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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the quarterly period ended June 30, 1999 (Second quarter of
fiscal 1999)
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the
transition period from_____________ to _____________
Commission File No. 0-24073
IBS INTERACTIVE, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 13-3817344
(State or Other Jurisdiction (I.R.S. Employer I.D. No.)
of Incorporation or Organization)
2 RIDGEDALE AVENUE
SUITE 350
CEDAR KNOLLS, NJ 07927
(Address of Principal Executive Offices)
(973) 285-2600
(Issuer's Telephone Number, Including Area Code)
_____________________________________________________
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
As of August 9, 1999, 4,281,667 shares of the issuer's common stock,
par value $.01 per share, were outstanding.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
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IBS INTERACTIVE, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of June 30, 1999
(unaudited).................................................... 1
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 1999
and 1998 (unaudited)........................................... 3
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 and 1998
(unaudited).................................................... 4
Notes to Condensed Consolidated Financial Statements........... 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.......................................... 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................................. 15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...................... 15
ITEM 3. DEFAULT UPON SENIOR SECURITIES................................. 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 16
ITEM 5. OTHER INFORMATION.............................................. 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................... 17
SIGNATURES.............................................................. 19
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
IBS INTERACTIVE, INC.
Condensed Consolidated Balance Sheet
(unaudited, in thousands)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1999
<S> <C>
Current Assets
Cash and cash equivalents................................................ $ 2,152
Accounts receivable (net of allowance for doubtful
accounts of $99)...................................................... 3,803
Prepaid expenses......................................................... 404
Deferred tax assets...................................................... 204
------------
Total Current Assets.......................................... 6,563
-----------
Property and equipment, net..................................................... 1,073
Intangible assets, net.......................................................... 4,038
Intangible assets - deferred compensation, net.................................. 590
Other assets.................................................................... 219
------------
TOTAL ASSETS.................................................. $ 12,483
=========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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IBS INTERACTIVE, INC.
Condensed Consolidated Balance Sheet
(unaudited, in thousands, except share amounts)
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY JUNE 30, 1999
-------------
<S> <C>
Current Liabilities
Long-term debt and capital lease obligations, current portion............. $ 949
Accounts payable and accrued expenses..................................... 1,248
Deferred revenue.......................................................... 527
---------
Total Current Liabilities........................................... 2,724
---------
Deferred compensation.......................................................... 895
Long-term debt and capital lease obligations................................... 203
---------
Total Liabilities......................................................... 3,822
---------
Stockholders' Equity
Preferred Stock, $.01 par value, authorized 1,000,000 shares, none issued and
outstanding........................................................... --
Common Stock, $.01 par value, authorized 11,000,000 shares,
4,211,848 shares issued and outstanding............................... 42
Additional paid in capital................................................ 10,419
Accumulated deficit....................................................... (1,800)
--------
Total Stockholders' Equity................................................ 8,661
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $ 12,483
=========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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IBS INTERACTIVE, INC.
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 1999 and 1998
(unaudited, in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the six months ended June 30, For the three months ended June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................... $ 8,753 $ 6,995 $ 4,737 $ 3,383
Cost of services........................... 5,572 4,606 3,122 2,299
-------- -------- -------- --------
Gross profit............................... 3,181 2,389 1,615 1,084
Operating expenses:
Selling, general and administrative... 4,199 2,055 2,537 1,142
Amortization of intangible assets..... 224 83 155 50
Compensation expense - non-cash....... 188 89 105 56
Merger expenses....................... 137 0 109 0
-------- -------- -------- --------
Operating income (loss).................... (1,567) 162 (1,291) (164)
Interest expense (income), net............. (47) 17 (22) (29)
-------- -------- -------- --------
Income (loss) before income taxes.......... (1,520) 145 (1,269) (135)
Tax benefit (provision).................... 77 (120) (45) 0
-------- -------- -------- --------
Net income (loss).......................... $ (1,443) $ 25 $ (1,314) $ (135)
========== ======== ========= =========
Earnings (loss) per share
Basic and Diluted.......................... $ (0.35) $ 0.01 $ (0.31) $ (0.04)
========== ======== ========= =========
Weighted average common shares outstanding
Basic...................................... 4,144,507 2,963,078 4,195,532 3,339,648
Diluted.................................... 4,144,507 3,116,103 4,195,532 3,485,185
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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IBS INTERACTIVE, INC.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 1999 and 1998
(unaudited, in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
-------- -------
<S> <C> <C>
Cash Flows (used in) provided by Operating Activities.................. $ (2,297) $ 1,022
Cash Flows used in Investing Activities................................ (1,573) (334)
Cash Flows provided by Financing Activities............................ 490 6,546
-------- -------
NET INCREASE (DECREASE) IN CASH
and CASH EQUIVELENTS................................................. (3,380) 7,234
CASH and CASH EQUIVALENTS
AT BEGINNING OF PERIOD................................................. 5,532 277
-------- -------
CASH and CASH EQUIVALENTS
AT END OF PERIOD....................................................... $2,152 $ 7,511
======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION
a. The condensed consolidated interim financial statements of IBS Interactive,
Inc. ("IBS," or the "Company") included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission with respect to Form 10-QSB. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures made herein
are adequate to make the information contained herein not misleading. These
condensed consolidated interim financial statements should be read in
conjunction with the Company's audited financial statements for the year
ended December 31, 1998 and the notes thereto included in the Company's
Annual Report on Form 10-KSB and the Company's reports on Form 8-K dated
April 15, 1999, June 2, 1999 and June 7, 1999. In the Company's opinion,
all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of the information shown herein have been included.
As discussed in Note 2, the Company acquired Spencer Analysis, Inc.
("Spencer") in a business combination accounted for as a
pooling-of-interests.
Previously issued consolidated financial statements and notes thereto for
the three and six month periods ended June 30, 1998 have been restated, as
required, to reflect the 1998 and 1999 business combinations accounted for
as poolings-of-interests (DesignFX Interactive, LLC ("Design FX"), Halo
Network Management, LLC ("Halo") and Spectrum Information Systems, Inc.
("Spectrum")) as well as the Spencer business combination).
b. The results of operations and cash flows for the six months ended June 30,
1999 presented herein are not necessarily indicative of the results of
operations and cash flows expected for the year ending December 31, 1999.
c. Basic earnings (loss) per share have been computed using the weighted
average number of shares of common stock outstanding, which includes the
shares issued in connection with the Spencer combination. Diluted earnings
per share for the six-month period ended June 30, 1998 include the assumed
exercise of stock options, warrants and convertible debt (using the
treasury stock method). For the three- and six-month period ended June 30,
1999 and the three-month period ended June 30, 1998, there was no
difference between basic and diluted loss per common share because the
assumed exercise of common share equivalents was anti-dilutive.
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2. BUSINESS COMBINATIONS
POOLING-OF-INTERESTS
On June 30, 1999, the Company signed an agreement with Spencer to issue
260,005 shares of its common stock (subject to certain adjustments) in exchange
for all of the issued and outstanding capital stock of Spencer, a full-service
provider of network and systems integration solutions. The business combination
has been accounted for as a pooling-of-interests. As such, the accompanying
consolidated financial statements are based on the assumption that the Company
and Spencer were combined as of January 1, 1998, and accordingly, financial
statements of prior periods have been restated to give effect to the Spencer
combination. There were no material adjustments necessary for the Company and
Spencer to conform to consistent accounting policies. Through the acquisition
date, the shareholders of Spencer elected, as permitted, to report income for
federal and state income tax purposes as an "S" corporation. Under those
regulations, the shareholders individually received the income tax provision or
benefit of their respective share of Spencer's net income or loss. Accordingly,
the Company has not recorded a federal and state tax provision or benefit for
the three and six months ended June 30, 1999 and 1998. However, Spencer is
subject to local income taxes, such provisions are reflected in the accompanying
statements of operations. The fiscal year end of Spencer also conforms to that
of the Company. Unaudited net revenues and net income (loss) and earnings (loss)
per share for the Company and Spencer for the six months ended June 30, 1999 and
1998 and the year ended December 31, 1998 are as follows:
IBS SPENCER COMBINED
Six Months Ended
June 30, 1999
Revenues $7,076 $1,677 $ 8,753
Net income (loss) (1,578) 135 (1,443)
Loss per share -- -- $ (0.35)
IBS SPENCER COMBINED
Six Months Ended
June 30, 1998
Revenues $5,401 $1,594 $ 6,995
Net income (loss) (20) 45 25
Earnings per share -- -- $0.01
IBS SPENCER COMBINED
Year Ended
December 31, 1998
Revenues $11,479 $3,734 $ 15,213
Net income (loss) (479) 114 365
Loss per share -- -- $(0.10)
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PURCHASE ACQUISITIONS
All of the following business combinations have been accounted for as
purchases. The ultimate values ascribed to the purchases are subject to certain
adjustments between the parties. The Company's acquisitions do not represent,
individually and in the aggregate, significant subsidiaries. Accordingly,
condensed and pro forma financial information is not presented.
On April 30, 1999, the Company acquired Realshare, Inc., a Cherry Hill,
New Jersey-based Web-site design and programming company.
On April 30, 1999, the Company acquired Millenium Computer
Applications, Inc., a Shallote, North Carolina-based Internet Service Provider.
On May 7, 1999, the Company acquired substantially all of the consumer
dial-up and ISDN accounts and related computer equipment of Planet Access, Inc.
and the owners of Planet Access, Inc., a Stanhope, New Jersey-based Internet
Service Provider.
MERGER EXPENSES
For the three and six months ended June 30, 1999, the Company
recognized $109,000 and $137,000, respectively, of costs related to the Spectrum
and Spencer business combinations. Such costs are principally comprised of
professional fees incurred during the periods.
3. INCOME TAXES.
The Company has not recognized an income tax benefit for the
three-month period ended June 30, 1999 based on uncertainties concerning its
ability to generate sufficient taxable income in future periods. The tax
provision for the three-month period ended June 30, 1999 related to state taxes
on certain subsidiaries and local income taxes incurred by Spencer. In future
periods, tax benefits and related deferred tax assets will be recognized when
management considers realization of such amounts to be more likely than not.
Deferred tax assets at June 30, 1999 of $204,000 are comprised of temporary
differences and tax loss carrybacks, the realization of which, at present, is
considered to be more likely than not.
4. 1998 INITIAL PUBLIC OFFERING
On May 14, 1998, the Company's registration statement on Form SB-2, as
amended (the "Registration Statement"), relating to its initial offering of
common stock, was declared effective by the SEC (the "Offering"). Whale
Securities Co., L.P. acted as the underwriter in connection with the Offering
which was consummated on May 20, 1998. In connection with the Offering, the
Company registered, issued and sold 1,380,000 shares of common stock, including
180,000 shares of common stock issued in connection with the exercise in full of
the underwriter's over-allotment option at an initial public offering price of
$6.00 per share resulting in proceeds to the Company (net of underwriting
discount, commissions and other expenses payable by the Company) in the
aggregate approximate amount of $6,642,000. From the effective date of the
Registration Statement through June 30, 1999, the Company has applied an
aggregate of $717,000 of the net proceeds of the Offering for the full repayment
of certain indebtedness; $451,000 towards the purchase of equipment; $1,489,000
towards the purchase of assets of, or the outright acquisition of, companies;
$830,000 towards sales and marketing; and $1,703,000 towards general
administrative expenses. The remaining net proceeds of the Offering in the
amount of $1,452,000 remain unused and are invested in short-term cash
equivalents.
5. STOCKHOLDERS' EQUITY
In April 1999, the Company consummated the acquisitions of Millennium
Computer Applications, Inc. and Realshare, Inc., and in connection therewith
issued up to 19,673 and 6,000 shares of its common stock (subject to
adjustments), respectively. In May 1999, the Company acquired certain assets of
Planet Access, Inc. and in connection therewith issued up to
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19,114 shares of its common stock (subject to certain adjustments). In June
1999, the Company consummated the acquisition of Spencer and in connection
therewith issued up to 260,005 share of its common stock (subject to certain
adjustments.)
On June 25, 1999, the Company's registration statement on Form S-3
relating to the resale of 202,440 shares of the Company's common stock was
declared effective by the SEC. Through June 30, 1999, the Company has received
proceeds of $330,000 from the exercise of certain warrants, the underlying
common stock of which is eligible for resale under the registration statement.
In addition, during the three-month period ended June 30, 1999, the
Company granted 217,432 options to employees pursuant to its 1999 Stock Option
Plan.
6. SUBSEQUENT EVENTS
On July 31, 1999, the Company acquired Jaguar Systems, Inc., a southern
New Jersey-based Internet Service Provider. This business combination has been
accounted for as a purchase. The ultimate values ascribed to the purchase are
subject to certain adjustments between the parties. This acquisition does not
represent, individually and in the aggregate, significant subsidiaries.
Accordingly, condensed and pro forma financial information is not presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Quarterly Report on Form 10-QSB contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Actual results, events and circumstances (including future
performance, results and trends) could differ materially from those set forth in
such statements due to various factors, risks and uncertainties including those
set forth in the Company's Form 10-KSB for 1998 in "Item 6. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Certain Factors Which May Affect the Company's Future Performance." Except as
otherwise required to be disclosed in periodic reports required to be filed by
companies registered under the Exchange Act by the rules of the SEC, the Company
has no duty and undertakes no obligation to update such statements.
OVERVIEW
The Company provides a range of Internet and information technology
consulting, training and networking planning, design and implementation
services, Internet connectivity services, and Internet programming and
applications development services, primarily to businesses and organizations.
The Company's revenues are derived principally from fees earned in connection
with the performance of consulting and networking services, recurring Internet
connectivity fees and fees earned in connection with programming and
applications development services.
The Company commenced operations in June 1995 as an Internet Service
Provider offering Web-site hosting services. In 1996 and 1997, the Company
acquired Interactive Networks, Inc., Mordor International and Allnet Technology
Services, Inc., each an Internet Service Provider principally offering dial-up
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access services. The Company began to provide Internet and information
technology consulting and networking services in April 1996 and has increasingly
emphasized such services.
In January 1998, the Company began to provide Internet programming and
applications development services through the acquisition of Entelechy, Inc., a
provider of programming and applications development services, and also acquired
substantially all of the assets of JDT Webwerx LLC (consisting primarily of
computer equipment and intangible assets). In September 1998, the Company
acquired all of the outstanding membership interests of DesignFX Interactive,
LLC, a Cherry Hill, New Jersey-based provider of Web-design, programming and
hosting services. In December 1998, the Company acquired substantially all of
the assets of MBS, Inc., a Huntsville, Alabama-based Microsoft Certified
Technical Education Provider Partner Level and also acquired Halo Network
Management, LLC, an Eatontown, New Jersey-based network services company that
offers complete network solutions including planning, installation and
maintenance.
In the first quarter of 1999, the Company acquired (i) substantially
all of the assets of Mainsite Communications, a Bridgeport, New Jersey-based
Internet Service Provider, (ii) substantially all of the assets of the
Renaissance Internet Services Division of PIVC, LLC, an Internet Service
Provider headquartered in Huntsville, Alabama, (iii) substantially all of the
assets of EZ Net, Inc., a Yorktown, Virginia-based Internet Service Provider,
(iv) substantially all of the assets of the ADViCOM division of Multitronics,
Inc., an Internet Service Provider headquartered in Huntsville, Alabama, and (v)
Spectrum, a Huntsville, Alabama-based network services company.
In the second quarter of 1999, the Company continued to make strategic
acquisitions, acquiring (i) the consumer Internet dial-up assets of the Planet
Access Network group of companies., a Stanhope, New Jersey-based Internet
Service Provider, (ii) Millenium Computer Applications, Inc., a Shallote, North
Carolina-based Internet Service Provider, (iii) Realshare, Inc., a Cherry Hill,
New Jersey-based Web-site design and programming company and (iv) Spencer, a
full-service provider of network and systems integration solutions.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
REVENUES:
Revenues increased by $1,354,000, or 40%, from $3,383,000 for the three
months ended June 30, 1998 ("1998") to $4,737,000 for the three months ended
June 30, 1999 ("1999"). Revenues for 1999 increased primarily due to an increase
in Internet connectivity service revenues and, to a lesser extent, increases in
Internet and information technology consulting and network service revenues and
Internet programming and applications service revenues. The Company's largest
customer, Aetna (which engaged the Company in October 1997), accounted for 28%
of the Company's consolidated revenues for 1998 and only 16% for 1999; thus,
non-Aetna revenues increased 65% for 1999 as compared to 1998.
COST OF SERVICES:
Cost of services consists primarily of expenses relating to the
operation of the network, including telecommunications and Internet access
costs, costs associated with monitoring network traffic and quality and
providing technical support to clients and subscribers, cost of equipment and
applications sold to clients and subscribers, salaries and expenses of
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engineering, programming and technical personnel and fees paid to outside
consultants. Cost of services increased by $823,000, or 36%, from $2,299,000 in
1998 to $3,122,000 in 1999. This increase was due to additional personnel and
network costs associated with expansion of the Company's client and subscriber
base. Cost of services as a percentage of sales was 66% in 1999 as opposed to
68% in 1998.
SELLING, GENERAL AND ADMINISTRATIVE:
Selling, general and administrative expenses consist primarily of
salaries and costs associated with sales personnel, marketing literature,
advertising, direct mailings and the Company's management, accounting, finance
and administrative functions. Selling, general and administrative expenses
increased by $1,395,000, or 122%, from $1,142,000 in 1998 to $2,537,000 in 1999.
This increase is primarily attributed to: (i) the hiring of additional
marketing, sales and administrative personnel; (ii) costs associated with
increased marketing and promotional activities; (iii) additional administrative
and professional costs associated with operating as a public company; (iv)
increased rent and utilities associated with acquisitions; and (v) increased
depreciation related to acquisitions and equipment purchases.
AMORTIZATION OF INTANGIBLE ASSETS:
Amortization of intangible assets increased by $105,000, from $50,000
in 1998 to $155,000 in 1999. This increase is primarily attributed to the
amortization of intangible assets, including customer lists and goodwill,
acquired by the Company in connection with its purchase of Micro Business
Solutions Inc., Mainsite Communications Inc., the Renaissance Internet Access
Division of PIVC, LLC, EZ Net Inc., the ADViCOM Internet Access Division of
Multitronics Inc., Realshare, Inc., Millenium Computer Applications, Inc. and
Planet Access, Inc. all of which were consummated subsequent to June 30, 1998.
INTEREST EXPENSE/(INCOME), NET:
Interest expense consists of interest on indebtedness, capital leases
and financing arrangements in connection with the Company's borrowings. Interest
income consists of money earned on cash equivalents. Interest income decreased
by $7,000 from approximately $29,000 of income in 1998 to $22,000 of income in
1999. This decrease is primarily due to a decrease in funds available for
investment in 1999 relative to 1998 and, to a lesser extent, increased
borrowings under the Company's line of credit.
TAX BENEFIT (PROVISION):
The Company recognized a tax provision of $45,000 in 1999 compared to a
tax provision of $0 in 1998. At June 30, 1999, based on estimated 1999 taxable
income, its ability to carry-back operating losses against previous tax
payments, and an assessment of all available evidence, management considers
realization of the unreserved deferred tax asset ($204,000) to be more likely
than not.
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NET INCOME:
As a result of the foregoing, the Company had net a net loss of
$1,314,000 for 1999 compared to net loss of $135,000 for 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
REVENUES:
Revenues increased by $1,758,000, or 25%, from $6,995,000 for the
six-month period ended June 30, 1998 to $8,753,000 for the six months ended June
30, 1999. Revenues for the six-month period ended June 30, 1999 increased
primarily due to an increase in Internet connectivity service revenues and, to a
lesser extent, increases in Internet programming and applications service
revenues and Internet and information technology consulting and network service
revenues. The Company's largest customer, Aetna (which engaged the Company in
October 1997), accounted for 35% of the Company's consolidated revenues for the
six-month period ended June 30, 1998 and only 16% for the six-month period ended
June 30, 1999; thus, non-Aetna revenues increased 63% for the six-month period
ended June 30, 1999 as compared to the six-month period ended June 30, 1998.
COST OF SERVICES:
Cost of services consists primarily of expenses relating to the
operation of the network, including telecommunications and Internet access
costs, costs associated with monitoring network traffic and quality and
providing technical support to clients and subscribers, cost of equipment and
applications sold to clients and subscribers, salaries and expenses of
engineering, programming and technical personnel and fees paid to outside
consultants. Cost of services increased by $966,000, or 21%, from $4,606,000 in
the six-month period ended June 30, 1998 to $5,572,000 in the six-month period
ended June 30, 1999. This increase was due to additional personnel and network
costs associated with expansion of the Company's client and subscriber base.
Cost of services as a percentage of sales was 64% in the six-month period ended
June 30, 1999 as opposed to 66% in the six-month period ended June 30, 1998. The
decline in cost of services as a percentage of sales was due to an increase in
revenues related to higher margin services and lower telecommunications costs.
SELLING, GENERAL AND ADMINISTRATIVE:
Selling, general and administrative expenses consist primarily of
salaries and costs associated with sales personnel, marketing literature,
advertising, direct mailings and the Company's management, accounting, finance
and administrative functions. Selling, general and administrative expenses
increased by $2,144,000, or 104%, from $2,055,000 in the six-month period ended
June 30, 1998 to $4,199,000 in the six-month period ended June 30, 1999. This
increase is primarily attributed to: (i) the hiring of additional marketing,
sales and administrative personnel to maintain and manage the rate of growth of
the Company's business; (ii) costs associated with increased marketing and
promotional activities; and (iii) additional administrative and professional
costs associated with operating as a public company.
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AMORTIZATION OF INTANGIBLE ASSETS:
Amortization of intangible assets increased by $141,000, from $83,000
in the six-month period ended June 30, 1998 to $224,000 in the six-month period
ended June 30, 1999. This increase is primarily attributed to the amortization
of intangible assets, including customer lists and goodwill, acquired by the
Company in connection with its purchase of Micro Business Solutions Inc.,
Mainsite Communications Inc., the Renaissance Internet Access Division of PIVC,
LLC, EZ Net Inc., the ADViCOM Internet Access Division of Multitronics Inc.,
Realshare, Inc., Millenium Computer Applications, Inc. and Planet Access, Inc.
all of which were consummated subsequent to June 30, 1998.
INTEREST EXPENSE/(INCOME), NET:
Interest expense consists of interest on indebtedness, capital leases
and financing arrangements in connection with the Company's borrowings. Interest
income consists of money earned on cash equivalents. Interest income increased
by $64,000 from approximately $17,000 of expense in the six-month period ended
June 30, 1998 to $47,000 of income in the six-month period ended June 30, 1999.
This decrease is primarily due to an increase in funds available for investment
in 1999 relative to 1998 due to the Company's initial public offering being
completed in May 1998.
TAX BENEFIT (PROVISION):
The Company recognized a tax benefit of $77,000 in the six-month period
ended June 30, 1999 compared to a tax provision of $120,000 in the six-month
period ended June 30, 1998. At June 30, 1999, based on estimated taxable income,
its ability to carryback operating losses against previous tax payments, and an
assessment of all available evidence, management considers realization of the
unreserved deferred tax asset ($204,000) to be more likely than not.
NET INCOME:
As a result of the foregoing, the Company had net a net loss of
$1,443,000 for the six-month period ended June 30, 1999 compared to net income
of $25,000 for the six-month period ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements have been to fund expenses in
connection with providing Internet and information technology consulting and
network services, Internet connectivity services, and Internet programming and
applications development services to its clients. The Company has historically
satisfied its working capital requirements principally through the issuance of
equity and debt securities and borrowings.
At June 30, 1999, the Company had working capital of $3,839,000.
Net cash used in operating activities decreased from $1,022,000
provided for the six-month period ended June 30, 1998 to $2,297,000 used in the
six-month period ended June 30, 1999. This change was primarily attributable to
decreased operating results that resulted in a net loss in the amount of
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$1,443,000 for the period ended June 30, 1999, compared to net income in the
amount of $25,000 for the six-month period ended June 30, 1998.
Net cash used in investing activities increased from $334,000 for the
six-month period ended June 30, 1998 to $1,573,000 for the six-month period
ended June 30, 1999 due to an increase in cash used in acquisitions.
Net cash provided by financing activities was $6,546,000 for the
six-month period ended June 30, 1998, compared to $490,000 provided for the
six-month period ended June 30, 1999. This change is primarily attributable to
the Company's completion of its initial public offering in the second quarter of
1998.
At June 30, 1999, the Company had capital lease obligations in the
aggregate amount of $52,000 that are secured by the personal guarantees of each
of Nicholas R. Loglisci, Jr., the Company's President and Chief Operating
Officer; Clark D. Frederick, the Company's Chief Technical Officer; and Frank R.
Altieri, Jr., the Company's Chief Information Officer. In addition, certain of
these capital lease agreements are secured by the equipment that is the subject
of the capital lease.
In June 1998, the Company secured a line of credit in the amount of
$1.5 million from First Union National Bank. The line of credit has been
extended through September 30, 1999. As of June 30, 1999, the Company had
$700,000 of outstanding indebtedness under such line of credit.
Additionally, in May 1998, the Company secured equipment lines of
credit from Ascend Credit Corp., Cisco Systems Capital Corp. and PAM Financial
Corp., each in the amount of $500,000. At June 30, 1999, the Company had no
outstanding indebtedness under any such line of credit.
The Company expects that its working capital and borrowing potential
under its various lines of credit will be sufficient to meet its planned
operating and capital requirements for the foreseeable future.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This situation could result in a system
failure or miscalculations causing disruptions of operations, including
inability to process transactions or engage in normal business activities.
Management has evaluated the Company's computer software and hardware
systems, and, based on currently available information, believes that it will
not have to replace or modify any of its hardware but has, and will have, to
modify its software so that its systems will function properly with respect to
dates in the year 2000 and thereafter. It is believed that the greatest risk to
the Company will be from outside firms that the Company relies on for its
operations as well as the legacy computer systems of its clients. The failure by
outside firms and/or clients' failure to address Year 2000 issues could
interfere with the Company's ability to provide its services, and therefore
impact future revenues. As of August 9, 1999, the Company has contingency plans
in place to remedy these types of problems. Estimated costs associated with such
plans are not expected to exceed $100,000, which are likely to be funded through
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<PAGE>
the use of available internal employees and resources. At this time, the Company
believes that the most likely "worst case" scenario involves potential
disruptions in areas in which the Company's operations must rely on outside
firms or clients whose systems may not function properly after January 1, 2000.
While such failures could affect important operations of the Company, either
indirectly or directly, in a significant manner, the Company cannot at present
estimate either the likelihood or the potential cost of such failures.
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<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Not applicable.
(b) Not applicable.
(c)
i. As part of its acquisition of Millennium Computer Applications, Inc., on
April 30, 1999 the Company issued 16,581 shares of its common stock (and
may issue an additional 3,092 shares of its common stock) as partial
consideration for all of the issued and outstanding capital stock of
Millennium Computer Applications, Inc. The exchange of the Company's common
stock with the stockholders of Millennium Computer Applications, Inc. was
exempt from registration under the Securities Act pursuant to Section 4(2).
ii. As part of its acquisition of Realshare, Inc., on April 30, 1999 the
Company issued 5,400 shares of its common stock (and may issue an
additional 600 shares of its common stock) in exchange for all of the
issued and outstanding capital stock of Realshare, Inc. The exchange of the
Company's common stock with the stockholders of Realshare, Inc. was exempt
from registration under the Securities Act pursuant to Section 4(2).
iii. As part of its acquisition of the consumer Internet dial-up accounts and
related computer equipment assets of the Planet Access Network group of
companies, on May 7, 1999 the Company issued 13,380 shares (and may issue
an additional 5,734 shares of its common stock) to the owners of Planet
Access, Inc. as partial consideration for the purchased assets. The
exchange of the Company's common stock with the owners of Planet Access,
Inc. was exempt from registration under the Securities Act pursuant to
Section 4(2).
iv. As part of its acquisition of Spencer Analysis, Inc., on June 30, 1999 the
Company issued 240,505 shares of its common stock (and may issue an
additional 19,500 shares of its common stock) in exchange for all of the
issued and outstanding capital stock of Spencer Analysis, Inc. The exchange
of the Company's common stock with the stockholders Realshare, Inc. was
exempt from registration under the Securities Act pursuant to Section 4(2).
(d) On May 14, 1998, the Company's registration statement on Form SB-2, as
amended (file number 333-47741) (the "Registration Statement"), relating to
the Offering, was declared effective by the SEC. Whale Securities Co., L.P.
acted as the underwriter in connection with the Offering which was
consummated on May 20, 1998. In connection with the Offering, the Company
registered, issued and sold 1,380,000 shares of common stock, including
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<PAGE>
180,000 shares of common stock issued in connection with the exercise in
full of the underwriter's over-allotment option at an initial public
offering price of $6.00 per share resulting in proceeds to the Company (net
of underwriting discounts, commissions and other expenses payable by the
Company) in the aggregate approximate amount of $6,642,000. Additionally,
the Company registered 120,000 shares of common stock underlying warrants
to purchase common stock which warrants were sold by the Company to the
underwriter for $100. The warrants are exercisable for a four-year period
commencing on May 14, 1999 at an initial exercise price of $8.10 per share.
From the effective date of the Registration Statement through June 30,
1999, the Company has applied an aggregate of $717,000 of the net proceeds
of the Offering for the full repayment of certain indebtedness; $451,000
towards the purchase of equipment; $1,489,000 towards the purchase of
assets of, or the outright acquisition of, companies; $830,000 towards
sales and marketing; and $1,703,000 towards general administrative
expenses. The Company believes that none of the proceeds used in the second
quarter of fiscal 1999 was paid, directly or indirectly, to (i) directors
or officers of the Company or their affiliates, (ii) persons owning ten
percent or more of the common stock or (iii) affiliates of the Company. To
date, the Company believes that it has used the net proceeds of the
Offering in a manner consistent with the use of proceeds described in the
Registration Statement and the Prospectus dated May 14, 1998. The remaining
net proceeds of the Offering in the amount of $1,452,000 remain unused.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on June 4, 1999.
Proposals presented for a stockholder vote were (i) the election of seven
directors to serve until the next Annual Meeting of Stockholders, (ii) the
approval of IBS' 1999 Stock Option Plan and (iii) the ratification of the
selection of BDO Seidman, LLP as independent auditors for the Company for
the fiscal year 1999.
Each of the incumbent directors nominated by the Company were elected with
the following voting results:
VOTES FOR VOTES WITHHELD
Nicholas R. Loglisci, Jr. 3,403,366 0
Clark D. Frederick 3,403,366 0
Frank R. Altieri, Jr. 3,403,366 0
Susan Holloway Torricelli 3,403,366 0
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VOTES FOR VOTES WITHHELD
Barrett N. Wissman 3,403,366 0
David Faeder 3,403,366 0
Patricia Duff 3,403,366 0
IBS' 1999 Stock Option Plan was approved with the following voting results:
VOTES CAST FOR VOTES CAST AGAINST ABSTENTIONS
2,374,650 9,944 1,550
The ratification of the selection of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year 1999 was approved with the
following voting results:
VOTES CAST FOR VOTES CAST AGAINST ABSTENTIONS
3,398,022 2,644 2,700
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits in the following table have been filed as part of this
Quarterly Report on Form 10-QSB:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
10.1 Employment Agreement, dated as of May 3, 1999, by and
between IBS and Nicholas R.Loglisci, Jr.
10.2 Employment Agreement, dated as of May 3, 1999, by
and between IBS and Clark D.Frederick.
10.3 Employment Agreement, dated as of May 3, 1999, by and
between IBS and Frank R. Altieri, Jr.
10.4 Employment Agreement, dated as of May 3, 1999, by
and between IBS and Jeffrey E. Brenner.
10.5 IBS Interactive, Inc. Deferred Compensation Plan,
effective May 1, 1999.
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<PAGE>
27.1 Financial Data Schedule for the six-month period ended
June 30, 1999.
(b) Reports on Form 8-K.
On April 15, 1999, the Company filed a Report with the SEC on Form 8-K,
under Item 2, to report that it had entered into an Exchange Agreement (the
"Agreement") with Spectrum Information Services, Inc., an Alabama corporation
("Spectrum"), and all of Spectrum's shareholders. Spectrum is a full-service
provider of network and systems integration solutions based in Madison, Alabama.
Pursuant to the terms of the Agreement, IBS acquired all of the issued and
outstanding shares of Spectrum in exchange for $3,200,000 (subject to certain
adjustments) of unregistered shares of IBS common stock, par value $.01 per
share, valued by the parties at $22.00 per share. The Company filed the
financial statements required by Items 7(a) and 7(b) of Form 8-K/A on June 2,
1999.
On June 7, 1999, the Company filed a Report with the SEC on Form 8-K,
under Item 5, to restate its Annual Financial Statement on Form 10-KSB for
Fiscal Year 1998 filed with the SEC on March 31, 1999, to reflect the
combination of Spectrum Information Systems, Inc. on March 31, 1999.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IBS INTERACTIVE, INC.
Date: May 16, 1999
By: /s/ Nicholas R. Loglisci, Jr.
_______________________________________
Name: Nicholas R. Loglisci, Jr.
Title: President and Chief Operating Officer
(Principal Executive Officer)
Date: May 16, 1999
By: /s/ Howard B. Johnson
_______________________________________
Name: Howard B. Johnson
Title: Chief Financial Officer (Principal
Financial and Accounting Officer)
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<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
10.1 Employment Agreement, dated as of May 3, 1999, by and
between IBS and Nicholas R.Loglisci, Jr.
10.2 Employment Agreement, dated as of May 3, 1999, by
and between IBS and Clark D.Frederick.
10.3 Employment Agreement, dated as of May 3, 1999, by and
between IBS and Frank R. Altieri, Jr.
10.4 Employment Agreement, dated as of May 3, 1999, by
and between IBS and Jeffrey E. Brenner.
10.5 IBS Interactive, Inc. Deferred Compensation Plan,
effective May 1, 1999.
27.1 Financial Data Schedule for the six-month period ended
June 30, 1999.
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 3, 1999 between IBS Interactive, Inc., a
Delaware corporation (the "Company") with its corporate offices at 2 Ridgedale
Avenue, Suite 350, Cedar Knolls, New Jersey 07927, and Nicholas R. Loglisci, Jr.
(the "Executive") residing at 76 Fairview Avenue, Tarrytown, New York 10591.
RECITALS
1. Executive is currently employed by the Company pursuant to an Employment
Agreement dated April 30, 1998 (the "Current Agreement").
2. The parties hereto desire to terminate the Current Agreement and provide for
the continued employment of Executive upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT; TERM; MILITARY LEAVE.
(a) EMPLOYMENT Subject to the terms and conditions set forth herein, the
Company agrees to employ and Executive agrees to serve as the Company's
President and Chief Executive Officer to perform such services and have such
powers and authority as are specified in the Company's Restated By-Laws, as in
effect from time to time, or as may be assigned to Executive by the Company's
Board of Directors, PROVIDED, THAT, the same is not inconsistent with such
position. Executive agrees that he will use his full business time to promote
the interests of the Company and its affiliates and to fulfill his duties
hereunder. Nothing in this Agreement shall, however, preclude Executive from
engaging, so long as, in the reasonable determination of the Company's Board of
Directors, such activities do not interfere with the execution of his duties and
responsibilities hereunder, in charitable and community affairs, from managing
any passive investment made by Executive in publicly traded equity securities or
other property (PROVIDED, THAT, no such investment may exceed 5% of the equity
of any entity, without the prior approval of the Company's Board of Directors)
or from serving, subject to the prior approval of the Company's Board of
Directors, as a member of boards of directors or as a trustee of any other
corporation, association or entity. For purposes of the preceding sentence, any
approval of the Company's Board of Directors required herein shall not be
unreasonably withheld.
(b) TERM. The term of Executive's employment pursuant to this Agreement
shall commence on May 1, 1999 (the "Effective Date") and shall continue
thereafter for a period of four years unless sooner terminated under Section 3.
The Company and Executive agree that on the Effective Date, the Current
Agreement will be superseded by this Agreement. This Agreement shall
automatically renew for one (1) successive four (4) year period; PROVIDED,
HOWEVER, that this Agreement shall expire on April 30, 2003 if either the
<PAGE>
Company or Executive has given the other party hereto written notice at least
six (6) months prior to such date that this Agreement will not be renewed.
(c) MILITARY LEAVE. Executive, as a former officer in the armed services
of the United States of America, shall be entitled to all the protection and
benefits afforded by any laws relating to any future compulsory military service
to which Executive may be called, and this Agreement shall be deemed subject to
the provisions of any such law. Upon the submission to the Company of proof of
having been called for military service, Executive will be granted a leave of
absence for the duration of such service.
2. COMPENSATION. During the employment term under this Agreement, the
Company shall compensate Executive as follows:
(a) BASE SALARY. Subject to adjustment as set forth below, the Company
will pay Executive an annual salary at a rate of $115,000 per year, payable in
substantially equal monthly installments, or more frequently in accordance with
Company's usual payroll policy. On each anniversary of the Effective Date,
Executive's then existing base salary will automatically increase at the rate of
10% per year and in the discretion of the Compensation Committee (or Board of
Directors, if at the time there shall be no Compensation Committee) at such
additional rate or amounts as the Compensation Committee shall deem appropriate.
Any such increases granted in the discretion of the Compensation Committee will
be retroactive to the beginning of the then current fiscal year. The Company
will review annually Executive's performance and compensation.
(b) PERFORMANCE BONUS. Executive shall be entitled to such bonus
compensation as the Compensation Committee deems appropriate. Such bonus
compensation shall be based, in part, on the achievement of certain performance
criteria established by the Compensation Committee.
(c) BENEFITS. Executive will be eligible to participate in all
benefit programs of the Company for which senior executive personnel are
eligible.
(d) VACATION. Executive will be entitled each year to vacation for a
period or periods not inconsistent with the normal policy of Company in effect
from time to time, but in any event not less than twenty vacation days each year
and to such holidays as may be customarily afforded to its employees by the
Company, during which periods Executive's compensation shall be paid in full.
(e) STOCK OPTIONS. On May 6, 1999, Executive shall receive an award,
pursuant to the Company's 1999 Stock Option Plan, of 2,142 options to purchase
Common Stock. Such options shall vest pursuant to the terms of the Stock Option
Plan.
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<PAGE>
(e) REIMBURSEMENT OF EXPENSES.
(i) All reasonable travel and entertainment expenses incurred by
Executive in the course of fulfilling this Agreement or otherwise
promoting the Company and its business shall be reimbursed by the Company.
Such reimbursement shall be made to Executive promptly following
submission to the Company of receipts and other documentation of such
expenses reasonably satisfactory to the Company.
(ii) In addition to the expenses reimbursable pursuant to paragraph
(i) above, the Company shall also pay to Executive a monthly allowance of
$600 for automobile expenses, PROVIDED, HOWEVER, that the Company shall
be entitled to withhold from such allowance, any amounts required to be
withheld by applicable federal, state or local tax laws.
3. TERMINATION.
(a) DEATH AND LEGAL INCAPACITY. Executive's employment hereunder
shall terminate upon Executive's death or legal incapacity.
(b) DISABILITY. Executive's employment hereunder may be terminated by the
Company in the event of Executive's physical or mental incapacity or inability
to perform his duties as contemplated under this Agreement for a period of at
least one hundred twenty (120) consecutive days. Until such termination occurs,
Executive shall continue to receive his base salary as then in effect, provided,
however, that such salary shall be reduced to the extent of any short-term
disability benefits provided to Executive under a short-term disability plan
sponsored by the Company. The determination of disability shall be made by an
independent physician selected by the Compensation Committee and approved by
Executive or his legal representative.
(c) FOR CAUSE. The termination of Executive's employment hereunder
upon the occurrence of any of the following events shall be deemed to be a
termination for Cause ("Cause"):
(i) Executive's intentional breach of any provision hereof, provided
such breach has a material adverse effect on the Company and is not cured
within twenty days after written notice thereof from the Company or, if
such breach is not curable within such twenty-day period, the cure does
not commence within such twenty-day period;
(ii) Executive's intentional violation of any other duty or
obligation owed by Executive to the Company which has a material adverse
effect on the Company, as determined by the Board of Directors, if such
violation is not cured within twenty days after written notice thereof
from the Company or, if such violation is not curable within such
twenty-day period, the cure does not commence within such twenty-day
period;
(iii) Executive is convicted or pleads guilty or nolo contendre to
any felony (other than traffic violation) or any crime involving fraud,
dishonesty or misappropriation;
3
<PAGE>
(iv) Executive willfully fails to perform and discharge his duties
hereunder in a competent manner and such failure shall continue for a
period in excess of twenty days after written notice thereof specifying
the failures is given by the Company to Executive.
(v) Executive willfully engages in misconduct that causes material
harm to the Company and such misconduct shall continue for a period in
excess of twenty days after written notice thereof specifying such
misconduct and the resulting harm is given by the Company to Executive.
(d) CONSENT OF DIRECTORS. Termination of this Agreement by the Company for
reasons other than: (i) for Cause or (ii) Executive's death, legal capacity or
disability must be approved by a vote of 2/3 of the members of the Company's
Board of Directors.
(e) FOR GOOD REASON. Executive shall be deemed to terminate his
employment for good reason ("Good Reason") if such termination occurs within
six months after:
(i) written notice of a failure by the Company to comply with
any material provision of this Agreement which failure has not been cured within
twenty days after such written notice of noncompliance has been given by
Executive to the Company, or
(ii) a significant diminishment in the nature or scope of the
authority, power, function or duty attached to the position which Executive
maintains as of the Effective Date without the express written consent of
Executive, and which is not remedied by the Company within twenty days after
Executive's notice to the Company of his reasonable objection thereto, or
(iii) Executive is relocated more than 40 miles from the
Company's office in Cedar Knolls, New Jersey without his prior written consent.
(f) EFFECT OF TERMINATION.
(i) If Executive terminates his employment for Good Reason, or if
the Company terminates Executive's employment for reasons other than for
Cause, Executive's death, legal incapacity or disability, the obligations
of Executive under this Agreement will terminate except that the covenants
contained in Section 4(a) shall continue indefinitely, and the obligations
in this section shall continue pursuant to their terms. In such event, for
a period of two years after the date of Executive's termination, the
Company shall pay Executive, in accordance with customary payroll
procedures, Executive's base salary as then in effect and, in addition,
any Performance Bonus that Executive would have earned in the year he was
terminated, prorated as of the date of termination. For such two-year
period, the Company shall continue to provide medical coverage to
Executive under substantially the same terms as were in effect on the date
Executive's employment terminated under this provision. Additionally, any
and all options, warrants or other securities awarded to Executive
pursuant to the Company's 1998 Stock Option Plan or any other similar plan
shall, as of the date of Executive's termination, immediately vest and
become exercisable and all such options, warrants or other securities
4
<PAGE>
shall remain exercisable by Executive for the duration of the period
during which the options, warrants or other securities would have remained
exercisable if Executive had remained employed by the Company. The amounts
payable to Executive under this paragraph shall not be affected in any way
by Executive's acceptance of other employment during the two-year period
described above.
(ii) Except as otherwise provided herein, if Executive terminates
his employment for any reason other than Good Reason or if the Company
terminates Executive for Cause, the obligations of Executive and the
Company under this Agreement will terminate except that the covenants of
Executive contained in Section 4(a) shall continue indefinitely and the
covenants of Executive contained in Section 4(d) shall continue until the
first anniversary of the date of Executive's termination. In such event,
Executive shall be entitled to receive only the compensation hereunder
accrued and unpaid as of the date of such termination.
(iii) If Executive's employment terminates due to a disability, as
defined in Section 3(b), the obligations of Executive under this Agreement
will terminate except that the covenants contained in Section 4(a) shall
continue indefinitely. In such event, for a period of one year after the
date of Executive's termination, the Company shall pay Executive, in
accordance with customary payroll procedures, Executive's base salary as
then in effect, provided, however, that the payment of such salary shall
be reduced to the extent of any long-term disability benefits provided to
Executive under a long-term disability plan sponsored by the Company. The
vesting and exercise of any and all options, warrants or other securities
awarded to Executive pursuant to the Company's 1998 Stock Option Plan (or
any other similar plan) shall be governed by the terms of such plan. The
amounts payable to Executive under this paragraph shall not be affected in
any way by Executive's acceptance of other employment during the one-year
period described above.
(iv) No amount payable to Executive pursuant to this Agreement shall
be subject to mitigation due to Executive's acceptance or availability of
other employment.
4. RESTRICTIVE COVENANTS; NON-COMPETITION.
Executive in consideration of his employment hereunder agrees as follows:
(a) Except as otherwise permitted hereby, or by the Company's Board of
Directors, Executive shall treat as confidential and not communicate or divulge
to any other person or entity any information related to the Company or its
affiliates or the business, affairs, prospects, financial condition or ownership
of the Company or any of its affiliates (the "Information") acquired by
Executive from the Company or the Company's other employees or agents, except
(i) as may be required to comply with legal proceedings (PROVIDED, THAT, prior
to such disclosure in legal proceedings Executive notifies the Company and
reasonably cooperates with any efforts by the Company to limit the scope of such
disclosure or to obtain confidential treatment thereof by the court or tribunal
seeking such disclosure) or (ii) while employed by the Company, as Executive
reasonably believes necessary in performing his duties. Executive shall use the
5
<PAGE>
Information only in connection with the performance of his duties hereunder, and
not otherwise for his benefit or the benefit of any other person or entity. For
the purposes of this Agreement, Information shall include, but not be limited
to, any confidential information concerning clients, subscribers, marketing,
business and operational methods of the Company or its affiliates and its
affiliates' clients, subscribers, contracts, financial or other data, technical
data or any other confidential or proprietary information possessed, owned or
used by the Company. Excluded from Executive's obligations of confidentiality is
any part of such Information that: (i) was in the public domain prior to the
date of commencement of Executive's employment with the Company or (ii) enters
the public domain other than as a result of Executive's breach of this covenant.
This Section (4)(a) shall survive the expiration or termination of the other
provisions of this Agreement.
(b) Executive shall fully disclose to the Company all discoveries,
concepts, and ideas, whether or not patentable, including, but not limited to,
processes, methods, formulas, and techniques, as well as improvements thereof or
know-how related thereto (collectively, "Inventions") concerning or relating to
the business conducted by the Company and concerning any present or prospective
activities of the Company which are published, made or conceived by Executive,
in whole or in part, during Executive's employment with the Company.
(c) Executive shall make applications in due form for United States
letters patent and foreign letters patent on such Inventions at the request of
the Company and at its expense, but without additional compensation to
Executive. Executive further agrees that any and all such Inventions shall be
the absolute property of Company or its designees. Executive shall assign to the
Company all of Executive's right, title and interest in any and all Inventions,
execute any and all instruments and do any and all acts necessary or desirable
in connection with any such application for letters patent or to establish and
perfect in the Company the entire right, title, and interest in such Inventions,
patent applications, or patents, and shall execute any instrument necessary or
desirable in connection with any continuations, renewals, or reissues thereof or
in the conduct of any related proceedings or litigation.
(d) During Executive's employment with the Company and for a period of one
year after the earlier of the expiration date of this Agreement or the
termination of Executive's employment hereunder by the Company for Cause or by
Executive (other than for Good Reason or subsequent to a Change in Control under
Section 5(a)):
(i) Executive will not, in any geographical area within which the
Company is, at the time of Executive's termination or during the term of
Executive's employment, marketing its products or services or conducting
other business activities, directly or indirectly, engage in, own or
control an interest in (except as a passive investor in publicly held
companies and except for investments held at the date hereof) or act as an
officer, director, or employee of, or consultant or adviser to, any firm,
corporation or institution directly or indirectly that is in competition
with the Company or engaged in business activities substantially similar
to those conducted by the Company at the time of Executive's termination
or during the term of Executive's employment with the Company; and
6
<PAGE>
(ii) Executive will not recruit or hire any employee of the Company,
or otherwise induce such employee to leave the employment of the Company,
to become an employee of or otherwise be associated with Executive or any
company or business with which Executive is or may become associated.
5. CHANGE OF CONTROL.
In the event of a Change of Control, the following provisions shall apply:
(a) If within one year after a Change of Control, Executive's
employment with the Company (or any entity to which this Agreement may be
assigned in connection with such Change of Control) is terminated for any reason
other than Executive's death, legal incapacity, or disability, Executive shall
be entitled to receive, within 10 days after the termination date, a lump sum
payment ("Change of Control Payment") equal to two times the amount of
Executive's annual base salary in effect on the date of termination plus any
other amounts accrued and unpaid as of such date (i.e., earned bonuses, car
allowance, unreimbursed business expenses, and any other amounts due to the
Executive under employee benefit or fringe benefit plans of the Company).
Notwithstanding the foregoing, if Executive so requests, any Change in Control
payment may be paid in substantially equal monthly installments, or more
frequently in accordance with the Company's payroll policy. Additionally, any
and all options, warrants or other securities awarded to Executive pursuant to
the Company's 1998 Stock Option Plan or any other similar plan shall, as of the
date of Executive's termination, immediately vest and become exercisable and all
such options, warrants or other securities shall remain exercisable by Executive
for the duration of the period during which the options, warrants or other
securities would have remained exercisable if Executive had remained employed by
the Company.
(b) For purposes of this Section 5, a "Change of Control" shall be
deemed to occur upon any of the following events:
(1) Any "person" or "group" within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act (i) becomes the "beneficial owner",
as defined in Rule 13d-3 under the Exchange Act, of 50% or more of the
combined voting power of the Company's then outstanding securities,
otherwise than through a transaction or series of related transactions
arranged by, or consummated with the prior approval of, the Board or (ii)
acquires by proxy or otherwise the right to vote 50% or more of the then
outstanding voting securities of the Company, otherwise than through an
arrangement or arrangements consummated with the prior approval of the
Board, for the election of directors, for any merger or consolidation of
the Company or for any other matter or question.
(2) During any period of 12 consecutive months (not including
any period prior to the adoption of this Section), Present Directors
and/or New Directors cease for any reason to constitute a majority of the
Board. For purposes of the preceding sentence, "Present Directors" shall
mean individuals who at the beginning of such consecutive 12-month period
were members of the Board and "New Directors" shall mean any director
whose election by the Board or whose nomination for election by the
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Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were Present Directors or New
Directors.
(3) Consummation of (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Stock would be converted into
cash, securities or other property, other than a merger of the Company in
which the holders of Stock immediately prior to the merger have the same
proportion and ownership of common stock of the surviving corporation
immediately after the merger or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; PROVIDED, THAT, the
divestiture of less than substantially all of the assets of the Company in
one transaction or a series of related transactions, whether effected by
sale, lease, exchange, spin-off sale of the stock or merger of a
subsidiary or otherwise, shall not constitute a Change in Control.
For purposes of this Section 5(b), the rules of Section 318(a) of the Code and
the regulations issued thereunder shall be used to determine stock ownership.
(c) EXCISE TAX GROSS-UP. If Executive becomes entitled to one or
more payments (with a "payment" including the vesting of restricted stock, a
stock option, or other non-cash benefit or property), whether pursuant to the
terms of this Agreement or any other plan or agreement with the Company or any
affiliated company (collectively, "Change of Control Payments"), which are or
become subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall pay to
Executive at the time specified below such amount (the "Gross-up Payment") as
may be necessary to place Executive in the same after-tax position as if no
portion of the Change of Control Payments and any amounts paid to Executive
pursuant to this paragraph 5(c) had been subject to the Excise Tax. The Gross-up
Payment shall include, without limitation, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax. For purposes of
determining the amount of the Gross-up Payment, Executive shall be deemed: (A)
to pay federal income taxes at the highest marginal rate of federal income
taxation for the year in which the Gross-up Payment is to be made; and (B) to
pay any applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. If the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to Executive or otherwise realized
as a benefit by Executive) the portion of the Gross-up Payment that would not
have been paid if such Excise Tax had been used in initially calculating the
Gross-up Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time the
Gross-up Payment is made, the Company shall make an additional Gross-up Payment
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in respect of such excess (plus any interest and penalties payable with respect
to such excess) at the time that the amount of such excess is finally
determined.
The Gross-up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Change of Control
Payments (or any portion thereof) are subject to the Excise Tax; PROVIDED,
HOWEVER, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to Executive
on such day an estimate, as determined by counsel or auditors selected by the
Company and reasonably acceptable to Executive, of the minimum amount of such
payments. The Company shall pay to Executive the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to Executive,
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code). The Company shall have
the right to control all proceedings with the Internal Revenue Service that may
arise in connection with the determination and assessment of any Excise Tax and,
at its sole option, the Company may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties thereon);
PROVIDED, HOWEVER, that the Company's control over any such proceedings shall be
limited to issues with respect to which a Gross-up Payment would be payable
hereunder, and Executive shall be entitled to settle or contest any other issue
raised by the Internal Revenue Service or any other taxing authority. Executive
shall cooperate with the Company in any proceedings relating to the
determination and assessment of any Excise Tax and shall not take any position
or action that would materially increase the amount of any Gross-up Payment
hereunder.
6. NO VIOLATION.
Executive warrants that the execution and delivery of this Agreement and
the performance of his duties hereunder will not violate the terms of any other
agreement to which he is a party or by which he is bound. Additionally,
Executive warrants that Executive has not brought and will not bring to the
Company or use in the performance of Executive's responsibilities at the Company
any materials or documents of a former employer that are not generally available
to the public, unless Executive has obtained express written authorization from
the former employer for their possession and use. Executive represents that he
is not and, since the commencement of Executive's employment with the Company
has not been a party to any employment, proprietary information,
confidentiality, or noncompetition agreement with any of Executive's former
employers which remains in effect as the date hereof. The warranties set forth
in this Section 6 shall survive the expiration or termination of the other
provisions of this Agreement.
7. BREACH BY EXECUTIVE.
Both parties recognize that the services to be rendered under this
Agreement by Executive are special, unique and extraordinary in character, and
that in the event of the breach by Executive of the terms and conditions of this
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Agreement to be performed by him or in the event Executive performs services for
any person, firm or corporation engaged in a competing line of business with
Company, the Company shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, whether in law or
in equity, to, by way of illustration and not limitation, obtain damages for any
breach of this Agreement, or to enforce the specific performance thereof by
Executive, or to enjoin Executive from competing with the Company or, performing
services for himself or any such other person, firm or corporation. The Company
may obtain an injunction restraining any such breach by Executive and no bond or
other security shall be required in connection therewith. The Company and
Executive each consent to the jurisdiction of the Superior Court of the State of
New Jersey, located in Hackensack, New Jersey, and the United States Federal
District Court for the District of New Jersey.
8. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Company, its successors, and assigns and may not be assigned by Executive.
(b) This Agreement contains the entire agreement of the parties hereto and
supersedes all prior or concurrent agreements, whether oral or written, relating
to the subject matter hereof. This Agreement may be amended only by a writing
signed by the party against whom enforcement is sought.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey without regard to its conflicts of laws,
rules or principles.
(d) Any notices or other communications required or permitted hereunder
shall be in writing and shall be deemed effective when delivered in person or,
if mailed, on the date of deposit in the mails, postage prepaid, to the other
party at the respective address of such party set forth herein or to such other
address as shall have been specified in writing by either party to the other in
accordance herewith.
(e) The provisions of Sections 4(a), 4(d) and 6 and the other provisions
of this Agreement which by their terms contemplate survival of the termination
of this Agreement, shall survive termination of this Agreement and be deemed to
be independent covenants.
(f) If any term or provision of this Agreement or its application to any
person or circumstance is to any extent invalid or unenforceable, the remainder
of this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision shall be valid and
enforced to the fullest extent permitted by law.
(g) No delay or omission to exercise any right, power or remedy accruing
to any party hereto shall impair any such right, power or remedy or shall be
construed to be a waiver of or an acquiescence to any breach hereof. No waiver
of any breach of this Agreement shall be deemed to be a waiver of any other
breach of this Agreement theretofore or thereafter occurring. Any waiver of any
provision hereof shall be effective only to the extent specifically set forth in
the applicable writing. All remedies afforded under this Agreement to any party
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hereto, by law or otherwise, shall be cumulative and not alternative and shall
not preclude assertion by any party hereto of any other rights or the seeking of
any other rights or remedies against any other party hereto.
(h) It is the intent of the Company that Executive not be required to
incur any legal fees or disbursements associated with (i) the interpretation of
any provision in, or obtaining of any right or benefit under this Agreement, or
(ii) the enforcement of his rights under this Agreement, including, without
limitation by litigation or other legal action, because the cost and expense
thereof would substantially detract from the benefits to be extended to
Executive hereunder. Accordingly, the Company irrevocably authorizes Executive
from time to time to retain counsel of his choice, at the expense of the Company
as hereafter provided, to represent Executive in connection with the
interpretation and/or enforcement of this Agreement, including without
limitation the initiation or defense of any litigation or other legal action,
whether by or against the Company, or any Director, officer, stockholder, or any
other person affiliated with the Company in any jurisdiction. The Company shall
pay or cause to be paid and shall be solely responsible for any and all
attorneys' and related fees and expenses incurred by Executive under this
Section 8(h).
9. INDEMNIFICATION.
The Company agrees to indemnify Executive to the fullest extent permitted
by applicable law, as such law may be hereafter amended, modified or
supplemented and to the fullest extent permitted by each of the Company's
Restated Certificate of Incorporation and the Company's Restated By-Laws, as
from time to time amended, modified or supplemented. The Company further agrees
that Executive is entitled to the benefits of any directors and officers
liability insurance policy, in accordance with the terms and conditions of that
policy, if such a policy is maintained by the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
COMPANY
IBS INTERACTIVE, INC.
By: /s/ Jeffrey E. Brenner
_____________________________
Name: Jeffrey E. Brenner
Title: Chief Operating Officer
EXECUTIVE
/s/ Nicholas R. Loglisci, Jr.
___________________________
NICHOLAS R. LOGLISCI, JR.
PRESIDENT AND
CHIEF OPERATING OFFICER
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EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 3, 1999 between IBS Interactive, Inc., a
Delaware corporation (the "Company") with its corporate offices at 2 Ridgedale
Avenue, Suite 350, Cedar Knolls, New Jersey 07927, and Clark D. Frederick (the
"Executive") residing at 8 Warwick Road, Morristown, New Jersey 07960.
RECITALS
1. Executive is currently employed by the Company pursuant to an Employment
Agreement dated April 30, 1998 (the "Current Agreement").
2. The parties hereto desire to terminate the Current Agreement and provide for
the continued employment of Executive upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT; TERM; MILITARY LEAVE.
(a) EMPLOYMENT Subject to the terms and conditions set forth herein, the
Company agrees to employ and Executive agrees to serve as the Company's Chief
Technical Officer to perform such services, including but not limited to
managing the Company's Systems Integration and Programming and Applications
Development services, new business development and strategic planning, and have
such powers and authority as are specified in the Company's Restated By-Laws, as
in effect from time to time, or as may be assigned to Executive by the Company's
Board of Directors, PROVIDED, THAT, the same is not inconsistent with such
position. Executive agrees that he will use his full business time to promote
the interests of the Company and its affiliates and to fulfill his duties
hereunder. Nothing in this Agreement shall, however, preclude Executive from
engaging, so long as, in the reasonable determination of the Company's Board of
Directors, such activities do not interfere with the execution of his duties and
responsibilities hereunder, in charitable and community affairs, from managing
any passive investment made by Executive in publicly traded equity securities or
other property (PROVIDED, THAT, no such investment may exceed 5% of the equity
of any entity, without the prior approval of the Company's Board of Directors)
or from serving, subject to the prior approval of the Company's Board of
Directors, as a member of boards of directors or as a trustee of any other
corporation, association or entity. For purposes of the preceding sentence, any
approval of the Company's Board of Directors required herein shall not be
unreasonably withheld.
(b) TERM. The term of Executive's employment pursuant to this Agreement
shall commence on May 1, 1999 (the "Effective Date") and shall continue
thereafter for a period of four years unless sooner terminated under Section 3.
The Company and Executive agree that on the Effective Date, the Current
Agreement will be superseded by this Agreement. This Agreement shall
automatically renew for one (1) successive four (4) year period; PROVIDED,
<PAGE>
HOWEVER, that this Agreement shall expire on April 30, 2003 if either the
Company or Executive has given the other party hereto written notice at least
six (6) months prior to such date that this Agreement will not be renewed.
(c) MILITARY LEAVE. Executive shall be entitled to all the protection and
benefits afforded by any laws relating to any future compulsory military service
to which Executive may be called, and this Agreement shall be deemed subject to
the provisions of any such law. Upon the submission to the Company of proof of
having been called for military service, Executive will be granted a leave of
absence for the duration of such service.
2. COMPENSATION. During the employment term under this Agreement, the
Company shall compensate Executive as follows:
(a) BASE SALARY. Subject to adjustment as set forth below, the Company
will pay Executive an annual salary at a rate of $115,000 per year, payable in
substantially equal monthly installments, or more frequently in accordance with
Company's usual payroll policy. On each anniversary of the Effective Date,
Executive's then existing base salary will automatically increase at the rate of
10% per year and in the discretion of the Compensation Committee (or Board of
Directors, if at the time there shall be no Compensation Committee) at such
additional rate or amounts as the Compensation Committee shall deem appropriate.
Any such increases granted in the discretion of the Compensation Committee will
be retroactive to the beginning of the then current fiscal year. The Company
will review annually Executive's performance and compensation.
(b) PERFORMANCE BONUS. Executive shall be entitled to such bonus
compensation as the Compensation Committee deems appropriate. Such bonus
compensation shall be based, in part, on the achievement of certain performance
criteria established by the Compensation Committee.
(c) BENEFITS. Executive will be eligible to participate in all
benefit programs of the Company for which senior executive personnel are
eligible.
(d) VACATION. Executive will be entitled each year to vacation for a
period or periods not inconsistent with the normal policy of Company in effect
from time to time, but in any event not less than twenty vacation days each year
and to such holidays as may be customarily afforded to its employees by the
Company, during which periods Executive's compensation shall be paid in full.
(e) STOCK OPTIONS. On June 4, 1999, Executive shall receive an award,
pursuant to the Company's 1999 Stock Option Plan, of 2,142 options to purchase
Common Stock. Such options shall vest pursuant to the terms of the Stock Option
Plan.
(f) REIMBURSEMENT OF EXPENSES.
(i) All reasonable travel and entertainment expenses incurred by
Executive in the course of fulfilling this Agreement or otherwise
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promoting the Company and its business shall be reimbursed by the Company.
Such reimbursement shall be made to Executive promptly following
submission to the Company of receipts and other documentation of such
expenses reasonably satisfactory to the Company.
(ii) In addition to the expenses reimbursable pursuant to paragraph
(i) above, the Company shall also pay to Executive a monthly allowance of
$400 for automobile expenses, PROVIDED, HOWEVER, that the Company shall
be entitled to withhold from such allowance, any amounts required to be
withheld by applicable federal, state or local tax laws.
3. TERMINATION.
(a) DEATH AND LEGAL INCAPACITY. Executive's employment hereunder
shall terminate upon Executive's death or legal incapacity.
(b) DISABILITY. Executive's employment hereunder may be terminated by the
Company in the event of Executive's physical or mental incapacity or inability
to perform his duties as contemplated under this Agreement for a period of at
least one hundred twenty (120) consecutive days. Until such termination occurs,
Executive shall continue to receive his base salary as then in effect, provided,
however, that such salary shall be reduced to the extent of any short-term
disability benefits provided to Executive under a short-term disability plan
sponsored by the Company. The determination of disability shall be made by an
independent physician selected by the Compensation Committee and approved by
Executive or his legal representative.
(c) FOR CAUSE. The termination of Executive's employment hereunder
upon the occurrence of any of the following events shall be deemed to be a
termination for Cause ("Cause"):
(i) Executive's intentional breach of any provision hereof, provided
such breach has a material adverse effect on the Company and is not cured
within twenty days after written notice thereof from the Company or, if
such breach is not curable within such twenty-day period, the cure does
not commence within such twenty-day period;
(ii) Executive's intentional violation of any other duty or
obligation owed by Executive to the Company which has a material adverse
effect on the Company, as determined by the Board of Directors, if such
violation is not cured within twenty days after written notice thereof
from the Company or, if such violation is not curable within such
twenty-day period, the cure does not commence within such twenty-day
period;
(iii) Executive is convicted or pleads guilty or nolo contendre to
any felony (other than traffic violation) or any crime involving fraud,
dishonesty or misappropriation;
(iv) Executive willfully fails to perform and discharge his duties
hereunder in a competent manner and such failure shall continue for a
period in excess of twenty days after written notice thereof specifying
the failures is given by the Company to Executive.
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(v) Executive willfully engages in misconduct that causes material
harm to the Company and such misconduct shall continue for a period in
excess of twenty days after written notice thereof specifying such
misconduct and the resulting harm is given by the Company to Executive.
(d) CONSENT OF DIRECTORS. Termination of this Agreement by the Company for
reasons other than: (i) for Cause or (ii) Executive's death, legal capacity or
disability must be approved by a vote of 2/3 of the members of the Company's
Board of Directors.
(e) FOR GOOD REASON. Executive shall be deemed to terminate his
employment for good reason ("Good Reason") if such termination occurs within
six months after:
(i) written notice of a failure by the Company to comply with
any material provision of this Agreement which failure has not been cured within
twenty days after such written notice of noncompliance has been given by
Executive to the Company, or
(ii) a significant diminishment in the nature or scope of the
authority, power, function or duty attached to the position which Executive
maintains as of the Effective Date without the express written consent of
Executive, and which is not remedied by the Company within twenty days after
Executive's notice to the Company of his reasonable objection thereto, or
(iii) Executive is relocated more than 40 miles from the
Company's office in Cedar Knolls, New Jersey without his prior written consent.
(f) EFFECT OF TERMINATION.
(i) If Executive terminates his employment for Good Reason, or if
the Company terminates Executive's employment for reasons other than for
Cause, Executive's death, legal incapacity or disability, the obligations
of Executive under this Agreement will terminate except that the covenants
contained in Section 4(a) shall continue indefinitely, and the obligations
in this section shall continue pursuant to their terms. In such event, for
a period of two years after the date of Executive's termination, the
Company shall pay Executive, in accordance with customary payroll
procedures, Executive's base salary as then in effect and, in addition,
any Performance Bonus that Executive would have earned in the year he was
terminated, prorated as of the date of termination. For such two-year
period, the Company shall continue to provide medical coverage to
Executive under substantially the same terms as were in effect on the date
Executive's employment terminated under this provision. Additionally, any
and all options, warrants or other securities awarded to Executive
pursuant to the Company's 1998 Stock Option Plan or any other similar plan
shall, as of the date of Executive's termination, immediately vest and
become exercisable and all such options, warrants or other securities
shall remain exercisable by Executive for the duration of the period
during which the options, warrants or other securities would have remained
exercisable if Executive had remained employed by the Company. The amounts
payable to Executive under this paragraph shall not be affected in any way
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by Executive's acceptance of other employment during the two-year period
described above.
(ii) Except as otherwise provided herein, if Executive terminates
his employment for any reason other than Good Reason or if the Company
terminates Executive for Cause, the obligations of Executive and the
Company under this Agreement will terminate except that the covenants of
Executive contained in Section 4(a) shall continue indefinitely and the
covenants of Executive contained in Section 4(d) shall continue until the
first anniversary of the date of Executive's termination. In such event,
Executive shall be entitled to receive only the compensation hereunder
accrued and unpaid as of the date of such termination.
(iii) If Executive's employment terminates due to a disability, as
defined in Section 3(b), the obligations of Executive under this Agreement
will terminate except that the covenants contained in Section 4(a) shall
continue indefinitely. In such event, for a period of one year after the
date of Executive's termination, the Company shall pay Executive, in
accordance with customary payroll procedures, Executive's base salary as
then in effect, provided, however, that the payment of such salary shall
be reduced to the extent of any long-term disability benefits provided to
Executive under a long-term disability plan sponsored by the Company. The
vesting and exercise of any and all options, warrants or other securities
awarded to Executive pursuant to the Company's 1998 Stock Option Plan (or
any other similar plan) shall be governed by the terms of such plan. The
amounts payable to Executive under this paragraph shall not be affected in
any way by Executive's acceptance of other employment during the one-year
period described above.
(iv) No amount payable to Executive pursuant to this Agreement shall
be subject to mitigation due to Executive's acceptance or availability of
other employment.
4. RESTRICTIVE COVENANTS; NON-COMPETITION.
Executive in consideration of his employment hereunder agrees as follows:
(a) Except as otherwise permitted hereby, or by the Company's Board of
Directors, Executive shall treat as confidential and not communicate or divulge
to any other person or entity any information related to the Company or its
affiliates or the business, affairs, prospects, financial condition or ownership
of the Company or any of its affiliates (the "Information") acquired by
Executive from the Company or the Company's other employees or agents, except
(i) as may be required to comply with legal proceedings (PROVIDED, THAT, prior
to such disclosure in legal proceedings Executive notifies the Company and
reasonably cooperates with any efforts by the Company to limit the scope of such
disclosure or to obtain confidential treatment thereof by the court or tribunal
seeking such disclosure) or (ii) while employed by the Company, as Executive
reasonably believes necessary in performing his duties. Executive shall use the
Information only in connection with the performance of his duties hereunder, and
not otherwise for his benefit or the benefit of any other person or entity. For
the purposes of this Agreement, Information shall include, but not be limited
to, any confidential information concerning clients, subscribers, marketing,
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business and operational methods of the Company or its affiliates and its
affiliates' clients, subscribers, contracts, financial or other data, technical
data or any other confidential or proprietary information possessed, owned or
used by the Company. Excluded from Executive's obligations of confidentiality is
any part of such Information that: (i) was in the public domain prior to the
date of commencement of Executive's employment with the Company or (ii) enters
the public domain other than as a result of Executive's breach of this covenant.
This Section (4)(a) shall survive the expiration or termination of the other
provisions of this Agreement.
(b) Executive shall fully disclose to the Company all discoveries,
concepts, and ideas, whether or not patentable, including, but not limited to,
processes, methods, formulas, and techniques, as well as improvements thereof or
know-how related thereto (collectively, "Inventions") concerning or relating to
the business conducted by the Company and concerning any present or prospective
activities of the Company which are published, made or conceived by Executive,
in whole or in part, during Executive's employment with the Company.
(c) Executive shall make applications in due form for United States
letters patent and foreign letters patent on such Inventions at the request of
the Company and at its expense, but without additional compensation to
Executive. Executive further agrees that any and all such Inventions shall be
the absolute property of Company or its designees. Executive shall assign to the
Company all of Executive's right, title and interest in any and all Inventions,
execute any and all instruments and do any and all acts necessary or desirable
in connection with any such application for letters patent or to establish and
perfect in the Company the entire right, title, and interest in such Inventions,
patent applications, or patents, and shall execute any instrument necessary or
desirable in connection with any continuations, renewals, or reissues thereof or
in the conduct of any related proceedings or litigation.
(d) During Executive's employment with the Company and for a period of one
year after the earlier of the expiration date of this Agreement or the
termination of Executive's employment hereunder by the Company for Cause or by
Executive (other than for Good Reason or subsequent to a Change in Control under
Section 5(a)):
(i) Executive will not, in any geographical area within which the
Company is, at the time of Executive's termination or during the term of
Executive's employment, marketing its products or services or conducting
other business activities, directly or indirectly, engage in, own or
control an interest in (except as a passive investor in publicly held
companies and except for investments held at the date hereof) or act as an
officer, director, or employee of, or consultant or adviser to, any firm,
corporation or institution directly or indirectly that is in competition
with the Company or engaged in business activities substantially similar
to those conducted by the Company at the time of Executive's termination
or during the term of Executive's employment with the Company; and
(ii) Executive will not recruit or hire any employee of the Company,
or otherwise induce such employee to leave the employment of the Company,
to become an employee of or otherwise be associated with Executive or any
company or business with which Executive is or may become associated.
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5. CHANGE OF CONTROL.
In the event of a Change of Control, the following provisions shall apply:
(a) If within one year after a Change of Control, Executive's
employment with the Company (or any entity to which this Agreement may be
assigned in connection with such Change of Control) is terminated for any reason
other than Executive's death, legal incapacity, or disability, Executive shall
be entitled to receive, within 10 days after the termination date, a lump sum
payment ("Change of Control Payment") equal to two times the amount of
Executive's annual base salary in effect on the date of termination plus any
other amounts accrued and unpaid as of such date (i.e., earned bonuses, car
allowance, unreimbursed business expenses, and any other amounts due to the
Executive under employee benefit or fringe benefit plans of the Company).
Notwithstanding the foregoing, if Executive so requests, any Change in Control
payment may be paid in substantially equal monthly installments, or more
frequently in accordance with the Company's payroll policy. Additionally, any
and all options, warrants or other securities awarded to Executive pursuant to
the Company's 1998 Stock Option Plan or any other similar plan shall, as of the
date of Executive's termination, immediately vest and become exercisable and all
such options, warrants or other securities shall remain exercisable by Executive
for the duration of the period during which the options, warrants or other
securities would have remained exercisable if Executive had remained employed by
the Company.
(b) For purposes of this Section 5, a "Change of Control" shall be
deemed to occur upon any of the following events:
(1) Any "person" or "group" within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act (i) becomes the "beneficial owner",
as defined in Rule 13d-3 under the Exchange Act, of 50% or more of the
combined voting power of the Company's then outstanding securities,
otherwise than through a transaction or series of related transactions
arranged by, or consummated with the prior approval of, the Board or (ii)
acquires by proxy or otherwise the right to vote 50% or more of the then
outstanding voting securities of the Company, otherwise than through an
arrangement or arrangements consummated with the prior approval of the
Board, for the election of directors, for any merger or consolidation of
the Company or for any other matter or question.
(2) During any period of 12 consecutive months (not including
any period prior to the adoption of this Section), Present Directors
and/or New Directors cease for any reason to constitute a majority of the
Board. For purposes of the preceding sentence, "Present Directors" shall
mean individuals who at the beginning of such consecutive 12-month period
were members of the Board and "New Directors" shall mean any director
whose election by the Board or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were Present Directors or New
Directors.
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(3) Consummation of (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Stock would be converted into
cash, securities or other property, other than a merger of the Company in
which the holders of Stock immediately prior to the merger have the same
proportion and ownership of common stock of the surviving corporation
immediately after the merger or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; PROVIDED, THAT, the
divestiture of less than substantially all of the assets of the Company in
one transaction or a series of related transactions, whether effected by
sale, lease, exchange, spin-off sale of the stock or merger of a
subsidiary or otherwise, shall not constitute a Change in Control.
For purposes of this Section 5(b), the rules of Section 318(a) of the Code and
the regulations issued thereunder shall be used to determine stock ownership.
(c) EXCISE TAX GROSS-UP. If Executive becomes entitled to one or
more payments (with a "payment" including the vesting of restricted stock, a
stock option, or other non-cash benefit or property), whether pursuant to the
terms of this Agreement or any other plan or agreement with the Company or any
affiliated company (collectively, "Change of Control Payments"), which are or
become subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall pay to
Executive at the time specified below such amount (the "Gross-up Payment") as
may be necessary to place Executive in the same after-tax position as if no
portion of the Change of Control Payments and any amounts paid to Executive
pursuant to this paragraph 5(c) had been subject to the Excise Tax. The Gross-up
Payment shall include, without limitation, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax. For purposes of
determining the amount of the Gross-up Payment, Executive shall be deemed: (A)
to pay federal income taxes at the highest marginal rate of federal income
taxation for the year in which the Gross-up Payment is to be made; and (B) to
pay any applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. If the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to Executive or otherwise realized
as a benefit by Executive) the portion of the Gross-up Payment that would not
have been paid if such Excise Tax had been used in initially calculating the
Gross-up Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time the
Gross-up Payment is made, the Company shall make an additional Gross-up Payment
in respect of such excess (plus any interest and penalties payable with respect
to such excess) at the time that the amount of such excess is finally
determined.
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The Gross-up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Change of Control
Payments (or any portion thereof) are subject to the Excise Tax; PROVIDED,
HOWEVER, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to Executive
on such day an estimate, as determined by counsel or auditors selected by the
Company and reasonably acceptable to Executive, of the minimum amount of such
payments. The Company shall pay to Executive the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to Executive,
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code). The Company shall have
the right to control all proceedings with the Internal Revenue Service that may
arise in connection with the determination and assessment of any Excise Tax and,
at its sole option, the Company may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties thereon);
PROVIDED, HOWEVER, that the Company's control over any such proceedings shall be
limited to issues with respect to which a Gross-up Payment would be payable
hereunder, and Executive shall be entitled to settle or contest any other issue
raised by the Internal Revenue Service or any other taxing authority. Executive
shall cooperate with the Company in any proceedings relating to the
determination and assessment of any Excise Tax and shall not take any position
or action that would materially increase the amount of any Gross-up Payment
hereunder.
6. NO VIOLATION.
Executive warrants that the execution and delivery of this Agreement and
the performance of his duties hereunder will not violate the terms of any other
agreement to which he is a party or by which he is bound. Additionally,
Executive warrants that Executive has not brought and will not bring to the
Company or use in the performance of Executive's responsibilities at the Company
any materials or documents of a former employer that are not generally available
to the public, unless Executive has obtained express written authorization from
the former employer for their possession and use. Executive represents that he
is not and, since the commencement of Executive's employment with the Company
has not been a party to any employment, proprietary information,
confidentiality, or noncompetition agreement with any of Executive's former
employers which remains in effect as the date hereof. The warranties set forth
in this Section 6 shall survive the expiration or termination of the other
provisions of this Agreement.
7. BREACH BY EXECUTIVE.
Both parties recognize that the services to be rendered under this
Agreement by Executive are special, unique and extraordinary in character, and
that in the event of the breach by Executive of the terms and conditions of this
Agreement to be performed by him or in the event Executive performs services for
any person, firm or corporation engaged in a competing line of business with
Company, the Company shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, whether in law or
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in equity, to, by way of illustration and not limitation, obtain damages for any
breach of this Agreement, or to enforce the specific performance thereof by
Executive, or to enjoin Executive from competing with the Company or, performing
services for himself or any such other person, firm or corporation. The Company
may obtain an injunction restraining any such breach by Executive and no bond or
other security shall be required in connection therewith. The Company and
Executive each consent to the jurisdiction of the Superior Court of the State of
New Jersey, located in Hackensack, New Jersey, and the United States Federal
District Court for the District of New Jersey.
8. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Company, its successors, and assigns and may not be assigned by Executive.
(b) This Agreement contains the entire agreement of the parties hereto and
supersedes all prior or concurrent agreements, whether oral or written, relating
to the subject matter hereof. This Agreement may be amended only by a writing
signed by the party against whom enforcement is sought.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey without regard to its conflicts of laws,
rules or principles.
(d) Any notices or other communications required or permitted hereunder
shall be in writing and shall be deemed effective when delivered in person or,
if mailed, on the date of deposit in the mails, postage prepaid, to the other
party at the respective address of such party set forth herein or to such other
address as shall have been specified in writing by either party to the other in
accordance herewith.
(e) The provisions of Sections 4(a), 4(d) and 6 and the other provisions
of this Agreement which by their terms contemplate survival of the termination
of this Agreement, shall survive termination of this Agreement and be deemed to
be independent covenants.
(f) If any term or provision of this Agreement or its application to any
person or circumstance is to any extent invalid or unenforceable, the remainder
of this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision shall be valid and
enforced to the fullest extent permitted by law.
(g) No delay or omission to exercise any right, power or remedy accruing
to any party hereto shall impair any such right, power or remedy or shall be
construed to be a waiver of or an acquiescence to any breach hereof. No waiver
of any breach of this Agreement shall be deemed to be a waiver of any other
breach of this Agreement theretofore or thereafter occurring. Any waiver of any
provision hereof shall be effective only to the extent specifically set forth in
the applicable writing. All remedies afforded under this Agreement to any party
hereto, by law or otherwise, shall be cumulative and not alternative and shall
not preclude assertion by any party hereto of any other rights or the seeking of
any other rights or remedies against any other party hereto.
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(h) It is the intent of the Company that Executive not be required to
incur any legal fees or disbursements associated with (i) the interpretation of
any provision in, or obtaining of any right or benefit under this Agreement, or
(ii) the enforcement of his rights under this Agreement, including, without
limitation by litigation or other legal action, because the cost and expense
thereof would substantially detract from the benefits to be extended to
Executive hereunder. Accordingly, the Company irrevocably authorizes Executive
from time to time to retain counsel of his choice, at the expense of the Company
as hereafter provided, to represent Executive in connection with the
interpretation and/or enforcement of this Agreement, including without
limitation the initiation or defense of any litigation or other legal action,
whether by or against the Company, or any Director, officer, stockholder, or any
other person affiliated with the Company in any jurisdiction. The Company shall
pay or cause to be paid and shall be solely responsible for any and all
attorneys' and related fees and expenses incurred by Executive under this
Section 8(h).
9. INDEMNIFICATION.
The Company agrees to indemnify Executive to the fullest extent permitted
by applicable law, as such law may be hereafter amended, modified or
supplemented and to the fullest extent permitted by each of the Company's
Restated Certificate of Incorporation and the Company's Restated By-Laws, as
from time to time amended, modified or supplemented. The Company further agrees
that Executive is entitled to the benefits of any directors and officers
liability insurance policy, in accordance with the terms and conditions of that
policy, if such a policy is maintained by the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
COMPANY
IBS INTERACTIVE, INC.
By: /s/ Nicholas R. Loglisci, Jr.
_____________________________
Name: Nicholas R. Loglisci, Jr.
Title: Chief Executive Officer
EXECUTIVE
/s/ Clark D. Frederick
_____________________________
CLARK D. FREDERICK
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EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 3, 1999 between IBS Interactive, Inc., a
Delaware corporation (the "Company") with its corporate offices at 2 Ridgedale
Avenue, Suite 350, Cedar Knolls, New Jersey 07927, and Frank R. Altieri, Jr.
(the "Executive") residing at 20 McKinley Drive, Kinnelon, New Jersey 07405.
RECITALS
1. Executive is currently employed by the Company pursuant to an Employment
Agreement dated April 30, 1998 (the "Current Agreement").
2. The parties hereto desire to terminate the Current Agreement and provide for
the continued employment of Executive upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT; TERM; MILITARY LEAVE.
(a) EMPLOYMENT Subject to the terms and conditions set forth herein, the
Company agrees to employ and Executive agrees to serve as the Company's Chief
Information Officer to perform such services, including but not limited to
managing the Company's Internet services, including construction and operation
of the Company's network, and have such powers and authority as are specified in
the Company's Restated By-Laws, as in effect from time to time, or as may be
assigned to Executive by the Company's Board of Directors, PROVIDED, THAT, the
same is not inconsistent with such position. Executive agrees that he will use
his full business time to promote the interests of the Company and its
affiliates and to fulfill his duties hereunder. Nothing in this Agreement shall,
however, preclude Executive from engaging, so long as, in the reasonable
determination of the Company's Board of Directors, such activities do not
interfere with the execution of his duties and responsibilities hereunder, in
charitable and community affairs, from managing any passive investment made by
Executive in publicly traded equity securities or other property (PROVIDED,
THAT, no such investment may exceed 5% of the equity of any entity, without the
prior approval of the Company's Board of Directors) or from serving, subject to
the prior approval of the Company's Board of Directors, as a member of boards of
directors or as a trustee of any other corporation, association or entity. For
purposes of the preceding sentence, any approval of the Company's Board of
Directors required herein shall not be unreasonably withheld.
(b) TERM. The term of Executive's employment pursuant to this Agreement
shall commence on May 1, 1999 (the "Effective Date") and shall continue
thereafter for a period of four years unless sooner terminated under Section 3.
The Company and Executive agree that on the Effective Date, the Current
Agreement will be superseded by this Agreement. This Agreement shall
automatically renew for one (1) successive four (4) year period; PROVIDED,
<PAGE>
HOWEVER, that this Agreement shall expire on April 30, 2003 if either the
Company or Executive has given the other party hereto written notice at least
six (6) months prior to such date that this Agreement will not be renewed.
(c) MILITARY LEAVE. Executive shall be entitled to all the protection and
benefits afforded by any laws relating to any future compulsory military service
to which Executive may be called, and this Agreement shall be deemed subject to
the provisions of any such law. Upon the submission to the Company of proof of
having been called for military service, Executive will be granted a leave of
absence for the duration of such service.
2. COMPENSATION. During the employment term under this Agreement, the
Company shall compensate Executive as follows:
(a) BASE SALARY. Subject to adjustment as set forth below, the Company
will pay Executive an annual salary at a rate of $115,000 per year, payable in
substantially equal monthly installments, or more frequently in accordance with
Company's usual payroll policy. On each anniversary of the Effective Date,
Executive's then existing base salary will automatically increase at the rate of
10% per year and in the discretion of the Compensation Committee (or Board of
Directors, if at the time there shall be no Compensation Committee) at such
additional rate or amounts as the Compensation Committee shall deem appropriate.
Any such increases granted in the discretion of the Compensation Committee will
be retroactive to the beginning of the then current fiscal year. The Company
will review annually Executive's performance and compensation.
(b) PERFORMANCE BONUS. Executive shall be entitled to such bonus
compensation as the Compensation Committee deems appropriate. Such bonus
compensation shall be based, in part, on the achievement of certain performance
criteria established by the Compensation Committee.
(c) BENEFITS. Executive will be eligible to participate in all
benefit programs of the Company for which senior executive personnel are
eligible.
(d) VACATION. Executive will be entitled each year to vacation for a
period or periods not inconsistent with the normal policy of Company in effect
from time to time, but in any event not less than twenty vacation days each year
and to such holidays as may be customarily afforded to its employees by the
Company, during which periods Executive's compensation shall be paid in full.
(e) STOCK OPTIONS. On June 4, 1999, Executive shall receive an award,
pursuant to the Company's 1999 Stock Option Plan, of 2,142 options to purchase
Common Stock. Such options shall vest pursuant to the terms of the Stock Option
Plan.
(f) REIMBURSEMENT OF EXPENSES.
(i) All reasonable travel and entertainment expenses incurred by
Executive in the course of fulfilling this Agreement or otherwise
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promoting the Company and its business shall be reimbursed by the
Company. Such reimbursement shall be made to Executive promptly
following submission to the Company of receipts and other documentation
of such expenses reasonably satisfactory to the Company.
(ii) In addition to the expenses reimbursable pursuant to paragraph
(i) above, the Company shall also pay to Executive a monthly allowance of
$400 for automobile expenses, PROVIDED, HOWEVER, that the Company shall
be entitled to withhold from such allowance, any amounts required to be
withheld by applicable federal, state or local tax laws.
3. TERMINATION.
(a) DEATH AND LEGAL INCAPACITY. Executive's employment hereunder
shall terminate upon Executive's death or legal incapacity.
(b) DISABILITY. Executive's employment hereunder may be terminated by the
Company in the event of Executive's physical or mental incapacity or inability
to perform his duties as contemplated under this Agreement for a period of at
least one hundred twenty (120) consecutive days. Until such termination occurs,
Executive shall continue to receive his base salary as then in effect, provided,
however, that such salary shall be reduced to the extent of any short-term
disability benefits provided to Executive under a short-term disability plan
sponsored by the Company. The determination of disability shall be made by an
independent physician selected by the Compensation Committee and approved by
Executive or his legal representative.
(c) FOR CAUSE. The termination of Executive's employment hereunder
upon the occurrence of any of the following events shall be deemed to be a
termination for Cause ("Cause"):
(i) Executive's intentional breach of any provision hereof, provided
such breach has a material adverse effect on the Company and is not cured
within twenty days after written notice thereof from the Company or, if
such breach is not curable within such twenty-day period, the cure does
not commence within such twenty-day period;
(ii) Executive's intentional violation of any other duty or
obligation owed by Executive to the Company which has a material adverse
effect on the Company, as determined by the Board of Directors, if such
violation is not cured within twenty days after written notice thereof
from the Company or, if such violation is not curable within such
twenty-day period, the cure does not commence within such twenty-day
period;
(iii) Executive is convicted or pleads guilty or nolo contendre to
any felony (other than traffic violation) or any crime involving fraud,
dishonesty or misappropriation;
(iv) Executive willfully fails to perform and discharge his duties
hereunder in a competent manner and such failure shall continue for a
period in excess of twenty days after written notice thereof specifying
the failures is given by the Company to Executive.
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(v) Executive willfully engages in misconduct that causes material
harm to the Company and such misconduct shall continue for a period in
excess of twenty days after written notice thereof specifying such
misconduct and the resulting harm is given by the Company to Executive.
(d) CONSENT OF DIRECTORS. Termination of this Agreement by the Company for
reasons other than: (i) for Cause or (ii) Executive's death, legal capacity or
disability must be approved by a vote of 2/3 of the members of the Company's
Board of Directors.
(e) FOR GOOD REASON. Executive shall be deemed to terminate his
employment for good reason ("Good Reason") if such termination occurs within
six months after:
(i) written notice of a failure by the Company to comply with
any material provision of this Agreement which failure has not been cured within
twenty days after such written notice of noncompliance has been given by
Executive to the Company, or
(ii) a significant diminishment in the nature or scope of the
authority, power, function or duty attached to the position which Executive
maintains as of the Effective Date without the express written consent of
Executive, and which is not remedied by the Company within twenty days after
Executive's notice to the Company of his reasonable objection thereto, or
(iii) Executive is relocated more than 40 miles from the
Company's office in Cedar Knolls, New Jersey without his prior written consent.
(f) EFFECT OF TERMINATION.
(i) If Executive terminates his employment for Good Reason, or if
the Company terminates Executive's employment for reasons other than for
Cause, Executive's death, legal incapacity or disability, the obligations
of Executive under this Agreement will terminate except that the covenants
contained in Section 4(a) shall continue indefinitely, and the obligations
in this section shall continue pursuant to their terms. In such event, for
a period of two years after the date of Executive's termination, the
Company shall pay Executive, in accordance with customary payroll
procedures, Executive's base salary as then in effect and, in addition,
any Performance Bonus that Executive would have earned in the year he was
terminated, prorated as of the date of termination. For such two-year
period, the Company shall continue to provide medical coverage to
Executive under substantially the same terms as were in effect on the date
Executive's employment terminated under this provision. Additionally, any
and all options, warrants or other securities awarded to Executive
pursuant to the Company's 1998 Stock Option Plan or any other similar plan
shall, as of the date of Executive's termination, immediately vest and
become exercisable and all such options, warrants or other securities
shall remain exercisable by Executive for the duration of the period
during which the options, warrants or other securities would have remained
exercisable if Executive had remained employed by the Company. The amounts
payable to Executive under this paragraph shall not be affected in any way
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by Executive's acceptance of other employment during the two-year period
described above.
(ii) Except as otherwise provided herein, if Executive terminates
his employment for any reason other than Good Reason or if the Company
terminates Executive for Cause, the obligations of Executive and the
Company under this Agreement will terminate except that the covenants of
Executive contained in Section 4(a) shall continue indefinitely and the
covenants of Executive contained in Section 4(d) shall continue until the
first anniversary of the date of Executive's termination. In such event,
Executive shall be entitled to receive only the compensation hereunder
accrued and unpaid as of the date of such termination.
(iii) If Executive's employment terminates due to a disability, as
defined in Section 3(b), the obligations of Executive under this Agreement
will terminate except that the covenants contained in Section 4(a) shall
continue indefinitely. In such event, for a period of one year after the
date of Executive's termination, the Company shall pay Executive, in
accordance with customary payroll procedures, Executive's base salary as
then in effect, provided, however, that the payment of such salary shall
be reduced to the extent of any long-term disability benefits provided to
Executive under a long-term disability plan sponsored by the Company. The
vesting and exercise of any and all options, warrants or other securities
awarded to Executive pursuant to the Company's 1998 Stock Option Plan (or
any other similar plan) shall be governed by the terms of such plan. The
amounts payable to Executive under this paragraph shall not be affected in
any way by Executive's acceptance of other employment during the one-year
period described above.
(iv) No amount payable to Executive pursuant to this Agreement shall
be subject to mitigation due to Executive's acceptance or availability of
other employment.
4. RESTRICTIVE COVENANTS; NON-COMPETITION.
Executive in consideration of his employment hereunder agrees as follows:
(a) Except as otherwise permitted hereby, or by the Company's Board of
Directors, Executive shall treat as confidential and not communicate or divulge
to any other person or entity any information related to the Company or its
affiliates or the business, affairs, prospects, financial condition or ownership
of the Company or any of its affiliates (the "Information") acquired by
Executive from the Company or the Company's other employees or agents, except
(i) as may be required to comply with legal proceedings (PROVIDED, THAT, prior
to such disclosure in legal proceedings Executive notifies the Company and
reasonably cooperates with any efforts by the Company to limit the scope of such
disclosure or to obtain confidential treatment thereof by the court or tribunal
seeking such disclosure) or (ii) while employed by the Company, as Executive
reasonably believes necessary in performing his duties. Executive shall use the
Information only in connection with the performance of his duties hereunder, and
not otherwise for his benefit or the benefit of any other person or entity. For
the purposes of this Agreement, Information shall include, but not be limited
to, any confidential information concerning clients, subscribers, marketing,
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business and operational methods of the Company or its affiliates and its
affiliates' clients, subscribers, contracts, financial or other data, technical
data or any other confidential or proprietary information possessed, owned or
used by the Company. Excluded from Executive's obligations of confidentiality is
any part of such Information that: (i) was in the public domain prior to the
date of commencement of Executive's employment with the Company or (ii) enters
the public domain other than as a result of Executive's breach of this covenant.
This Section (4)(a) shall survive the expiration or termination of the other
provisions of this Agreement.
(b) Executive shall fully disclose to the Company all discoveries,
concepts, and ideas, whether or not patentable, including, but not limited to,
processes, methods, formulas, and techniques, as well as improvements thereof or
know-how related thereto (collectively, "Inventions") concerning or relating to
the business conducted by the Company and concerning any present or prospective
activities of the Company which are published, made or conceived by Executive,
in whole or in part, during Executive's employment with the Company.
(c) Executive shall make applications in due form for United States
letters patent and foreign letters patent on such Inventions at the request of
the Company and at its expense, but without additional compensation to
Executive. Executive further agrees that any and all such Inventions shall be
the absolute property of Company or its designees. Executive shall assign to the
Company all of Executive's right, title and interest in any and all Inventions,
execute any and all instruments and do any and all acts necessary or desirable
in connection with any such application for letters patent or to establish and
perfect in the Company the entire right, title, and interest in such Inventions,
patent applications, or patents, and shall execute any instrument necessary or
desirable in connection with any continuations, renewals, or reissues thereof or
in the conduct of any related proceedings or litigation.
(d) During Executive's employment with the Company and for a period of one
year after the earlier of the expiration date of this Agreement or the
termination of Executive's employment hereunder by the Company for Cause or by
Executive (other than for Good Reason or subsequent to a Change in Control under
Section 5(a)):
(i) Executive will not, in any geographical area within which the
Company is, at the time of Executive's termination or during the term of
Executive's employment, marketing its products or services or conducting
other business activities, directly or indirectly, engage in, own or
control an interest in (except as a passive investor in publicly held
companies and except for investments held at the date hereof) or act as an
officer, director, or employee of, or consultant or adviser to, any firm,
corporation or institution directly or indirectly that is in competition
with the Company or engaged in business activities substantially similar
to those conducted by the Company at the time of Executive's termination
or during the term of Executive's employment with the Company; and
(ii) Executive will not recruit or hire any employee of the Company,
or otherwise induce such employee to leave the employment of the Company,
to become an employee of or otherwise be associated with Executive or any
company or business with which Executive is or may become associated.
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5. CHANGE OF CONTROL.
In the event of a Change of Control, the following provisions shall apply:
(a) If within one year after a Change of Control, Executive's
employment with the Company (or any entity to which this Agreement may be
assigned in connection with such Change of Control) is terminated for any reason
other than Executive's death, legal incapacity, or disability, Executive shall
be entitled to receive, within 10 days after the termination date, a lump sum
payment ("Change of Control Payment") equal to two times the amount of
Executive's annual base salary in effect on the date of termination plus any
other amounts accrued and unpaid as of such date (i.e., earned bonuses, car
allowance, unreimbursed business expenses, and any other amounts due to the
Executive under employee benefit or fringe benefit plans of the Company).
Notwithstanding the foregoing, if Executive so requests, any Change in Control
payment may be paid in substantially equal monthly installments, or more
frequently in accordance with the Company's payroll policy. Additionally, any
and all options, warrants or other securities awarded to Executive pursuant to
the Company's 1998 Stock Option Plan or any other similar plan shall, as of the
date of Executive's termination, immediately vest and become exercisable and all
such options, warrants or other securities shall remain exercisable by Executive
for the duration of the period during which the options, warrants or other
securities would have remained exercisable if Executive had remained employed by
the Company.
(b) For purposes of this Section 5, a "Change of Control" shall be
deemed to occur upon any of the following events:
(1) Any "person" or "group" within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act (i) becomes the "beneficial owner",
as defined in Rule 13d-3 under the Exchange Act, of 50% or more of the
combined voting power of the Company's then outstanding securities,
otherwise than through a transaction or series of related transactions
arranged by, or consummated with the prior approval of, the Board or (ii)
acquires by proxy or otherwise the right to vote 50% or more of the then
outstanding voting securities of the Company, otherwise than through an
arrangement or arrangements consummated with the prior approval of the
Board, for the election of directors, for any merger or consolidation of
the Company or for any other matter or question.
(2) During any period of 12 consecutive months (not including
any period prior to the adoption of this Section), Present Directors
and/or New Directors cease for any reason to constitute a majority of the
Board. For purposes of the preceding sentence, "Present Directors" shall
mean individuals who at the beginning of such consecutive 12-month period
were members of the Board and "New Directors" shall mean any director
whose election by the Board or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were Present Directors or New
Directors.
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(3) Consummation of (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Stock would be converted into
cash, securities or other property, other than a merger of the Company in
which the holders of Stock immediately prior to the merger have the same
proportion and ownership of common stock of the surviving corporation
immediately after the merger or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; PROVIDED, THAT, the
divestiture of less than substantially all of the assets of the Company in
one transaction or a series of related transactions, whether effected by
sale, lease, exchange, spin-off sale of the stock or merger of a
subsidiary or otherwise, shall not constitute a Change in Control.
For purposes of this Section 5(b), the rules of Section 318(a) of the Code and
the regulations issued thereunder shall be used to determine stock ownership.
(c) EXCISE TAX GROSS-UP. If Executive becomes entitled to one or
more payments (with a "payment" including the vesting of restricted stock, a
stock option, or other non-cash benefit or property), whether pursuant to the
terms of this Agreement or any other plan or agreement with the Company or any
affiliated company (collectively, "Change of Control Payments"), which are or
become subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall pay to
Executive at the time specified below such amount (the "Gross-up Payment") as
may be necessary to place Executive in the same after-tax position as if no
portion of the Change of Control Payments and any amounts paid to Executive
pursuant to this paragraph 5(c) had been subject to the Excise Tax. The Gross-up
Payment shall include, without limitation, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax. For purposes of
determining the amount of the Gross-up Payment, Executive shall be deemed: (A)
to pay federal income taxes at the highest marginal rate of federal income
taxation for the year in which the Gross-up Payment is to be made; and (B) to
pay any applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. If the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to Executive or otherwise realized
as a benefit by Executive) the portion of the Gross-up Payment that would not
have been paid if such Excise Tax had been used in initially calculating the
Gross-up Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time the
Gross-up Payment is made, the Company shall make an additional Gross-up Payment
in respect of such excess (plus any interest and penalties payable with respect
to such excess) at the time that the amount of such excess is finally
determined.
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The Gross-up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Change of Control
Payments (or any portion thereof) are subject to the Excise Tax; PROVIDED,
HOWEVER, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to Executive
on such day an estimate, as determined by counsel or auditors selected by the
Company and reasonably acceptable to Executive, of the minimum amount of such
payments. The Company shall pay to Executive the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to Executive,
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code). The Company shall have
the right to control all proceedings with the Internal Revenue Service that may
arise in connection with the determination and assessment of any Excise Tax and,
at its sole option, the Company may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties thereon);
PROVIDED, HOWEVER, that the Company's control over any such proceedings shall be
limited to issues with respect to which a Gross-up Payment would be payable
hereunder, and Executive shall be entitled to settle or contest any other issue
raised by the Internal Revenue Service or any other taxing authority. Executive
shall cooperate with the Company in any proceedings relating to the
determination and assessment of any Excise Tax and shall not take any position
or action that would materially increase the amount of any Gross-up Payment
hereunder.
6. NO VIOLATION.
Executive warrants that the execution and delivery of this Agreement and
the performance of his duties hereunder will not violate the terms of any other
agreement to which he is a party or by which he is bound. Additionally,
Executive warrants that Executive has not brought and will not bring to the
Company or use in the performance of Executive's responsibilities at the Company
any materials or documents of a former employer that are not generally available
to the public, unless Executive has obtained express written authorization from
the former employer for their possession and use. Executive represents that he
is not and, since the commencement of Executive's employment with the Company
has not been a party to any employment, proprietary information,
confidentiality, or noncompetition agreement with any of Executive's former
employers which remains in effect as the date hereof. The warranties set forth
in this Section 6 shall survive the expiration or termination of the other
provisions of this Agreement.
7. BREACH BY EXECUTIVE.
Both parties recognize that the services to be rendered under this
Agreement by Executive are special, unique and extraordinary in character, and
that in the event of the breach by Executive of the terms and conditions of this
Agreement to be performed by him or in the event Executive performs services for
any person, firm or corporation engaged in a competing line of business with
Company, the Company shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, whether in law or
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in equity, to, by way of illustration and not limitation, obtain damages for any
breach of this Agreement, or to enforce the specific performance thereof by
Executive, or to enjoin Executive from competing with the Company or, performing
services for himself or any such other person, firm or corporation. The Company
may obtain an injunction restraining any such breach by Executive and no bond or
other security shall be required in connection therewith. The Company and
Executive each consent to the jurisdiction of the Superior Court of the State of
New Jersey, located in Hackensack, New Jersey, and the United States Federal
District Court for the District of New Jersey.
8. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Company, its successors, and assigns and may not be assigned by Executive.
(b) This Agreement contains the entire agreement of the parties hereto and
supersedes all prior or concurrent agreements, whether oral or written, relating
to the subject matter hereof. This Agreement may be amended only by a writing
signed by the party against whom enforcement is sought.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey without regard to its conflicts of laws,
rules or principles.
(d) Any notices or other communications required or permitted hereunder
shall be in writing and shall be deemed effective when delivered in person or,
if mailed, on the date of deposit in the mails, postage prepaid, to the other
party at the respective address of such party set forth herein or to such other
address as shall have been specified in writing by either party to the other in
accordance herewith.
(e) The provisions of Sections 4(a), 4(d) and 6 and the other provisions
of this Agreement which by their terms contemplate survival of the termination
of this Agreement, shall survive termination of this Agreement and be deemed to
be independent covenants.
(f) If any term or provision of this Agreement or its application to any
person or circumstance is to any extent invalid or unenforceable, the remainder
of this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision shall be valid and
enforced to the fullest extent permitted by law.
(g) No delay or omission to exercise any right, power or remedy accruing
to any party hereto shall impair any such right, power or remedy or shall be
construed to be a waiver of or an acquiescence to any breach hereof. No waiver
of any breach of this Agreement shall be deemed to be a waiver of any other
breach of this Agreement theretofore or thereafter occurring. Any waiver of any
provision hereof shall be effective only to the extent specifically set forth in
the applicable writing. All remedies afforded under this Agreement to any party
hereto, by law or otherwise, shall be cumulative and not alternative and shall
not preclude assertion by any party hereto of any other rights or the seeking of
any other rights or remedies against any other party hereto.
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(h) It is the intent of the Company that Executive not be required to
incur any legal fees or disbursements associated with (i) the interpretation of
any provision in, or obtaining of any right or benefit under this Agreement, or
(ii) the enforcement of his rights under this Agreement, including, without
limitation by litigation or other legal action, because the cost and expense
thereof would substantially detract from the benefits to be extended to
Executive hereunder. Accordingly, the Company irrevocably authorizes Executive
from time to time to retain counsel of his choice, at the expense of the Company
as hereafter provided, to represent Executive in connection with the
interpretation and/or enforcement of this Agreement, including without
limitation the initiation or defense of any litigation or other legal action,
whether by or against the Company, or any Director, officer, stockholder, or any
other person affiliated with the Company in any jurisdiction. The Company shall
pay or cause to be paid and shall be solely responsible for any and all
attorneys' and related fees and expenses incurred by Executive under this
Section 8(h).
9. INDEMNIFICATION.
The Company agrees to indemnify Executive to the fullest extent permitted
by applicable law, as such law may be hereafter amended, modified or
supplemented and to the fullest extent permitted by each of the Company's
Restated Certificate of Incorporation and the Company's Restated By-Laws, as
from time to time amended, modified or supplemented. The Company further agrees
that Executive is entitled to the benefits of any directors and officers
liability insurance policy, in accordance with the terms and conditions of that
policy, if such a policy is maintained by the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
COMPANY
IBS INTERACTIVE, INC.
By: /s/ Nicholas R. Loglisci, Jr.
_____________________________
Name: Nicholas R. Loglisci, Jr.
Title: Chief Executive Officer &
President
EXECUTIVE
/s/ Frank R. Altieri, Jr.
_____________________________
FRANK R. ALTIERI, JR.
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EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 3, 1999 between IBS Interactive, Inc., a
Delaware corporation (the "Company") with its corporate offices at 2 Ridgedale
Avenue, Suite 350, Cedar Knolls, New Jersey 07927, and Jeffrey E. Brenner (the
"Executive") residing 466 White Birch Drive, Rivervale, New Jersey 07675.
RECITALS
1. Executive is currently employed by the Company pursuant to an Employment
Agreement dated April 30, 1998 (the "Current Agreement").
2. The parties hereto desire to terminate the Current Agreement and provide for
the continued employment of Executive upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT; TERM; MILITARY LEAVE.
(a) EMPLOYMENT Subject to the terms and conditions set forth herein, the
Company agrees to employ and Executive agrees to serve as the Company's Chief
Operating Officer to perform such services, and have such powers and authority
as are specified in the Company's Restated By-Laws, as in effect from time to
time, or as may be assigned to Executive by the Company's Board of Directors,
PROVIDED, THAT, the same is not inconsistent with such position. Executive
agrees that he will use his full business time to promote the interests of the
Company and its affiliates and to fulfill his duties hereunder. Nothing in this
Agreement shall, however, preclude Executive from engaging, so long as, in the
reasonable determination of the Company's Board of Directors, such activities do
not interfere with the execution of his duties and responsibilities hereunder,
in charitable and community affairs, from managing any passive investment made
by Executive in publicly traded equity securities or other property (PROVIDED,
THAT, no such investment may exceed 5% of the equity of any entity, without the
prior approval of the Company's Board of Directors) or from serving, subject to
the prior approval of the Company's Board of Directors, as a member of boards of
directors or as a trustee of any other corporation, association or entity. For
purposes of the preceding sentence, any approval of the Company's Board of
Directors required herein shall not be unreasonably withheld.
(b) TERM. The term of Executive's employment pursuant to this Agreement
shall commence on May 1, 1999 (the "Effective Date") and shall continue
thereafter for a period of four years unless sooner terminated under Section 3.
The Company and Executive agree that on the Effective Date, the Current
Agreement will be superseded by this Agreement. This Agreement shall
automatically renew for one (1) successive four (4) year period; PROVIDED,
HOWEVER, that this Agreement shall expire on April 30, 2003 if either the
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Company or Executive has given the other party hereto written notice at least
six (6) months prior to such date that this Agreement will not be renewed.
(c) MILITARY LEAVE. Executive shall be entitled to all the protection and
benefits afforded by any laws relating to any future compulsory military service
to which Executive may be called, and this Agreement shall be deemed subject to
the provisions of any such law. Upon the submission to the Company of proof of
having been called for military service, Executive will be granted a leave of
absence for the duration of such service.
2. COMPENSATION. During the employment term under this Agreement, the
Company shall compensate Executive as follows:
(a) BASE SALARY. Subject to adjustment as set forth below, the Company
will pay Executive an annual salary at a rate of $137,500 per year, payable in
substantially equal monthly installments, or more frequently in accordance with
Company's usual payroll policy. On each anniversary of the Effective Date,
Executive's then existing base salary will automatically increase at the rate of
10% per year and in the discretion of the Compensation Committee (or Board of
Directors, if at the time there shall be no Compensation Committee) at such
additional rate or amounts as the Compensation Committee shall deem appropriate.
Any such increases granted in the discretion of the Compensation Committee will
be retroactive to the beginning of the then current fiscal year. The Company
will review annually Executive's performance and compensation.
(b) PERFORMANCE BONUS. Executive shall be entitled to such bonus
compensation as the Compensation Committee deems appropriate. Such bonus
compensation shall be based, in part, on the achievement of certain performance
criteria established by the Compensation Committee.
(c) BENEFITS. Executive will be eligible to participate in all
benefit programs of the Company for which senior executive personnel are
eligible.
(d) VACATION. Executive will be entitled each year to vacation for a
period or periods not inconsistent with the normal policy of Company in effect
from time to time, but in any event not less than twenty vacation days each year
and to such holidays as may be customarily afforded to its employees by the
Company, during which periods Executive's compensation shall be paid in full.
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(e) STOCK OPTIONS. On June 4, 1999, Executive shall receive an award,
pursuant to the Company's 1999 Stock Option Plan, of 6,432 options to purchase
Common Stock. Such options shall vest pursuant to the terms of the Stock Option
Plan.
(f) REIMBURSEMENT OF EXPENSES.
(i) All reasonable travel and entertainment expenses incurred by
Executive in the course of fulfilling this Agreement or otherwise
promoting the Company and its business shall be reimbursed by the Company.
Such reimbursement shall be made to Executive promptly following
submission to the Company of receipts and other documentation of such
expenses reasonably satisfactory to the Company.
(ii) In addition to the expenses reimbursable pursuant to paragraph
(i) above, the Company shall also pay to Executive a monthly allowance of
$550 for automobile expenses, PROVIDED, HOWEVER, that the Company shall
be entitled to withhold from such allowance, any amounts required to be
withheld by applicable federal, state or local tax laws.
3. TERMINATION.
(a) DEATH AND LEGAL INCAPACITY. Executive's employment hereunder
shall terminate upon Executive's death or legal incapacity.
(b) DISABILITY. Executive's employment hereunder may be terminated by the
Company in the event of Executive's physical or mental incapacity or inability
to perform his duties as contemplated under this Agreement for a period of at
least one hundred twenty (120) consecutive days. Until such termination occurs,
Executive shall continue to receive his base salary as then in effect, provided,
however, that such salary shall be reduced to the extent of any short-term
disability benefits provided to Executive under a short-term disability plan
sponsored by the Company. The determination of disability shall be made by an
independent physician selected by the Compensation Committee and approved by
Executive or his legal representative.
(c) FOR CAUSE. The termination of Executive's employment hereunder
upon the occurrence of any of the following events shall be deemed to be a
termination for Cause ("Cause"):
(i) Executive's intentional breach of any provision hereof, provided
such breach has a material adverse effect on the Company and is not cured
within twenty days after written notice thereof from the Company or, if
such breach is not curable within such twenty-day period, the cure does
not commence within such twenty-day period;
(ii) Executive's intentional violation of any other duty or
obligation owed by Executive to the Company which has a material adverse
effect on the Company, as determined by the Board of Directors, if such
violation is not cured within twenty days after written notice thereof
from the Company or, if such violation is not curable within such
twenty-day period, the cure does not commence within such twenty-day
period;
(iii) Executive is convicted or pleads guilty or nolo contendre to
any felony (other than traffic violation) or any crime involving fraud,
dishonesty or misappropriation;
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(iv) Executive willfully fails to perform and discharge his duties
hereunder in a competent manner and such failure shall continue for a
period in excess of twenty days after written notice thereof specifying
the failures is given by the Company to Executive.
(v) Executive willfully engages in misconduct that causes material
harm to the Company and such misconduct shall continue for a period in
excess of twenty days after written notice thereof specifying such
misconduct and the resulting harm is given by the Company to Executive.
(d) CONSENT OF DIRECTORS. Termination of this Agreement by the Company for
reasons other than: (i) for Cause or (ii) Executive's death, legal capacity or
disability must be approved by a vote of 2/3 of the members of the Company's
Board of Directors.
(e) FOR GOOD REASON. Executive shall be deemed to terminate his
employment for good reason ("Good Reason") if such termination occurs within
six months after:
(i) written notice of a failure by the Company to comply with
any material provision of this Agreement which failure has not been cured within
twenty days after such written notice of noncompliance has been given by
Executive to the Company, or
(ii) a significant diminishment in the nature or scope of the
authority, power, function or duty attached to the position which Executive
maintains as of the Effective Date without the express written consent of
Executive, and which is not remedied by the Company within twenty days after
Executive's notice to the Company of his reasonable objection thereto, or
(iii) Executive is relocated more than 40 miles from the
Company's office in Cedar Knolls, New Jersey without his prior written consent.
(f) EFFECT OF TERMINATION.
(i) If Executive terminates his employment for Good Reason, or if
the Company terminates Executive's employment for reasons other than for
Cause, Executive's death, legal incapacity or disability, the obligations
of Executive under this Agreement will terminate except that the covenants
contained in Section 4(a) shall continue indefinitely, and the obligations
in this section shall continue pursuant to their terms. In such event, for
a period of two years after the date of Executive's termination, the
Company shall pay Executive, in accordance with customary payroll
procedures, Executive's base salary as then in effect and, in addition,
any Performance Bonus that Executive would have earned in the year he was
terminated, prorated as of the date of termination. For such two-year
period, the Company shall continue to provide medical coverage to
Executive under substantially the same terms as were in effect on the date
Executive's employment terminated under this provision. Additionally, any
and all options, warrants or other securities awarded to Executive
pursuant to the Company's 1998 Stock Option Plan or any other similar plan
shall, as of the date of Executive's termination, immediately vest and
become exercisable and all such options, warrants or other securities
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<PAGE>
shall remain exercisable by Executive for the duration of the period
during which the options, warrants or other securities would have remained
exercisable if Executive had remained employed by the Company. The amounts
payable to Executive under this paragraph shall not be affected in any way
by Executive's acceptance of other employment during the two-year period
described above.
(ii) Except as otherwise provided herein, if Executive terminates
his employment for any reason other than Good Reason or if the Company
terminates Executive for Cause, the obligations of Executive and the
Company under this Agreement will terminate except that the covenants of
Executive contained in Section 4(a) shall continue indefinitely and the
covenants of Executive contained in Section 4(d) shall continue until the
first anniversary of the date of Executive's termination. In such event,
Executive shall be entitled to receive only the compensation hereunder
accrued and unpaid as of the date of such termination.
(iii) If Executive's employment terminates due to a disability, as
defined in Section 3(b), the obligations of Executive under this Agreement
will terminate except that the covenants contained in Section 4(a) shall
continue indefinitely. In such event, for a period of one year after the
date of Executive's termination, the Company shall pay Executive, in
accordance with customary payroll procedures, Executive's base salary as
then in effect, provided, however, that the payment of such salary shall
be reduced to the extent of any long-term disability benefits provided to
Executive under a long-term disability plan sponsored by the Company. The
vesting and exercise of any and all options, warrants or other securities
awarded to Executive pursuant to the Company's 1998 Stock Option Plan (or
any other similar plan) shall be governed by the terms of such plan. The
amounts payable to Executive under this paragraph shall not be affected in
any way by Executive's acceptance of other employment during the one-year
period described above.
(iv) No amount payable to Executive pursuant to this Agreement shall
be subject to mitigation due to Executive's acceptance or availability of
other employment.
4. RESTRICTIVE COVENANTS; NON-COMPETITION.
Executive in consideration of his employment hereunder agrees as follows:
(a) Except as otherwise permitted hereby, or by the Company's Board of
Directors, Executive shall treat as confidential and not communicate or divulge
to any other person or entity any information related to the Company or its
affiliates or the business, affairs, prospects, financial condition or ownership
of the Company or any of its affiliates (the "Information") acquired by
Executive from the Company or the Company's other employees or agents, except
(i) as may be required to comply with legal proceedings (PROVIDED, THAT, prior
to such disclosure in legal proceedings Executive notifies the Company and
reasonably cooperates with any efforts by the Company to limit the scope of such
disclosure or to obtain confidential treatment thereof by the court or tribunal
seeking such disclosure) or (ii) while employed by the Company, as Executive
reasonably believes necessary in performing his duties. Executive shall use the
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Information only in connection with the performance of his duties hereunder, and
not otherwise for his benefit or the benefit of any other person or entity. For
the purposes of this Agreement, Information shall include, but not be limited
to, any confidential information concerning clients, subscribers, marketing,
business and operational methods of the Company or its affiliates and its
affiliates' clients, subscribers, contracts, financial or other data, technical
data or any other confidential or proprietary information possessed, owned or
used by the Company. Excluded from Executive's obligations of confidentiality is
any part of such Information that: (i) was in the public domain prior to the
date of commencement of Executive's employment with the Company or (ii) enters
the public domain other than as a result of Executive's breach of this covenant.
This Section (4)(a) shall survive the expiration or termination of the other
provisions of this Agreement.
(b) Executive shall fully disclose to the Company all discoveries,
concepts, and ideas, whether or not patentable, including, but not limited to,
processes, methods, formulas, and techniques, as well as improvements thereof or
know-how related thereto (collectively, "Inventions") concerning or relating to
the business conducted by the Company and concerning any present or prospective
activities of the Company which are published, made or conceived by Executive,
in whole or in part, during Executive's employment with the Company.
(c) Executive shall make applications in due form for United States
letters patent and foreign letters patent on such Inventions at the request of
the Company and at its expense, but without additional compensation to
Executive. Executive further agrees that any and all such Inventions shall be
the absolute property of Company or its designees. Executive shall assign to the
Company all of Executive's right, title and interest in any and all Inventions,
execute any and all instruments and do any and all acts necessary or desirable
in connection with any such application for letters patent or to establish and
perfect in the Company the entire right, title, and interest in such Inventions,
patent applications, or patents, and shall execute any instrument necessary or
desirable in connection with any continuations, renewals, or reissues thereof or
in the conduct of any related proceedings or litigation.
(d) During Executive's employment with the Company and for a period of one
year after the earlier of the expiration date of this Agreement or the
termination of Executive's employment hereunder by the Company for Cause or by
Executive (other than for Good Reason or subsequent to a Change in Control under
Section 5(a)):
(i) Executive will not, in any geographical area within which the
Company is, at the time of Executive's termination or during the term of
Executive's employment, marketing its products or services or conducting
other business activities, directly or indirectly, engage in, own or
control an interest in (except as a passive investor in publicly held
companies and except for investments held at the date hereof) or act as an
officer, director, or employee of, or consultant or adviser to, any firm,
corporation or institution directly or indirectly that is in competition
with the Company or engaged in business activities substantially similar
to those conducted by the Company at the time of Executive's termination
or during the term of Executive's employment with the Company; and
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(ii) Executive will not recruit or hire any employee of the Company,
or otherwise induce such employee to leave the employment of the Company,
to become an employee of or otherwise be associated with Executive or any
company or business with which Executive is or may become associated.
5. CHANGE OF CONTROL.
In the event of a Change of Control, the following provisions shall apply:
(a) If within one year after a Change of Control, Executive's
employment with the Company (or any entity to which this Agreement may be
assigned in connection with such Change of Control) is terminated for any reason
other than Executive's death, legal incapacity, or disability, Executive shall
be entitled to receive: (a) within 10 days after the termination date, a lump
sum payment equal to the amount of Executive's annual base salary in effect on
the date of termination plus any other amounts accrued and unpaid as of such
date (i.e., earned bonuses, car allowance, unreimbursed business expenses, and
any other amounts due to the Executive under employee benefit or fringe benefit
plans of the Company) and (b) on January 1 of the calendar year immediately
following such termination date, a second lump sum payment equal to the amount
of Executive's annual base salary in effect on the date of termination (the
"Change of Control Payments"). Notwithstanding the foregoing, if Executive so
requests, any Change in Control payment may be paid in substantially equal
monthly installments, or more frequently in accordance with the Company's
payroll policy. Additionally, any and all options, warrants or other securities
awarded to Executive pursuant to the Company's 1998 Stock Option Plan or any
other similar plan shall, as of the date of Executive's termination, immediately
vest and become exercisable and all such options, warrants or other securities
shall remain exercisable by Executive for the duration of the period during
which the options, warrants or other securities would have remained exercisable
if Executive had remained employed by the Company.
(b) For purposes of this Section 5, a "Change of Control" shall be
deemed to occur upon any of the following events:
(1) Any "person" or "group" within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act (i) becomes the "beneficial owner",
as defined in Rule 13d-3 under the Exchange Act, of 50% or more of the
combined voting power of the Company's then outstanding securities,
otherwise than through a transaction or series of related transactions
arranged by, or consummated with the prior approval of, the Board or (ii)
acquires by proxy or otherwise the right to vote 50% or more of the then
outstanding voting securities of the Company, otherwise than through an
arrangement or arrangements consummated with the prior approval of the
Board, for the election of directors, for any merger or consolidation of
the Company or for any other matter or question.
(2) During any period of 12 consecutive months (not including
any period prior to the adoption of this Section), Present Directors
and/or New Directors cease for any reason to constitute a majority of the
Board. For purposes of the preceding sentence, "Present Directors" shall
mean individuals who at the beginning of such consecutive 12-month period
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<PAGE>
were members of the Board and "New Directors" shall mean any director
whose election by the Board or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were Present Directors or New
Directors.
(3) Consummation of (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Stock would be converted into
cash, securities or other property, other than a merger of the Company in
which the holders of Stock immediately prior to the merger have the same
proportion and ownership of common stock of the surviving corporation
immediately after the merger or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; PROVIDED, THAT, the
divestiture of less than substantially all of the assets of the Company in
one transaction or a series of related transactions, whether effected by
sale, lease, exchange, spin-off sale of the stock or merger of a
subsidiary or otherwise, shall not constitute a Change in Control.
For purposes of this Section 5(b), the rules of Section 318(a) of the Code and
the regulations issued thereunder shall be used to determine stock ownership.
(c) EXCISE TAX GROSS-UP. If Executive becomes entitled to one or
more payments (with a "payment" including the vesting of restricted stock, a
stock option, or other non-cash benefit or property), whether pursuant to the
terms of this Agreement or any other plan or agreement with the Company or any
affiliated company (collectively, "Change of Control Payments"), which are or
become subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall pay to
Executive at the time specified below such amount (the "Gross-up Payment") as
may be necessary to place Executive in the same after-tax position as if no
portion of the Change of Control Payments and any amounts paid to Executive
pursuant to this paragraph 5(c) had been subject to the Excise Tax. The Gross-up
Payment shall include, without limitation, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax. For purposes of
determining the amount of the Gross-up Payment, Executive shall be deemed: (A)
to pay federal income taxes at the highest marginal rate of federal income
taxation for the year in which the Gross-up Payment is to be made; and (B) to
pay any applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. If the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to Executive or otherwise realized
as a benefit by Executive) the portion of the Gross-up Payment that would not
have been paid if such Excise Tax had been used in initially calculating the
Gross-up Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time the
Gross-up Payment is made, the Company shall make an additional Gross-up Payment
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in respect of such excess (plus any interest and penalties payable with respect
to such excess) at the time that the amount of such excess is finally
determined.
The Gross-up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Change of Control
Payments (or any portion thereof) are subject to the Excise Tax; PROVIDED,
HOWEVER, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to Executive
on such day an estimate, as determined by counsel or auditors selected by the
Company and reasonably acceptable to Executive, of the minimum amount of such
payments. The Company shall pay to Executive the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to Executive,
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code). The Company shall have
the right to control all proceedings with the Internal Revenue Service that may
arise in connection with the determination and assessment of any Excise Tax and,
at its sole option, the Company may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties thereon);
PROVIDED, HOWEVER, that the Company's control over any such proceedings shall be
limited to issues with respect to which a Gross-up Payment would be payable
hereunder, and Executive shall be entitled to settle or contest any other issue
raised by the Internal Revenue Service or any other taxing authority. Executive
shall cooperate with the Company in any proceedings relating to the
determination and assessment of any Excise Tax and shall not take any position
or action that would materially increase the amount of any Gross-up Payment
hereunder.
6. NO VIOLATION.
Executive warrants that the execution and delivery of this Agreement and
the performance of his duties hereunder will not violate the terms of any other
agreement to which he is a party or by which he is bound. Additionally,
Executive warrants that Executive has not brought and will not bring to the
Company or use in the performance of Executive's responsibilities at the Company
any materials or documents of a former employer that are not generally available
to the public, unless Executive has obtained express written authorization from
the former employer for their possession and use. Executive represents that he
is not and, since the commencement of Executive's employment with the Company
has not been a party to any employment, proprietary information,
confidentiality, or noncompetition agreement with any of Executive's former
employers which remains in effect as the date hereof. The warranties set forth
in this Section 6 shall survive the expiration or termination of the other
provisions of this Agreement.
7. BREACH BY EXECUTIVE.
Both parties recognize that the services to be rendered under this
Agreement by Executive are special, unique and extraordinary in character, and
that in the event of the breach by Executive of the terms and conditions of this
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Agreement to be performed by him or in the event Executive performs services for
any person, firm or corporation engaged in a competing line of business with
Company, the Company shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, whether in law or
in equity, to, by way of illustration and not limitation, obtain damages for any
breach of this Agreement, or to enforce the specific performance thereof by
Executive, or to enjoin Executive from competing with the Company or, performing
services for himself or any such other person, firm or corporation. The Company
may obtain an injunction restraining any such breach by Executive and no bond or
other security shall be required in connection therewith. The Company and
Executive each consent to the jurisdiction of the Superior Court of the State of
New Jersey, located in Hackensack, New Jersey, and the United States Federal
District Court for the District of New Jersey.
8. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Company, its successors, and assigns and may not be assigned by Executive.
(b) This Agreement contains the entire agreement of the parties hereto and
supersedes all prior or concurrent agreements, whether oral or written, relating
to the subject matter hereof. This Agreement may be amended only by a writing
signed by the party against whom enforcement is sought.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey without regard to its conflicts of laws,
rules or principles.
(d) Any notices or other communications required or permitted hereunder
shall be in writing and shall be deemed effective when delivered in person or,
if mailed, on the date of deposit in the mails, postage prepaid, to the other
party at the respective address of such party set forth herein or to such other
address as shall have been specified in writing by either party to the other in
accordance herewith.
(e) The provisions of Sections 4(a), 4(d) and 6 and the other provisions
of this Agreement which by their terms contemplate survival of the termination
of this Agreement, shall survive termination of this Agreement and be deemed to
be independent covenants.
(f) If any term or provision of this Agreement or its application to any
person or circumstance is to any extent invalid or unenforceable, the remainder
of this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision shall be valid and
enforced to the fullest extent permitted by law.
(g) No delay or omission to exercise any right, power or remedy accruing
to any party hereto shall impair any such right, power or remedy or shall be
construed to be a waiver of or an acquiescence to any breach hereof. No waiver
of any breach of this Agreement shall be deemed to be a waiver of any other
breach of this Agreement theretofore or thereafter occurring. Any waiver of any
provision hereof shall be effective only to the extent specifically set forth in
the applicable writing. All remedies afforded under this Agreement to any party
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hereto, by law or otherwise, shall be cumulative and not alternative and shall
not preclude assertion by any party hereto of any other rights or the seeking of
any other rights or remedies against any other party hereto.
(h) It is the intent of the Company that Executive not be required to
incur any legal fees or disbursements associated with (i) the interpretation of
any provision in, or obtaining of any right or benefit under this Agreement, or
(ii) the enforcement of his rights under this Agreement, including, without
limitation by litigation or other legal action, because the cost and expense
thereof would substantially detract from the benefits to be extended to
Executive hereunder. Accordingly, the Company irrevocably authorizes Executive
from time to time to retain counsel of his choice, at the expense of the Company
as hereafter provided, to represent Executive in connection with the
interpretation and/or enforcement of this Agreement, including without
limitation the initiation or defense of any litigation or other legal action,
whether by or against the Company, or any Director, officer, stockholder, or any
other person affiliated with the Company in any jurisdiction. The Company shall
pay or cause to be paid and shall be solely responsible for any and all
attorneys' and related fees and expenses incurred by Executive under this
Section 8(h).
9. INDEMNIFICATION.
The Company agrees to indemnify Executive to the fullest extent permitted
by applicable law, as such law may be hereafter amended, modified or
supplemented and to the fullest extent permitted by each of the Company's
Restated Certificate of Incorporation and the Company's Restated By-Laws, as
from time to time amended, modified or supplemented. The Company further agrees
that Executive is entitled to the benefits of any directors and officers
liability insurance policy, in accordance with the terms and conditions of that
policy, if such a policy is maintained by the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
COMPANY
IBS INTERACTIVE, INC.
By: /s/ Nicholas R. Loglisci, Jr.
_____________________________
Name: Nicholas R. Loglisci, Jr.
Title: Chief Executive Officer
EXECUTIVE
/s/ Jeffrey E. Brenner
_____________________________
JEFFREY E. BRENNER
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IBS INTERACTIVE, INC.
DEFERRED COMPENSATION PLAN
EFFECTIVE MAY 1, 1999
PURPOSE
The purpose of the Plan is to provide specified benefits to a select
group of senior management who contribute materially to the continued growth,
development and future business success of IBS Interactive, Inc. (the
"Company"), a Delaware corporation. The Plan shall be unfunded for tax purposes
and for purposes of Title I of ERISA.
ARTICLE 1
DEFINITIONS
For purposes of the Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following meanings:
1.1 "ACCOUNT BALANCE" shall mean, with respect to a Participant, a credit on
the records of the Company equal to the sum of the Deferral Account
balance. The Account Balance, shall be a bookkeeping entry only and shall
be utilized solely as a device for the measurement and determination of
the amounts to be paid to a Participant, or his designated Beneficiary,
pursuant to the Plan.
1.2 "ANNUAL DEFERRAL AMOUNT" shall mean that portion of a Participant's
Salary or Bonus that a Participant elects to have, and is deferred, in
accordance with Article 3, for any Plan Year.
1.3 "BENEFICIARY" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to
receive benefits under the Plan upon the death of a Participant.
1.4 "BENEFICIARY DESIGNATION FORM" shall mean the form established by the
Committee for a Participant to designate one or more Beneficiaries.
1.5 "BOARD" shall mean the board of directors of the Company.
1.6 "BONUS" shall mean any bonus awarded to the Participant for services
rendered to the Company by the Participant.
1.7 "CHANGE IN CONTROL" shall be deemed to occur in the event that any of the
following circumstances have occurred:
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(a) Any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act (i) becomes the "beneficial owner",
as defined in Rule 13d-3 under the Exchange Act, of 50% or more of
the combined voting power of the Company's then outstanding
securities, otherwise than through a transaction or series of
related transactions arranged by, or consummated with the prior
approval of, the Board or (ii) acquires by proxy or otherwise the
right to vote 50% or more of the then outstanding voting
securities of the Company, otherwise than through an arrangement
or arrangements consummated with the prior approval of the Board,
for the election of directors, for any merger or consolidation of
the Company or for any other matter or question.
(b) During any period of 24 consecutive months (not including any
period prior to the adoption of this Section), Present Directors
and/or New Directors cease for any reason to constitute a majority
of the Board. For purposes of the preceding sentence, "Present
Directors" shall mean individuals who at the beginning of such
consecutive 24-month period were members of the Board and "New
Directors" shall mean any director whose election by the Board or
whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then
still in office who were Present Directors or New Directors.
(c) Consummation of (i) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation
or pursuant to which shares of Stock would be converted into cash,
securities or other property, other than a merger of the Company
in which the holders of Stock immediately prior to the merger have
the same proportion and ownership of common stock of the surviving
corporation immediately after the merger or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets
of the Company; PROVIDED, THAT, the divestiture of less than
substantially all of the assets of the Company in one transaction
or a series of related transactions, whether effected by sale,
lease, exchange, spin-off sale of the stock or merger of a
subsidiary or otherwise, shall not constitute a Change in Control.
For purposes of this Section 1.7, the rules of Section 318(a) of the Code
and the regulations issued thereunder shall be used to determine stock
ownership.
1.8 "CODE"shall mean the Internal Revenue Code of 1986, as it may be amended
from time to time.
1.9 "COMMITTEE" shall mean the Compensation Committee appointed by the Board,
or if no such committee is appointed, the full Board.
1.10 "COMPANY" shall mean IBS Interactive, Inc., a Delaware corporation, and
any successor to all or substantially all of the Company's assets or
business.
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1.11 "DEDUCTION LIMITATION" shall mean the following limitation on a benefit
that may otherwise be distributable under the Plan. Except as otherwise
provided, this limitation shall be applied to all distributions that are
subject to the Deduction Limitation. If the Company determines in good
faith prior to a Change in Control that there is a reasonable likelihood
that any compensation paid to a Participant for a taxable year of the
Company would not be deductible by the Company solely by reason of the
limitation under Code Section 162(m), then to the extent deemed necessary
by the Company to ensure that the entire amount of any distribution to
the Participant prior to the Change in Control is deductible, the Company
may defer all or any portion of a distribution under the Plan. Any
amounts deferred pursuant to this limitation shall continue to be
credited/debited with additional amounts in accordance with Section 3.5,
below, even if such amount is being paid out in installments. The amounts
so deferred and amounts credited thereon shall be distributed to the
Participant or his Beneficiary (in the event of the Participant's death)
at the earliest possible date, as determined by the Company in good
faith, on which the deductibility by the Company of compensation paid or
payable to the Participant for the taxable year of the Company during
which the distribution is made will not be limited by Code Section 162(m)
or, if earlier, the effective date of a Change in Control.
Notwithstanding anything in the Plan to the contrary, the Deduction
Limitation shall not apply to any distributions made after a Change in
Control.
1.12 "DEFERRAL ACCOUNT" shall mean (i) the sum of all of a Participant's
Annual Deferral Amounts, plus (ii) amounts credited in accordance with
the applicable crediting provisions of the Plan that relate to the
Participant's Deferral Account, less (iii) all distributions made to the
Participant or his Beneficiary pursuant to the Plan that relate to his
Deferral Account.
1.13 "DISABILITY" means a Participant's inability to engage in any substantial
gainful activity because 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 12 months or
longer. A Participant shall not be considered to be disabled hereunder
unless the Participant furnishes proof of the disability in such form and
manner, and at such times, as the Committee may require.
1.14 "DISABILITY BENEFIT" shall mean the benefit set forth in Article 8.
1.15 "ELECTION FORM" shall mean the form established from time to time by the
Committee for a Participant to elect to defer a portion of his salary
under the Plan.
1.16 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
1.17 "MONTHLY INSTALLMENTS" shall mean monthly installment payments calculated
in the following manner. Each monthly installment shall be equal to the
Participant's Account Balance as of the date of the Participant's
Retirement, death, Disability or Termination of Employment, divided by
the number of months over which the elected monthly installment payments
shall be paid. The Participant's Account Balance remaining after each
payment shall be appropriately adjusted to reflect the appreciation or
depreciation in value and the net income or loss on the funds which
remain in the Deferral Account.
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1.18 "PARTICIPANT" shall mean any employee (i) who is selected by the
Committee to participate in the Plan (ii) who signs an Election Form and
a Beneficiary Designation Form, and (iii) whose signed Election Form and
Beneficiary Designation Form are accepted by the Committee. A spouse or
former spouse of a Participant shall not be treated as a Participant in
the Plan or have an account balance under the Plan, even if he has an
interest in the Participant's benefits under the Plan as a result of
applicable law or property settlements resulting from legal separation or
divorce.
1.19 "PLAN" shall mean the IBS Interactive, Inc. Deferred Compensation Plan,
as it may be amended from time to time.
1.20 "PLAN YEAR" shall mean a period beginning on January 1 of each calendar
year and continuing through December 31 of such calendar year.
1.21 "PRE-RETIREMENT SURVIVOR BENEFIT" shall mean the benefit set forth in
Article 6.
1.22 "RETIREMENT," "RETIRE(S)" or "RETIRED" shall mean, with respect to an
Employee, severance from employment from the Company for any reason
(other than a leave of absence, death or Disability) on or after the
attainment of age sixty (60).
1.23 "RETIREMENT BENEFIT" shall mean the benefit set forth in Article 5.
1.24 "SALARY" shall mean the base salary paid to a Participant for services
performed for the Company during any Plan Year.
1.25 "SHORT-TERM PAYOUT" shall mean the payout set forth in Section 4.1.
1.26 "TERMINATION BENEFIT" shall mean the benefit set forth in Article 7.
1.27 "TERMINATION OF EMPLOYMENT" or "TERMINATES EMPLOYMENT" shall mean the
severing of employment with the Company, voluntarily or involuntarily,
for any reason other than Retirement, Disability, death or an authorized
leave absence.
1.28 "UNFORESEEABLE FINANCIAL EMERGENCY" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant that
would result in severe financial hardship to the Participant resulting
from (i) a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, (ii) a loss of the Participant's
property due to casualty, or (iii) such other extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant, all as determined in the sole discretion of
the Committee.
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ARTICLE 2
PARTICIPATION
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a
select group of senior management employees, as determined by the
Committee in its sole discretion.
2.2 ENROLLMENT REQUIREMENTS. To become a Participant, each selected employee
shall complete, execute and return to the Committee an Election Form and
a Beneficiary Designation Form within 30 days after he is selected to
participate in the Plan. In addition, the Committee may establish
additional enrollment requirements from time to time.
2.3 COMMENCEMENT OF PARTICIPATION. An employee selected under Section 2.1
shall become a Participant on the first day of the month following the
month in which the employee completes the enrollment requirements set
forth in Section 2.2. If an employee fails to meet all such requirements
within the time period required under Section 2.2, such Employee shall
not be eligible to participate in the Plan until the first day of the
Plan Year following the delivery to and acceptance by the Committee of
the required documents.
2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee
determines in good faith that a Participant no longer qualifies as a
member of a select group of senior management employees, the Committee
shall have the right in its sole discretion, to (i) terminate any
deferral election the Participant has made for the remainder of the Plan
Year in which the Participant's membership status changes, (ii) prevent
the Participant from making future deferral elections, and/or (iii)
immediately distribute the Participant's then Account Balance as a
Termination Benefit and terminate the Participant's participation in the
Plan.
ARTICLE 3
DEFERRAL COMMITMENTS/COMPANY MATCHING/CREDITING/TAXES
3.1 AMOUNT OF DEFERRAL. Except as otherwise provided in this Article 3, for
each Plan Year, a Participant may elect to defer any portion of his
Salary and/or Bonus.
3.2 ELECTION TO DEFER. For each Plan Year in which a Participant wishes to
defer a portion of his Salary and/or Bonus, the Participant must make an
irrevocable deferral election for that Plan Year. Such election shall be
made by filing an Election Form with the Committee before the end of the
Plan Year preceding the Plan Year for which the election is made. If no
such Election Form is received by the Committee for a Plan Year, the
Annual Deferral Amount shall be zero for that Plan Year.
3.3 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Annual
Deferral Amount shall be withheld from each regularly scheduled payroll
in equal amounts, as adjusted from time to time for increases and
decreases in Salary, and from Bonuses, if applicable.
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3.4 VESTING. A participant shall at all times be 100% vested in his Deferral
Account.
3.5 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject
to, the rules and procedures that are established form time to time by
the Committee, in its sole discretion, amounts shall be credited or
debited to a Participant's Account Balance in accordance with the
following rules:
(a) ELECTION OF INVESTMENT. A Participant shall elect, on the Election
Form, one or more investment vehicles ("Investments") as a basis
to determine the additional amounts to be credited or debited to
his Account Balance. The Participant shall specify the percentage
of his Account Balance to be allocated to each Investment. The
Participant may change his Investment election at such intervals
and by such means as the Committee shall designate.
(b) CREDITING OR DEBITING METHOD. A Participant's Account Balance
shall be credited or debited on a daily basis based on the
performance of each Investment selected by the Participant, as
determined by the Committee in its sole discretion, as though the
Participant's Account Balance were invested in the Investments
selected by the Participant.
(c) NO ACTUAL INVESTMENT. Investments are to be used for measurement
purposes only, and a Participant's election of any such
Investment, the allocation to his Account Balance thereto, the
calculation of additional amounts and the crediting or debiting of
such amounts to Participant's Account Balance shall not be
considered or construed in any manner as an actual investment of
his Account Balance in any such Investment. If the Company, in its
discretion, invests funds in any or all of the Investment(s), no
Participant shall have any rights in or to such Investments.
Without limiting the foregoing, a Participant's Account Balance
shall at all times be a bookkeeping entry only and shall not
represent any investment made on his behalf by the Company, and
the Participant shall at all times remain an unsecured creditor of
the Company.
3.6 FICA AND OTHER TAXES. For each Plan Year in which an Annual Deferral
Amount is being withheld from a Participant, the Company shall withhold
from that portion of the Participant's Salary and/or Bonus that is not
being deferred, in a manner determined by the Company, the Participant's
share of FICA and other employment taxes attributable to such Annual
Deferral Amount. If necessary, the Committee may reduce the Annual
Deferral Amount in order to comply with this Section 3.6.
3.7 DISTRIBUTIONS. The Company shall withhold from any payments made to a
Participant hereunder all federal, state and local income, employment and
other taxes required to be withheld by the Company, in connection with
such payments, in amounts and in a manner to be determined in the sole
discretion of the Company.
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ARTICLE 4
SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES
4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual
Deferral Amount, a Participant may irrevocably elect to receive a future
"Short-Term Payout" from the Plan with respect to such Annual Deferral
Amount. Subject to the Deduction Limitation, the Short-Term Payout shall
be a lump sum payment in an amount equal to the Annual Deferral Amount
plus amounts credited or debited in the manner provided in Section 3.5,
determined at the time that the Short-Term Payout becomes payable (rather
than the date of a Termination of Employment). Subject to the Deduction
Limitation and the other terms and conditions of the Plan, each
Short-Term Payout elected shall be distributed within 60 days after the
first day of any Plan Year designated by the Participant that is at least
five Plan Years after the Plan Year in which the Annual Deferral Amount
is actually deferred. For example, if a five year Short-Term Payout is
elected for Annual Deferral Amounts that are deferred in the Plan Year
commencing January 1, 2000, the five-year Short-Term Payout would become
payable during a 60-day period commencing January 1, 2005.
4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM. Should an event occur
that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral
Amount, plus amounts credited or debited thereon, that is subject to a
Short-Term Payout election under Section 4.1 shall not be paid in
accordance with Section 4.1 but shall be paid in accordance with the
other applicable Article.
4.3 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If
the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to (i) suspend any deferrals
required to be made by a Participant and/or (ii) receive a partial or
full payout from the Plan. The payout shall not exceed the lesser of the
Participant's Account Balance, calculated as if such Participant were
receiving a Termination Benefit, or the amount reasonably needed to
satisfy the Unforeseeable Financial Emergency. If, subject to the sole
discretion of the Committee, the petition for a suspension and/or payout
is approved, the suspension shall take effect upon the date of approval
and any payout shall be made within 60 days of the date of approval. The
payment of any amount under this Section 4.3 shall not be subject to the
Deduction Limitation.
ARTICLE 5
RETIREMENT BENEFIT
5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant
who Retires shall receive, as a Retirement Benefit, his Account Balance.
5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his
commencement of participation in the Plan, shall elect on an Election
Form to receive the Retirement Benefit in a lump sum or in Monthly
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Installments over a period of 24 to 120 months (as specified in the
Election Form). The Participant may change his payment election annually
by submitting a new Election Form to the Committee, provided that any
such Election Form is submitted at least one year prior to the
Participant's Retirement and is accepted by the Committee in its sole
discretion. The Election Form most recently accepted by the Committee
shall govern the payout of the Retirement Benefit. If a Participant does
not make any election with respect to the payment of the Retirement
Benefit, then such benefit shall be payable in a lump sum. Payments shall
begin within 60 days of the date the Participant Retires. Any payment
made shall be subject to the Deduction Limitation.
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant dies
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and shall
be paid to the Participant's Beneficiary (a) over the remaining number of
years and in the same amounts as that benefit would have been paid to the
Participant had the Participant survived, or (b) in a lump sum, if
requested by the Beneficiary and allowed in the sole discretion of the
Committee, equal to the Participant's unpaid remaining Account Balance.
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation, the
Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit
equal to the Participant's Account Balance if the Participant dies before
he Retires, Terminates Employment, or suffers a Disability.
6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. A Participant, in connection
with his commencement of participation in the Plan, shall elect on an
Election Form whether the Pre-Retirement Survivor Benefit shall be
distributed to his Beneficiary in a lump sum or in Monthly Installments
over a period of 24 to 120 months (as specified in the Election Form).
The Participant may annually change this election to an allowable
alternative payout period by submitting a new Election Form to the
Committee, which form must be accepted by the Committee in its sole
discretion. The Election Form most recently accepted by the Committee
prior to the Participant's death shall govern the payout of the
Participant's Pre-Retirement Survivor Benefit. If a Participant does not
make any election with respect to the payment of the Pre-Retirement
Survivor Benefit, then such benefit shall be paid in a lump sum. Payment
to the Beneficiary shall begin within 60 days after the date on which the
Committee is provided with satisfactory proof of the Participant's death.
Any such payments shall be subject to the Deduction Limitation.
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ARTICLE 7
TERMINATION BENEFIT
7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the Participant
shall receive a Termination Benefit equal to the Participant's Account
Balance if a Participant Terminates Employment prior to his Retirement,
death or Disability.
7.2 PAYMENT OF TERMINATION BENEFIT. A Participant, in connection with his
commencement of participation in the Plan, shall elect on an Election
Form to receive the Termination Benefit in a lump sum or in Monthly
Installments over a period of 24 to 120 months (as specified in the
Election Form). The Participant may change his payment election annually
by submitting a new Election Form to the Committee, provided that any
such Election Form is submitted at least one year prior to the
Participant's Termination of Employment and is accepted by the Committee
in its sole discretion. The Election Form most recently accepted by the
Committee shall govern the payout of the Termination Benefit.
Notwithstanding the foregoing, if a Participant does not make any
election with respect to the payment of the Termination Benefit or if the
Participant's Account Balance on the date he Terminates Employment is
less than $25,000, the Termination Benefit shall be paid in a lump sum.
Payment of the Termination Benefit shall begin within 60 days after the
Participant Terminates Employment and shall be subject to the Deduction
Limitation.
ARTICLE 8
DISABILITY WAIVER AND BENEFIT
8.1 DISABILITY WAIVER.
(a) WAIVER OF DEFERRAL. A Participant who is determined by the
Committee to be suffering from a Disability shall be excused from
fulfilling that portion of the Annual Deferral Amount commitment
that would otherwise have been withheld from a Participant's
Salary or Bonus for the Plan Year during which the Participant
first suffers a Disability. During the period of Disability, the
Participant shall not be allowed to make any additional deferral
elections, but will continue to be considered a Participant for
all other purposes of the Plan.
(b) RETURN TO WORK. If a Participant returns to employment after a
Disability ceases, the Participant may elect to defer an Annual
Deferral Amount for the Plan Year following his return to
employment or service and for every Plan Year thereafter while a
Participant; provided such deferral elections are otherwise
allowed and an Election Form is delivered to, and accepted by, the
Committee for each such election in accordance with Article 3.
8.2 CONTINUED ELIGIBILITY: DISABILITY BENEFIT. A Participant suffering a
Disability shall continue to be eligible for the benefits provided for in
Articles 4, 5, 6 or 7 in accordance with the provisions of those
9
<PAGE>
Articles. Notwithstanding the above, the Committee shall, in the case of
a Participant who is otherwise eligible to Retire, deem the Participant
to have Retired as soon as practicable after such Participant is
determined to be suffering a Disability, in which case the Participant
shall be paid a Retirement Benefit in accordance with Article 5. In the
case of a Participant who is not otherwise eligible to Retire, the
Committee may, in its sole discretion, deem the Participant to have
Terminated Employment at any time after such Participant is determined to
be suffering from a Disability, in which case such Participant shall
receive a Termination Benefit equal to his Account Balance on the date of
the deemed Termination of Employment. The Termination Benefit shall be
paid in accordance with Section 7.2 as if the deemed Termination of
Employment was an actual Termination of Employment.
ARTICLE 9
BENEFICIARY DESIGNATION
9.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his Beneficiary(ies) to receive any benefits payable under the
Plan to a Beneficiary upon the death of a Participant.
9.2 BENEFICIARY DESIGNATION CHANGE. A Participant shall designate his
Beneficiary by completing and signing the Beneficiary Designation Form,
and returning it to the Committee or its designated agent. A Participant
shall have the right to change a Beneficiary by submitting a new
Beneficiary Designation Form under Committee's rules and procedures, as
in effect from time to time. Upon the acceptance by the Committee of a
new Beneficiary Designation Form, all Beneficiary designations previously
filed shall be canceled. The Committee shall be entitled to rely on the
last Beneficiary Designation Form accepted by the Committee prior to his
death.
9.3 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 9.1 and 9.2 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's surviving spouse shall be deemed to be his designated
Beneficiary. If the Participant has no surviving spouse, the benefits
remaining under the Plan to be paid to a Beneficiary shall be payable to
the Participant's estate.
9.4 DISCHARGE OF OBLIGATIONS. The payment of benefits hereunder to a
Beneficiary shall fully and completely discharge the Company and the
Committee from all further obligations under the Plan with respect to the
Participant.
ARTICLE 10
TERMINATION, AMENDMENT OR MODIFICATION
10.1 TERMINATION. Although the Company anticipates that it will continue the
Plan for an indefinite period of time, the Company reserves the right to
terminate the Plan at any time with respect to any or all Participants,
10
<PAGE>
by action of the Board. Upon the termination of the Plan, the Account
Balances of the affected Participants (determined as if they had
Terminated Employment on the termination date of the Plan or, if the Plan
is terminated after a Participant was eligible to Retire, then as if the
Participant had Retired on the termination date of the Plan) shall be
paid to the Participants as follows. If the Plan is terminated prior to a
Change in Control, the Company may, in its sole discretion and
notwithstanding any elections made by the Participant, pay such benefits
in a lump sum or in annual installments of up to 10 years, with amounts
credited and debited during the installment period as provided herein. If
the Plan is terminated after a Change in Control, the Company shall pay
such benefits in a lump sum as soon as practicable after such
termination. The termination of the Plan shall not adversely affect any
Participant or Beneficiary who has become entitled to the payment of any
benefits under the Plan as of the date of termination; provided, however,
that the Company may accelerate installment payments by paying the
Account Balance in a lump sum or in fewer Monthly Installments.
10.2 AMENDMENT. The Company may, at any time, amend or modify the Plan, in
whole or in part, by action of the Board; provided, however, that no
amendment or modification shall decrease or restrict the value of a
Participant's Account Balance or affect any Participant or Beneficiary
who has become entitled to the payment of benefits under the Plan as of
the date of the amendment or modification; provided, however, that the
Company may accelerate installment payments by paying the Account Balance
in a lump sum or in fewer Monthly Installments.
10.3 EFFECT OF PAYMENT. The full payment of the applicable benefit under
Articles 4, 5, 6, 7, 8 shall completely discharge all obligations to a
Participant and his designated Beneficiaries under the Plan.
ARTICLE 11
ADMINISTRATION
11.1 COMMITTEE DUTIES. The Plan shall be administered by the Committee.
Members of the Committee may be Participants. The Committee shall have
the discretion and authority to (i) make, amend, interpret, and enforce
all appropriate rules and regulations for the administration of the Plan
and (ii) decide or resolve any and all questions including
interpretations of the Plan, as may arise in connection with the Plan.
Any individual serving on the Committee who is a Participant shall not
vote or act on any matter relating solely to himself. When making a
determination or calculation, the Committee shall be entitled to rely on
information furnished by a Participant or the Company.
11.2 AGENTS. In the administration of the Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties as
it sees fit (including acting through a duly appointed representative)
and may from time to time consult with counsel who may be counsel to the
Company.
11
<PAGE>
11.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
11.4 INDEMNITY OF COMMITTEE. The Company shall indemnify and hold harmless the
members of the Committee, and any employee to whom the duties of the
Committee may be delegated, against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with
respect to the Plan, except in the case of willful misconduct by the
Committee or any of its members or any such employee.
11.5 COMPANY INFORMATION. To enable the Committee to perform its functions,
the Company shall supply full and timely information to the Committee on
all matters relating to the compensation of its Participants, the date
and circumstances of the Retirement, Disability, death or Termination of
Employment, and such other pertinent information as the Committee may
reasonably require.
ARTICLE 12
OTHER BENEFITS AND AGREEMENTS
12.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant
and Participant's Beneficiary hereunder are in addition to any other
benefits available to such Participant under any other plan or program
for employees of the Company. The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.
ARTICLE 13
CLAIMS PROCEDURES
13.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (a "Claimant") may deliver to the Committee a written claim
for benefits under the Plan. All claims must be filed within 180 days of
the date on which the event that caused the claim to arise occurred. The
claim must specify the determination desired by the Claimant.
13.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the Claimant in writing of its
decision on a claim. If the claim is denied, in whole or in part, such
notice must set forth, in a manner calculated to be understood by the
Claimant: (i) the specific reason(s) for the denial of the claim; (ii)
specific reference(s) to pertinent provisions of the Plan upon which such
denial was based; (iii) a description of any additional material or
information necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary; and (iv) an
explanation of the claim review procedure set forth in Section 13.3.
12
<PAGE>
13.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant's duly authorized representative) may file with
the Committee a written request for a review of the denial of the claim.
Thereafter, but not later than 30 days after the review procedure began,
the Claimant (or the Claimant's duly authorized representative) may: (i)
review pertinent documents; (ii) submit written comments or other
documents; and/or (iii) request a hearing, which the Committee, in its
sole discretion, may grant.
13.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood by
the Claimant, and it must contain: (i) specific reasons for the decision;
(ii) specific reference(s) to the pertinent Plan provisions upon which
the decision was based; and (iii) such other matters as the Committee
deems relevant.
ARTICLE 14
MISCELLANEOUS
14.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified
within the meaning of Code Section 401(a) and that is unfunded and is
maintained by the Company primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees within the meaning of ERISA Sections 201(2), 302(a)(3) and
401(a)(1). The Plan shall be administered and interpreted to the extent
possible in a manner consistent with that intent.
14.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of the Company. For purposes of the
payment of benefits hereunder, any and all of the Company's assets shall
be, and remain, the general, unpledged unrestricted assets of the
Company. The Company's obligation under the Plan shall be merely that of
an unfunded and unsecured promise to pay money in the future.
14.3 COMPANY'S LIABILITY. The Company's liability for the payment of benefits
shall be defined only by the Plan and the Election Form signed by the
Company and a Participant. The Company shall have no obligation to a
Participant under the Plan except as expressly provided in the Plan.
14.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate, alienate or convey
in advance of actual receipt, the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are expressly
declared to be, unassignable and non-transferable. No part of the amounts
payable shall, prior to actual payment, be (i) subject to seizure,
13
<PAGE>
attachment, garnishment or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any
other person, (ii) transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency, or (iii)
transferable to a spouse as a result of a property settlement or
otherwise.
14.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of the Plan shall
not be deemed to constitute a contract of employment between the Company
and the Participant. Nothing in the Plan shall be deemed to give a
Participant the right to be retained in the service of the Company as an
employee, or to interfere with the right of the Company to discipline or
discharge the Participant at any time.
14.6 FURNISHING INFORMATION. A Participant or his Beneficiary will cooperate
with the Committee by furnishing any and all information requested by the
Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of benefits
hereunder, including but not limited to taking such physical examinations
as the Committee may deem necessary.
14.7 GOVERNING LAW. Subject to ERISA, the provisions of the Plan shall be
construed and interpreted according to the internal laws of the State of
New Jersey without regard to its conflicts of laws principles.
14.8 NOTICE. Any notice or filing required or permitted to be given to the
Committee under the Plan shall be sufficient if in writing and
hand-delivered, or sent by registered certified mail, to the address
below:
IBS Interactive, Inc.
Compensation Committee
2 Ridgedale Avenue, Suite 350
Cedar Knolls, New Jersey 07927
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant
under the Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Participant.
14.9 SUCCESSORS. The provisions of the Plan shall bind and inure to the
benefit of the Company and its successors and assigns and the Participant
and the Participant's Beneficiaries.
14.10 VALIDITY. In case any provision of the Plan shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the
remaining parts hereof; and the Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
14
<PAGE>
14.11 INCOMPETENT. If the Committee determines in its discretion that a benefit
under the Plan is to be paid to a minor, a person declared incompetent or
to a person incapable of handling the disposition of that person's
property, the Committee may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of
such minor, incompetent or incapable person. The Committee may require
proof of minority, incompetence, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant's Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.
14.12 COURT ORDER. The Committee is authorized to make any payments directed by
court order in any action in which the Plan or the Committee has been
named as a party. In addition, if a court determines that a spouse or
former spouse of a Participant has an interest in the Participant's
benefits under the Plan in connection with a property settlement or
otherwise, the Committee, in its sole discretion, shall have the right,
notwithstanding any election made by a Participant, to immediately
distribute the spouse's or former spouse's interest in the Participant's
benefits under the Plan to that spouse or former spouse.
14.13 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any
portion of Participant's benefits under the Plan becomes taxable to the
Participant prior to receipt, a Participant may petition the Committee
for a distribution of such taxable portion. Upon the grant of such a
petition, which grant shall not be unreasonably withheld (and which,
after a Change in Control, shall be granted), the Company shall
distribute to the Participant immediately available funds in an amount
equal to the taxable portion of his benefit (which amount shall not
exceed a Participant's unpaid Account Balance under the Plan). If the
petition is granted, the tax liability distribution shall be made within
90 days of the date when the Participant's petition is granted. Such a
distribution shall affect and reduce the benefits to be paid under the
Plan.
14.14 LEGAL FEES TO ENFORCE RIGHTS. It is the intent of the Company that a
Participant not be required to incur any legal fees or disbursements
associated with (i) the interpretation of any provision in, or obtaining
of any right or benefit under the Plan, or (ii) the enforcement of his
rights under the Plan, including without limitation the initiation or
defense of any litigation or other legal action, because the cost and
expense thereof would substantially detract from the benefits extended to
the Participant hereunder. Accordingly, if it should appear to any
Participant that the Company, or any successor corporation has failed to
comply with any of its obligations under the Plan or any agreement
thereunder or, if the Company, or any other person takes any action to
declare the Plan void or unenforceable or institutes any litigation or
other legal action designed to deny, diminish or to recover from any
Participant the benefits intended to be provided, then the Company
irrevocably authorizes such Participant to retain counsel of his choice
at the expense of the Company to represent such Participant in connection
with the initiation or defense of any litigation or other legal action,
whether by or against the Company, or any director, officer, shareholder
or other person affiliated with the Company, or any successor thereto in
any jurisdiction.
15
<PAGE>
IN WITNESS WHEREOF, the Company has signed the Plan document as of
May 1, 1999.
IBS Interactive, Inc.
By: /s/ Nicholas R. Loglisci, Jr.
______________________________________
Title: Chief Executive Officer
___________________________________
16
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AND UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS OF IBS INTERACTIVE, INC. FOR THE PERIOD
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<INCOME-PRETAX> (1,520)
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