SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Arthur Treacher's Inc.
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(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
042901R18
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(CUSIP NUMBER)
William Saculla, President
Arthur Treacher's Inc.
7400 Bay Meadows Way
Jacksonville, Florida 32255
(904) 739 1200
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 1, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
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1 NAME OF REPORTING PERSON. S.S. OR I.R.S. IDENTIFICATION NO. OF PERSON
Ralph Sorrentino S.S. # ###-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
--
(b) / /
--
3 SEC USE ONLY
4 SOURCE OF FUNDS
PF
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) N.A. -----
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
NUMBER 7. SOLE VOTING POWER 5,613,094
------------
OF
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 0
------------
OWNED
BY
EACH 9. SOLE DISPOSITIVE POWER 5,613,094
------------
REPORTING
PERSON
WITH 10. SHARED DISPOSITIVE POWER 0
---------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
5,613,094
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.7%
14. TYPE OF REPORTING PERSON
IN
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Item 1. Security and Issuer.
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This Statement of Beneficial Ownership on Schedule 13-D relates to shares
of Common Stock, $.01 par value per share (the "Shares" or "Common Stock"), of
Arthur Treacher's, Inc., a Utah corporation (the "Issuer"), which has its
principal executive offices located at 7400 Baymeadows Way, Suite 300,
Jacksonville, Florida 32255.
Item 2. Identity and Background.
(a) Name: Ralph J. Sorrentino
(b) Address: 407 Blauvelt Road, Pearl River, New York 10965
(c) Principal Occupation: Chief Executive Officer, President, Digital
Creative Development Corporation, c/o Burnham Securities Inc., 1325 Avenue of
the Americas, 26th Floor, New York, New York 10019 ("Digital")
(d) Involvement in certain legal proceedings: Not Applicable.
(e) Party to a civil proceeding: Not Applicable.
(f) Citizenship: U.S.
Item 3. Source of Funds
Mr. Sorrentino received options (the "Options") to purchase 5,000,000
shares of Common Stock at an exercise price of $.37 per share pursuant to a
Stock Option Agreement between the Issuer and Sorrentino dated as of May 1,
2000. The Options are exercisable through September 30, 2007. The aggregate
purchase price for the 5,000,000 shares of Common Stock is $1,850,000. The
Option Agreement was executed in conjunction with a Consulting Agreement dated
as of May 1, 2000 amongst the Issuer, Mr. Sorrentino, Digital (a subsidiary of
the Issuer) and RJS Consulting Corp.
Mr. Sorrentino has not determined the source of funds for the
acquisition of the Common Stock. As more fully described in Item 6, under the
terms of the Consulting Agreement, Digital agreed to assume and be primarily
liable for up to $2,500,000 of indebtedness incurred by Mr. Sorrentino (the
"Assumed Debt") and, upon consummation of an offering by Digital of a financing
of debt and\or equity securities of a minimum of $20,000,000, Digital agreed to
loan to Mr. Sorrentino the difference between $2,500,000 and the amount of the
Assumed Debt.
Item 4. Purpose of Transaction
Mr. Sorrentino will purchase the Common Stock under the options for the
purpose of investing in the Issuer. Mr. Sorrentino is not interested in and has
no plans or proposals which would result in the items described in Item
4(a)-(j).
Item 5. Interest in Securities of the Issuer.
- ------ ------------------------------------
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(a) Mr. Sorrentino beneficially owns an aggregate of 5,613,094 shares of
Common Stock, representing 26.7% of the outstanding shares of Common Stock of
the Issuer.
(b) Mr. Sorrentino will possess sole power to vote and to dispose or
direct the disposition of all 5,000,000 shares of Common Stock issuable upon
exercise of the Options.
(c) As of May 1, 2000, the Issuer and Mr. Sorrentino entered into the Stock
Option Agreement described in Item 6.
(d) No other person is known to have the right to receive or the power
to direct the receipt of dividends from, or the proceed from the sale of the
shares of Common Stock disclosed herein.
(e) Not applicable.
Item 6. Contracts, Arrangement, Understandings or Relationships with
Respect to Securities of ------
- ------------------------------------------------------------------------------
the Issuer.
Mr. Sorrentino received Options to purchase 5,000,000 shares of
Common Stock pursuant to a Stock Option Agreement between the Issuer and
Sorrentino. The Option Agreement was executed in conjunction with a Consulting
Agreement dated as of May 1, 2000 amongst the Issuer, Mr. Sorrentino, Digital (a
subsidiary of the Issuer) and RJS Consulting Corp. The Consulting Agreement
provides, in part, for Mr. Sorrentino, acting through RJS Consulting Corp., to
serve as Chief Executive Officer and President of Digital. Mr. Sorrentino became
Chief Executive Officer and President of Digital effective May 1, 2000.
Mr. Sorrentino received Options to purchase 5,000,000 shares of Common
Stock at an exercise price of $.37 per share pursuant to the Stock Option
Agreement between the Issuer and Sorrentino. The Options are exercisable through
September 30, 2007.
The amount of shares issuable upon exercise of the Options and the
exercise price are subject to adjustment under certain circumstances. In the
event that Mr. Sorrentino's retention under the Consulting Agreement is
terminated by Mr. Sorrentino other than for "Good Reason" (as defined in the
Consulting Agreement) or is terminated by Digital with "Cause" (as defined in
the Consulting Agreement) at any time prior to October 1, 2002, then Mr.
Sorrentino shall forfeit that number of Options (to the extent not previously
exercised) equal to the product of 100,000 times the number of months between
the date of termination and October 1, 2002. Grounds for termination for "Cause"
by Digital and "Good Reason" by Mr. Sorrentino, include, but are not limited to,
a breach by the defaulting party of the material terms of the Consulting
Agreement which is not cured within 30 days notice by the non-defaulting party.
In the event that Mr. Sorrentino's retention under the Consulting
Agreement is terminated by Mr. Sorrentino for Good Reason or is terminated by
Digital without "Cause" then Mr. Sorrentino may exercise all outstanding Options
at an exercise price of $.01 per share. At any
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time after Digital terminates Mr. Sorrentino's employment other than for Cause
and at any time after Mr. Sorrentino terminates his employment for Good Reason,
Mr. Sorrentino may require Digital to repurchase any Options held by Mr.
Sorrentino which are not subject to forfeiture and any Shares previously issued
to Mr. Sorrentino upon exercise of any Options, upon written notice (the "Put
Notice") to Digital of Mr. Sorrentino's election to require Digital to effect
such repurchase. The purchase price (the "Purchase Price") for each such Option
and each such Share shall be the greater of (x) the average of the closing
prices of a board lot of Shares traded on Digital's principal listed exchange
for the thirty (30) trading days immediately preceding the purchase date or (y)
the closing price of Shares on such exchange on the date of the Put Notice. The
payment of the Purchase Price shall be effected as follo
(i) If 25% of the average cash balances held by
Digital over 90 days.
("Available Cash") is in excess of the amount of the Purchase Price, Digital
shall pay the entire Purchase Price in cash;
(ii) If Digital has less Available Cash than the Purchase Price, then,
if Mr. Sorrentino is legally able publicly to sell such Options or Shares,
Digital shall cooperate with Mr. Sorrentino in effecting such sale and pay to
Mr. Sorrentino the difference between (a) the average of the closing prices of a
board lot of Shares traded on Digital's principal listed exchange for the thirty
(30) trading days immediately preceding the date of sale and (b) the price at
which Mr. Sorrentino was able to effect such sale. The payment by Digital of
such difference shall be made in cash, to the extent of Available Cash, plus the
balance in the form of either, at Mr. Sorrentino's election, (x) a Promissory
Note with a term of 30 months bearing interest at the prime rate plus 300 basis
points and otherwise in form and substance satisfactory to Mr. Sorrentino or (y)
additional Shares or (c) any combination of such a Promissory Note and
additional Shares.
Under the terms of the Consulting Agreement, Digital agreed
to assume and be primarily liable for and shall indemnify Mr. Sorrentino against
up to $2,500,000 of indebtedness incurred by Mr. Sorrentino for any legal
purpose. Upon consummation of an offering by Digital of a financing of debt
and\or equity of a minimum of $20,000,000, Digital agreed to loan to Mr.
Sorrentino the difference between $2,500,000 and the aggregate amount of the
Assumed Debt (the "Loan"). The Loan shall be evidenced by a promissory note
bearing interest at 6% per annum in form satisfactory to Digital and Mr.
Sorrentino with a maturity date of October 1, 2002(the "Maturity Date"). The
Loan shall be secured by a first priority security interest in the Options and
any Shares issued upon exercise of the Options which, at a valuation of $.50 per
share, secures performance by Mr. Sorrentino of his obligations under the
Consulting Agreement through the Maturity Date. Upon the issuance of any shares
of Common Stock upon exercise of any Options, Mr. Sorrentino shall deliver the
stock certificates representing such shares to Digital to be held as security.
Upon the issuance of any shares of Common Stock upon exercise of the Options,
the shares will be deposited as pledged securities in favor of Digital in a
brokerage account subject to a customary account control agreement. Under
certain circumstances, the Loan and the Assumed Debt shall be forgiven by
Digital.
<PAGE>
Mr. Sorrentino had previously become the beneficial owner of 613,094
shares of Common Stock of the Issuer pursuant to certain convertible promissory
notes and warrants issued in October 1999 and February 2000. In October 1999,
Mr. Sorrentino loaned the Issuer $50,000 under the terms of a promissory note
bearing interest at the rate of 12% per annum, which not is due in October 2000.
The promissory note, including all accrued interest thereon, is convertible into
shares of common stock at the rate of $.21 per share or 238,095 shares of Common
Stock for the principal amount of the note. In consideration for the loan, Mr.
Sorrentino also received a warrant to purchase 83,333 share of Common Stock for
$.30 per share through October 21, 2004.
In February 2000, Mr. Sorrentino loaned the Issuer $50,000 under the
terms of a promissory note bearing interest at the rate of 12% per annum, which
note is due in February 2001. The promissory note, including all accrued
interest thereon, is convertible into shares of common stock at the rate of $.24
per share or 208,333 shares of Common Stock for the principal amount of the
note. In consideration for the loan, Mr. Sorrentino also received a warrant to
purchase 83,333 share of Common Stock for $.30 per share through February 5,
2005.
Item 7. Material to be filed as Exhibits.
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1. Stock Option Agreement dated as of May 1, 2000 between the Issuer and
Mr. Sorrentino.
2. Executive Consulting Agreement dated as of May 1, 2000 among the Issuer,
Mr. Sorrentino, Digital and RJS Consulting Corp.
SIGNATURE
After reasonable inquiry and to the best of our knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
Date: May 5, 2000
/s/Ralph J. Sorrentino
Ralph J. Sorrentino
6
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EXHIBIT 1
EXHIBIT A TO
EXECUTIVE CONSULTING
AGREEMENT
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement") effective as of the 1st day of
May, 2000 between ARTHUR TREACHER'S INC., a Utah corporation with offices at
7400 Baymeadows Way, Suite 300, Jacksonville, Florida 32255 (the "Corporation"),
and RALPH J. SORRENTINO (the "Optionee") residing at 407 Blauvelt Road, Pearl
River, New York 10965
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, an affiliate of the Optionee is executing and delivering
contemporaneously with this Agreement an Executive Consulting Agreement (the
"Consulting Agreement") which provides for, among other things, the requirement
that the Corporation issue to the Optionee stock options to acquire shares of
the Corporation's common stock, par value $.37 per share (the "Common Stock");
and
WHEREAS, the Optionee is executing and delivering the Consulting Agreement
for the purpose of confirming his intention, as the sole stockholder of such
affiliate, to cause such affiliate to perform the Consulting Agreement; and
WHEREAS, the parties desire to set forth the terms and conditions of the
stock options in this Agreement;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the parties hereby agree as follows:
ARTICLE I
GRANT OF OPTIONS
Section 1.1 Grant of Option
On and as of the date hereof, the Corporation irrevocably grants to the
Optionee stock options to purchase 5,000,000 shares of the Common Stock (any
such shares, the "Shares") upon the terms and conditions set forth herein (the
"Options").
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Section 1.2 Exercise Price
Subject only to the terms of Section 2.3 of this Agreement, the exercise
price shall be $.37 per Share without commission or other charge (the "Exercise
Price"). The Special Exercise Price described in Section 2.3 of this Agreement
shall be $.01 without commission or other charge.
Section 1.3 Adjustments in Options
In the event of a stock split, stock dividend, combination of shares or
similar event or in the event that the outstanding shares of Common Stock
subject to the Options are, from time to time, changed into or exchanged for a
different number or kind of shares of Common Stock or other securities of the
Corporation by reason of a merger, consolidation, recapitalization,
reclassification, or otherwise, the Corporation shall make an appropriate and
equitable adjustment in the number and kind of shares or other consideration as
to which the Options, or portions thereof then unexercised, shall be
exercisable.
ARTICLE II
PERIOD OF EXERCISABILITY
Section 2.1 Exercisability
The Options are fully vested immediately upon the execution and delivery of
this Agreement, subject only to the forfeiture provisions set forth in Section
2.2 of this Agreement. The Options shall remain exercisable until 5:00 p.m. New
York City time on September 30, 2007 (the "Expiration Date").
Section 2.2 Forfeiture of Options
In the event the retention of RJS Consulting Corp. (the "Executive") under
the Consulting Agreement is terminated by the Executive for any reason other
than Good Reason (as such term is defined in the Consulting Agreement) or by the
Corporation for Cause (as such term is defined in the Consulting Agreement) at
any time prior to October 1, 2002, then the Optionee shall forfeit that number
of Options (to the extent not previously exercised) equal to the product of
100,000 times the number of months between the Date of Termination (as such term
is defined in the Consulting Agreement) and October 1, 2002. Any such forfeited
Options shall be deemed null and void.
Section 2.3 Special Exercises
(a) Notwithstanding any other provision of this Agreement, in the event the
retention of the Executive under the Consulting Agreement is terminated by the
Executive for Good Reason, or is terminated by the Corporation without Cause,
the Optionee
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may exercise all outstanding Options at any time before the Expiration Date at
the Special Exercise Price set forth in Section 1.2 of this Agreement.
(b) Notwithstanding any other provision of this Agreement, in the event the
retention of the Executive under the Consulting Agreement is terminated by
reason of the death or Disability (as such term is defined in the Consulting
Agreement) of the Optionee, the Options shall remain exercisable through the
Expiration Date at the Exercise Price.
ARTICLE III
EXERCISE OF OPTION
Section 3.1 Persons Eligible to Exercise
During the Optionee's lifetime, only the Optionee may
exercise the Options.
After the death or Disability (as such term is defined in the Consulting
Agreement) of the Optionee and prior to the close of business on the Expiration
Date, the Options may be exercised by the Optionee's personal representative,
conservator, or by any person empowered to do so under the Optionee's will or
under the then applicable laws of descent and distribution. The party entitled
to exercise the Options shall be referred to herein as the "Exercising Party."
Section 3.2 Partial Exercise
The Options or any exercisable portion thereof may be exercised in whole or
in part at any time prior to the close of business on the Expiration Date.
Section 3.3 Manner of Exercise
The Options may be exercised solely by delivering to the Corporation all of
the following prior to the close of business on the Expiration Date:
(a) Notice in writing signed by the Exercising Party, stating the number of
Shares with respect to which the Options are exercised;
(b) Full payment (in cash, by check or by a combination thereof) for the
Shares with respect to which such Options or portion thereof is exercised, at
either the Exercise Price or the Special Exercise Price, whichever applies;
(c) In the event that the Exercising Party is not the Optionee, appropriate
proof, in the reasonable judgment of the Corporation, of the right of such
person to exercise the Options; and
(d) The Corporation covenants to provide to the Optionee, upon Optionee's
or Optionee's representative's request, a loan to enable Optionee to exercise
the Options hereunder. Any such loan shall have a term of ten (10) business days
and shall be interest-free.
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Section 3.4 Shares to be Issued
The Shares deliverable upon the exercise of the Options, or any portion
thereof, shall be fully paid and nonassessable. Promptly after proper exercise
of the Options or any portion thereof, the Corporation shall deliver to the
Optionee one or more stock certificates for the appropriate number of Shares
issued in connection with such exercise. The Corporation shall not deduct from
or withhold any Shares issuable pursuant hereto on account of any Federal, State
or local income or other taxes.
Section 3.5 No Rights as Stockholder
Neither the Optionee nor any Exercising Party shall be a stockholder of the
Corporation as to any Shares covered by the Options prior to the exercise of the
Options.
ARTICLE IV
REGISTRATION RIGHTS
Section 4 Registration of Securities
(a) If, at any time the Corporation proposes to register any of its
securities under the Securities Act of 1933, as amended (the "Securities Act")
other than in connection with a merger or pursuant to Form S-8 or other
comparable form, it will give written notice by registered mail, at least thirty
(30) days prior to the filing of any such registration statement, pre-effective
or post-effective amendment thereto (the "Registration Statement"), to the
Optionee of its intention to do so. If the Optionee notifies the Corporation
within twenty (20) days after receipt of any such notice of his desire to
include the Shares purchased pursuant to this Agreement and owned by him in such
proposed Registration Statement, the Corporation shall afford the Optionee the
opportunity to have all or any of his shares registered under such Registration
Statement. However, there can be no assurance that the Corporation will
effectuate any public offering of its securities.
If the managing underwriter in such underwritten offering shall advise the
Corporation that it declines to include a portion or all of the Shares requested
by the Optionee or its Permitted Assignee (collectively, the "Holders") in the
Registration Statement, then (i) registration of all of the Shares sold in
connection with the Offering shall be excluded from such Registration Statement
on the condition that all securities to be registered by other selling security
holders, if any, are also excluded and (ii) registration of a portion of such
Shares shall be excluded if such portion is allocated among the Optionee and any
other selling security holders in proportion to the respective numbers of
securities to be registered by each such Holder and other selling security
holder. In such event the Corporation shall give the Optionee prompt notice of
the number of Shares excluded.
Notwithstanding the provisions of this Section 4(a), the Corporation shall
have the right at any time after it shall have given written notice pursuant to
this Section (irrespective of whether a written request for inclusion of the
Shares shall have been made) to
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elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
(b) In the case of each registration effected by the Corporation pursuant
to Section 4(a), the Corporation will keep the Optionee or its Permitted
Assignee advised in writing as to the initiation of each registration and as to
the completion thereof. As used in this Agreement, "Permitted Assignee" shall
mean an "affiliate" of the Optionee as defined in Rule 144 of the Securities Act
or any other transferee pursuant to a transfer made in compliance with
applicable state and federal securities laws. At its expense, the Corporation
will:
(i) Keep such registration effective for a
period of 9 months or until the Optionee or
his Permitted Assignee has completed the
distribution described in the Registration
Statement relating thereto, whichever occurs
later.
(ii) Furnish such number of prospectuses and
other documents incident thereto as the
Optionee or its Permitted Assignee from time
to time may reasonably request.
(c) Indemnification will be furnished as follows:
(i) The Corporation will indemnify the Optionee and any Permitted Assignees
whose Shares are included in any registration when registration has been
effected pursuant to paragraph (a), and each underwriter, if any, and each
person who controls any underwriter within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended (the "Exchange Act") against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus incident to
any such registration or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that the Corporation will be not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon information furnished to the Corporation by the Optionee or
a Permitted Assignee whose Shares are included in such registration or by any
underwriter specifically for use herein.
(ii) The Optionee and each Permitted Assignee
will, if Shares held by them are included in
the securities as to which such registration
is being effected, indemnify the
Corporation, each of its directors, and
officers and counsel and each underwriter,
if any, of the
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Corporation's securities covered by the
Registration Statement, each person who
controls the Corporation or such underwriter
within the meaning of the Exchange Act and
the Securities Act and the rules and
regulations thereunder, each other
stockholder participating in such
distribution and each of his officers,
directors and partners, and each person
controlling such other stockholder, against
all claims, losses, damages and liabilities
(or actions in respect thereto) arising out
of or based on any untrue statement (or
alleged untrue statement) of a material fact
contained in any such registration
statement, prospectus, or any omission (or
alleged omission) to state therein a
material fact required to be stated therein
in order to make the statements therein not
misleading in each case to the extent, but
only to the extent, that such untrue
statement (or alleged untrue statement) or
omission (or alleged omission) is made in
such document in reliance upon and in
conformity with information furnished to the
Corporation by the Optionee and each
Permitted Assignee, including the
information set forth in this Agreement;
provided, however, that the obligations of
the Optionee and each Permitted Assignee
hereunder shall be limited to an amount
equal to the proceeds received by such
holder or each Permitted Assignee, as the
case may be, of securities sold as
contemplated herein.
(iii) Each party entitled to indemnification under this agreement (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under Section 4 hereof. Each Indemnified
Party shall furnish such information regarding itself or the claim in question
as an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the defense of such claim and any
litigation resulting therefrom.
(d) The Optionee shall furnish to the Corporation such information
regarding the Optionee and any information relating to the registration of any
of the
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Corporation's securities proposed by the Optionee as the Corporation may
reasonably request in writing and as shall be reasonably required in connection
with any registration.
(e) The rights granted pursuant to this Section 4 will expire if the Shares
issued upon exercise of the Options are available for sale under Rule 144(k) of
the Securities Act in the opinion of counsel to the Corporation.
ARTICLE V
MISCELLANEOUS
Section 5.1 Options Transferable
The Optionee's rights under this Agreement may be transferred or assigned
in the discretion of the Optionee, including, without limitation, by will or by
the applicable laws of descent and distribution and in connection with brokerage
accounts held by the Optionee. Neither the Options nor any interest or right
therein or part thereof shall be liable for the debts, contracts or engagements
of the Optionee or his legal successors or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means, whether such disposition be voluntary or involuntary or occur by
operation of law by judgement, levy, attachment, garnishment or any other legal
or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect. All of the terms and provisions
of this Agreement shall be binding on, and shall inure to the benefit of, the
respective legal successors and assigns of the parties.
Section 5.2 Shares to be Reserved
The Corporation shall at all times during the term of the Options reserve
and keep available such number of shares of Common Stock as will be sufficient
to satisfy the requirements of this Agreement.
Section 5.3 Arbitration
Any controversy or claim arising out of or relating to this Agreement, the
breach thereof, or any other aspect of the relationship between the parties, or
relating to the scope of this arbitration provision, shall be settled
exclusively by private arbitration before JAMS Endispute, New York, New York (or
any successor thereto) or, if such entity is no longer operating, such other
dispute resolution agency as may be acceptable to the Company and the Optionee.
The arbitration of such issues, including the determination of the amount of any
damages suffered by either party hereto by reason of the acts or omissions of
the other, shall be to the exclusion of any court of law. The decision of the
arbitrators or a majority of them shall be final and binding on both parties and
their respective heirs, executors, administrators, successors and assigns. There
shall be three arbitrators, one to be chosen directly by each party and the
third arbitrator to be selected jointly by the Company and the Optionee from a
list of arbitrators provided by JAMS Endispute or such other dispute resolution
agency. In all events the arbitrators so chosen shall be experienced in the
valuations and business operations of closely-held
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business which complete and initial public offering of equity securities under
the Securities Act of 1933, as amended. Each party shall pay the fees of the
arbitrator selected by him and of his own attorneys and the expenses of his
witnesses and all other expenses connected with the presentation of his case.
All other costs of the arbitration, including the cost of the record or
transcripts thereof, if any, administrative fees, and all other fees and costs
shall be borne equally by the parties.
Section 5.4 Entire Agreement
This Agreement supersedes and cancels any and all prior agreements between
the parties hereto, express or implied, relating to the subject matter hereof.
This Agreement, together with the Consulting Agreement, sets forth the entire
agreement between the parties hereto. It may not be changed, altered, modified
or amended except in a writing signed by both parties.
Section 5.5 Non-Waiver
The failure or refusal of either party to insist upon the strict
performance of any provision of this Agreement or to exercise any right in any
one or more instances or circumstances shall not be construed as a waiver or
relinquishment of such provision or right, nor shall such failure or refusal be
deemed a custom or practice contrary to such provision or right.
Section 5.6 Non-Assignment
The Optionee shall have no right to delegate any of the duties created by
this Agreement, and any delegation or attempted delegation of the Optionee's
duties, shall be null and void. In all other respects, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, beneficiaries, personal representatives, successors, permitted
assigns, officers and directors.
Section 5.7 Severability
If any paragraph, term or provision of this Agreement shall be held or
determined to be unenforceable, the balance of this Agreement shall nevertheless
continue in full force and effect unaffected by such holding or determination.
In addition, in any such event, the parties agree that it is their intention and
agreement that any such paragraph, term or provision which is held or determined
to be unenforceable as written, shall nonetheless be enforced and binding to the
fullest extent permitted by law as though such paragraph, term or provision has
been written in such a manner and to such an extent as to be enforceable under
the circumstances. Without limitation of the foregoing, with respect to any
restrictive covenant contained herein, if it is determined that any such
provision is excessive as to duration or scope, it is intended that it
nonetheless be enforced for such shorter duration or with such narrower scope as
will render it enforceable.
Section 5.8 Notices
8
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All notices hereunder shall be in writing. Notices may be delivered
personally, or by mail, postage prepaid, to the respective addresses noted
above.
Section 5.9 Governing Law
This Agreement shall be governed in all respects by the laws of the State
of New York without regard to principles of conflicts of laws.
Section 5.10 Captions and Titles
Captions and titles have been used in this Agreement only for convenience,
and in no way define, limit or describe the meaning of this Agreement or any
part thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto on the date first set forth above.
ARTHUR TREACHER'S INC.
By:/s/Bruce Galloway
Name: Bruce Galloway
Title: Chairman
AGREED AND ACCEPTED BY:
/s/Ralph J. Sorrentino
Ralph J. Sorrentino
9
EXHIBIT 2
EXECUTIVE CONSULTING AGREEMENT
EXECUTIVE CONSULTING AGREEMENT (this "Agreement") made as of the 1ST day of
May, 2000, by and among DIGITAL CREATIVE DEVELOPMENT CORP., a New York
corporation with its principal place of business located at 1325 Avenue of the
Americas, New York, New York 10019 (the "Company"), ARTHUR TREACHER'S INC., a
Utah corporation with its principal place of business located at 7400 Baymeadows
Way, Suite 300, Jacksonville, Florida 32255 ("Treachers"), RJS CONSULTING CORP.,
a Delaware corporation (Executive") with offices at 407 Blauvelt Road, Pearl
River, New York 10965, and for the limited purposes described herein, Ralph J.
Sorrentino, residing at 407 Blauvelt Road, Pearl River, New York 10965 ("RJS")
(for convenience of reference only, this Agreement shall refer to Executive in
the masculine gender, but such reference shall not imply that any person other
than Ralph J. Sorrentino Inc. is a party as Executive hereto).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Executive has been providing services to Treacher's since
December, 1999; and
WHEREAS, the Company is a subsidiary of Treacher's; and
WHEREAS, the Company desires to engage for itself the experience, abilities
and service of Executive in principal executive capacities, and Executive
desires to be so engaged, upon the terms and conditions specified herein; and
WHEREAS, RJS, as the sole stockholder of Executive, is willing to confirm
his agreement to cause Executive to perform this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
terms and conditions hereinafter set forth, and for other good and valuable
consideration, receipt of which is specifically acknowledged, the parties hereto
hereby agree as follows:
1. Retention
The Company hereby retains Executive, and Executive hereby accepts such
retention from the Company, to serve, as Executive Consultant, as the President
and Chief Executive Officer of the Company in accordance with the terms of this
Agreement. Pending the Executive Transition Date, as defined below, Executive
shall not be identified as an officer of the
1
<PAGE>
Company in any public announcements. The term "Executive Transition Date" means
the earlier of (i) July 1, 2000 or (ii) the date on which Executive notifies the
Company that he no longer holds the position of Executive Vice President and
Chief Financial Officer of Liberty Digital, Inc.
2. Executive's Duties
(a) The Company hereby agrees to retain Executive, and Executive agrees
faithfully and to the best of his ability, in the position of President and
Chief Executive Officer, to have general and active management and supervision
of the business of the Company and to discharge the duties of said office and
perform such other duties and services of an executive, administrative and
managerial nature as shall be specified and designated from time to time by the
Board of Directors of the Company in connection with the business and activities
of the Company; provided that the Company acknowledges that, as described in
Section 8(c)(ii) of this Agreement, the assignment of any duties inconsistent
with Executive's positions, duties, responsibilities and status with the Company
or a change in Executive's reporting responsibilities, titles or offices will
constitute a constructive termination providing Executive with the rights
described in such Section 8(c)(ii) and elsewhere in this Agreement.
(b) Commencing on the Executive Termination Date, Executive agrees to
devote his best efforts, energy and skill, and in no event less than a majority
of his time during regular business hours, to the performance of such services;
provided, however, that the Company acknowledges that Executive may from time to
time engage in consulting and related activities for other entities. Without
limiting the foregoing, Executive shall be permitted to serve as a consultant
with and to (i) Liberty Digital, Inc., (ii) Heavy.Com, Inc. and (iii) Heavy
Industry, Inc., their respective successors and assigns. Notwithstanding the
foregoing, Executive shall not, without the prior written consent of the
Chairman of the Company (the "Chairman"), serve as consultant to any other
entity or person if such entity or person is engaged in Competitive Activities.
As used herein, the term "Competitive Activities" means activities and business
operations that are competitive with any business operations then conducted or
definitively proposed to be conducted by the Company within the same geographic
market as that in which the business of the Company is or is definitively
proposed to be conducted. The parties acknowledge that, in reviewing any request
for consent hereunder, the Company shall cause the Chairman to consult in good
faith with Executive mindful that Executive's consulting activities with
competitors may benefit the Company through strategic investment or other
business opportunities and that Executive's analysis thereof will be accorded
significant weight.
(c) Executive agrees to observe and comply with all rules, regulations,
policies and practices adopted by the Company, either orally or in writing, both
as they now exist and as they may be adopted or modified from time to time.
3. Term
Executive's employment and the term of this Agreement shall be for a period
of thirty (30) months commencing on April 1, 2000 and ending on October 1, 2002
(the "Initial Term") and shall automatically extend for additional one-year
periods (each, an "Extended Term") unless either party gives the other party
notice (the "Non-Renewal Notice"), not fewer
2
<PAGE>
than 180 days prior to the end of the then current term, that the Agreement will
not be so extended.
4. Compensation
(a) Fee. Upon the execution and delivery of this Agreement, the --- Company
shall pay to Executive the sum of $15,000 (representing a $7,500 per month fee
owing for February, 2000 and March, 2000) and the sum of $20,000 for April,
2000. The Company shall pay to Executive a base annual fee in the amount of
$250,000 payable on the first day of each month in installments of $20,000 per
month except that the installment due on each of March 1, 2001 and March 1, 2002
shall be $30,000 and the installment due on September 1, 2002 shall be $25,000.
The parties shall negotiate in good faith for a fee for any Extended Term but in
no event shall any such fee be less than 120% of the fee in effect for the
twelve-month period immediately preceding such Extended Term. All amounts paid
to Executive under this Agreement shall be paid without withholding for income,
social security or other taxes of any kind.
(b) Bonus. The Company shall pay Executive at the end of each -----
calendar year and at the end of the Initial Term and any Extended Term a bonus
in such form and amount as the Board of Directors of the Company shall deem
appropriate.
(c) Car Allowance. During the Initial Term and any Extended Term,
- ------------- the Company shall provide to Executive a car allowance in an
amount not to exceed $750 per month.
(d) Life Insurance. During the Initial Term and any Extended Term,
- -------------- the Company shall cause to be issued a key man life insurance
policy on RJS in the amount of $3,000,000, the premiums for which shall be paid
by the Company. The beneficiaries of such life insurance shall be the Company
(to the extent of $2,500,000) and a beneficiary to be designated by Executive
(as the same may be changed by Executive from time to time) to the extent of
$500,000. Such policy shall include a customary waiver of premium in the event
of Executive's Disability.
5. Equity Participation. Simultaneously with the execution and
- -------------------- delivery of this Agreement, Treacher's and Executive shall
execute and deliver the Stock Option Agreement (the "Option Agreement") in the
form attached hereto as Exhibit A providing for the grant to Executive of
options to acquire Five Million (5,000,000) shares of Treacher's common stock
(the "Shares"), at an exercise price of $.37 per share, with such vesting and
other terms as are set forth in such Option Agreement.
6. Assumption of Indebtedness; Loan. (a) Upon the request of
- -------------------------------- Executive from time to time, the Company shall
assume and be primarily liable for and shall indemnify Executive against up to
$2,500,000 of indebtedness incurred by Executive for any legal purpose (the
"Assumed Debt"). The Company shall promptly execute and deliver such documents
and instruments as Executive may deem reasonably necessary to effect such
assumption. Upon consummation of a Qualified Financing, as defined below, the
Company shall
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<PAGE>
promptly loan to Executive in cash (the "Loan") an amount equal to the
difference between $2,500,000 and the aggregate amount of the Assumed Debt. The
Loan, which shall be non- recourse to Executive, shall be evidenced by a Note
bearing interest at 6% per annum in form satisfactory to the Company and
Executive with a maturity date for the payment of principal and interest of
October 1, 2002 (the "Maturity Date"). The Loan and the Assumed Debt shall be
secured by a first priority security interest in that number of Options and
Shares issued upon exercise of the Options which, at a valuation of $.50 per
share, secures the aggregate outstanding amount of the Loan and Assumed Debt, to
secure performance by Executive of his obligations under this Agreement through
the Maturity Date. As used herein, the term "Qualified Financing" means any
transaction or series of related transactions by which the Company obtains cash
of at least $20,000,000 through the issuance of debt, equity or any combination
of debt and equity.
(b) Upon the issuance of any Shares upon exercise of any Options, Executive
shall open a brokerage account at a broker-dealer selected by Executive and
reasonably satisfactory to the Company (the "Account") and deposit the pledged
Shares into the Account to be held as security, as described herein, provided
that, subject to such security interest, Executive may utilize such Shares for
margin or other investment activity to the extent acceptable to such
broker-dealer. Executive agrees to execute and deliver an account control
agreement with such broker-dealer in form satisfactory to the Company and
Executive and such other documents as reasonably requested by the Company to
cause the Shares to be sold in the event amounts under the Loan and Assumed Debt
are required to be repaid by Executive and Executive has failed to repay such
amounts.
(c) Notwithstanding the foregoing, the Company expressly acknowledges that
if Executive's performance under this Agreement has not given rise to a right of
termination for Cause, as defined herein, the Company shall on the Maturity Date
forgive all amounts (including interest) owing under the Loan and the Assumed
Debt if (i) the closing price of the Shares on the Company's principal listed
exchange on the Maturity Date is not
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<PAGE>
less than $12.50 per share or (ii) the average of the closing prices of
a board lot of Shares traded on the Company's principal listed exchange for the
sixty (60) trading days immediately preceding the Maturity Date is not less than
12.50 per share. The Company further acknowledges that Executive is entering
into this Agreement in reliance on the foregoing undertaking of the Company. The
Company acknowledges that if Executive's performance during the Initial Term has
been satisfactory and the price of the Shares has performed generally consistent
with the performance of the market, then the Board of Directors of the Company
may in its discretion forgive all amounts (including interest) owing under the
Loan and the Assumed Debt notwithstanding that the foregoing formula is not
satisfied by reason of, by way of illustration, aberrational swings in the price
of the Shares during such sixty (60) day period.
7. Put Right. At any time after the Company terminates Executive's
- --------- employment other than for Cause and at any time after Executive
terminates his employment for Good Reason, Executive may require the Company to
repurchase any Options held by Executive which are not subject to forfeiture, as
provided for in the Option Agreement, and any Shares previously issued to
Executive upon exercise of any Options, upon five (5) days written notice (the
"Put Notice") to the Company of Executive's election to require the Company to
effect such repurchase. The purchase price (the "Purchase Price") for each such
Option and each such Share shall be the greater of (x) the average of the
closing prices of a board lot of Shares traded on the Company's principal listed
exchange for the thirty (30) trading days immediately preceding the purchase
date or (y) the closing price of Shares on such exchange on the date of the Put
Notice. The payment of the Purchase Price shall be effected as follows:
(i) If the Company has Available Cash, as defined below, in excess of the
amount of the Purchase Price, the Company shall pay the entire Purchase Price in
cash;
(ii) If the Company has Available Cash in an amount
which is less than the amount of the Purchase Price, then, if
Executive is legally able publicly to sell such Options or
Shares, the Company shall cooperate with Executive in
effecting such sale and pay to Executive the difference
between (a) the average of the closing prices of a board lot
of Shares traded on the Company's principal listed exchange
for the thirty (30) trading days immediately preceding the
date of sale and (b) the price at which Executive was able to
effect such sale. The payment by the Company of such
difference shall be made in cash, to the extent of Available
Cash, plus the balance in the form of either, at Executive's
election, (x) a Promissory Note with a term of thirty (30)
months bearing interest at the Prime Rate, as defined below,
plus 300 basis points, and otherwise in form and substance
satisfactory to Executive or (y) additional Shares or (z) any
combination of such a Promissory Note and additional Shares.
As used herein the term "Available Cash" means 17.5% of
average cash balances held by the Company over 90 days. As used herein the term
"Prime Rate" means the Prime Rate as published from time to time by The Wall
Street Journal (or any successor publication).
8. Termination.
-----------
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(a) The Company may terminate Executive's retention hereunder for Cause, as
defined in Section 8(c)(i) hereof. Executive's retention shall terminate upon
his death.
(b) Executive may terminate his retention for Good Reason.
(c) For purposes of this Agreement, the following terms shall be defined as
follows:
(i) Cause: Termination by the Company of Executive's retention for "Cause"
shall mean termination upon (A) Executive's failure to cure a material breach of
a material term or provision of this Agreement within thirty (30) days' after
Executive's receipt of notice from the Company of such breach, (b) Executive's
conviction of a felony under the laws of the United States or any State, (C)
Executive's willful violation of any applicable Federal or State law, rule or
regulation applicable to the Company's business or (D) circumstances under which
Executive's physical or mental condition renders him unable to perform his
duties under this Agreement and such inability shall continue for a period in
excess of ninety (90) consecutive or one-hundred eighty (180) non-consecutive
calendar days in any consecutive twelve-month period (such circumstances
referred to herein as "Disability").
(ii) Good Reason. Termination by Executive of Executive's -----------
employment for "Good Reason" shall mean termination upon the occurrence of any
of the following events without Executive's consent:
(A) the assignment to Executive of any
duties inconsistent with Executive's positions,
duties, responsibilities and status with the Company
or a change in Executive's reporting
responsibilities, titles or offices, except in
connection with the termination of Executive's
retention for Cause or as a result of Executive's
death or Disability;
(B) a reduction by the Company in Executive's annual base fee as in effect
on the date hereof or as the same may be increased from time to time;
(C) the failure of Executive to hold a seat on the Company's Board of
Directors (except as a result of Executive's voluntary resignation); or
(D) any other breach by the Company of any
material provision of this Agreement, including,
without limitation, Section 16 of this Agreement.
(iii) Notice of Termination. Any purported
termination by the Company pursuant to paragraph (i) above or
by Executive pursuant to paragraph (ii) above shall be
communicated by written Notice of Termination to the other
party hereto.
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For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's
retention under the provisions so indicated.
(iv) Date of Termination. "Date of Termination" shall
mean (A) if Executive's retention is terminated pursuant to
paragraph (i) above, the date specified in the Notice of
Termination, (B) if Executive's retention is terminated by
reason of Executive's death, the date of Executive's death,
(C) if Executive's retention is terminated by Executive for
any reason other than Good Reason, upon the date which is
thirty (30) days after the Company's receipt of the Notice of
Termination and (D) if Executive's retention is terminated for
Good Reason, the date on which a Notice of Termination is
given; provided that if within thirty (30) days after any
Notice of Termination is given the party receiving such Notice
of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by
mutual written agreement of the parties, or by a binding and
final arbitration award and a judgment confirming such award
(the time for appeal therefrom having expired and no appeal
having been perfected), except that if the termination was by
the Company for Cause (and such termination is upheld by such
award) then the Date of Termination shall be the date
specified in the Notice of Termination.
9. Compensation Upon Termination or During Disability.
- --------------------------------------------------
(a) During any period that Executive fails to perform duties hereunder as a
result of Disability, Executive's benefits shall be determined in accordance
with the Company's long-term disability plan, if any, then in effect; provided
that in all events Executive shall continue to be provided all fees and benefits
hereunder during any elimination or waiting period under any such plan.
(b) If Executive's retention shall be terminated for Cause (other than
Disability) or by Executive other than for Good Reason, the Company shall pay
Executive's full base annual fee to Executive through the Date of Termination at
the rate in effect at the time Notice of Termination is given and the Company
shall have no further obligation to Executive under this Agreement except in
respect of the Executive's rights to Options and Shares issued pursuant hereto
and the Option Agreement. If Executive's retention shall be terminated by reason
of Executive's death or Disability, the Company shall pay Executive's full base
annual fee to Executive through the period ending six (6) months after the Date
of Termination at the rate in effect at the time of Executive's death or
commencement of Disability, as the case may be, and the Company shall have no
further obligation to Executive under this Agreement except in respect of the
Executive's rights to Options and Shares issued pursuant hereto and the Option
Agreement, all of which may be transferred to the Executive's heirs.
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<PAGE>
(c) If Executive's retention by the Company shall be terminated (A) by the
Company other than for Cause or other than by reason of death or Disability or
(B) by Executive for Good Reason, then Executive shall be entitled to the
benefits provided below:
(A) The Company shall pay Executive's full
base annual fee to Executive through the later of (i)
the Date of Termination or (ii) the end of the
Initial Term or any Extended Term, as the case may
be, at the rate in effect at the time Notice of
Termination is given;
(B) in lieu of any further fees to Executive
for periods subsequent to the Date of Termination,
Executive shall receive as severance compensation a
lump sum equal to the product of Executive's base
monthly fee at the highest rate in effect during the
twelve (12) months immediately preceding the Date of
Termination multiplied by the number twelve (12); and
(C) Without limiting Executive's rights
under Section 7 of this Agreement and any and all
rights under the Option Agreement, Executive may at
any time exercise all Options issued to Executive at
an exercise price of $.01 per share.
(d) In the event the Company delivers to Executive a Non-Renewal Notice in
accordance with Section 3 of this Agreement, then, in addition to all other
benefits owing to Executive, the Company shall pay to Executive at the end of
the then-current term (Initial Term or Extended Term, as the case may be) am
amount equal to fifty percent (50%) of the Executive's then current annual fee.
(e) Executive shall not be required to mitigate the amount of any payment
provided for in this Section 9 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 9 be reduced by any
compensation earned by Executive as the result of employment or retention by
another employer after the Date of Termination, or otherwise.
10. Executive's Rights Under Certain Plans; Reimbursement for Expenses
The Company agrees that nothing contained herein is intended to or shall be
deemed to be granted to Executive in lieu of any rights and privileges which
Executive shall be entitled to as a consultant of the Company under any
retirement, pension, insurance, hospitalization, medical, disability or other
plan which may now or hereafter be in effect, it being understood that Executive
shall, if he so elects, have the right and privilege to participate in such plan
or benefits. The Company covenants to cause all such plans and benefits to
include Executive as an eligible participant and, if necessary, to adopt new
plans and benefits that include Executive as an eligible participant. Executive
shall be entitled to incur on behalf of the Company reasonable and necessary
expenses in connection with the performance of his duties, and the
8
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Company shall pay for or reimburse Executive for all such expenses upon
presentation of proper receipts therefor.
11. Vacation
Executive shall be entitled to paid vacation time of six (6) weeks during
each year.
12. Board Seats
The Company shall take all necessary steps to cause the nomination and
election of RJS to the Board of Directors of the Company so long as this
Agreement is in effect and to carry Directors and Officers Liability Insurance
in an amount consented to by RJS, such consent not be unreasonably withheld. RJS
shall serve on the Boards of Directors of entities in which the Company may
invest so long as the terms and conditions of such service are satisfactory to
him in his discretion.
13. Protection of the Company's Interest; Non-Compete
(a) Proprietary and Confidential Information. Executive acknowledges
- ---------------------------------------- that while he performs services
hereunder, he will receive, have access to and become acquainted with documents
setting forth the Company's Confidential Information (as defined below).
Executive hereby agrees that all such confidential documents are the sole and
exclusive property of the Company, and that, during the term of this Agreement,
Executive will not use any such documents other than in the course of performing
his duties under this Agreement. Executive further agrees that upon expiration
or termination of Executive's retention, Executive shall not take or use any
such documents of the Company. Executive further agrees that, upon termination
of his services with the Company, all such documents then in Executive's
possession, whether prepared by him or others will be left with the Company. For
purposes of this Section 13, "Confidential Information" means information
disclosed to Executive through such documents, not generally known in the
industry in which the Company is or may become engaged, about the Company's
products, processes, and services.
(b) Notwithstanding anything to the contrary set forth in this Section 13,
if any provision of this Section 13, or the application thereof to any
circumstance, is held invalid for any reason whatsoever, such invalid provision
shall be severable and such invalidity shall not affect any other provision of
this Section 13, or the application thereof to any other circumstance, which can
be given effect without such invalid provision or application.
(c) With respect to all Inventions (as hereinafter defined) made or
conceived by Executive, whether or not during the hours of Executive's services,
or with the use of the Company's and/or its affiliates' facilities, materials,
or personnel, either solely or jointly with others, during the term of this
Agreement, and without royalty or any other consideration, the following shall
apply:
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<PAGE>
(i) Reports. Executive shall inform the Company
promptly and fully of such Inventions by a written report,
setting forth in detail the structures, procedures, and
methodology employed and the results achieved.
(ii) Assignment. Executive hereby assigns and agrees
to assign to the Company all of the right, title and interest
to Executive's Inventions and to all proprietary rights of
every kind and nature therein, based thereon or related
thereto, including, but not limited to, applications for
United States and foreign letters patent and resulting letters
patent, trademarks and copyrights.
(iii) Patents. At the Company's request and expense,
Executive shall execute such documents as the Company deems
necessary to vest in the Company sole and exclusive title to
or otherwise to secure and protect the Company's rights in
such Inventions and in all related trademarks, copyrights
and/or patent rights, and Executive shall provide such
assistance as may be deemed necessary by the Company to apply
for, defend or enforce any United States and foreign letters
patent, trademarks or copyrights based upon or related to such
Inventions, as well as all reissues, renewals and extensions
thereof.
(iv) Inventions. As used herein, "Inventions" shall
mean all developments, discoveries, concepts, inventions,
improvements, trade secrets and ideas, whether or not
patentable or otherwise protectable, that are conceived or
developed or reduced to practice, alone or jointly with
others, which relate to any present or prospective activities
of the Company and/or its affiliates, including, but not
limited to, devices, processes, methods, formulae, techniques,
modifications and any improvements to the foregoing.
(v) Non-Exclusive License. In the event that the
Company shall terminate Executive's services other than for
Cause, then Executive shall have hereby a royalty free,
transferable, non-exclusive, perpetual license with respect to
all Inventions assigned, licensed or developed by Executive to
the Company during the term of this Agreement and Executive
shall have the right to retain any Confidential Information
with respect to such Inventions.
(d) Executive acknowledges and agrees that a violation of this Section 13
of this Agreement shall cause irreparable harm to the Company and that the
Company shall be entitled to specific performance of this Agreement or an
injunction without proof of special damages, together with the costs and
reasonable attorneys' fees incurred by the Company in enforcing its rights under
this Section 13. Further, Executive acknowledges that the restrictions and
agreements set forth in this Section 13 are in addition to, and are not intended
to limit or diminish in any way, any other restrictions of law or contract, and
that the Company shall be entitled, in addition to any other right and remedy
available to it at law or in equity, to an injunction enjoining or restraining
Executive from any violation or threatened violation of this Section 13, and
Executive hereby consents to the issuance of such injunction without bond or
other security.
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<PAGE>
(e) The provisions of this Section 13 of this Agreement shall survive the
termination of Executive's retention hereunder and continue to be binding upon
Executive.
14. Covenant Not to Compete. In the event that Executive terminates
- ----------------------- this Agreement without Good Reason, Executive will not,
at any time through the end of the then current term (either Initial Term or
Extended Term, as the case may be), anywhere in the United States, either
directly or indirectly, engage in, with or for any enterprise, institution,
whether or not for profit, business, or company, competitive with the business
(as identified herein) of the Company as such business may be conducted on the
date thereof, as a creditor, guarantor or financial backer, stockholder,
director, officer, consultant, advisor, employee, member, inventor, producer,
director, or otherwise of or through any corporation, partnership, association,
sole proprietorship or other entity; provided, that an investment by Executive,
his spouse or his children or other affiliate of not more than five (5%) percent
of the total equity of such entity shall be permitted and provided further that
Executive may continue to perform any consulting activities permitted by or
consented to under this Agreement, as described in Section 2(b) of this
Agreement. For purposes of this Section 14, the business of the Company shall be
limited to providing content or services over the Internet and wireless
communications. In the event that Executive terminates this Agreement without
Good Reason, Executive agrees that through the end of the then current term
(either Initial Term or Extended Term, as the case may be) he will not solicit
or hire, either as an employee or independent contractor, any employee of the
Company or its affiliates or any person who had been an employee of the Company
or its affiliates within one year prior to such solicitation or engagement. The
restriction of this Section 14 shall be effective if, but only if, and so long
as, the Company continues to pay the Executive his full annual base fee through
the end of the then-current term (either Initial Term or Extended Term, as the
case may be) and honors any other obligations owing to Executive hereunder or
under the Option Agreement.
15. Offering Allocation
In the event that the Company files a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") for the sale of shares
of the Company's common stock to the public, then the Company shall, if the
Company has established a directed share or similar program to enable a class of
persons to purchase, on a pro rata basis, a portion of the common stock so
offered, include Executive or RJS (as designated by Executive) in such class of
persons.
16. Provision of Working Capital
The Company shall provide adequate working capital (directly or through
equity or debt placements with third parties) to sustain reasonable growth of
the Company's revenue and asset base. Without limiting the foregoing, the
Company acknowledges that the Company intends to invest in businesses of which
the Company may take majority positions and active control, minority positions
and active control and minority positions without such control, and that
adequate working capital is essential to fulfill such intention.
17. Preemptive Right
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Executive shall, upon the issue or sale of shares by the Company of stock
of any class (whether now or hereafter authorized), have the right
simultaneously with any such issuance or sale to subscribe to and purchase such
shares in proportion to Executive's holdings (on a fully diluted basis), at the
issue or sale price. The Company shall give Executive not fewer than thirty (30)
days prior written notice of any such issuance or sale and shall cooperate with
Executive in his exercise of his preemptive right.
18. Stockholders Agreement
Executive may, in his discretion, elect to become a party to any
Stockholders Agreement among the principal stockholders of the Company and the
Company, and if Executive makes any such election, the Company shall take such
steps as are necessary to enable Executive to become a party thereto; provided
that in no event shall any such Stockholders Agreement adversely modify or
affect any rights of Executive under this Agreement or the Option Agreement.
12
<PAGE>
19. Arbitration
Any controversy or claim arising out of or relating this Agreement, the
breach thereof, or any other aspect of the relationship between the parties, or
relating to the scope of this arbitration provision, shall be settled
exclusively by private arbitration before JAMS Endispute, New York, New York (or
any successor thereto) or, if such entity is no longer operating, such other
dispute resolution agency as may be acceptable to the Company and Executive. The
arbitration of such issues, including the determination of the amount of any
damages suffered by either party hereto by reason of the acts or omissions of
the other, shall be to the exclusion of any court of law. The decision of the
arbitrators or a majority of them shall be final and binding on both parties and
their respective heirs, executors, administrators, successors and assigns. There
shall be three arbitrators, one to be chosen directly by each party and the
third arbitrator to be selected jointly by the Company and Executive from a list
of arbitrators provided by JAMS Endispute or such other dispute resolution
agency. In all events the arbitrators so chosen shall be experienced in the
valuations and business operations of closely-held businesses which completed an
initial public offering of equity securities under the Securities Act of 1933,
as amended. Each party shall pay the fees of the arbitrator selected by him and
of his own attorneys and the expenses of his witnesses and all other expenses
connected with the presentation of his case. All other costs of the arbitration,
including the cost of the record or transcripts thereof, if any, administrative
fees, and all other fees and costs shall be borne equally by the parties.
20. Entire Agreement
This Agreement supersedes and cancels any and all prior agreements between
the parties hereto, express or implied, relating to the subject matter hereof.
This Agreement, together with the Stock Option Agreement, sets forth the entire
agreement between the parties hereto. It may not be changed, altered, modified
or amended except in a writing signed by both parties.
21. Non-Waiver
The failure or refusal of either party to insist upon the strict
performance of any provision of this Agreement or to exercise any right in any
one or more instances or circumstances shall not be construed as a waiver or
relinquishment of such provision or right, nor shall such failure or refusal be
deemed a custom or practice contrary to such provision or right.
22. Non-Assignment
Executive shall have no right to delegate any of the duties created by this
Agreement, and any delegation or attempted delegation of Executive duties, shall
be null and void. In all other respects, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal representatives, successors, permitted assigns, officers
and directors.
23. Severability
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If any paragraph, term or provision of this Agreement shall be held or
determined to be unenforceable, the balance of this Agreement shall nevertheless
continue in full force and effect unaffected by such holding or determination.
In addition, in any such event, the parties agree that it is their intention and
agreement that any such paragraph, term or provision which is held or determined
to be unenforceable as written, shall nonetheless be enforced and binding to the
fullest extent permitted by law as though such paragraph, term or provision has
been written in such a manner and to such an extent as to be enforceable under
the circumstances. Without limitation of the foregoing, with respect to any
restrictive covenant contained herein, if it is determined that any such
provision is excessive as to duration or scope, it is intended that it
nonetheless be enforced for such shorter duration or with such narrower scope as
will render it enforceable.
24. Notices
All notices hereunder shall be in writing. Notices may be delivered
personally, or by mail, postage prepaid, to the respective addresses noted
above.
25. Governing Law
This Agreement shall be governed in all respects by the laws of the State
of New York without regard to principles of conflicts of laws.
26. Captions and Titles
Captions and titles have been used in this Agreement only for convenience,
and in no way define, limit or describe the meaning of this Agreement or any
part thereof.
27. Performance Undertaking
By signing below, RJS confirms his intention, as the sole stockholder of
Executive, to cause Executive to perform its obligations under this Agreement.
14
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
DIGITAL CREATIVE DEVELOPMENT
CORP.
By:/s/Bruce Galloway
Name: Bruce Galloway
Title: Chairman
ARTHUR TREACHER'S INC.
By:/s/Bruce Galloway
Name: Bruce Galloway
Title: Chairman
RJS CONSULTING CORP.
BY:/s/Ralph J. Sorrentino
----------------------
Name: Ralph J. Sorrentino
Title: President
RALPH J. SORRENTINO (for purposes of
Section 2, 4, 5, 6, 7, 8, 9, 12,
13, 14, 15 and 27 only)
/s/Ralph J. Sorrentino
----------------------
Ralph J. Sorrentino
15
