SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: July 7, 1999
(Date of earliest event reported)
NETWOLVES CORPORATION
(Exact name of registrant as specified in its charter)
New York 000-25831 11-3439392
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
200 Broadhollow Road, Suite 207, Melville, New York 11747
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (516) 393-5016
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets
(a) On July 7, 1999, NetWolves Corporation (the "Company") acquired the
outstanding capital stock of the Sullivan Group in exchange for 180,000 shares
of the Company's outstanding common stock. David H. Sullivan and Martin E.
Cunningham, the founders of the Sullivan Group, will be Chairman and Chief
Executive Officer, respectively, of the Company's new subsidiary, TSG Global
Web, Inc. Pursuant to the terms of the acquisition, the five principal employees
of the Sullivan Group, including Messrs. Sullivan and Cunningham, will continue
operating this subsidiary under long term employment agreements.
(b) The Sullivan Group is the pre-eminent training and consulting firm to
the petroleum, automotive aftermarket and convenience store industry with
clients comprising the top 100 companies in the world. The Company intends to
combine the training content and consulting services of the Sullivan Group with
the Company's internet delivery system to allow training and management content
to be simultaneously broadcast through the internet to customers.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
(a) (i) Financial Statements of Businesses Acquired. The Company will file
the required financial statements on Form 8-K/A as soon as practicable, but not
later than sixty days after the required filing date of this report.
(ii) Pro Forma Financial Information. Any required pro forma financial
information also will be filed on Form 8-K/A within sixty days after the
required filing date of this report.
(b) Exhibits
2.1 Agreement and Plan of Merger dated as of July 7, 1999 among NetWolves
Corporation, TSG Global Education Web, Inc., a wholly-owned subsidiary of
NetWolves Corporation and Sales and Management Consulting, Inc. d/b/a The
Sullivan Group and Duffy-Vinet Institute.
10.1 Shareholders' Agreement dated July 7, 1999 by and among TSG Global
Education Web, Inc. , NetWolves Corporation, Martin E. Cunningham, David H.
Sullivan, Ronald B. Collins, John J. Phelan and Daniel J. Molloy.
10.2 Employment Agreement dated as of July 7, 1999 between TSG Global
Education Web, Inc. and David H. Sullivan.
10.3 Employment Agreement dated as of July 7, 1999 between TSG Global
Education Web, Inc. and Martin E. Cunningham.
10.4 Employment Agreement dated as of July 7, 1999 between TSG Global
Education Web, Inc. and Ronald B. Collins.
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10.5 Employment Agreement dated as of July 7, 1999 between TSG Global
Education Web, Inc. and John J. Phelan.
10.6 Employment Agreement dated as of July 7, 1999 between TSG Global
Education Web, Inc. and Daniel J. Molloy.
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
NETWOLVES CORPORATION
/s/ Walter M. Groteke
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Walter M. Groteke, President
Dated: July 21, 1999
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 7, 1999 (this "Agreement"),
among NETWOLVES CORPORATION, a New York corporation, ("NetWolves"), TSG Global
Education Web, Inc., a Delaware corporation and a direct, wholly-owned
subsidiary of NetWolves ("TSG"), and SALES AND MANAGEMENT CONSULTING, INC.,
d/b/a, THE SULLIVAN GROUP and DUFFY-VINET INSTITUTE, a Connecticut corporation (
"SMCI"), and the persons whose signatures appear at the foot hereof
(individually a "Stockholder" and collectively the "Stockholders".
W I T N E S S E T H:
WHEREAS, the Boards of Directors of NetWolves, and the Board of Directors
and Stockholders of TSG and SMCI have each determined that it is advisable and
in the best interests of their respective shareholders for NetWolves to cause
SMCI to merge with and into TSG upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
NetWolves, and the Board of Directors and Stockholders of SMCI and SMCI have
each approved the merger (the "Merger") of SMCI with and into TSG in accordance
with the applicable provisions of the Delaware General Corporation Law
("Delaware Law"), and upon the terms and subject to the conditions set forth
herein; and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of
SMCI's Common Stock, par value $100.00 per share (the "Company Common Stock"),
subject to the provisions of Section 1.7, shall be converted into the right to
receive the Merger Consideration (as defined in Section 1.6(a)), upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
NetWolves, TSG, SMCI and the Stockholders hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger (a) Effective Time. At the Effective Time (as
defined in Section 1.2), and subject to and upon the terms and conditions of
this Agreement and Delaware Law, SMCI shall be merged with and into TSG, the
separate corporate existence of SMCI shall cease, and TSG shall continue as the
Surviving TSG. TSG as the Surviving TSG after the Merger is hereinafter
sometimes referred to as the "Surviving TSG."
(b) Closing. The consummation of the Merger will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article V at the offices
of Blau, Kramer, Wactlar & Lieberman, P.C., 100 Jericho Quadrangle, Jericho, New
York, unless another date, time or place is agreed to in writing by the parties
hereto.
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SECTION 1.2 Effective Time. The parties hereto shall cause the Merger to be
consummated by filing a certificate of merger as contemplated by Delaware Law
(the "Certificate of Merger"), together with any required related certificates,
with the Secretary of State of the State of Delaware, in such form as required
by, and executed in accordance with the relevant provisions of, Delaware Law
(the time of such filing being the "Effective Time"), attached as Exhibit 1.2.
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (i) the Surviving TSG
shall possess all the rights, privileges, immunities, powers and purposes of TSG
and SMCI, (ii) all the property, real and personal, including subscriptions to
shares, causes of action and every other asset of TSG and SMCI shall vest in the
Surviving TSG without further act or deed, and (iii) the Surviving TSG shall
assume and be liable for all the liabilities, obligations and penalties of TSG
and SMCI.
SECTION 1.4 Certificate of Incorporation; By-Laws. (a) Certificate of
Incorporation. At the Effective Time, the Certificate of Incorporation of TSG,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving TSG until thereafter amended as provided by
Delaware Law and such Certificate of Incorporation.
(b) By-Laws. The By-Laws of TSG, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving TSG until thereafter
amended as provided by Delaware Law, the Certificate of Incorporation of the
Surviving TSG and such By-Laws.
SECTION 1.5 Directors and Officers. The directors of TSG immediately prior
to the Effective Time shall be the initial directors of the Surviving TSG, each
to hold office in accordance with the Certificate of Incorporation and By-Laws
of the Surviving TSG, and the officers of TSG immediately prior to the Effective
Time shall be the initial officers of the Surviving TSG, in each case until
their respective successors are duly elected or appointed and qualified.
SECTION 1.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of NetWolves, TSG, SMCI or the
holders of any of the following securities:
(a) Conversion of Shares.
(i) NetWolves shall contribute 180,000 shares of its 0.0033 par
value Common Stock ("NetWolves Common Stock") to TSG to be used to
acquire SMCI;
(ii) Each share of SMCI Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the
right to receive 300 validly issued, fully paid and non assessable
shares of NetWolves Common Stock;
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(iii) Each share of SMCI Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted to and
exchanged for 300 fully paid and non assessable shares of NetWolves
Common Stock;
(iv) Then the Merger of SMCI into TSG shall occur with TSG
Surviving in accordance with the Certificate of Merger set forth in
Exhibit 1.2; and
(v) The 180,000 shares of NetWolves Common Stock referred to in
(i), (ii) and (iii) above is collectively referred to herein as the
"Merger Consideration".
(b) Cancellation. Each share of SMCI Common Stock held in the treasury
of SMCI shall, by virtue of the Merger and without any action on the part of the
holder thereof, cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.
(c) No Liability. Neither NetWolves, TSG nor SMCI shall be liable to
any holder of Company Common Stock for any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(d) Withholding Rights. NetWolves shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement such amounts as NetWolves is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code") or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by NetWolves, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by NetWolves.
SECTION 1.7 Delivery of Merger Consideration. As soon as practicable after
the Effective Time, the Secretary of the Surviving TSG and the Secretary of
NetWolves shall take such action as may be appropriate in order to deliver the
shares of NetWolves Common Stock, respectively, in accordance with the
provisions of Section 1.6(a).
SECTION 1.8 Taking of Necessary Action; Further Action. Each of NetWolves,
TSG and SMCI will take all such reasonable and lawful action as may be necessary
or appropriate in order to effectuate the Merger in accordance with this
Agreement as promptly as possible. If, at any time after the Effective Time, any
such further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving TSG with all the rights, privileges,
immunities, powers and purposes, and all the property, real and personal,
including subscriptions to shares, causes of action and every other asset of
SMCI and TSG, the officers and directors of SMCI and TSG immediately prior to
the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
SECTION 1.9 Material Adverse Effect. When used in connection with the
Company, the term "Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all other such
changes, effects or circumstances that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, operations, assets
(including intangible assets), condition (financial or otherwise), liabilities,
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or results of operations of SMCI. When used in connection with NetWolves, the
term "Material Adverse Effect" means any change, effect or circumstance that,
individually or when taken together with all other such changes, effects or
circumstances that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, is or is reasonably likely to be
materially adverse to the business, operations, assets (including intangible
assets), condition (financial or otherwise), liabilities, or results of
operations of NetWolves.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SMCI
The Stockholders and SMCI, jointly and severally, represent and warrant to
NetWolves as of the date hereof and as of the Closing Date as follows:
SECTION 2.1 Organization and Authority.
SMCI is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with all
requisite power and authority (corporate and governmental) to own, operate and
lease its properties and to carry on its business as now being conducted, except
where the failure to have such power and authority would have an adverse effect
of less than $15,000 in the aggregate on SMCI. Except as set forth in Schedule
2.1, SMCI is duly licensed or qualified to do business and is in good standing
in each jurisdiction in which it is required to be so licensed or qualified,
except where the failure to be so licensed or qualified would have an adverse
effect of less than $15,000 in the aggregate on the business of SMCI.
SECTION 2.2. Subsidiary. SMCI has no subsidiaries nor any direct or
indirect interest by stock ownership or otherwise in any firm, association,
corporation or business enterprise, except as set forth on Schedule 2.2.
SECTION 2.3 Authorization of Agreements. The Stockholders have the legal
capacity and SMCI has the power and authority to execute, deliver and perform
their respective obligations under this Agreement. This Agreement has been duly
executed and delivered by SMCI and the Stockholders and constitutes the legal,
valid and binding obligation of SMCI and Stockholders enforceable against them
in accordance with its terms, except as the enforcement thereof may be subject
to or limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors' rights generally now or hereafter
in effect and subject to the application of equitable principles and the
availability of equitable remedies.
SECTION 2.4 Capital Stock. The authorized, issued and outstanding capital
stock of all classes of SMCI is set forth on Schedule 2.4. All of the
outstanding capital stock of SMCI has been duly authorized and is validly
issued, fully paid and nonassessable. All outstanding capital stock and any
other outstanding securities of SMCI were issued in compliance with all federal
and state securities laws. The lawful, registered and beneficial owners (and
their addresses) of all shares of the capital stock of SMCI and the number of
shares held by each is as indicated on Schedule 2.4 hereto. There are no rights,
subscriptions, warrants, options, conversion rights, commitments or agreements
of any kind authorized or outstanding to purchase or otherwise acquire from the
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Stockholders, SMCI, or any other person, any shares of stock, or securities or
obligations of any kind convertible into or exchangeable for any shares of
stock, of any class of SMCI or any other equity interest in SMCI. There is no
proxy, or any agreement, arrangement or understanding of any kind authorized or
outstanding which restricts, limits or otherwise affects the right to vote any
share of Stock.
SECTION 2.5 . No Conflicts. The execution, delivery and performance of this
Agreement, and any other agreement or document contemplated herein or therein
and the consummation of all of the transactions contemplated hereby and thereby:
(i) do not and will not require the consent, waiver, approval, license,
designation or authorization of, or declaration with, any Person or court to
which SMCI is subject or any governmental authority or agency; and (ii) do not
and will not, with or without the giving of notice or the passage of time or
both, violate or conflict with or result in a breach or termination of any
provision of, or constitute a default under, or accelerate or permit the
acceleration of the performance required by the terms of, or result in the
creation of any mortgage, security interest, claim, lien, charge or other
encumbrance upon any of the assets of SMCI pursuant to, or otherwise give rise
to any liability or obligation under, the certificate of incorporation or bylaws
of SMCI, any agreement, mortgage, deed of trust, indenture, license, permit or
any other agreement or instrument or any order, judgment, decree, statute or
regulation to which the Stockholders or SMCI is a party or by which the
Stockholders, SMCI or any of their assets may be bound, except for any such
violations, conflicts, breaches, defaults or other occurrences which would not
have a material adverse effect on SMCI.
SECTION 2.6 Financial Statements. Schedule 2.6 sets forth the Financial
Statements of SMCI.
(a) For the relevant periods, the Financial Statements: (1) are
complete and correct in all material respects; (2) present fairly the
consolidated financial position of SMCI at such dates and the results of
operations and changes in financial position for the respective periods ended on
such dates; and (3) were prepared in accordance with generally accepted
accounting principles, consistently applied during the periods, and are in
accordance with the books and records maintained by SMCI in all material
respects.
(b) As at April 30, 1999, SMCI had no liabilities, commitments or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
not shown and adequately provided for in the Financial Statements as of such
date or in the Schedules to this Agreement.
SECTION 2.7 Taxes. True and correct copies of SMCI's federal and state
income tax returns for the years ended December 31, 1996, 1997, and 1998 have
been delivered to NetWolves. All tax returns (including information returns)
required by any jurisdiction to have been filed by or with respect to SMCI have
been timely filed, except for returns with respect to which extensions have been
granted, and each such return is true, correct and complete.
Except as set forth in Schedule 2.7, all liabilities of SMCI to any
jurisdiction for taxes of every kind and nature, including interest thereon and
penalties with respect thereto, (collectively "Taxes") relating to any period
ending on or prior to April 30, 1999, have been timely paid by SMCI or are
accrued and provided for in the Financial Statements for the period ended April
30, 1999. Any liability for Taxes incurred by SMCI since April 30, 1999 was
incurred in the ordinary course of business.
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Except as set forth in Schedule 2.7, the U.S. federal income tax
returns and state and foreign income tax returns of SMCI have not been audited
by the Internal Revenue Service or other taxing authority within the past five
(5) years. Neither the Internal Revenue Service nor any state, local or other
taxing authority has proposed any additional taxes, interest or penalties with
respect to SMCI or any of its operations or business; there are no pending or,
to the knowledge of SMCI and the Stockholders, threatened tax claims or
assessments; and there are no pending or, to the knowledge of SMCI and the
Stockholders, threatened tax examinations by any taxing authorities.
SMCI has not given any waivers of rights (which are currently in
effect) under applicable statutes of limitations with respect to the federal
income tax returns for any fiscal year. SMCI has not consented to the
application of Section 341(f) of the Code.
SMCI has been a "C" corporation since January 1, 1994.
SECTION 2.8 No Adverse Changes. Since April 30, 1999, (i) the business of
SMCI has been conducted only in the ordinary course, except for the transactions
contemplated by this Agreement; (ii) there has been no change in the condition
(financial or otherwise), assets, liabilities, business, operations or affairs
of SMCI, other than changes in the ordinary course of business, none of which
singly and no combination of which, in the aggregate, has been materially
adverse; and (iii) there has been no damage, destruction or loss or other
occurrence or development, whether or not insured against, which, either singly
or in the aggregate, materially adversely affects, and the Stockholders have no
knowledge of any threatened occurrence or development which would materially
adversely affect, the condition (financial or otherwise), assets, liabilities,
business, operations, affairs or prospects of SMCI.
SECTION 2.9 Conduct of Business. Except as disclosed on Schedule 2.9
hereto, since April 30, 1999, SMCI has not: (i) created or incurred any
liability (absolute, accrued, contingent or otherwise) except unsecured current
liabilities incurred in the ordinary course of business consistent with past
practice for other than money borrowed and disclosed on Schedule 2.9 hereto;
(ii) mortgaged, pledged or subjected to any lien or otherwise encumbered any of
its assets, tangible or intangible; (iii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute, accrued, contingent
or otherwise) other than current liabilities shown on the Financial Statements
as at April 30, 1999, and taxes and current liabilities incurred since April 30,
1999 in the ordinary course of business for other than money borrowed or under
contracts or agreements entered into in the ordinary course of business (other
than as a result of any default or breach of, or penalty under, any such
contracts of agreements); (iv) waived, released or compromised any claims or
rights of substantial value, or experienced any labor trouble (including without
limitation any actual or threatened strike or lock-out) or lost, or been
threatened with the loss of, any key employees or any substantial number of
employees; (v) entered into any settlement, compromise or consent with respect
to any claim, proceeding or investigation; (vi) made capital expenditures or
capital additions or betterments in excess of $20,000; (vii) sold, assigned,
transferred, leased or otherwise disposed of any of its assets, tangible or
intangible, or canceled any debts or claims except, in each case, for fair
consideration in the ordinary course of business; (viii) declared or paid any
dividends, or made any other distribution on or in respect of, or directly or
indirectly purchased, retired, redeemed or otherwise acquired any shares of its
capital stock, paid any notes or open accounts or paid any amount or transferred
<PAGE>
any asset to the Stockholders, any member of their families or any other holder
of any capital stock of SMCI; (ix) made or become a party to, or become bound
by, any contract or commitment or renewed, extended, amended, modified or
terminated any contract or commitment which in any one case involved an amount
in excess of $15,000; (x) issued or sold any shares of its capital stock; (xi)
except in the ordinary course of business, granted any increase in the
compensation of, made any other change in employment terms for, or adopted,
amended, modified or terminated any bonus, profit-sharing, incentive, severance
or other plan, contract or commitment for the benefit of, any of its directors,
officers or employees; (xii) entered into any transaction not in the ordinary
course of business (except for transactions contemplated by this Agreement);
(xiii) changed any of its accounting methods or principles used in preparing the
Financial Statements; or (xiv) entered into any contract or commitment to do any
of the foregoing.
SECTION 2.10 Title to Assets. Except as set forth in Schedule 2.10, SMCI
has valid title to all of its personal property and valid leasehold interests in
all real and personal property leased by it, free and clear of all claims,
liens, charges, mortgages, pledges, security interests, restrictions and other
encumbrances of any kind whatsoever, excluding (i) any such liens relating to
carriers, warehousemen, real property lessors, mechanics, materialmen, and
similar persons, affecting leased real property, or arising as a matter of law,
which, in the aggregate, do not exceed $15,000; (ii) defects, zoning
restrictions, restrictions on use, irregularities, encumbrances or clouds on
title of real property, which do not materially impair the property affected
thereby for the purpose for which it was acquired or leased; and (iii) any
mortgages, pledges, security interests, restrictions and other encumbrances
caused by parties other than SMCI or the Stockholders relating to any leased
real property, which, in the aggregate, do not materially affect the use and
enjoyment of such leased real property. No instrument, easement, license or
grant of record, applicable zoning or building law, ordinance or administrative
regulation or other impediment of any kind prohibits or interferes with, limits
or impairs, or would, if not permitted by any prior nonconforming use, prohibit
or interfere with or limit or impair, the use, operation, maintenance of, or
access to, or the value of, the real or personal property owned or leased by
SMCI as presently used, operated, maintained and accessed by SMCI to carry on
its business as presently conducted. All of the assets and properties owned or
leased by SMCI are (i) sufficient and adequate to carry on their business as
presently conducted; (ii) are in good condition and repair as necessary to carry
on their business as presently conducted, normal wear and tear excepted, and are
in a state of maintenance, repair and operating condition required for the
proper operation and use thereof as necessary to carry on their business as
presently conducted; (iii) comply with all applicable federal, state or local
laws, ordinances, rules and regulations and with the terms and conditions of all
leases and other agreements affecting or relating to any such property, except
where the noncompliance with any of the foregoing does not have a material
adverse affect on the business of SMCI, taken as a whole; and (iv) are adequate
to provide the products and services of SMCI in accordance with the most current
standards established by customers, clients and governmental bodies.
SECTION 2.11 Real Property. SMCI does not own any real property. Schedule
2.11 sets forth a true and complete list of all leases of real property to which
SMCI is a party. Except as set forth in Schedule 2.11, SMCI enjoys quiet
possession under all of their leases of real property, each of which is
enforceable in accordance with its terms against the lessor thereunder and is
not in default under the terms of any of said leases, except for any such
default which does not have an adverse effect of $15,000 or more on SMCI; and no
condition exists and no event has occurred which, with or without the passage of
time or the giving of notice or both, could constitute such a default.
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SECTION 2.12 Personal Property. Schedule 2.12 hereto sets forth a true and
complete list of all items of personal property having an original cost of more
than $5,000, owned or leased by SMCI and the location of each such item.
SECTION 2.13 Inventory. SMCI does not have, nor did it have in the past any
material amounts of inventory.
SECTION 2.14 Accounts Receivable. All accounts receivable, net of reserves,
shown on the Financial Statements for the period ending April 30, 1999, or
thereafter acquired by SMCI, have been collected or will be collected and are
subject to no known counterclaims or setoffs. All such accounts receivable have
been generated in the ordinary course of business and reflect a bona fide
obligation for the payment of goods or services provided by SMCI.
SECTION 2.15 Material/Service Agreements; Other Contracts. (a) Schedule
2.15(a) sets forth a complete list with regard to SMCI of (i) all bids,
applications or proposals submitted by it to provide materials or services with
a value of $15,000 or more to any Person and for which the award, approval or
selection is pending, (ii) all contracts or agreements for the provision of
materials or services with a value of $15,000 or more to which SMCI is a party
and which has not yet been performed in full (the items referred to in the
foregoing clauses (i) and (ii) being herein collectively called the
"Material/Service Agreements"). All of such Material/Service Agreements are
fully performable by SMCI in compliance with their terms. To the knowledge of
SMCI and the Stockholders, no grounds exist for the termination or cancellation
of any Material/Service Agreement by the other party thereto. Schedule 2.15(a)
sets forth for each Material/Service Agreement: (i) the branch of SMCI
responsible; (ii) the customer; and (iii) the remaining revenue to be earned.
(b) Except as disclosed in Schedule 2.15(b) hereto, other than as
disclosed on Schedule 2.15(a), neither SMCI is a party to or bound by any oral
or written contracts, obligations or commitments, including without limitation
any:
(i) contract, commitment or arrangement involving, in any one case,
$15,000 or more;
(ii) contract with a term of, or requiring performance, more than six
(6) months from its date;
(iii) lease or lease purchase agreement, mortgage, conditional sale or
title retention agreement, indenture, security agreement, credit agreement,
pledge or option with respect to any property, real or personal (tangible
or intangible), in any capacity;
(iv) commitment, contract or undertaking for the purchase or use of
services, materials, supplies, inventory, machinery or equipment and
involving more than $15,000 in the aggregate;
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(v) employment contracts or agreements;
(vi) contract or agreement with any labor union or other collective
bargaining group;
(vii) bonus, pension, savings, welfare, profit sharing, stock option,
retirement, commission, executive compensation, hospitalization, insurance
or similar plan providing for employee benefits or any other arrangement
providing for benefits for any former or current employees or for the
remuneration, direct or indirect, of the directors, officers or employees
of SMCI;
(viii) note, loan, credit or financing agreement or other contract for
money borrowed, and all related security agreements and collateral
documents, including any agreement for any commitment for future loans,
credit or financing;
(ix) guarantee;
(x) contract or understanding regarding any capital expenditures in
excess of $15,000;
(xi) agency (sales or otherwise), distribution, brokerage (including,
without limitation, any brokerage or finder's agreement or arrangement with
respect to any of the transactions contemplated by this Agreement) or
advertising agreement;
(xii) contract with investment bankers, accountants, attorneys,
consultants or other independent contractors;
(xiii) shareholder agreement or contract with any Stockholder (or
family member thereof), director or officer of SMCI or any Affiliate of
such persons, except agreements or contracts referred to herein which
relate to the transactions contemplated by this Agreement;
(xiv) contract, commitment or arrangement which would restrain the
Company from engaging or competing in any business or to maintain the
confidentiality of any matter, except agreements made in the ordinary
course of business to maintain confidentiality of their vendors and
customers;
(xv) contract, commitment or arrangement not made in the ordinary
course of business; and
(xvi) license, permit, franchise or royalty agreement which is
material to the Company's business.
(c) SMCI has made available to NetWolves correct and complete copies
of all of the contracts, agreements and other documents listed in Schedules
2.15(a) and 2.15(b) hereto and all amendments thereto and any waivers granted
thereunder (the "Scheduled Contracts"). Except as specifically set forth on
Schedules 2.15(a) and 2.15(b), the consummation of this Agreement and the other
<PAGE>
transactions contemplated by this Agreement are not a violation of or grounds
for the modification or cancellation of any of the Scheduled Contracts or for
the imposition of any penalty or security interests thereunder. SMCI enjoys good
working relationships under all Scheduled Contracts, and no unresolved disputes
are pending or, to the best of the Stockholders' or SMCI's knowledge, threatened
under or in respect of any such Scheduled Contracts. SMCI does not have any
outstanding power of attorney other than routine power of attorney relating to
representation before governmental agencies or given in connection with
qualification to do business in another jurisdiction.
Except as described in Schedule 2.15(a) and (b) hereto, all Scheduled
Contracts described in such Schedule 2.15(a) and (b) are valid and enforceable
in accordance with their respective terms, except as the enforcement thereof may
be subject to or limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally now or
hereafter in effect and subject to the application of equitable principles and
the availability of equitable remedies; and there is not, under any of such
documents or agreements or any obligation, or covenant or condition contained
therein, any existing default by SMCI, to the Stockholders's knowledge, by any
other party, or any event which with notice, lapse of time, or both, would
constitute a default and which would have a Material Adverse Effect on the
continued operation of SMCI or its business.
SECTION 2.16 Intellectual Property. Schedule 2.16 hereto sets forth a true
and complete list of all of trademarks, service marks and tradenames, and the
federal, state and foreign registrations and applications thereof, patents and
patent applications and extensions and renewals thereof and copyrights and
copyright applications and renewals thereof (the "Intellectual Property"). All
the Intellectual Property is owned by SMCI free and clear of any and all
licenses, liens, claims, security interests, charges or other encumbrances or
restrictions of any kind, and no licenses for the use of any of such rights or
Trade Secrets have been granted by SMCI to any third parties, except as
reflected in the Schedules attached hereto. All of such rights together with the
Trade Secrets are valid, enforceable and in good standing, and are sufficient
and appropriate for the conduct of business of SMCI as currently conducted. The
sale of the Stock to NetWolves and the consummation of the other transactions
contemplated hereby will not adversely affect any rights in the Intellectual
Property or Trade Secrets of SMCI. To the knowledge of SMCI and the
Stockholders, the operation of the business of SMCI does not infringe in any way
on any registered patent, trademark, trade name, copyright, Trade Secret,
contract, license or other similar right, of any person, and SMCI does not
license any such right from others except as set forth on Schedule 2.16. No
claim is pending or, to the knowledge of SMCI and the Stockholders, threatened,
with respect to such infringement or conflict. To the knowledge of SMCI and the
Stockholders, no other Intellectual Property or Trade Secret other than those
owned or licensed by SMCI are required by them for their business as presently
conducted. The Stockholders have no knowledge of any infringement by any third
parties upon any of the Intellectual Property.
SECTION 2.17 Insurance. Schedule 2.17 hereto contains a complete and
correct list of all insurance policies maintained by SMCI together with a
schedule of required premiums, premium payment dates and any prepaid premiums
under each such policy. SMCI has made available to NetWolves complete and
correct copies of all such policies together with all riders and amendments
thereto. Such policies are in full force and effect, and all premiums due
thereon have been paid. SMCI has complied in all material respects with the
<PAGE>
provisions of such policies. No notice has been received canceling or
threatening to cancel or refusing to renew any of such insurance. The rights of
the insured under such policies will not be terminated or adversely affected by
the Closing or the consummation of the other transactions contemplated hereby.
To the knowledge of SMCI and the Stockholders, there is currently no basis for
any insurance claim by SMCI.
SECTION 2.18 Customer and Supplier Relationships. Attached as Schedule 2.18
is a complete and correct list of all current customers of SMCI showing the
sales to each for the year ended December 31, 1998 and of all suppliers whose
sales to SMCI amounted to more than $25,000 during any of such periods showing
the sales of each. With respect to any such customer or supplier or group of
related customers or suppliers listed on Schedule 2.18, the Stockholders have no
knowledge that any such customer, supplier or group of related customers or
suppliers has terminated or expects to terminate a material portion of its
normal business with SMCI. Except as disclosed in Schedule 2.18 hereto, no
Stockholders or director or officer of SMCI or any of their family members or
Affiliates has any direct or indirect interest, either by way of stock ownership
or otherwise, in any firm, corporation, association or business enterprise,
which competes with, is a supplier or customer of, or is a distributor or sales
agent for, or is a party to any contract with SMCI.
SECTION 2.19 Employees. SMCI has furnished to NetWolves a true and complete
list setting forth all of the employees and officers of SMCI with a description
of their job designations, compensation, benefits (including severance pay and
bonuses), outstanding loans to officers or employees and all understandings not
in the ordinary course of business relating to terms and conditions of
employment. Proper and accurate amounts have been withheld by SMCI from their
employees for all periods in full compliance with tax withholding provisions of
applicable federal, state, local or foreign law. Proper and accurate federal,
state, local and foreign returns have been filed by SMCI for all periods for
which returns were due with respect to employee income tax withholding, social
security and unemployment taxes, and the amounts shown thereon to be due and
payable have been paid.
SECTION 2.20 Labor Relations. Except as set forth on Schedule 2.20, there
has been no material violation of any federal, state or local statutes, laws,
ordinances, rules, regulations, orders or directives with respect to the
employment of individuals by, or the employment practices or work conditions of,
SMCI, or their respective terms and conditions of employment, wages and hours.
SMCI is not engaged in any unfair labor practice or other unlawful employment
practice and there are no unfair labor practice charges or other employee
related complaints against SMCI pending or, to the knowledge of SMCI and the
Stockholders, threatened before any other federal, state, or local, or other
governmental authority by or concerning the employees of SMCI.
SECTION 2.21 Benefit Plans. (a) Schedule 2.21 hereto sets forth a true and
complete list of each "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) maintained by SMCI or an Affiliate or to which SMCI or an
Affiliate contributes or is required to contribute, including any multiemployer
employee welfare benefit plan, on behalf of officers and employees of SMCI or an
Affiliate (such multiemployer and other employee welfare benefit plans being
hereinafter collectively referred to as the "Welfare Benefit Plans"). With
respect to each Welfare Benefit Plan, all contributions or premiums due by the
Closing Date have been paid or accrued. All Welfare Benefits Plans are fully
funded, none of which are defined benefit plans.
<PAGE>
(b) All Welfare Benefit Plans, and each employee pension benefit plan
(as defined in Section 3(2) ERISA) and all plans, agreements, arrangements and
commitments related thereto ("Pension Benefit Plans") are legal, valid and
binding in full force and effect and in compliance with all applicable rules,
regulations and laws.
(c) Each Pension Benefit Plan, each Welfare Benefit Plan and each
related trust agreement and annuity contract and insurance policy (and any other
funding instruments) complies and has complied, both as to form and operation,
with the provisions of (A) the Code in order to be tax qualified under Section
401(a) or 403(a) of the Code; (B) ERISA; and (C) all other applicable laws,
rules and regulations; all necessary government approvals for the Pension
Benefit Plans have been obtained; and favorable determination letters, copies of
which have been made available to NetWolves, as to the qualification under the
Code of each of the Pension Benefit Plans and each amendment thereto have been
received from the Internal Revenue Service and no event has occurred or
condition exists which would adversely affect such determination.
(d) Each Welfare Benefit Plan and each Pension Benefit Plan has been
administered to date in material compliance with the requirements of the Code,
ERISA and all other applicable laws and all reports required by any government
agency.
(e) Neither SMCI, nor any Affiliate, nor any plan fiduciary of any
Welfare Benefit Plan or Pension Benefit Plan has engaged in any transaction in
violation of Section 406 of ERISA or any "prohibited transaction" (as described
in Section 4975(c) of the Code), except to the extent that such violation would
not result in an aggregate cost, fine or penalty in excess of $1,000.
(f) Schedule 2.21 lists each deferred compensation plan, bonus plan,
stock option plan, employee stock purchase plan and any other employee benefit
plan, agreement, arrangement or commitment not required under a previous
subsection to be listed on Schedule 2.21 maintained by SMCI or an Affiliate with
respect to the compensation of any of their employees.
(g) There are no actions, suits or claims (other than routine claims
for benefits) pending or which could reasonably be expected to be asserted
against any Pension Benefit Plan or Welfare Benefit Plan; there are no civil or
criminal actions pending or threatened against any fiduciary, Pension Benefit
Plan or Welfare Benefit Plan with respect to the plan; and no Pension Benefit
Plan or Welfare Benefit Plan is the direct or indirect subject of any audit,
investigation or examination by any governmental or quasigovernmental agency,
and no such completed audit, investigation or examination, if any, has resulted
in the imposition of any fine or penalty on any person.
(h) All Welfare Benefit Plans, Pension Benefit Plans, related trust
agreements or annuity contracts (or any other funding instruments), and all
plans, agreements, arrangements and commitments referred to in this Section 2.21
are legally valid and binding and in full force and effect and in compliance
with all applicable laws.
SECTION 2.22 Litigation; Compliance; Permits. Except as disclosed in
Schedule 2.22 hereto, there are no actions, suits, proceedings, arbitrations or
governmental investigations pending, or, to the best of Stockholders' knowledge,
threatened against, by or affecting SMCI in which, individually or in the
aggregate, an unfavorable determination could adversely affect by $15,000 or
more the business of SMCI or their earnings or condition (financial or
otherwise) or any of their assets or result in any liability on the part of SMCI
or prevent, hinder or delay the execution and performance of this Agreement or
any of the transactions contemplated hereby, or could declare this Agreement
<PAGE>
unlawful or cause the rescission of any of the transactions hereunder, or
require NetWolves or TSG to divest itself of the Stock; nor has any such suit
been pending within the two years prior to the date hereof. SMCI has not been
charged with or received notice of any violation of any applicable federal,
state, local or foreign law, rule, regulation, ordinance, order or decree
relating to it, or the operation of its business, and the Stockholders are not
aware of any threatened claim of such violation (including any investigation) or
any basis therefor.
SMCI has complied and is in compliance with, all laws, rules, regulations,
ordinances, orders, judgments, decrees, writs, injunctions, building codes,
safety, fire and health approvals, certificates of occupancy or other
governmental restrictions applicable to them, their assets, employees and
employment practices, except where the failure to so comply would not have an
adverse effect of $15,000 or more on them, their business, assets, financial
condition, employees and employment practices.
SMCI has all material governmental licenses, permits, approvals or other
authorizations required for the conduct of their business as now conducted, all
of which are in full force and effect and all of which are listed on Schedule
2.22 hereto; there is no action pending or, to the knowledge of SMCI and
Stockholders, threatened, to terminate any rights under any such governmental
licenses, permits or authorizations; and except as disclosed on Schedule 2.22 at
the Closing, none of such licenses, permits, approvals and authorizations will
be adversely affected by this Agreement or the consummation of the other
transactions contemplated by this Agreement.
SECTION 2.23 Environmental Compliance. Except as set forth in Schedule
2.23, (i) all of the assets and properties presently owned, leased or operated
by SMCI is in compliance with all Environmental Laws, except where the
noncompliance with any such Environmental Laws would have an adverse effect of
$15,000 or less in the aggregate on the business, assets and financial condition
of SMCI, and is not subject to any pending or, to the knowledge of the
Stockholders or SMCI, threatened Environmental Actions; (ii) none of the assets
and properties which have been or are now owned, leased or operated by SMCI have
been used by SMCI for the generation, storage, manufacture, use, transportation,
disposal or treatment of Hazardous Substances; (iii) there has been no Hazardous
Discharge by SMCI on or from any of the assets and properties presently or
formerly owned, leased or operated by SMCI; (iv) there are no outstanding, or to
the knowledge of SMCI and the Stockholders, threatened Environmental Actions
against SMCI; and (v) SMCI has not owned, possessed or arranged for the
transportation of Hazardous Substances at any site where any of them have
performed remediation services. No employee or other person has ever made a
claim or demand against SMCI of which SMCI has received written notice based on
alleged damage to health caused by any Hazardous Substance. All services
performed by SMCI, including, without limitation, remediation activities, were
and are in full compliance with all Environmental Laws and applicable industrial
and professional standards, except where the noncompliance with any of the
foregoing would have an adverse effect of $15,000 or less in the aggregate on
the business, assets and financial condition of SMCI.
<PAGE>
SECTION 2.24 Corporate Records. The copy of the certificate of
incorporation of SMCI and all amendments thereof to date, certified by the
Secretary of State of their respective jurisdictions of incorporation and of the
by-laws of SMCI, as amended to date, certified by the Secretary or an Assistant
Secretary of SMCI, as applicable, all under a date not more than five (5) days
prior to the Closing Date which have been or will be delivered to NetWolves are
complete and correct, and the minute books of SMCI correctly reflect all
material corporate actions taken at all meetings of directors (including
committees thereof) and Stockholders, and correctly record all resolutions
certified copies of which have been delivered to other parties. The stock
transfer books (with all canceled and unused stock certificates attached) and
stock ledgers are complete and correct and correctly reflect all issuances and
transfers of the capital stock of SMCI.
SECTION 2.25 Disclosure. No representation or warranty by the Stockholders
or SMCI and no statement or certificate furnished or to be furnished by or on
behalf of the Stockholders, SMCI to NetWolves or its agents pursuant to this
Agreement or in connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
As used in this Section 2.25 and elsewhere in this Agreement the term
"to the knowledge of the Stockholders" or "to the best of the Stockholders'
knowledge" means the actual knowledge of the Stockholders or any executive
officer or director of SMCI after due inquiry.
SECTION 2.26 Investment Intent. Those Stockholders who are acquiring
NetWolves Common Stock are doing so for investment purposes only and not with a
view to, or for sale in connection with, any distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"); the
holders of NetWolves Common Stock understand that none of NetWolves Stock has
been registered under the Securities Act or qualified under applicable state
securities laws, and all of such NetWolves Common Stock are "restricted
securities" within the meaning of the Securities Act, may not be transferred or
sold without registration under the Securities Act or an exemption therefrom and
further restricted from transfer, gift, hypothecation or sale for eighteen
months without the written consent of NetWolves.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NETWOLVES
NetWolves hereby represents and warrants to SMCI that, except as set forth
in the written disclosure schedule delivered by NetWolves to SMCI (the
"NetWolves Disclosure Schedule"):
SECTION 3.1 Corporate Organization. NetWolves is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite corporate
power and authority to own, operate and lease its properties and assets as and
where the same are owned, operated or leased and to conduct its business as it
is now being conducted. NetWolves is in good standing and duly qualified or
licensed as a foreign corporation to do business in those jurisdictions in which
the location of the property and assets owned, operated or leased by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect. NetWolves has heretofore delivered to SMCI
complete and correct copies of the Certificate of Incorporation and By-laws, as
amended of TSG to and as in effect on the date hereof.
<PAGE>
SECTION 3.2 Capitalization. The authorized capital stock of TSG as of the
date hereof consists of ten million (10,000,000) shares of Common Stock par
value one thousandth of a dollar ($0.001) per share ("TSG Common Stock") and one
million (1,000,000) shares of preferred stock par value of one dollar ($1.00)
per share ("TSG Stock"). All four million one hundred fifty thousand (4,150,000)
shares of TSG Common Stock outstanding and owned beneficially and of record by
NetWolves have been duly issued as of the date hereof. TSG has no subsidiaries,
no material assets or liabilities (except pursuant to this Agreement) and was
formed solely to facilitate the Merger.
SECTION 3.3 Authorization; Execution and Delivery. Each of NetWolves and
TSG has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by each of NetWolves and TSG and the consummation
by NetWolves or TSG of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of NetWolves and TSG.
This Agreement has been duly executed and delivered by NetWolves and TSG and
constitutes the legal, valid and binding obligation of NetWolves and TSG,
enforceable against NetWolves and TSG in accordance with its terms, except for
the Exceptions.
SECTION 3.4 Shares of NetWolves. NetWolves Common Stock to be issued
hereunder will, when issued, be fully paid and nonassessable, and there will be
no preemptive or similar rights in respect of such common stock.
SECTION 3.5 Governmental Approvals and Filings. No approval, authorization,
consent, license, clearance or order of, declaration or notification to, or
filing or registration with, any governmental or regulatory authority that
currently regulates NetWolves or TSG is required in order to permit NetWolves or
TSG to consummate the Merger or perform its obligations under this Agreement.
SECTION 3.6 No Conflict. Neither the execution, delivery and performance of
this Agreement by NetWolves or TSG, nor the consummation by NetWolves or TSG of
the transactions contemplated hereby, will (i) conflict with, or result in a
breach or violation of, any provision of the certificate of incorporation (or
similar organizational document) or by-laws of NetWolves or TSG; (ii) conflict
with, result in a breach or violation of, give rise to a default, or result in
the acceleration of performance, or permit the acceleration of performance,
under (whether or not after the giving of notice or lapse of time or both) any
Encumbrance, note, bond, indenture, guaranty, lease, license, agreement or other
instrument, writ, injunction, order, judgment, decree, statute, rule or
regulation to which NetWolves or TSG or any of their respective properties or
assets is subject; (iii) give rise to a declaration or imposition of any
Encumbrance upon any of the properties or assets of NetWolves or TSG; or (iv)
impair NetWolves' business or adversely affect any Governmental License
necessary to enable NetWolves and TSG to carry on their business as presently
conducted, except, in the cases of clauses (ii), (iii) or (iv), for any
conflict, breach, violation, default, declaration, imposition or impairment that
would not have a Material Adverse Effect.
<PAGE>
SECTION 3.7 No Legal Proceedings. Neither the execution and delivery of
this Agreement by NetWolves or TSG, nor the consummation by NetWolves or TSG of
the transactions contemplated hereby, are being challenged by or are the subject
of any pending or, to the knowledge of NetWolves or TSG, threatened litigation
or governmental investigation or proceeding as of the date of this Agreement.
SECTION 3.8 Finders. No broker, finder or investment advisor acted directly
or indirectly as such for NetWolves, any Subsidiary of NetWolves or any
stockholder of NetWolves in connection with this Agreement or the Merger, and no
broker, finder, investment advisor or other Person is entitled to any fee or
other commission, or other remuneration, in respect thereof based in any way on
any action, agreement, arrangement or understanding taken or made by or on
behalf of NetWolves, any Subsidiary of NetWolves or any stockholder of
NetWolves.
ARTICLE IV
COVENANTS, TRANSACTIONS AND CONDUCT OF
BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by SMCI Pending the Merger. SMCI covenants
and agrees that during the period from the date of this Agreement until the
earlier of the termination of this Agreement or the Effective Time, unless
NetWolves shall otherwise agree in writing, (i) SMCI shall conduct its business
only in the ordinary course of business consistent with past practice; (ii) that
SMCI shall use reasonable commercial efforts to preserve substantially intact
the business organization of SMCI, to keep available the services of the present
officers, employees, agents and consultants of SMCI and to preserve the present
relationships of SMCI with governmental agencies, insurance brokers, insurance
companies, lenders, customers, suppliers and other Persons with which SMCI has
significant regulatory or business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, SMCI shall not, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, directly or indirectly do,
or propose to do, any of the following:
(a) amend or otherwise change SMCI's Certificate of Incorporation or
By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest) in SMCI or any of its
Affiliates;
(c) sell, pledge, dispose of or encumber any assets of SMCI (except for (i)
sales of assets in the ordinary course of business and in a manner consistent
with past practice, (ii) dispositions of obsolete or worthless assets, and (iii)
sales of immaterial assets not in excess of $15,000);
(d) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock; (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
<PAGE>
(iii) amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire, any of its securities, including,
without limitation, shares of Company Common Stock or any option, warrant or
right, directly or indirectly, to acquire shares of Company Common Stock;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money, except for borrowings
and reborrowing under SMCI's existing credit facilities or issue any debt
securities or assume, guarantee (other than guarantees of bank debt of SMCI's
subsidiaries under existing credit facilities entered into in the ordinary
course of business) or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans or advances,
except in the ordinary course of business consistent with past practice; (iii)
authorize any capital expenditures or purchases of fixed assets which are, in
the aggregate, in excess of $50,000; or (iv) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters prohibited by
this Section 4.1(e);
(f) make any material change in the rate of compensation, commission, bonus
or other remuneration payable, or pay or agree or promise to pay, conditionally
or otherwise, any bonus, extra compensation, pension or severance or vacation
pay, to any director, officer, employee, salesman, broker or agent of SMCI
except in the ordinary course of business consistent with prior practice;
(g) take any action to change accounting practices, policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable or collection of accounts receivable);
(h) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) in excess of $15,000 per matter or
$50,000 in the aggregate, other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in SMCI Financial Statements or incurred in the
ordinary course of business and consistent with past practice; or
(i) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (h) above, or any action which would make
any of the representations or warranties of SMCI contained in this Agreement
untrue or incorrect in any material respect or prevent SMCI from performing or
cause SMCI not to perform its covenants herein.
SECTION 4.2 Access to Information. SMCI will give NetWolves and TSG, and
their respective counsel, financial advisors, auditors and other authorized
representatives, full access to the offices (including a work area for the use
of NetWolves and TSG and their authorized representatives), properties,
employees, books and records of SMCI and its subsidiaries at all reasonable
times upon reasonable notice, and will instruct the employees, counsel,
financial advisors and auditors of SMCI and its subsidiaries to cooperate in all
reasonable respects with NetWolves and TSG and each such representative in its
investigation of the business of SMCI and its subsidiaries, provided that no
investigation pursuant to this Section 4.2 shall affect any representation or
warranty given by SMCI to NetWolves or TSG hereunder. SMCI will confer from time
to time with NetWolves at NetWolves' request to discuss the status of the
operations of SMCI and its subsidiaries.
<PAGE>
SECTION 4.3 Best Efforts. Subject to the terms and conditions herein
provided, each of SMCI, NetWolves and TSG agrees to use its commercially
reasonable efforts consistent with applicable legal requirements to take, or
cause to be taken, all action, and to do, or cause to be done, all things
reasonably necessary or proper and advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
reasonably practicable, the Merger and the other transactions contemplated by
this Agreement.
SECTION 4.4 Consents. NetWolves and SMCI each shall use their respective
commercially reasonable efforts to obtain all material consents of third parties
and governmental authorities, and to make all governmental filings, necessary
for the consummation of the transactions contemplated by this Agreement.
SECTION 4.5 Public Announcements. Except as hereinafter provided in this
Section 4.5, NetWolves and SMCI will consult with each other before issuing any
press release or otherwise making any public statements prior to the Effective
Time with respect to the Merger or the other transactions contemplated hereby
and shall not issue any such press release or make any such public statement
prior to receiving the consent of the other party, which consent will not be
unreasonably withheld or delayed. Nothing stated herein shall prohibit any party
from making a press release or other statement required by law or by obligations
pursuant to any listing agreement with any automated interdealer quotation
system if the party making the disclosure has first consulted with the other
parties hereto.
SECTION 4.6 Notification of Certain Matters. SMCI will give prompt notice,
as soon as reasonably practicable, to NetWolves and TSG of the occurrence or
non-occurrence of any event (i) which has had or is reasonably likely to have a
Material Adverse Effect, (ii) which has caused any representation or warranty of
SMCI contained in this Agreement to be untrue or inaccurate in any material
respect or (iii) which has caused any failure of SMCI to comply in all material
respects with or satisfy in all material respects any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
however, that the delivery of any notice pursuant to this Section 4.6 will not
limit or otherwise affect the remedies available under this Agreement to
NetWolves or limit the rights of SMCI under this Agreement.
SECTION 4.7 Conveyance Taxes. NetWolves and SMCI shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time and the Surviving TSG
shall be responsible for the payment of all such taxes and fees.
<PAGE>
ARTICLE V
GENERAL PROVISIONS
SECTION 5.1 Effectiveness of Representations, Warranties and Agreements.
(a) Except as otherwise provided in this Section 5.1, the representations,
warranties, covenants and agreements of each party hereto shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any other party hereto, any Person controlling any such party or any
of their officers, directors or representatives, whether prior to or after the
execution of this Agreement, for a period of three (3) years from the Effective
Time.
(b) Any disclosure made with reference to one or more Sections of SMCI
disclosure schedule or NetWolves disclosure schedule shall be deemed disclosed
with respect to each other section therein as to which such disclosure is
relevant provided that such relevance is reasonably apparent. Disclosure of any
matter in SMCI disclosure schedule or NetWolves disclosure schedule shall not be
deemed an admission that such matter is material.
SECTION 5.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(A) If to NetWolves or TSG:
NetWolves Corporation
200 Broadhollow Road, Suite 207
Melville, New York 11747
Attn: Walter M. Groteke
Telecopier No.: (516) 393-5017
Telephone No.: ( 516) 393-5016
With a copy to:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
Telecopier No.: (516) 822-4824
Telephone No.: (516) 822-4820
Attention: David H. Lieberman, Esq.
<PAGE>
(B) If to SMCI:
Sales and Management Consulting, Inc.
d/b/a The Sullivan Group and
Duffy-Vinet Institute
320 Soundview Road
Guilford, Connecticut 06457
Telecopier No.: (203) 453-1259
Telephone No.: ( 203) 453-0893
Attention: Mr. Martin Cunningham
With a copy to:
Fasciana and Associates, P.C.
358 Fifth Avenue
New York, New York 10001
Telecopier No.: (212) 922-9606
Telephone No.: (212) 922-5300
Attention: John E. Fasciana, Esq.
SECTION 5.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "Affiliate" means a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned Person;
(b) "Business Day" means any day other than a day on which banks in
the State of New York are required or authorized to be closed;
(c) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization other entity
or group (as defined in Section 13(d)(3) of the Securities and Exchange Act of
1934); and
(e) "Subsidiary" or "Subsidiaries" of any Person means any
corporation, partnership, limited liability company, or other legal entity of
which such Person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
<PAGE>
SECTION 5.4 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval and
adoption of the Merger and this Agreement by the Stockholders of SMCI, no
amendment may be made which by law requires further approval by such
Stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 5.5 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 5.6 Headings; Construction. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement (a) words
denoting the singular include the plural and vice versa, (b) "it" or "its" or
words denoting any gender include all genders, (c) the word "including" shall
mean "including without limitation," whether or not expressed, (d) any reference
to a statute shall mean the statute and any regulations thereunder in force as
of the date of this Agreement or the Effective Time, as applicable, unless
otherwise expressly provided, (e) any reference herein to a Section, Article,
Schedule or Exhibit refers to a Section or Article of or a Schedule or Exhibit
to this Agreement, unless otherwise stated, (f) when calculating the period of
time within or following which any act is to be done or steps taken, the date
which is the reference day in calculating such period shall be excluded and if
the last day of such period is not a Business Day, then the period shall end on
the next day which is a Business Day, and (g) any reference to a party's "best
efforts" or "reasonable efforts" shall not include any obligation of such party
to pay, or guarantee the payment of, money or other consideration to any third
party or to agree to the imposition on such party or its Affiliates of any
condition reasonably considered by such party to be materially burdensome to
such party or its Affiliates.
SECTION 5.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent reasonably
possible.
SECTION 5.8 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letter), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, except as otherwise expressly
provided herein.
<PAGE>
SECTION 5.9 Assignment; TSG. This Agreement shall not be assigned by
operation of law or otherwise, except that all or any of the rights of TSG
hereunder may be assigned to any direct, wholly-owned Subsidiary of NetWolves
provided that no such assignment shall relieve the assigning party of its
obligations hereunder.
SECTION 5.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 5.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 5.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to contracts executed and fully performed within the State of New
York, without regard to conflicts of laws provisions.
SECTION 5.13 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 5.14 WAIVER OF JURY TRIAL. EACH OF NETWOLVES, TSG SMCI AND THE
STOCKHOLDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE>
IN WITNESS WHEREOF, NetWolves, TSG and SMCI have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
NETWOLVES CORPORATION
By /s/ Walter M. Groteke
------------------------------------------
Name: Walter M. Groteke
Title: Chief Executive Officer
TSG
By /s/ Martin E. Cunningham
------------------------------------------
Name: Martin E. Cunningham
Title: President/CEO
SALES AND MANAGEMENT
CONSULTING, INC., d/b/a,
THE SULLIVAN GROUP and
DUFFY-VINET INSTITUTE
By /s/ Martin E. Cunningham
------------------------------------------
Name: Martin E. Cunningham
Title: President/CEO
/s/ David Sullivan
------------------------------------------
David Sullivan, Stockholder
/s/ Martin E. Cunningham
------------------------------------------
Martin Cunningham, Stockholder
/s/ Ronald B. Collins
------------------------------------------
Ronald B. Collins, Stockholder
/s/ John J. Phelan
------------------------------------------
John J. Phelan, Stockholder
/s/ Daniel J. Molloy
------------------------------------------
Daniel J. Molloy, Stockholder
TSG GLOBAL EDUCATION WEB, INC.
SHAREHOLDERS AGREEMENT
<PAGE>
TABLE OF CONTENTS
1. Representations of the Shareholders . . . . . . . . . . . .1
2. Corporate Governance and Related Matters. . . . . . . . . .2
3. Restriction on Transfer of Shares.. . . . . . . . . . . . .3
4. Right of First Refusal. . . . . . . . . . . . . . . . . . .4
5. Rights of Inclusion (Tag Along).. . . . . . . . . . . . . .6
6. Purchase of Shares upon Death of a Shareholder. . . . . . .7
7. Disposition of Shares Upon Disability of Shareholder/
Employee. . . . . . . . . . . . . . . . . . . . . . . . . .9
8. Right to Purchase - Call Option.. . . . . . . . . . . . . 11
9. Purchase Price. . . . . . . . . . . . . . . . . . . . . . 11
10. Loans.. . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . 12
12. Injunctive Relief; Specific Performance.. . . . . . . . . 13
13. Corporate Surplus.. . . . . . . . . . . . . . . . . . . . 13
14. Shareholder Inspection of Corporate Books.. . . . . . . . 13
15. Voting Requirements.. . . . . . . . . . . . . . . . . . . 13
16. Capital Contributions.. . . . . . . . . . . . . . . . . . 15
17. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . 18
EXHIBIT A Shareholder List. . . . . . . . . . . . . . . . . 21
<PAGE>
TSG GLOBAL EDUCATION WEB, INC.
SHAREHOLDERS AGREEMENT
----------------------
SHAREHOLDERS' AGREEMENT, effective as of July 7, 1999 (this "Agreement"),
by and among TSG GLOBAL EDUCATION WEB, INC., a Delaware corporation with offices
at P.O. Box 300, 320 Soundview Road, Guilford, CT 06437, (the "Corporation"),
and each of the persons being herein collectively referred to as the
"Shareholders" and individually as a "Shareholder").
WHEREAS, the Corporation is authorized to issue ten million (10,000,000)
shares of Common Stock, $0.001 par value (the "Common Stock"), five million
(5,000,000) shares of which four million two hundred twenty thousand (4,220,000)
are currently issued and outstanding with seven hundred eighty thousand
(780,000) in reserve and one million (1,000,000) shares of Preferred Stock $1.00
par value ("Preferred Stock") of which two hundred fifty thousand (250,000)
shares are currently issued and outstanding;
WHEREAS, the Shareholders own all of the issued and outstanding shares of
the Common Stock of the Corporation, in the amounts set forth on Exhibit A
annexed hereto; and
WHEREAS, the initial Shareholders shall be NetWolves Corporation
("NetWolves") and David H. Sullivan, Martin E. Cunningham, Ronald B. Collins,
John J. Phelan and Daniel J. Molloy ("Sullivan Shareholders").
WHEREAS, the Shareholders and the Corporation desire to regulate the
management of the Corporation, the transfer of the shares of Common Stock and
Preferred Stock now owned or hereafter acquired by the Shareholders (such shares
being hereinafter referred to as the "Shares"), the purchase by the Corporation
and/or the Shareholders of the Shares in certain circumstances and certain other
matters relating to the Corporation, all in accordance with the terms and
subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto hereby agree as follows:
1. Representations of the Shareholders.
Each Shareholder represents to and agrees with the other Shareholders and
the Corporation that such Shareholder is the legal holder and beneficial
owner of the Shares currently owned by such Shareholder, that such Shares
and the Shares hereafter acquired by such Shareholder will be owned free
and clear of all liens, claims, charges, options and encumbrances other
than restrictions on transfer under this Agreement, and applicable federal
and state securities laws, and that such Shareholder will have the right to
transfer such Shares upon the terms and subject to the conditions of this
Agreement.
<PAGE>
2. Corporate Governance and Related Matters.
Each Shareholder hereby agrees, during the term of this Agreement, to vote
the Shares owned by such Shareholder in the following manner:
a. Upon the execution of this Agreement, each of the Shareholders shall
vote such Shareholder's Shares so as to elect, two (2) persons
designated by David H. Sullivan ("Sullivan") or in the event of his
death or disability, Martin E. Cunningham ("Cunningham") and, three
(3) persons designated by NetWolves as directors of the Corporation.
In the event that NetWolves fails to fund an aggregate amount of
$1,750,000 in accordance with the terms of the Agreement, then
Sullivan shall have the right to designate one (1) additional member
of the Board of Directors. In the event that NetWolves is unable to
provide additional funding beyond one million seven hundred fifty
thousand dollars ($1,750,000.00) to the Corporation, the Board of
Directors will be expanded to seven (7) members to be allocated as
follows: four (4) persons to be designated NetWolves, two (2) persons
to be designated by Sullivan and one (1) person to be designated by a
new equity investor.
In the event any of the foregoing persons shall be unable or unwilling
to serve as a director of the Corporation, the Shareholders shall vote
all of their Shares so as to elect such replacement or additional
nominees as Sullivan shall designate or, in the case of a NetWolves
designee, as NetWolves shall designate. If the number of members of
the Board of Directors is increased to more than seven (7) directors,
the Shareholders shall vote all of their Shares so as to allocate the
additional directors between Sullivan designees and NetWolves
designees.
b. Each Shareholder shall vote such Shareholder's Shares in favor of any
amendment of the Certificate of Incorporation or By-laws of the
Corporation necessary to permit, effect and further carry out the
transactions contemplated hereby.
c. The Shareholders shall vote, and shall cause all persons nominated and
elected by them as directors of the Corporation to appoint the
following persons to the offices set forth opposite their names below:
Martin E. Cunningham: President and Chief Executive Officer
Peter Castle: Secretary
David H. Sullivan: Treasurer and Chairman of the Board
d. If any Shareholder shall refuse or is unable to vote its Shares as
provided in this Section 2 at any meeting of the Shareholders of the
Corporation, or shall refuse or is unable to give its consent in lieu
of a meeting, thereupon, without further action by such Shareholder,
the President or Secretary shall be, and each of them hereby is,
irrevocably constituted the attorney-in-fact and proxy of such
<PAGE>
Shareholder (i) for the purpose of voting, and shall vote, such Shares
at such meeting as provided in this Section 2; or (ii) for the purpose
of giving such written consent, as the case may be. The Shareholders
acknowledge and agree that such proxy is coupled with an interest and
is irrevocable.
e. In the event that the Corporation consummates an initial public
offering or merges with a publicly held shell, then this Agreement
shall terminate as to the Corporation only. The Agreement will remain
in effect as to the Shareholders.
f. In the event that all or substantially all of the assets or common
stock of NetWolves is sold or NetWolves merges into or is acquired by
a third party (hereinafter the "Sale") then this Agreement shall
terminate as follows:
i. As to NetWolves and its successors or assigns only, provided that
Cunningham and Sullivan each shall receive gross pre-tax proceeds
of one million one hundred five thousand dollars ($1,105,000.00)
in connection with the Sale of their shares of NetWolves or
otherwise; or
ii. In its entirety, provided that Sullivan and Cunningham shall each
receive minimum gross pre-tax proceeds of, two million dollars
($2,000,000.00) in connection with the Sale of their shares of
NetWolves or otherwise.
Nothing herein shall prohibit Sullivan and Cunningham from receiving
additional gross pre-tax proceeds based upon their stock ownership in
NetWolves.
g. Each of the Shareholders shall vote such Shareholder's Shares to
establish a Qualified Incentive Stock Option Plan which has reserved
780,000 shares of Common Stock to be granted in accordance with such
plan.
3. Restriction on Transfer of Shares.
a. The Corporation and the Shareholders wish to avoid the transfer of
Shares to outside third parties who do not have a knowledge of the
Corporation's business and who may disrupt the management of the
Corporation. Each Shareholder hereby agrees that such Shareholder
shall not, as long as this Agreement is in effect, directly or in
directly sell, assign, mortgage, hypothecate, transfer, pledge, lien,
encumber, give or in any way otherwise dispose of (collectively, a
"Transfer") any of the Shares (or any interest therein) except as may
be expressly permitted by this Agreement. The Corporation shall not
transfer on its books any certificates for the Shares nor issue any
certificate in lieu of the Shares unless, in the opinion of counsel to
the Corporation, there has been compliance with all of the material
<PAGE>
conditions hereof affecting the Shares. Any purported disposition of
any Shares made other than in full compliance with the terms of this
Agreement shall be null and void and of no force or effect, and shall
not be recognized by the Corporation.
b. Notwithstanding the general prohibition on Transfers contained in
Section 3(a) of this Agreement hereof, the Corporation and the
Shareholders agree that any of the following Transfers shall be
permitted under this Agreement:
i. A Transfer in accordance with Sections 4, 5, 6, 7 or 8 hereof;
ii. A Transfer by NetWolves to any wholly-owned, direct or indirect
subsidiary of NetWolves;
iii. A Transfer or sale by NetWolves of all or substantially all of
the assets or common stock, of NetWolves to a third party, or the
merger into or acquisition of NetWolves by a third party; or
iv. A Transfer to any other party to this Agreement.
c. Upon the execution of this Agreement, each Shareholder shall surrender
to the Corporation his or its stock certificate representing the
Shares, which stock certificate shall be imprinted with the following
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and cannot be
offered or sold except pursuant to an effective registration statement
under such Act or an exemption from registration under such Act which,
in the opinion of counsel for the holder, which counsel and opinion
are reasonably satisfactory to counsel for the corporation, is
available.
The Shares represented hereby are also subject to the terms of a
Shareholders' Agreement, dated as of July 7, 1999, by and among TSG
Global Education Web, Inc., and its Shareholders, a copy of which is
on file at the principal office of the Corporation, and any sale,
pledge, gift, transfer, assignment, encumbrance or other disposition
of the shares represented by this certificate in violation of said
Agreement shall be void and of no effect."
d. As a further condition of any Transfer pursuant to this Agreement,
each transferee shall, prior to such Transfer, agree in writing to be
bound by all of the provisions of this Agreement and no such
transferee shall be permitted to make any Transfer that the original
transferor was not permitted to make.
<PAGE>
4. Right of First Refusal.
a. Except as provided in paragraph 3(b) hereof, in the event any
Shareholder shall receive a bona fide written non-collusive offer
or enter into an agreement (the "Offer") for the purchase of his
or its Shares ("Selling Shareholder") from an independent third
party (the "Outside Party"), he, or it or they shall give notice
(the "Option Notice") to the Corporation and the other
Shareholders containing the name and address of the Outside Party
and accompanied by a copy of the Offer. (The Shares subject to
such Offer are referred to herein as the "Offered Shares").
b. Upon the giving by a Selling Shareholder of an Option Notice, the
other Shareholders shall have the right to purchase (the
"Shareholder Right"), at the price, on the terms and subject to
the conditions specified in the Offer, the Offered Shares by
notifying the Selling Shareholder and the Corporation, (the
"Shareholder Notice") within twenty-five (25) days after the date
of the Option Notice whether and to what extent the other
Shareholders intend to exercise the Shareholder Right. If the
other Shareholders fail to exercise the Shareholder Right as to
his or its Proportionate Share (as hereinafter defined) of the
Offered Shares, then the other Shareholders shall have the right
to purchase all or any part of the Offered Shares that any
Shareholders have elected not to purchase by amending his or its
Shareholder Notice within five (5) days after the date that the
Shareholders receive notice that any other Shareholder has so
declined to exercise the Shareholder Right in full or in part.
Failure to deliver the Shareholder Notice within the applicable
periods shall constitute a waiver of such Shareholder's purchase
right as to the Offered Shares.
c. In the event that the Shareholders do not exercise the
Shareholder Right as to all of the Offered Shares, the
Corporation, to the extent permitted by law, shall have the right
(the "Corporation Right") to purchase, at the price, on the terms
and subject to the conditions specified in the Offer, all or part
of the remaining Offered Shares covered by the Option Notice.
Within thirty (30) days after the date of the Option Notice, the
Corporation shall notify the Shareholders (the "Corporation
Notice") whether and to what extent it intends to exercise the
Corporation Right. Failure to deliver the Corporation Notice
within such period shall constitute a waiver of the Corporation
Right.
d. Any Selling Shareholder shall have the obligation to sell to the
other Shareholders and/or the Corporation, as the case may be,
such Offered Shares as are covered by the notices referred to in
Sections 4(b) or 4(c) hereof, and the Selling Shareholder may
sell the balance of the Offered Shares (or all of the Offered
Shares if no such notices have been given) to the Outside Party
on terms not more favorable to such Outside Party than those
contained in the Offer. In the event that such terms are more
favorable or if such sale to the Outside Party is not consummated
within the time period specified in Section 4(e) hereof, the
Offered Shares shall again be subject to the restrictions
contained in this Agreement.
<PAGE>
e. The closing for any purchase of Shares ("Closing") by any
Shareholder, and/or the Corporation shall be held at 10:00 a.m.
at the offices of the Corporation on the sixtieth (60th) day
after the date of the Option Notice or at such other time and
place as the parties shall mutually agree. The Closing of a
purchase of Shares by an Outside Party shall occur within sixty
(60) days after the giving of the Option Notice. At the Closing,
the Shareholders, the Corporation or the Outside Party, as the
case may be, shall pay for the Shares in accordance with the
terms of the Offer, the Shareholder shall deliver certificates
representing the Shares free and clear of all liens, charges and
encumbrances (other than those set forth herein or in the Stock
Purchase Agreement) and properly endorsed for transfer and, if
such Shares are being purchased by an Outside Party, such person
shall agree to be bound by the terms of this Agreement in
accordance with Section 3(d) hereof.
f. For purposes of this Agreement, the term "Proportionate Share"
shall mean the percentage of the total number of Shares subject
to the Shareholder Right multiplied by a fraction, the numerator
of which shall be the number of Shares owned by a non-selling
shareholder, as the case may be, divided by all the aggregate
number of Shares owned by the Shareholders.
5. Rights of Inclusion (Tag Along).
a. Except as provided in paragraph 3(b) hereof, no Shareholder, who
owns twenty percent (20%) or more of the issued and outstanding
shares of the Corporation ("20% Shareholder") shall, in any one
transaction or any series of similar transactions, directly or
indirectly sell to any third party or otherwise dispose of more
than fifty percent (50%) of the Shares owned by him or it unless
the terms and conditions of such sale or other disposition to
such third party shall include an offer to the other Shareholders
to include, at the other Shareholders' option, in the sale or
other disposition to the third party, the other Shareholders'
ratable share of the Shares covered by such disposition. If any
20% Shareholder receives a bona fide offer from a third party to
purchase or otherwise acquire more than fifty percent (50%) of
the Shares owned by him or it, the 20% Shareholder shall then
cause the third party's offer to be reduced to writing (which
writing shall include an offer to purchase or otherwise acquire
Shares from the other Shareholders according to the terms and
conditions of Section 5(a)(ii) of this Agreement) and shall send
written notice of the third party's offer (the "Inclusion
Notice") to the other Shareholders. The Inclusion Notice shall be
accompanied by a true and correct copy of the third party's
offer. At any time within thirty (30) days after receipt of the
Inclusion Notice, the other Shareholders may accept the offer
<PAGE>
included in the Inclusion Notice for up to his or its
proportionate share by furnishing written notice of such
acceptance to the 20% Shareholder and delivering to the 20%
Shareholder the certificate or certificates representing the
Shares to be sold or otherwise disposed of pursuant to such offer
by the other Shareholders (which certificate or certificates
shall be held in escrow pending the consummation of the sale),
together with a limited power-of-attorney authorizing the 20%
Shareholder to sell or otherwise dispose of such Shares pursuant
to the terms of such third party's offer.
b. The purchase from the other Shareholders pursuant to this Section
5(b) shall be on the same terms and conditions, including the per
Share price (which shall in all events be paid directly to the
other Shareholder by bank cashier's or certified check or by wire
transfer of immediately available funds) and the date of sale or
other disposition, as are received by the 20% Shareholder and
stated in the Inclusion Notice provided to the other Shareholders
by the 20% Shareholder, however, the 20% Shareholder shall be
under no obligation to make any representations or warranties or
agree to any covenants or indemnification provisions in
connection with such sale, except for such representations,
warranties and covenants (and related indemnification) as shall
specifically relate to the 20% Shareholder.
c. Simultaneously with the consummation of the sale or other
disposition of the Shares of the Shareholders to the third party
pursuant to the third party's offer, the 20% Shareholder shall
notify the other Shareholders of the consummation of the sale,
shall cause the purchaser to remit directly to the other
Shareholders the total sales price of the other Shareholders'
Shares sold or otherwise disposed of pursuant thereto and the 20%
Shareholder shall furnish such other evidence of the completion
and time of completion of such sale or other disposition and the
terms thereof as may be reason ably requested by the other
Shareholders.
d. If within thirty (30) days after the receipt of the Inclusion
Notice, the other Shareholders have not accepted the offer
contained in the Inclusion Notice, the other Shareholders, shall
be deemed to have waived any and all rights with respect to the
sale or other disposition of the Shares described in the
Inclusion Notice and the 20% Shareholder shall have sixty (60)
days after receipt of the Inclusion Notice in which to sell or
otherwise dispose of not more than the amount of Shares described
in the Inclusion Notice, on terms not more favorable to the 20%
Shareholder than were set forth in the Inclusion Notice. If the
sale or disposition is not consummated within sixty (60) days,
the 20% Shareholder shall comply with the provisions of this
Section 5 for all proposed future sales or dispositions that are
described in Section 5(a). If, at the end of ninety (90) days
following the receipt of the Inclusion Notice, the 20%
Shareholder has not completed the sale or other disposition of
his Shares and those of the other Shareholders in accordance with
the terms of the third party's offer, the 20% Shareholder shall
<PAGE>
return all certificates of the other Shareholders representing
the Shares which the other Shareholders delivered for sale or
other disposition pursuant to this Section 5, and all the
restrictions on sale or other disposition contained in this
Agreement with respect to Shares owned by the 20% Shareholder
shall again be in effect.
6. Purchase of Shares upon Death of a Shareholder.
a. Upon the death of a Shareholder, the Corporation shall purchase
from the deceased Shareholder's estate and the deceased
Shareholder's estate shall sell to the Corporation all of the
deceased Shareholder's Shares, now owned or hereafter acquired,
in accordance with the terms and procedures set forth in Section
9 of this Agreement. For purposes of this Section 6, however: (i)
the date on which the Corporation shall purchase the deceased
Shareholder's Shares shall be the Closing Date which is no later
than sixty (60) days after the later of (A) the qualification of
the deceased Shareholder's legal representative (or, if no legal
representative is appointed or qualifies, within one hundred
eighty (180) days following the death of the deceased
Shareholder), or (B) the collection by the Corporation of the
proceeds of any policy or policies of insurance on the life of
the deceased Shareholder the Corporation may own at the time of
the deceased Shareholder's death, on which Closing Date the down
payment for the deceased Shareholder's Shares shall be paid and
the promissory note shall be delivered to the deceased
Shareholder's estate, and (ii) the amount of the down payment
shall be determined pursuant to subparagraph (b) below. In the
event that the deceased Shareholder's heirs have not caused a
legal representative for the deceased Shareholder's estate to be
appointed and qualified within one hundred twenty (120) days
following the death of the deceased Shareholder, the Corporation
may petition a court of competent jurisdiction to appoint an
appropriate legal representative for the deceased Shareholder's
estate for the purpose of permitting the sale of the deceased
Shareholder's Shares in accordance with the provisions of this
Section 6, it being the express intention of the parties that the
deceased Shareholder's estate shall be obligated to sell the
deceased Shareholder's Shares and that the Corporation be
obligated to purchase the deceased Shareholders Shares as herein
provided.
b. The full amount of the proceeds of any life insurance policies
owned by the Corporation naming the deceased Shareholder as the
insured shall be used as the down payment required to be paid
under the provisions of this Section 6, it being the agreement of
the parties that, in the event the proceeds of any such life
insurance policies owned by the Corporation equal or exceed the
amount of the Purchase Price for the deceased Shareholder's
Shares, the full amount of the Purchase Price shall be paid to
the deceased Shareholder's estate on the Closing Date in a lump
sum from such insurance proceeds. In the event the Corporation
does not own any life insurance policies naming the deceased
Shareholder as the insured, or the proceeds of any such policy or
policies received by the Corporation equal less than fifty
percent (50%) percent of the Purchase Price to be paid by the
<PAGE>
Corporation for the deceased Shareholder's Shares, then, in
either such event, the Corporation shall make a cash payment on
the Closing Date to the deceased Shareholder's estate in such an
amount as will result in a total down payment of not less than
twenty-five (25%) percent of the Purchase Price for the deceased
Shareholder's Shares. Any unpaid balance of the Purchase Price
remaining after the proceeds of any life insurance policies
and/or any cash payments made by the Corporation are paid to the
deceased Shareholder's estate shall be paid by the Corporation's
delivery to the deceased Shareholder's estate on the Closing Date
of a promissory note in the form referred to in Section 9(b) of
this Agreement.
c. In the event the Corporation is unable to purchase any or all of
the deceased Shareholder's Shares for the reasons set forth in
Section 13 of the Agreement, the surviving Shareholders shall
purchase from the deceased Shareholder's estate and the deceased
Shareholder's estate shall sell to the surviving Shareholders all
of the deceased Shareholder's Shares which the Corporation was
unable to purchase (the "Remaining Decedent's Shares") on the
same terms and conditions as hereinbefore provided with respect
to the purchase of the deceased Shareholder's Shares by the
Corporation. The obligation of the Corporation with respect to
the Remaining Decedent's Shares shall therefore be deemed to have
been assumed by the surviving Shareholders. In the event the
surviving Shareholders are unable to purchase all of the
remaining Decedents Shares, the Remaining Decedent's Shares which
the surviving Shareholders were unable to purchase (the
"remainder of Decedent's Shares") may be offered for sale to
third parties, provided that any such sale of the Remainder of
Decedent's Shares is made in full compliance with any applicable
federal and/or state laws governing the sale and issuance of
securities.
7. Disposition of Shares Upon Disability of Shareholder/Employee.
a. In the event a Shareholder, who is also an employee of the
Corporation, shall become so mentally or physically disabled that
he shall not be able to actively perform his corporate duties and
responsibilities for a period of three (3) consecutive months or
an aggregate period of six (6) months in any twelve (12) month
period the existence of such a disability to be determined by the
mutual agreement of the parties hereto, or in the event such
agreement cannot be reached, the following procedure:
i. If the Corporation maintains a disability income policy, the
definition set forth in such policy shall control, provided
the issuing insurance company agree to commence disability
payments as a result of such permanent disability.
<PAGE>
ii. If the Corporation does not maintain a disability income
policy:
1. Each party shall select an independent physician who
shall examine the subject Shareholder. The mutual
agreement of the two examining physicians shall
control, and their decision shall be binding.
2. If the two physicians cannot agree, they (the
physicians) shall select a third physician to examine
the subject Shareholder. The majority opinion of such
three (3) physicians shall control, and their decision
shall be binding;
(the "Disabled Shareholders") the Corporation shall purchase from
the Disabled Shareholder and the Disabled Shareholder shall sell
to the Corporation all of the Disabled Shareholder's Shares, now
owned or hereafter acquired, in accordance with the terms and
procedures set forth in Section 9 of this Agreement. For purposes
of this Section 7 however: (i) the date on which the Corporation
shall purchase the Disabled Shareholder's Shares shall be a date
(the "Purchase Date") which is no later than nine (9) months
following the onset of the Disabled Shareholder's disability, on
which Purchase Date the down payment for the Disabled
Shareholder's Shares shall be paid and the promissory note shall
be delivered to the Disabled Shareholder (or his legal
representative, as the case may be), and (ii) the amount of the
down payment shall be determined pursuant to subparagraph (b)
below. In the event the Disabled Shareholder is incapable of
managing his affairs and a legal representative for the Disabled
Shareholder has not been appointed and qualified within nine (9)
months following the onset of the Disabled Shareholder's
disability, the Corporation may petition a court of competent
jurisdiction to appoint an appropriate legal representative for
the Disabled Shareholder for the purpose of permitting the sale
of the Disabled Shareholder's Shares in accordance with the
provisions of this Section 7, it being the express intention of
the parties that the Disabled Shareholder shall be obligated to
sell his Shares and the Corporation is obligated to purchase the
Disabled Shareholder's Shares as herein provided.
b. The full amount of the proceeds of any disability insurance
policies owned by the Corporation naming the Disabled Shareholder
as the insured shall be used as the down payment required to be
paid under the provisions of this Section 7, it being the
agreement of the parties hereto that, in the event the proceeds
of any such disability insurance policies owned by the
Corporation equal or exceed the amount of the Purchase Price for
the Disabled Shareholder's Shares, the full amount of the
Purchase Price shall be paid to the Disabled Shareholder (or his
legal representative, as the case may be) on the Purchase Date in
a lump sum from such insurance proceeds. In the event the
Corporation does not own any disability insurance policies naming
the Disabled Shareholder as the insured, or the proceeds of any
such policy or policies received by the Corporation equal less
than fifty percent (50%) percent of the Purchase Price to be paid
by the Corporation for the Disabled Shareholder's Shares, then,
<PAGE>
in either such event, the Corporation shall make a cash payment
on the Purchase Date to the Disabled Shareholder (or his legal
representative) in such an amount as will result in a total down
payment of not less than twenty-five (25%) percent of the
Purchase Price for the Disabled Shareholder's Shares. Any unpaid
balance of the Purchase Price remaining after the proceeds of any
disability insurance policies and/or any cash payments made by
the Corporation are paid to the Disabled Shareholder (or his
legal representative) shall be paid by the Corporation's delivery
to the Disabled Shareholder (or his legal representative) on the
Purchase Date of a promissory note in the form referred to in
Section 9(b)of this Agreement.
c. In the event the Corporation is unable to purchase any or all of
the Disabled Shareholder's Shares for the reasons set forth in
Section 13 of this Agreement, the non-disabled Shareholders shall
purchase from the Disabled Shareholder and the Disabled
Shareholder shall sell to the non-disabled Shareholders all of
the Disabled Shareholder's Shares which the Corporation was
unable to purchase (the "Remaining Disabled Shareholder's
Shares") on the same terms and conditions as hereinbefore
provided with respect to the purchase of the Disabled
Shareholder's Shares by the Corporation. The obligation of the
Corporation with respect to the Remaining Disabled Shareholder's
Shares shall therefore be deemed to have been assumed by the
non-disabled Shareholders. In the event the non-disabled
Shareholders are unable to purchase all of the Remaining Disabled
Shareholder's Shares, the Remaining Disabled Shareholder's Shares
which the non-disabled Shareholders were unable to purchase (the
"Remainder of Disabled Shareholder's Shares") may be offered for
sale to third parties, provided that any such sale of the
Remainder of Disabled Shareholder's Shares is made in full
compliance with any applicable federal and/or state laws
governing the sale and issuance of securities.
8. Right to Purchase - Call Option.
a. Upon the occurrence of the following events to any Shareholder,
the Shareholder shall be obliged to offer to sell his or its
Shares to the Corporation at the Purchase Price, as defined in
Section 9 herein:
1. Shareholder files a voluntary petition of bankruptcy;
2. Any Shares of a Shareholder are directed by a court of
competent jurisdiction to be transferred to any person not a
party to this Agreement for any reason including, without
limitation, divorce or satisfaction of a judgment.
<PAGE>
9. Purchase Price.
a. The purchase price for the Shares ("Purchase Price") purchased
pursuant to this Section 9 shall be the fair market value of the
Common Stock (as determined by the Corporation's independent
certified public accountants in accordance with generally
accepted accounting principles and valued on the date of the
events enumerated in Sections 4, 5, 6, 7 or 8 of this Agreement).
b. The Closing for any purchase of Shares pursuant to this Section 9
shall be held at 10:00 a.m. at the offices of the Corporation on
the sixtieth (60th) day after the date that the Shareholders or
the Corporation provide notice that he or it is exercising his or
its right to purchase the Shares pursuant to Sections 4, 5, 6, 7
or 8 herein, or at such other time and place as the parties shall
agree. At the Closing, the Shareholders or the Corporation shall
pay for the Shares and the selling Shareholders shall deliver
certificates representing the Shares free and clear of all liens,
charges and encumbrances and properly endorsed for transfer. At
the option of the purchasing Shareholders or the Corporation,
payment of the Purchase Price for the Shares may be made in up to
thirty-six (36) equal monthly installments as determined by the
purchasing Shareholders or the Corporation in his or its sole
discretion, with the first such installment to be paid at the
closing of the purchase of such Shares and the remaining
installments to be paid on the first day of each month
thereafter. The obligation to make the installment payments shall
be evidenced by a promissory note bearing interest at a rate
equal to the prime rate of interest set forth in The Wall Street
Journal at the time of issuance and delivery of such promissory
note.
10. Loans.
a. If there shall be a loan due from the Corporation to a
Shareholder whose Shares are being sold pursuant to this
Agreement, unless there is a preexisting agreement in place, such
loan shall be repaid by the Corporation in equal monthly
installments over a thirty-six (36) month period. The obligation
of the Corporation to repay any such loan, if not already
evidenced by a promissory note, shall be evidenced by a
promissory note of the Corporation in the principal amount of
such loan, which promissory note shall bear interest at the rate
such loan was earning at the time of the purchase of such
Shareholders Shares. Said promissory note shall be delivered by
the Corporation to the Shareholder whose Shares are being sold
pursuant to this Agreement (or his estate or legal
representative, as the case may be) at the time such
Shareholder's Shares are delivered to the Corporation (or, if
such Shareholder's Shares are being sold to another Shareholder,
at the time such Shareholder's Shares are delivered to the other
Shareholder).
b. Cunningham shall have the option to borrow up to fifty thousand
dollars ($50,000.00) from the Corporation at an interest rate of
six percent (6%) per annum or the applicable federal rate,
whichever is greater. Interest only shall be payable quarterly;
however, on the third anniversary of the date of the issuance of
the promissory note the balance of the principal shall become due
and payable to the Corporation.
<PAGE>
11. Insurance.
a. The Corporation, at its option, may purchase and cause to be
maintained life insurance policies in amounts determined by the
Corporation on the Shareholder's life with the Corporation as
owner and beneficiary thereof for the purpose of meeting its
obligations under Sections 6 and 7 hereof. The Corporation may,
from time to time, purchase such additional amounts of insurance
as it deems appropriate in light of increases in the fair market
value of the Common Stock of the Corporation. The Shareholder
employees of the Corporation shall cooperate in connection with
the purchase and maintenance of any such insurance policy,
including without limitation, the submission to any medical
examinations reasonably required to obtain and main tain any such
policy.
b. Sullivan and Cunningham shall have the right to purchase keyman
insurance on the lives of Walter M. Groteke, Daniel Stephens and
Kevin F. Sherlock in an amount up to two million dollars
($2,000,000.00) each, the premium for which will be paid for by
Sullivan and Cunningham, personally.
12. Injunctive Relief; Specific Performance.
Each of the Shareholders acknowledges that his or its interest in the
Agreement is unique to him or it, that his or its Shares cannot be
readily purchased or sold in the open market and that the other
Shareholders and the Corporation will be irreparably damaged in the
event of a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any Shareholder which damages will not
be measurable or compensable in money damages unless this Agreement
shall be specifically enforced. In addition, to any other remedy to
which the other Shareholders or the Corporation may be entitled, the
other Shareholders or the Corporation shall be entitled to a
preliminary and permanent injunction, without showing any actual
damage or threat of irreparable injury, and/or a decree for specific
performance, without any bond or other security being required in
connection therewith, in accordance with the provisions hereof.
13. Corporate Surplus.
If the Corporation shall not have sufficient surplus to permit it to
lawfully make payment of the Purchase Price for the Shares purchased
by it under this Agreement, the entire available surplus shall be paid
on account, and each Shareholder or the legal representative of any
Shareholder's estate shall promptly take such measures to vote the
respective holdings of Shares owned by the Shareholder to reduce the
<PAGE>
capital of the Corporation or to take such other steps as may be
appropriate or necessary in order to enable the Corporation to
lawfully make payment of the purchase price for Shares purchased by
it.
14. Shareholder Inspection of Corporate Books.
The Corporation shall keep complete and correct books and records of:
Shareholder proceedings, board and committee meetings; and the names
and addresses of all Shareholders, including the number and class of
Shares held by each Shareholder and the dates when they became owners
thereof (collectively called the "books and records").
All Shareholders shall have the right to inspect the books and records
of the Corporation upon providing the Corporation or its designated
agent with ten (10) days written notice.
15. Voting Requirements.
Except as herewith permitted in this Agreement unless a greater
percentage vote is required by law, the written consent or the
affirmative vote of at least 80% of the entire board of directors (the
"Required Super-Majority") shall be required to authorize any of the
following:
a. Any merger or consolidation of the Corporation with or into any
other corporation (provided, that in any merger or consolidation,
all of the provisions of the Agreement shall be binding on the
survivor corporation or consolidated corporation, to the same
extent and with the same effect as in respect of the
Corporation);
b. Modification of the Corporation from a "C" corporation to a
limited liability Company or similar "pass through entity".
c. The sale, lease or exchange of all or substantially all of the
assets of the Corporation;
d. The issuance of any Shares other than those set forth on Exhibit
A attached hereto or the agreed ISO Shares; provided, however,
that no Shares other than those set forth on Exhibit A attached
hereto may be issued unless, at the time of such issuance, the
proposed shareholder is or becomes a party to this Agreement by
signing a counterpart hereof or a consent to be bound hereby;
e. The dissolution of the Corporation;
f. The adoption of a plan of liquidation of the Corporation;
g. Any action by the Corporation to commence any case, proceeding or
other action (i) under any existing or future law of any
jurisdiction relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have any order for relief
entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (ii) seeking
appointment of a receiver, trustee, custodian or other similar
official for it, or for all or any substantial part of its
assets, or making a general assignment for the benefit or its
creditors;
h. Any amendment of the certificate of incorporation or by-laws of
the Corporation;
<PAGE>
i. Any amendment of this Agreement;
j. Any investment or expenditure by the Corporation directly or
indirectly, through a subsidiary or otherwise, which exceeds
$250,000 whether such investment or expenditure is made in a lump
sum or in a series of related payments unless in the Business
Plan, attached as Exhibit B ; or
k. Approval of any agreements, documents or other arrangements
between or involving the Corporation and any shareholder or
affiliate thereof, as well as, any amendment, consent or waiver
with respect to such arrangements;
l. Removal of directors other than by the party which designated the
director;
m. Approval of the appointment of the members of any committee
established by the board of directors;
n. Declaration of dividends;
o. A material change in the business of the Corporation;
p. Issuance, purchase or redemption of the Corporation of any
securities of the Corporation and any change, increase or
reduction in the capitalization of the Corporation;
q. Appointment or removal of any officer of the Corporation except
as provided in the employment agreement to which the Corporation
is a party;
r. Any reduction of the funding requirements of the Business Plan;
and
s. To obligate the Corporation to repay all or any portion of the
open advance made by NetWolves as referenced in Section 16
herein.
A majority vote of the board of directors, to the extend board of
directors approval is required, shall prevail with regard to all other
corporate action, including, without limitation, matters affecting
products, pricing, sales, inventory and operations.
16. Capital Contributions.
The parties recognize that there are certain funding requirements for
the proposed business of the Corporation. NetWolves agrees to make the
following payments to the Corporation for this purpose:
<PAGE>
<TABLE>
<CAPTION>
Date of Payment Amount
--------------- ------
<S> <C>
April 19, 1999 $50,000.00
May 5, 1999 $117,000.00
May 14, 1999 $100,000.00
May 24, 1999 $100,000.00
May 28, 1999 $332,000.00
June 11, 1999 $150,000.00
June 29, 1999 $100,000.00
July 7, 1999 $426,000.00
August 1, 1999 $375,000.00
September 15, 1999 $850,000.00 - $1,000,000.00
October 15, 1999 $850,000.00 - $1,000,000.00
November 15, 1999 $850,000.00 - $1,000,000.00
</TABLE>
The parties agree that NetWolves shall have the option to secure all or
any part of the above proceeds through the sale of part of its shares in the
Corporation or through the merger of the Corporation into a publicly traded
corporation, provided that the aggregate equity interest of the Sullivan
Shareholders shall not be diluted as a result of such transactions. The parties
further agree that the funds contributed by NetWolves shall be structured as a
non-interest bearing open advance to the Corporation which shall have no
maturity date and shall be subordinate to all other debt and obligations of the
Corporation.
In the event NetWolves fails to make the payments set forth in this
Section, and such failure continues for twenty (20) days after written notice
thereof, the number of Shares owned by NetWolves in the Corporation shall be
reduced as follows:
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Sullivan Shareholders Number of Shares Percentage of
NetWolves Percentage Sullivan Percentage of TSG Available to Sell to TSG Shares
NetWolves NetWolves of TSG Assuming Shareholders Shares Assuming Outside Investors Available for
Investment Number of TSG 5,000,000 Shares Number of TSG 5,000,000 Shares Assuming 5,000,000 Outside
Amount Shares Outstanding Shares Outstanding Shares Outstanding Investors
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$4,750,000.00 4,150,000 83.0% 850,000 17% 0 0.0%
- -------------------------------------------------------------------------------------------------------------------------
4,050,000.00 4,050,000 81.0% 850,000 17% 100,000 2.0%
- -------------------------------------------------------------------------------------------------------------------------
3,250,000.00 3,825,000 73.0% 850,000 17% 325,000 10.0%
- -------------------------------------------------------------------------------------------------------------------------
2,250,000.00 3,075,000 58.0% 850,000 17% 1,075,000 25.0%
- -------------------------------------------------------------------------------------------------------------------------
1,750,000.00 2,700,000 50.5% 850,000 17% 1,450,000 32.5%
- -------------------------------------------------------------------------------------------------------------------------
1,000,000.00 1,950,000 35.5% 850,000 17% 2,200,000 47.5%
- -------------------------------------------------------------------------------------------------------------------------
- ---------
<FN>
1. The 850,000 includes 70,000 shares purchased by the Sullivan Shareholders, ISO shares of 605,000 and 175,000 reserved for ISO
shares tied to the achievement of goals in the Business Plan.
2. The equity received for the amounts paid shall be computed on a pro rata basis.
3. NetWolves has a twenty (20) day grace period after the due date of any payment to make the required payment.
4. Formula:
-------
2.0% For First $700,000
8.0% For Next $800,000 (1 Point Per $100,000)
15.0% For Next $1,000,000 (1.5 Point Per $100,000)
7.5% For Next $500,000 (1.5 Point Per $100,000)
15.0% For Next $750,000 (2 Point Per $100,000)
</FN>
</TABLE>
<PAGE>
If 5,000,000 shares of TSG stock have been issued and if NetWolves does
not make any further funding payments of the amounts indicated above, TSG will
have the right to obtain equity from NetWolves in order to raise the funds
required for the Business Plan from entities other than NetWolves or its
affiliates provided only that NetWolves has the right of first refusal to match
the amount and the terms of any such funding payments. This raise is not to be
considered a Second Capital Raise. However, NetWolves will have the opportunity
to fund the Corporation for the full amount indicated above until twenty (20)
days after November 15, 1999, in the event no third parties have provided the
necessary funds in the interim period.
17. Miscellaneous.
a. Each party hereto acknowledges that it or he has read this Agreement,
understands it, and agrees to be bound by its terms, and further
acknowledges and agrees that it is the complete and exclusive
statement of the agreement and understanding of the parties regarding
the subject matter hereof, which supersedes and merges all prior
proposals, agreements and understandings, oral and written, relating
to the subject matter hereof. This Agreement may not be changed
orally, but only by an agreement in writing.
b. No waiver of any breach or default hereunder shall be considered valid
unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
c. If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and
this Agreement shall be carried out as if any such invalid or
unenforceable provision were not contained herein. In the event that
any provision is declared invalid or unenforceable, the Shareholders
and the Corporation agree to substitute for such invalid or
unenforceable provision a new provision which reflects, to the closest
extent possible, the intent of the parties.
d. Except as otherwise expressly provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors, estates, heirs, legal representatives and
permitted assigns and transferees.
e. The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents
of said actions.
f. This Agreement shall be governed by the laws of the State of New York
(without giving effect to principles of conflicts of law). The
Shareholders and the Corporation consent and agree that jurisdiction
and venue for all legal proceedings relating to the subject matter of
this Agreement shall lie exclusively with the appropriate federal or
state court sitting within the State of New York, County of New York.
<PAGE>
g. A copy of this Agreement shall be filed with the Secretary of the
Corporation and kept with the records of the Corporation.
h. Any notice or other communication to be given hereunder shall be in
writing and delivered personally or sent by certified or registered
mail, postage prepaid, if to the Corporation, addressed to the
Corporation at its then-principal business address, and if to any
Shareholder, addressed to him or it at his or its address as it
appears in the stock records of the Corporation, or to such other
address as any party may have furnished to the others in writing.
Unless otherwise provided in this Agreement, notice given pursuant to
this section shall be deemed given as of the date of its receipt.
i. This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
j. All representations, warranties and agreements contained herein shall
survive the execution and delivery of this Agreement.
k. This Agreement and the restrictions on transfer set forth herein shall
terminate upon the occurrence of any of the following events: (i)
cessation of the Corporation's business, (ii) bankruptcy, receivership
or dissolution of the Corporation, (iii) the voluntary agreement of
all parties who are bound by the terms hereof. Upon termination of
this Agreement, each Shareholder shall surrender to the Corporation
the certificates for his or its Shares and the Corporation shall issue
to him, her or it, in lieu thereof, new certificates for an equal
number of Shares without the second of the two legends set forth in
Section 3(c) hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
TSG Global Education Web, Inc. NetWolves Corporation
By: /s/ Martin E. Cunningham By: /s/ Walter M. Groteke
------------------------------------ ----------------------------
President & Chief Executive Officer Walter M. Groteke
Chief Executive Officer
/s/ Martin E. Cunningham
------------------------------------
Martin E. Cunningham
in his individual capacity
/s/ David H. Sullivan
------------------------------------
David H. Sullivan
in his individual capacity
/s/ Ronald B. Collins
------------------------------------
Ronald B. Collins
in his individual capacity
/s/ John J. Phelan
------------------------------------
John J. Phelan
in his individual capacity
/s/ Daniel J. Molloy
------------------------------------
Daniel J. Molloy
in his individual capacity
<PAGE>
EXHIBIT A Shareholder List
<TABLE>
<CAPTION>
Name of Shareholder Class of Stock Number of Shares Owned
- ------------------- -------------- ----------------------
<S> <C> <C>
NetWolves Corporation Common Stock 4,150,000
200 Broadhollow Road
Suite 207
Melville, NY 11747
David H. Sullivan Common Stock 25,250
78 Strawberry Hill Road
Madison, CT 06443
Martin E. Cunningham Common Stock 25,250
73 Fort Path Road
Madison, CT 06443
Common Stock
Ronald B. Collins Common Stock 6,500
2 Little Road
Guilford, CT 06437
John J. Phelan Common Stock 6,500
30 Glen Hollow Road
West Hartford, CT 06117
Daniel J. Molloy Common Stock 6,500
812 18th Street
Union City, NJ 07087
David H. Sullivan Preferred Stock 250,000
78 Strawberry Hill Road
Madison, CT 06443
</TABLE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of July 7th, 1999, between TSG Global Education Web,
Inc. ("Company"), a Delaware corporation, having its principal place of business
located at P.O. Box 300, 320 Soundview Road, Guilford, Connecticut, and David H.
Sullivan ("Employee"), residing at 78 Strawberry Hill Road, Madison, Connecticut
06443.
WITNESSETH:
WHEREAS, the Employee has expertise in the management of a company that
provides educational and other consulting services to major corporations through
the means of a secure internet connection, which company has been merged into
the Company concurrently with the execution of this Agreement;
WHEREAS, the parties acknowledge that the Employee's abilities and services
are unique and essential to the prospects of the Company; and
WHEREAS, in light of the foregoing, the Company desires to employ the
Employee to perform Employee and other services for the Company, and the
Employee desires to accept such employment, subject to the terms and conditions
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as Advisor to the
Company, President and Chief Executive Officer and the Employee hereby accepts
employment upon the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be three (3) years, commencing on
the date hereof ("Effective Date") and ending July , 2002, subject to earlier
termination as provided in this Agreement ("Term") and subject to certain
provisions hereof which survive the Term. The Term shall be extended for
additional one (1) year periods automatically unless either party shall give the
other party a written termination notice, which notice shall be given at least
ninety (90) days prior to the end of the Term.
3. Compensation.
(a) For all services rendered under this Agreement:
<PAGE>
(i) The Company shall pay the Employee a base salary at the rate of
$150,000.00 per annum payable in equal monthly installments. ("Base Salary"), as
may be adjusted from time to time by the CPI Factor (as defined below) as
provided in Section 3(b) below, or such greater amount as shall be approved by
the Company's Board of Directors from time to time; and
(ii) The Company shall pay the Employee Incentive Compensation, calculated
and payable as set forth on Exhibit A attached hereto and made a part hereof.
(iii) The Company shall agree to grant to the Employee on the Effective
Date options to acquire TSG $0.001 par value Common Stock ("Shares") pursuant to
the provisions of the Company's qualified Incentive Stock Option Plan ("ISO")
attached as Exhibit B and the number of Shares at the grant price of the ISO
Shares in accordance with the table in Exhibit C, attached hereto.
(iv) The Company shall also agree to sell to the Employee on the Effective
Date the numbers of Shares in accordance with the table on Exhibit D;
(b) The Base Salary shall be subject each year to adjustment to reflect
changes in the cost of living as set forth in this Section 3(b). Effective on
each May 1st the Base Salary shall be changed to the amount derived by
multiplying the Base Salary by a fraction, the numerator of which shall be the
Consumer Price Index for All Urban Consumers, [U.S. City Average] (1982-84 =
100) for the month of March immediately preceding such May 1st and the
denominator of which shall be 165.0, the said Consumer Price Index for the month
of March, 1999 ("CPI Factor"). The amount so determined shall be the Base Salary
for the calendar year beginning as of that May 1st until the next May 1st or the
end of the Term, whichever occurs sooner.
(c) Sullivan shall receive deferred compensation in the amount of $100,000,
payable in monthly installments from October 1999 through March 2000 in the
amount of $16,667.00 per month.
4. Duties. The Employee shall perform such duties of an advisory nature as
shall be requested by the President and Chief Executive Officer subject to the
direction of the Board of Directors. The Employee shall perform and discharge
well and faithfully the duties which may be assigned to him from time to time by
the Company in connection with the conduct of its business. If the Employee is
elected or appointed a director or officer of the Company or any subsidiary
thereof during the term of this Agreement, the Employee will serve in such
capacity without further compensation.
<PAGE>
5. Extent of Services. So long as during the Term of this Agreement the
Company has not notified the Employee of his disability pursuant to Section 9
hereof, the Employee shall devote reasonable time, attention and energies to the
business of the Company, in order to perform the duties assigned to him;
however, notwithstanding anything to the contrary otherwise stated Employee
shall be entitled to own and invest in other businesses, so long as he does not
assume an operational role of such businesses.
6. Benefits/Expenses.
(a) During the term of his employment, the Employee shall be entitled to
participate in employee benefit plans or programs of the Company, provided that
they should conform to the benefits which are now offered to the Employee in his
current position, if any, to the extent that his position, tenure, salary, age,
health and other qualifications make him eligible to participate, subject to the
rules and regulations applicable thereto. Such additional benefits shall
include, subject to the approval of the Board of Directors, medical and dental
insurance, paid vacation and qualified pension and profit sharing plans.
(b) The Company will furnish the Employee, $1,000.00 each month to be used
for the purchase or lease of an automobile and an amount sufficient each month
to cover auto insurance for such vehicle.
(c) The Company shall maintain term life insurance with Mass Mutual Life
Insurance Company with annual premium payment not to exceed $4,500.00 with the
beneficiary to be designated by the Employee.
(d) The Employee shall be entitled to reimbursement of all out of pocket
expenses reasonably incurred by him in the performance of his duties to the
Company, subject to the presenting of appropriate vouchers in accordance with
the Company's policy.
7. Disclosure of Information.
(a) The Employee represents and warrants to the Company that there are no
other agreements that would interfere with his ability to perform his duties
hereunder and that Exhibit E hereto sets forth, to the best of Employee's
knowledge:
(i) All rights, in respect of the Employee's engaging in any business
activity (whether or not for profit), of former employers, clients, principals,
partners or others with whom or for whom the Employee has performed services
since 1988; and
(ii) All of the business activities (whether or not for profit) of the
Employee applicable to periods after the time such services were performed.
<PAGE>
(b) The Employee recognizes and acknowledges that the Company's
confidential or proprietary data or information as they have existed, will
exist, may continue to exist from time to time, are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company, in whole or in part,
directly or indirectly disclose, divulge or communicate such secrets,
information or processes to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use of
any such property for his own purposes or for the benefit of any person, firm,
corporation or other entity (except the Company) under any circumstances
provided that after the term of his employment these restrictions shall not
apply to such secrets, information and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, information or process entering the public domain without the
Company's consent). The Employee agrees to hold as the Company's property, all
memoranda, books, papers, letters, formulas and other data, and all copies
thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of the Company, at any time, to
deliver the same to the Company.
(c) The term "confidential or proprietary data or information": as used in
this Agreement shall mean information not generally available to the public,
including without limitation, all database information, personnel information,
financial information, customer lists, supplier lists, trade secrets, patented
or proprietary information, forms, information regarding operations, systems,
services, know how, computer and any other processed or collated data, computer
programs, pricing, marketing and advertising data.
(d) All written materials, records and documents made by the Employee or
coming into Employee's possession during Employee's employment by the Company
concerning any products, processes or equipment manufactured, used, developed,
investigated, purchased, sold or considered by the Company or otherwise
concerning the business or affairs of the Company shall be the sole property of
the Company, and upon termination of Employee's employment by the Company, or
upon request of the Company during Employee's employment by the Company,
Employee shall promptly deliver the same to the Company. In addition, upon
termination of Employee's employment by the Company, Employee will deliver to
the Company all other Company property in Employee's possession or under
Employee's control, including but not limited to, financial statements,
marketing and sales data, customer and supplier lists, database information and
other documents, and any Company credit cards.
8. Restrictive Covenant. During the Term of this Agreement and for a period
of three (3) years after the date of such termination for any reason Employee
shall not without the prior written consent of the Company:
<PAGE>
(a) Non-Competition. Act as an individual proprietor, partner, stockholder,
officer, principal, agent, employee, supervisor, manager, consultant, guarantor,
creditor, lender, co-endorser or in any other capacity whatsoever, own,
participate in the ownership of, manage, operate, exercise any control over,
render services to, or engage in any of the foregoing for any business, firm,
corporation, limited liability company, its successors or assigns, partnership
or other entity which operates a business similar to or competitive with any of
the products or services developed by the Company during the period commencing
on October 1, 1992, until termination of employment which are conducted in any
of the geographic areas, including the continental United States, in which the
Company's business is conducted. These products include, but are not limited to
the following products or services:
(a) Foxbox Technology;
(b) ESCN Training;
(c) PROFIT COACH ;
(d) PROFIT COACH TOOL KIT ;
(e) Organizational Competitive Benchmark Studies of major oil companies;
and
(f) Leader/Lead classroom training.
(b) Non-Solicitation. Solicit any business from any current customers or
clients of the Company, its successors or assigns, or from any prospective
customers or clients of Company, its successors or assigns from whom the
Company's employees or agents have engaged in, or solicited business within the
three (3) year period immediately preceding the termination date of the
Executive's employment for the purpose of selling products or services similar
to or competitive with those offered or sold or provided by the Company.
(c) Solicitation of Employees. In any manner, whether directly or
indirectly, seek to persuade any director, officer, or other employee of
Company, its successors or assigns to discontinue their employment or
relationship with Company, its successors or assigns, nor will such Employee
solicit, entice, induce or retain any such person for such purpose.
(d) The parties hereto intend that the covenants contained in this Section
8, which pertain only to geographic areas where the Company is engaged in
business, shall be deemed a series of separate covenants for each applicable
area of the relevant country, state, county and city. If, in any judicial
proceeding, a court shall refuse to enforce all the separate covenants deemed
included in this Section 8 because, taken together, they cover too extensive a
geographic area, the parties intend that those of such covenants (taken in order
of the cities, counties, states and countries therein which are least populous)
which if eliminated would permit the remaining separate covenants to be enforced
in such proceeding shall, for the purpose of such proceeding, be deemed
eliminated from the provisions of this Section 8.
(e) Nothing in this Section 8 shall reduce or abrogate the Employee's
obligations during the term of this Agreement under Sections 4 and 5 hereof.
<PAGE>
9. Termination.
(a) Disability. The Company shall have the right to terminate this
Agreement at any time, without cause, upon ninety (90) days prior notice, or in
the event of the permanent disability of the Employee, upon five (5) days prior
written notice. Upon termination, the Company shall pay the Employee all
compensation earned under Section 3 through the date of termination; provided
that the incentive compensation shall be payable within one hundred twenty (120)
days after termination as set forth in Exhibit A. In addition, the Employee
shall receive a termination payment computed and payable as described in Section
9(e). For the purposes of this subparagraph "permanent disability" shall mean
the physical or mental incapacity of the Employee for any consecutive three (3)
month period or any aggregate period of six (6) months in any twelve (12) month
period of such a nature that the Employee shall be unable diligently to perform
the duties of advisor to the President and Chief Executive Officer as
contemplated hereby. Such determination shall be made by the mutual agreement of
the parties hereto, or in the event such agreement cannot be reached, by the
following procedure:
(i) If the Company maintains a disability income policy, the definition
set forth in such policy shall control, provided the issuing insurance
company agrees to commence disability payments as a result of such
permanent disability.
(ii) If the Company does not maintain a disability income policy:
(A) Each party shall select an independent physician who shall
examine the subject Employee. The mutual agreement of the two
examining physicians shall control, and their decision shall be
binding.
(B) If the two (2) physicians cannot agree, they (the physicians)
shall select a third physician to examine the subject Employee.
The majority opinion of such three physicians shall control, and
their decision shall be binding.
(b) Death. This Agreement shall terminate automatically upon the death of
the Employee. In such event, the Company shall pay the estate of the Employee,
within thirty (30) days after the date of death, all compensation earned under
Section 3 through the date of termination, provided the incentive compensation
shall be payable within one hundred twenty (120) days after termination as set
forth in Exhibit A.
(c) For Cause. In addition to its rights under Section 9(a) above, the
Company shall have the right, at its sole option, to terminate this Agreement
"for cause", as hereinafter defined, at any time, without any further payment to
the Employee other than compensation earned under Section 3(a)(i) prior to the
date of termination, by notice to the Employee (or his personal representative,
as the case may be), specifying the reason for such termination, and the
Employee shall be entitled to any incentive compensation on a pro rata basis for
<PAGE>
the period ending on the date of such termination. For purposes of this Section
9(c), "cause" shall mean solely (i) the Employee's conviction of a felony or a
crime of moral turpitude, (ii) the Employee's willful misconduct or gross
negligence materially detrimental to the Company, or (iii) the breach by the
Employee of a material term of this Agreement which continues for thirty (30)
days after written notice thereof, specifying the nature of the breach, is given
to the Employee.
(d) Without Cause. If the Employee is terminated by the Company without
Cause he shall be entitled to all Incentive Compensation earned under Section 3
through the date of termination provided that the compensation shall be paid
within one hundred twenty (120) days after termination as set forth in Exhibit
A.
(e) Termination Payment. If the Employee's employment is terminated under
Section 9(a), 9(b) or 9(d) herein, the Employee shall be entitled to receive, as
a termination payment, any amount equal to his annual Base Salary, as adjusted
by the CPI Factor, in effect on the date of termination, payable through July ,
2002, or such other date as this Agreement may have been extended to pursuant to
Section 2 herein, in the same manner as such compensation was paid prior to
termination. The amount of payment under Section 9 (a) shall be reduced by the
amounts, if any, paid to the Employee by the Company's disability insurance
policy . In the event of termination upon death, the Company will fund such
payments with term life insurance at standard rates and the Employee will pay
any additional amount over and above the standard rate amount .
(f) Loans. Upon termination of the Employee's employment under this
Agreement for any reason (including expiration of the term hereof), (i) all
loans made to the Employee shall become immediately due and payable, except that
if the Employee's employment is terminated under Section 9(a) or 9(b), he (or
his personal representatives) shall have the option to elect, by notice to the
Company within ten (10) days after the date of such termination, to repay such
loans in twelve (12) equal monthly installments following termination, with
interest, from the date of termination of employment, at the prime rate of
interest announced by Citibank N.A. from time to time. In such event, the
Employee (or his personal representatives) shall execute a promissory note and
other documentation evidencing such loans as the Company shall reasonably
request; and (ii) all loans due Employee and any deferred compensation owed to
the Employee by the Company shall become due and payable to the Employee be paid
in accordance with its terms.
10. Remedies. If there is a breach or threatened breach of the provisions
of Section 5, 7(b), or 8 of this Agreement, the Company shall be entitled to an
injunction restraining the Employee from such breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
<PAGE>
11. Insurance. The Company may, at its election and for its benefit, insure
the Employee through key man insurance up to $2,000,000.00 or otherwise, against
accidental loss or death and the Employee shall submit to such physical
examination and supply such information as may be required in connection
therewith.
12. Location of Performance. The Employee's services will be performed in
the Guilford, Connecticut area. The Employee's performance hereunder shall be
within such area or its environs. The parties acknowledge, however, that the
Employee may be required to travel some in connection with the performance of
his duties hereunder.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company, and unless clearly
inapplicable, all references herein to the Company shall be deemed to include
any successors. In addition, this Agreement shall be binding upon and inure to
the benefit of the Employee and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Employee hereunder may not
be delegated without the prior written approval of the Board of Directors of the
Company.
14. Successor Company. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform as if no such succession
had taken place.
15. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and shall be deemed given when
delivered personally or three days after being sent by first-class registered or
certified mail, return receipt requested, to the party for which intended at its
or his address set forth at the beginning of this Agreement (which, in the case
of the Company, shall be sent "Attention: Chairman of the Board") or to such
other address as either party may hereafter specify by similar notice to the
other.
16. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
17. Entire Agreement. This Agreement supersedes all prior agreements
between the parties, written and oral, and cannot be amended or modified except
by a writing signed by both parties. It may be executed in one or more
counterpart copies, each of which shall be deemed an original, but all of which
shall constitute the same instrument.
<PAGE>
18. Choice of Law/Forum. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Any disputes arising out of this Agreement shall be
adjudicated in the Federal or State court presiding in the Counties of New York,
Nassau or Suffolk, State of New York.
19. Captions/Exhibits. Captions used in this Agreement are for convenience
of reference only and shall not be deemed a part of this Agreement nor used in
the construction of its meaning. Exhibits attached to this Agreement shall be
deemed as fully a part of this Agreement as if set forth in full herein.
20. Severability. If any provision of this Agreement shall be deemed
invalid or unenforceable as written it shall be construed, to the greatest
extent possible, in a manner which shall render it valid and enforceable and any
limitations on the scope or duration of any such provision necessary to make it
valid and enforceable shall be deemed to be part thereof; no invalidity or
unenforceability shall affect any other portion of this Agreement unless the
provision deemed to be so invalid or unenforceable is a material element of this
Agreement, taken as a whole.
21. Acknowledgment. Employee acknowledges that he has carefully read this
Agreement and hereby represents and warrants to the Company that Employee's
entering into this Agreement, and the obligations and duties undertaken by
Employee hereunder, will not conflict with, constitute a breach of or otherwise
violate the terms of any other agreement to which Employee is a party and that
Employee is not required to obtain the consent of any person or entity in order
to enter into and perform his obligations under this Agreement.
With respect to the covenants contained in Sections 7 and 8 of this
Agreement, Employee agrees that any remedy at law for any breach or threatened
or attempted breach of such covenants may be inadequate and that the Company
shall be entitled to specific performance or any other mode of injunctive and/or
other equitable relief to enforce its rights hereunder or any other relief a
court might award without the necessity of showing any actual damage or
irreparable harm or the posting of any bond or furnishing of other security.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.
TSG GLOBAL EDUCATION WEB, INC.
By: /s/ Martin Cunningham
-----------------------------------------
[Title]
/s/ David H. Sullivan
-----------------------------------------
David H. Sullivan
Employee
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of July 7, 1999, between TSG Global Education Web, Inc.
("Company"), a Delaware corporation, having its principal place of business
located at P.O. Box 300, 320 Soundview Road, Guilford, Connecticut, and Martin
E. Cunningham ("Employee"), residing at 73 Fort Path Road, Madison, CT 06443.
WITNESSETH:
WHEREAS, the Employee has expertise in the management of a company that
provides educational and other consulting services to major corporations through
the means of a secure internet connection, which company has been merged into
the Company concurrently with the execution of this Agreement;
WHEREAS, the parties acknowledge that the Employee's abilities and services
are unique and essential to the prospects of the Company; and
WHEREAS, in light of the foregoing, the Company desires to employ the
Employee to perform Employee and other services for the Company, and the
Employee desires to accept such employment, subject to the terms and conditions
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as President and
Chief Employee Officer and the Employee hereby accepts employment upon the terms
and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be three (3) years, commencing on
the date hereof ("Effective Date") and ending July , 2002, subject to earlier
termination as provided in this Agreement ("Term") and subject to certain
provisions hereof which survive the Term. The Term shall be extended for
additional one (1) year periods automatically unless either party shall give the
other party a written termination notice, which notice shall be given at least
ninety (90) days prior to the end of the Term.
3. Compensation.
(a) For all services rendered under this Agreement:
(i) The Company shall pay the Employee a base salary at the
rate of $150,000.00 per annum payable in equal monthly installments. ("Base
Salary"), as may be adjusted from time to time by the CPI Factor (as defined
below) as provided in Section 3(b) below, or such greater amount as shall be
approved by the Company's Board of Directors from time to time; and
<PAGE>
(ii) The Company shall pay the Employee Incentive
Compensation, calculated and payable as set forth on Exhibit A attached hereto
and made a part hereof.
(iii) The Company shall agree to grant to the Employee on the
Effective Date options to acquire TSG $0.001 par value Common Stock ("Shares")
pursuant to the provisions of the Company's qualified Incentive Stock Option
Plan ("ISO") attached as Exhibit B and the number of Shares and the grant price
of the ISO Shares in accordance with the table in Exhibit C.
(iv) The Company shall also agree to sell to the Employee on
the Effective Date the numbers of Shares in accordance with the table on Exhibit
D.
(b) The Base Salary shall be subject each year to adjustment to reflect
changes in the cost of living as set forth in this Section 3(b). Effective on
each May 1st the Base Salary shall be changed to the amount derived by
multiplying the Base Salary by a fraction, the numerator of which shall be the
Consumer Price Index for All Urban Consumers, [U.S. City Average] (1982-84 =
100) for the month of March immediately preceding such May 1st and the
denominator of which shall be 165.0, the said Consumer Price Index for the month
of March, 1999 ("CPI Factor). The amount so determined shall be the Base Salary
for the calendar year beginning as of that May 1st until the next May 1st or the
end of the Term, whichever occurs sooner.
4. Duties. The Employee shall perform on a full time basis such duties
of an executive nature as shall be customarily associated with the offices of
President and Chief Executive Officer subject to the direction of the Board of
Directors. The Employee shall perform and discharge well and faithfully the
duties which may be assigned to him from time to time by the Company in
connection with the conduct of its business. If the Employee is elected or
appointed a director or officer of the Company or any subsidiary thereof during
the term of this Agreement, the Employee will serve in such capacity without
further compensation.
5. Extent of Services. So long as during the Term of this Agreement the
Company has not notified the Employee of his disability pursuant to Section
10(a) hereof, the Employee shall devote his full business time, attention and
energies to the business of the Company subject to reasonable absences for
vacation and illness and may not during the term of this Agreement be engaged
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage.
6. Benefits/Expenses.
(a) During the term of his employment, the Employee shall be entitled
to participate in employee benefit plans or programs of the Company, provided
that they should conform to the benefits which are now offered to the Employee
in his current position, if any, to the extent that his position, tenure,
salary, age, health and other qualifications make him eligible to participate,
subject to the rules and regulations applicable thereto. Such additional
benefits shall include, subject to the approval of the Board of Directors,
medical and dental insurance, paid vacation and qualified pension and profit
sharing plans.
<PAGE>
(b) The Company will furnish the Employee, $1,000.00 each month to be used
for the purchase or lease of an automobile and an amount sufficient each month
to cover auto insurance for such vehicle.
(c) The Company shall maintain term life insurance with Mass Mutual Life
Insurance Company with annual premium payment not to exceed $2,716.92 with the
beneficiary to be designated by the Employee.
(d) The Employee shall be entitled to reimbursement of all out of pocket
expenses reasonably incurred by him in the performance of his duties to the
Company, subject to the presenting of appropriate vouchers in accordance with
the Company's policy.
7. Disclosure of Information.
(a) The Employee represents and warrants to the Company that Exhibit E
hereto sets forth, to the best of Employee's knowledge:
(i) All rights, in respect of the Employee's engaging in any
business activity (whether or not for profit), of former employers, clients,
principals, partners or others with whom or for whom the Employee has performed
services since 1988; and
(ii) All of the business activities (whether or not for
profit) of the Employee applicable to periods after the time such services were
performed.
(b) The Employee recognizes and acknowledges that the Company's
confidential or proprietary data or information as they have existed, will
exist, may continue to exist from time to time, are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company, in whole or in part,
directly or indirectly disclose, divulge or communicate such secrets,
information or processes to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use of
any such property for his own purposes or for the benefit of any person, firm,
corporation or other entity (except the Company) under any circumstances
provided that after the term of his employment these restrictions shall not
apply to such secrets, information and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, information or process entering the public domain without the
Company's consent). The Employee agrees to hold as the Company's property, all
memoranda, books, papers, letters, formulas and other data, and all copies
thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of the Company, at any time, to
deliver the same to the Company.
(c) The term "confidential or proprietary data or information": as used in
this Agreement shall mean information not generally available to the public,
including without limitation, all database information, personnel information,
financial information, customer lists, supplier lists, trade secrets, patented
or proprietary information, forms, information regarding operations, systems,
services, know how, computer and any other processed or collated data, computer
programs, pricing, marketing and advertising data.
<PAGE>
(d) All written materials, records and documents made by the Employee or
coming into Employee's possession during Employee's employment by the Company
concerning any products, processes or equipment manufactured, used, developed,
investigated, purchased, sold or considered by the Company or otherwise
concerning the business or affairs of the Company shall be the sole property of
the Company, and upon termination of Employee's employment by the Company, or
upon request of the Company during Employee's employment by the Company,
Employee shall promptly deliver the same to the Company. In addition, upon
termination of Employee's employment by the Company, Employee will deliver to
the Company all other Company property in Employee's possession or under
Employee's control, including but not limited to, financial statements,
marketing and sales data, customer and supplier lists, database information and
other documents, and any Company credit cards.
8. Inventions. The Employee hereby sells, transfers and assigns to the
Company or to any person, or entity designated by the Company, all of the entire
right, title and interest of the Employee in and to all inventions, ideas,
disclosures and improvements, whether patented or unpatented, and copyrightable
material, made or conceived by the Employee, solely or jointly, or in whole or
in part, during or before the term hereof (but after the Effective Date) which
(i) relate to methods, apparatus, designs, products, processes or devices sold,
leased, used or under construction or development by the Company or any
subsidiary or (ii) otherwise relate to or pertain to the business, functions or
operations of the Company or any subsidiary, or (iii) arise (wholly or partly)
from the efforts of the Employee during the term hereof. The Employee shall
communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to the aforementioned
inventions, ideas, disclosures and improvements; and, whether during the term
hereof or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company or any person or entity
designated by the Company to file and prosecute the patent applications and, as
to copyrightable material, to obtain copyright thereon. Any invention by the
Employee within one year following the termination of this Agreement shall be
deemed to fall within the provisions of this paragraph unless proved by the
Employee to have been first conceived and made following such termination.
9. Restrictive Covenant. During the Term of this Agreement and for a period
of three (3) years after the date of such termination for any reason Employee
shall not without the prior written consent of the Company:
(a) Non-Competition. Act as an individual proprietor, partner, stockholder,
officer, principal, agent, employee, supervisor, manager, consultant, guarantor,
creditor, lender, co- endorser or in any other capacity whatsoever, own,
participate in the ownership of, manage, operate, exercise any control over,
render services to, or engage in any of the foregoing for any business, firm,
corporation, limited liability company, its successors or assigns, partnership
or other entity which operates a business similar to or competitive with any of
the products or services developed by the Company during the period commencing
on October 1, 1992, until termination of employment which are conducted in any
of the geographic areas, including the continental United States, in which the
Company's business is conducted. These products include, but are not limited to
the following products or services:
<PAGE>
(a) Foxbox Technology;
(b) ESCN Training;
(c) PROFIT COACH ;
(d) PROFIT COACH TOOL KIT ;
(e) Organizational Competitive Benchmark Studies of major oil companies;
and
(f) Leader/Lead classroom training.
(b) Non-Solicitation. Solicit any business from any current customers or
clients of the Company, its successors or assigns, or from any prospective
customers or clients of Company, its successors or assigns from whom the
Company's employees or agents have engaged in, or solicited business within the
three (3) year period immediately preceding the termination date of the
Executive's employment for the purpose of selling products or services similar
to or competitive with those offered or sold or provided by the Company.
(c) Solicitation of Employees. In any manner, whether directly or
indirectly, seek to persuade any director, officer, or other employee of
Company, its successors or assigns to discontinue their employment or
relationship with Company, its successors or assigns, nor will such Employee
solicit, entice, induce or retain any such person for such purpose.
(d) The parties hereto intend that the covenants contained in this Section
9, which pertain only to geographic areas where the Company is engaged in
business, shall be deemed a series of separate covenants for each applicable
area of the relevant country, state, county and city. If, in any judicial
proceeding, a court shall refuse to enforce all the separate covenants deemed
included in this Section 9 because, taken together, they cover too extensive a
geographic area, the parties intend that those of such covenants (taken in order
of the cities, counties, states and countries therein which are least populous)
which if eliminated would permit the remaining separate covenants to be enforced
in such proceeding shall, for the purpose of such proceeding, be deemed
eliminated from the provisions of this Section 9.
(e) Nothing in this Section 9 shall reduce or abrogate the Employee's
obligations during the term of this Agreement under Sections 4 and 5 hereof.
10. Termination.
(a) Disability. The Company shall have the right to terminate this
Agreement at any time, without cause, upon ninety (90) days prior notice, or in
the event of the permanent disability of the Employee, upon five (5) days prior
written notice. Upon termination, the Company shall pay the Employee all
compensation earned under Section 3 through the date of termination; provided
that the incentive compensation shall be payable within one hundred twenty (120)
days after termination as set forth in Exhibit A. In addition, the Employee
shall receive a termination payment computed and payable as described in Section
10(e). For the purposes of this subparagraph "permanent disability" shall mean
the physical or mental incapacity of the Employee for any consecutive three (3)
<PAGE>
month period or any aggregate period of six (6) months in any twelve (12) month
period of such a nature that the Employee shall be unable diligently to perform
the duties of advisor to the President and Chief Employee Officer as
contemplated hereby. Such determination shall be made by the mutual agreement of
the parties hereto, or in the event such agreement cannot be reached, by the
following procedure:
(i) If the Company maintains a disability income policy, the
definition set forth in such policy shall control, provided the
issuing insurance company agrees to commence disability payments
as a result of such permanent disability.
(ii) If the Company does not maintain a disability income policy:
(A) Each party shall select an independent physician who shall
examine the subject Employee. The mutual agreement of the
two examining physicians shall control, and their decision
shall be binding.
(B) If the two physicians cannot agree, they (the physicians)
shall select a third physician to examine the subject
Employee. The majority opinion of such three physicians
shall control, and their decision shall be binding.
(b) Death. This Agreement shall terminate automatically upon the death of
the Employee. In such event, the Company shall pay the estate of the Employee,
within thirty (30) days after the date of death, all compensation earned under
Section 3 through the date of termination, provided the incentive compensation
shall be payable within one hundred twenty (120) days after termination as set
forth in Exhibit A. In addition, the estate of the Employee shall receive a
termination payment computed and payable as described in Section 10(e) herein.
(c) For Cause. In addition to its rights under Section 10(a) above, the
Company shall have the right, at its sole option, to terminate this Agreement
"for cause", as hereinafter defined, at any time, without any further payment to
the Employee other than compensation earned under Section 3(a)(i) prior to the
date of termination, by notice to the Employee (or his personal representative,
as the case may be), specifying the reason for such termination, and the
Employee shall be entitled to any incentive compensation on a pro rata basis for
the period ending on the date of such termination. For purposes of this Section
10(c), "cause" shall mean solely (i) the Employee's conviction of a felony or a
crime of moral turpitude, (ii) the Employee's willful misconduct or gross
negligence materially detrimental to the Company, or (iii) the breach by the
Employee of a material term of this Agreement which continues for thirty (30)
days after written notice thereof, specifying the nature of the breach, is given
to the Employee.
(d) Without Cause. If the Employee is terminated by the Company without
Cause he shall be entitled to all Incentive Compensation earned under Section 3
through the date of termination provided that the compensation shall be paid
within one hundred twenty (120) days after termination as set forth in Exhibit
A.
(e) Termination Payment. If the Employee's employment is terminated under
Section 10(a), 10(b) or 10(d) herein, the Employee shall be entitled to receive,
as a termination payment, any amount equal to his annual Base Salary, as
adjusted by the CPI Factor, in effect on the date of termination, payable
through July , 2002, or such other date as this Agreement may have been extended
to pursuant to Section 2 herein, in the same manner as such compensation was
paid prior to termination. The amount of payment under Section 10 (a) shall be
reduced by the amounts, if any, paid to the Employee by the Company's disability
insurance policy. In the event of termination upon death, the Company will fund
such payments with term life insurance at standard rates and the Employee will
pay any additional amount over and above the standard rate amount.
<PAGE>
(f) Loans. Upon termination of the Employee's employment under this
Agreement for any reason (including expiration of the term hereof), (i) all
loans made to the Employee shall become immediately due and payable, except that
if the Employee's employment is terminated under Section 10 (a) or 10 (b), he
(or his personal representatives) shall have the option to elect, by notice to
the Company within ten (10) days after the date of such termination, to repay
such loans in twelve (12) equal monthly installments following termination, with
interest, from the date of termination of employment, at the prime rate of
interest announced by Citibank N.A. from time to time. In such event, the
Employee (or his personal representatives) shall execute a promissory note and
other documentation evidencing such loans as the Company shall reasonably
request; and (ii) all loans due Employee and any deferred compensation owed to
the Employee by the Company shall become due and payable to the Employee be paid
in accordance with its terms.
11. Remedies. If there is a breach or threatened breach of the provisions
of Section 5, 7(b), 8 or 9 of this Agreement, the Company shall be entitled to
an injunction restraining the Employee from such breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
12. Insurance. The Company may, at its election and for its benefit, insure
the Employee through key man insurance up to $2,000,000.00 or otherwise, against
accidental loss or death and the Employee shall submit to such physical
examination and supply such information as may be required in connection
therewith.
13. Location of Performance. The Employee's services will be performed in
the Guilford, Connecticut area. The Employee's performance hereunder shall be
within such area or its environs. The parties acknowledge, however, that the
Employee may be required to travel some in connection with the performance of
his duties hereunder.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company, and unless clearly
inapplicable, all references herein to the Company shall be deemed to include
any successors. In addition, this Agreement shall be binding upon and inure to
the benefit of the Employee and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Employee hereunder may not
be delegated without the prior written approval of the Board of Directors of the
Company.
15. Successor Company. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform as if no such succession
had taken place.
<PAGE>
16. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and shall be deemed given when
delivered personally or three days after being sent by first-class registered or
certified mail, return receipt requested, to the party for which intended at its
or his address set forth at the beginning of this Agreement (which, in the case
of the Company, shall be sent "Attention: Chairman of the Board") or to such
other address as either party may hereafter specify by similar notice to the
other.
17. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
18. Entire Agreement. This Agreement supersedes all prior agreements
between the parties, written and oral, and cannot be amended or modified except
by a writing signed by both parties. It may be executed in one or more
counterpart copies, each of which shall be deemed an original, but all of which
shall constitute the same instrument.
19. Choice of Law/Forum. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Any disputes arising out of this Agreement shall be
adjudicated in the Federal or State court presiding in the Counties of New York,
Nassau or Suffolk, State of New York.
20. Captions/Exhibits. Captions used in this Agreement are for convenience
of reference only and shall not be deemed a part of this Agreement nor used in
the construction of its meaning. Exhibits attached to this Agreement shall be
deemed as fully a part of this Agreement as if set forth in full herein.
21. Severability. If any provision of this Agreement shall be deemed
invalid or unenforceable as written it shall be construed, to the greatest
extent possible, in a manner which shall render it valid and enforceable and any
limitations on the scope or duration of any such provision necessary to make it
valid and enforceable shall be deemed to be part thereof; no invalidity or
unenforceability shall affect any other portion of this Agreement unless the
provision deemed to be so invalid or unenforceable is a material element of this
Agreement, taken as a whole.
22. Acknowledgment. Employee acknowledges that he has carefully read this
Agreement and hereby represents and warrants to the Company that Employee's
entering into this Agreement, and the obligations and duties undertaken by
Employee hereunder, will not conflict with, constitute a breach of or otherwise
violate the terms of any other agreement to which Employee is a party and that
Employee is not required to obtain the consent of any person or entity in order
to enter into and perform his obligations under this Agreement.
With respect to the covenants contained in Sections 7, 8 and 9 of this
Agreement, Employee agrees that any remedy at law for any breach or threatened
or attempted breach of such covenants may be inadequate and that the Company
shall be entitled to specific performance or any other mode of injunctive and/or
other equitable relief to enforce its rights hereunder or any other relief a
court might award without the necessity of showing any actual damage or
irreparable harm or the posting of any bond or furnishing of other security.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
TSG GLOBAL EDUCATION WEB, INC.
By: /s/ Walter M. Groteke
-----------------------------------------
[Title]
/s/ Martin E. Cunningham
-----------------------------------------
Martin E. Cunningham
Employee
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of July 7, 1999, between TSG Global Education Web, Inc.
("Company"), a Delaware corporation, having its principal place of business
located at P.O. Box 300 320 Soundview Road, Guilford, Connecticut, and Ronald B.
Collins ("Employee"), residing at 2 Little Road, Guilford, CT 06437.
WITNESSETH:
WHEREAS, the Employee has expertise in the management of a company that
provides educational and other consulting services to major corporations through
the means of a secure internet connection, which company has been merged into
the Company concurrently with the execution of this Agreement;
WHEREAS, the parties acknowledge that the Employee's abilities and services
are unique and essential to the prospects of the Company; and
WHEREAS, in light of the foregoing, the Company desires to employ the
Employee to perform Employee and other services for the Company, and the
Employee desires to accept such employment, subject to the terms and conditions
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as Senior Vice
President-Duffy Vinet Institute and the Employee hereby accepts employment upon
the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be three (3) years, commencing on
the date hereof ("Effective Date") and ending July , 2002, subject to earlier
termination as provided in this Agreement ("Term") and subject to certain
provisions hereof which survive the Term. The Term shall be extended for
additional one (1) year periods automatically unless either party shall give the
other party a written termination notice, which notice shall be given at least
ninety (90) days prior to the end of the Term.
3. Compensation.
(a) For all services rendered under this Agreement:
(i) The Company shall pay the Employee a base salary at the rate of
$100,000.00 per annum payable in equal monthly installments. ("Base Salary"), as
may be adjusted from time to time by the CPI Factor (as defined below) as
provided in Section 3(b) below, or such greater amount as shall be approved by
the Company's Board of Directors from time to time; and
<PAGE>
(ii) The Company shall pay the Employee Incentive Compensation, calculated
and payable as set forth on Exhibit A attached hereto and made a part hereof.
(iii) The Company shall agree to grant to the Employee on the Effective
Date options to acquire TSG $0.001 par value Common Stock ("Shares") pursuant to
the provisions of the Company's qualified Incentive Stock Option Plan ("ISO")
attached as Exhibit B and the number of Shares and the grant price of the ISO
Shares in accordance with the table in Exhibit C . (iv) The Company shall also
agree to sell to the Employee on the Effective Date the numbers of Shares in
accordance with the table on Exhibit D.
(b) The Base Salary shall be subject each year to adjustment to reflect
changes in the cost of living as set forth in this Section 3(b). Effective on
each May 1st the Base Salary shall be changed to the amount derived by
multiplying the Base Salary by a fraction, the numerator of which shall be the
Consumer Price Index for All Urban Consumers, [U.S. City Average] (1982-84 =
100) for the month of March immediately preceding such May 1st and the
denominator of which shall be 165.0, the said Consumer Price Index for the month
of March, 1999 ("CPI Factor"). The amount so determined shall be the Base Salary
for the calendar year beginning as of that May 1st until the next May 1st or the
end of the Term, whichever occurs sooner.
4. Duties. The Employee shall perform on a full time basis such duties of
an Employee nature as shall be customarily associated with the offices of Senior
Vice President-Duffy Vinet Institute subject to the direction of the President
and Chief Executive Officer and the Board of Directors. The Employee shall
perform and discharge well and faithfully the duties which may be assigned to
him from time to time by the Company in connection with the conduct of its
business. If the Employee is elected or appointed a director or officer of the
Company or any subsidiary thereof during the term of this Agreement, the
Employee will serve in such capacity without further compensation.
5. Extent of Services. So long as during the Term of this Agreement the
Company has not notified the Employee of his disability pursuant to Section
10(a) hereof, the Employee shall devote his full business time, attention and
energies to the business of the Company subject to reasonable absences for
vacation and illness and may not during the term of this Agreement be engaged
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage.
6. Benefits/Expenses.
(a) During the term of his employment, the Employee shall be entitled to
participate in employee benefit plans or programs of the Company, provided that
they should conform to the benefits which are now offered to the Employee in his
current position if any, to the extent that his position, tenure, salary, age,
health and other qualifications make him eligible to participate, subject to the
rules and regulations applicable thereto. Such additional benefits shall
include, subject to the approval of the Board of Directors, medical and dental
insurance, paid vacation and qualified pension and profit sharing plans.
<PAGE>
(b) The Company will furnish the Employee, $700.00 each month to be used
for the loan or lease of an automobile.
(c) The Company shall maintain term life insurance with Mass Mutual Life
Insurance Company with annual premium payment not to exceed $1,810.32 with the
beneficiary to be designated by the Employee.
(d) The Employee shall be entitled to reimbursement of all out of pocket
expenses reasonably incurred by him in the performance of his duties to the
Company, subject to the presenting of appropriate vouchers in accordance with
the Company's policy.
7. Disclosure of Information.
(a) The Employee represents and warrants to the Company that Exhibit E
hereto sets forth, to the best of Employee's knowledge:
(i) All rights, in respect of the Employee's engaging in any business
activity (whether or not for profit), of former employers, clients, principals,
partners or others with whom or for whom the Employee has performed services
since 1988; and
(ii) All of the business activities (whether or not for profit) of the
Employee applicable to periods after the time such services were performed.
(b) The Employee recognizes and acknowledges that the Company's
confidential or proprietary data or information as they have existed, will
exist, may continue to exist from time to time, are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company, in whole or in part,
directly or indirectly disclose, divulge or communicate such secrets,
information or processes to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use of
any such property for his own purposes or for the benefit of any person, firm,
corporation or other entity (except the Company) under any circumstances
provided that after the term of his employment these restrictions shall not
apply to such secrets, information and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, information or process entering the public domain without the
Company's consent). The Employee agrees to hold as the Company's property, all
memoranda, books, papers, letters, formulas and other data, and all copies
thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of the Company, at any time, to
deliver the same to the Company.
(c) The term "confidential or proprietary data or information": as used in
this Agreement shall mean information not generally available to the public,
including without limitation, all database information, personnel information,
financial information, customer lists, supplier lists, trade secrets, patented
or proprietary information, forms, information regarding operations, systems,
services, know how, computer and any other processed or collated data, computer
programs, pricing, marketing and advertising data.
<PAGE>
(d) All written materials, records and documents made by the Employee or
coming into Employee's possession during Employee's employment by the Company
concerning any products, processes or equipment manufactured, used, developed,
investigated, purchased, sold or considered by the Company or otherwise
concerning the business or affairs of the Company shall be the sole property of
the Company, and upon termination of Employee's employment by the Company, or
upon request of the Company during Employee's employment by the Company,
Employee shall promptly deliver the same to the Company. In addition, upon
termination of Employee's employment by the Company, Employee will deliver to
the Company all other Company property in Employee's possession or under
Employee's control, including but not limited to, financial statements,
marketing and sales data, customer and supplier lists, database information and
other documents, and any Company credit cards.
8. Inventions. The Employee hereby sells, transfers and assigns to the
Company or to any person, or entity designated by the Company, all of the entire
right, title and interest of the Employee in and to all inventions, ideas,
disclosures and improvements, whether patented or unpatented, and copyrightable
material, made or conceived by the Employee, solely or jointly, or in whole or
in part, during or before the term hereof (but after the Effective Date) which
(i) relate to methods, apparatus, designs, products, processes or devices sold,
leased, used or under construction or development by the Company or any
subsidiary or (ii) otherwise relate to or pertain to the business, functions or
operations of the Company or any subsidiary, or (iii) arise (wholly or partly)
from the efforts of the Employee during the term hereof. The Employee shall
communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to the aforementioned
inventions, ideas, disclosures and improvements; and, whether during the term
hereof or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company or any person or entity
designated by the Company to file and prosecute the patent applications and, as
to copyrightable material, to obtain copyright thereon. Any invention by the
Employee within one year following the termination of this Agreement shall be
deemed to fall within the provisions of this paragraph unless proved by the
Employee to have been first conceived and made following such termination.
9. Restrictive Covenant. During the Term of this Agreement and for a period
of three (3) years after the date of such termination for any reason Employee
shall not without the prior written consent of the Company:
(a) Non-Competition. Act as an individual proprietor, partner, stockholder,
officer, principal, agent, employee, supervisor, manager, consultant, guarantor,
creditor, lender, co- endorser or in any other capacity whatsoever, own,
participate in the ownership of, manage, operate, exercise any control over,
render services to, or engage in any of the foregoing for any business, firm,
corporation, limited liability company, its successors or assigns, partnership
or other entity which operates a business similar to or competitive with any of
the products or services developed by the Company during the period commencing
on October 1, 1992, until termination of employment which are conducted in any
of the geographic areas, including the continental United States, in which the
Company's business is conducted. These products include, but are not limited to
the following products or services:
<PAGE>
(a) Foxbox Technology;
(b) ESCN Training;
(c) PROFIT COACH ;
(d) PROFIT COACH TOOL KIT ;
(e) Organizational Competitive Benchmark Studies of major oil companies;
and
(f) Leader/Lead classroom training.
(b) Non-Solicitation. Solicit any business from any current customers or
clients of the Company, its successors or assigns, or from any prospective
customers or clients of Company, its successors or assigns from whom the
Company's employees or agents have engaged in, or solicited business within the
three (3) year period immediately preceding the termination date of the
Executive's employment for the purpose of selling products or services similar
to or competitive with those offered or sold or provided by the Company.
(c) Solicitation of Employees. In any manner, whether directly or
indirectly, seek to persuade any director, officer, or other employee of
Company, its successors or assigns to discontinue their employment or
relationship with Company, its successors or assigns, nor will such Employee
solicit, entice, induce or retain any such person for such purpose.
(d) Severability. The parties hereto intend that the covenants contained in
this Section 9, which pertain only to geographic areas where the Company is
engaged in business, shall be deemed a series of separate covenants for each
applicable area of the relevant country, state, county and city. If, in any
judicial proceeding, a court shall refuse to enforce all the separate covenants
deemed included in this Section 9 because, taken together, they cover too
extensive a geographic area, the parties intend that those of such covenants
(taken in order of the cities, counties, states and countries therein which are
least populous) which if eliminated would permit the remaining separate
covenants to be enforced in such proceeding shall, for the purpose of such
proceeding, be deemed eliminated from the provisions of this Section 9.
(e) Nothing in this Section 9 shall reduce or abrogate the Employee's
obligations during the term of this Agreement under Sections 4 and 5 hereof.
10. Termination.
(a) Disability. The Company shall have the right to terminate this
Agreement at any time, without cause, upon ninety (90) days prior notice, or in
the event of the permanent disability of the Employee, upon five (5) days prior
written notice. Upon termination, the Company shall pay the Employee all
compensation earned under Section 3 through the date of termination; provided
that the incentive compensation shall be payable within one hundred twenty (120)
days after termination as set forth in Exhibit A. In addition, the Employee
shall receive a termination payment computed and payable as described in Section
10(e). For the purposes of this subparagraph "permanent disability" shall mean
the physical or mental incapacity of the Employee for any consecutive three (3)
month period or any aggregate period of six (6) months in any twelve (12) month
period of such a nature that the Employee shall be unable diligently to perform
the duties of advisor to the President and Chief Employee Officer as
contemplated hereby. Such determination shall be made by the mutual agreement of
the parties hereto, or in the event such agreement cannot be reached, by the
following procedure:
<PAGE>
(i) If the Company maintains a disability income policy, the definition
set forth in such policy shall control, provided the issuing insurance
company agrees to commence disability payments as a result of such
permanent disability.
(ii) If the Company does not maintain a disability income policy:
(A) Each party shall select an independent physician who shall
examine the subject Employee. The mutual agreement of the two
examining physicians shall control, and their decision shall be
binding.
(B) If the two physicians cannot agree, they (the physicians) shall
select a third physician to examine the subject Employee. The
majority opinion of such three physicians shall control, and
their decision shall be binding.
(b) Death. This Agreement shall terminate automatically upon the death of
the Employee. In such event, the Company shall pay the estate of the Employee,
within thirty (30) days after the date of death, all compensation earned under
Section 3 through the date of termination, provided the incentive compensation
shall be payable within one hundred twenty (120) days after termination as set
forth in Exhibit A. In addition, the estate of the Employee shall receive a
termination payment computed and payable as described in Section 10(e) herein.
(c) For Cause. In addition to its rights under Section 10(a) above, the
Company shall have the right, at its sole option, to terminate this Agreement
"for cause", as hereinafter defined, at any time, without any further payment to
the Employee other than compensation earned under Section 3(a)(i) prior to the
date of termination, by notice to the Employee (or his personal representative,
as the case may be), specifying the reason for such termination, and the
Employee shall be entitled to any incentive compensation on a pro rata basis for
the period ending on the date of such termination. For purposes of this Section
10(c), "cause" shall mean solely (i) the Employee's conviction of a felony or a
crime of moral turpitude, (ii) the Employee's willful misconduct or gross
negligence materially detrimental to the Company, or (iii) the breach by the
Employee of a material term of this Agreement which continues for thirty (30)
days after written notice thereof, specifying the nature of the breach, is given
to the Employee.
(d) Without Cause. If the Employee is terminated by the Company without
Cause he shall be entitled to all Incentive Compensation earned under Section 3
through the date of termination provided that the compensation shall be paid
within one hundred twenty (120) days after termination as set forth in Exhibit
A.
(e) Termination Payment. If the Employee's employment is terminated under
Section 10(a), 10(b) or 10(d) herein, the Employee shall be entitled to receive,
as a termination payment, any amount equal to his annual Base Salary, as
adjusted by the CPI Factor, in effect on the date of termination, payable
through July , 2002, or such other date as this Agreement may have been extended
to pursuant to Section 2 herein, in the same manner as such compensation was
paid prior to termination. The amount of payment under Section 10 (a) shall be
reduced by the amounts, if any, paid to the Employee by the Company's disability
insurance policy. In the event of termination upon death, the Company will fund
such payments with term life insurance at standard rates and the Employee will
pay any additional amount over and above the standard rate amount.
<PAGE>
(f) Loans. Upon termination of the Employee's employment under this
Agreement for any reason (including expiration of the term hereof), (i) all
loans made to the Employee shall become immediately due and payable, except that
if the Employee's employment is terminated under Section 10 (a) or 10 (b), he
(or his personal representatives) shall have the option to elect, by notice to
the Company within ten (10) days after the date of such termination, to repay
such loans in twelve (12) equal monthly installments following termination, with
interest, from the date of termination of employment, at the prime rate of
interest announced by Citibank N.A. from time to time. In such event, the
Employee (or his personal representatives) shall execute a promissory note and
other documentation evidencing such loans as the Company shall reasonably
request; and (ii) all loans due Employee and any deferred compensation owed to
the Employee by the Company shall become due and payable to the Employee be paid
in accordance with its terms.
11. Remedies. If there is a breach or threatened breach of the provisions
of Section 5, 7(b), 8 or 9 of this Agreement, the Company shall be entitled to
an injunction restraining the Employee from such breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
12. Insurance. The Company may, at its election and for its benefit, insure
the Employee through key man insurance up to $500,000.00 or otherwise, against
accidental loss or death and the Employee shall submit to such physical
examination and supply such information as may be required in connection
therewith.
13. Location of Performance. The Employee's services will be performed in
the Guilford, Connecticut area. The Employee's performance hereunder shall be
within such area or its environs. The parties acknowledge, however, that the
Employee may be required to travel extensively in connection with the
performance of his duties hereunder.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company, and unless clearly
inapplicable, all references herein to the Company shall be deemed to include
any successors. In addition, this Agreement shall be binding upon and inure to
the benefit of the Employee and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Employee hereunder may not
be delegated without the prior written approval of the Board of Directors of the
Company.
15. Successor Company. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform as if no such succession
had taken place.
<PAGE>
16. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and shall be deemed given when
delivered personally or three days after being sent by first-class registered or
certified mail, return receipt requested, to the party for which intended at its
or his address set forth at the beginning of this Agreement (which, in the case
of the Company, shall be sent "Attention: Chairman of the Board") or to such
other address as either party may hereafter specify by similar notice to the
other.
17. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
18. Entire Agreement. This Agreement supersedes all prior agreements
between the parties, written and oral, and cannot be amended or modified except
by a writing signed by both parties. It may be executed in one or more
counterpart copies, each of which shall be deemed an original, but all of which
shall constitute the same instrument.
19. Choice of Law/Forum. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Any disputes arising out of this Agreement shall be
adjudicated in the Federal or State court presiding in the Counties of New York,
Nassau or Suffolk, State of New York.
20. Captions/Exhibits. Captions used in this Agreement are for convenience
of reference only and shall not be deemed a part of this Agreement nor used in
the construction of its meaning. Exhibits attached to this Agreement shall be
deemed as fully a part of this Agreement as if set forth in full herein.
21. Severability. If any provision of this Agreement shall be deemed
invalid or unenforceable as written it shall be construed, to the greatest
extent possible, in a manner which shall render it valid and enforceable and any
limitations on the scope or duration of any such provision necessary to make it
valid and enforceable shall be deemed to be part thereof; no invalidity or
unenforceability shall affect any other portion of this Agreement unless the
provision deemed to be so invalid or unenforceable is a material element of this
Agreement, taken as a whole.
22. Acknowledgment. Employee acknowledges that he has carefully read this
Agreement and hereby represents and warrants to the Company that Employee's
entering into this Agreement, and the obligations and duties undertaken by
Employee hereunder, will not conflict with, constitute a breach of or otherwise
violate the terms of any other agreement to which Employee is a party and that
Employee is not required to obtain the consent of any person or entity in order
to enter into and perform his obligations under this Agreement.
With respect to the covenants contained in Sections 7, 8 and 9 of this
Agreement, Employee agrees that any remedy at law for any breach or threatened
or attempted breach of such covenants may be inadequate and that the Company
shall be entitled to specific performance or any other mode of injunctive and/or
other equitable relief to enforce its rights hereunder or any other relief a
court might award without the necessity of showing any actual damage or
irreparable harm or the posting of any bond or furnishing of other security.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first hereinabove written.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
TSG GLOBAL EDUCATION WEB, INC.
By: /s/ Martin E. Cunningham
-----------------------------------------
[Title]
/s/ Ronald B. Collins
-----------------------------------------
Ronald B. Collins
Employee
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of July 7, 1999, between TSG Global Education Web,
Inc. ("Company"), a Delaware corporation, having its principal place of business
located at P.O. Box 300 320 Soundview Road, Guilford, Connecticut, and John J.
Phelan ("Employee"), residing at 30 Glen Hollow Road, West Hartford, CT 06117.
WITNESSETH:
WHEREAS, the Employee has expertise in the management of a company that
provides educational and other consulting services to major corporations through
the means of a secure internet connection , which company has been merged into
the Company concurrently with the execution of this Agreement;
WHEREAS, the parties acknowledge that the Employee's abilities and services
are unique and essential to the prospects of the Company; and
WHEREAS, in light of the foregoing, the Company desires to employ the
Employee to perform Employee and other services for the Company, and the
Employee desires to accept such employment, subject to the terms and conditions
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as Senior Vice
President-TSG and the Employee hereby accepts employment upon the terms and
conditions hereinafter set forth.
2. Term. The term of this Agreement shall be three (3) years, commencing on
the date hereof ("Effective Date") and ending July , 2002, subject to earlier
termination as provided in this Agreement ("Term") and subject to certain
provisions hereof which survive the Term. The Term shall be extended for
additional one (1) year periods automatically unless either party shall give the
other party a written termination notice, which notice shall be given at least
ninety (90) days prior to the end of the Term.
3. Compensation.
(a) For all services rendered under this Agreement:
(i) The Company shall pay the Employee a base salary at the rate of
$100,000.00 per annum payable in equal monthly installments. ("Base Salary"), as
may be adjusted from time to time by the CPI Factor (as defined below) as
provided in Section 3(b) below, or such greater amount as shall be approved by
the Company's Board of Directors from time to time; and
<PAGE>
(ii) The Company shall pay the Employee Incentive Compensation, calculated
and payable as set forth on Exhibit A attached hereto and made a part hereof.
(iii) The Company shall agree to grant to the Employee on the Effective
Date options to acquire TSG $0.001 par value Common Stock ("Shares") pursuant to
the provisions of the Company's qualified Incentive Stock Option Plan ("ISO")
attached as Exhibit B and the number of Shares and the grant price of the ISO
Shares in accordance with the table in Exhibit C.
(iv) The Company shall also agree to sell to the Employee on the Effective
Date the numbers of Shares in accordance with the table on Exhibit D.
(b) The Base Salary shall be subject each year to adjustment to reflect
changes in the cost of living as set forth in this Section 3(b). Effective on
each May 1st the Base Salary shall be changed to the amount derived by
multiplying the Base Salary by a fraction, the numerator of which shall be the
Consumer Price Index for All Urban Consumers, [US Cities Average] (1982-84= 100)
for the month of March immediately preceding such May 1st and the denominator of
which shall be 165.0, the said Consumer Price Index for the month of March, 1999
("CPI Factor"). The amount so determined shall be the Base Salary for the
calendar year beginning as of that May 1st until the next May 1st or the end of
the Term, whichever occurs sooner.
4. Duties. The Employee shall perform on a full time basis such duties of
an Employee nature as shall be customarily associated with the offices of Senior
Vice President-TSG subject to the direction of the President and Chief Executive
Officer and the Board of Directors. The Employee shall perform and discharge
well and faithfully the duties which may be assigned to him from time to time by
the Company in connection with the conduct of its business. If the Employee is
elected or appointed a director or officer of the Company or any subsidiary
thereof during the term of this Agreement, the Employee will serve in such
capacity without further compensation.
5. Extent of Services. So long as during the Term of this Agreement the
Company has not notified the Employee of his disability pursuant to Section
10(a) hereof, the Employee shall devote his full business time, attention and
energies to the business of the Company subject to reasonable absences for
vacation and illness and may not during the term of this Agreement be engaged
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage.
6. Benefits/Expenses.
(a) During the term of his employment, the Employee shall be entitled to
participate in employee benefit plans or programs of the Company, provided that
they should conform to the benefits which are now offered to the Employee in his
current position if any, to the extent that his position, tenure, salary, age,
health and other qualifications make him eligible to participate, subject to the
rules and regulations applicable thereto. Such additional benefits shall
include, subject to the approval of the Board of Directors, medical and dental
insurance, paid vacation and qualified pension and profit sharing plans.
<PAGE>
(b) The Company will furnish the Employee, $700.00 each month to be used
for the loan or lease of an automobile.
(c) The Company shall maintain term life insurance with Mass Mutual Life
Insurance Company with annual premium payment not to exceed $1,556.64 with the
beneficiary to be designated by the Employee.
(d) The Employee shall be entitled to reimbursement of all out of pocket
expenses reasonably incurred by him in the performance of his duties to the
Company, subject to the presenting of appropriate vouchers in accordance with
the Company's policy.
7. Disclosure of Information.
(a) The Employee represents and warrants to the Company that Exhibit E
hereto sets forth, to the best of Employee's knowledge:
(i) All rights, in respect of the Employee's engaging in any business
activity (whether or not for profit), of former employers, clients, principals,
partners or others with whom or for whom the Employee has performed services
since 1988; and
(ii) All of the business activities (whether or not for profit) of the
Employee applicable to periods after the time such services were performed.
(b) The Employee recognizes and acknowledges that the Company's
confidential or proprietary data or information as they have existed, will
exist, may continue to exist from time to time, are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company, in whole or in part,
directly or indirectly disclose, divulge or communicate such secrets,
information or processes to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use of
any such property for his own purposes or for the benefit of any person, firm,
corporation or other entity (except the Company) under any circumstances
provided that after the term of his employment these restrictions shall not
apply to such secrets, information and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, information or process entering the public domain without the
Company's consent). The Employee agrees to hold as the Company's property, all
memoranda, books, papers, letters, formulas and other data, and all copies
thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of the Company, at any time, to
deliver the same to the Company.
(c) The term "confidential or proprietary data or information": as used in
this Agreement shall mean information not generally available to the public,
including without limitation, all database information, personnel information,
financial information, customer lists, supplier lists, trade secrets, patented
or proprietary information, forms, information regarding operations, systems,
services, know how, computer and any other processed or collated data, computer
programs, pricing, marketing and advertising data.
<PAGE>
(d) All written materials, records and documents made by the Employee or
coming into Employee's possession during Employee's employment by the Company
concerning any products, processes or equipment manufactured, used, developed,
investigated, purchased, sold or considered by the Company or otherwise
concerning the business or affairs of the Company shall be the sole property of
the Company, and upon termination of Employee's employment by the Company, or
upon request of the Company during Employee's employment by the Company,
Employee shall promptly deliver the same to the Company. In addition, upon
termination of Employee's employment by the Company, Employee will deliver to
the Company all other Company property in Employee's possession or under
Employee's control, including but not limited to, financial statements,
marketing and sales data, customer and supplier lists, database information and
other documents, and any Company credit cards.
8. Inventions. The Employee hereby sells, transfers and assigns to the
Company or to any person, or entity designated by the Company, all of the entire
right, title and interest of the Employee in and to all inventions, ideas,
disclosures and improvements, whether patented or unpatented, and copyrightable
material, made or conceived by the Employee, solely or jointly, or in whole or
in part, during or before the term hereof (but after the Effective Date) which
(i) relate to methods, apparatus, designs, products, processes or devices sold,
leased, used or under construction or development by the Company or any
subsidiary or (ii) otherwise relate to or pertain to the business, functions or
operations of the Company or any subsidiary, or (iii) arise (wholly or partly)
from the efforts of the Employee during the term hereof. The Employee shall
communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to the aforementioned
inventions, ideas, disclosures and improvements; and, whether during the term
hereof or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company or any person or entity
designated by the Company to file and prosecute the patent applications and, as
to copyrightable material, to obtain copyright thereon. Any invention by the
Employee within one year following the termination of this Agreement shall be
deemed to fall within the provisions of this paragraph unless proved by the
Employee to have been first conceived and made following such termination.
9. Restrictive Covenant. During the Term of this Agreement and for a period
of three (3) years after the date of such termination for any reason Employee
shall not without the prior written consent of the Company:
(a) Non-Competition. Act as an individual proprietor, partner,
stockholder, officer, principal, agent, employee, supervisor, manager,
consultant, guarantor, creditor, lender, co- endorser or in any other capacity
whatsoever, own, participate in the ownership of, manage, operate, exercise any
control over, render services to, or engage in any of the foregoing for any
business, firm, corporation, limited liability company, its successors or
assigns, partnership or other entity which operates a business similar to or
competitive with any of the products or services developed by the Company during
the period commencing on October 1, 1992, until termination of employment which
are conducted in any of the geographic areas, including the continental United
States, in which the Company's business is conducted. These products include,
but are not limited to the following products or services:
<PAGE>
(a) Foxbox Technology;
(b) ESCN Training;
(c) PROFIT COACH ;
(d) PROFIT COACH TOOL KIT ;
(e) Organizational Competitive Benchmark Studies of major oil companies;
and
(f) Leader/Lead classroom training.
(b) Non-Solicitation. Solicit any business from any current customers or
clients of the Company, its successors or assigns, or from any prospective
customers or clients of Company, its successors or assigns from whom the
Company's employees or agents have engaged in, or solicited business within the
three (3) year period immediately preceding the termination date of the
Executive's employment for the purpose of selling products or services similar
to or competitive with those offered or sold or provided by the Company.
(c) Solicitation of Employees. In any manner, whether directly or
indirectly, seek to persuade any director, officer, or other employee of
Company, its successors or assigns to discontinue their employment or
relationship with Company, its successors or assigns, nor will such Employee
solicit entice, induce or retain any such person for such purpose.
(d) Severability. The parties hereto intend that the covenants contained in
this Section 9, which pertain only to geographic areas where the Company is
engaged in business, shall be deemed a series of separate covenants for each
applicable area of the relevant country, state, county and city. If, in any
judicial proceeding, a court shall refuse to enforce all the separate covenants
deemed included in this Section 9 because, taken together, they cover too
extensive a geographic area, the parties intend that those of such covenants
(taken in order of the cities, counties, states and countries therein which are
least populous) which if eliminated would permit the remaining separate
covenants to be enforced in such proceeding shall, for the purpose of such
proceeding, be deemed eliminated from the provisions of this Section 9.
(e) Nothing in this Section 9 shall reduce or abrogate the Employee's
obligations during the term of this Agreement under Sections 4 and 5 hereof.
10. Termination.
(a) Disability. The Company shall have the right to terminate this
Agreement at any time, without cause, upon ninety (90) days prior notice, or in
the event of the permanent disability of the Employee, upon five (5) days prior
written notice. Upon termination, the Company shall pay the Employee all
compensation earned under Section 3 through the date of termination; provided
that the incentive compensation shall be payable within one hundred twenty (120)
days after termination as set forth in Exhibit A. In addition, the Employee
shall receive a termination payment computed and payable as described in Section
10(e). For the purposes of this subparagraph "permanent disability" shall mean
the physical or mental incapacity of the Employee for any consecutive three (3)
month period or any aggregate period of six (6) months in any twelve (12) month
period of such a nature that the Employee shall be unable diligently to perform
the duties of advisor to the President and Chief Employee Officer as
contemplated hereby. Such determination shall be made by the mutual agreement of
the parties hereto, or in the event such agreement cannot be reached, by the
following procedure:
<PAGE>
(i) If the Company maintains a disability income policy, the definition
set forth in such policy shall control, provided the issuing insurance
company agrees to commence disability payments as a result of such
permanent disability.
(ii) If the Company does not maintain a disability income policy:
(A) Each party shall select an independent physician who shall
examine the subject Employee. The mutual agreement of the two
examining physicians shall control, and their decision shall be
binding.
(B) If the two physicians cannot agree, they (the physicians) shall
select a third physician to examine the subject Employee. The
majority opinion of such three physicians shall control, and
their decision shall be binding.
(b) Death. This Agreement shall terminate automatically upon the death of
the Employee. In such event, the Company shall pay the estate of the Employee,
within thirty (30) days after the date of death, all compensation earned under
Section 3 through the date of termination, provided the incentive compensation
shall be payable within one hundred twenty (120) days after termination as set
forth in Exhibit A. In addition, the estate of the Employee shall receive a
termination payment computed and payable as described in Section 10(e) herein.
(c) For Cause. In addition to its rights under Section 10(a) above, the
Company shall have the right, at its sole option, to terminate this Agreement
"for cause", as hereinafter defined, at any time, without any further payment to
the Employee other than compensation earned under Section 3(a)(i) prior to the
date of termination, by notice to the Employee (or his personal representative,
as the case may be), specifying the reason for such termination, and the
Employee shall be entitled to any incentive compensation on a pro rata basis for
the period ending on the date of such termination. For purposes of this Section
10(c), "cause" shall mean solely (i) the Employee's conviction of a felony or a
crime of moral turpitude, (ii) the Employee's willful misconduct or gross
negligence materially detrimental to the Company, or (iii) the breach by the
Employee of a material term of this Agreement which continues for thirty (30)
days after written notice thereof, specifying the nature of the breach, is given
to the Employee.
(d) Without Cause. If the Employee is terminated by the Company without
Cause he shall be entitled to all Incentive Compensation earned under Section 3
through the date of termination provided that the compensation shall be paid
within one hundred twenty (120) days after termination as set forth in Exhibit
A.
(e) Termination Payment. If the Employee's employment is terminated under
Section 10(a), 10(b) or 10(d) herein, the Employee shall be entitled to receive,
as a termination payment, any amount equal to his annual Base Salary, as
adjusted by the CPI Factor, in effect on the date of termination, payable
through July , 2002, or such other date as this Agreement may have been extended
to pursuant to Section 2 herein, in the same manner as such compensation was
paid prior to termination. The amount of payment under Section 10 (a) shall be
reduced by the amounts, if any, paid to the Employee by the Company's disability
insurance policy. In the event of termination upon death, the Company will fund
such payments with term life insurance at standard rates and the Employee will
pay any additional amount over and above the standard rate amount.
<PAGE>
(f) Loans. Upon termination of the Employee's employment under this
Agreement for any reason (including expiration of the term hereof), (i) all
loans made to the Employee shall become immediately due and payable, except that
if the Employee's employment is terminated under Section 10 (a) or 10 (b), he
(or his personal representatives) shall have the option to elect, by notice to
the Company within ten (10) days after the date of such termination, to repay
such loans in twelve (12) equal monthly installments following termination, with
interest, from the date of termination of employment, at the prime rate of
interest announced by Citibank N.A. from time to time. In such event, the
Employee (or his personal representatives) shall execute a promissory note and
other documentation evidencing such loans as the Company shall reasonably
request; and (ii) all loans due Employee and any deferred compensation owed to
the Employee by the Company shall become due and payable to the Employee be paid
in accordance with its terms.
11. Remedies. If there is a breach or threatened breach of the provisions
of Section 5, 7(b), 8 or 9 of this Agreement, the Company shall be entitled to
an injunction restraining the Employee from such breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
12. Insurance. The Company may, at its election and for its benefit, insure
the Employee through key man insurance up to $500,000.00 or otherwise, against
accidental loss or death and the Employee shall submit to such physical
examination and supply such information as may be required in connection
therewith.
13. Location of Performance. The Employee's services will be performed in
the Guilford, Connecticut area. The Employee's performance hereunder shall be
within such area or its environs. The parties acknowledge, however, that the
Employee may be required to travel extensively in connection with the
performance of his duties hereunder.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company, and unless clearly
inapplicable, all references herein to the Company shall be deemed to include
any successors. In addition, this Agreement shall be binding upon and inure to
the benefit of the Employee and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Employee hereunder may not
be delegated without the prior written approval of the Board of Directors of the
Company.
15. Successor Company. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform as if no such succession
had taken place.
<PAGE>
16. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and shall be deemed given when
delivered personally or three days after being sent by first-class registered or
certified mail, return receipt requested, to the party for which intended at its
or his address set forth at the beginning of this Agreement (which, in the case
of the Company, shall be sent "Attention: Chairman of the Board") or to such
other address as either party may hereafter specify by similar notice to the
other.
17. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
18. Entire Agreement. This Agreement supersedes all prior agreements
between the parties, written and oral, and cannot be amended or modified except
by a writing signed by both parties. It may be executed in one or more
counterpart copies, each of which shall be deemed an original, but all of which
shall constitute the same instrument.
19. Choice of Law/Forum. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Any disputes arising out of this Agreement shall be
adjudicated in the Federal or State court presiding in the Counties of New York,
Nassau or Suffolk, State of New York.
20. Captions/Exhibits. Captions used in this Agreement are for convenience
of reference only and shall not be deemed a part of this Agreement nor used in
the construction of its meaning. Exhibits attached to this Agreement shall be
deemed as fully a part of this Agreement as if set forth in full herein.
21. Severability. If any provision of this Agreement shall be deemed
invalid or unenforceable as written it shall be construed, to the greatest
extent possible, in a manner which shall render it valid and enforceable and any
limitations on the scope or duration of any such provision necessary to make it
valid and enforceable shall be deemed to be part thereof; no invalidity or
unenforceability shall affect any other portion of this Agreement unless the
provision deemed to be so invalid or unenforceable is a material element of this
Agreement, taken as a whole.
22. Acknowledgment. Employee acknowledges that he has carefully read this
Agreement and hereby represents and warrants to the Company that Employee's
entering into this Agreement, and the obligations and duties undertaken by
Employee hereunder, will not conflict with, constitute a breach of or otherwise
violate the terms of any other agreement to which Employee is a party and that
Employee is not required to obtain the consent of any person or entity in order
to enter into and perform his obligations under this Agreement.
<PAGE>
With respect to the covenants contained in Sections 7, 8 and 9 of this
Agreement, Employee agrees that any remedy at law for any breach or threatened
or attempted breach of such covenants may be inadequate and that the Company
shall be entitled to specific performance or any other mode of injunctive and/or
other equitable relief to enforce its rights hereunder or any other relief a
court might award without the necessity of showing any actual damage or
irreparable harm or the posting of any bond or furnishing of other security.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
TSG GLOBAL EDUCATION WEB, INC.
By: /s/ Martin E. Cunningham
-----------------------------------------
[Title]
/s/ John J. Phelan
-----------------------------------------
John J. Phelan
Employee
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of July 7, 1999, between TSG Global Education Web, Inc.
("Company"), a Delaware corporation, having its principal place of business
located at P.O. Box 300 320 Soundview Road, Guilford, Connecticut, and Daniel J.
Molloy ("Employee"), residing at 812 18th Street, Union City, NJ 07087.
WITNESSETH:
WHEREAS, the Employee has expertise in the management of a company that
provides educational and other consulting services to major corporations through
the means of a secure internet connection, which company has been merged into
the Company concurrently with the execution of this Agreement;
WHEREAS, the parties acknowledge that the Employee's abilities and services
are unique and essential to the prospects of the Company; and
WHEREAS, in light of the foregoing, the Company desires to employ the
Employee to perform Employee and other services for the Company, and the
Employee desires to accept such employment, subject to the terms and conditions
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as Senior Vice
President-ESCN Technology and the Employee hereby accepts employment upon the
terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be three (3) years, commencing on
the date hereof ("Effective Date") and ending July , 2002, subject to earlier
termination as provided in this Agreement ("Term") and subject to certain
provisions hereof which survive the Term. The Term shall be extended for
additional one (1) year periods automatically unless either party shall give the
other party a written termination notice, which notice shall be given at least
ninety (90) days prior to the end of the Term.
3. Compensation.
(a) For all services rendered under this Agreement:
(i) The Company shall pay the Employee a base salary at the rate of
$100,000.00 per annum payable in equal monthly installments. ("Base Salary"), as
may be adjusted from time to time by the CPI Factor (as defined below) as
provided in Section 3(b) below, or such greater amount as shall be approved by
the Company's Board of Directors from time to time; and
<PAGE>
(ii) The Company shall pay the Employee Incentive Compensation, calculated
and payable as set forth on Exhibit A attached hereto and made a part hereof.
(iii) The Company shall agree to grant to the Employee on the Effective
Date options to acquire TSG $0.001 par value Common Stock ("Shares") pursuant to
the provisions of the Company's qualified Incentive Stock Option Plan ("ISO")
attached as Exhibit B and the number of Shares and the grant price of the ISO
Shares in accordance with the table in Exhibit C.
(iv) The Company shall also agree to sell to the Employee on the Effective
Date the numbers of Shares in accordance with the table on Exhibit D.
(b) The Base Salary shall be subject each year to adjustment to reflect
changes in the cost of living as set forth in this Section 3(b). Effective on
each May 1st the Base Salary shall be changed to the amount derived by
multiplying the Base Salary by a fraction, the numerator of which shall be the
Consumer Price Index for All Urban Consumers, [U.S. City Average] (1982-84 =
100) for the month of March immediately preceding such May 1st and the
denominator of which shall be 165.0, the said Consumer Price Index for the month
of March, 1999 ("CPI Factor"). The amount so determined shall be the Base Salary
for the calendar year beginning as of that May 1st until the next May 1st or the
end of the Term, whichever occurs sooner.
4. Duties. The Employee shall perform on a full time basis such duties of
an Employee nature as shall be customarily associated with the offices of Senior
Vice President- ESCN subject to the direction of the President and Chief
Executive Officer and the Board of Directors. The Employee shall perform and
discharge well and faithfully the duties which may be assigned to him from time
to time by the Company in connection with the conduct of its business. If the
Employee is elected or appointed a director or officer of the Company or any
subsidiary thereof during the term of this Agreement, the Employee will serve in
such capacity without further compensation.
5. Extent of Services. So long as during the Term of this Agreement the
Company has not notified the Employee of his disability pursuant to Section
10(a) hereof, the Employee shall devote his full business time, attention and
energies to the business of the Company subject to reasonable absences for
vacation and illness and may not during the term of this Agreement be engaged
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage.
6. Benefits/Expenses.
(a) During the term of his employment, the Employee shall be entitled to
participate in employee benefit plans or programs of the Company, provided that
they should conform to the benefits which are offered to an employee in a
comparable position if any, to the extent that his position, tenure, salary,
age, health and other qualifications make him eligible to participate, subject
to the rules and regulations applicable thereto. Such additional benefits shall
include, subject to the approval of the Board of Directors medical and dental
insurance, paid vacation and qualified pension and profit sharing plans.
<PAGE>
(b) The Company will furnish the Employee, $700.00 each month to be used
for the loan or lease of an automobile.
(c) The Company shall maintain term life insurance with Mass Mutual Life
Insurance Company with annual premium payment not to exceed $1,810.32 with the
beneficiary to be designated by the Employee.
(d) The Employee shall be entitled to reimbursement of all out of pocket
expenses reasonably incurred by him in the performance of his duties to the
Company, subject to the presenting of appropriate vouchers in accordance with
the Company's policy.
7. Disclosure of Information.
(a) The Employee represents and warrants to the Company that Exhibit E
hereto sets forth, to the best of Employee's knowledge:
(i) All rights, in respect of the Employee's engaging in any business
activity (whether or not for profit), of former employers, clients, principals,
partners or others with whom or for whom the Employee has performed services
since 1988; and
(ii) All of the business activities (whether or not for profit) of the
Employee applicable to periods after the time such services were performed.
(b) The Employee recognizes and acknowledges that the Company's
confidential or proprietary data or information as they have existed, will
exist, may continue to exist from time to time, are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company, in whole or in part,
directly or indirectly disclose, divulge or communicate such secrets,
information or processes to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use of
any such property for his own purposes or for the benefit of any person, firm,
corporation or other entity (except the Company) under any circumstances
provided that after the term of his employment these restrictions shall not
apply to such secrets, information and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, information or process entering the public domain without the
Company's consent). The Employee agrees to hold as the Company's property, all
memoranda, books, papers, letters, formulas and other data, and all copies
thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of the Company, at any time, to
deliver the same to the Company.
<PAGE>
(c) The term "confidential or proprietary data or information": as used in
this Agreement shall mean information not generally available to the public,
including without limitation, all database information, personnel information,
financial information, customer lists, supplier lists, trade secrets, patented
or proprietary information, forms, information regarding operations, systems,
services, know how, computer and any other processed or collated data, computer
programs, pricing, marketing and advertising data.
(d) All written materials, records and documents made by the Employee or
coming into Employee's possession during Employee's employment by the Company
concerning any products, processes or equipment manufactured, used, developed,
investigated, purchased, sold or considered by the Company or otherwise
concerning the business or affairs of the Company shall be the sole property of
the Company, and upon termination of Employee's employment by the Company, or
upon request of the Company during Employee's employment by the Company,
Employee shall promptly deliver the same to the Company. In addition, upon
termination of Employee's employment by the Company, Employee will deliver to
the Company all other Company property in Employee's possession or under
Employee's control, including but not limited to, financial statements,
marketing and sales data, customer and supplier lists, database information and
other documents, and any Company credit cards.
8. Inventions. The Employee hereby sells, transfers and assigns to the
Company or to any person, or entity designated by the Company, all of the entire
right, title and interest of the Employee in and to all inventions, ideas,
disclosures and improvements, whether patented or unpatented, and copyrightable
material, made or conceived by the Employee, solely or jointly, or in whole or
in part, during or before the term hereof (but after the Effective Date) which
(i) relate to methods, apparatus, designs, products, processes or devices sold,
leased, used or under construction or development by the Company or any
subsidiary or (ii) otherwise relate to or pertain to the business, functions or
operations of the Company or any subsidiary, or (iii) arise (wholly or partly)
from the efforts of the Employee during the term hereof. The Employee shall
communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to the aforementioned
inventions, ideas, disclosures and improvements; and, whether during the term
hereof or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company or any person or entity
designated by the Company to file and prosecute the patent applications and, as
to copyrightable material, to obtain copyright thereon. Any invention by the
Employee within one year following the termination of this Agreement shall be
deemed to fall within the provisions of this paragraph unless proved by the
Employee to have been first conceived and made following such termination.
<PAGE>
9. Restrictive Covenant. During the Term of this Agreement and for a period
of three (3) years after the date of such termination for any reason Employee
shall not without the prior written consent of the Company:
(a) Non-Competition. Act as an individual proprietor, partner, stockholder,
officer, principal, agent, employee, supervisor, manager, consultant, guarantor,
creditor, lender, co-endorser or in any other capacity whatsoever, own,
participate in the ownership of, manage, operate, exercise any control over,
render services to, or engage in any of the foregoing for any business, firm,
corporation, limited liability company, its successors or assigns, partnership
or other entity which operates a business similar to or competitive with any of
the products or services developed by the Company during the period commencing
on October 1, 1992, until termination of employment which are conducted in any
of the geographic areas, including the continental United States, in which the
Company's business is conducted. These products include, but are not limited to
the following products or services:
(a) Foxbox Technology;
(b) ESCN Training;
(c) PROFIT COACH ;
(d) PROFIT COACH TOOL KIT ;
(e) Organizational Competitive Benchmark Studies of major oil companies;
and
(f) Leader/Lead classroom training.
(b) Non-Solicitation. Solicit any business from any current customers or
clients of the Company, its successors or assigns, or from any prospective
customers or clients of Company, its successors or assigns from whom the
Company's employees or agents have engaged in, or solicited business within the
three (3) year period immediately preceding the termination date of the
Executive's employment for the purpose of selling products or services similar
to or competitive with those offered or sold or provided by the Company.
(c) Solicitation of Employees. In any manner, whether directly or
indirectly, seek to persuade any director, officer, or other employee of
Company, its successors or assigns to discontinue their employment or
relationship with Company, its successors or assigns, nor will such Employee
solicit entice, induce or retain any such person for such purpose.
(d) Severability. The parties hereto intend that the covenants contained in
this Section 9, which pertain only to geographic areas where the Company is
engaged in business, shall be deemed a series of separate covenants for each
applicable area of the relevant country, state, county and city. If, in any
judicial proceeding, a court shall refuse to enforce all the separate covenants
deemed included in this Section 9 because, taken together, they cover too
extensive a geographic area, the parties intend that those of such covenants
(taken in order of the cities, counties, states and countries therein which are
least populous) which if eliminated would permit the remaining separate
covenants to be enforced in such proceeding shall, for the purpose of such
proceeding, be deemed eliminated from the provisions of this Section 9.
<PAGE>
(e) Nothing in this Section 9 shall reduce or abrogate the Employee's
obligations during the term of this Agreement under Sections 4 and 5 hereof.
10. Termination.
(a) Disability. The Company shall have the right to terminate this
Agreement at any time, without cause, upon ninety (90) days prior notice, or in
the event of the permanent disability of the Employee, upon five (5) days prior
written notice. Upon termination, the Company shall pay the Employee all
compensation earned under Section 3 through the date of termination; provided
that the incentive compensation shall be payable within one hundred twenty (120)
days after termination as set forth in Exhibit A. In addition, the Employee
shall receive a termination payment computed and payable as described in Section
10(e). For the purposes of this subparagraph "permanent disability" shall mean
the physical or mental incapacity of the Employee for any consecutive three (3)
month period or any aggregate period of six (6) months in any twelve (12) month
period of such a nature that the Employee shall be unable diligently to perform
the duties of advisor to the President and Chief Employee Officer as
contemplated hereby. Such determination shall be made by the mutual agreement of
the parties hereto, or in the event such agreement cannot be reached, by the
following procedure:
(i) If the Company maintains a disability income policy, the definition
set forth in such policy shall control, provided the issuing insurance
company agrees to commence disability payments as a result of such
permanent disability.
(ii) If the Company does not maintain a disability income policy:
(A) Each party shall select an independent physician who shall
examine the subject Employee. The mutual agreement of the two
examining physicians shall control, and their decision shall be
binding.
(B) If the two physicians cannot agree, they (the physicians) shall
select a third physician to examine the subject Employee. The
majority opinion of such three physicians shall control, and
their decision shall be binding.
(b) Death. This Agreement shall terminate automatically upon the death of
the Employee. In such event, the Company shall pay the estate of the Employee,
within thirty (30) days after the date of death, all compensation earned under
Section 3 through the date of termination, provided the incentive compensation
shall be payable within one hundred twenty (120) days after termination as set
forth in Exhibit A. In addition, the estate of the Employee shall receive a
termination payment computed and payable as described in Section 10(e) herein.
(c) For Cause. In addition to its rights under Section 10(a) above, the
Company shall have the right, at its sole option, to terminate this Agreement
"for cause", as hereinafter defined, at any time, without any further payment to
the Employee other than compensation earned under Section 3(a)(i) prior to the
date of termination, by notice to the Employee (or his personal representative,
as the case may be), specifying the reason for such termination, and the
Employee shall be entitled to any incentive compensation on a pro rata basis for
the period ending on the date of such termination. For purposes of this Section
10(c), "cause" shall mean solely (i) the Employee's conviction of a felony or a
crime of moral turpitude, (ii) the Employee's willful misconduct or gross
negligence materially detrimental to the Company, or (iii) the breach by the
Employee of a material term of this Agreement which continues for thirty (30)
days after written notice thereof, specifying the nature of the breach, is given
to the Employee.
<PAGE>
(d) Without Cause. If the Employee is terminated by the Company without
Cause he shall be entitled to all Incentive Compensation earned under Section 3
through the date of termination provided that the compensation shall be paid
within one hundred twenty (120) days after termination as set forth in Exhibit
A.
(e) Termination Payment. If the Employee's employment is terminated under
Section 10(a), 10(b) or 10(d) herein, the Employee shall be entitled to receive,
as a termination payment, any amount equal to his annual Base Salary, as
adjusted by the CPI Factor, in effect on the date of termination, payable
through July , 2002 such other date as this Agreement may have been extended to
pursuant to Section 2 herein, in the same manner as such compensation was paid
prior to termination. The amount of payment under Section 10(a) shall be reduced
by the amounts, if any, paid to the Employee by the Company's disability
insurance policy. In the event of termination upon death, the Company will fund
such payments with term life insurance at standard rates and the Employee will
pay any additional amount over and above the standard rate amount.
(f) Loans. Upon termination of the Employee's employment under this
Agreement for any reason (including expiration of the term hereof), (i) all
loans made to the Employee shall become immediately due and payable, except that
if the Employee's employment is terminated under Section 10 (a) or 10 (b), he
(or his personal representatives) shall have the option to elect, by notice to
the Company within ten (10) days after the date of such termination, to repay
such loans in twelve (12) equal monthly installments following termination, with
interest, from the date of termination of employment, at the prime rate of
interest announced by Citibank N.A. from time to time. In such event, the
Employee (or his personal representatives) shall execute a promissory note and
other documentation evidencing such loans as the Company shall reasonably
request; and (ii) all loans due Employee and any deferred compensation owed to
the Employee by the Company shall become due and payable to the Employee be paid
in accordance with its terms.
11. Remedies. If there is a breach or threatened breach of the provisions
of Section 5, 7(b), 8 or 9 of this Agreement, the Company shall be entitled to
an injunction restraining the Employee from such breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies for such
breach or threatened breach.
12. Insurance. The Company may, at its election and for its benefit, insure
the Employee through key man insurance up to $500,000.00 or otherwise, against
accidental loss or death and the Employee shall submit to such physical
examination and supply such information as may be required in connection
therewith.
<PAGE>
13. Location of Performance. The Employee's services will be performed in
the Guilford, Connecticut area. The Employee's performance hereunder shall be
within such area or its environs. The parties acknowledge, however, that the
Employee may be required to travel extensively in connection with the
performance of his duties hereunder.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company, and unless clearly
inapplicable, all references herein to the Company shall be deemed to include
any successors. In addition, this Agreement shall be binding upon and inure to
the benefit of the Employee and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Employee hereunder may not
be delegated without the prior written approval of the Board of Directors of the
Company.
15. Successor Company. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform as if no such succession
had taken place.
16. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and shall be deemed given when
delivered personally or three days after being sent by first-class registered or
certified mail, return receipt requested, to the party for which intended at its
or his address set forth at the beginning of this Agreement (which, in the case
of the Company, shall be sent "Attention: Chairman of the Board") or to such
other address as either party may hereafter specify by similar notice to the
other.
17. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
18. Entire Agreement. This Agreement supersedes all prior agreements
between the parties, written and oral, and cannot be amended or modified except
by a writing signed by both parties. It may be executed in one or more
counterpart copies, each of which shall be deemed an original, but all of which
shall constitute the same instrument.
19. Choice of Law/Forum. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Any disputes arising out of this Agreement shall be
adjudicated in the Federal or State court presiding in the Counties of New York,
Nassau or Suffolk, State of New York.
20. Captions/Exhibits. Captions used in this Agreement are for convenience
of reference only and shall not be deemed a part of this Agreement nor used in
the construction of its meaning. Exhibits attached to this Agreement shall be
deemed as fully a part of this Agreement as if set forth in full herein.
<PAGE>
21. Severability. If any provision of this Agreement shall be deemed
invalid or unenforceable as written it shall be construed, to the greatest
extent possible, in a manner which shall render it valid and enforceable and any
limitations on the scope or duration of any such provision necessary to make it
valid and enforceable shall be deemed to be part thereof; no invalidity or
unenforceability shall affect any other portion of this Agreement unless the
provision deemed to be so invalid or unenforceable is a material element of this
Agreement, taken as a whole.
22. Acknowledgment. Employee acknowledges that he has carefully read this
Agreement and hereby represents and warrants to the Company that Employee's
entering into this Agreement, and the obligations and duties undertaken by
Employee hereunder, will not conflict with, constitute a breach of or otherwise
violate the terms of any other agreement to which Employee is a party and that
Employee is not required to obtain the consent of any person or entity in order
to enter into and perform his obligations under this Agreement.
With respect to the covenants contained in Sections 7, 8 and 9of this
Agreement, Employee agrees that any remedy at law for any breach or threatened
or attempted breach of such covenants may be inadequate and that the Company
shall be entitled to specific performance or any other mode of injunctive and/or
other equitable relief to enforce its rights hereunder or any other relief a
court might award without the necessity of showing any actual damage or
irreparable harm or the posting of any bond or furnishing of other security.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first hereinabove written.
[SIGNATURES APPEAR ON THE NEXT PAGE]
<PAGE>
TSG GLOBAL EDUCATION WEB, INC.
By: /s/ Martin E. Cunningham
-----------------------------------------
[Title]
/s/ Daniel J. Molloy
-----------------------------------------
Daniel J. Molloy
Employee
