI Merger Agreement and Pironti shall have the
Acceleration Rights set forth in subsection (c) below without the
requirement for any further notices or passage of time.
(b) Effect of Default prior to Delivery of Letter of Credit. If prior
to the delivery of a Purchase Note Letter of Credit having a face amount
equal to the Full Note Amount there shall occur an Event of Default under
either the Purchase Note or the Negotiable Purchase Note, the holders of
the Purchase Note and of the Negotiable Purchase Note, those having the
Stockholder JV Entitlements under the NSI Merger Agreement and Pironti
shall have the Acceleration Rights set forth in subsection (c) below
without the requirement for any further notices or passage of time.
(c) Acceleration Rights. The "Acceleration Rights" shall be the
following:
(i) An Event of Default shall be deemed to have occurred under
the Purchase Note and the Negotiable Purchase Note, and the holders
thereof shall have the rights thereunder set forth in Section 3
thereof;
(ii) Those having the Stockholder JV Entitlements under the NSI
Merger Agreement shall have the rights of acceleration thereto set
forth in Section 2.9 (d)(i) of the NSI Merger Agreement; and
(iii) Good Reason shall be deemed to have occurred under Section
5(d) of the Pironti Employment Agreement and Pironti shall have the
right to terminate the Pironti Employment Agreement in accordance with
Section 4(f) thereof. If
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Pironti terminates the Pironti Employment Agreement by reason hereof,
the Non-competition provisions of Section 5.6 hereof and Section 5.6
of the NSI Merger Agreement shall immediately terminate and be of no
further force and effect; and there shall be no further restrictions
on Pironti's activities by reason thereof or otherwise.
7. Conditions to the Merger.
7.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the PCM Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Governmental Actions. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation or
other inquiry that is reasonably likely to result in such an action or
proceeding) by any governmental authority or administrative agency before
any governmental authority, administrative agency or court of competent
jurisdiction that is reasonably likely to result in an order, nor shall
there be in effect any judgment, decree or order of any governmental
authority, administrative agency or court of competent jurisdiction, or any
other legal restraint, (i) preventing or seeking to prevent consummation of
the Merger, (ii) prohibiting or seeking to prohibit or limiting or seeking
to limit, Parent from exercising all material rights and privileges
pertaining to its ownership of the PCM Surviving Corporation or the
ownership or operation by Parent or any of its subsidiaries of all or a
material portion of the business or assets of the PCM Surviving
Corporation, or (iii) compelling or seeking to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of Parent or any of its subsidiaries (including the
PCM Surviving Corporation or any of its subsidiaries), as a result of the
PCM Merger or the transactions contemplated by this Agreement.
(b) Illegality. No statute, rule, regulation or order shall be
enacted, entered, enforced or deemed applicable to the PCM Merger which
makes the consummation of the PCM Merger illegal.
(c) NSI Merger. The NSI Merger shall have occurred simultaneously with
the PCM Merger.
7.2 Additional Conditions to Obligations of Parent and PCM Merger Sub. The
obligations of Parent and PCM Merger Sub to effect the PCM Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of PCM and the Stockholder contained in this Agreement shall have been true
and correct in all material respects individually and in the aggregate
(without for this purpose giving effect to qualifications of materiality
contained in such representations and warranties and without giving effect
to matters disclosed on any supplements to the PCM Disclosure Schedule)
when made and shall be true and correct in all material respects
individually
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and in the aggregate (without for this purpose giving effect to
qualifications of materiality contained in such representations and
warranties and without giving effect to matters disclosed on any
supplements to the PCM Disclosure Schedule) on and as of the Effective
Time, with the same force and effect as if made on and as of the Effective
Time, except for (i) changes contemplated by this Agreement and (ii) those
representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date),
and Parent and PCM Merger Sub shall have received a certificate of PCM to
such effect signed by the Chief Executive Officer or Chief Financial
Officer of PCM and the Stockholder.
(b) Agreements and Covenants. PCM and the Stockholder shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and Parent and PCM Merger Sub shall
have received a certificate to such effect signed by the Chief Executive
Officer or Chief Financial Officer of PCM and the Stockholder.
(c) Consents Obtained. All consents, waivers, approvals,
authorizations, or orders required to be obtained, and all filings required
to be made, by PCM for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by PCM, including the consent of
the Consentors to the PCM Merger and to all of the other foregoing actions,
except where the failure to receive such consents, waivers, approvals,
authorizations or orders would not reasonably be expected, individually or
in the aggregate with all other such failures, to have a Material Adverse
Effect on PCM or the PCM Surviving Corporation; and Parent and PCM Merger
Sub shall have received a certificate to such effect signed by the Chief
Executive Officer or Chief Financial Officer of PCM with signed originals
of all such consents, waivers, approvals, authorizations, orders, and
filings attached as exhibits to such certificate. For purposes of this
Section 7.2(c): (i) the failure to receive such consents from either of the
Consentors shall be deemed to have a Material Adverse Effect on PCM and PCM
Surviving Corporation and (ii) any consent that is conditioned on any
material change in the terms of the agreement to which it relates is deemed
to be a failure to consent unless Parent expressly agrees in writing to
such change.
(d) Secretary's Certificate. PCM shall have delivered to Parent a
certificate of the Secretary or an Assistant Secretary of PCM, dated as of
the Effective Date and in the form of Exhibit G, certifying: (i) that the
necessary corporate action by the Board of Directors and stockholders of
PCM has been taken to authorize the execution and delivery of this
Agreement by PCM, the performance by PCM of its obligations under this
Agreement and the consummation by PCM of the transactions contemplated by
this Agreement (with copies of all such resolutions attached as exhibits
thereto); (ii) that the Articles of Incorporation and By-laws of PCM
attached to the Secretary's certificate are true, complete, and correct and
are in full force and effect as of the Effective Date; and (iii) as to the
incumbency and specimen signature of the officers of PCM executing this
Agreement and other documents to be executed on behalf of PCM in connection
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therewith, together with a certification by another officer of PCM as to
the incumbency and specimen signature of the Secretary or Assistant
Secretary signing such certificate.
(e) Pironti Indebtedness. Pironti shall have taken such action as is
satisfactory to Parent, in its reasonable judgment, to contribute all
indebtedness owing to Pironti by NSI or PCM, as of the Effective Time
(other than (i) in respect of the Pironti Loan Amount, (ii) the Dividend
Notes, (iii) the Dividends Payable, and (iv) amounts that are deducted in
arriving at 2001 EBITDA) to the applicable obligor, including without
limitation, the surrender of all promissory notes or other evidences of any
such indebtedness to the applicable obligor for cancellation.
(f) Releases. Pironti and each of the Permitted Transferees shall have
executed and delivered to PCM a release in the form of Exhibit H releasing
all claims of Pironti or such Transferee, as the case may be, against PCM
and the PCM Surviving Corporation other than claims arising under this
Agreement.
(g) No Material Adverse Changes. No Material Adverse Effect shall have
occurred with respect to PCM following the date hereof.
(h) Completion of Fleet Financing. The Fleet Financing shall have been
completed.
7.3 Additional Conditions to Obligation of PCM and Pironti. The obligation
of PCM and Pironti to effect the PCM Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and PCM Merger Sub contained in this Agreement shall have been
true and correct in all material respects individually and in the aggregate
(without for this purpose giving effect to qualifications of materiality
contained in such representations and warranties and without giving effect
to matters disclosed on any supplements to the Parent Disclosure Schedule)
when made and shall be true and correct in all material respects
individually and in the aggregate (without for this purpose giving effect
to qualifications of materiality contained in such representations and
warranties and without giving effect to matters disclosed on any
supplements to the Parent Disclosure Schedule) on and as of the Effective
Time, with the same force and effect as if made on and as of the Effective
Time, except for (i) changes contemplated by this Agreement and (ii) those
representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date),
and PCM and the Stockholder shall have received a certificate to such
effect signed by the President or Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and PCM Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and PCM and the Stockholder shall
have received a certificate to such effect signed by the President or Chief
Financial Officer of Parent.
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(c) Consents Obtained. All material consents, waivers, approvals,
authorizations, or orders required to be obtained, and all filings required
to be made, by Parent or PCM Merger Sub for the authorization, execution
and delivery of this Agreement and the consummation by them of the
transactions contemplated hereby shall have been obtained and made by
Parent or PCM Merger Sub, except where the failure to receive such
consents, waivers, approvals, authorizations or orders would not reasonably
be expected, individually or in the aggregate with all other such failures,
to have a Material Adverse Effect on Parent or PCM Merger Sub; and PCM and
the Stockholder shall have received a certificate of Parent to such effect
signed by the President or Chief Financial Officer of Parent with signed
originals of all such consents, waivers, approvals, authorizations, orders,
and filings attached as exhibits to such certificate.
(d) Employment Agreements. NSI shall have executed the Employment
Agreements with respect to each of Pironti and the Permitted Transferees.
(e) Registration Rights Agreement. Parent, Pironti, and (if Pironti
has transferred Shares to the Permitted Transferees pursuant to Section
5.2(b)) the Permitted Transferees shall have entered into the Registration
Rights Agreements.
(f) No Material Adverse Changes. No Material Adverse Effect shall have
occurred with respect to Parent and its subsidiaries taken as a whole.
(g) Payments at Closing. Parent Parties shall have paid in full, by
wire transfer of immediately available funds to (A) Pironti's Bank Account
the Pironti Loan Amount and (B) the Stockholder's Bank Account the sum of
(i) the amount of Overage, (ii) the Dividends Payable and (iii) the
Dividend Note Amount. Notwithstanding the foregoing, the Cash Portion shall
not exceed $9 million; and the extent to which the Cash Portion would
otherwise exceed $9 million shall be a reduction to the amount of the cash
payment hereunder and shall instead by paid by execution and delivery of
the Negotiable Purchase Note in the amount of such excess.
(h) Release of Guaranty. Pironti's personal guaranty in respect of the
indebtedness of NSI and PCM to Fleet National Bank shall have been
released.
8. Termination.
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, notwithstanding approval thereof by the Stockholder:
(a) by mutual written consent of the Parties;
(b) by either Parent or PCM if the PCM Merger and NSI Merger shall not
have been consummated by the Merger Deadline (other than for the reasons
set forth in Sections 8.1(d), 8.1(e)or 8.1(f); provided, however, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any Party whose failure to
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fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the PCM Merger to be consummated on or prior to
such date;
(c) by either Parent or PCM if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger;
(d) by (i) Parent or (ii) PCM, if any representation or warranty of
PCM or the Stockholder, or Parent and PCM Merger Sub, respectively, set
forth in this Agreement shall have been untrue when made, such that the
conditions set forth in Sections 7.2(a) or 7.3(a), as the case may be,
would not be satisfied (a "Terminating Misrepresentation"); provided, that,
if such Terminating Misrepresentation is curable through the exercise of
its commercially reasonable efforts and is cured prior to the date two (2)
days prior to the Effective Date by PCM or Parent, as the case may be,
neither Parent nor PCM, respectively, may terminate this Agreement under
this Section 8.1(d) (it being understood that if such Terminating
Misrepresentation consists of the omission of any information from a
disclosure schedule, then such Terminating Misrepresentation cannot be
cured by an amendment or supplement to such disclosure schedule unless the
other party agrees in writing to waive such Terminating Misrepresentation
for the purposes of this Section 8.1(d));
(e) by (i) Parent, if any representation or warranty of PCM or the
Stockholder shall have become untrue such that the condition set forth in
Section 7.2(a) would not be satisfied, or by (ii) PCM, if any
representation or warranty of Parent and PCM Merger Sub shall have become
untrue such that the condition set forth in Section 7.3(a), would not be
satisfied (in either case, a "Terminating Change"), in either case other
than by reason of a Terminating Breach (as hereinafter defined); provided,
that, if any such Terminating Change is curable through the exercise of its
commercially reasonable efforts and is cured prior to the date two (2) days
prior to the Effective Date by PCM or Parent, as the case may be, neither
Parent nor PCM, respectively, may terminate this Agreement under this
Section 8.1(e);
(f) by (i) Parent or (ii) PCM, upon a breach of any covenant or
agreement on the part of PCM or the Stockholder, or Parent, respectively,
set forth in this Agreement such that the conditions set forth in Sections
7.2(b) or 7.3(b), as the case may be, would not be satisfied (a
"Terminating Breach"); provided, that, except for any breach of PCM's
obligations under Section 5.4, if such Terminating Breach is curable
through the exercise of its commercially reasonable efforts and is cured
prior to the date two (2) days prior to the Effective Date by PCM or
Parent, as the case may be, neither Parent nor PCM, respectively, may
terminate this Agreement under this Section 8.1(f); or
(g) by Parent or PCM, if Parent or NSI, respectively, has the right to
terminate the NSI Merger Agreement pursuant to Section 8.1 thereof.
8.2 Effect of Termination.
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(a) In the event of the termination of this Agreement pursuant to
Section 8.1, this Agreement shall forthwith become void and there shall be
no liability on the part of any Party or any Party's affiliates, directors,
officers or shareholders, except as set forth in Section 6.2, Section
8.2(b) or Section 9.6.
(b) In the event of the termination of this Agreement by Parent or PCM
(such party, the "Terminating Party"): (i) pursuant to Section 8.1(b) if
such termination results from the failure or refusal of the other party
(the "Breaching Party") to close on or prior to the Merger Deadline under
circumstances in which the Terminating Party is not in material breach of
its representations, warranties, covenants or obligations hereunder, (ii)
pursuant to Section 8.1(d) as a result of a Terminating Misrepresentation
by the Breaching Party, (iii) pursuant to Section 8.1(e) as a result of a
Terminating Change (but only if such Terminating Change resulted from any
willful action or willful failure to take action on the part of the
Breaching Party or any Affiliate of the Breaching Party, or (iv) pursuant
to Section 8.1(f) as a result of a Terminating Breach by the Breaching
Party, then within two business days following the date of termination, the
Breaching Party shall pay the Terminating Party the sum of $400,000 as
liquidated damages, and not as a penalty, in lieu of any and all other
remedies that the Terminating Party may have against the Breaching Party;
provided, however, that the aggregate amount payable pursuant to this
Section 8.2(b) and Section 8.2(b) of the NSI Merger Agreement shall not
exceed $400,000.
9. Indemnification.
9.1 Indemnification by the Stockholder. The Stockholder shall indemnify and
hold harmless Parent, PCM Merger Sub and their respective officers, directors,
stockholders, employees, attorneys, accountants, affiliates and agents ("Parent
Indemnified Persons") from and against (and shall on demand reimburse them for)
any and all claims, demands, suits, causes of action, proceedings, judgments,
damages, losses, liabilities, royalties, costs and expenses (including, without
limitation, reasonable counsel fees and disbursements incurred in litigation or
otherwise) (any of the foregoing, a "Loss") suffered or incurred, directly or
indirectly, by any Parent Indemnified Person, with respect to, resulting from or
arising out of:
(a) Any untrue representation or warranty made by PCM or the
Stockholder in this Agreement, the PCM Disclosure Schedule, the supplements
to the PCM Disclosure Schedule or any other certificate or document
delivered by PCM or the Stockholder pursuant to this Agreement (including
certificates of officers of PCM acting in their capacities as such), or the
failure, breach or nonfulfillment of any covenant, agreement or other
obligation of PCM or the Stockholder, hereunder, or under the Exhibits
attached hereto or under the certificates and documents delivered pursuant
hereto (including certificates of officers of PCM acting in their
capacities as such); provided, that, except with respect to the matters
described in Schedule 9.1(a) hereto (as to which this proviso shall not
apply), the Stockholder shall have no obligation to indemnify any Parent
Indemnified Person with respect to any such untrue representation or
warranty if Parent had knowledge that such representation and warranty was
untrue on the Effective Date,
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and the burden of proof shall be on the Stockholder to prove that Parent
had such knowledge;
(b) Any untrue representation or warranty made by NSI or the
Stockholder in the NSI Merger Agreement, the Disclosure Schedule thereto,
the supplements to the Disclosure Schedule or any other certificate or
document delivered by NSI or the Stockholder pursuant to the NSI Merger
Agreement (including certificates of officers of NSI acting in their
capacities as such), or the failure, breach or nonfulfillment of any
covenant, agreement or other obligation of NSI, the Stockholder or the
Permitted Transferees, under the NSI Merger Agreement, or under the
Exhibits attached thereto or under the certificates and documents delivered
pursuant thereto (including certificates of officers of NSI acting in their
capacities as such), provided, that, except with respect to the matters
described in Schedule 9.1(a) thereto (as to which this proviso shall not
apply), the Stockholder shall have no obligation to indemnify any Parent
Indemnified Person with respect to any such untrue representation or
warranty if Parent had knowledge that such representation and warranty was
untrue on the Effective Date, and the burden of proof shall be on the
Stockholder to prove that Parent had such knowledge;
(c) All Losses arising out of or relating to: (i) items specifically
set forth in Schedule 9.1(c); and (ii) any obligation or liability
whatsoever as to any employee or former employee of PCM or any Affiliate
with respect to any matter arising on or prior to the Effective Time,
including unpaid compensation, pension, severance, retirement, employee
welfare or other benefits, collective state or local law designed to
protect employees, including equal employment laws, wrongful discharge laws
or other rights, except to the extent such obligation or liability is
reflected on or reserved against on the Interim Balance Sheet, incurred in
the ordinary course of PCM's business in accordance with past practice
subsequent to the date of the Interim Balance Sheet or is specifically
disclosed as an obligation or liability in this Agreement or in the PCM
Disclosure Schedule; provided, that, notwithstanding anything else to the
contrary contained in this Agreement, all obligations or liabilities
existing or arising in connection with the administration of NSI Employee
Plans prior to the Effective Time or the failure of such plans to comply
with applicable laws or regulations prior to the Effective Time ("Benefits
Issues") shall be Losses within the meaning of this clause (c);
(d) Third Party Liabilities;
(e) All Taxes for which Stockholder is responsible pursuant to
Sections 6.4, 6.5(b) and 6.5(c) hereof;
(f) All Losses arising out of or relating to matters set forth on
Schedule 9.1(f) of the PCM Disclosure Schedule (the "Scheduled Losses");
(g) All Losses arising out of a draw made by Stockholder under the
letter of credit securing the Purchase Note and the Negotiable Note that is
based upon the untrue statement or misrepresentation by Stockholder to the
Bank; and
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(h) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, reasonable legal
fees and expenses, incident to any of the foregoing referred to in clauses
(a) through (g) or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in enforcing this indemnity.
If the PCM Merger occurs, (i) the Stockholder shall have no obligation to
indemnify the Parent Indemnified Persons: (x) for the first $400,000 (the
"General Deductible") of aggregate Losses described in clauses (a), (b), (d) or
(f) of this Section 9.1 or clauses (a), (b), (d) or (f) of Section 9.1 of the
NSI Merger Agreement and Losses referred to in clause (h) of this Section 9.1 or
clause (h) of Section 9.1 of the NSI Merger Agreement incident to Losses
described in clauses (a), (b), (d) or (f) of this Section 9.1 or clauses (a),
(b), (d) or (f) of Section 9.1 of the NSI Merger Agreement, or (y) for the first
$150,000 of Losses resulting from a breach of the representation in Section
3.8(d) hereof or of the NSI Merger Agreement (and for the avoidance of doubt,
any Losses in excess of $150,000 resulting from a breach of such representation
will be subject to indemnification pursuant to clause (a) of this Section 9.1 or
clause (a) of Section 9.1 of the NSI Merger Agreement) and will be subject to
the application of the General Deductible, and (ii) the obligation of the
Stockholder with respect to Losses relating to Benefits Issues shall not exceed
an amount equal to the sum of: (x) the amount that would be reasonably required
solely to cause Employee Plans to comply with legal and regulatory requirements
applicable thereto; (y) the amount required to satisfy any liabilities arising
out of or relating to the failure of any such Employee Plan so to comply,
including any fines, penalties, liabilities to any employee participating or
denied the opportunity to participate, taxes and the like; and (z) including
reasonable fees and disbursements of counsel specifically allocable to the
resolution of the Benefits Issues.
9.2 Indemnification by Parent. Parent agrees to indemnify and hold harmless
the Stockholder, PCM, and its officers, directors, stockholder, employees,
attorneys, accountants, affiliates and agents (the "PCM Indemnified Persons")
from and against (and shall on demand reimburse them for):
(a) any and all Losses suffered or incurred, directly or indirectly,
by a PCM Indemnified Person with respect to, resulting from or arising out
of any untrue representation or warranty made by Parent, or the failure,
breach or nonfulfillment of any representation, warranty, covenant,
agreement or other obligation of Parent, hereunder, or under any other
agreement, document, certificate or instrument entered into pursuant
hereto; provided that Parent shall have no obligation to indemnify any PCM
Indemnified Person with respect to any such untrue representation or
warranty if the Stockholder had knowledge that such representation and
warranty was untrue on the Effective Date and the burden of proof shall be
on Parent to prove that such Stockholder had such knowledge; or
(b) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, reasonable legal
fees and expenses, incident to
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any of the foregoing or incurred in investigating or attempting to avoid
the same or to oppose the imposition thereof, or in enforcing this
indemnity.
9.3 Assumption of Defense. An indemnified party shall promptly give notice
to each indemnifying party after obtaining knowledge of any matter as to which
recovery may be sought against such indemnifying party because of any indemnity
set forth in this Section 9 if such indemnity shall arise from the claim of a
third party and shall permit such indemnifying party to assume the defense of
any such claim or any proceeding resulting from such claim; provided, however,
that failure promptly to give any such notice shall not affect the
indemnification provided under this Section 9, except to the extent such
indemnifying party shall have been actually prejudiced as a result of such
failure (in which event the amount of any indemnity payment required to be made
by the indemnifying party shall be reduced by the amount of any losses sustained
by such party as a result of such failure). Notwithstanding the foregoing, an
indemnifying party may not assume the defense of any such third-party claim if
it does not demonstrate to the reasonable satisfaction of the indemnified party
that it has adequate financial resources to defend such claim and pay any and
all Losses that may result therefrom, or if the claim (a) is reasonably likely
to result in imprisonment of the indemnified party or (b) is reasonably likely
to result in an equitable remedy which would materially impair the indemnified
party's ability to exercise its rights under this Agreement, or impair Parent's
right or ability to conduct the Business as it is currently conducted. If an
indemnifying party assumes the defense of such third party claim, such
indemnifying party shall agree prior thereto, in writing, that it is liable
under this Section 9 to indemnify the indemnified party in accordance with the
terms contained herein in respect of such claim, shall conduct such defense
diligently, shall have full and complete control over the conduct of such
proceeding on behalf of the indemnified party and shall, in his, her or its sole
discretion, have the right to decide all matters of procedure, strategy,
substance and settlement relating to such proceeding; provided, however, that
any counsel chosen by such indemnifying party to conduct such defense shall be
reasonably satisfactory to the indemnified party. The indemnified party may
participate in such proceeding and retain separate co-counsel at its sole cost
and expense and the indemnifying party will not without the written consent of
the indemnified party consent to the entry of any judgment or enter into any
settlement with respect to the matter which does not include a provision whereby
the plaintiff or the claimant in the matter releases the indemnified party from
all liability with respect thereto. Failure by an indemnifying party to notify
the indemnified party of its election to defend any such claim or proceeding by
a third party within thirty (30) days after notice thereof shall have been given
to such indemnifying party by the indemnified party shall be deemed a waiver by
such indemnifying party of its right to defend such claim or action.
9.4 Non-Assumption of Defense. If no indemnifying party is permitted or
elects to assume the defense of any such claim by a third party or proceeding
resulting therefrom, the indemnified party shall diligently defend against such
claim or litigation in such manner as it may deem appropriate and, in such
event, if such claim is one for which the indemnifying party is in fact
responsible, the indemnifying party or parties shall promptly reimburse the
indemnified party for all reasonable out-of-pocket costs and expenses, legal or
otherwise, incurred by the indemnified party and its affiliates in connection
with the defense against such claim or proceeding. Any counsel chosen by such
indemnified party to conduct such defense must be
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reasonably satisfactory to the indemnifying party or parties, and only one
counsel shall be retained to represent all indemnified parties in an action
(except that if litigation is pending in more than one jurisdiction with respect
to an action, one such counsel may be retained in each jurisdiction in which
such litigation is pending). The indemnified party shall not settle or
compromise any such claim without the written consent of the indemnifying party,
which shall not be unreasonably withheld.
9.5 Indemnified Party's Cooperation as to Proceedings. The indemnified
party will cooperate in all reasonable respects with any indemnifying party in
the conduct of any proceeding as to which such indemnifying party assumes the
defense. For the cooperation of the indemnified party pursuant to this Section
9.5, if such claim is one for which the indemnifying party is in fact
responsible, the indemnifying party or parties shall promptly reimburse the
indemnified party for all reasonable out-of-pocket costs and expenses, legal or
otherwise, incurred by the indemnified party or its affiliates in connection
therewith as such costs and expenses are incurred.
9.6 Limitation on Losses.
(a) The amount of any Loss incurred or suffered by a person shall be
reduced by any insurance proceeds received by such person in connection
with the breach, failure or other event which gave rise to such Loss (net
of any costs incurred by such person in connection with the collection of
such insurance proceeds). In connection therewith, for so long as the
Stockholder has any obligations pursuant to this Section 9 or Section 9 of
the NSI Merger Agreement, Parent and PCM Surviving Corporation will
maintain or cause to be maintained with financially sound and reputable
insurers that have a rating of "A" or better as established by Best's
Rating Guide (or an equivalent rating with such other publication of a
similar nature as shall be in current use), insurance coverage comparable
or superior to the coverage described on Schedule 9.6(a) hereto with
respect to NSI and PCM.
(b) The amount of any Loss incurred or suffered by any Indemnified
Party (i) shall be increased by any Tax incurred or reasonably expected to
be incurred as a result of or related to any such Loss, including any Tax
related to the inclusion in gross income of insurance proceeds or a
payment, (ii) shall be reduced by any Tax benefit realized or reasonably
expected to be realized as a result of or related to any such Loss, and
(iii) shall be increased by interest computed at the rate of 7% per annum
from the date such Loss is incurred or suffered to the date of payment.
(c) The breach of any representation and warranty or agreement by the
Stockholder or PCM set forth in Section 3.8, 3.9 or 5.2 hereof shall not be
deemed to have resulted in a Loss to the Parent Indemnified Parties if such
breach resulted in an overpayment of NSI Merger Consideration or PCM Merger
Consideration to the Stockholder and/or the Permitted Transferees or of the
Overage or any other amount payable to Pironti or the Stockholder and/or
such Permitted Transferees and such overpayment is in any such case
subsequently corrected pursuant to an adjustment in
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accordance with Sections 2.8(c) or 2.9 hereof or Section 2.8(c) of the NSI
Merger Agreement, as the case may be; provided, however, that the foregoing
exclusion shall not apply to any Third Party Liability arising out of or
relating to any such breach. For avoidance of doubt, any adjustments
pursuant to with Sections 2.8(c) or 2.9 hereof or Section 2.8(c) of the NSI
Merger Agreement shall not be counted toward satisfaction of the General
Deductible in Section 9.1 hereof and shall not be subject to the maximum
liability provisions set forth in Sections 9.6(d) and (e).
(d) The maximum aggregate amount for which the Stockholder shall be
liable hereunder and under the NSI Merger Agreement shall be liable shall
be (in each case such that Parent and PCM Merger Sub hereunder and Parent
and NSI Merger Sub under the NSI Merger Agreement shall not under any
circumstances have any recourse against the Stockholder pursuant to this
Agreement and the NSI Merger Agreement in excess of the named amount in the
aggregate):
(i) If the PCM Merger does not occur, $400,000 (as provided in
Section 8.2(b) hereof); and
(ii) If the PCM Merger occurs, $7,500,000;
provided, however, that if the PCM Merger occurs, the foregoing limitation
shall not apply to Losses arising out of or relating to third party claims,
including proceedings brought by any governmental entity.
(e) The maximum aggregate amount for which Parent and PCM Merger Sub
hereunder and Parent and NSI Merger Sub under the NSI Merger Agreement
shall be liable shall be (in each case such that the Stockholder hereunder
and the Stockholder under the NSI Merger Agreement shall not under any
circumstances have any recourse against Parent, PCM Merger Sub, and NSI
Merger Sub pursuant to this Agreement and the NSI Merger Agreement in
excess of the named amount in the aggregate):
(i) If the PCM Merger does not occur, $400,000 (as provided in
Section 8.2(b) hereof);
(ii) From and after the Effective Date and until the Purchase
Note and Negotiable Purchase Note have been paid, $6,600,000; and
(iii) From and after the date upon which the Purchase Note and
Negotiable Purchase Note have been paid, $3,000,000;
provided, however, that if the PCM Merger occurs, the foregoing limitation
shall not apply to Losses arising out of or relating to third party claims,
including proceedings brought by any governmental entity.
(f) No Parent Indemnified Person shall have recourse for
indemnification under Section 9.1(b) above and beyond the time frames set
forth in the NSI Merger Agreement
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or for indemnification under Section 9.1(a) above beyond the time frames
set forth below:
(i) in the case of Sections 3.1, 3.3, 3.4 and 3.5, there shall be
no such time limit,
(ii) in the case of Sections 3.17, 3.20, 3.21 and 3.24, until
thirty (30) days following the expiration of the applicable statute of
limitations with respect to the matter to which the claim relates,
(iii) in the case of all other provisions of Section 3, until
June 30, 2002.
(g) No PCM Indemnified Person shall have recourse for indemnification
under Section 9.2(a) beyond the time frames set forth below:
(i) in the case of Sections 4.1, 4.3, 4.4 and 4.8, there shall be
no such time limit, and
(ii) in the case of all other provisions of Section 4, beyond the
third anniversary of the Effective Date.
9.7 Dispute Resolution. In the event that any of the Parent Indemnified
Person is seeking indemnification pursuant to Section 9.1 hereof or Section 9.1
of the NSI Merger Agreement, such Parent Indemnified Person, (the "Notifying
Person") shall notify Stockholder thereof, which notice (the "Indemnity Notice")
shall set forth in reasonable detail the facts and circumstances giving rise to
the Losses for which indemnity is sought, the amount thereof including the basis
for the calculation of the Losses, including without limitation the amount of
costs and expenses incurred by such Parent Indemnified Person, and, if then
known, the amount of any adjustment to or deduction from the amount of Losses
subject to indemnification as a result of the deductibles established pursuant
to Section 9.1 hereof or Section 9.1 of the NSI Merger Agreement or the
provisions of Section 9.6 hereof or Section 9.6 of the NSI Merger Agreement, as
the case may be. If Stockholder disagrees with any matter set forth in an
Indemnity Notice, he shall provide the Notifying Person with notice of such
disagreement (the "Indemnity Dispute Notice") within thirty (30) days following
the date on which the applicable Indemnity Notice was given to Stockholder. Such
Indemnity Dispute Notice shall set forth in reasonable detail the nature and
basis of such disagreement together with Stockholder's view, if any, of the
amount of any indemnity payment to which the Parent Indemnified Person should be
entitled. If Stockholder does not deliver an Indemnity Dispute Notice within
such thirty (30) day period, Stockholder shall be deemed to have agreed with the
matters set forth in the Indemnity Notice. If Stockholder timely provides a
Dispute Notice, then (a) the representatives of Stockholder and the Notifying
Person shall meet promptly and attempt in good faith to resolve such dispute. If
such representatives cannot mutually resolve such dispute within ten (10) days
after the date on which the Indemnity Dispute Notice is given, either party may
submit such dispute for final and binding arbitration in The City of New York by
a panel of three (3) arbitrators (the "Arbitrators") pursuant to the commercial
arbitration rules then prevailing of the American Arbitration Association
("AAA"), as supplemented herein, and judgment upon the
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award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Pending final award, Arbitrator compensation and expenses
shall be advanced equally by Stockholder on the one hand and the parties seeking
indemnification, on the other hand. The Parent Indemnified Person and
Stockholder shall instruct the AAA to hold an administrative conference with
counsel for the parties within twenty (20) days after the filing of the demand
for arbitration. The parties and the AAA shall thereafter cooperate in order to
complete the appointment of the Arbitrators as quickly as possible. Within ten
days after all three Arbitrators have been appointed, the Parent Indemnified
Person and Stockholder shall seek to have an initial meeting among the
Arbitrators and counsel for the parties shall be held for the purpose of
establishing a plan for administration of the arbitration, including (a) scope,
timing and types of discovery, which may at the discretion of the Arbitrators
include production of documents in the possession of the parties, but may not
without consent of all parties include depositions; (c) exchange of documents
and filing of detailed statement of claim and prehearing memoranda; (c) schedule
and place(s) of hearings; and (d) any other matters that may promote the
efficient, expeditious and cost-effective conduct of the proceeding. The
Arbitrators shall not be permitted to award Losses in an amount in excess of
those set forth in the Indemnity Notice or less than the amount set forth in the
Indemnity Dispute Notice, except in either case with respect to amounts
constituting adjustments or deductibles which were not known at the time the
applicable notice was given. The Arbitrators shall be instructed to allocate and
award all costs and fees (including costs incurred by the Parent Indemnified
Person and Stockholder) based upon their relative success in arbitration).
9.8 Setoff. Parent or PCM Surviving Corporation may set off any amount
payable to it by the Stockholder pursuant to this Section 9 or Section 9 of NSI
Merger Agreement against the payment of any amount due under the Purchase Note;
provided, however, that no such setoff shall be permitted until the resolution
of any dispute respecting the obligation to pay any such amount by operation of
Section 9.7 above. Any failure by PCM Surviving Corporation to pay any principal
or interest otherwise due under the Purchase Note solely as a result of a setoff
effected in accordance with the provisions of this Section 9.8 shall not
constitute an Event of Default under the Purchase Note.
9.9 Option to Make Part Payment in Stock. Up to 35% of the aggregate of the
amount payable by the Stockholder pursuant to this Section 9 and pursuant to
Section 9 of the NSI Merger Agreement may be paid in shares of Parent Common
Stock, with each share of Parent Common Stock valued at the Current Market
Price.
9.10 Exclusive Remedies. Each Party's sole recourse against each of the
other Parties under this Agreement or in respect of the transactions
contemplated by this Agreement shall be pursuant to and under Section 8 and this
Section 9, and subject to the limitations and restrictions contained herein and
therein.
10. Miscellaneous
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10.1 Representations, Warranties, Covenants, etc. The representations,
warranties, covenants, and other agreements of each Party herein shall survive
the PCM Merger except as may be limited by Sections 9.6(f) and 9.6(g).
10.2 Disclosures. Any disclosure made with reference to one or more
Sections of the PCM Disclosure Schedule or the Parent Disclosure Schedule, as
applicable, shall be deemed disclosed with respect to each other section therein
as to which such disclosure is relevant provided that such relevance is
reasonably apparent. No statement contained in any certificate or schedule
required to be furnished by any Party pursuant to this Agreement, including such
Party's Disclosure Schedule, shall contain any untrue statement of a material
fact or omit to state any material facts necessary under the circumstances, in
order to make the other statements contained therein not misleading.
10.3 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
if and when delivered personally or by overnight courier to the parties at the
following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a Party as shall be specified by like notice):
(a) If to Parent or PCM Merger Sub:
c/o Cross Media Marketing Corporation
461 Fifth Avenue
19th Floor
New York, New York 10017
Attn: President
Telecopy: (212) 457-1202
Confirm: (212) 457-1200
With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Bonnie Podolsky, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(b) If to PCM:
Preferred Consumer Marketing, Inc.
230 Fifth Avenue, Suite 210
New York, New York 10001
Attn: Anthony R. Pironti
Telecopy: (212) 889-1146
Confirm: (212) 686-8680
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With a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020-1605
Attn: C. David Goldman, Esq.
Telecopy: (212) 547-5444
Confirm: (212) 547-5512
(c) If to the Stockholder:
Preferred Consumer Marketing, Inc.
230 Fifth Avenue, Suite 210
New York, New York 10001
Attn: Anthony R. Pironti
Telecopy: (212) 889-1146
Confirm: (212) 686-8680
With a copy to:
Nims, Howes, Collison, Hansen & Lackert
605 Third Avenue, Suite 3500
New York, New York 10158
Attn: Bruce Grossman, Esq.
Telecopy: (212) 661-9213
Confirm: (212) 661-9700
Any such notice given hereunder shall be deemed given and received on the
date of hand delivery or transmission by facsimile or the day after
delivery to an overnight express service for next day delivery, as the case
may be.
10.4 Amendment. This Agreement may not be amended except by an instrument
in writing signed by the Parties.
10.5 Waiver. Any waiver of the provisions hereof shall be valid only if set
forth in an instrument in writing signed by the Party or Parties entitled to
make such waiver.
10.6 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon a determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an
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acceptable manner to the end that transactions contemplated hereby are fulfilled
to the extent possible.
10.8 Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements and undertakings, both written and oral, among
the Parties, or any of them, with respect to the subject matters hereof, except
as otherwise expressly provided herein.
10.9 Assignment. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of the parties hereto. Neither
Party may assign any of its rights, or delegate any of its obligations under
this Agreement to any person without the prior written consent of the other
Party, and any such purported assignment without the written consent of the
other Party shall be void and of no effect; provided, that (i) all or any of the
rights of the Parent Parties hereunder may be assigned to any Affiliate of
Parent and to any person who acquires all or a substantial portion of the
business of Parent, (ii) all of the rights of the Parent Parties hereunder may
be assigned as collateral security to one or more persons which provide
financing for the transactions contemplated hereby and by the NSI Merger
Agreement, and (iii) if Pironti transfers any of the Shares of NSI or any shares
of PCM to either or both of the Permitted Transferees, such Permitted
Transferee(s) shall succeed to the rights of Pironti hereunder and under the PCM
Agreement in respect of such transferred Shares and/or shares; provided, that no
such assignment shall relieve the assigning Party of its obligations hereunder.
10.10 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement,
including by way of subrogation.
10.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any Party in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.12 Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York applicable to contracts
executed and fully performed within the State of New York.
(b) Each Party submits to the non-exclusive jurisdiction of the state
and federal courts of the United States located in the City of New York,
Borough of Manhattan with respect to any claim or cause of action arising
out of this Agreement or the transactions contemplated hereby.
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10.13 WAIVER OF JURY TRIAL. EACH OF PARENT, PCM MERGER SUB, PCM AND THE
STOCKHOLDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
10.14 Execution and Delivery. This Agreement may be executed in two or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement. This
Agreement may be delivered by facsimile transmission with the same legal effect
as if delivery of an original were made in person.
[Signature page follows; remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date and year first mentioned above.
CROSS MEDIA MARKETING CORPORATION
By__________________________________
Name:
Title:
CROSS MEDIA CONSUMER MARKETING
CORPORATION
By__________________________________
Name:
Title:
PREFERRED CONSUMER MARKETING, INC.
(a Florida corporation)
By__________________________________
Name:
Title:
ANTHONY R. PIRONTI
in his individual capacity
____________________________________
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Schedule 2.5
Initial Officers of PCM Surviving Corporation
Ronald Altbach Chairman of the Board of Directors
Anthony R. Pironti President
Randall Gouse Senior Vice President and Chief Financial Officer
Jess Joseph Senior Vice President
Richard Kaufman Vice President and Secretary
Chet Borgida Vice President
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Exhibit A
Employment Agreements
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Exhibit B
Negotiable Purchase Note
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Exhibit C
Purchase Note
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Exhibit D
Purchase Note Letter of Credit
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Exhibit E
Registration Rights Agreement
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Exhibit F
Articles of Merger
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Exhibit G
Secretary's Certificate
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Exhibit H
Release
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