<PAGE>
DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
( ) Transition Report under Section 13 or 15(d) of the Exchange Act of 1934
for the transition period from __________ to _________
DME INTERACTIVE HOLDINGS, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-27944 98-0157860
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(State of Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
39 Broadway, New York 10006
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, Including area code 212-422-6600
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Not Applicable
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(Former Name of Former Address, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of May 1, 2000 there were 25,964,666 shares of common stock
outstanding.
===============================================================================
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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DME INTERACTIVE HOLDINGS, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 2000 (Unaudited) and
December 31, 1999
Consolidated Statements of Operations for the three months ended March
31, 2000 (Unaudited) and March 31, 1999 (Unaudited)
Consolidated Statements of Changes in Shareholders' Deficit for the
Period Ended March 31, 2000 (Unaudited)
Consolidated Statements of Cash Flows for the three months ended March
31, 2000 (Unaudited) and March 31, 1999 (Unaudited)
Notes to Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION AND SUBSEQUENT EVENTS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
2
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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PART I FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
DME Interactive Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
2000 1999
----- -----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 312,051 $ 171,996
Accounts receivable, net 157,396 116,168
Prepaid expenses 36,422 28,661
----------- -----------
Total current assets 505,869 316,825
Security deposits 167,257 167,257
Property and equipment, net 379,459 62,980
----------- -----------
Total assets $1,052,585 $ 547,062
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses 531,881 460,695
Due to affiliated company 1,446 1,297
Note payable to employee 41,000 41,000
Loan from shareholder -- 50,000
----------- -----------
Total current liabilities 574,327 552,992
Notes payable 86,805 86,805
Loans from shareholder 456,906 158,906
Unearned revenue 138,922 --
----------- -----------
Total liabilities 1,256,960 $ 798,703
=========== ===========
Commitments and Contingencies(Note 10)
Common stock, par value $0.001; 60,000,000
shares authorized; 25,964,666 and
23,714,666 issued and outstanding as of
March 31, 2000 and December 31, 1999,
respectively 25,965 23,715
Additional paid-in capital 25,059,980 980,980
Accumulated deficit (2,110,320) (1,256,336)
Less deferred strategic agreement expense (23,180,000) --
----------- -----------
Total shareholders' deficit (204,375) (251,641)
----------- -----------
Total liabilities and shareholders' deficit $ 1,052,585 $ 547,062
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-1
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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DME Interactive Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the For the
3-months 3-months
period ended period ended
March 31, 2000 March 31, 1999
------------ ----------------
GROSS REVENUES $ 218,766 $ 87,589
------------ ------------
COST OF OPERATIONS
Salaries and employee benefits 407,644 18,983
Project expense 12,003 6,270
Consulting services 70,586 34,959
------------ ------------
Total cost of operations 490,233 60,212
------------ ------------
GROSS PROFIT (LOSS) (271,467) 27,377
GENERAL AND ADMINISTRATIVE
EXPENSES 581,709 10,085
------------ ------------
INCOME (LOSS) FROM OPERATIONS (853,176) 17,292
------------ ------------
OTHER INCOME AND (EXPENSES)
Interest and rental income 6,539 -
Interest expense 7,347 1,820
------------ ------------
(809) 1,820
------------ ------------
NET INCOME (LOSS) $ (853,984) $ 15,472
============ ============
INCOME (LOSS) PER SHARE:
Basic $ (0.03) $ 0.001
============ ============
Diluted $ (0.03) $ 0.001
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 25,964,666 23,347,999
------------ ------------
Diluted 25,964,666 25,942,999
------------ ------------
See accompanying notes to consolidated financial statements.
F-2
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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DME Interactive Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT FOR THE PERIOD ENDED
MARCH 31, 2000.
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Deferred Total
Paid-in Accumulated Strategic Shareholders'
Number Amount Capital Deficit Expense Deficit
--------- ----------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 23,714,666 $ 23,715 $ 980,980 $ (1,256,336) -- $ (251,641)
Common shares issued to 1,250,000 1,250 -- -- -- 1,250
strategic agreement
Stock issuance for strategic
agreement -- -- 11,210,000 -- -- 11,210,000
Strategic agreement deferred
expense recognition -- -- -- -- (11,210,000) (11,210,000)
Warrants issuance for
strategic agreement -- -- 11,970,000 -- (11,970,000) --
Common Shares issued 1,000,000 1,000 899,000 -- -- 900,000
Net loss -- -- -- (853,984) -- (853,984)
Balance, March 31, 2000 25,964,666 $ 25,965 $ 25,059,980 $ (2,110,320) (23,180,000) $ (204,375)
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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DME Interactive Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
3-month 3-month
period ended period ended
March 31, 2000 March 31, 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (853,984) $ 15,742
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Depreciation 41,287 697
Decrease in accounts receivable (41,228) 1,800
(Increase) in prepaid expenses (7,760) --
Increase in due to affiliated company 149 --
Increase in accounts payable 71,186 33,143
Increase in advances/unearned revenue 56,250 --
----------- -----------
Net cash used in provided by
operating activities (734,100) 50,415
----------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment (357,767) --
----------- -----------
Net cash used in investing activities (357,767) --
----------- -----------
FINANCING ACTIVITIES
Proceeds from loans and notes payable 300,000 30,000
Payments on loans and notes payable (52,000) --
Proceeds from sale of common stock 901,250 --
Increase in capital lease obligation 82,672 --
----------- -----------
Net cash provided by financing activities 1,231,922 30,000
----------- -----------
Net increase in cash
and cash equivalents 140,055 80,415
CASH AND CASH EQUIVALENTS:
Beginning of period 171,996 629
----------- -----------
End of period $ 312,051 $ 81,044
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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DME Interactive Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial
statements, which include the accounts of DME Interactive
Holdings, Inc. and its wholly owned subsidiaries, have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion
of management, all adjustments, consisting only of normal
recurring accruals considered necessary for a fair
presentation, have been included in the accompanying
unaudited consolidated financial statements. All significant
intercompany transactions and balances have been eliminated
in consolidation. Operating results for the three months
ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the full year ending
December 31, 2000. For further information, refer to the
consolidated financial statements and notes thereto,
included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1999.
NOTE 2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
Pride Automotive Group ("Pride") was incorporated in 1995 in
the State of Delaware as a "C" Corporation. On June 18, 1999,
Pride changed its name to DME Interactive Holdings, Inc. ("DME
or Company") following a reverse merger (re-capitalization)
with Digital Mafia Entertainment, LLC. ("Digital Mafia"), a
New Jersey Limited Liability Company (the "Transaction"). The
re-capitalization occurred pursuant to the Exchange of Common
Stock agreement dated March 30, 1999 (as amended). In
connection with the re-capitalization, Pride exchanged
14,800,000 shares of its Common Stock (representing
approximately 64% of the outstanding shares after the
exchange) for all of the membership interests of Digital
Mafia. In addition, Pride sold all of its interest in its two
operating subsidiaries to Pride, Inc., its parent and owner of
more than 50% of its outstanding common stock prior to the
transaction, for $1.00 each. As a result, Digital Mafia became
a wholly owned subsidiary of Pride. For accounting purposes,
the exchange was treated as a re-capitalization, as if Digital
Mafia acquired Pride.
F-5
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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NOTE 2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(Continued)
Digital Mafia is deemed to be the predecessor company and
all financial information prior to June 18, 1999 is that of
Digital Mafia.
DME is an advanced technology company that provides corporate
internet strategy, development services and advertising
services ("digital communications solutions") primarily to
clients seeking to reach the urban African-American and Latino
markets. We are in the process of expanding our business
by developing online resource communities which are
designed to provide a variety of content of interest to
our urban target market. Currently, we are developing
two on-line resource communities, Places of Color and
Fan4Life.
On February 2, 2000, DME and Places of Color entered into a
"strategic agreement" with CompuServe Interactive Service,
Inc. subsidiary of America Online, Inc., an internet service
provider ("ISP"). The agreement expires 18 months after the
launch date and requires the ISP to provide hosting and
other technical and support services for a website
customized Service for internet users from the urban market.
Places of Color will receive a stated percentage of the
monthly subscription fees received by the ISP. DME has
issued 1,250,000 common shares to the ISP. In addition to the
shares, DME has granted a warrant for 4,000,000 additional
shares to the ISP at a purchase price of $8.563 per share.
The warrants are only exercisable if, at the end of the
strategic agreement, the parties negotiate an extension of the
strategic agreement, or enter into a new agreement
substantially similar to the strategic agreement.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of DME and its wholly owned subsidiaries, Digital
Mafia Entertainment, LLC, and DME 39 Broadway Corporation
("DME 39"). All material intercompany transactions and
balances have been eliminated in consolidation.
Fixed Assets
Fixed assets are recorded at cost and are depreciated on the
straight-line basis over the estimated useful lives of the
assets.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could
differ from those estimates.
Statement of Cash Flows
For financial statement purposes, cash in demand deposit
accounts and money market accounts with maturities of ninety
days or less are considered to be cash equivalents.
F-6
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NOTE 2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (Continued)
Allowance for Doubtful Accounts The Company establishes an
allowance for uncollectible accounts receivable based on
historical collection experience and management's evaluation
of collectibility of outstanding accounts receivable. Accounts
receivable is shown net of allowance for doubtful accounts in
the accompanying consolidated financial statements. The
allowance for uncollectible accounts receivable as of March
31, 2000 and December 31, 1999, was $17,424 and $50,030,
respectively.
Revenue Recognition
The Company bills for services recognizes project revenues
based on time-and-materials arrangements, fixed-price
contracts and maintenance agreements. The Company recognizes
project revenues on a percentage of completion method.
Maintenance revenue is recognized on a monthly basis while
the relevant maintenance agreement is in effect, and the
Company has performed the agreed-upon maintenance services.
Reclassification
Certain reclassifications have been made to the prior period's
financial statements in order to conform them to the
classifications used for the current year.
NOTE 3. INCOME TAXES:
DME accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). SFAS 109 is an asset and liability approach that
requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers all expected
future events other than enactment of changes in the tax law
or rates. Any available deferred tax assets arising from net
operating loss carryforwards has been offset by a deferred
tax valuation allowance on the entire amount.
F-7
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NOTE 4. PROPERTY AND EQUIPMENT, NET:
Property and equipment, net is comprised of the following:
<TABLE>
<CAPTION>
Estimated March 31, December 31,
Useful Life 2000 1999
----------- ------ ------
<S> <C> <C> <C>
Office equipment 5 $ 319,351 $ 74,952
Furniture and fixtures 5 104,064 6,490
Software 3 18,806 4,628
----------- -----------
443,837 86,070
Accumulated depreciation (64,378) (23,090)
------------ ------------
$ 379,459 $ 62,980
=========== ===========
</TABLE>
Depreciation expense for the three-month period ended March
31, 2000 and March 31, 1999, was $41,287 and $2,091.
NOTE 5. NOTES PAYABLE:
The Company has two notes payable outstanding, one for $50,000
and another for $36,805. The $50,000 note bears interest at a
rate of 9% per annum and matures on March 21, 2001. The
$36,805 note bears interest at a rate of 9% per annum and has
no stated maturity date.
NOTE 6. EQUITY FINANCING:
In January 2000, we issued 500,000 shares of Common Stock at
par value, 500,000 warrants at a $2.00 strike price, and
500,000 shares at $2.00 per share in a private placement to
satisfy our working capital requirements. Gross proceeds
totaled $1,000,000.
NOTE 7. STOCK OPTIONS AND WARRANTS:
Employee Stock Options
DME has an incentive stock option plan (the "Plan") for key
management employees. On May 8, 2000, the Board of
Directors increased the maximum shares of common stock
that may be issued under the Plan to 12,000,000 from
3,000,000. The option price, number of shares and grant
date are determined at the discretion of the Board of
Directors. Options granted under the Plan are exercisable
at dates determined by the Board of Directors. If an
employee is terminated, all unexercised options
expire automatically. An employee has ninety days from
date of voluntary termination to exercise options to the
extent such options were exercisable at the time of
termination. As of March 31, 2000, no employee
compensation expenses was incurred nor were any options
exercised.
As of March 31, 2000 a total of 1,210,000 options had
been granted to nineteen employees of the Company. These
options were not granted pursuant to the Plan.
On May 11, 2000 the Board of Directors granted Darien Dash the
option to purchase up to 4,000,000 shares of common stock
pursuant to the Plan for a period over 10 years from July 1,
1999, at the purchase price of $2.81 per share per first 2.5
million shares, $4.00 per additional 750,000 shares, and $5.00
per remaining 750,000 shares. The shares can be exercised pro
rata over three years after the anniversary of the grant date.
On May 11, 2000 the Board of Directors granted Thomas O'Rourke
the option to purchase up to 4,000,000 shares of common stock
pursuant to the Plan for a period over 10 years, at the
purchase price of $2.81 per share per first 1.33 million
shares, $4.00 per additional 1.33 million shares, and $5.00
per remaining 1.33 million shares. The shares can be exercised
pro rata over three years after the anniversary of the grant
date.
Warrants
As of March 31, 2000, DME had 2,595,000 redeemable purchase
warrants outstanding. Each warrant allows the holder to
purchase one share of the Company's common stock at a price
of $5.75. DME may redeem the warrants at anytime upon 30
days' written notice at a price of $0.05 per warrant subject
to certain conditions. The expiration date on the warrants
is April 23, 2001.
F-8
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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NOTE 8. NET LOSS PER COMMON SHARE:
The following table presents the calculation of basic and
diluted net loss per common share required under SFAS 128:
Period Period
Ended Ended
March 31, March 31,
2000 1999
------ ------
Net (loss)/Net income ($ 853,984) $ 15,472
============= =============
Weighted average shares -
basic 25,964,666 23,347,999
Effect of dilutive securities:
Warrants and employee
stock options -- 2,595,000
------------- --------------
Weighted average shares -
diluted 25,964,666 25,942,999
------------- --------------
Net (loss)/Net income per
common share - basic ($ 0.033) $ 0.001
------------ -------------
Net (loss)/Net income ($ 0.033) $ 0.001
Per share - diluted ------------ -------------
NOTE 9. RELATED PARTY TRANSACTION:
Due to Affiliated Company
Digital Mafia shares office space with an affiliated company.
Certain administrative expenses incurred by Digital Mafia may
from time to time be paid by the affiliated company. The
amount payable to the affiliated company as of March 31, 2000
and December 31, 1999 was $1,446 and $1,297, respectively.
Loan Payable to Employee
DME also issued a $41,000 note payable to an employee pursuant
to an asset purchase agreement executed on September 1, 1999.
There is no stated interest rate. The note will be settled
from collections on accounts receivable assigned by the
employee to DME.
Principal Shareholder Loans
As of March 31, 2000, the Company owes its principal
shareholder a total of $456,906. The majority loan of
$300,000 has an interest rate of 13% and matures on May
31, 2000. The remaining loans carry an interest rate of 9%
per annum and mature on from December 31, 2001.
F-9
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NOTE 10. STRATEGIC AGREEMENT:
In February 2000, the Company entered into a strategic
partnership with AOL. In connection with this agreement DME
issued 1,250,000 common shares to AOL valued at $11,210,000,
based upon the trading price of the stock on the issuance
date. In addition the Company also issued 4,000,000 options
with an exercise price of $8.563 exercisable at the end of the
term of the strategic agreement. The value of the Warrants on
the issuance date was $11,970,000 using the Black-Scholes
Option-Pricing Model.
The effect of applying Statement No. 123 is not likely to be representative of
the effects on reported net income for future months due to, among other things,
DME reaching certain performance milestones. The deferred strategic agreement
expense is recognized straight line over the 18 months after the POC launch. As
of March 31, 2000, no strategic agreement expenses has been recognized.
F-10
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NOTE 11. COMMITMENTS AND CONTINGENCIES:
(A) Employment Agreement
On April 18, 2000, the Company entered into an
employment agreement with its President and Chief
Operating Officer, Thomas O'Rourke. The effective date
of this agreement is April 18, 2000, and is for a period
of three years at which time it can be renewed by mutual
agreement of both parties. The agreement may be
terminated at any time by mutual written agreement by
the parties. The consideration is $150,000 annually to
be paid at regular payroll periods. As additional
compensation, the Company has issued a total of
4,000,000 stock options excisable at annual intervals
ranging from April 18, 2000 to April 18, 2003 at varying
exercise prices between $2.81 to $5.00.
(B) Rental Lease
On September 23, 1999, DME 39 entered into two
non-cancelable office space rental lease agreements with a
real estate company. The agreements became effective in
March 2000 and expires in July 2010. In addition to base
rent and electricity, DME 39 is required, under the lease
agreements, to pay real estate taxes equal to 2.4% of base
tax, as defined in the agreement.
In conjunction with DME 39's lease signings, DME signed an
absolute and unconditional deed guaranteeing the full, prompt
and complete performance of all of the terms, covenants and
conditions of the lease agreements entered into by DME 39. The
guaranty expires if, at any time, DME and/or DME 39 pays the
landlord base rent equal to $450,000 or more under the above
mentioned leases.
Future minimum lease payments under the lease agreements are
as follows:
For the Year Ending December 31,
--------------------------------
2000 $ 189,361
2001 245,909
2002 297,695
2003 305,798
2004 314,148
Thereafter 2,226,440
---------------
Total $ 3,579,351
===============
Total rent expense under all operating leases amounted to
$38,744 and $6,450 for the three-month period ended March
31, 2000, and March 31, 1999, respectively.
F-11
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NOTE 11. COMMITMENTS AND CONTINGENCIES: (Continued)
(C) Litigation
The Receiver of Autokraft Limited and ACL(1996) Limited,
both in Administrative Receivership in the United Kingdom
have asserted a claim against us for monies allegedly due
under (i) a guarantee agreement and (ii) a variation
agreement executed by us pursuant to which the loan
allegedly guaranteed was restructured. The amount claimed to
be due is British pounds 281,107 plus interest. The
obligations arise out of the purchase by a former subsidiary
of ours, when we were Pride Automotive Group, Inc. ("PAG"),
of certain assets of the claimants. We are currently
investigating the claim; however, we believe that the
existence of the liability for the claim constitutes a
breach of the representations and warranties made to Digital
Mafia LLC in the agreement pursuant to which it was acquired
by PAG in the June 1999 reverse merger (the
"re-capitalization"). Therefore, we have asserted a claim for
indemnification against Pride Inc. (now known as Mason Hill
Holdings, Inc.), the then parent of PAG, who, in the
exchange agreement for the acquisition, joined in the
foregoing representations and agreed to indemnify Digital
Mafia LLC in connection with any breach of those
representations. If it is determined that we are liable to
the Receiver, we intend to vigorously assert our rights
against Pride, Inc.
F-12
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements involving
risks and uncertainties based on management's current expectations, which
involve risks and uncertainties, estimates and projections about the internet
industry and the evolution of on-line Internet commerce. All statements in this
10-QSB related to DME's changing financial operations and expected future growth
or profitability constitute forward-looking statements. The actual results may
differ significantly from those anticipated or expressed in these statements.
The following discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements. The results of interim periods are
not necessarily indicative of the results to be obtained in a full fiscal year.
OVERVIEW
DME Interactive Holdings, Inc. is an interactive services firm and is
a leader in developing Internet marketing services aimed at the urban market. We
provide creative, technology and strategic services that we believe will enable
our clients to gain a competitive advantage in creating, enhancing and
benefiting from relationships with African-American and Latino-American
customers. We are in the process of expanding our business by developing online
resource communities which are designed to provide a variety of content of
interest to our urban target markets. Currently, we are developing two on-line
resource communities, Places of Color and Fan4Life.
In February 2000, the company entered into a strategic partnership with
America Online, Inc. and its wholly owned subsidiary CompuServe Interactive
Services, Inc. This alliance will enable the official launch of an urban branded
Internet service provider hosted by AOL/CompuServe and featuring the Places of
Color online resource community. AOL, through CompuServe, will provide all
interactive services, including email, instant messaging, chat rooms and news
briefs as well as "back end" services for Places of Color, including customer
service, billing, dial up access numbers, and web site hosting and other
technical infrastructure. We will provide relevant content and be responsible
for all marketing and advertising for Places of Color. We will receive a portion
of the subscriber fee from AOL and derive revenue from the advertising and
affiliate relationships with content providers and e-commerce partners.
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Fan4Life is an online resource community aimed at fans of celebrities
who represent, and have popularized, the urban culture, as well as personalities
from sports and entertainment. In conjunction with the celebrity, we develop
personal histories, current news, an e-commerce souvenir gift shop, horoscopes
and chat rooms about or related to the celebrity. Fan4Life is almost fully
operational and presently we are negotiating with additional celebrities to be
added to the site.
As of March 31, 2000, we have not realized any income from Places of
Color and Fan4Life. We derive our interactive service revenues from one of three
pricing arrangements: maintenance, time-and-materials and fixed-price.
We bill and recognize revenues from time-and-materials projects on the
basis of costs incurred in the period. We use a standardized estimation and work
plan development process to determine the requirements and estimated price for
each project. This process takes into account the type and overall complexity of
the project, the anticipated number of personnel of various skill sets needed
and their associated billing rates, and the estimated duration of and risks
associated with the project. Management personnel familiar with the production
process evaluate and price all project proposals.
We recognize revenues from fixed-price projects using the
percentage-of-completion method based on the ratio of costs incurred to the
total estimated project costs. Fees are billed to the client over the course of
the project. We estimate the price for fixed-price projects using the same
methodology as time-and-materials projects. All fixed-price proposals must first
be approved by a member of our senior management team. Provisions for estimated
losses on contracts are made during the period in which such losses become
probable and can be reasonably estimated. To date, such losses have not been
significant.
We bill and recognize revenues from maintenance agreements on a monthly
basis while the agreement is in effect. We believe that maintenance arrangements
are indicative of our strong, long-term relationships with clients which yield
significant benefits both to our clients and to us. We believe that we will
achieve greater predictability of revenues and higher revenue growth with
clients who engage us in maintenance-based relationships. Maintenance agreements
are generally one to two years in length and include a renewal clause.
Typically, maintenance relationships with clients result in additional
fixed-price and time-and-materials projects. Maintenance fees currently
represent a small percentage of our overall revenues. Consistent with our focus
on long-term relationships, our goal is to increase our number of
maintenance-based arrangements.
Our revenues and earnings from our digital communication solutions
business are affected by a number of factors, including:
- the amount of business developed from existing relationships;
- our ability to meet the changing needs of the marketplace;
- employee retention;
- billing rates;
- our ability to deliver complex projects on time; and
- efficient utilization of our employees.
Many of our business initiatives are aimed at enhancing these factors.
Further, we believe that our focus on maintenance-based arrangements will
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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continue to improve the predictability of our quarter-to-quarter results.
Our expenses include direct salaries and costs, selling, general and
administrative and depreciation. Direct salaries and costs includes salaries,
benefits and incentive compensation of billable employees and other direct costs
associated with revenue generation. Sales and marketing expenses include
promotion and new business generation expenses. General and administrative
expenses include benefits costs of management, rent and human resources costs.
Professional fees include accounting, legal and consulting costs. Depreciation
expenses primarily include depreciation of technology equipment and furniture
and fixtures. Personnel compensation and facilities costs represent a high
percentage of our operating expenses and are relatively fixed in advance of each
quarter. Expenses related to our online resource community were expensed to
operations for the quarter ended March 31, 2000. For full year 2000, we expect
such expenses to increase significantly as we complete development and prototype
testing and commence marketing and operations.
As a strategic response to changes in the competitive environment, we
may from time to time make certain pricing, service, technology or marketing
decisions or business or technology acquisitions that could have a material
adverse effect on our business, results of operations and financial condition.
DME may also experience seasonality in its business in the future, resulting in
diminished revenues as a consequence of decreased demand for Internet
professional services during summer and year-end vacation and holiday periods.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED MARCH 31,
1999
GROSS REVENUES AND OTHER INCOME. Gross Revenues for the first quarter of 1999
were $225,305 as compared to $87,589 in 1999. The increase of $137,716, or 157%,
was attributable to several factors, including an increase in the number of
clients served, sales of additional projects to existing clients and additional
service offerings.
TOTAL EXPENSES. For the first quarter of 2000, total expenses were $1,079,290 as
compared to $72,117 in 1999. The increase of $1,007,173, was primarily due to an
increase in accounting, management consulting and legal services to build the
necessary infrastructure for the anticipated expansion of our business and to
commence development of our online resource communities. In particular, salaries
and employee benefits were $407,644 in the first quarter of 2000 as compared to
$18,983 in 1999. The increase of $388,661 was the result of hiring additional
salaried employees to support our internal growth and expanded service
offerings.
NET INCOME (LOSS). As a result of the foregoing, in the first quarter of 2000,
we had a net loss of $853,984 as compared to a net income of $15,472 in 1999.
LIQUIDITY
At March 31, 2000, the Company had $321,051 of cash and cash
equivalents compared to $81,044 at March 31, 1999. Prior to the reverse
merger (re-capitalization) transaction on June 18, 1999, the Company's primary
source of liquidity had been proceeds from officer's loan and operating cash
flows.
Net cash used in operating activities for the first quarter of 2000 was
$734,100. In 2000, net cash used in operating activities was primarily
attributable to our net loss that resulted primarily from establishing the
necessary infrastructure for the expansion of our business and commencing the
development of our online resource communities.
Net cash used in investing activities was $357,767 for first quarter of
2000. This was attributable to the acquisition of property and equipment.
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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Net cash provided by financing activities was $1,231,922. The cash
provided for financing activities during 2000 was primarily the result of
proceeds from the January 2000 private placement of common stock and the March
2000 loan from principal shareholder to meet our working capital requirements.
We believe that current cash on hand and cash generated from operations
in 2000 is sufficient to fund our digital communication solutions business at
our current levels but is not sufficient to allow us to implement our expansion
strategy or properly develop our online resource communities. Therefore, we are
pursing external financing. We cannot assure you that such additional capital
will be available when needed on terms acceptable to us. The inability to obtain
such financing, if needed, could adversely affect our ability to achieve our
business objectives.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation noted in Note 10.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the first quarter of 2000, DME acting by written consent of a
majority of its shareholders adopted an amended and restated
certificate of incorporation. Request notice of such action was given
to shareholders prior to the filing of such certificate of amendment.
ITEM 5. OTHER INFORMATION AND SUBSEQUENT EVENTS
Mark Herlitz-Ferguson resigned as President in April 2000. Carlton
Charles resigned as Chief Financial Officer in May 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
Exhibit 3.1. Certificate of Amendment of Restated Certificate of
Incorporation of DME Interactive Holdings, Inc.
DME Interactive Holdings, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DME Interactive Holdings, Inc.
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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DATE: March 2, 2000 SIGNATURE:/s/ Darien Dash
-----------------------
Darien Dash
President and Chief Executive
Officer
Exhibit 3.1
CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF
DME INTERACTIVE HOLDINGS, INC.
DME Interactive Holdings, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
I. The name of the Corporation is DME Interactive Holdings, Inc.
and the Corporation was originally incorporated under the name Pride Automotive
Group, Inc., and the original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on March 20,
1995.
II. The Certificate of Incorporation was amended previously on June
15, 1999 and June 18, 1999.
III. Pursuant to Sections 242 and 245 of the Delaware General
Corporation Law ("DGCL"), this Restated Certificate of Incorporation restates
and integrate and further amends the provisions of the Certificate of
Incorporation of the Corporation, as amended, and has been consented to in
writing by the Board of Directors and the sole stockholder of the Corporation.
IV. The sole amendment adopted hereby is the increase in the number
of authorized shares of common stock and the addition of preferred stock.
V. The text of the Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
FIRST: The name of the corporation is:
DME Interactive Holdings, Inc.
SECOND: Its registered office in the State of Delaware is to
be located at 1013 Centre Road, Wilmington, Delaware 19805, County of New
Castle. The registered agent in charge thereof is The Company Corporation, 1013
Centre Road, Wilmington, Delaware 19805, County of New Castle.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the corporation
laws of the State of Delaware.
FOURTH: Capital Stock
(A) Authorized Capital Stock. The total number of shares of
all classes of stock which this Corporation shall have authority to issue is
SIXTY TWO MILLION (62,000,000) shares, consisting of SIXTY MILLION (60,000,000)
shares of common stock, $.001 par value per share (hereinafter, the "Common
Stock"), and TWO MILLION (2,000,000) shares of Preferred Stock, $.01 par value
per share (hereinafter, the "Preferred Stock").
(B) Preferred Stock.
(i) Shares of Preferred Stock may be issued from time
to time in one or more series as may from time to time be determined by the
Board of Directors. Each series shall be distinctly designated. The relative
rights, preferences and limitations of shares of undesignated Preferred Stock
are as provided for in this Article THIRD.
(ii) Undesignated Preferred Stock. Shares of Preferred
Stock may be issued from time to time in one or more series as may from time to
time be
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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determined by the Board of Directors. Each series shall be distinctly
designated. All shares of any one series of the Preferred Stock shall be alike
in every particular event except that there may be different dates from which
dividends thereon, if any, shall be cumulative, if made cumulative. The powers,
preferences and relative, participating, optional and other rights of each
series, and the qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding. Subject
to the provisions of this Article THIRD, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of each particular
series of Preferred Stock, the designation, powers, preferences and relative,
participating, optional and other rights, and the qualifications, limitations
and restrictions thereof, if any, of such series, including, but without
limiting the generality of the foregoing, the following:
(1) the distinctive designation of and the
number of shares of Preferred Stock which shall constitute the series, which
number may be increased (except as otherwise fixed by the Board of Directors) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by action of the Board of Directors;
(2) the rate and times at which, and the
terms and conditions upon which, dividends, if any, on shares of the series
shall be paid, the extent of preferences of relation, if any, of such dividends
to the dividends payable on any other class or classes of stock of this
corporation, or on any series of Preferred Stock or of any other class or
classes of stock of this corporation, and whether such dividends shall be
cumulative or non-cumulative;
(3) the right, if any, of the holders of
shares of the series to convert the same into, or exchange the same for, shares
of any other class or classes of stock of this corporation, or of any series of
Preferred Stock of this corporation, and the terms and conditions of such
conversion or exchange;
(4) whether shares of the series shall be
subject to redemption, and the redemption price or prices including, without
limitation, a redemption price or prices payable in shares of the Common Stock
and the time or times at which, and the terms and conditions upon which, shares
of the series may be redeemed;
(5) the rights, if any, of the holders of
shares of the series upon voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding up of this
corporation;
(6) the terms of the sinking fund or
redemption or purchase account, if any, to be provided for shares of the series;
and
(7) the voting powers, if any, of the
holders of shares of the series which may, without limiting the generality of
the foregoing, include (i) the right to more or less than one vote per share on
any or all matters voted upon by the stockholders and (ii) the right to vote, as
a series by itself or together with other series of Preferred Stock or together
with all series of Preferred Stock as a class, upon such matters, under such
circumstances and upon such conditions as the Board of Directors may fix,
including, without limitation, the right, voting as a series by itself or
together with other series of Preferred Stock or together with all series of
Preferred Stock as a class, to elect one or more directors of this corporation,
or to elect one or more directors of this corporation, or to elect a majority of
the members of the Board, under such circumstances and upon such conditions as
the Board may determine.
(C) Common Stock.
(i) After the requirements with respect to
preferential dividends on Preferred Stock (fixed in accordance with provisions
of this Article THIRD), if any, shall have been met and after this corporation
shall have complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase accounts (fixed
in accordance with the provisions of paragraph (C) of this Article THIRD) and
subject further to any other conditions which may be fixed in accordance with
the provisions of paragraph (C) of this Article THIRD, then but not otherwise,
the holders of Common Stock shall be entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors.
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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(ii) After distribution in full of the
preferential amount (fixed in accordance with the provisions of paragraph (C) of
this Article THIRD), if any, to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or sale of
assets, dissolution or winding-up of this corporation, the holders of the Common
Stock shall be entitled to receive all the remaining assets of this corporation,
tangible and intangible, of whatever kind available for distribution to
stockholders, ratably in proportion to the number of shares of the Common Stock
held by each.
(iii) Except as otherwise be required by law, this
Certificate of Incorporation or the provisions of the resolution or resolutions
as may be adopted by the Board of Directors pursuant to this Article THIRD, each
holder of Common Stock shall have one vote in respect of each share of Common
Stock held by such holder on each matter voted upon by the stockholders.
(D) Other Provisions.
(i) The relative powers, preferences and rights of
each series of Preferred Stock in relation to the powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed from
time to time by the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in this Article THIRD, and the consent, by class
or series vote or otherwise, of the holders of the Preferred Stock of such of
the series of the Preferred Stock as are from time to time outstanding shall not
be required for the issuance by the Board of Directors of any other series of
Preferred Stock whether the powers, preferences and rights of such other series
shall be fixed by the Board of Directors as senior to, or on a parity with, the
powers, preferences and rights of such outstanding series, or any of them,
provided, however, that the Board of Directors may provide in such resolution or
resolutions adopted with respect to any series of Preferred Stock that the
consent of the holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other shares of Preferred Stock.
(ii) Subject to the provisions of subparagraph (i)
of this paragraph, shares of any series of Preferred Stock may be issued from
time to time as the Board of Directors shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(iii) Shares of the Common Stock may be issued from
time to time as the Board of Directors shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(iv) No holder of any of the shares of any class
or series of stock or of options, warrants or other rights to purchase shares of
any class or series of stock or of other securities of the corporation shall
have any preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be issued by
reason of any increase of the authorized capital stock of the corporation of any
class or series, or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the corporation of any
class or series, or carrying any right to purchase stock of any class or series.
FIFTH: The name and mailing address of the sole incorporator
is Mitchell Lampert, Lampert & Lampert, 10 East 40th Street, New York, New York
10016.
SIXTH: The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by the
provisions of paragraph (7) of subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented.
SEVENTH: The corporation shall, to the fullest extent
permitted by the provisions of Section 145 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented, indemnify any
and all persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters referred
to in or covered by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
EIGHTH: (A) The Business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts as are
not by law or by the Certificate of Incorporation of the Corporation directed or
required to be exercised or done by the shareholders.
(B) The number of Directors of the Corporation shall
be as from time to time provided by or pursuant to the By-Laws of the
Corporation, but shall be not less than three. A director shall hold office
until the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible.
(C) Newly created directorships resulting from any
increase in the authorized number of Directors constituting the entire Board of
Directors or vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or any other
cause shall be filled only by the affirmative vote of a majority of the
remaining directors then in office, even if less than a quorum, or by the sole
remaining director. Directors elected to fill vacancies shall hold office for
the remainder of the full term of the class of Directors in which the vacancy
occurred and until such director's successor shall be elected and shall qualify.
The directors of any class of directors of the Corporation may be removed by the
shareholders only for cause by the affirmative vote of the holders of at least
70% of the combined voting power of all outstanding voting stock. For the
purpose of this Article SEVENTH, "cause" shall mean the willful failure of a
director to perform in any substantial respect such Director's duties to the
Corporation (other than any such failure resulting from incapacity due to
physical or mental illness), willful malfeasance by a Director in the
performance of his duties to the Corporation which is materially and
demonstrably injurious to the Corporation, the commission by a Director of an
act of fraud in the performance of his duties, the conviction of a Director for
a felony punishable by confinement for a period in excess of one year, or the
ineligibility of a Director for continuation in office under any applicable
rules, regulations or orders of any federal or state regulatory authority.
(D) Notwithstanding the foregoing, whenever the
holders of any one or more classes or series of preferred stock or preference
shares issued by the Corporation shall have the right to vote separately by
class or series to elect Directors at an annual or special meeting of
shareholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of this
Certificate of Incorporation applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this Article SEVENTH unless
expressly provided by such terms.
(E) Where the term "Board of Directors" is used in
this Certificate of Incorporation, such term shall mean the Board of Directors
of the Corporation; provided, however, that to the extent any committee of
Directors of the Corporation is lawfully entitled to exercise the powers of the
Board of Directors, such committee may exercise any right or authority of the
Board of Directors under this Certificate of Incorporation.
(F) Notwithstanding any other provisions of this
Certificate of Incorporation or the By-Laws of this Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Certificate of Incorporation, the By-Laws of the
Corporation or otherwise), the affirmative vote of the holders of at least 70%
of the combined voting power of all outstanding voting stock shall be required
to adopt any provisions inconsistent with, or to amend or repeal, this Article
SEVENTH.
NINTH: The Corporation indemnifies each director, officer,
employee or agent of the corporation or any other person who serves or has
served at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership,
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DME INTERACTIVE HOLDINGS INC - 10QSB - Quarterly Report
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joint venture, trust or other enterprise to the fullest extent permitted by the
General Corporation Law of Delaware.
I, being the President and Chief Executive Officer hereby sign
this certificate this 31st day of March, 2000.
DME INTERACTIVE HOLDINGS, INC.
---------------------------------
Darien Dash
President and Chief Executive Officer
(b) REPORTS ON FORM 8-K.
The registrant filed a Form 8-K with the Securities and Exchange Commission on
February 24, 2000. In this filing the registrant disclosed that on February 2,
2000, along with its subsidiary, Places of Color, Inc., they entered into a
Strategic Agreement with CompuServe Interactive Services, Inc., a subsidiary of
America Online, Inc., whereby the parties have agreed to develop and market an
urban-oriented online service. The service shall be marketed under the name
"Places of Color, Powered by CompuServe" (the "Service"). CompuServe shall
charge subscribers a monthly fee. The registrant shall receive a monthly fee
from CompuServe for all subscribers to the Service, as well as all revenue
generated by advertising and e-commerce opportunities on the Places of Color web
site. The initial term of the Strategic Agreement is eighteen months.
In connection with the Strategic Agreement, the registrant agreed to issue to
America Online, Inc., 1,250,000 shares of its common stock for an aggregate
purchase price of $1,250. Additionally, America Online was issued a warrant to
purchase up to 4,000,000 shares at a purchase price of $8.563 per share.
However, the warrant only becomes exercisable if, at the end of the eighteen
month term, the parties negotiate an extension of the Strategic Agreement or
enter into a substantially similar agreement. The parties also entered into an
Investor Rights Agreement granting America Online registration rights with
respect to the common stock it has acquired as well as the common stock it may
acquire through exercise of the warrant.
SIGNATURE
Pursuant to requirements of the Securities Exchange Act of 1934, as
amended, the Issuer has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
May 15, 2000 DME Interactive Holdings, Inc.
By:
----------------------------------------
Thomas O'Rourke
Director, President and Chief Operating
Officer
By:
----------------------------------------
Andre H. McKoy
Executive Vice President and Chief
Financial Officer
(principal accounting officer)
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<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
UNDER
DME INTERACTIVE HOLDINGS, INC.
STOCK OPTION PLAN OF 2000
THIS AGREEMENT, made this 11th day of May, 2000, by and
between DME INTERACTIVE HOLDINGS, INC., a Delaware corporation (hereinafter
called the "Company"), and
Thomas O'Rourke (hereinafter called "Optionee"),
WITNESSETH THAT:
WHEREAS, the Board of Directors of the Company ("Board of
Directors") has adopted the DME Interactive Holdings, Inc. Stock Option Plan of
2000 (the "Plan") pursuant to which options covering shares of the Common Stock
of the Company may be granted to employees of the Company; and
WHEREAS, Optionee is now an employee of the Company; and
WHEREAS, the Company desires to grant to Optionee the option
to purchase certain shares of its stock under the terms of the Plan;
NOW, THEREFORE, in consideration of the premises, and of the
mutual agreements hereinafter set forth, it is covenanted and agreed as follows:
1. Grant Subject to Plan. This option is granted under and is
expressly subject to, all the terms and provisions of the Plan, which terms are
incorporated herein by reference. The Committee referred to in Paragraph 4 of
the Plan ("Committee") has been appointed by the Board of Directors, and
designated by it, as the Committee to make grants of options.
2. Grant and Terms of Option. Pursuant to action of the
Committee, which action was taken as of May 8, 2000 ("Date of Grant"), the
Company grants to Optionee the option to purchase all or any part of Four
Million (4,000,000) shares of the Common Stock of the Company, no par value
("Common Stock"), for a period of ten (10) years from the Date of Grant, at the
purchase price of $2.81 per share per first 1.33 million shares, $4.00 per
additional 1.33 million shares, and $5.00 per remaining 1.33 million shares;
provided, however, that, except as provided in Section 4(c) of the Employment
Agreement by and between Employee and Company dated as of April 18, 2000, the
right to exercise such option shall be, and is hereby, restricted so that no
shares may be purchased prior to the first anniversary of the Date of Grant;
that at any time during the term of this option on or after the first
anniversary of the Date of Grant, Optionee may purchase up to 33-1/3 % of the
total number of shares to which this option relates; that at any time during the
term of this option on or after the second anniversary of the Date of Grant,
Optionee may purchase up to an additional 33-1/3% of the total number of shares
to which this option relates; that at any time during the term of this option on
or after the third anniversary of the Date of Grant, Optionee may purchase up to
an additional 33-1/3% of the total
<PAGE>
number of shares to which this option relates so that on the third anniversary
of the Date of Grant, Optionee will have become entitled to purchase 100% of the
total number of shares to which this option relates. Notwithstanding the
foregoing, in the event of a Change of Control (as hereinafter defined) Optionee
may purchase 100% of the total number of shares (four (4) million) to which this
option relates. In no event may this option or any part thereof be exercised
after the expiration of ten (10) years from the Date of Grant. The purchase
price of the shares subject to the option may be paid by any manner specified in
Section 6 of the Plan. For the purposes of this Agreement, a Change of Control
means:
a. The purchase or other acquisition (other than from
the Company) by any person, entity or group of persons, within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (excluding, for this purpose, the
Company or its subsidiaries or any employee benefit plan of the Company
or its subsidiaries), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either
the then-outstanding shares of common stock of the Company or the
combined voting power of the Company's then-outstanding voting
securities entitled to vote generally in the election of directors; or
b. Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case with respect to
which persons who were the stockholders of the Company immediately
prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of, respectively, the common
stock and the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated
corporation's then-outstanding voting securities, or of a liquidation
or dissolution of the Company or of the sale of all or substantially
all of the assets of the Company.
3. Anti-Dilution Provisions. In the event that, during the
term of this Agreement, there is any change in the number of shares of
outstanding Common Stock of the Company by reason of stock dividends,
recapitalizations, mergers, consolidations, split-ups, combinations or exchanges
of shares and the like, the number of shares covered by this option agreement
and the price thereof shall be adjusted, to the same proportionate number of
shares and price as in this original agreement.
4. Investment Purpose. Optionee represents that, in the event
of the exercise by him of the option hereby granted, or any part thereof, he
intends to purchase the shares acquired on such exercise for investment and not
with a view to resale or other distribution; except that the Company shall waive
or release this condition in the event the shares acquired on exercise of the
option are registered under the Securities Act of 1933, or upon the happening of
any other contingency which the Company shall determine warrants the waiver or
release of this condition. Optionee agrees that the certificates evidencing the
shares acquired by him on exercise of all or any part of this option, may bear a
restrictive legend, if appropriate, indicating that the shares have not been
registered under said Act and are subject to restrictions on the transfer
thereof, which legend may be in the following form (or such other form as the
Company shall determine to be proper), to-wit:
2
<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, but have been
issued or transferred to the registered owner pursuant to the
exemption afforded by Section 4(2) of said Act. No transfer or
assignment of these shares by the registered owner shall be
valid or effective, and the issuer of these shares shall not
be required to give any effect to any transfer or attempted
transfer of these shares, including without limitation, a
transfer by operation of law, unless (a) the issuer shall have
received an opinion of its counsel that the shares may be
transferred without requirement of registration under said
Act, or (b) there shall have been delivered to the issuer a
'no-action' letter from the staff of the Securities and
Exchange Commission, or (c) the shares are registered under
said Act."
5. Non-Transferability. Neither the option hereby granted nor
any rights thereunder or under this Agreement may be assigned, transferred or in
any manner encumbered except by will or the laws of descent and distribution,
and any attempted assignment, transfer, mortgage, pledge or encumbrance except
as herein authorized, shall be void and of no effect. The option may be
exercised during Optionee's lifetime only by him.
6. Termination of Employment. In the event of the termination
of employment of Optionee (including by death) the option granted may be
exercised at the times and to the extent provided in paragraph 9 of the Plan for
the total number of shares (four (4) million) to which this option relates.
7. Death of Optionee. In the event of the death of Optionee
during the term of this Agreement and while he is employed by the Company (or a
subsidiary), or within three (3) months after the termination of his employment
(or one (l) year in the case of the termination of employment of an Optionee who
is disabled as provided in the Plan), this option may be exercised, to the
extent that he was entitled to exercise it at the date of his death, by a
legatee or legatees of Optionee under his last will, or by his personal
representatives or distributees, at any time within a period of one (1) year
after his death, but not after ten (10) years from the date hereof, and only if
and to the extent that he was entitled to exercise the option at the date of his
death.
8. Shares Issued on Exercise of Option. It is the intention of
the Company that on any exercise of this option it will transfer to Optionee
shares of its authorized but unissued stock or transfer Treasury shares, or
utilize any combination of Treasury shares and authorized but unissued shares,
to satisfy its obligations to deliver shares on any exercise hereof.
9. Committee Administration. This option has been granted
pursuant to a determination made by the Committee, and such Committee or any
successor or substitute committee authorized by the Board of Directors or the
Board of Directors itself, subject to the express terms of this option, shall
have plenary authority to interpret any provision of this option and to make any
determinations necessary or advisable for the administration of this option and
the exercise of the rights herein granted, and may waive or amend any provisions
hereof in any manner not adversely affecting the rights granted to Optionee by
the express terms hereof.
3
<PAGE>
10. Option an Incentive Stock Option. This option is intended
as, and shall be treated as, an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed on its behalf by its Chairman and Chief Executive Officer and to be
attested by its Secretary under the seal of the Company, pursuant to due
authorization, and Optionee has signed this Agreement to evidence his acceptance
of the option herein granted and of the terms hereof, all as of the date hereof.
DME INTERACTIVE HOLDINGS, INC.
By----------------------------
DARIEN DASH
ATTEST:
- --------------------
Secretary
--------------------
Optionee
4
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
UNDER
DME INTERACTIVE HOLDINGS, INC.
STOCK OPTION PLAN OF 2000
THIS AGREEMENT, made this 11th day of May, 2000, by and
between DME INTERACTIVE HOLDINGS, INC., a Delaware corporation (hereinafter
called the "Company"), and
Darien Dash (hereinafter called "Optionee"),
WITNESSETH THAT:
WHEREAS, the Board of Directors of the Company ("Board of
Directors") has adopted the DME Interactive Holdings, Inc. Stock Option Plan of
2000 (the "Plan") pursuant to which options covering shares of the Common Stock
of the Company may be granted to employees of the Company; and
WHEREAS, Optionee is now an employee of the Company; and
WHEREAS, the Company desires to grant to Optionee the option
to purchase certain shares of its stock under the terms of the Plan;
NOW, THEREFORE, in consideration of the premises, and of the
mutual agreements hereinafter set forth, it is covenanted and agreed as follows:
1. Grant Subject to Plan. This option is granted under and is
expressly subject to, all the terms and provisions of the Plan, which terms are
incorporated herein by reference. The Committee referred to in Paragraph 4 of
the Plan ("Committee") has been appointed by the Board of Directors, and
designated by it, as the Committee to make grants of options.
2. Grant and Terms of Option. Pursuant to action of the
Committee, which action was taken as of May 8, 2000, the Company grants to
Optionee the option to purchase all or any part of Four Million (4,000,000)
shares of the Common Stock of the Company, no par value ("Common Stock"), for a
period of ten (10) years from July 1, 1999 ("the Date of Grant"), at the
purchase price of $2.81 per share per first 2.5 million shares, $4.00 per
additional 750,000 shares, and $5.00 per remaining 750,000 shares; provided,
however, that, except as provided in Section 6 of this Agreement, the right to
exercise such option shall be, and is hereby, restricted so that no shares may
be purchased prior to the first anniversary of the Date of Grant; that at any
time during the term of this option on or after the first anniversary of the
Date of Grant, Optionee may purchase up to 33-1/3 % of the total number of
shares to which this option relates; that at any time during the term of this
option on or after the second anniversary of the Date of Grant, Optionee may
purchase up to an additional 33-1/3% of the total number of shares to which this
option relates; that at any time during the term of this option on or after the
third anniversary of the Date of Grant, Optionee may purchase up to an
additional 33-1/3% of the total number of shares to which this option relates so
that on the third anniversary of the Date of Grant, Optionee
<PAGE>
will have become entitled to purchase 100% of the total number of shares to
which this option relates. Notwithstanding the foregoing, in the event of a
Change of Control (as hereinafter defined) Optionee may purchase 100% of the
total number of shares (four (4) million) to which this option relates. In no
event may this option or any part thereof be exercised after the expiration of
ten (10) years from the Date of Grant. The purchase price of the shares subject
to the option may be paid by any manner specified in Section 6 of the Plan. For
the purposes of this Agreement, a Change of Control means:
a. The purchase or other acquisition (other than from
the Company) by any person, entity or group of persons, within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (excluding, for this purpose, the
Company or its subsidiaries or any employee benefit plan of the Company
or its subsidiaries), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either
the then-outstanding shares of common stock of the Company or the
combined voting power of the Company's then-outstanding voting
securities entitled to vote generally in the election of directors; or
b. Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case with respect to
which persons who were the stockholders of the Company immediately
prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of, respectively, the common
stock and the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated
corporation's then-outstanding voting securities, or of a liquidation
or dissolution of the Company or of the sale of all or substantially
all of the assets of the Company.
3. Anti-Dilution Provisions. In the event that, during the
term of this Agreement, there is any change in the number of shares of
outstanding Common Stock of the Company by reason of stock dividends,
recapitalizations, mergers, consolidations, split-ups, combinations or exchanges
of shares and the like, the number of shares covered by this option agreement
and the price thereof shall be adjusted, to the same proportionate number of
shares and price as in this original agreement.
4. Investment Purpose. Optionee represents that, in the event
of the exercise by him of the option hereby granted, or any part thereof, he
intends to purchase the shares acquired on such exercise for investment and not
with a view to resale or other distribution; except that the Company shall waive
or release this condition in the event the shares acquired on exercise of the
option are registered under the Securities Act of 1933, or upon the happening of
any other contingency which the Company shall determine warrants the waiver or
release of this condition. Optionee agrees that the certificates evidencing the
shares acquired by him on exercise of all or any part of this option, may bear a
restrictive legend, if appropriate, indicating that the shares have not been
registered under said Act and are subject to restrictions on the transfer
thereof, which legend may be in the following form (or such other form as the
Company shall determine to be proper), to-wit:
"The shares represented by this certificate have not been
registered under the
2
<PAGE>
Securities Act of 1933, but have been issued or transferred
to the registered owner pursuant to the exemption afforded
by Section 4(2) of said Act. No transfer or assignment of
these shares by the registered owner shall be valid or
effective, and the issuer of these shares shall not be
required to give any effect to any transfer or attempted
transfer of these shares, including without limitation, a
transfer by operation of law, unless (a) the issuer shall
have received an opinion of its counsel that the shares may
be transferred without requirement of registration under
said Act, or (b) there shall have been delivered to the
issuer a 'no-action' letter from the staff of the Securities
and Exchange Commission, or (c) the shares are registered
under said Act."
5. Non-Transferability. Neither the option hereby granted nor
any rights thereunder or under this Agreement may be assigned, transferred or in
any manner encumbered except by will or the laws of descent and distribution,
and any attempted assignment, transfer, mortgage, pledge or encumbrance except
as herein authorized, shall be void and of no effect. The option may be
exercised during Optionee's lifetime only by him.
6. Termination of Employment. In the event of the termination
of employment of Optionee (including by death), the option granted may be
exercised at the times and to the extent provided in paragraph 9 of the Plan for
the total number of shares (four (4) million) to which this option relates.
7. Death of Optionee. In the event of the death of Optionee
during the term of this Agreement and while he is employed by the Company (or a
subsidiary), or within three (3) months after the termination of his employment
(or one (l) year in the case of the termination of employment of an Optionee who
is disabled as provided in the Plan), this option may be exercised, to the
extent that he was entitled to exercise it at the date of his death, by a
legatee or legatees of Optionee under his last will, or by his personal
representatives or distributees, at any time within a period of one (1) year
after his death, but not after ten (10) years from the date hereof, and only if
and to the extent that he was entitled to exercise the option at the date of his
death.
8. Shares Issued on Exercise of Option. It is the intention of
the Company that on any exercise of this option it will transfer to Optionee
shares of its authorized but unissued stock or transfer Treasury shares, or
utilize any combination of Treasury shares and authorized but unissued shares,
to satisfy its obligations to deliver shares on any exercise hereof.
9. Committee Administration. This option has been granted
pursuant to a determination made by the Committee, and such Committee or any
successor or substitute committee authorized by the Board of Directors or the
Board of Directors itself, subject to the express terms of this option, shall
have plenary authority to interpret any provision of this option and to make any
determinations necessary or advisable for the administration of this option and
the exercise of the rights herein granted, and may waive or amend any provisions
hereof in any manner not adversely affecting the rights granted to Optionee by
the express terms hereof.
10. Option an Incentive Stock Option. This option is intended
as, and shall be
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<PAGE>
treated as, an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed on its behalf and to be attested by its Secretary under the seal of
the Company, pursuant to due authorization, and Optionee has signed this
Agreement to evidence his acceptance of the option herein granted and of the
terms hereof, all as of the date hereof.
DME INTERACTIVE HOLDINGS, INC.
By
----------------------------
ATTEST:
- ------------------
Secretary
--------------------
Optionee
<PAGE>
DME INTERACTIVE HOLDINGS, INC. STOCK OPTION PLAN OF 2000
1. Purpose of the Plan.
The DME Interactive Holdings, Inc. Stock Option Plan of 2000 (the
"Plan") is intended to provide an incentive to, and to encourage ownership of
the common stock (the "Common Stock"), of DME Interactive Holdings, Inc.
("Company"), by, selected employees of the Company. Certain options granted
hereunder may qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and other options granted hereunder may not qualify as
Incentive Stock Options ("Nonqualified Stock Options"), as determined in each
instance by the Committee referred to in Paragraph 3 (the "Committee").
2. Stock Subject to the Plan.
A total of twelve million (12,000,000) shares of the authorized but
unissued Common Stock have been allocated to the Plan and will be reserved for
issue upon the exercise of options granted under the Plan. The Company may, in
its discretion, use shares held in the treasury in lieu of authorized but
unissued shares. If any such option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject thereto
shall again be available for the purposes of the Plan. Any shares of Common
Stock issued pursuant to the Plan which are used by an optionee as full or
partial payment to the Company of the purchase price of shares of Common Stock
upon exercise of a stock option shall again be available for the purposes of the
Plan. The number of shares with respect to which options may be granted to any
individual during any calendar year may not exceed four million (4,000,000)
shares.
3. Administration.
The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have plenary authority, in
its discretion, to determine the individuals to whom, and the time or times at
which, options shall be granted and the number of shares to be subject to each
option. In making such determinations the Committee may take into account the
nature of the services rendered by the respective individuals, their present and
potential contributions to the Company's success and such other factors as the
Committee, in its discretion, shall deem relevant. Subject to the express
provisions of the Plan, the Committee shall also have plenary authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of the respective stock
option agreements or certificates (which need not be identical) and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee's determinations on the matters referred to in this Paragraph 3
shall be final, binding and conclusive. Except to the extent prohibited by
applicable law, the Committee may grant to one or more of its members or to any
person(s) selected by it, subject to revocation or modification by the
Committee, the authority to grant options under the Plan to eligible persons
described in Paragraph 5 hereof, except that the no such person may be delegated
authority to grant options to any employee who is subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934 or who is a
"covered employee" within the meaning of Section 162(m)(3) of the Code.
<PAGE>
4. The Committee.
The Committee shall consist of two or more directors appointed by the
Board of Directors, which may from time to time appoint members of the Committee
in substitution for members previously appointed and may fill vacancies, however
caused, in the Committee. The Board shall select a chairman of the Committee.
The Committee shall hold its meetings at such times and places as it may
determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members
present at any meeting at which there is a quorum. Any decision or determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary, shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable.
5. Eligibility.
Options may be granted to employees, consultants or advisors of the
Company or its subsidiaries selected by the Committee, which may include
officers, whether or not they are directors, but does not include directors who
are not also executive employees of the Company, or a subsidiary thereof, but
may include directors of subsidiaries which are organized under laws outside the
United States. Provided, that Incentive Stock Options may only be granted to
employees of the Company or a subsidiary. The term "subsidiary" shall mean any
corporation, partnership, limited liability company or other entity (other than
the Company), in an unbroken chain of entities beginning with the Company if, at
the time of the granting of the option, each of the entities other than the last
entity in the unbroken chain owns equity possessing 50% or more of the total
combined voting power of all classes of equity in one of the other entities in
such chain, or such other meaning as may be hereafter ascribed to it in Section
424 of the Code.
6. Option Prices.
The purchase price of the Common Stock under each option shall not be
less than 100% of the fair market value of the stock on the date of the grant of
the option as determined by the by the Committee. The purchase price is to be
paid in full upon the exercise of the option, either (i) in cash, (ii) in the
discretion of the Committee, by the tender, either actually or by attestation,
to the Company of shares of the Common Stock of the Company, owned by the
optionee and registered in his name, having a fair market value, as defined
above, on the date of exercise equal to the cash exercise price of the option
being exercised, or (iii) in the discretion of the Committee, by any combination
of the payment methods specified in clauses (i) and (ii) hereof; provided that,
no shares of Common Stock may be tendered in exercise of an Incentive Stock
Option if such shares were acquired by the optionee through the exercise of an
Incentive Stock Option unless (i) such shares have been held by the optionee for
at least one year and (ii) at least two years have elapsed since such Incentive
Stock Option was granted; provided further, that no shares may be tendered in
exercise of an option unless such shares have been held by the optionee for at
least six (6) months. In addition, the optionee may effect a "cashless exercise"
of an option in lieu of paying the option price in cash or shares owned by the
optionee, provided that such "cashless exercise" is facilitated through a third
party, other than the Company, in accordance with the rules and procedures
adopted by the Committee. Further, the Committee, in its discretion, may approve
such other methods or forms of payment of the purchase price, and
2
<PAGE>
establish rules and procedures therefor. The proceeds of sale of stock subject
to option are to be added to the general funds of the Company or to the shares
of the Common Stock of the Company held in its Treasury, and used for such
corporate purposes as the Board of Directors shall determine.
7. Option Amounts.
The maximum aggregate fair market value (determined at the time an
option is granted in the same manner as provided for in Paragraph 6 hereof) of
the Common Stock of the Company with respect to which Incentive Stock Options
are exercisable for the first time by any optionee during any calendar year
(under all plans of the Company and its subsidiaries) shall not exceed $100,000.
8. Exercise of Options.
(a) The term of each option shall be not more than ten (10) years
from the date of granting thereof or such shorter period as is prescribed in
Paragraph 9 hereof; Within such limit, options will be exercisable at such time
or times, and subject to such restrictions and conditions, as the Committee
shall, in each instance, approve, which need not be uniform for all optionees;
provided, however, that except as provided in Subparagraph (b) of this Paragraph
8 or Paragraph 9 hereof, no option may be exercised at any time unless the
optionee is then an employee of the Company or a subsidiary and has been so
employed continuously since the granting of the option. Upon exercise of an
option the Committee shall withhold a sufficient number of shares to satisfy the
Company's withholding obligations for any taxes incurred as a result of such
exercise, based on the fair market value thereof, as defined above, as of the
date taxes are required to be withheld; provided, that in lieu of all or part of
such withholding, the optionee may pay an equivalent amount of cash to the
Company.
(b) Notwithstanding any other provision of the Plan, unless otherwise
provided by the Committee in the option agreement, each outstanding option shall
become immediately and fully exercisable for a one (1) year period following the
date of a "Change of Control" but in no event beyond the specified term of such
options; provided that, after such one (1) year period, the normal option
exercise provisions of the Plan and such option shall govern; and provided
further, that in the event an optionee's employment with the Company or any
subsidiary is terminated within two (2) years of a Change of Control, all
outstanding stock options of such optionee at the date of termination shall be
exercisable for a period of six (6) months beginning on the date of termination
but in no event beyond the specified term of such options. The option agreements
may contain such other or different provisions as the Committee, in its
discretion, may approve in addition to, or in lieu of, this Subparagraph (b) of
Paragraph 8. In addition, the Committee shall have the authority, in its
discretion, to accelerate the vesting and permit the immediate exercisability of
outstanding options under such other circumstances as it may deem appropriate.
(c) "Change of Control," as used in Paragraph 8(b) shall mean:
(i) The purchase or other acquisition (other than from the Company) by any
person, entity or group of persons, within the meaning of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(excluding, for this purpose, the Company or its subsidiaries or any employee
benefit plan of the Company or its subsidiaries), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either the
3
<PAGE>
then-outstanding shares of common stock of the Company or the combined voting
power of the Company's then-outstanding voting securities entitled to vote
generally in the election of directors; or (ii) Approval by the stockholders of
the Company of a reorganization, merger or consolidation, in each case with
respect to which persons who were the stockholders of the Company immediately
prior to such reorganization, merger or consolidation do not, immediately
thereafter, own more than 50% of, respectively, the common stock and the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated corporation's then-outstanding voting
securities, or of a liquidation or dissolution of the Company or of the sale of
all or substantially all of the assets of the Company.
9. Termination of Employment.
The holder of any option issued hereunder must exercise the option
prior to his termination of employment, except that (i) if the employment of an
optionee terminates with the consent and approval of his employer, the Committee
in its absolute discretion may permit the optionee to exercise his option to the
extent that he was entitled to exercise it at the date of such termination of
employment, at any time within twelve (12) months after such termination, but
not after ten (10) years from the date of the granting thereof, or, (ii) if the
employment agreement between optionee and the Company provides that all of
optionee's options vest immediately upon his termination without cause, then
optionee may exercise such options at any time within twelve (12) months after
such termination. If a subsidiary of the Company ceases to be a subsidiary of
the Company, an optionee who is employed by such former subsidiary and is no
longer employed by either the Company or any current subsidiary of the Company
shall be deemed to have terminated employment with the Company and every
subsidiary of the Company. If the optionee terminates employment on account of
disability he may exercise such option to the extent he was entitled to exercise
it at the date of such termination at any time within one (1) year of the
termination of his employment but not after ten (10) years from the date of the
granting thereof. For this purpose a person shall be deemed to be disabled if he
is permanently and totally disabled within the meaning of Section 422(c)(6) of
the Code, which, as of the date hereof, shall mean that he is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months. A person shall be considered disabled only if he furnishes such proof
of disability as the Committee may require. Options granted under the Plan shall
not be affected by any change of employment so long as the holder continues to
be an employee of the Company or a subsidiary thereof. The option agreements may
contain such provisions as the Committee shall approve with reference to the
effect of approved leaves of absence. Nothing in the Plan or in any option
granted pursuant to the Plan shall confer on any individual any right to
continue in the employ of the Company or any subsidiary or interfere in any way
with the right of the Company or any subsidiary thereof to terminate his
employment at any time.
10. Non-Transferability of Options.
Each option granted under the Plan shall, by its terms, be
non-transferable otherwise than by will or the laws of descent and distribution
and an option may be exercised, during the lifetime of the holder thereof, only
by him; provided, however, that the Committee may, in its
4
<PAGE>
sole discretion permit an optionee to transfer a Nonqualified Stock Option to
such persons or entities as the Committee may approve, in its discretion. In the
event of any such transfer, the option shall still be subject to the provisions
of Paragraphs 8 and 9 hereof concerning the exercisability during the optionee's
employment.
11. Successive Option Grants.
Successive option grants may be made to any holder of options under
the Plan.
12. Investment Purpose.
Each option under the Plan shall be granted only on the condition
that all purchases of stock thereunder shall be for investment purposes, and not
with a view to resale or distribution, except that the Committee may make such
provision with respect to options granted under this Plan as it deems necessary
or advisable for the release of such condition upon the registration with the
Securities and Exchange Commission of stock subject to the option, or upon the
happening of any other contingency warranting the release of such condition.
13. Adjustments Upon Changes in Capitalization or Corporate Acquisitions.
In the event of increases or decreases in the outstanding Common
Stock, or such shares are exchanged or changed, by reason of any stock dividend,
stock split, reverse stock split, reclassification, recapitalization, merger,
consolidation, reorganization, split-up, spin-off, combination or exchange of
shares or the like, and, in the event of any such increase, decrease, exchange
or change in the outstanding Common Stock, (i) the aggregate number, kind and
class of shares available for issuance under the Plan, (ii) the maximum number
of shares as to which options may be granted to any individual, and (iii) the
number, kind and class of shares subject to outstanding options and the exercise
prices of such options, shall be appropriately and proportionately adjusted or
substituted by the Committee, whose determination shall be final, binding and
conclusive; provided that the number of shares subject to any award shall always
be a whole number. Notwithstanding the foregoing: (1) in the event the Company
or a subsidiary enters into a transaction described in Section 424(a) of the
Code with any other corporation, the Committee may, in its discretion, grant
options to employees or former employees of such corporation in substitution of
options previously granted to them upon such terms and conditions as shall be
necessary to qualify such grant as a substitution described in Section 424(a) of
the Code; and (2) in the event of a special, non-recurring distribution with
respect to the Company's Common Stock, the Committee may, in its discretion,
adjust the number of shares subject to each option and the option price per
share in such manner as the Committee deems just and equitable to reflect such
distribution, but in no event shall the total number of shares of Common Stock
used under the Plan exceed the number authorized under Paragraph 2.
14. Amendment and Termination.
Either the Board of Directors or the Committee may at any time
terminate the Plan, or make such modifications of the Plan as it shall deem
advisable; provided, however, that neither the Board of Directors nor the
Committee may, without further approval by the holders of Common Stock, increase
the maximum numbers of shares as to which options may be granted under the Plan
(except under the anti-dilution provisions hereof). No termination or amendment
5
<PAGE>
of the Plan may, without the consent of the optionee to whom any option shall
theretofore have been granted, adversely affect the rights of such optionee
under such option.
15. Effectiveness of the Plan.
The Plan shall become effective upon adoption by the Board of
Directors or the Committee subject, however, to its further approval by the
shareholders of the Company given within twelve (12) months of the date the Plan
is adopted by the Board of Directors or the Committee at a regular meeting of
the shareholders or at a special meeting duly called and held for such purpose.
Grants of options may be made prior to such shareholder approval but all option
grants made prior to shareholder approval shall be subject to the obtaining of
such approval and if such approval is not obtained, such options shall not be
effective for any purpose.
16. Time of Granting of Options.
An option grant under the Plan shall be deemed to be made on the date
on which the Committee (or other person to whom the Committee shall have
delegated authority pursuant to Paragraph 3 hereof) makes an award of an option
to an eligible employee of the Company or its subsidiaries (but in no event
prior to the adoption of the Plan by the Board of Directors), provided that such
option is evidenced by a written option agreement or certificate duly executed
on behalf of the Company and on behalf of the optionee within a reasonable time
after the date of the action of the Committee (or other person to whom the
Committee shall have delegated authority pursuant to Paragraph 3 hereof).
17. Term of Plan.
This Plan shall commence on the date specified herein, and subject to
Paragraph 15, shall remain in effect thereafter. Options outstanding at the
termination of the Plan shall continue in full force and effect and shall not be
affected thereby.
18. Indemnification and Exculpation
Each person who is or shall have been a member of the Board of
Directors or of the Committee (and each such person to whom the Committee shall
have delegated authority pursuant to Paragraph 3 hereof) shall be indemnified
and held harmless by the Company against and from any and all loss, cost,
liability or expense that may be imposed upon or reasonably incurred in
connection with or resulting from any claim, action, suit or proceeding to which
the person may be a party or in which they may be involved by reason of any
action taken or failure to act under the Plan and against and from any and all
amounts paid by them in settlement thereof (with the Company's written approval)
or paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment based upon a finding of his or her bad faith;
subject, however, to the condition that upon the institution of any claim,
action, suit or proceeding against them, they shall in writing give the Company
an opportunity, at its own expense, to handle and defend the same before
undertaking to handle and defend it on their own behalf. The foregoing right to
indemnification shall not be exclusive of any other right to which such person
may be entitled as a matter of law or otherwise, or any power that the Company
may have to indemnify or hold such person harmless.
6
<PAGE>
Each member of the Board of Directors or of the Committee (and each
such person to whom the Committee shall have delegated authority pursuant to
Paragraph 3 hereof), and each officer and employee of the Company, shall be
fully justified in relying or acting upon any information furnished to or on
behalf of the Company by any person or persons, other than said individual, in
connection with the administration of the Plan. In no event shall any person who
is or shall have been a member of the Board of Directors or of the Committee (or
any such person to whom the Committee shall have delegated authority pursuant to
Paragraph 3 hereof), or an officer or employee of the Company, be liable for any
determination made or other action taken or any omission to act in reliance upon
any such information, or for any action (including the furnishing of
information) taken or any failure to act, if in good faith.
19. Miscellaneous.
(a) Nothing in the Plan or in any option agreement or certificate
granted pursuant to the Plan shall confer on any individual any right to
continue in the employ of the Company or any subsidiary or interfere in any way
with the right of the Company or any subsidiary thereof to terminate his or her
employment at any time, with or without cause.
(b) The holder of an option shall have none of the rights of a
shareholder with respect to the shares subject to option until such shares shall
be issued to him or her upon the exercise of such option.
(c) This Plan and all award agreements or certificates made and
actions taken hereunder and thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard for conflicts
of laws principles thereof.
(d) In the event any provision of this Plan or any option agreement
or certificate hereunder shall be held illegal or invalid for any reason, the
illegality or invalidty shall not affect the remaining provisions of this Plan
or such agreement, and this Plan and such agreement or certificate shall be
construed and enforced as if the illegal or invalid provision had not been
included.
(e) The granting of awards and the issuance of shares of Common Stock
under this Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or bodies as may be required.
(f) Captions are provided for convenience only, and shall not serve
as a basis for interpretation or construction of this Plan or any option
agreement or certificate.
* * *
The foregoing Plan was approved and adopted by the Board of Directors
of the Company as of May 8, 2000.
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of April
18, 2000 is between DME Interactive Holdings, Inc. ("DME" or "Company") and
Thomas O'Rourke ("Employee").
In consideration of the promises and covenants set forth in
this Agreement, DME and Employee hereby agree as follows:
1. EMPLOYMENT
Subject to the approval of the Company's board of directors,
Company hereby employs Employee and Employee hereby accepts employment, to
render professional services to Company as President and Chief Operating Officer
in accordance with the terms and conditions set forth herein. All of Employee's
services and duties hereunder shall be performed when Company may require and,
except as specifically limited herein, subject to Company's direction and
control.
2. TERM
Subject to the provisions for termination as hereinafter
provided in Section 7 of this Agreement, the Term of this Agreement shall begin
on April 18, 2000 and shall continue for a period of three (3) years. Upon
mutual agreement of the Employee and Company, this Agreement may be renewed for
an additional three (3) year term. When used herein, "Term" shall refer to the
entire period of engagement of Employee, whether for the period provided above
or whether terminated earlier as hereinafter provided.
3. DUTIES
In Employee's capacity as President and Chief Operating
Officer, Employee duties shall include such duties and responsibilities as
assigned from time to time by the Chief Executive Officer of the Company or its
board of directors. Employee agrees and acknowledges that Company retains sole
discretion to change the scope and extent of Employee's duties at any time,
subject only to the terms of this Agreement.
4. COMPENSATION
(a) Conditioned upon full performance by Employee of
all of Employee's material obligations hereunder, Company agrees to pay
Employee, as full and complete compensation for all of the services to be
rendered by Employee, for all rights granted to Company, and for all
representations, warranties and agreements made by Employee hereunder, the
annual compensation of $150,000.00 for Year 1, payable on a semi-monthly basis.
Employee's complete compensation for Years 2 and 3 will be based on annual
reviews by the Chief Executive Officer, provided, however, Employee's annual
compensation will be no less than $150,000.00 during the Term of this Agreement.
(b) Pursuant to the terms and conditions set forth in
the Company Stock Option Plan of 2000 (the "Plan"), including provisions therein
which provide for the immediate vesting of options upon a "Change of Control,"
as defined in the Plan, and the Stock Option
<PAGE>
Agreement executed contemporaneously herewith, Company grants to Employee an
option to purchase up to 4,000,000 shares of the Company's common stock during
the Term of this Agreement in accordance with the following specifications:
<TABLE>
<CAPTION>
First 1.33 Million Additional Remaining
Shares 1.33 Million Shares 1.33 Million Shares
---------------------------- -------------------- -------------------
<S> <C> <C> <C>
Price Per Share At market as of close of $4.00 $5.00
business on date preceding
the Date of Grant under the
Plan
Vesting Date End of Year 1 End of Year 2 End of Year 3
</TABLE>
(c) In the event Employee is terminated without cause
before the end of Year 3, the option to purchase all of the four (4) million
shares listed above shall vest immediately.
(d) Employee will be eligible for an annual bonus
based upon his satisfactory performance under this Agreement at the discretion
of the Company and subject to the Company's overall performance.
5. BENEFITS
(a) Benefits. Employee shall be entitled to
participate in any Company benefit plans now existing or hereafter adopted for
which he may be eligible pursuant to established Company policy, subject to the
provisions of such plans as the same may be in effect from time to time.
Employee agrees that nothing contained in this Agreement shall prevent Company
from terminating or modifying any such benefit plan in whole or in part at any
time.
(b) Vacation. Employee shall be entitled to three (3)
weeks per contract year as hereinafter defined, of fully paid vacation time, and
holidays in accordance with current Company policy during the term of this
Agreement subject to Company's absolute approval of the dates when such vacation
may be taken. For purposes of this Agreement, the term "Contract Year" shall
mean the period commencing January 1st, and ending December 31st.
Notwithstanding the above, such vacation rights shall not vest until Employee
has worked for Company for at least three (3) months; provided, however, at the
discretion of the Company's Chief Executive Officer, any pre-existing vacation
plans of Employee may be honored. Vacation rights shall not be cumulative from
Contract Year to Contract Year, nor shall Employee be paid for more than
fifty-two (52) weeks of employment in each Contract Year irrespective of whether
or not vacation rights are exercised.
(c) Sick/Personal Days. Employees shall be entitled
to six (6) days per Contract Year of fully paid sick/personal days in accordance
with current Company policy during the term of this Agreement. Notwithstanding
the above, such sick/personal day rights shall not vest until Employee has
worked for Company for at least three (3) months. Sick/Personal Day rights shall
not be cumulative from Contract Year to Contract Year, nor shall Employee be
paid for more than fifty-two (52) weeks of employment in each Contract Year
irrespective of whether or not sick/personal days are exercised.
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<PAGE>
6. EMPLOYEE COVENANTS
6.1. Notice of Creation. Employee shall both during and after the Term
of this Agreement promptly and fully disclose to the Company any and all
inventions, discoveries, improvements, ideas, devices, designs, models,
prototypes, processes, compositions, know-how, information, works (including
computer programs and written and graphics materials), mask works and data,
whether of a business, technical or other nature and whether or not protectable
under U.S. or foreign patent, copyright, trade secret or other law
(collectively, "Works"), that concern or relate to or are useful to the Company
in connection with its business activities ("Company Business") and that are
first conceived, reduced to practice, fixed in a tangible medium of expression
or are otherwise made by Employee solely or jointly with others during the Term
of this Agreement, whether during regular business hours or otherwise (the
"Intellectual Property").
6.2. Ownership of Intellectual Property. Upon its respective
conception, reduction to practice or fixation in a tangible medium of expression
or other making, an item of Intellectual Property and all worldwide right, title
and interest in and to that Intellectual Property, including all common law,
statutory, treaty and convention rights, including the right to sue for all
past, present and future infringement, shall immediately become and forever
remain the property of Company without any further act or deed being required
and without any additional consideration from Company to Employee, and Employee
hereby irrevocably assigns to Company, and Company hereby accepts, all such
Intellectual Property and all such worldwide right, title and interest. The
Employee hereby waives and agrees not to assert any moral rights or similar
rights under the laws of any jurisdiction with respect to any Intellectual
Property.
6.3. Further Assurances. Employee will from time to time, both during
and after the Term of this Agreement, upon the request and at the expense of the
Company, but without further consideration from the Company, (a) make
application through the attorneys for the Company for Letters Patent, utility
models, copyright registrations and other forms of intellectual property
protection for and on the Intellectual Property in the United States and in
countries foreign thereto, (b) cooperate with the attorneys in the prosecution,
maintenance, reissue, renewal, extension and defense of, and suit upon, all such
applications and resulting Letters Patent, utility models, copyright
registrations and other forms of intellectual property protection, and (c) do
and perform all acts, including executing documents, believed by the attorneys
to be necessary or desirable in furtherance of the foregoing and for assigning
and perfecting all right, title and interest in and to the Intellectual Property
in the Company or its successors or assigns, including executing applications
and assignment documents. All decisions concerning such applications and
resulting Letters Patent, utility models, copyright registrations and other
forms of intellectual property protection, including all decisions concerning
their filing, prosecution, maintenance, reissue, renewal, extension, defense and
suits upon them, shall be solely those of the Company, and Employee shall have
no claim or cause of action against the Company arising out of or concerning any
such decisions of the Company or the results of those decisions.
6.4. Non-Competition. Employee hereby expressly covenants and agrees
that he shall not, without the express written consent of the Company, for his
own account or jointly with any other person, during the Term of this Agreement
and for a period of one year thereafter, for any reason, directly or indirectly,
(i) establish or manage any business, or enter into the employ of, or render any
services to, any person, firm or corporation engaged in the business of
providing
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<PAGE>
services as an Internet service provider ("ISP"); (ii) own, manage,
operate, join, control, loan money to, invest in, or otherwise participate in,
or be connected with, or become or act as an officer, employee, consultant,
representative or agent of any business, individual, partnership, firm or
corporation (other than the Company) which is a customer of the Company or was
at any time during the Term of this Agreement a customer of the Company
("Competitive Activities"); or (iii) intervene in or interfere with any
relationships between the Company and its vendors or customers (including
potential customers identified by the Company during the Term of this Agreement)
or disrupt its customer markets, anywhere in the world in which the Company
conducts Company business. Notwithstanding the foregoing, the Employee may at
any time own, solely as an inactive investor, securities of any entity, whether
or not in competition with the Company, if (i) such securities are publicly
traded on a nationally-recognized stock exchange or on NASDAQ, and (ii) the
aggregate holdings of such securities by the Employee and his immediate family
do not exceed two percent (2%) of the voting power or two percent (2%) of the
capital stock of such entity. Company and Employee agree that the restrictions
set forth hereinabove are intended to prohibit post-termination employment of
Employee which would unfairly disadvantage Company as an ISP and nothing
contained herein shall be interpreted to bar Employee from employment as a
President and Chief Operating Officer in a company which does not provide
services as an ISP or is not a customer of Company, and with respect to any such
companies as may be competitors or customers of Company, Company will consider
Employee's written request for a waiver of this provision on a case by case
basis.
6.5. Reasonableness of Restrictions. The Employee acknowledges and
agrees that the covenants contained herein with respect to non-competition are
reasonable in scope, geographic application and duration, in view of the
economic bargain contained herein.
6.6. Tangible Things. Employee covenants and agrees that (i) all
tangible things, including confidential memoranda, notes, notebooks, drawings,
lists (including, without limitation, mailing and customer lists), records and
other confidential documents (and all copies thereof), made or compiled by
Employee or made available to Employee concerning the Company Business shall be
the property of the Company, and (ii) if such tangible things or copies thereof
are in the possession or control of Employee, Employee shall deliver them to the
Company promptly following the Term of this Agreement or at any other time upon
request of the Company.
6.7. No Improper Disclosure. Employee represents and warrants that
Employee has not disclosed, and will not disclose, to the Company any
information, whether confidential, proprietary or otherwise, that the Employee
possesses and that Employee is not legally free to disclose.
6.8. No Employee Solicitation. The Employee hereby agrees that during
the Term of this Agreement and for a period of one (1) year thereafter, he shall
not, directly or indirectly, for his own account or jointly with another, or for
or on behalf of any entity, as principal, agent or otherwise, solicit or induce
or in any manner attempt to solicit or induce any person employed by the Company
or any of its affiliates to leave such employment, whether or not such
employment is pursuant to a written contract with the Company or otherwise.
4
<PAGE>
6.9. Non-Disclosure. Employee acknowledges that Employee's work for the
Company is expected to bring Employee into close contact with various
confidential technical and research data, confidential business data and other
information of the Company not readily available to the public. The Employee
expressly covenants and agrees that he will not at any time, whether during or
after the Term of this Agreement, directly or indirectly, on any basis for any
reason, use or permit third parties within his control or authority or under his
supervision the use of any trade secrets, confidential information or
proprietary information of, or relating to, the Company, or any affiliate of the
Company (including, without limitation, data and other information relating to
any of the Company's processes, apparatus, products, software, packages,
programs, trends in research, product development techniques or plans, research
and development programs and plans or any works and all secrets, customer lists,
lists of employees, sales representatives and their territories, mailing lists,
details of consultant contracts, pricing policies, operational methods,
marketing plans or strategies, business acquisition plans, new personnel
acquisition plans, designs and design projects and other confidential business
affairs concerning the Company and the Company Business), in connection with any
activity or business, whether for his own account or otherwise, and will not
divulge such trade secrets, confidential information or proprietary information
to any person, firm, corporation or other entity whatsoever. The Employee shall
not be prohibited from divulging information deemed to be trade secret or
confidential or proprietary information of the Company: (i) if and to the extent
that disclosure of any such information is pursuant to appropriate safeguards on
confidentiality and (a) necessary and appropriate in connection with the
submission of bids by the Company in the ordinary course of business or (b)
required pursuant to the Company's marketing efforts directed to specific
clients or bona fide prospective clients or the provision of services to
existing clients in the ordinary course of business, (ii) if the specific item
of information becomes generally available to the public without violation of
this Agreement or any other confidentiality agreement between the Employee and
the Company or any other confidentiality agreement to which the Employee is a
party, or (iii) if such disclosure is compelled by law, in which event the
Employee agrees to give the Company prior written notice of any disclosure to be
made pursuant to this Subsection (iii), and the Employee, at the Company's
expense, shall cooperate fully with the Company to obtain protective orders,
confidential treatment or other such protective action as may be available to
preserve the confidentiality of the information required to be disclosed.
6.10. Remedies. It is expressly understood and agreed that the services
to be rendered hereunder by the Employee are special, unique and of
extraordinary character, and in the event of the breach by the Employee of any
of the terms and conditions of this Agreement on his part to be performed
hereunder, or in the event of the breach or threatened breach by the Employee of
the terms and provisions of this Section 6 of this Agreement, then the Company
shall be entitled, if it so elects, to institute and prosecute any proceedings
in any court of competent jurisdiction, either in law or equity, for such relief
as it deems appropriate, including without limiting the generality of the
foregoing, any proceedings to obtain damages for any breach of this Agreement or
to enforce the specific performance thereof by the Employee or to enjoin the
Employee from performing services which are prohibited by this Agreement for any
other person, firm or corporation.
6.11. Enforcement. It is hereby expressly agreed by the Company and the
Employee that if any portion of the restrictive covenants or provisions set
forth in this Section 6 is
5
<PAGE>
held to be unreasonable, arbitrary, against public policy or otherwise
unenforceable for any reason, then each such covenant or provision shall be
considered divisible as to scope, time and geographical area, with each month of
a specified period being deemed a separate period of time and each county within
any geographical area being deemed a separate geographic area. The parties
hereto expressly agree that notwithstanding their mutual expectation that the
covenants and restrictions contained herein will be enforceable and enforced, a
lesser scope, period of time or geographic area shall be enforced to the extent
that the covenants contained herein may be unenforceable as written. The
existence of any claim or cause of action by the Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of the restrictive covenants contained
in this Section 6.
6.12. Covenants Non-Exclusive. The Employee acknowledges and agrees
that the covenants contained in this Section 6 shall not be deemed exclusive of
any common law rights of the Company in connection with the relationships
contemplated hereby; and that the Company shall have any and all rights as may
be provided by law in connection with the relationships contemplated hereby.
7. TERMINATION
The Employee's employment hereunder shall terminate under the following
circumstances:
(a) Termination For Cause. Company may terminate the
employment of Employee for cause at any time upon written notice to Employee
specifying the cause for termination. For purposes of this Section, "for cause"
is limited to discharge resulting from a determination by Company that the
Employee has: (i) been convicted of a criminal offense involving dishonesty,
fraud, theft, embezzlement, breach of trust or moral turpitude; (ii) performed
an act or failed to act, which, if he were prosecuted and convicted, would
constitute a crime or offense involving money or property of Company; or (iii)
willfully refused to perform the duties reasonably assigned to Employee and
consistent with his status as Chief Operating Officer of Company; or (iv)
violates any non-competition or non-disclosure agreement of the Company.
In the event of Employee's termination under this
Section 7(a), Company shall have no further obligation to Employee except for
any amounts earned by, or accrued for, Employee under any employee benefit plans
in which the Employee is then a participant, earned and unpaid salary, accrued
and unused vacation pay, and any rights of Employee under any bonus or stock
option agreement, which right has been earned by Employee at the time of such
termination pursuant to the terms of such plan or agreement. Employee shall not
be entitled to any further Base Salary, Incentive Compensation, severance pay,
fringe benefits, additional stock options, or any other compensation or
benefits, except as otherwise provided herein.
(b) Termination Without Cause. Employee or Company
may terminate this Agreement at any time upon thirty (30) days prior written
notice to the other party. In the event of Employee's termination by Company
under this provision, Company shall pay severance to Employee of four (4) months
base salary. In addition, if Employee is terminated by Company without cause,
stock options granted to Employee, pursuant to paragraph 4(b) above, which would
have vested on or before the third anniversary date of the commencement of this
Agreement if
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<PAGE>
Employee had remained in Company's employ, shall vest immediately. In the event
of termination hereunder, except as set forth herein, Company shall have no
further obligations to Employee under this Agreement except for any amounts
earned by, or accrued for, Employee under any employee benefit plans in which
Employee is then a participant, earned and unpaid salary and accrued and unused
vacation pay and any rights of Employee under any bonus or stock option
agreement, which right has been earned by Employee at the time of such
termination pursuant to the terms of such plan or agreement. After termination,
Employee shall not be entitled to Base Salary, Bonus Compensation, fringe
benefits, additional stock options, or any other compensation or benefits.
Company may, in its sole discretion, accept Employee's resignation and terminate
Employee's employment prior to the expiration of the thirty (30) day notice
period and pay Employee's compensation for the notice period (or remaining term
thereof). In the event of Employee's termination by Company under this
provision, Company shall pay severance to Employee of three (3) months base
salary.
(c) Employee's employment hereunder shall also
terminate automatically, and without any further action by the Employee or the
Company, upon the earlier to occur of (i) the death of the Employee; (ii) the
adjudicated incompetency of the Employee; or (iii) the disability of the
Employee to perform a material portion of his duties for 180 consecutive days,
or for 100 business days, which need not be consecutive, during any twelve-month
period.
8. ARBITRATION
(a) Exclusive Remedy. If Employee and the Company
cannot resolve a dispute, arising under any legal theory or based on federal,
state, or local statute, or common law (including any claims of discrimination),
that in any way arises out of, relates to, or is connected with the employment
relationship established in this Agreement or the termination thereof (a
"Dispute") then it shall be settled by final and binding arbitration, except
that this Paragraph does not apply to any legal action by the Company or
Employee for injunctive or other equitable relief (including, but not limited
to, any claim for breach or enforcement of the provisions of Paragraph 7 or any
claim for unfair competition or unauthorized use or disclosure of trade secrets
or other confidential information). Arbitration shall be the exclusive remedy
for any Dispute either party may bring against the other, or against any
employee, officer, director or agent of the other.
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<PAGE>
(b) Procedure. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association and shall be
conducted in New York, N.Y. Any Dispute submitted to arbitration shall be
decided by a single, neutral arbitrator (the "Arbitrator"). The parties to the
arbitration shall mutually select the Arbitrator not later than forty-five (45)
days after service of the demand for arbitration. If the parties for any reason
do not mutually select the Arbitrator within the forty-five (45) day period,
then either party may apply to any court of competent jurisdiction to appoint an
Arbitrator, chosen in accordance with the rules of the American Arbitration
Association.
9. GENERAL
9.1. No Brokers. Each of the parties to this Agreement represents and
warrants, each to the other, that it has not utilized the services of any
finder, broker or agent. Each of the parties agrees to indemnify the other party
against and hold it harmless from any and all liabilities to any person, firm or
corporation claiming any broker's or finder's fee or commission of any kind on
account of services rendered on behalf of such party in connection with the
transactions contemplated by this Agreement.
9.2. Applicable Law. This Agreement shall, in all respects, be governed
by the laws of the State of New York.
9.3. Venue; Process. The parties to this Agreement agree that
jurisdiction and venue shall properly lie only in any New York state court
located in New York County or the City of New York or in the United States
District Court for the Southern District of New York, with respect to any legal
proceedings arising from this Agreement. The parties agree that they will not
object that any action commenced in the foregoing jurisdictions is commenced in
a forum non conveniens. The parties further agree that the mailing by certified
or registered mail, return receipt requested, of any process required by any
such court shall constitute valid and lawful service of process against them,
without the necessity for service by any other means provided by statute or rule
of court. Notwithstanding the foregoing, however, nothing contained in this
Subsection 9.3 shall be deemed to limit or waive any right of the parties to
remove any dispute to federal court in New York which might otherwise properly
be removed to such court.
9.4. Survival. The parties hereto agree that the covenants contained in
Section 6 hereof shall survive any termination of employment by the Employee and
any termination of this Agreement.
9.5. Notices. Any and all notices required or desired to be given
hereunder by any party shall be in writing and shall be validly given or made to
another party if delivered either personally, by telex, facsimile transmission,
same day delivery service, overnight delivery service, or if deposited in the
United States mail, certified or registered, postage prepaid, return receipt
requested. If notice is served personally, notice shall be deemed effective upon
receipt. If notice is served by telex or by facsimile transmission, notice shall
be deemed effective upon transmission, provided that such notice is confirmed in
writing by the sender within one day after transmission. If notice is served by
same day delivery service or overnight expedited delivery service, notice shall
be deemed effective the day after it is sent, and if notice is given by mail,
notice shall be deemed effective five days after it is sent. In all instances,
notice shall be sent to the parties
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<PAGE>
at the respective addresses set forth above. Any party may change its
address for the purpose of receiving notices by a written notice given to the
other party.
9.6. Modifications or Amendments. No amendment, change or modification
of this document shall be valid unless in writing and signed by all of the
parties hereto.
9.7. Waiver. Failure of either party to exercise in any respect any
right provided for herein shall not be deemed a waiver of any right hereunder.
9.8. Successors and Assigns. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns, but Employee's rights and obligations hereunder are personal to
Employee and shall not be subject to voluntary or involuntary alienation,
assignment or transfer.
9.9. Separate Counterparts. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and shall be one
and the same instrument.
9.10. Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents and other assurances, and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
9.11. Legal Fees and Costs. Each party in any action, proceeding,
arbitration or similar legal proceeding arising under this Agreement shall be
responsible for such party's own attorneys' fees and costs.
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EMPLOYEE IS HEREBY
CERTIFYING THAT EMPLOYEE (A) RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND
STUDY BEFORE EXECUTING IT; (B) READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT;
(C) HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EMPLOYEE HAD ABOUT THE AGREEMENT AND RECEIVED SATISFACTORY ANSWERS TO ALL SUCH
QUESTIONS; AND (D) UNDERSTANDS EMPLOYEE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
DME INTERACTIVE HOLDINGS, INC. THOMAS O'ROURKE
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By:
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Title:
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10
