<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
_______________
MARCH 24, 1999
Date of Report
INTERACTIVE OBJECTS, INC.
Former name of small business issuer
_______________
STATE OF WASHINGTON 0-25373 87-0434226
State or Other Jurisdiction of Commission File IRS Employer
Incorporation or Organization Number Identification Number
217 PINE STREET, SUITE 800
Seattle, WA 98101
Address of Principal Executive Offices
(206) 464-1008
Issuer Telephone Number
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ITEM 5. OTHER EVENTS
On March 4, 1999 Interactive Objects, Inc., a Washington corporation (the
"Company"), entered into Mutual Release and Settlement Agreements (the
"Settlement Agreements") with each of Ryan Smith, one of the Company's founders
and a former director and Chief Executive Officer ("Smith"), and John Guarino, a
founder and former director and officer of the Company ("Guarino"). The
Settlement Agreements were entered into to resolve all disputes between Smith
and Guarino, on the one hand, and the Company, Northwest Capital Partners, LLC
("Northwest Capital") and certain officers and shareholders of the Company named
therein (together with Northwest Capital, the "Other Parties"), on the other
hand.
The Settlement Agreements provide that each of Smith and Guarino
unconditionally and irrevocably release the Company and the Other Parties from
any and all claims and liability arising out of Smith or Guarino's employment,
their respective employment agreements and the conduct of the Company and the
Other Parties through the date of Smith or Guarino's, as applicable,
resignation. In return, the Company and the Other Parties unconditionally and
irrevocably agreed to release Smith and Guarino from all claims and liability
arising out of their respective employment agreements and their management,
whether as officer, director or shareholder, of the Company prior to their
respective dates of resignation.
Notwithstanding the foregoing, the Settlement Agreements expressly provide
that the above releases do not apply to certain provisions of each of Smith and
Guarino's employment agreements relating to indemnification, confidentiality,
nonraiding, noncompetition and assignment of inventions. In addition, pursuant
to the Settlement Agreements, each of Smith and Guarino have retained all their
rights of indemnity and/or contribution as provided for in the Company's
organizational documents and under applicable law. Smith and Guarino also
retain their respective insurance coverage under the Company's directors and
officers' insurance policy. Each Settlement Agreement further provides that the
Company and Northwest Capital shall irrevocably waive any rights of first
refusal on any shares of the Company's stock owned by Smith or Guarino.
Pursuant to the Company's Settlement Agreement with Smith, Smith has
granted to the Company or its assignee options (the "Smith Options"), to
purchase all 1,680,800 shares of the Company owned by Smith, at an exercise
price of $0.50 per share. Pursuant to the terms of the Smith Options, the
Company has irrevocably agreed to acquire 550,000 of Smith's shares by payment
of $275,000 to Smith.
After giving effect to the foregoing purchase, Smith's remaining 1,130,800
shares in the Company will be placed in escrow and released upon expiration of
the option periods with respect thereto. Commencing on October 15, 1999, and
every three months thereafter (each such date, an "Option Date"), an aggregate
of 226,160 shares, less any shares theretofore purchased by the Company or its
assignee, will be released from the escrow and returned to Smith. Shares may be
purchased from escrow by payment by the Company or its assignee, on or prior to
the applicable Option Date, of the exercise price therefore into an escrow
account. Shares not acquired by the Company or its assignee and released from
escrow will be tradable by Smith, subject to applicable securities laws and a
maximum limit of 5,000 shares per day. Mr. Smith has given his proxy to each of
the current directors of the Company to vote the shares while the shares are in
escrow.
The Company's Settlement Agreement with Guarino contains a similar option
whereby the Company or its assignee has been granted options (the "Guarino
Options") to acquire up to 900,000
2
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shares of the Company's stock owned by Guarino, which shares represent seventy-
five percent (75%) of the shares of the Company owned by Guarino. The Company
has irrevocable agreed to purchase 400,000 of the shares at a price of $0.50 per
share, or $200,000. The remaining 500,000 shares will be placed in escrow by Mr.
Guarino and will be released upon expiration of the option periods with respect
thereto. Mr. Guarino has given his proxy to each of the current directors of the
Company to vote the shares while the shares are in escrow.
Commencing on October 15, 1999, and every Option Date thereafter, an
aggregate of 100,000 shares, less any shares theretofore purchased by the
Company or its assignee, will be released from escrow and returned to Guarino.
Shares may be purchased from escrow by payment by the Company or its assignee,
on or prior to the applicable Option Date, of the exercise price therefor into
an escrow account. Shares not acquired by the Company or its assignee and
released from escrow will be freely tradable by Guarino, subject to applicable
securities laws and a limit of 5,000 shares per day.
Guarino has agreed not to sell any of the remaining 300,000 shares of the
Company which he owns until October 15, 2000. However, for each Option Period
in which the Company or its assignee does not exercise its Guarino Option in
full, in addition to those shares released from escrow on such date, an
additional 100,000 of the 300,000 shares not subject to the Guarino Option shall
be freely tradable by Guarino, subject to applicable securities laws and the
5,000 shares per day maximum limit described above.
ITEM 7(c). EXHIBITS
Exhibit
Number Description
- -------- ------------------------------------------------------------------
10.1 Mutual Release and Settlement Agreement dated March 4, 1999 by and
among Interactive Objects, Inc., Ryan Smith and the other
signatories thereto.
10.2 Mutual Release and Settlement Agreement dated March 4, 1999 by and
among Interactive Objects, Inc., John Guarino and the other
signatories thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 24, 1999.
Interactive Objects, Inc.
By: /s/ STEVEN G. WOLLACH
---------------------
Steven G. Wollach
President and Chief Financial Officer
3
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EXHIBIT 10.1
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
The parties to this Mutual Release and Settlement Agreement ("Agreement")
are Ryan Smith ("Smith"), Interactive Objects, Inc. ("IO"), Northwest Capital
Partners, LLC ("Northwest Capital"), Steve Wollach ("Wollach"), Thad Wardall
("Wardall") and Brent Nelson ("Nelson") (Northwest Capital, Wollach, Wardall and
Nelson are sometimes referred to as "the other parties to this Agreement"). The
intent of this Agreement is to resolve all disputes between Smith, on the one
hand, and IO and the other parties to this Agreement, on the other, pertaining
in any way to (a) Smith's employment at Interactive Objects; (b) Smith's
Executive Employment Agreement dated January 1, 1998, as amended July 1, 1998
(the "Employment Agreement"), (c) Smith's service as CEO and a director of IO,
(d) Smith's relations with IO and the other parties to this Agreement, and such
parties' relations with Smith, and (e) any claims or rights Smith or the other
parties to this Agreement may have individually, as shareholders, as
shareholders on behalf of IO, or as officers, directors, employees or agents of
IO, from the beginning of the involvement of each with IO (and any
predecessor(s) of IO) to the date of Smith's resignation from his positions in
management of IO on or about October 8, 1998.
RECITATIONS
WHEREAS Smith is a founder of IO (or its predecessor(s)), who served as CEO
and a member of IO's Board of Directors from its inception to October 8, 1998;
and
WHEREAS Smith owns 1,680,800 shares of common stock of IO, as well as
options to purchase an additional 50,000 shares as reflected more particularly
in the Minutes of Board meetings and financial statements of IO; and
WHEREAS Smith and IO entered into the Employment Agreement on or about
January 1, 1998, as amended July 1, 1998; and
WHEREAS Smith resigned from his positions as an officer and director of IO
on or about October 8, 1998, such resignations having been accepted by IO on the
same date; and
WHEREAS the other parties to this Agreement are or have been involved from
time to time in the management of IO as officers and directors or are otherwise
involved as investors or substantial shareholders; and
WHEREAS disputes have arisen between Smith, on the one hand, and IO and the
other parties to this Agreement, on the other, regarding matters of
compensation, management and direction; and
WHEREAS Smith, on the one hand, and IO and the other parties to this
Agreement, on the other, wish to resolve their differences and settle their
disputes upon the terms and conditions hereafter set forth,
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. OPTIONS TO PURCHASE STOCK. Smith, with respect to his 1,680,800 shares
of IO, will provide IO and/or its assignee options for the purchase of up to
100% of such shares, and any shares related and/or arising therefrom by stock
split or stock dividend or otherwise, in the manner and at the times set forth
on the schedule attached hereto. The first option, the exercise of which is
irrevocably committed, is for 550,000 shares at $.50 per share for a total
option payment of $275,000. Subsequent options will be for 226,160 shares each
at $.50 per share and shall be exercised by the payment of cash into escrow, as
prescribed hereafter, on or before the exercise dates set forth in the attached
schedule. IO and/or its assignee may exercise/purchase all or a portion of the
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shares covered by each subsequent option. In the event any such subsequent
option is not exercised or not completely exercised by a purchase of all shares
covered by the option on or before its appointed date, then the option, to the
extent shares remain that were not purchased, shall be deemed to have expired,
and the remaining shares represented by such option shall be immediately
returned to Smith. The total value of the options is $840,400, including the
initial committed option payment of $275,000.
2. ESCROW. IO and Smith agree to share the expense, and will open an
agreed escrow into which will be deposited all of Smith's shareholdings in IO
and $275,000 cash representing the initial committed option payment, such
deposits to be made within seven (7) days from the date of execution of this
Agreement. The escrowee will be instructed to release 550,000 of Smith's shares
as directed by IO, but no later than twenty (20) days from the date of execution
of this Agreement and simultaneously with the release of such shares, the
escrowee shall release $275,000 to Smith. In the event no direction is received
from IO, within such twenty (20) days, the escrowee shall nonetheless release
$275,000 to Smith and shall then retain the shares represented by such payment
pending receipt of direction from IO. Any interest earned on escrowed funds
shall be for the account of IO. Smith shall cooperate with IO, in assuring that
escrowed shares can be released by the escrowee in appropriate numbers
represented by appropriate certificates on timely payment of the option amounts.
Smith agrees to execute any and all documentation necessary directed to either
the escrowee and/or the transferring agent to effectuate transfers contemplated
hereunder. Such documentation will include but not be limited to any necessary
medallion guarantees. In the event that any subsequent option (after the
initial committed option or portion thereof) is not timely exercised and
expires, then the remaining unpurchased shares represented by that option shall
be immediately returned to Smith, with shares represented by any unexpired
options to remain in escrow pending either timely exercise or return to Smith as
the case may be.
3. EXPIRED OPTIONS. Excepting the initial option, execution of which is
irrevocably committed, if any subsequent option is not timely exercised in the
manner described above, and the shares represented by such option or a portion
thereof are returned to Smith, any such returned shares shall be returned in
freely tradable form, subject only to applicable rules and regulations of the
SEC or other agency with jurisdiction, and subject further to Smith's agreement
that he will not, without the permission of IO, endeavor to sell any such
returned shares at a rate greater than 5,000 shares per day. IO shall cooperate
fully in assuring that any returned shares are freely tradable.
4. SMITH'S OPTIONS. Smith shall retain any and all options he may have
received to purchase shares of IO, based upon the rules and regulations of the
stock option plan of IO. It is the intent of the parties that Smith's options
shall not be affected by this Agreement. Nothing in this Agreement shall be
interpreted or construed as expanding or modifying Smith's option rights.
5. RIGHTS OF FIRST REFUSAL RELEASED. IO and Northwest Capital may have
certain rights of first refusal with respect to the shares owned by Smith and
optioned pursuant to this Agreement. IO and Northwest Capital hereby relinquish
any and all such rights of first refusal.
6. PARTIAL PAYMENT OF COSTS. Upon execution of this Agreement, Perkins
Coie shall invoice IO for the sum of $16,000 for costs and fees. IO agrees to
pay Perkins Coie said sum within seven (7) days of the date of receiving said
invoice.
7. VOTING RIGHTS DURING ESCROW. Smith assigns to Steve Wollach and/or
Brent Nelson and/or Thad Wardall the proxy to vote all of his escrowed shares.
Wollach, Nelson, and/or Wardall agree to vote said shares as directed by the
Board of Directors of IO. This proxy is coupled with an interest in said shares.
Notwithstanding the above, this proxy shall not be exercised in favor of any
proposal which would treat Smith, as a shareholder, less favorably than would be
treated any other director or officer of IO who is also a shareholder.
8. ASSIGNABILITY. The options provided for herein shall be assignable by
the company, provided, however, that the shares represented by such options will
only be released on timely receipt of option payments, as specified herein, or
shall be promptly returned to Smith on expiration of relevant option periods.
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9. SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS. Notwithstanding the mutual
releases set forth below, it is the parties' intent that certain provisions of
the Employment Agreement, as well as certain other rights and obligations, shall
survive this Agreement. These provisions of the Employment Agreement are [_] 11
(Indemnification) and [_] 12 (Invention, Confidentiality, Nonraiding and
Noncompetition Agreement). In addition to the survival of such provisions,
Smith shall retain all other rights of indemnity and/or contribution as may be
provided for in corporate documents, resolutions and minutes, as well as any and
all rights of indemnity and/or contribution allowed under applicable law. Smith
shall also retain, unimpaired by this Agreement, his interest in and right to
insurance coverage under all applicable D&O insurance policies, consistent with
the terms and conditions of such D&O policies. Nothing in this Agreement shall
be construed as requiring the company to continue the coverage if the company is
unable to do so; provided however, that Smith's interest in and right to
coverage shall be no less favorable than that of any other director or officer
of IO; and provided further that Smith shall receive timely advance notice of
any decision affecting his coverage and the opportunity to purchase tail
coverage if available.
10. MUTUAL RELEASES. The parties intend that their releases be mutual.
(a) SMITH'S RELEASE. In consideration of the initial option payment,
---------------
and the mutual promises set forth in this Agreement, and upon receipt by Smith
of such initial option payment Smith unconditionally and irrevocably releases
and discharges IO and the other parties to this Agreement, their respective
marital communities, affiliates, former affiliates, predecessors, successors,
assigns and any person claiming an interest through or under any of them (and
the respective directors, officers, partners, employees, agents and
representatives of any of the foregoing) from
(i) any and all actions, claims, demands, causes of action,
arbitrations, disputes or controversies, whether based on contract, tort,
statute or otherwise, and
(ii) any direct or indirect liability (whether absolute, accrued
or unaccrued, contingent, liquidated or unliquidated, matured or
unmatured), indebtedness, obligation, expense or loss, known or unknown,
arising out of relating to or resulting from, directly or indirectly, (A)
Smith's employment at IO and/or (B) his employment at IO and/or (C) the
Employment Agreement and/or (C) such parties' management of or relations with IO
or with Smith whether in their capacities as officers, directors or shareholders
from the date any such management or relations commenced to the date of Smith's
resignation as an officer and director of IO on or about October 8, 1998.
Except as set forth in this Agreement, the release given hereunder is intended
to be a general release. Except as set forth in this Agreement, the release
given hereunder is intended to be a general release. This Agreement shall not
affect or impair, however, the rights or obligations of the parties under this
Agreement, or Smith's rights as a shareholder of IO, following October 8, 1998.
(b) IO AND THE OTHER PARTIES' RELEASE. In consideration of the
---------------------------------
options provided for herein, and the mutual promises set forth in this
Agreement, IO and the other parties to this Agreement unconditionally and
irrevocably release and discharge Smith, his marital community, successors and
assigns, and any person claiming an interest through or under Smith from
(i) any and all actions, claims, demands, causes of action,
arbitrations, disputes or controversies, whether based on contract, tort,
statute or otherwise, and
(ii) any direct or indirect liability (whether absolute, accrued
or unaccrued, contingent, liquidated or unliquidated, matured or
unmatured), indebtedness, obligation, expense or loss, known or unknown,
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arising out of relating to or resulting from, directly or indirectly, (A)
Smith's employment at IO and/or (B) the Employment Agreement, and/or (C) Smith's
management of or relations with IO or the other parties to this Agreement
whether in his capacity as officer, director or shareholder from the date any
such management or relations commenced to the date of Smith's resignation as an
officer and director of IO on or about October 8, 1998. Except as set forth in
this Agreement, the release given hereunder is intended to be a general release.
This Agreement shall not affect or impair, however, the rights or obligations of
the parties under this Agreement or Smith's rights as a shareholder of IO,
following October 8, 1998.
(c) All parties to this Agreement expressly understand and acknowledge
that unknown losses or claims may exist with respect to the releases
contemplated by this Section 10(a) and (b), that present claims or interests may
have been underestimated in amount or severity, and that they explicitly took
that into account in determining the amount of consideration to be received
hereunder, and that a portion of such consideration, having been bargained for
among the parties with the knowledge of the possibility of such unknown losses
or claims, was given in exchange for a full accord, satisfaction and discharge
of all such losses or claims.
(d) Neither Smith, nor IO, nor the other parties to this Agreement
will bring, commence, institute or prosecute in the name of that person,
individually as shareholder, in a corporate capacity or in the name of the
corporation or any other person, any action, claim, demand, cause of action,
suit, arbitration, dispute or controversy based in whole or in part upon any
fact or event to be released herein, whether known or unknown. This Section
10(d) may be pleaded as a full and complete defense to, and may be used as a
basis for injunctive relief against any action, claim, demand, cause of action,
suit, arbitration, dispute or controversy which may be instituted, prosecuted or
attempted in breach of this Section 10(d). None of the parties hereto will
enter into any arrangement or understanding with any third party with respect to
the foregoing or any discussions designed to advise, assist or encourage any
third party in connection with the foregoing.
11. CONFIDENTIALITY. Except as provided, the terms and conditions of this
Agreement, and the disputes addressed herein, shall be and remain confidential
and shall not be disclosed to any third party except on a need-to-know basis,
i.e., attorneys, accountants, and the like, and except to the SEC or other
regulatory authorities as required by law. If anyone asks, the parties agree
that they will only state that any disputes between Smith on the one hand and IO
and the other parties hereto on the other have been satisfactorily resolved.
Notwithstanding the foregoing, IO is authorized to disclose to former IO
principal Jay Paulson and his attorney(s) the terms of this Agreement (including
a copy of this Agreement) providing that Mr. Paulson and his attorney agree in
advance to keep the terms of this Agreement confidential. Further,
notwithstanding the foregoing, the parties acknowledge that the terms of this
Agreement may be filed with the SEC and fully disclosed to the public. The
parties further agree that each shall not disparage the character, conduct
and/or abilities and/or reputation of any other party to the Agreement.
12. REPRESENTATIONS AND WARRANTIES. IO represents as follows:
(a) It is a corporation duly organized and existing in good standing
under the laws of the state of its incorporation and has the power to own its
properties and to carry on its business as now being conducted.
(b) It has full legal right, power and authority to enter into and
perform this Agreement; the execution and delivery of this Agreement by it and
the consummation by it of the transactions contemplated hereby have been duly
authorized by it and to the best of its knowledge do not contravene any law or
regulation governing the parties hereto and have been appropriately noticed, if
required, to any and all regulatory bodies having jurisdiction; this Agreement
has been duly executed and delivered by it and constitutes its valid and binding
obligation enforceable against it in accordance with its terms, except that such
enforcement is subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting, generally, the enforcement of creditors' rights and remedies.
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13. VOLUNTARY AGREEMENT. The parties hereto understand the significance
and consequences of this Agreement and acknowledge that it is voluntary and has
not been given as a result of any coercion. The parties also acknowledge that
they have been given full opportunity to review and negotiate this Agreement,
have been represented by competent legal counsel and execute this Agreement only
after full reflection and analysis and after mediation before Peter D. Byrnes,
Esq. The parties acknowledge that they have reviewed the Memorandum of
Settlement prepared by Mr. Byrnes following mediation, that such Memorandum of
Settlement accurately reflected the parties' agreements reached at mediation and
that this Agreement is intended to and does restate and formalize such
Memorandum of Settlement.
14. NO ADMISSION OF LIABILITY. This Agreement shall not be construed as
an admission of wrongdoing by any party hereto and all parties hereto do
expressly deny wrongdoing of any kind.
15. GOVERNING LAW AND VENUE. This Agreement shall be interpreted in
accordance with the laws of the state of Washington with the venue for any
dispute to be set in King County, Washington.
16. ATTORNEYS' FEES. Any party to this Agreement may sue for breach of
its terms and, in the event of suit, the prevailing party shall be entitled to
recover his or its reasonable costs and attorneys' fees incurred therein and on
any appeal.
17. ENTIRE AGREEMENT. This Agreement represents and contains the entire
understanding among the parties in connection with the subject matter of the
Agreement. The Agreement shall not be modified or varied except by a written
document signed by the parties.
18. OPPORTUNITY TO REVIEW. Each party hereto acknowledges that he or it
has had sufficient time to review and consider this Agreement and to consult
with attorneys of its choosing. By their signatures, the parties acknowledge
that they have carefully read and fully understand all of the provisions of the
Agreement and that they are voluntarily entering into this Agreement.
19. NOTICES. Any notice required under this Agreement may be sent regular
mail postage prepaid to the parties at the following address and shall be deemed
delivered three days following deposit in the mail.
<TABLE>
<CAPTION>
Interactive Objects Ryan Smith with a copy to:
------------------- ---------- ---------------
<S> <C> <C>
217 Pine Street 1020 W. Lake Sammamish Pkwy. NE Ramer B. Holtan, Jr.
8th Floor Bellevue, WA 98008 1201 Third Avenue, Ste. 4000
Seattle, WA 98101 Seattle, WA 98101
</TABLE>
Each party agrees to notify the other in writing of any change in address.
DATED this 4th day of March, 1999.
/s/ RYAN SMITH
--------------------
Ryan Smith
Interactive Objects, Inc.
By: /s/ STEVEN G. WOLLACH /s/ STEVE WOLLACH
--------------------------- -----------------------
Its: President and Chief Financial Officer Steve Wollach
Northwest Capital Partners LLC
By: /s/ BRENT S. NELSON /s/ THAD WARDALL
-------------------------- ----------------------
Its: Managing Partner Thad Wardall
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SCHEDULE OF OPTIONS PROVIDED BY SMITH
<TABLE>
<CAPTION>
EXERCISE DATE EXERCISE PRICE NUMBER OF SHARES
- ------------------------------------------------------------------------------------------
<S> <C> <C>
1. Within 30 days of $275,000 (committed) 550,000
execution of Agreement
- ------------------------------------------------------------------------------------------
2. 10/15/99 $113,080 226,160
- ------------------------------------------------------------------------------------------
3. 1/15/00 $113,080 226,160
- ------------------------------------------------------------------------------------------
4. 4/15/00 $113,080 226,160
- ------------------------------------------------------------------------------------------
5. 7/15/00 $113,080 226,160
- ------------------------------------------------------------------------------------------
6. 10/15/00 $113,080 226,160
- ------------------------------------------------------------------------------------------
TOTAL $840,400 1,680,800
==========================================================================================
</TABLE>
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EXHIBIT 10.2
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
The parties to this Mutual Release and Settlement Agreement ("Agreement")
are John Guarino ("Guarino"), Interactive Objects, Inc. ("IO"), Northwest
Capital Partners, LLC ("Northwest Capital"), Steve Wollach ("Wollach"), Thad
Wardall ("Wardall") and Brent Nelson ("Nelson") (Northwest Capital, Wollach,
Wardall and Nelson are sometimes referred to as "the other parties to this
Agreement"). The intent of this Agreement is to resolve all disputes between
Guarino, on the one hand, and IO and the other parties to this Agreement, on the
other, pertaining in any way to (a) Guarino's employment at IO; (b) Guarino's
Executive Employment Agreement dated January 1, 1998, as amended July 1, 1998
(the "Employment Agreement"), (c) Guarino's service as an officer and a director
of IO, (d) Guarino's relations with IO and the other parties to this Agreement,
and such parties' relations with Guarino, and (e) any claims or rights Guarino
or the other parties to this Agreement may have individually, as shareholders,
as shareholders on behalf of IO, or as officers, directors, employees or agents
of IO, from the beginning of the involvement of each with IO (and any
predecessor(s) of IO) to the date of Guarino's resignation from his positions in
management of IO on or about October 12, 1998.
RECITATIONS
WHEREAS Guarino is a founder of IO (or its predecessor(s)), who served as
an officer and a member of IO's Board of Directors from its inception to October
12, 1998; and
WHEREAS Guarino owns 1,200,000 shares of common stock of IO, as well as
options to purchase an additional 50,000 shares as reflected more particularly
in the Minutes of Board meetings and financial statements of IO; and
WHEREAS Guarino and IO entered into the Employment Agreement on or about
January 1, 1998, as amended July 1, 1998; and
WHEREAS Guarino resigned from his positions as an officer and director of
IO on or about October 12, 1998, such resignations having been accepted by IO on
the same date; and
WHEREAS the other parties to this Agreement are or have been involved from
time to time in the management of IO as officers and directors or are otherwise
involved as investors or substantial shareholders; and
WHEREAS disputes have arisen between Guarino, on the one hand, and IO and
the other parties to this Agreement, on the other, regarding matters of
compensation, management and direction; and
WHEREAS Guarino, on the one hand, and IO and the other parties to this
Agreement, on the other, wish to resolve their differences and settle their
disputes upon the terms and conditions hereafter set forth,
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. OPTIONS TO PURCHASE STOCK. Guarino, with respect to his 1,200,000
shares of IO, will provide IO and/or its assignee options for the purchase of up
to 75% of such shares, and any shares related and/or arising therefrom by stock
split or stock dividend or otherwise, (900,000) in the manner and at the times
set forth on the schedule attached hereto. The first option, the exercise of
which is irrevocably committed, is for 400,000 shares at $.50 per share for a
total option payment of $200,000. Subsequent options will be for 100,000 shares
each at $.50 per share and shall be exercised by the payment of cash into
escrow, as prescribed hereafter, on or before the exercise dates set forth in
the attached schedule. IO and/or its assignee may exercise/purchase all or a
portion of the shares covered by each subsequent option. In the event any such
subsequent option is not exercised or not completely exercised by purchase of
all shares covered by this option on or before its appointed date, then the
option, to the extent shares remain that were not purchased, shall be deemed to
have expired, and the remaining
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shares represented by such option shall be immediately returned to Guarino. The
total value of the options is $450,000, including the initial committed option
payment of $200,000.
2. ESCROW. IO and Guarino agree to share the expense and will open an
agreed escrow into which will be deposited 900,000 shares of Guarino's
shareholdings in IO and $200,000 cash representing the initial committed option
payment, such deposits to be made within seven (7) days from the date of
execution of this Agreement. The escrowee will be instructed to release 400,000
of Guarino's shares as directed by IO, but no later than twenty (20) days from
the date of execution of this Agreement and simultaneously with the release of
such shares, the escrowee shall release $200,000 to Guarino. In the event no
direction is received from IO, within such twenty (20) days, the escrowee shall
nonetheless release $200,000 to Guarino and shall then retain the shares
represented by such payment pending receipt of direction from IO. Any interest
earned on escrowed funds shall be for the account of IO. Guarino shall
cooperate with IO in assuring that escrowed shares can be released by the
escrowee in appropriate numbers represented by appropriate certificates on
timely payment of the option amounts. Guarino agrees to execute any and all
documentation necessary directed to either the escrowee and/or the transferring
agent to effectuate transfers contemplated hereunder. Such documentation will
include but not be limited to any necessary medallion guarantees. In the event
that any subsequent option (after the initial committed option or portion
thereof) is not timely exercised and expires, then the remaining unpurchased
shares represented by that option shall be immediately returned to Guarino, with
shares represented by any unexpired options to remain in escrow pending either
timely exercise or return to Guarino as the case may be.
3. EXPIRED OPTIONS. Excepting the initial option, execution of which is
irrevocably committed, if any subsequent option is not timely exercised in the
manner described above, and the shares represented by such option or a portion
thereof are returned to Guarino, any such returned shares shall be returned in
freely tradable form, subject only to applicable rules and regulations of the
SEC or other agency with jurisdiction, and subject further to Guarino's
agreement that he will not, without the permission of IO, endeavor to sell any
such returned shares at a rate greater than 5,000 shares per day. IO shall
cooperate fully in assuring that any returned shares are freely tradable.
4. GUARINO'S OPTIONS. Guarino shall retain any and all options he may
have received to purchase shares of IO, based upon the rules and regulations of
the stock option plan of IO. It is the intent of the parties that Guarino's
options shall not be affected by this Agreement. Nothing in this Agreement
shall be interpreted or construed as expanding or modifying Guarino's option
rights.
5. GUARINO'S RETAINED SHARES. With respect to the 300,000 shares retained
by Guarino which are not a part of this Agreement, Guarino shall not sell those
shares, with the exceptions hereinafter set forth, until on or after the date of
expiration of the last option, i.e., October 15, 2000. Guarino also agrees that
in connection with any sale of such retained shares, he shall sell no more than
5,000 shares per day. However, in the event any option is not timely exercised
or not completely exercised, and expires, Guarino shall not only have the right
to sell any shares returned pursuant to such expired option, but also an
additional matching amount of 100,000 shares from the 300,000 shares Guarino has
retained, provided that the sale of all such shares shall be restricted to
Guarino's agreed limitation of 5,000 shares per day. In addition, in the event
all options are executed before their expiration dates, then Guarino's retained
shares shall be freed for sale immediately following the last date of execution,
subject only to the 5,000 share per day limitation. IO shall cooperate fully in
assuring that, subject to the above time and volume limitations, Guarino's
retained shares are freely tradable, subject to the aforesaid limitation and to
applicable rules and regulations of the SEC or other agency with jurisdiction.
6. RIGHTS OF FIRST REFUSAL RELEASED. IO and Northwest Capital may have
certain rights of first refusal with respect to the shares owned by Guarino and
optioned pursuant to this Agreement. IO and Northwest Capital hereby relinquish
any and all such rights of first refusal.
7. VOTING RIGHTS DURING ESCROW. Guarino assigns to Steve Wollach and/or
Brent Nelson and/or Thad Wardall the proxy to vote all of his escrowed shares.
Wollach, Nelson and/or Wardall agree to vote said shares as directed by the
Board of Directors of IO. This proxy is coupled with an interest in said
shares. Notwithstanding the above this proxy shall not be exercised in favor of
any proposal which would treat Guarino, as a shareholder, less favorably than
would be treated any other director or officer of IO who is also a shareholder.
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<PAGE>
8. ASSIGNABILITY. The options provided for herein shall be assignable by
the company, provided, however, that the shares represented by such options will
only be released on timely receipt of option payments, as specified herein, or
shall be promptly returned to Guarino on expiration of relevant option periods.
9. SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS. Notwithstanding the mutual
releases set forth below, it is the parties' intent that certain provisions of
the Employment Agreement, as well as certain other rights and obligations, shall
survive this Agreement. These provisions of the Employment Agreement are [_] 11
(Indemnification) and [_] 12 (Invention, Confidentiality, Nonraiding and
Noncompetition Agreement). In addition to the survival of such provisions,
Guarino shall retain all other rights of indemnity and/or contribution as may be
provided for in corporate articles and bylaws or other corporate documents,
resolutions and minutes, as well as any and all rights of indemnity and/or
contribution allowed under applicable law. Guarino shall also retain,
unimpaired by this Agreement, his interest in and right to insurance coverage
under all applicable D&O insurance policies, consistent with the terms and
conditions of such D&O policies. Nothing in this Agreement shall be construed
as requiring the company to continue the coverage if the company is unable to do
so; provided however, that Guarino's interest in and right to coverage shall be
no less favorable than that of any other director or officer of IO; and provided
further that Guarino shall receive timely advance notice of any decision
affecting his coverage and the opportunity to purchase tail coverage if
available.
10. MUTUAL RELEASES. The parties intend that their releases be mutual.
(a) GUARINO'S RELEASE. In consideration of the initial option
-----------------
payment, and the mutual promises set forth in this Agreement, and upon receipt
by Guarino of such initial option payment Guarino unconditionally and
irrevocably releases and discharges IO and the other parties to this Agreement,
their respective marital communities, affiliates, former affiliates,
predecessors, successors, assigns and any person claiming an interest through or
under any of them (and the respective directors, officers, partners, employees,
agents and representatives of any of the foregoing) from
(i) any and all actions, claims, demands, causes of action,
arbitrations, disputes or controversies, whether based on contract, tort,
statute or otherwise, and
(ii) any direct or indirect liability (whether absolute, accrued
or unaccrued, contingent, liquidated or unliquidated, matured or
unmatured), indebtedness, obligation, expense or loss, known or unknown,
arising out of relating to or resulting from, directly or indirectly, (A) his
employment at IO and/or (B) the Employment Agreement and/or (C) such parties'
management of or relations with IO or with Guarino whether in their capacities
as officers, directors or shareholders from the date any such management or
relations commenced to the date of Guarino's resignation as an officer and
director of IO on or about October 12, 1998. Except as set forth in this
Agreement,the release given hereunder is intended to be a general release. This
Agreement shall not affect or impair, however, the rights or obligations of the
parties under this Agreement, or Guarino's rights as a shareholder of IO,
following October 12, 1998.
(b) IO AND THE OTHER PARTIES' RELEASE. In consideration of the
---------------------------------
options provided for herein, and the mutual promises set forth in this
Agreement, IO and the other parties to this Agreement unconditionally and
irrevocably release and discharge Guarino, his marital community, successors and
assigns, and any person claiming an interest through or under Guarino from
(i) any and all actions, claims, demands, causes of action,
arbitrations, disputes or controversies, whether based on contract, tort,
statute or otherwise, and
(ii) any direct or indirect liability (whether absolute, accrued
or unaccrued, contingent, liquidated or unliquidated, matured or
unmatured), indebtedness, obligation, expense or loss, known or unknown,
arising out of relating to or resulting from, directly or indirectly, (A)
Guarino's employment at IO and/or (B) the Employment Agreement, and/or (C)
Guarino's management of or relations with IO or the other parties to this
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<PAGE>
Agreement whether in his capacity as officer, director or shareholder from the
date any such management or relations commenced to the date of Guarino's
resignation as an officer and director of IO on or about October 12, 1998.
Except as set forth in this Agreement, the release given hereunder is intended
to be a general release. This Agreement shall not affect or impair, however, the
rights or obligations of the parties under this Agreement or Guarino's rights as
a shareholder of IO, following October 12, 1998.
(c) All parties to this Agreement expressly understand and acknowledge
that unknown losses or claims may exist with respect to the releases
contemplated by this Section 10(a) and (b), that present claims or interests may
have been underestimated in amount or severity, and that they explicitly took
that into account in determining the amount of consideration to be received
hereunder, and that a portion of such consideration, having been bargained for
among the parties with the knowledge of the possibility of such unknown losses
or claims, was given in exchange for a full accord, satisfaction and discharge
of all such losses or claims.
(d) Neither Guarino, nor IO, nor the other parties to this Agreement
will bring, commence, institute or prosecute in the name of that person,
individually as shareholder, in a corporate capacity or in the name of the
corporation or any other person, any action, claim, demand, cause of action,
suit, arbitration, dispute or controversy based in whole or in part upon any
fact or event to be released herein, whether known or unknown. This Section
10(d) may be pleaded as a full and complete defense to, and may be used as a
basis for injunctive relief against any action, claim, demand, cause of action,
suit, arbitration, dispute or controversy which may be instituted, prosecuted or
attempted in breach of this Section 10(d). None of the parties hereto will
enter into any arrangement or understanding with any third party with respect to
the foregoing or any discussions designed to advise, assist or encourage any
third party in connection with the foregoing.
11. CONFIDENTIALITY. Except as provided, the terms and conditions of this
Agreement, and the disputes addressed herein, shall be and remain confidential
and shall not be disclosed to any third party except on a need-to-know basis,
i.e., attorneys, accountants, and the like, and except to the SEC or other
regulatory authorities as required by law. If anyone asks, the parties agree
that they will only state that any disputes between Guarino on the one hand and
IO and the other parties hereto on the other have been satisfactorily resolved.
Notwithstanding the foregoing, IO is authorized to disclose to former IO
principal Jay Paulson and his attorney(s) the terms of this Agreement (including
a copy of this Agreement) providing that Mr. Paulson and his attorney agree in
advance to keep the terms of this Agreement confidential. Further,
notwithstanding the foregoing the parties acknowledge that the terms of this
Agreement and the Agreement itself may be filed with the SEC and fully disclosed
to the public. the parties further agree that each shall not disparage the
character, conduct and/or abilities and/or reputation of any other party to this
Agreement.
12. REPRESENTATIONS AND WARRANTIES. IO represents as follows:
(a) It is a corporation duly organized and existing in good standing
under the laws of the state of its incorporation and has the power to own its
properties and to carry on its business as now being conducted.
(b) It has full legal right, power and authority to enter into and
perform this Agreement; the execution and delivery of this Agreement by it and
the consummation by it of the transactions contemplated hereby have been duly
authorized by it and to the best of its knowledge do not contravene any law or
regulation governing the parties hereto and have been appropriately noticed, if
required, to any and all regulatory bodies having jurisdiction; this Agreement
has been duly executed and delivered by it and constitutes its valid and binding
obligation enforceable against it in accordance with its terms, except that such
enforcement is subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting, generally, the enforcement of creditors' rights and remedies.
13. VOLUNTARY AGREEMENT. The parties hereto understand the significance
and consequences of this Agreement and acknowledge that it is voluntary and has
not been given as a result of any coercion. The parties also acknowledge that
they have been given full opportunity to review and negotiate this Agreement,
have been represented by competent legal counsel and execute this Agreement only
after full reflection and analysis and after mediation before Peter D. Byrnes,
Esq. The parties acknowledge that they have reviewed the Memorandum of
Settlement prepared by Mr. Byrnes following mediation, that such Memorandum of
Settlement
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<PAGE>
accurately reflected the parties' agreements reached at mediation and that this
Agreement is intended to and does restate and formalize such Memorandum of
Settlement.
14. NO ADMISSION OF LIABILITY. This Agreement shall not be construed as
an admission of wrongdoing by any party hereto and all parties hereto do
expressly deny wrongdoing of any kind.
15. GOVERNING LAW AND VENUE. This Agreement shall be interpreted in
accordance with the laws of the state of Washington with the venue for any
dispute to be set in King County, Washington.
16. ATTORNEYS' FEES. Any party to this Agreement may sue for breach of
its terms and, in the event of suit, the prevailing party shall be entitled to
recover his or its reasonable costs and attorneys' fees incurred therein and on
any appeal.
17. ENTIRE AGREEMENT. This Agreement represents and contains the entire
understanding among the parties in connection with the subject matter of the
Agreement. The Agreement shall not be modified or varied except by a written
document signed by the parties.
18. OPPORTUNITY TO REVIEW. Each party hereto acknowledges that he or it
has had sufficient time to review and consider this Agreement and to consult
with attorneys of its choosing. By their signatures, the parties acknowledge
that they have carefully read and fully understand all of the provisions of the
Agreement and that they are voluntarily entering into this Agreement.
19. NOTICES. Any notice required under this Agreement may be sent regular
mail postage prepaid to the parties at the following address and shall be deemed
delivered three days following deposit into the mail postage prepaid.
<TABLE>
<CAPTION>
Interactive Objects John Guarino with a copy to:
-------------------- ------------ ---------------
<S> <C> <C>
217 Pine Street 19302-218th Pl. N.E. Ramer B. Holtan, Jr.
8th Floor Woodinville, WA 98072 1201 Third Ave., Ste. 4000
Seattle, Wa 98101 Seattle, WA 98101
</TABLE>
Each party agrees to notify the other in writing of any change in address.
DATED this 4th day of March, 1999.
/s/ JOHN GUARINO
----------------------
John Guarino
Interactive Objects, Inc.
By: /s/ STEVEN G. WOLLACH /s/ STEVE WOLLACH
--------------------------- -----------------------
Its: President and Chief Financial Officer Steve Wollach
Northwest Capital Partners LLC
By: /s/ BRENT S. NELSON /s/ THAD WARDALL
-------------------------- ----------------------
Its: Managing Partner Thad Wardall
/s/ Brent Nelson
----------------------
Brent Nelson
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<PAGE>
SCHEDULE OF OPTIONS PROVIDED BY GUARINO
<TABLE>
<CAPTION>
EXERCISE DATE EXERCISE PRICE NUMBER OF SHARES
- ------------------------------------------------------------------------------------------
<S> <C> <C>
1. Within 30 days of $200,000 (committed) 400,000
execution of Agreement
- ------------------------------------------------------------------------------------------
2. 10/15/99 $ 50,000 100,000
- ------------------------------------------------------------------------------------------
3. 1/15/00 $ 50,000 100,000
- ------------------------------------------------------------------------------------------
4. 4/15/00 $ 50,000 100,000
- ------------------------------------------------------------------------------------------
5. 7/15/00 $ 50,000 100,000
- ------------------------------------------------------------------------------------------
6. 10/15/00 $ 50,000 100,000
- ------------------------------------------------------------------------------------------
TOTAL $450,000 900,000
==========================================================================================
</TABLE>
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