-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PewUCR2ViZ5+JLHW4n8hhPe2lNBhmlBGGFNg+arSvq9mQCpPkJP/r8jNXoyL8i/t P7Jvp1BWUR9nR0LurUXGtw== 0001169232-02-001371.txt : 20020829 0001169232-02-001371.hdr.sgml : 20020829 20020829135447 ACCESSION NUMBER: 0001169232-02-001371 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020816 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROSS MEDIA MARKETING CORP CENTRAL INDEX KEY: 0001069201 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 134042921 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16023 FILM NUMBER: 02752413 BUSINESS ADDRESS: STREET 1: 461 FIFTH AVENUE 19TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022- BUSINESS PHONE: 2127549901 MAIL ADDRESS: STREET 1: 461 FIFTH AVENUE 19TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: SYMPOSIUM TELECOM CORP DATE OF NAME CHANGE: 19990211 FORMER COMPANY: FORMER CONFORMED NAME: SYMPOSIUM CORP DATE OF NAME CHANGE: 19991129 8-K 1 d51821_8k.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): August 16, 2002 CROSS MEDIA MARKETING CORPORATION (Exact name of registrant as specified in its charter) Delaware 0-25435 13-4042921 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 461 Fifth Avenue, 19th Floor, New York, New York 10017 (Address of principal executive offices/Zip Code) Registrant's telephone number, including area code: (212) 457-1200 Former name, former address, and former fiscal year, if changed since last report: N/A Item 5. Other Events On August 16, 2002, Cross Media's credit facility was amended. The amendment reduced the amount of subordinated debt financing which Cross Media is required to receive by September 2, 2002 from $3,000,000 to $1,500,000. Cross Media obtained this financing on August 19, 2002, as described below. Additionally, Cross Media is only permitted to borrow up to an additional $750,000 under the facility without obtaining the lenders prior consent. There is also another $750,000 of availability under the credit facility, which Cross Media may borrow only with the lenders consent. On August 16, 2002, Cross Media borrowed $1,650,000 from its largest principal stockholder (the "Lender"), pursuant to a $1,650,000 note (the "Note"). The Note is due on the fifth business day after demand for payment is made, which may be made on the earlier of (i) August 16, 2003 and (ii) the receipt by the Company of debt and/or equity financing resulting gross proceeds of at least $5,000,000 to the Company (the "Maturity Date"). The Note bears interest at an annual rate of 10%, payable quarterly, in arrears. If Cross Media does not repay the Note on the Maturity Date, the Lender may convert the Note into shares of common stock of Cross Media at the rate of $1.91 of principal of, and/or accrued and unpaid interest on, the Note. If the note is not repaid on or prior to February 16, 2003, Cross Media shall issue to the Lender a warrant to purchase up to a number of shares of common stock of Cross Media equal to 500,000 multiplied by a fraction, the numerator of which is the then outstanding principal amount of the Note and the denominator of which is $1,650,000 (the "Note Warrants") The Note Warrants will be exercisable for a period of ten years from the date of issuance at an exercise price of $1.91 per share. Cross Media also issued to the Lender a ten-year warrant to purchase 200,000 shares of its common stock at an exercise price of $1.91 per share. Cross Media paid the Lender a fee of $150,000 for providing this financing. In connection with the issuance of Note, Cross Media and the Lender amended a $1,500,000 note issued to the Lender on May 27, 2002 (the "Original Note"). The amended note (the "Amended Note") is due February 16, 2003, and bears interest at the rate of 6% per annum until November 27, 2002 and 10% thereafter. Interest, which accrues from the date of issuance of the Original Note, is payable at maturity. If Cross Media does not repay the Amended Note at maturity, the Lender may convert the Amended Note into shares of common stock of Cross Media at the rate of $1.91 of principal of, and/or accrued unpaid interest on, the Amended Note or (ii) receive a warrant to purchase up to a number of shares of common stock of Cross Media equal to 500,000 multiplied by a fraction, the numerator of which is the then outstanding principal amount of the Amended Note and the denominator of which is $1,500,000 (the "Amended Note Warrants"). The Amended Note Warrants will be exercisable for a period of ten years from the date of issuance at an exercise price of $1.91 per share. In connection with the amendment of the Original Note and issuance of the Amended Note, Cross Media issued to the Lender an additional ten-year warrant to purchase 200,000 shares of its common stock at an exercise price of $1.91 per share. Cross Media granted the Lender registration rights with respect to the shares issuable upon conversion of the notes and exercise of the warrants. -2- Item 7. Financial Statement, Pro Forma Financial Statements and Exhibits C. Exhibits Exhibit 99.1 - Amendment to Waiver and Credit Agreements by and among Cross Media, Media Outsourcing, Inc., National Syndications, Inc. and Preferred Consumer Marketing, as borrowers, Fleet National Bank, as agent and issuing lender, and the other lenders under the Credit Agreement dated as of March 19, 2002. Exhibit 99.2 - $1,650,000 principal amount note issued to the Lender on August 16, 2002. Exhibit 99.3 - $1,500,000 principal amount note issued to the Lender on August 16, 2002. -3- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Cross Media Marketing Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CROSS MEDIA MARKETING CORPORATION Date: August 20, 2002 By: /s/ Richard Kaufman ------------------------------------- Richard Kaufman President and Chief Operating Officer -4- EXHIBIT INDEX Description Exhibit 99.1 - Amendment to Waiver and Credit Agreements by and among Cross media, Media Outsourcing, Inc., National Syndications, Inc. and Preferred Consumer Marketing, as borrowers, Fleet National Bank, as agent and issuing lender, and the other lenders under the Credit Agreement dated as of March 19, 2002. Exhibit 99.2 - $1,650,000 principal amount note issued to the Lender on August 16, 2002. Exhibit 99.3 - $1,500,000 principal amount note issued to the Lender on August 16, 2002. -5- EX-99.1 3 d51821_ex99-1.txt AMENDMENT TO WAIVER & CREDIT AGREEMENT EXECUTION COPY AMENDMENT TO WAIVER AND CREDIT AGREEMENTS August 19, 2002 Cross Media Marketing Corporation 461 Fifth Avenue, 19th Floor New York, New York 10017 Gentlemen: Reference is made to the Credit Agreement among Cross Media Marketing Corporation ("Cross Media"), Media Outsourcing, Inc. ("Media"), National Syndications, Inc. and Preferred Consumer Marketing, Inc. (together with their successors or assigns, the "Borrowers"), each of the lenders which is a signatory thereto or which shall become a party thereto from time to time (together with their respective successors and assigns, the "Lenders") and Fleet National Bank, as agent for the Lenders (in such capacity, together with its successors and assigns, the "Agent"), and as Issuing Agent, dated as of March 19, 2002 (as amended through the date hereof, the 'Credit Agreement') and each of the other Facility Documents referred to therein. All capitalized terms used herein shall have the meanings assigned thereto in the Credit Agreement, unless otherwise defined herein. Reference is also made to the Waiver, Consent and Amendment to Credit Agreement, dated August 13, 2002 (the "Waiver Agreement"). The Borrowers have advised the Agent and the Lenders that it may borrow only $1,650,000 of the New Subordinated Indebtedness (as defined in the Waiver Agreement) and, therefore, have requested an amendment to certain provisions of the Waiver Agreement and an additional amendment to the Credit Agreement. In consideration of executing this Amendment to Waiver and Credit Agreements and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the undersigned hereby agrees as follows: 1. Paragraph 1 of the Waiver Agreement is hereby amended in its entirety to read as follows: "Consent to Borrowing. Subject to the terms and conditions contained herein, the Agent and the Lenders hereby agree that, notwithstanding anything to the contrary contained in Section 8.01 of the Credit Agreement, the Borrowers may incur sub- ordinated indebtedness in an amount not to exceed $3,000,000 (the "New Subordinated Indebtedness"), provided, that (a) the form and substance of the promissory note representing the New Subordinated Indebtedness is acceptable to the Agent and (b) the subordinated lenders and the Borrowers enter into a subordination agreement in form and substance acceptable to the Agent and the Lenders." 2. Paragraph 3 of the Waiver Agreement is hereby amended in its entirety to read as follows: "Subordinated Debt. Notwithstanding anything to the contrary contained herein or in the Credit Agreement, the Borrowers may not make any borrowings and the Lenders shall not be obligated to make any Loans or issue any Letters of Credit under the Credit Agreement until $1,500,000 of the New Subordinated Indebtedness has been received by the Borrowers and the conditions set forth in Section 1 above have been satisfied and the fee payable to the Agent pursuant to paragraph 9 of the Waiver Agreement, as amended hereby, shall have been paid; provided, however, if Borrowers fail to receive $1,500,000 of the New Subordinated Indebtedness as provided herein, within twenty (20) days from the date hereof, an Event of Default shall be deemed to have occurred and the Agent and the Lenders shall have all of the remedies set forth in Section 10.2 of the Credit Agreement." 3 Paragraph 9 of the Waiver Agreement is hereby amended in its entirety to read as follows: "Fees. In consideration of providing the waivers and consent in accordance herewith, the Borrowers agree to pay to the Agent for the pro-rata benefit of the Lenders a non-refundable fee of $75,000, which shall be payable at the earlier of (a) receipt by the Borrowers of the proceeds of $1,500,000 of the New Subordinated Indebtedness or (b) twenty (20) days from the date hereof. The Borrowers also acknowledge and agree that, pursuant to the Credit Agreement, it is obligated to pay the Agent, upon demand, all reasonable costs and expenses incurred in connection with the preparation, execution and enforcement of the Waiver, Consent and Amendment to Credit Agreement and this Amendment to Waiver and Credit Agreements." 4. The definition of "Applicable Margin" in Section 1.1 of the Credit Agreement is hereby amended in its entirety to read as follows: - 2 - "Applicable Margin" means a percentage equal to 0.75% with respect to Revolving Credit Loans that are Prime Rate Loans, 3.25% with respect to Revolving Credit Loans that are LIBOR Loans and .375% with respect to the Commitment Fee." 5. Article II to the Credit Agreement is hereby amended by adding a new Section 2.14 thereto, which shall read as follows: "Section 2.14. Notwithstanding anything to the contrary contained herein, without the written consent of the Agent and all of the Lenders, the Borrowers may not make any borrowings and the Lenders shall not be obligated to make Loans and the Issuing Lender shall not be required to issue any Letters of Credit under the Credit Agreement in excess of an aggregate of $29,950,000, as such amount is reduced at the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending September 30, 2002, as set forth on Schedule A attached to the Waiver Agreement, less the sum of (i) the aggregate principal amount of the Revolving Credit Loans outstanding, (ii) the aggregate amount available to be drawn on the outstanding Letters of Credit and (iii) any amounts drawn under Letters of Credit but not yet either reimbursed or converted to Loans as provided in the Credit Agreement." 6. Defaults and Events of Default. The parties hereto acknowledge, confirm and agree that the execution and delivery of this Amendment to Waiver and Credit Agreements by the Agent, the Lenders and the Issuing Lender shall not be construed to constitute a waiver or release by the Agent, the Lenders or the Issuing Lender of any Default or Event of Default which has occurred prior to the date hereof, or which exists as of the date hereof or may exist or occur at any time after the date hereof, or of any rights or remedies of the Agent, the Lenders or the Issuing Lender as a result thereof, under any of the Facility Documents, applicable law or otherwise. 7. Conditions Precedent. This Amendment to Waiver and Credit Agreements shall become effective upon delivery to the Agent of original counterpart signature pages to this Amendment to Waiver and Credit Agreements, duly executed and delivered by the Borrowers. 8. Release. In consideration of, among other things, the execution and delivery of this Amendment to Waiver and Credit Agreements by the Agent, the Lenders and the Issuing Lender, each of the Borrowers, on behalf of itself and its successors and assigns (collectively, "Releasors"), hereby forever waives, releases and discharges to the fullest extent permitted by law any and all claims (including without limitation, crossclaims, counterclaims, rights of set off and recoupment, causes of action, demands, suits, costs, expenses and damages (collectively, the "Claims")), that any Releasor now has or hereafter may have, of whatsoever nature and kind, whether known or unknown, whether now existing or hereafter arising, whether arising at law or in equity, against any - 3 - or all of the Agent, the Lenders and the Issuing Lender and their respective affiliates, shareholders and "controlling persons" (within the meaning of the federal securities laws), and their respective successors and assigns and each and all of the officers, directors, employees, agents, attorneys, consultants and other representatives of each of the foregoing (collectively, the "Releasees"), based in whole or in part on facts, whether or not now known, existing on or before the execution of this Amendment to Waiver and Credit Agreements. In entering into this Amendment to Waiver and Credit Agreements, the Borrowers have consulted with, and been represented by, legal counsel and expressly disclaim any reliance on any representations, acts or omissions by any of the Releasees and hereby agree and acknowledge that the validity and effectiveness of the release set forth above do not depend in any way on any such representations, acts and/or omissions or the accuracy, completeness or validity hereof. The provisions of this paragraph 8 shall survive the termination of the Credit Agreement and the other Facility Documents and payment in full of the Obligations. 9. Governing Law. This Amendment to Waiver and Credit Agreements and the rights and obligations hereunder of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of the State of New York. 10. Binding Effect. This Amendment to Waiver and Credit Agreements shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. 11. Severability. Any provision of this Amendment to Waiver and Credit Agreements held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment to Waiver and Credit Agreements and the effect thereof shall be confirmed to the provision so held to be invalid or unenforceable. 12. Counterparts. This Amendment to Waiver and Credit Agreements may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment to Waiver and Credit Agreements, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. [Signature page to follow] - 4 - If you are in agreement with the foregoing, please sign the enclosed counterparts of this Agreement in the spaces provided below, whereupon this Agreement, as so accepted, shall become a binding agreement between the parties hereof. FLEET NATIONAL BANK, As Agent By: ---------------------------- Name: ---------------------------- Title: ---------------------------- LENDERS: FLEET NATIONAL BANK By: ---------------------------- Name: ---------------------------- Title: ---------------------------- KEYBANK NATIONAL ASSOCIATION By: ---------------------------- Name: ---------------------------- Title: ---------------------------- FIRST UNION NATIONAL BANK By: ---------------------------- Name: ---------------------------- Title: ---------------------------- SIGNATURE BANK By: ---------------------------- Name: ---------------------------- Title: ---------------------------- ISSUING LENDER: FLEET NATIONAL BANK, as Issuing Lender By: ---------------------------- Name: ---------------------------- Title: ---------------------------- READ AND AGREED TO: BORROWERS: CROSS MEDIA MARKETING CORPORATION By: ---------------------------- Name: ---------------------------- Title: ---------------------------- MEDIA OUTSOURCING, INC. By: ---------------------------- Name: ---------------------------- Title: ---------------------------- NATIONAL SYNDICATIONS, INC. By: ---------------------------- Name: ---------------------------- Title: ---------------------------- PREFERRED CONSUMER MARKETING, INC. By: ---------------------------- Name: ---------------------------- Title: ---------------------------- EX-99.2 4 d51821_ex99-2.txt $1,650,000 PRINCIPAL AMOUNT NOTE "THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE SENIOR OBLIGATIONS (AS DEFINED IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT, DATED AS OF MAY 27, 2002 (AS AMENDED), AMONG THE ENTITIES THERETO, WHICH INCLUDE THE MAKER HEREOF, THE PAYEE NAMED HEREIN, AND FLEET NATIONAL BANK, AS AGENT." NOTE New York, New York August 16, 2002 FOR VALUE RECEIVED, the undersigned, CROSS MEDIA MARKETING CORPORATION, a Delaware corporation with its principal offices and place of business at 461 Fifth Avenue, New York, New York 10017 (the "Borrower"), promises to pay to the order of LANCER OFFSHORE, INC. (the "Lender"), at c/o Lancer Management Group, 375 Park Avenue, Suite 2006, New York, New York 10152 or at such other place as may be designated from time to time by the Lender, the unpaid amount of all sums that have been advanced to or for the benefit of the Borrower in accordance with the terms hereof, the principal sum of ONE MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS ($1,650,000), lawful money of the United States of America, plus all accrued and unpaid interest (as provided for in this Note) through the Repayment Date (defined below). 1. Principal and Interest Borrower shall pay the entire unpaid principal balance hereunder and accrued and unpaid interest thereon on the fifth business day following demand by Lender on or after the earlier of (i) August 16, 2003 or (ii) the receipt by the Company of debt and/or equity financing resulting in at least $5,000,000 of gross proceeds to the Company (the "Maturity Date"). The principal amount of this Note outstanding from time to time shall bear interest at the annual rate of 10%, payable quarterly, in arrears, on November 16, February 16, May 16 and August 16 of each year and on the date the entire principal amount of this Note is repaid (the "Repayment Date"). There shall be no prepayment premium in the event the Borrower prepays any principal or accrued interest thereon. 2. Conversion (a) If this Note is not paid in full on the Maturity Date, thereafter, the Lender may, at its option, at any time prior to the Repayment Date, convert all or a portion of the then outstanding principal amount of this Note and/or accrued and unpaid interest thereon, into shares of common stock, par value $.001 per share of the Company (the "Common Stock"), at the initial conversion rate of $1.91 of principal and/or interest for one share of Common Stock (the "Conversion Rate"), subject to adjustment as provided below. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares or (iii) combine its outstanding shares of Common Stock into a smaller number of shares (each of (i) through (iii) an "Action"), then the Conversion Rate shall be adjusted to be equal to the product of (i) a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately prior to such Action and the denominator of which is the number of shares of Common Stock outstanding immediately following such Action, multiplied by (ii) the Conversion Rate immediately prior to such Action. An adjustment made pursuant to this Subsection 2(a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) In the event of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of this Note. The above provisions of this Subsection 2(c) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note shall be responsible for all of the agreements and obligations of the Company hereunder. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. -2- (d) No adjustment in the Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 2(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 2 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 2 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Conversion Rate, in addition to those required by this Section 2, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (e) If, as a result of an adjustment made pursuant to this Section 2, the Holder of this Note thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of this Note promptly after such adjustment) shall determine the allocation of the adjusted Conversion Rate between or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 3. Warrants In the event that this Note is not repaid on or prior to February 16, 2003 (the "Trigger Date"), the Borrower shall issue to the Lender a warrant, in the form attached as Exhibit A hereto, to purchase a number of shares of its common stock, par value $0.001 per share Common Stock equal to 500,000 multiplied by the Outstanding Percentage (defined below). The "Outstanding Percentage" on the Trigger Date shall mean the principal amount of this Note outstanding on the Trigger Date divided by $1,650,000. 4. Subordination Notwithstanding any other term or provision contained in this Note, all obligations, liabilities and indebtedness of the Borrower now or hereafter existing, whether fixed or contingent and whether for principal, interest (including interest accruing after the filing of a petition under the Federal Bankruptcy Code, to the extent allowed), fees, expenses or otherwise ("Debt") in respect of this Note, are subordinated and junior in right of payment to all Debt under the Credit Agreement dated as of March 19, 2002 (as amended), by and among the Borrower, Media Outsourcing, Inc., National Syndications, Inc. and Preferred Consumer Marketing, Inc., as joint and several borrowers, the banks, financial institutional lenders party thereto, and Fleet as agent and issuing lender (the "Credit Agent"), to the extent provided in the Subordination Agreement dated as of May 27, 2002, as amended through the date hereof, by and among the Lender and Fleet National Bank, as agent and issuing lender. -3- 5. Miscellaneous This Note may not be waived, changed, modified or discharged orally, but only by agreement in writing signed by the party against whom any enforcement of any waiver, change modification or discharge is sought. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK. BORROWER HEREBY WAIVES THE RIGHT TO A JURY TRIAL AND CONSENTS TO JURISDICTION IN THE FEDERAL OR STATE COURTS OF THE STATE OF NEW YORK WITH RESPECT TO THE ENFORCEMENT OF THE TERMS HEREOF AND THE COLLECTION OF THE OBLIGATIONS HEREUNDER. IN WITNESS WHEREOF, the Borrower has duly executed this Note the day and year first above written. CROSS MEDIA MARKETING CORPORATION By: /s/ Ronald Altbach ------------------------------------ Ronald Altbach Chairman and Chief Executive Officer -4- EX-99.3 5 d51821_ex99-3.txt $1,500,000 PRINCIPAL AMOUNT NOTE "THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE SENIOR OBLIGATIONS (AS DEFINED IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT, DATED AS OF MAY 27, 2002 (AS AMENDED), AMONG THE ENTITIES THERETO, WHICH INCLUDE THE MAKER HEREOF, THE PAYEE NAMED HEREIN, AND FLEET NATIONAL BANK, AS AGENT." NOTE New York, New York As of August 16, 2002 FOR VALUE RECEIVED, the undersigned, CROSS MEDIA MARKETING CORPORATION, a Delaware corporation with its principal offices and place of business at 461 Fifth Avenue, New York, New York 10017 (the "Borrower"), promises to pay to the order of LANCER OFFSHORE, INC. (the "Lender"), at c/o Lancer Management Group, 375 Park Avenue, Suite 2006, New York, New York 10152 or at such other place as may be designated from time to time by the Lender, the unpaid amount of all sums that have been advanced to or for the benefit of the Borrower in accordance with the terms hereof, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000), lawful money of the United States of America, plus all accrued and unpaid interest (as provided for in this Note) through the Repayment Date (defined below). This Note amends and restates the $1,500,000 principal amount note issued to the Lender on May 27, 2002 (the "Original Note"). 1. Principal and Interest Borrower shall pay the entire unpaid principal balance hereunder and accrued and unpaid interest thereon (accruing from the date of issuance of the Original Note) on the fifth business day following demand by Lender on or after February 16, 2003 (the "Maturity Date"). The principal amount of this Note outstanding from time to time shall bear interest at the annual rate of 6% from the date of issuance of this Note through November 27, 2002 and at an annual rate of 10% from November 28, 2002 through and including the date the entire principal amount of this Note is repaid (the "Repayment Date"). There shall be no prepayment premium in the event the Borrower prepays any principal or accrued interest thereon. 2. Conversion (a) If this Note is not paid in full on the Maturity Date, the Lender may, at its option, at any time prior to the Repayment Date, convert all or a portion of the then outstanding principal amount of this Note and/or accrued and unpaid interest thereon, into shares of common stock, par value $.001 per share of the Company (the "Common Stock"), at the initial conversion rate of $1.91 of principal and/or interest for one share of Common Stock (the "Conversion Rate"), subject to adjustment as provided below. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares or (iii) combine its outstanding shares of Common Stock into a smaller number of shares (each of (i) through (iii) an "Action"), then the Conversion Rate shall be adjusted to be equal to the product of (i) a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately prior to such Action and the denominator of which is the number of shares of Common Stock outstanding immediately following such Action, multiplied by (ii) the Conversion Rate immediately prior to such Action. An adjustment made pursuant to this Subsection 2(a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) In the event of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of this Note. The above provisions of this Subsection 2(c) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note shall be responsible for all of the agreements and obligations of the Company hereunder. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. -2- (d) No adjustment in the Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Common Stock; provided, however, that any adjustments which by reason of this Subsection 2(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 2 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 2 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Conversion Rate, in addition to those required by this Section 2, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (e) If, as a result of an adjustment made pursuant to this Section 2, the Holder of this Note thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of this Note promptly after such adjustment) shall determine the allocation of the adjusted Conversion Rate between or among shares or such classes of capital stock or shares of Common Stock and other capital stock. 3. Warrants In the event that this Note is not repaid on or prior to February 16, 2003 (the "Trigger Date"), the Borrower shall issue to the Lender a warrant, in the form attached as Exhibit A hereto, to purchase a number of shares of its common stock, par value $0.001 per share Common Stock equal to 500,000 multiplied by the Outstanding Percentage (defined below). The "Outstanding Percentage" on the Trigger Date shall mean the principal amount of this Note outstanding on the Trigger Date divided by $1,650,000. 4. Subordination Notwithstanding any other term or provision contained in this Note, all obligations, liabilities and indebtedness of the Borrower now or hereafter existing, whether fixed or contingent and whether for principal, interest (including interest accruing after the filing of a petition under the Federal Bankruptcy Code, to the extent allowed), fees, expenses or otherwise ("Debt") in respect of this Note, are subordinated and junior in right of payment to all Debt under the Credit Agreement dated as of March 19, 2002 (as amended), by and among the Borrower, Media Outsourcing, Inc., National Syndications, Inc. and Preferred Consumer Marketing, Inc., as joint and several borrowers, the banks, financial institutional lenders party thereto, and Fleet as agent and issuing lender (the "Credit Agent"), to the extent provided in the Subordination Agreement dated as of May 27, 2002, as amended through the date hereof, by and among the Lender and Fleet National Bank, as agent and issuing lender. -3- 5. Miscellaneous This Note may not be waived, changed, modified or discharged orally, but only by agreement in writing signed by the party against whom any enforcement of any waiver, change modification or discharge is sought. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK. BORROWER HEREBY WAIVES THE RIGHT TO A JURY TRIAL AND CONSENTS TO JURISDICTION IN THE FEDERAL OR STATE COURTS OF THE STATE OF NEW YORK WITH RESPECT TO THE ENFORCEMENT OF THE TERMS HEREOF AND THE COLLECTION OF THE OBLIGATIONS HEREUNDER. IN WITNESS WHEREOF, the Borrower has duly executed this Note the day and year first above written. CROSS MEDIA MARKETING CORPORATION By: /s/ Ronald Altbach ------------------------------------ Ronald Altbach Chairman and Chief Executive Officer -4- -----END PRIVACY-ENHANCED MESSAGE-----