<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to ______________
COMMISSION FILE NUMBER 33-19435
eVENTURES GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2233445
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
300 CRESCENT COURT, SUITE 800
DALLAS, TEXAS 75201
(214) 777-4100
(Address and telephone number of principal executive offices)
ONE EVERTRUST PLAZA, 8TH FLOOR
JERSEY CITY, NEW JERSEY 07302
(201) 200-5515
(Former address and telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No
--- ---
(2) Yes X No
--- ---
On May 12, 2000, 51,188,176 shares of the registrant's Common Stock were
outstanding.
1
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eVENTURES GROUP, INC.
QUARTERLY REPORT FORM 10-Q
INDEX
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<CAPTION>
PAGE NO.
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 and March 31, 2000 (unaudited) 3
Consolidated Statements of Operations -
Three and nine months ended March 31,1999 and 2000 (unaudited) 4
Consolidated Statement of Shareholders' Equity (Deficit) -
Nine months ended March 31, 2000 (unaudited) 5
Consolidated Statements of Cash Flows -
Nine months ended March 31,1999 and 2000 (unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Securities Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 24
Exhibit Index 25
</TABLE>
2
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eVENTURES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 2000 1999
------------- -----------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 12,716,576 $ 39,379
Accounts receivable, less allowances for
doubtful accounts, ($0 - 1999; $473,162 - 2000) 2,443,646 6,129
Prepaid expenses and other receivables 37,004 11,164
Deposits 416,986 13,250
Notes receivable 587,393 242,310
VAT receivable 2,848,155 2,757,368
------------ -----------
Total current assets 19,049,760 3,069,600
------------ -----------
Restricted cash 281,928 1,107,437
Property and equipment, net 16,341,925 6,219,874
Note receivable from affiliate 2,142,035 --
Investments 5,038,655 2,191,498
Goodwill, net 110,275,361 3,072,908
Other 448,499 --
------------ -----------
134,528,403 12,591,717
------------ -----------
Total Assets $153,578,163 $15,661,317
============ ===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Capital leases, current portion $ 3,576,931 $ 1,916,761
Accounts payable 6,604,456 4,609,806
Accrued other 2,244,568 1,477,757
Accrued interest payable -- 383,163
Customer deposits and deferred revenues 1,149,140 1,272,682
Notes payable 245,000 --
------------ -----------
Total current liabilities 13,820,095 9,660,169
------------ -----------
Notes payable 2,280,954 --
Capital leases, net of current portion 6,891,618 2,031,513
Debentures -- 6,828,948
------------ -----------
9,172,572 8,860,461
------------ -----------
Stockholders' Equity (Deficit):
Common stock 974 36
Preferred stock -- --
Additional paid-in capital 170,442,276 4,310,144
Accumulated deficit (37,102,718) (7,169,493)
Deferred compensation (1,706,164) --
Notes receivable from shareholders (1,048,872) --
------------ -----------
130,585,496 (2,859,313)
------------ -----------
Total Liabilities & Stockholders' Equity (Deficit) $153,578,163 $15,661,317
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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eVENTURES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 16,308,494 $ 7,979,792 $ 38,970,332 $ 20,993,492
Direct costs 15,400,305 6,142,151 37,160,085 15,887,755
------------ ------------ ------------ ------------
Gross profit 908,189 1,837,641 1,810,247 5,105,737
Selling, general and administrative expenses 4,506,404 1,519,499 13,087,581 4,550,319
Depreciation and amortization 2,431,734 337,398 4,205,374 748,929
------------ ------------ ------------ ------------
Loss from operations, before other
(income) expense (6,029,949) (19,256) (15,482,708) (193,511)
Other (income) expenses
Interest expense (income), net (223,717) 399,877 374,343 1,133,228
Write off of unamortized debt discount -- -- 917,615 --
Equity in losses of affiliates 2,296,913 -- 2,328,732 --
Foreign currency (gain) loss (84) 1,236 (2,116) 12,398
Other 422,915 12,464 423,989 (4,951)
------------ ------------ ------------ ------------
2,496,027 413,577 4,042,563 1,140,675
------------ ------------ ------------ ------------
Net loss (8,525,976) (432,833) (19,525,271) (1,334,186)
Imputed preferred dividend 9,292,011 -- 10,407,954 --
------------ ------------ ------------ ------------
Net loss available to common shareholders $(17,817,987) $ (432,833) $(29,933,225) $ (1,334,186)
============ ============ ============ ============
Net loss per share - (basic and diluted) $ (0.38) $ (0.04) $ (0.84) $ (0.12)
Weighted average number of shares
outstanding - (basic and diluted) 46,512,853 11,365,614 35,750,889 11,365,614
</TABLE>
See accompanying notes to consolidated financial statements.
4
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eVENTURES GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------------ ----------------------- Paid-in
Shares Amount Shares Amount Capital
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1999 -- $ -- 1,800,000 $ 36 $ 4,310,144
Acquisition of AxisTel -- -- 12,381,000 248 17,110,929
Acquisition of eVentures -- -- 10,330,610 207 (2,980)
Acquisition of 66.67% of e.Volve -- -- 9,565,614 190 8,540,159
Contribution of i2v2 cost investment from Major Shareholders -- -- 2,879,386 58 --
Issuance of Series A Preferred Stock 1,000 -- -- -- 1,000,000
Issuance of common stock -- -- 2,470,000 49 4,939,951
Conversion of Series A Preferred Stock (1,000) -- 200,000 4 (4)
Intrinsic value of stock options -- -- -- -- 3,311,250
Amortization of deferred compensation -- -- -- -- --
Net effect of the purchase of remaining 1/3 of e.Volve -- -- 5,831,253 117 11,662,389
Issuance of Series B Preferred Stock 7,000 -- -- -- 6,997,500
Issuance of Series C Preferred Stock 15,570 -- -- -- 15,469,985
Imputed preferred dividend -- -- -- -- 10,407,954
Issuance of common stock as payment for accounts payable -- -- 426,729 9 6,549,471
Acquisition of Fonbox -- -- 27,860 1 696,499
Acquisition of iGlobal -- -- 2,551,087 51 79,449,033
Conversion of Series B Preferred Stock (2,500) -- 181,159 4 (4)
Notes receivable from shareholders -- -- -- -- --
Net loss -- -- -- -- --
---------- ---------- ---------- ---------- -------------
Balance, March 31, 2000 20,070 $ -- 48,644,698 $ 974 $ 170,442,276
========== ========== ========== ========== =============
<CAPTION>
Notes
Receivable
Accumulated Deferred from
Deficit Compensation Shareholders Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, June 30, 1999 $ (7,169,493) $ -- $ -- $ (2,859,313)
Acquisition of AxisTel -- -- -- 17,111,177
Acquisition of eVentures -- -- -- (2,773)
Acquisition of 66.67% of e.Volve -- -- -- 8,540,349
Contribution of i2v2 cost investment from Major Shareholders -- -- -- 58
.
Issuance of Series A Preferred Stock -- -- -- 1,000,000
Issuance of common stock -- -- -- 4,940,000
Conversion of Series A Preferred Stock -- -- -- --
Intrinsic value of stock options -- (3,311,250) -- --
Amortization of deferred compensation -- 1,605,086 -- 1,605,086
Net effect of the purchase of remaining 1/3 of e.Volve -- -- -- 11,662,506
Issuance of Series B Preferred Stock -- -- -- 6,997,500
Issuance of Series C Preferred Stock -- -- -- 15,469,985
Imputed preferred dividend (10,407,954) -- -- --
Issuance of common stock as payment for accounts payable -- -- -- 6,549,480
Acquisition of Fonbox -- -- -- 696,500
Acquisition of iGlobal -- -- -- 79,449,084
Conversion of Series B Preferred Stock -- -- -- --
Notes receivable from shareholders -- -- (1,048,872) (1,048,872)
Net loss (19,525,271) -- -- (19,525,271)
------------- ------------- ------------- -------------
Balance, March 31, 2000 $ (37,102,718) $ (1,706,164) $ (1,048,872) $ 130,585,496
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements
5
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eVENTURES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended March 31,
--------------------------------
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (29,933,225) $ (1,334,186)
Adjustments to reconcile net income to net cash (used in)
provided by net operating activities:
Depreciation and amortization 4,360,729 1,491,711
Imputed preferred dividend 10,407,954 --
Other expenses 2,419,146 671,133
Bad debt 53,162 --
Foreign currency (gain) loss (2,116) 12,398
Equity in losses of unconsolidated affiliates 2,328,732 --
Change in operating assets and liabilities:
Accounts receivable (963,142) 104,422
Other receivables (25,840) (125,503)
Prepaid expenses and other (40,085) (18,987)
VAT receivable (90,787) (2,399,687)
Restricted cash 1,857,437 (1,094,121)
Accounts payable 5,246,775 817,327
Accrued interest payable 161,285 174,968
Accrued other 451,542 (100,620)
Customer deposits (1,221,541) 367,418
------------- -------------
Net cash used in operating activities (4,989,974) (1,433,727)
------------- -------------
Cash Flow Used In Investing Activities
Deposits (345,083) 4,728
Proceeds from sale of available-for-sale securities -- 246,580
Purchase of property and equipment (1,777,447) (1,972,328)
Net cash acquired in acquisitions 509,021 --
Long term investments (150,000) --
Investments in affiliates (7,233,242) (26,000)
------------- -------------
Net cash used in investing activities (8,996,751) (1,747,020)
------------- -------------
Cash Flow From Financing Activities
Advances - shareholders -- (60,920)
Issuance of common stock and preferred stock 28,455,828 --
Proceeds from the issuance of debt -- 1,240,000
Loan repayment (823,278) --
Payments on capital leases (968,628) (196,043)
------------- -------------
Net cash provided by financing activities
increase (decrease) 26,663,922 983,037
------------- -------------
Net increase (decrease) in cash 12,677,197 (2,197,710)
Cash and cash equivalents, beginning of period 39,379 2,417,216
------------- -------------
Cash and cash equivalents, end of period $ 12,716,576 $ 219,506
============= =============
Supplemental schedule of non-cash investing and financing activities:
Cash paid for:
Interest $ 425,621 287,997
============= =============
Taxes $ -- $ --
============= =============
Supplemental schedule of non-cash investing and financing activities:
Purchases of equipment under capital leases $ 5,288,392 $ 3,422,647
============= =============
Fair value of original issue discount on warrants
granted pursuant to certain of the debentures $ -- $ --
============= =============
Fair value of original issue discount on revaluation of Company
at July 1, 1998, arising from change in ownership $ -- $ 2,000,000
============= =============
Goodwill arising from change in ownership
and acquisitions settled through the issuance of stock $ 108,515,172 $ 3,414,343
============= =============
Net assets of subsidiary acquired through an
issue of stock $ 197,169 $ --
============= =============
Stock issued for settlement of accounts payable $ 6,549,480 $ --
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
EVENTURES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Description of the Company
eVentures Group, Inc. ("eVentures" or the "Company") is an Internet
communications holding company that provides a range of services including
voice, Internet, data, fax, e-mail and video transmission through its
consolidated subsidiaries and affiliated companies (collectively referred to
as Partner Companies). The Company's strategy is to develop and operate its
majority-owned subsidiaries, and to make acquisitions of and take strategic
positions in other Internet and communications companies. The Company's
strategy envisions and promotes opportunities for synergistic business
relationships among its Partner Companies.
The Company's wholly owned Partner Companies operate private communications
networks that consist of digital switching, routing and signal management
equipment, as well as fiber optic cable lines. These subsidiaries also offer
voice, Internet, fax, DSL, e-mail and video transmission services to
customers. Services provided by the Company's Partner Companies may utilize
networks owned and/or operated by the Company's wholly owned subsidiaries,
as well as third party network providers.
Although the Company refers to the companies in which it has an equity
ownership interest as its "Partner Companies" and that it has a
"partnership" with these companies, the Company does not act as an agent or
legal representative for any of its Partner Companies, it does not have the
power or authority to legally bind any of its Partner Companies and it does
not have the types of liabilities in relation to its Partner Companies that
a general partner of a partnership would have.
Organization
Prior to September 22, 1999, eVentures was a publicly held company with no
material operations. The Company was formerly known as Adina, Inc., which
was incorporated in the state of Delaware on June 24, 1987. In September
1999, the Company acquired (i) all of the outstanding shares of AxisTel
Communications, Inc. ("AxisTel"); (ii) approximately 66.67% of the
outstanding shares of e.Volve Technology Group, Inc. ("e.Volve"); (iii)
approximately 17% of the outstanding shares of PhoneFree.com, Inc. (formerly
known as i2v2.com, Inc.) ("PhoneFree.com"); and (iv) a note receivable from
e.Volve in the amount of $8,540,159, including accrued interest ("Notes").
In a related transaction, the remaining 33.33% of e.Volve was acquired by
the Company in October 1999. All of the acquisitions and the purchase of the
Notes were settled through the issuance of 26,827,552 shares of common stock
of eVentures and are collectively referred to as the "Initial Transaction".
Prior to the Initial Transaction, three shareholders that are affiliated
with each other (the "Major Shareholders") had directly and indirectly held
ownership interests of (i) 66.67% of e.Volve; (ii) 17% of PhoneFree.com; and
(iii) 0.7% of AxisTel, and owned the Notes and an option to purchase a
further 49.3% of AxisTel. Immediately after the Major Shareholders exercised
this option to purchase an additional 49.3% of AxisTel, the Major
Shareholders directly and indirectly transferred all of their ownership
interests in e.Volve, AxisTel and PhoneFree.com, and the Notes to eVentures
in exchange for common stock in eVentures. Upon completion of the Initial
Transaction, the Major Shareholders owned approximately 77% of the
outstanding common stock of the Company. At May 12, 2000, the Major
Shareholders owned approximately 57% of the outstanding common stock of the
Company.
Allocation of consideration given during the three months ended March 31,
2000 to the acquired assets is as follows:
Purchase of 100% of iGlobal on March 10, 2000
---------------------------------------------
<TABLE>
<S> <C>
Cost of investment $79,450,201
Net assets acquired 1,000
-----------
Excess attributed to goodwill $79,449,201
===========
</TABLE>
The above represents the final purchase price allocation.
Basis of Presentation
The accompanying consolidated financial statements of the Company for the
three and nine month periods ended March 31, 1999 and 2000, have been
prepared by the Company without audit, pursuant to the interim financial
statements rules and regulations of the SEC. In the opinion of management,
the accompanying consolidated financial statements include all adjustments,
consisting only of those of a normal recurring nature, necessary to present
fairly the results of the Company's operations and cash flows at the dates
and for the periods indicated. The results of operations for the interim
periods are not necessarily indicative of the results for the full fiscal
year. The accompanying financial statements should be read in conjunction
with the Company's audited consolidated financial statements included in the
Company's Form 10/A filed with the Securities and Exchange Commission on
March 8, 2000.
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<PAGE> 8
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The consolidated financial statements include the accounts of the Company
and all wholly owned and majority owned subsidiaries. The financial results
of e.Volve are included in the financial statements for all periods
presented. The financial results for AxisTel are included in the financial
statements since September 22, 1999, the date of acquisition. The financial
results of iGlobal are included in the financial statements since its
acquisition on March 10, 2000. All significant inter-company accounts have
been eliminated.
Principles of Accounting for Ownership in Partner Companies
The Company accounts for its ownership interests in Partner Companies under
three broad methods: consolidation, equity method and cost method. The
applicable accounting method is generally determined based on eVentures
voting interest in a Partner Company, as well as the Company's degree of
influence over each Partner Company.
Consolidation. Companies in which eVentures directly or indirectly owns more
than 50% of the outstanding voting securities are generally accounted for
under the consolidation method of accounting. Under this method, a Partner
Company's accounts are reflected within eVentures' Consolidated Statements
of Operations. Participation of other Partner Company shareholders, if any,
in the earnings or losses of a consolidated Partner Company is reflected in
the caption "Minority interest" in the Consolidated Statements of
Operations. Minority interest, if any, adjusts the consolidated net results
of operations to reflect only eVentures' share of the earnings or losses of
the consolidated Partner Company. As of March 31, 2000, eVentures owned 100%
of the outstanding common stock of all Partner Companies accounted for under
the consolidation method of accounting, and as a result there are no
minority interests in the Consolidated Statements of Operations. The wholly
owned Partner Companies are AxisTel, e.Volve and iGlobal.
Equity Method. Partner Companies whose results are not consolidated, but
over whom the Company exercises significant influence, are generally
accounted for under the equity method of accounting. Whether or not the
Company exercises significant influence with respect to a Partner Company
depends on an evaluation of several factors including, among others,
representation on the Partner Company's board of directors and ownership
level, which is generally a 20% to 50% interest in the voting securities of
the Partner Company, including voting rights associated with eVentures'
holdings in common stock, preferred stock and other convertible instruments
in the Partner Company. Under the equity method of accounting, a Partner
Company's accounts are not reflected within the Consolidated Statements of
Operations; however, the Company's share of the earnings or losses of the
Partner Company is reflected in the caption "Equity in losses of affiliates"
in the Consolidated Statements of Operations. At March 31, 2000, the
Company's direct and indirect ownership interests in Innovative Calling
Technologies, LLC ("ICT"), PhoneFree.com, Fonbox, Inc. ("Fonbox") and
Televant, Inc. ("Callrewards") were 50%, 16%, 31% and 30%, respectively and
are accounted for under the equity method.
Cost Method. Partner Companies not accounted for under either the
consolidation or the equity method of accounting are accounted for under the
cost method of accounting. Under this method, eVentures' share of the
earnings or losses of these companies is not included in the Consolidated
Statements of Operations. In certain cases, the Company has representation
on the board of directors of the Partner Companies accounted for under the
cost method. As of March 31, 2000, the Company's investments in Launch
Center 39 and Spydre Labs are accounted for using the cost method.
Segment Information
In the fiscal year ended June 30, 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 131, which requires the
reporting of segment information using the "management approach" versus the
"industry approach" previously required. The Company operates in one
reportable segment.
8
<PAGE> 9
New Accounting Pronouncements
The American Institute of Certified Public Accountants has issued Statement
of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities." This SOP defines start-up activities as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a
new class of customers, initiating a new process in an existing facility, or
commencing some new operation. SOP 98-5 requires that these start-up costs
be expensed as incurred. This SOP is effective for financial statements for
fiscal years beginning after December 15, 1998, and was adopted by the
Company on July 1, 1999. The adoption has not materially impacted the
results of operations, financial position and financial statement
disclosures, and is not expected to have a significant impact on future
financial statements.
In June 1998, the Financial Accounting Standards Board ("FASB"), issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 requires companies to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133, as amended by SFAS No. 137,
is effective for fiscal years beginning after June 15, 2000. The Company
does not presently enter into any transactions involving derivative
financial instruments and, accordingly, does not anticipate the new standard
will have any effect on its financial statements for the foreseeable future.
2. ACQUISITIONS AND INVESTMENTS
On March 10, 2000, the Company issued an aggregate of 2,551,087 shares of
common stock to the stockholders of iGlobal in exchange for all of the
outstanding voting securities of iGlobal. In connection therewith, a total
of 390,947 warrants to purchase shares of common stock of iGlobal were
converted into an aggregate of 141,210 warrants to purchase shares of
eVentures' common stock pursuant to the terms of each warrant agreement.
iGlobal, founded in 1994, aggregates communications technologies that
utilize and integrate voice, data and video. In 1998, iGlobal created
Telares, the country's largest revenue-sharing consortium of independent
internet service providers ("ISPs"), providing a broad range of
communication services to independent ISPs including digital subscriber line
("DSL"), long distance, Voice ISP, streaming video, prepaid calling cards
and other value-added services.
On January 31, 2000, the Company exercised its option to purchase
approximately 23% of Fonbox for $1.0 million cash and the issuance of 27,860
shares of the Company's common stock. As of March 31, 2000, the Company owns
approximately 31% of the equity and voting interests of Fonbox. Fonbox is a
development stage company that offers Internet based unified messaging
services for the Portuguese-speaking and Spanish-speaking market in Latin
America.
On January 28, 2000, the Company purchased 100,000 Series A Preferred Units
of Launch Center 39 ("LC39"), representing approximately 2.1% of the equity
and voting interests of LC39 for $1.0 million. LC39 is a full service
incubator, which provides a series of services for launching Internet and
new media companies. These services include a unique combination of funding,
strategic advice and business development, shared legal, financial and other
professional services, shared infrastructure, and partnerships for strategic
recruiting.
On February 11, 2000, the Company purchased, for $750,000, a 30% ownership
interest in Televant, Inc., which owns and operates the Callrewards.com(TM)
website. Callrewards is a development stage company that intends to derive
revenues from advertising and e-commerce transactions. Callrewards customers
can place free PC-to-Phone and PC-to-PC calls over the Callrewards network.
Additionally, Callrewards customers can earn loyalty points by responding to
banner ads and targeted email, and redeem these points for international
telephony minutes. The Company's investment anticipates an additional $3.5
million of funding during 2000. These future funding commitments are
conditioned on Callrewards achieving certain operational targets.
On February 18, 2000, through its subsidiary, eVentures Latin America, the
Company acquired a 5% interest in Spydre Labs, a pan-regional Internet
incubator that accelerates early stage technology companies in Latin America
and the U.S. Hispanic market.
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<PAGE> 10
On March 3, 2000, the Company loaned $3.0 million to PhoneFree.com under a
promissory note. The promissory note is due September 1, 2000 and bears
interest at 7%. PhoneFree.com may repay the promissory note at any time,
subject to the Company's right to convert all outstanding principal and
interest under the note into stock of PhoneFree.com. In connection with the
loan made under the promissory note, the Company also received a four-year
warrant to purchase 240,000 shares of PhoneFree.com at a price equal to 110%
of the conversion price of the promissory note. On May 4, 2000, the Company,
through (i) the purchase of voting preferred stock in PhoneFree.com and (ii)
the conversion of all of the outstanding principal and interest under the
promissory note dated March 3, 2000 into voting preferred stock of
PhoneFree.com, increased its ownership interest in PhoneFree.com to
approximately 22% of the outstanding voting securities.
3. GOODWILL
Goodwill arising from the excess of cost over net assets of businesses
acquired by the Company is amortized on a straight-line basis over periods
ranging from five to ten years. The Company assesses the recoverability of
goodwill by determining whether the amortization over its remaining life can
be recovered through projected undiscounted future cash flows. The amount of
impairment, if any, is measured based on fair value and is charged to
operations in the period in which impairment is determined by management. As
of March 31, 2000, the Company's management has not identified any material
impairment of goodwill.
4. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Under the asset and liability method of SFAS
No. 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on the deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is provided for significant deferred
tax assets when it is more likely than not, that such assets will not be
recovered.
5. STOCK BASED COMPENSATION
The FASB issued SFAS No. 123, "Accounting for Stock Based Compensation,"
which defines a fair value based method of accounting for stock-based
compensation. However, SFAS No. 123 allows an entity to continue to measure
compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees".
Entities electing to remain with the accounting method of APB No. 25 must
make pro forma disclosures of net income and earnings per share, as if the
fair value method of accounting defined in SFAS No. 123 had been applied.
The Company has elected to account for its stock-based compensation to
employees under APB No. 25.
6. NET INCOME (LOSS) PER SHARE
The Company calculates earnings per share in accordance with SFAS No. 128,
Earnings per Share ("EPS"). SFAS No. 128 requires dual presentation of basic
EPS and diluted EPS on the face of all income statements issued after March
15, 1997 for all entities with complex capital structures. Basic EPS is
computed as net income divided by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock options,
warrants and convertible debentures. Diluted EPS has not been presented for
the effects of stock options, warrants, convertible debentures and preferred
stock as the effect would be antidilutive. Accordingly, basic and diluted
EPS did not differ for any period presented. For purposes of computation of
EPS, the shares issued for the acquisition of e.Volve (11,365,614 shares)
are deemed to have been in existence for the entire period.
10
<PAGE> 11
7. INDEBTEDNESS
On January 26, 2000, iGlobal entered into a credit agreement with an
equipment vendor for $12,000,000. The financing is divided into three
categories: Tranche A, B and C. Under Tranche A, a maximum of $8,000,000 may
be borrowed to purchase networking hardware from the vendor. Under Tranche
B, an additional $2,000,000 may be used for costs associated with the
integration and installation of the vendor's hardware, and under Tranche C
$2,000,000 may be used for working capital purposes. Interest is payable at
a spread of 600 basis points above the three month London Interbank Offered
Rate ("LIBOR"). The outstanding balance at March 31, 2000 was $2,280,954.
8. SHAREHOLDERS' EQUITY
In a series of transactions that closed between January 6 and February 10,
2000, the Company issued 15,570 shares of Series C Convertible Preferred
Stock, par value $0.00002 per share, to 8 accredited investors, at a price
of $1,000 per share. The shares are convertible into Common Stock at a
price of $17.90 per share, subject to certain anti-dilution adjustments.
The conversion price was determined using the average of the closing bid
prices per share of the Company's common stock for the 20 trading days
ended March 10, 2000. The effect of the difference between the closing
prices for the Company's common stock on the issuance dates and the
conversion price was recorded in the Company's financial statements as an
imputed preferred dividend.
9. SIGNIFICANT EVENTS
On March 23, 2000, the Company issued 50,000 shares of common stock to
Maxcom Telecomunicaciones, S.A. de C.V ("Maxcom") in settlement of an
outstanding accounts payable to Maxcom of $825,095.
10. SUBSEQUENT EVENTS
On April 5, 2000, the Company completed a private placement of 2,543,478
shares of common stock with aggregate gross proceeds of approximately $58.5
million. Proceeds from this issuance are for new investments, projects and
general corporate purposes.
11. PRO FORMA FINANCIAL DATA
On September 22, 1999, the Company acquired all of the outstanding shares of
AxisTel, approximately 66.7% of the outstanding shares of e.Volve, the
e.Volve Notes, and a minority interest in PhoneFree.com. In a related
transaction, on October 19, 1999, the Company acquired the remaining 33.3%
of the outstanding shares of e.Volve. All of these acquisitions were settled
through the issuance of stock of the Company. On March 10, 2000 the Company
issued a total of 2,551,087 shares of the Company's common stock and 209,737
options to purchase shares of common stock to shareholders and option
holders of iGlobal as part of the share exchange and merger of iGlobal into
a wholly owned subsidiary of the Company. eVentures also assumed 141,210
warrants to purchase shares of its common stock in exchange for outstanding
iGlobal warrants.
11
<PAGE> 12
Set forth below is the Company's unaudited pro forma condensed statement of
operations for the three and nine months ended March 31, 1999 and 2000 as
though the Initial Transaction and the acquisition of iGlobal had occurred
on July 1, 1998, after adjustments related to goodwill, amortization of
intangible assets and debt discount and interest expense relating to the
e.Volve debentures. The unaudited pro forma results are not necessarily
indicative of either actual results of operations that would have occurred
had the acquisitions been made on July 1, 1998 or of future results.
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 17,779,922 $ 9,560,663 $ 45,766,007 $ 25,105,464
Net loss $ (19,320,028) $ (5,939,267) $ (23,189,308) $ (18,341,764)
Net loss per share $ (0.42) $ (0.13) $ (0.52) $ (0.40)
</TABLE>
12
<PAGE> 13
eVENTURES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements. The Company has based
these forward-looking statements on our current expectations and projections
about future events. These statements may be identified by the use of words such
as "expects," "anticipates," "intends," "plans" and similar expressions. Factors
that could cause actual results to differ materially from those reflected in the
forward-looking statements include, but are not limited to, those discussed in
this section, elsewhere in this report and the risks discussed in the "Risk
Factors Related to Our Industry" section included in our Form 10/A filed with
the SEC on March 8, 2000. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis, judgment,
belief or expectation only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date of this report.
BASIS OF PRESENTATION
The financial statements presented through June 30, 1999 represent the interests
of the Major Shareholders in each of e.Volve, AxisTel and PhoneFree.com prior to
the Initial Transaction. The Major Shareholders' interests in e.Volve, AxisTel
and PhoneFree.com, prior to the Initial Transaction, is deemed to be the
"Accounting Acquirer". The financial results of e.Volve are included in the
financial statements for all periods presented. The financial results for
AxisTel are included in the financial statements since September 22, 1999, the
date of acquisition. The financial results of iGlobal are included in the
financial statements since its acquisition on March 10, 2000.
Revenues. Through our wholly owned Partner Companies the Company generates
revenues from the sale of (i) international and domestic Internet telephony
minutes on a wholesale and retail basis to other U.S. long-distance providers,
distributors of prepaid calling cards and to residential and business consumers;
(ii) data bandwidth to other communications carriers and corporate customers;
(iii) communication services, such as long-distance, DSL and Virtual ISP service
through a consortium of independent ISPs and network marketing companies and;
(iv) dial-up and dedicated Internet access (v) web hosting and collocation
services. Historically, the Company has derived substantially all of its revenue
from sale of Internet telephony services and data bandwidth. Our agreements with
our wholesale Internet telephony customers are short term in duration and the
rates the Company charges customers are subject to change from time to time. Due
to increasing competition, management expects these rates to decline, which
could result in lower revenues and increased losses. The Company's three largest
customers accounted for 80.0% of revenues during the nine months ended March 31,
2000. Historically, the three largest customers accounted for 79.3% of the
Company's revenue. Management of the Company anticipates that eVentures'
dependence on these three customers will continue to decline as the wholly owned
Partner Companies (i) broaden their sales and marketing initiatives to include
additional potential customers and (ii) execute on their business plans to sell
Internet telephony minutes (on a retail basis), prepaid calling cards, DSL
services and Virtual ISP services.
Direct Costs. Direct costs include per minute termination charges and lease
payments and fees for fiber optic cable. Prior to September 1999, the Company
provided international telecommunication services only from the United States to
Mexico. The majority of our termination fees and certain fiber optic lease
payments were payable in Mexican pesos. As a result the Company was exposed to
exchange rates risk due to the fluctuation of the Mexican peso compared to the
U.S. dollar. Continued fluctuation in the exchange rate may make it cheaper or
more expensive for us to purchase pesos to meet our peso denominated expenses.
Two vendors in Mexico provide substantially all of our terminating capabilities
in Mexico. If either of these vendor relationships were terminated, our ability
to conduct operations in Mexico would be limited.
Selling, General and Administrative. This category includes general corporate
expenses, management salaries, professional fees, sales and marketing expenses,
travel and development expenses, benefits, occupancy costs, and administrative
expenses. eVentures maintains a corporate office and several switch facilities.
Due to the international nature of our business, travel and development costs
have been significant and could continue to increase as the Company seeks to
expand the networks of our wholly owned Partner Companies. Additionally, the
Company is rapidly expanding the size of its corporate office and anticipates
the related overhead costs to significantly increase. The Company also expects
depreciation and amortization costs to increase as a result of the Company's
recent acquisitions and the wholly owned Partner Companies continued investment
in their communications networks.
Depreciation and Amortization. Represents the depreciation of property, plant &
equipment and the amortization of goodwill, mainly as a result of the
acquisitions by the Company.
13
<PAGE> 14
SUMMARY OF OPERATING RESULTS
The table below summarizes our operating results
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
----------------------------------------- ---------------------------------------
2000 % 1999 % 2000 % 1999 %
------------ ----- ------------ ----- ------------ ----- ------------ -----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 16,308,494 100.0% $ 7,979,792 100.0% $ 38,970,332 100.0% $ 20,993,492 100.0%
Direct costs 15,400,305 94.4% 6,142,151 77.0% 37,160,085 95.4% 15,887,755 75.7%
------------------- ------------------- ------------------- -------------------
Gross profit 908,139 5.6% 1,837,641 23.0% 1,810,247 4.6% 5,105,737 24.3%
Selling, general and administrative expenses 4,506,404 27.6% 1,519,499 19.0% 13,087,581 33.6% 4,550,319 21.7%
Depreciation and amortization 2,431,734 14.9% 337,398 4.2% 4,205,374 10.8% 748,929 3.6%
------------------- ------------------- ------------------- -------------------
Loss from operations, before
other (income) expense (6,029,949) (37.0%) (19,256) (0.2%) (15,482,708) (39.7%) (193,511) (0.9%)
Other (income) expenses:
Interest expense (income), net (223,717) (1.4%) 399,877 5.0% 374,343 1.0% 1,133,228 5.4%
Write off of unamortized debt discount -- 0.0% -- 0.0% 917,615 2.4% -- 0.0%
Equity in losses of affiliates 2,296,913 14.1% -- 0.0% 2,328,732 6.0% -- 0.0%
Foreign currency (gain) loss (84) (0.0%) 1,236 0.0% (2,116) (0.0%) 12,398 0.1%
Other 422,915 2.6% 12,464 0.2% 423,989 1.1% (4,951) (0.0%)
------------------- ------------------- ------------------- -------------------
2,496,027 15.3% 413,577 5.2% 4,042,563 10.4% 1,140,675 5.4%
------------------- ------------------- ------------------- -------------------
Net loss (8,525,976) (52.3%) (432,833) (5.4%) (19,525,271) (50.1%) (1,334,186) (6.4%)
=================== =================== =================== ===================
Imputed preferred dividend 9,292,011 -- 10,407,954 --
------------ ------------ ------------ ------------
Net loss available
to common shareholders $(17,817,987) $ (432,833) $(29,933,225) $ (1,334,186)
============ ============ ============ ============
Net loss per share - (basic and diluted) $ (0.38) $ (0.04) $ (0.84) $ (0.12)
============ ============ ============ ============
Weighted average number of shares
outstanding - (basic and diluted) 46,512,853 11,365,614 35,750,889 11,365,614
============ ============ ============ ============
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues increased to $16.3 million during the three months ended March 31, 2000
from $8.0 million during the three months ended March 31, 1999, an increase of
103.8%. The increase in revenues during the three months ended March 31, 2000
primarily resulted from acquisitions completed since March 31, 1999, which
increased revenues by $6.2 million during the third quarter. In addition, an
increase in traffic contributed to the remainder of the increase in revenues,
offset by a decrease in the average price per minute that the Company charged.
During the three months ended March 31, 2000 the Company transmitted 154.8
million minutes versus 47.1 million minutes during the third quarter of 1999, an
increase of 228.6%. Excluding the 42.0 million minutes added as a result of
acquisitions since March 31, 1999, the Company increased minutes during the
quarter, as compared to the comparable period in 1999, by 65.7 million minutes,
an increase of 139.5%. The average price per minute the Company charged for
these services decreased to $0.105 during the three months ended March 31, 2000
versus $0.169 during the comparable period in fiscal 1999.
Direct costs increased to $15.4 million during the three months ended March 31,
2000 from $6.1 million during the three months ended March 31, 1999, an increase
of 152.4%. The increase in direct costs in the three months ended March 31, 2000
primarily resulted from direct costs attributable to the acquisitions completed
since March 31, 1999, which increased direct costs by $6.1 million during our
third quarter. Of the additional increase during the period, $2.7 million was a
result of the previously discussed increases in traffic volumes, offset by lower
per minute termination costs. The average cost per minute to terminate calls
decreased to $0.079 during the three months ended March 31, 2000 from $0.108
during the comparable period in fiscal 1999. Direct costs also increased during
the three months ended March 31, 2000 by approximately $0.5 million as a result
of fixed circuit cost increases. As a percentage of revenues, direct costs
during the three months ended March 31, 2000 increased to 94.4% from 77.0%
during the three months ended March 31, 1999. The increase in direct costs as a
percentage of revenues resulted primarily from the average price the Company
charges per minute decreasing faster than our cost per minute for termination.
14
<PAGE> 15
Selling, general and administrative expenses increased to $4.5 million during
the three months ended March 31, 2000 from $1.5 million during the three months
ended March 31, 1999, an increase of 200.0%. Selling, general and administrative
expenses during the three months ended March 31, 2000 increased primarily due
to: (i) expenses incurred by the businesses acquired since March 31, 1999 of
$1.8 million, (ii) an increase in deferred compensation of $0.4 million and (iv)
an increase in consulting and professional fees of $0.8 million.
Depreciation and amortization increased to $2.4 million during the three months
ended March 31, 2000 from $0.3 million during the three months ended March 31,
1999. The increase is the result of the acquisitions completed and capital
expenditures incurred since March 31, 1999.
Interest expense (income), net was $(.2) million during the three months ended
March 31, 2000 compared with $.4 million during the three months ended March 31,
1999. The interest income, net during the three months ended March 31, 2000
resulted from interest income on greater cash balances, partially offset by
lower interest expense on outstanding indebtedness. The reduction in interest
expense was a result of the elimination of $8.0 million of debentures as a
result of our acquisition of e.Volve's outstanding debentures on September 22,
1999.
Equity in losses of affiliates resulted from the Company's minority ownership in
certain investments that are accounted for under the equity method of
accounting. Under the equity method, the Company's proportionate share of each
affiliate's operating losses and amortization of the Company's net excess
investment over its equity in each affiliate's net assets is included in equity
in losses of affiliates. Equity in loss of affiliates was $2.3 million during
the three months ended March 31, 2000. These losses were the result of our (i)
50% ownership interest in ICT, a joint venture formed with e.Volve in April
1999; (ii) 31% ownership interest in Fonbox, the majority of which was purchased
on January 31, 2000; and (iii) 17% ownership interest in PhoneFree.com. The
Company expects its Partner Companies accounted for under the equity method to
continue to invest in development of their products and services, and to
recognize operating losses, which will result in future charges recorded by the
Company to reflect its proportionate share of such losses.
Other expenses of $0.4 million during the three months ended March 31, 2000 were
the primary result of the discontinuance of a venture to terminate
communications traffic to Syria.
The Company reported an imputed dividend during the three months ended March 31,
2000 of $9.3 million as a result of the difference between the closing prices
for the Company's common stock on the dates on which the Company issued
convertible preferred stock during the quarter and the price per share at which
such preferred stock is convertible into common shares.
NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO NINE MONTHS ENDED MARCH 31, 1999
Revenues increased to $39.0 million during the nine months ended March 31, 2000
from $21.0 million during the nine months ended March 31, 1999, an increase of
85.7%. The increase in revenues during the nine months ended March 31, 2000
primarily resulted from acquisitions completed during the nine months ended
March 31, 2000, which increased revenues by $11.8 million. In addition, an
increase in traffic contributed the remainder of the increase in revenues,
offset by a decrease in the average price per minute that the Company charged.
During the nine months ended March 31, 2000 the Company transmitted 371.9
million minutes versus 111.6 million minutes during the comparable period in
1999, an increase of 233.2%. Excluding the 89.3 million minutes added as a
result of acquisitions since March 31, 1999, the Company increased minutes
during the nine months ended March 31, 2000, as compared to the comparable
period in 1999, by 171.0 million minutes, an increase of 153.2%. The average
price per minute the Company charged for these minutes decreased to $0.101
during the nine months ended March 31, 2000, from $0.188 during the comparable
period in fiscal 1999.
Direct costs increased to $37.2 million during the nine months ended March 31,
2000 from $15.9 million during the nine months ended March 31, 1999, an increase
of 134.0%. The increase in direct costs in the nine months ended March 31, 2000
primarily resulted from direct costs attributable to the acquisitions completed
during the nine months ended March 31, 2000 of $11.3 million. Of the additional
increase during the period, $10.0 million was a result of the previously
discussed increases in traffic volumes, offset by lower per minute termination
costs. The average cost per minute to terminate calls decreased to $0.085 during
the nine months ended March 31, 2000, from $0.115 during the comparable period
in fiscal 1999. As a percentage of revenues, direct costs during the nine months
ended March 31, 2000 increased to 95.4% from 75.7% during the nine months ended
March 31, 2000. The increase in direct costs as a percentage of revenues was
primarily the result of the average price the Company charges per minute
decreasing faster than the cost per minute for termination.
15
<PAGE> 16
Selling, general and administrative expenses increased to $13.1 million during
the nine months ended March 31, 2000 from $4.6 million during the nine months
ended March 31, 1999, an increase of 184.8%. Selling, general and administrative
expenses during the nine months ended March 31, 2000 increased primarily due to
(i) expenses attributable to the acquisitions completed during the nine months
ended March 31, 2000 of $2.5 million; (ii) an increase in consulting and
professional fees of $4.0 million; (iii) an increase in deferred compensation of
$1.6 million; and (iv) an increase in salary expenses of $0.4 million.
Depreciation and amortization increased to $4.2 million during the nine months
ended March 31, 2000 from $0.7 million during the comparable period in 1999. The
increase is the result of the acquisitions completed and capital expenditures
incurred since March 31, 1999.
Interest expense (income), net was $0.4 million during the nine months ended
March 31, 2000 compared with $1.1 million during the nine months ended March 31,
1999. The decrease in interest expense (income), net during the nine months
ended March 31, 2000 resulted from interest income on greater cash balances,
partially offset by lower interest expense on outstanding indebtedness. The
reduction in interest expense was a result of the elimination of $8.0 million of
debentures as a result of our acquisition of e.Volve's outstanding debentures on
September 22, 1999.
The write off of unamortized debt discount during the nine months ended March
31, 2000 resulted from eVentures purchase of e.Volve's outstanding debentures
and the subsequent elimination of these debentures upon consolidation in the
financial statements.
Equity in losses of affiliates resulted from the Company's minority ownership in
certain investments that are accounted for under the equity method of
accounting. Under the equity method, the Company's proportionate share of each
affiliate's operating losses and amortization of the Company's net excess
investment over its equity in each affiliate's net assets is included in equity
in losses of affiliates. Equity in loss of affiliates was $2.3 million during
the nine months ended March 31, 2000. These losses were the result of our (i)
50% ownership interest in ICT, a joint venture formed with e.Volve in April
1999; (ii) 31% ownership interest in Fonbox, the majority of which was purchased
on January 31, 2000; and (iii) 17% ownership interest in PhoneFree.com. The
Company expects its Partner Companies accounted for under the equity method to
continue to invest in development of their products and services, and to
recognize operating losses, which will result in future charges recorded by the
Company to reflect its proportionate share of such losses.
Other expenses of $0.4 million during the three months ended March 31, 2000 were
the primary result of the discontinuance of a venture to terminate
communications traffic to Syria.
The Company reported an imputed dividend during the nine months ended March 31,
2000 of $10.4 million as a result of the difference between the closing prices
for the Company's common stock on the dates on which the Company issued
convertible preferred stock during the period and the price per share at which
such preferred stock is convertible into common shares.
LIQUIDITY AND CAPITAL RESOURCES
The business plans of our Partner Companies will continue to require a
substantial amount of capital to fund operations and the expansion of the
businesses. The Company also continues to make strategic acquisitions and
investments as a part of our long range plans to develop and expand the
Company's business and the business of the eVentures' Partner Companies. Such
strategic investments and acquisitions, if realized, could require expenditure
of a material portion of our financial resources and would accelerate the need
for raising additional capital. Sources of funding for our financing
requirements may include vendor financing, bank loans and public offerings or
private placements of equity and/or debt securities. There can be no assurance
that additional financing will be available or, if available, that financing
can be obtained on a timely basis and on acceptable terms. The failure to
obtain such financing on acceptable terms could significantly reduce our
ability to fund our expenses, development, acquisitions and operations. Our
cash and cash equivalents are expected to provide sufficient liquidity to meet
our capital requirements for the next twelve months.
Since July 1, 1999, the Company has funded operations primarily through cash
from operations and from private placements of common stock, preferred stock,
options to purchase common stock and borrowings under loan and capital lease
agreements. During the nine months ended March 31, 2000, the Company raised a
total (i) $28.5 million of gross proceeds through private placements of common
stock and preferred stock and (ii) $7.7 million from borrowings pursuant to
loans and capital lease agreements.
16
<PAGE> 17
On September 28, 1999, the Company completed a private placement of common and
preferred stock of approximately $5.9 million. Proceeds from this placement were
used for general corporate purposes and to fund the expansion of our Partner
Companies' operations and new investments.
On November 19 and 26, 1999, eVentures completed two private placements of
preferred stock with aggregate proceeds of approximately $6.2 million. Proceeds
from these issuances were used for general corporate purposes and to fund the
expansion of our Partner Companies' operations and new investments.
On December 15, 1999, the Company completed a private placement of preferred
stock with aggregate proceeds of approximately $775,000. Proceeds from this
issuance are for general corporate purposes.
Between January 6 and February 10, 2000, the Company completed a series of
private placements of preferred stock with aggregate proceeds of approximately
$15.6 million. Proceeds from these issuances were used for general corporate
purposes and to fund the expansion of our Partner Companies' operations and new
investments.
Our principal uses of cash are to fund (i) the expansion of our Partner
Companies operations; (ii) working capital requirements; (iii) capital
expenditures; (iv) operating losses; and (v) acquisitions. As of March 31, 2000,
the Company had current assets of $19.0 million, including cash, cash
equivalents and short-term investments of $12.7 million, and a working capital
surplus of $5.2 million. Current assets included a tax refund receivable of
$2.8 million.
Since March 31, 2000, the Company has raised additional funds through a private
placement of common stock. On April 5, 2000, eVentures completed a private
placement of common stock with aggregate gross proceeds of approximately $58.5
million. Proceeds from this issuance are for general corporate purposes and for
use as capital for new investments and projects.
Our operating activities used cash of $5.0 million during the nine months ended
March 31, 2000. During the nine months ended March 31, 2000 cash flow used by
operating activities primarily resulted from net losses, the reduction of
customer deposits, and an increase in accounts receivable, offset by
depreciation and amortization charges, a decrease in restricted cash, and a
decrease in accounts payable (funded through the issuance of our common stock to
vendors of $6.5 million) and an increase in other accrued liabilities.
eVentures used cash for investing activities of $9.0 million during the nine
months ended March 31, 2000. During the nine months ended March 31, 2000 cash
used by investing activities primarily consisted of cash used to purchase
equipment, fund affiliates, and make other long term investments, offset by net
cash acquired in connection with acquisitions of wholly owned Partner Companies
during the period.
Our cash flow from financing activities was $26.7 million during the nine months
ended March 31, 2000. During the nine months ended March 31, 2000 cash provided
by financing activities was attributable to the issuance of common stock and
preferred stock ($28.4 million), offset by the repayment of a bridge loan and
capital lease payments.
EQUIPMENT LEASING AND FINANCING
The Company has leased equipment manufactured by various equipment manufacturers
including Siemens A.G., Lucent Technologies, Cisco Systems Capital Corporation,
Network Equipment Technologies, Inc. and Harris Corporation. As of March 31,
2000, the Company had an aggregate of approximately $12.8 million outstanding
pursuant to capital leases and credit facilities with (i) Telecommunications
Finance Group, a subsidiary of Siemens A.G., (ii) BA Capital Corp., (iii) Ascend
Credit Corporation, (iv) Arrendadora BankAmerica, S.A., (v) Cisco Systems
Capital Corporation, and (vi) Harris Corporation.
17
<PAGE> 18
SUBSEQUENT EVENTS
On April 5, 2000, the Company completed a private placement of common stock with
aggregate gross proceeds of approximately $58.5 million. Proceeds from this
issuance are for general corporate purposes and for use as capital for new
investments and projects.
On May 4, 2000, the Company purchased 1,856,199 shares of newly issued voting
Series A Cumulative Convertible Preferred Stock of PhoneFree.com for $10,000,000
in cash and the conversion of a promissory note and related interest in the
aggregate amount of $3,035,671. As a result of such purchase, the Company owns
approximately 22% of the outstanding voting securities of PhoneFree.com.
EFFECTS OF INFLATION
Management does not believe that its business is impacted by inflation to a
significantly different extent than is the general economy. However, there can
be no assurances that inflation will not have a material effect on the Company's
operations in the future.
18
<PAGE> 19
eVENTURES GROUP, INC.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's international operations expose us to political instability risks.
The Company has relationships with foreign suppliers in Syria, Mexico, India,
Sri Lanka and other countries. The Company has not experienced any negative
economic consequences as a result of relationships with foreign suppliers in
these countries, but may be negatively affected should political instability in
any of these countries develop. In addition to economic consequences, the
Company is also exposed to potentially weaker protection of intellectual
property rights, unexpected changes in regulations and tariffs, and varying tax
consequences.
eVENTURES' operations and financial condition may be adversely affected by
fluctuations in foreign currencies. Since the agreements the Company has entered
into with foreign suppliers in Syria, India, Sri Lanka and other countries are
denominated in U.S. dollars, the Company is not exposed to risks associated with
fluctuations in these foreign currencies. However, because the agreements with
Mexican suppliers are denominated in Mexican pesos, the Company may be exposed
to fluctuations in Mexican pesos, as well as to downturns in the Mexican
economy, all of which may affect profitability. During the nine months ended
March 31, 2000, $23.3 million of our direct costs were denominated in Mexican
pesos.
19
<PAGE> 20
eVENTURES GROUP, INC.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 3, 2000, e.Volve reached an agreement with Yurie Systems to settle
the lawsuit between e.Volve and Yurie Systems described in the Company's
Quarterly Report Form 10QA filed on February 22, 2000. Under that agreement the
Company paid $140,000 on April 11, 2000 and the lawsuit was dismissed.
On February 7, 2000, Star Telecommunications, Inc. ("Star") filed a lawsuit
against AxisTel International, Inc., a subsidiary of AxisTel. Star's complaint
alleges that AxisTel International failed to pay for amounts allegedly owed by
AxisTel International to Star as a result of Star's acquisition of PT-1
Communications and under an August 9, 1999 carrier services agreement between
Star and AxisTel International. Star is alleging damages in the amount of
$416,590, plus late fees and interest. This lawsuit was settled on April 13,
2000 by the payment of $346,501 to Star.
On April 17, 2000, e.Volve and the Company filed a lawsuit, captioned e.Volve
Technology Group, Inc. and eVENTURES Group, Inc. v. United Technology Systems,
Inc. d/b/a, Uni-Tel in Superior Court of the State of New Jersey, Mercer County.
In the lawsuit, the Company alleged that Uni-Tel breached the terms of our joint
venture to operate a telecommunications network between the United States and
India. We alleged damages in excess of $10 million. As of the date of this
Report, Uni-Tel had not responded to this lawsuit.
The Company is involved in other legal proceedings from time to time, none of
which management believes, if decided adversely to us, would have a material
adverse effect on the business, financial condition or results of operations of
the Company.
ITEM 2. CHANGES IN SECURITIES
Between January 6 and February 10, 2000, the Company issued and sold 15,570
shares of our Series C preferred stock to an aggregate of 9 accredited investors
for $15.6 million in a series of transactions exempt from the registration
requirements of the Securities Act pursuant to Rule 506 of Regulation D
promulgated pursuant to the Securities Act. No general solicitations were made
in connection with this transaction.
On January 31, 2000, the Company issued a total of 27,860 shares of our common
stock to Net Provider and Spydre as part of the Company's acquisition of a
minority interest in Fonbox through a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act.
On February 21, 2000, the Company issued 50,000 shares of our common stock to
Maxcom to settle certain accounts payable due to Maxcom in a transaction exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) of the Securities Act.
On March 10, 2000, in connection with our acquisition of iGlobal, the Company
issued an aggregate of 2,551,087 shares to 107 shareholders of iGlobal in
exchange for the outstanding shares of capital stock of iGlobal in a transaction
exempt from the registration requirements of the Securities Act pursuant to Rule
506 of Regulation D under the Securities Act. No general solicitations were made
in connection with this transaction, and 73 accredited and 34 non-accredited
investors participated in this transaction. All non-accredited investors were
represented in connection with this transaction by purchaser representatives.
On March 13, 2000, the Company issued 181,159 shares of our common stock upon
conversion of 2,500 shares of our Series B preferred stock in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 3(a)(9) of the Securities Act.
On April 5, 2000, the Company issued and sold 2,543,478 shares of our common
stock to an aggregate of 19 accredited investors for aggregate gross proceeds
approximately $58.5 million in a transaction exempt from the registration
requirements of the Securities Act pursuant to Rule 506 of Regulation D
promulgated pursuant to the Securities Act. No general solicitations were made
in connection with this transaction.
20
<PAGE> 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
EMPLOYMENT AGREEMENTS
During April 2000 the Company entered into three-year employment agreements with
the following individuals:
<TABLE>
<CAPTION>
Name Title Date of Agreement
- - ---- ----- -----------------
<S> <C> <C>
Jeffrey A. Marcus (1) Chairman and Chief Executive Officer April 4, 2000
Barrett N. Wissman (2) President April 4, 2000
Thomas P. McMillin Executive Vice President April 4, 2000
Daniel J. Wilson Senior Vice President April 4, 2000
Chad E. Coben Senior Vice President April 4, 2000
Olaf Guerrand-Hermes Senior Vice President April 4, 2000
Susie C. Holliday Senior Vice President-Accounting & Administration April 17, 2000
</TABLE>
- - -----------------------------
(1) Mr. Marcus was appointed as a member of the Company's board of directors
and named Chairman. Fred Vierra, the Company's previous Chairman, was named
Vice Chairman.
(2) Mr. Wissman relinquished the title of Chief Executive Officer upon Mr.
Marcus joining the Company.
On April 4, 2000, the Company named Stuart Chasanoff as its Senior Vice
President, Corporate Development and Legal Affairs. Mr. Chasanoff previously
served as Vice President of Business Development, General Counsel and Secretary.
RESIGNATION OF DIRECTOR
Effective April 1, 2000, Olaf Geurrand-Hermes resigned from the board of
directors. This resignation was in connection with Mr. Guerrand-Hermes' joining
the Company as Senior Vice President and was not the result of any disagreement
with the board of directors.
SHAREHOLDER CALL OPTIONS
Effective April 10, 2000, the Company entered into Issuer Stock Option
Agreements with Samuel Litwin and Mitchell Arthur, executive officers of
AxisTel, whereby each of Mr. Litwin and Mr. Arthur granted to the Company an
option to acquire 300,000 and 400,000 shares of common stock of the Company,
respectively. Such options are exercisable by the Company at a price of $15.00
per share through September 22, 2000, thereafter at $20.00 per share through
expiration on September 22, 2001. The Company paid each of Mr. Litwin and Mr.
Arthur $100,000 for the options.
21
<PAGE> 22
On May 4, 2000, the Company purchased a total of 1,856,199 shares of newly
issued Series A Cumulative Convertible Preferred Stock of PhoneFree.com in
exchange for cash of $10 million and the cancellation of $3,035,671 of
indebtedness owed by PhoneFree.com to us under our March 2, 2000 bridge loan to
PhoneFree.com. The PhoneFree.com preferred stock that the Company purchased
carries a 7% cumulative dividend, is convertible into 1,856,199 shares of
PhoneFree.com common stock, and votes with the PhoneFree.com common stock on all
matters. The Company also received the right to appoint an additional director
to the board of directors of PhoneFree.com. As part of our investment in
PhoneFree.com, the Company also received a four-year warrant to purchase 100,000
shares of PhoneFree.com common stock at $7.11 per share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) EXHIBITS
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of eVentures Group, Inc.
3.2 Amended and Restated By-Laws of eVentures Group, Inc.
4.1 Registration Rights Agreement, dated as of April 4th, 2000, by and among
eVentures Group, Inc. and the signatories thereto.
10.1 Employment Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Jeffrey A. Marcus.
10.2 Stock Option Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Jeffrey A. Marcus.
10.3 Employment Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Thomas P. McMillin.
10.4 Stock Option Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Thomas P. McMillin.
10.5 Employment Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Daniel J. Wilson.
10.6 Stock Option Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Daniel J. Wilson.
10.7 Employment Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Chad E. Coben.
10.8 Stock Option Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Chad E. Coben.
10.9 Employment Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Barrett N. Wissman.
10.10 Stock Option Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Barrett N. Wissman.
10.11 Employment Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Olaf Guerrand-Hermes.
10.12 Stock Option Agreement, dated as of April 4th, 2000, between eVentures
Group, Inc. and Olaf Guerrand-Hermes.
10.13 Employment Agreement, dated as of April 17th, 2000, between eVentures
Group, Inc. and Susie C. Holliday.
10.14 Stock Option Agreement, dated as of April 17th, 2000, between
eVentures Group, Inc. and Susie C. Holliday.
10.15 Common Stock Subscription Agreement, dated as of April 4th, 2000, by
and among eVentures Group, Inc. and the signatories thereto.
10.16 Issuer Option Agreement, dated as of April 10th, 2000, between
eVentures Group, Inc. and Samuel L. Litwin.
10.17 Issuer Option Agreement, dated as of April 10th, 2000, between
eVentures Group, Inc. and Mitchell C. Arthur.
10.18 Office Lease, dated as of May 20th, 1999, between Crescent Real Estate
Funding I, L.P. and Marcus & Partners, L.P.
</TABLE>
22
<PAGE> 23
10.19 First Amendment to Office Lease, dated as of March 28th, 2000 by and
between Crescent Real Estate Funding I, L.P. and Marcus & Partners,
L.P.
10.20 Assignment of Office Lease, dated as of April 4th, 2000, by and
between Marcus & Partners, L.P. and eVentures Group, Inc.
10.21 Consent to Assignment, dated as of April 4th, 2000, by and among
Crescent Real Estate Funding I, L.P., Marcus & Partners, L.P. and
eVentures Group, Inc.
10.22 Second Amendment to Office Lease, dated as of April 24th, 2000, by and
between Crescent Real Estate Funding I, L.P. and eVentures Group, Inc.
10.23 Securities Purchase Agreement, dated as of May 3rd, 2000, by and among
PhoneFree.com, Inc. and the purchasers listed on Schedule A attached
thereto.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
1. On March 27, 2000, the Company filed a Report on Form 8-K announcing
the closing of the acquisition of Internet Global Services, Inc.
2. On April 5th, 2000, the Company filed a Report on Form 8-K announcing
the retention of new senior management and the completion of a $58.5
million private placement of its common stock.
3. On May 11th, 2000, the Company filed a Report on Form 8-K announcing
the closing of its investment in PhoneFree.com.
4. On May 12 th, 2000, the Company filed an amendment to its March 27th,
2000 Report on Form 8-K. The amendment included the audited and
unaudited historical financial statements of Internet Global Services,
Inc. and consolidated pro forma financial statements of eVentures
Group, Inc.
23
<PAGE> 24
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
eVENTURES GROUP, INC.
Date: May 15, 2000 By: /s/ Barrett N. Wissman
-------------------------------
Barrett N. Wissman
(Authorized Signatory and President)
Date: May 15, 2000 By: /s/ John Stevens Robling Jr.
-------------------------------
John Stevens Robling Jr.
(Principal Financial and Accounting Officer)
24
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of
eVentures Group, Inc.
3.2 Amended and Restated By-Laws of eVentures Group, Inc.
4.1 Registration Rights Agreement, dated as of April 4th, 2000, by
And among eVentures Group, Inc. and the signatories thereto.
10.1 Employment Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Jeffrey A. Marcus.
10.2 Stock Option Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Jeffery A. Marcus.
10.3 Employment Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Thomas P. McMillin.
10.4 Stock Option Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Thomas P. McMillin.
10.5 Employment Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Daniel J. Wilson.
10.6 Stock Option Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Daniel J. Wilson.
10.7 Employment Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Chad E. Coben.
10.8 Stock Option Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Chad E. Coben.
10.9 Employment Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Barrett N. Wissman.
10.10 Stock Option Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Barrett N. Wissman.
10.11 Employment Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Olaf Guerrand-Hermes.
10.12 Stock Option Agreement, dated as of April 4th, 2000, between
eVentures Group, Inc. and Olaf Guerrand-Hermes.
10.13 Employment Agreement, dated as of April 17th, 2000, between
eVentures Group, Inc. and Susie C. Holliday.
10.14 Stock Option Agreement, dated as of April 17th, 2000, between
eVentures Group, Inc. and Susie C. Holliday.
10.15 Common Stock Subscription Agreement, dated as of April 4th, 2000,
by and among eVentures Group, Inc. and the signatories thereto.
10.16 Issuer Option Agreement, dated as of April 10th, 2000, between
eVentures Group, Inc. and Samuel L. Litwin.
10.17 Issuer Option Agreement, dated as of April 10th, 2000, between
eVentures Group, Inc. and Mitchell C. Arthur.
10.18 Office Lease, dated as of May 20th, 1999, between Crescent Real
Estate Funding I, L.P. and Marcus & Partners, L.P.
10.19 First Amendment to Office Lease, dated as of May 28th, 2000,
between Crescent Real Estate Funding I, L.P. and Marcus &
Partners, L.P.
10.20 Assignment of Office Lease, dated as of May 28th, 2000, by and
between Marcus & Partners, L.P. and eVentures Group, Inc.
</TABLE>
25
<PAGE> 26
<TABLE>
<S> <C>
10.21 Consent to Assignment, dated as of April 4th, 2000, by and among
Crescent Real Estate funding I, L.P. and eVentures Group, Inc.
10.22 Second Amendment to Office Lease, dated as of April 24th, 2000,
by between Crescent Real Estate funding I, L.P. and eVentures
Group, Inc.
10.23 Securities Purchase Agreement, dated as of May 3rd, 2000, by and
among PhoneFree.com, Inc. and the purchasers listed on Schedule A
attached thereto.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
eVENTURES GROUP, INC.
--------------
This Amended and Restated Certificate of Incorporation amends
and restates the Certificate of Incorporation of eVentures Group, Inc., a
corporation originally incorporated under the name of Adina, Inc., on November
19, 1987. This Amended and Restated Certificate of Incorporation has been duly
adopted pursuant to Sections 242 and 245 of the Delaware General Corporation
Law.
FIRST: The current name of this corporation is eVentures
Group, Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in
the State of Delaware is 15 East North Street, in the City of Dover, County of
Kent. The name of the registered agent in the State of Delaware at such address
is United Corporate Services, Inc.
THIRD: The purpose of the corporation is to engage, directly,
or indirectly, in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware as from
time to time in effect.
FOURTH: The aggregate number of shares which the Corporation
shall have the authority to issue is 80,000,000 shares, consisting of (i)
75,000,000 shares of Common Stock, par value $0.00002 per share (the "Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, par value $0.00002 per
share (the "Preferred Stock").
The following is a statement of the designations, preferences,
limitations, and relative rights, including voting rights, in respect of the
classes of stock of the Corporation and of the authority with respect thereto
expressly vested in the Board of Directors of the Corporation:
COMMON STOCK
A. Each share of Common Stock of the Corporation shall have
identical rights and privileges in every respect. The holders of shares of
Common Stock shall be entitled to vote upon all matters submitted to a vote of
the stockholders of the Corporation and shall be entitled to one vote for each
share of Common Stock held.
B. Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be
<PAGE> 2
entitled to receive such dividends (payable in cash, stock, or otherwise) when,
if and as may be declared thereon by the Board of Directors at any time and from
time to time out of any funds of the Corporation legally advisable therefor.
PREFERRED STOCK
C. The Board of Directors of the Corporation is hereby
expressly authorized, subject to the limitations provided by law, to establish
and designate series of the Preferred Sock, to fix the number of shares
constituting each series, and to fix the designations and the preferences,
limitations, and relative rights, including voting rights, of the shares of each
series and the variations of the relative rights and preferences as between
series, and to increase and to decrease the number of shares constituting each
series, provided that the Board of Directors may not decrease the number of
shares within a series to less than the number of shares within such series that
are then issued. Each such series of Preferred Stock shall be designated so as
to distinguish the shares thereof from the shares of all other series and
classes. The relative powers, rights, preferences, and limitations may vary
between and among series of Preferred Stock in any and all respects so long as
all shares of the same series are identical in all respects, except that shares
of any such series issued at different times may have different dates from which
dividends thereon cumulate.
The authority of the Board of Directors of the Corporation
with respect to each series shall include, but shall not be limited to, the
authority to determine the following:
(a) The designation of such series;
(b) The number of shares initially constituting such series;
(c) The rate or rates and the times at which dividends on the
shares of such series shall be paid, the periods in respect of which dividends
are payable, the conditions upon such dividends, the relationship and
preferences, if any, of such dividends to dividends payable on any other class
or series of shares, whether or not such dividends shall be cumulative,
partially cumulative, or noncumulative, if such dividends shall be cumulative or
partially cumulative, the date or dates from and after which, and the amounts in
which, they shall accumulate, whether such dividends shall be share dividends,
cash or other dividends, or any combination thereof, and if such dividends shall
include share dividends, whether such share dividends shall be payable in shares
of the same or any other class or series of shares of the Corporation (whether
now or hereafter authorized) or any combination thereof, and the other terms and
conditions, if any, applicable to dividends on shares of such series;
(d) Whether or not the shares of such series shall be
redeemable or subject to repurchase at the option of the Corporation or the
holder thereof or upon the happening of a specified event, if such shares shall
be redeemable, the terms and conditions of such redemption, including not
limited to the date or dates upon or after which such shares shall be
redeemable, the amount per share which shall be payable upon such redemption,
which amount may vary under different conditions and at different redemption
dates, and whether such amount shall be payable in cash, property, or rights,
including securities of the Corporation or another corporation;
-2-
<PAGE> 3
(e) The rights of the holders of shares of such series (which
may vary depending upon the circumstances or nature of such liquidation,
dissolution, or winding up) in the event of the voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation and the relationship
or preference, if any, of such rights to rights of holders of stock of any other
class or series.
(f) Whether or not the shares of such series shall have voting
powers and, if such shares shall have such voting powers, the terms and
conditions thereof, including, but not limited to, the right of the holders of
such shares to vote as a separate class either alone or with the holders of
shares of one or more other classes or series of stock and the right to have
more (or less) than one vote per share;
(g) Whether or not a sinking fund shall be provided for the
redemption of the shares of such series and, if such a sinking fund shall be
provided, the terms and conditions thereof;
(h) Whether or not a purchase fund shall be provided for the
shares of such series and, if such a purchase fund shall be provided, the terms
and conditions thereof;
(i) Whether or not the shares of such series, at the option of
either the Corporation or the holder or upon the happening of a specified event,
shall be convertible into stock of any other class or series and, if such shares
shall be so convertible, the terms and conditions of conversion, including, but
not limited to, any provision for the adjustment of the conversion rate or the
conversion price;
(j) Whether or not the shares of such series, at the option of
either the Corporation or the holder or upon the happening of a specified event,
shall be exchangeable for securities, indebtedness, or property of the
Corporation and, if such shares shall be so exchangeable, the terms and
conditions of exchange, including, but not limited to, any provision for the
adjustment of the exchange rate or the exchange price; and
(k) Any other preferences, limitations, and relative rights as
shall not be inconsistent with the provisions of this Article Four or the
limitations provided by law.
D. Except as otherwise required by law, in the Corporation's
Certificate of Incorporation, or in any resolution of the Board of Directors
creating any series of Preferred Stock, the holders of shares of Preferred Stock
and all series thereof who are entitled to vote shall vote together with the
holders of shares of Common Stock, and not separately by class.
FIFTH: The corporation is to have perpetual existence.
SIXTH: Board of Directors.
A. Classified Board. The Board shall be divided into three
classes, as nearly equal in number as the then-authorized number of directors
constituting the Board permits, with the term of office of one class expiring
each year. Following approval of this Amended and
-3-
<PAGE> 4
Restated Certificate of Incorporation, the stockholders shall elect one class of
directors for a term expiring at the annual meeting of stockholders to be held
in 2001, another class for a term expiring at the annual meeting of stockholders
to be held in 2002, and another class for a term expiring at the annual meeting
of stockholders to be held in 2003. Such initial election may be effected by a
consent of stockholders in lieu of a meeting. Thereafter, each director shall
serve for a term ending at the third annual meeting of stockholders of the
Corporation following the annual meeting at which such director was elected.
Members of each class shall hold office until their successors are elected and
qualified. At each succeeding annual meeting of the stockholders of the
Corporation, the successors of the class of directors whose term expires at that
meeting shall be elected by a plurality vote of all votes cast at such meeting
to hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
B. Vacancies. Newly created directorships resulting from any
increase in the authorized number of directors and any vacancies on the Board
resulting from death, resignation, disqualification, removal or other cause
shall be filled only by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or in which the vacancy occurred and until such
director's successor shall have been duly elected and qualified. No decrease in
the number of directors constituting the Board shall shorten the term of any
incumbent director.
SEVENTH: Director Nomination Procedure; Annual Meeting
Business
A. Director Nomination Procedure. Nominations for the election
of directors may be made by the affirmative vote of a majority of the Board or a
duly authorized committee thereof or by any holder of record of shares of
capital stock of the Corporation entitled to vote generally for the election of
directors; provided that any stockholder may nominate one or more persons for
election as directors at a meeting only if written notice of such stockholder's
intention to make such nomination or nominations has been given, either by
personal delivery or by United States mail, postage prepaid, to the Secretary of
the Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders, ninety (90) days prior to the date that is one
year from the date of the immediately preceding meeting of stockholders and (ii)
with respect to an election to be held at a special meeting of stockholders for
the election of directors, the close of business on the seventh day following
the date on which notice of the meeting is first given to stockholders. For the
purposes of this Section (A) of this Article VII, the date notice of a meeting
is deemed to have been first given shall include, but not be limited to, the
date on which disclosure of the date of the meeting is first made in a press
release reported by the Dow Jones News Service, Associated Press or comparable
national news service, or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) (or
the rules and regulations thereunder) of the Securities Exchange Act of 1934, as
amended. Each such notice to the Secretary shall set forth the following
information: (i) the name and address of record of the stockholder who intends
to make the nomination, (ii) a representation that the stockholder is a holder
of record of stock of the Corporation entitled to vote generally for the
election of directors at such meeting and intends
-4-
<PAGE> 5
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (iii) the name, age, business and residential addresses
and principal occupation or employment of each nominee, (iv) a description of
all arrangements or understandings between the stockholder and each proposed
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the stockholder, (v)
such other information regarding each proposed nominee as would be required to
be included in a proxy statement filed pursuant to the rules and regulations of
the Securities and Exchange Commission and (vi) the written consent of each
proposed nominee to serve as a director of the Corporation if so elected. The
Corporation may require the proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation. The presiding
officer of the meeting may, if the facts warrant, determine that a nomination
was not made in accordance with the foregoing procedure, and if such officer
should so determine, such officer shall so declare to the meeting and the
defective nomination shall be disregarded.
Section B. Annual Meeting Business. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (ii) otherwise
properly brought before the meeting by or at the direction of the Board or (iii)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be received at the
principal executive offices of the Corporation (i) not less than ninety (90)
days in advance of a meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting, and (ii) with respect to any
other annual meeting of stockholders, on or before the close of business on the
15th day following the date (or the first date, if there be more than one) of
public disclosure of the date of such meeting. For the purposes of this Section
(B) of this Article VII, the date of public disclosure of a meeting shall
include, but not be limited to, the date on which disclosure of the date of the
meeting is first made in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service, or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) (or the rules and regulations thereunder) of the
Securities Exchange Act of 1934, as amended. A stockholder's notice to the
Secretary of the Corporation shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name, age and business
and residential addresses, as they appear on the Corporation's records, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in the Bylaws of the Corporation to the contrary, no business shall be conducted
at an annual meeting except in accordance with the procedures set forth herein.
The Chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and in accordance with the provisions
-5-
<PAGE> 6
hereof, and if the Chairman should so determine, the Chairman shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
EIGHTH: The Board of Directors may make, alter or repeal the
Bylaws of the Corporation.
NINTH: Special meetings of stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the Chairman
of the Board or by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies, and such special meeting may not be called by any other
person or persons.
TENTH: To the fullest extent permitted by the General
Corporation Law of Delaware, as the same may be amended from time to time, the
Corporation shall indemnify any and all of its directors, officers, employees or
agents of the Corporation or former directors and officers, or any person who is
or was serving at the Corporation's request as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, limited liability company or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such
liability.
No amendment nor repeal of this Article, nor the adoption of
any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article, shall eliminate or reduce the effect of this Article, in
respect of any matter occurring, or any action or proceeding accruing or arising
or that, but for this Article, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
ELEVENTH: To the fullest extent permitted by the General
Corporation Law of Delaware, as the same may be amended from time to time, a
director or former director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. No repeal, amendment or modification of this Article, whether
direct or indirect, shall eliminate or reduce its effect with respect to any act
or omission of a director or former director of the corporation prior to such
repeal, amendment or modification.
TWELFTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter
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prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
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IN WITNESS WHEREOF, the corporation has caused this Amended
and Restated Certificate to by duly executed this 4th day of April, 2000.
/s/ Stuart J. Chasanoff
---------------------------------------------
By: Stuart J. Chasanoff
Its: Senior Vice President,
Corporate Development and Legal Affairs
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
eVENTURES GROUP, INC
(FORMERLY KNOWN AS ADINA, INC.)
A DELAWARE CORPORATION
(THE "COMPANY")
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the Company
in the State of Delaware is located at United Corporate Services, Inc., 15 East
North Street, City of Dover, County of Kent.
SECTION 1.2. PRINCIPAL OFFICE. The principal office of the Company
will be 300 Crescent Court, Suite 800, Dallas, TX 75201 or at such other place
as the Board of Directors may from time to time determine.
SECTION 1.3. OTHER OFFICES. The Company may also have offices at such
other places as the Board of Directors may from time to time determine or the
business of the Company may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. PLACE OF MEETINGS. All meetings of stockholders will be
held at the principal office of the Company, or at such other place as will be
determined by the Board of Directors and specified in the notice of the
meeting.
SECTION 2.2. ANNUAL MEETING. The annual meeting of stockholders will
be held at such date and time as will be designated from time to time by the
Board of Directors and stated in the notice of the meeting, at which meeting
the stockholders will elect by written ballot a Board of Directors and transact
such other business as may properly be brought before the meeting of
stockholders. The Board of Directors may postpone the time of holding the
annual meeting of stockholders for such period not exceeding ninety (90) days,
as they may deem advisable. Failure to hold the annual meeting at the
designated time shall not work a dissolution of the Company nor impair the
powers, rights and duties of the Company's officers and Directors. At annual
meetings, the stockholders shall elect Directors and transact such other
business as may properly be brought before the meeting. If the election of
Directors shall not be held on the day designated herein for any annual meeting
of the stockholders or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the stockholders as soon
thereafter as is convenient.
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SECTION 2.3. NOTICE OF ANNUAL MEETING. Written or printed notice of
the annual meeting, stating the place, day and hour thereof, will be delivered
personally to each stockholder at his residence or usual place of business or
mailed to each stockholder entitled to vote at such address as appears on the
books of the Company, not less than ten (10) nor more than sixty (60) days
before the date of the meeting. Waiver by a stockholder (or his duly authorized
attorney) in writing of notice of a stockholders' meeting, signed by the
stockholder, whether before or after the time of such meeting, shall be
equivalent to the giving of such notice. Attendance by a stockholder, whether
in person or by proxy, at a stockholders' meeting shall constitute a waiver of
notice of such meeting of which the stockholder has had no notice.
SECTION 2.4. SPECIAL MEETING. Special meetings of stockholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chairman of the Board or by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of Directors which the
Company would have if there were no vacancies, and such special meeting may not
be called by any other person or persons.
SECTION 2.5. NOTICE OF SPECIAL MEETING. Written or printed notice of a
special meeting stating the place, day, hour and purpose(s) thereof, will be
personally delivered to each stockholder at his residence or usual place of
business or mailed to each stockholder entitled to vote at such address as
appears on the books of the Company, not less than ten (10) nor more than sixty
(60) days before the date of the meeting. Business transacted at any special
meeting shall be limited to the purpose(s) stated in the notice.
SECTION 2.6. ADJOURNMENT. At any meeting of stockholders of the
Company, if less than a quorum be present, a majority of the stockholders
entitled to vote, present in person or by proxy, shall have the power to
adjourn the meeting from time to time without notice other than announcement at
the meeting until a quorum shall be present. Any business may be transacted at
the adjourned meeting which might have been transacted at the meeting
originally noticed. If the adjournment is for more than thirty days, or if
after the adjournment a new record date, as provided for in Section 2.7 of
these Bylaws, is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 2.7. FIXING OF DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. The Board of Directors may, by resolution, fix in advance a date as the
record date for the purpose of determining stockholders entitled to notice of,
or to vote at, any meeting of stockholders or any adjournment thereof, or
stockholders entitled to receive payment of any dividend or the allotment of
any rights, or in order to make a determination of stockholders for any other
purposes (other than determining stockholders entitled to consent to action by
stockholders proposed to be taken without a meeting of stockholders). Such
date, in any case, shall not be more than sixty (60) days and not less than ten
(10) days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If no record date is fixed for
the determination of stockholders entitled to notice of or to vote at a meeting
of stockholders, or stockholders entitled to receive payment of a dividend,
such date shall be at the close of business on the day on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
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<PAGE> 3
declaring such dividend is adopted, as the case may be, and shall be the record
date for such determination of stockholders. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof except where the determination has been made through the closing of the
stock transfer records and the stated period of closing has expired.
SECTION 2.8. STOCKHOLDER LIST. At least ten (10) days before each
meeting of stockholders, a complete list of stockholders entitled to vote at
each such meeting or in any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each, will be
prepared by the Secretary or the officer or agent having charge of the stock
transfer ledger of the Company. Such list will be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours for such ten (10) day period either at a place within the city
where the meeting is to be held, or, if not so specified, the place where the
meeting is to be held. Such list will also be produced and kept open at the
time and place of the meeting. The stock ledger shall be the only evidence as
to who are the stockholders entitled to vote in person or by proxy at any
meeting of stockholders.
SECTION 2.9. QUORUM. The holders of a majority of the shares of
capital stock issued and outstanding and entitled to vote, represented in
person or by proxy, will constitute a quorum at all meetings of the
stockholders for the transaction of business. The stockholders present may
adjourn the meeting despite the absence of a quorum. When a meeting is
adjourned for less than thirty (30) days in any one adjournment, it will not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted which might have been transacted on the original date of the
meeting. When a meeting is adjourned for thirty (30) days or more, notices of
the adjourned meeting will be given as in the case of an original meeting. The
vote of the holders of a majority of the shares entitled to vote and thus
represented at a meeting at which a quorum is present shall be the act of the
stockholders' meeting unless the vote of a greater number is required by law,
the Certificate of Incorporation or these Bylaws, in which case the vote of
such greater number shall be requisite to constitute the act of the meeting.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 2.10. PROXIES AND VOTING. Stockholders entitled to vote shall
have the number of votes specified in the Certificate of Incorporation for each
share of stock owned by them and a proportionate vote for a fractional share.
Stockholders may vote in person or by written proxy dated not more than six
months before the meeting named therein. Proxies shall be filed with the
Secretary of the meeting, or of any adjournment thereof, before being voted.
Except as otherwise limited therein, proxies shall entitle the person named
therein to vote at any meeting or adjournment of such meeting but shall not be
valid after final adjournment of such meeting. A proxy with respect to stock
held in the name of two or more persons shall be valid if executed by any one
of them unless at or prior to its exercise the Company receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a
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stockholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger.
When a quorum is present at any meeting, the holders of a majority of
the stock represented and entitled to vote on any question (or if there are two
or more classes of stock entitled to vote as separate classes, then in the case
of each such class, the holders of a majority of the stock of that class
represented and entitled to vote on any question) other than an election by
stockholders shall, except where a larger vote is required by law, by the
Certificate of Incorporation or by these bylaws, decide any question brought
before such meeting. Any election by stockholders shall be determined by a
plurality of the votes cast.
SECTION 2.11. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action
that may be taken at any annual or special meeting of the stockholders of the
Company, may be taken without a meeting, without prior notice, and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted,
provided that a consent must bear the date of each stockholder's signature and
no consent will be effective unless written consents received by a sufficient
number of stockholders to take the contemplated action are delivered to the
Company within sixty days of the date that the earliest consent is delivered to
the Company. Prompt notice of the taking of corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. In the event that the action which is consented
to is such as would have required the filing of a certificate under any section
of Delaware law, if such action had been voted on by stockholders at a meeting
thereof, the certificate filed under such other section shall state, in lieu of
any statement required by such section concerning any vote of stockholders,
that written consent and that written notice have been given in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
SECTION 2.12. PRESIDING OFFICER AND CONDUCT OF MEETINGS. The Chairman
of the Board of Directors shall preside at all meetings of the stockholders and
shall automatically serve as Chairman of such meetings. In the absence of the
Chairman of the Board of Directors, or if the Directors neglect or fail to
elect a Chairman, then the President of the Company shall preside at the
meetings of the stockholders and shall automatically be the Chairman of such
meeting, unless and until a different person is elected by a majority of the
shares entitled to vote at such meeting. The Secretary of the Company shall act
as Secretary at all meetings of the stockholders. In the absence or disability
of the Secretary, the Chairman of the Board of Directors, the Chief Executive
Officer, or the President shall appoint a person to act as Secretary at such
meetings.
SECTION 2.13. CONDUCT OF MEETINGS. The date and time of the opening
and the closing of the polls for each matter upon which the stockholders will
vote at a meeting shall be announced at the meeting by the person presiding
over the meeting. The Board of Directors may, to the extent not prohibited by
law, adopt by resolution such rules and regulations for the conduct of the
meeting of stockholders as it shall deem appropriate. Except to the extent
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inconsistent with such rules and regulations as adopted by the Board of
Directors, the person presiding over any meeting of stockholders shall have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of such person, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board of Directors or prescribed by the person presiding over
the meeting, may to the extent not prohibited by law include, without
limitation, the following: (i) the establishment of an agenda or order of
business for the meeting; (ii) rules and procedures for maintaining order at
the meeting and the safety of those present; (iii) limitations on attendance at
or participation in the meeting to stockholders of record of the Company, their
duly authorized and constituted proxies or such other persons as the chairman
of the meeting shall determine; (iv) restrictions on entry to the meeting after
the time fixed for the commencement thereof; and (v) limitations on the time
allotted to questions or comments by participants.
SECTION 2.14. INSPECTORS. The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If any of the inspectors so appointed shall
fail to appear or act, the chairman of the meeting may, or if inspectors shall
not have been appointed, the Chairman of the meeting shall, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Company outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the results, and
do such acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the chairman of the meeting, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No Directors or
candidate for the office of Director shall act as an inspector of an election
of Directors.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. FUNCTIONS AND NUMBER. The property, business and affairs
of the Company shall be managed and controlled by a Board of Directors, who
need not be stockholders, citizens of the United States or residents of the
State of Delaware. The authorized number of Directors that shall constitute the
full Board of Directors of the Company shall be fixed from time to time by
resolution of the Board of Directors. The Board of Directors, other than those
Directors elected by the holders of any series of preferred stock, shall be
divided into three classes, as nearly equal in number as the then-authorized
number of Directors constituting the Board of Directors permits, with the term
of office of one class expiring each year.
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SECTION 3.2. ELECTION AND TERM. Except as provided in Section 3.3 of
this Article, the stockholders shall initially elect ONE CLASS OF DIRECTORS FOR
A TERM EXPIRING AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD IN 2001,
ANOTHER CLASS FOR A TERM EXPIRING AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD IN 2002, AND ANOTHER CLASS FOR A TERM EXPIRING AT THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD IN 2003. SUCH INITIAL ELECTION MAY BE EFFECTED BY A
CONSENT OF STOCKHOLDERS IN LIEU OF A MEETING. Members of each class shall hold
office until their successors are elected and qualified. At each succeeding
annual meeting of the stockholders of the Company, the successors of the class
of Directors whose term expires at that meeting shall be elected by a plurality
vote of all votes cast at such meeting to hold office for a term expiring at
the annual meeting of stockholders held in the third year following the year of
their election. Directors need not be stockholders of the Company.
SECTION 3.3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Newly created
directorships resulting from any increase in the authorized number of Directors
and any vacancies on the Board resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board. Any Director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the class of directors in which the new directorship was created or in which
the vacancy occurred and until such director's successor shall have been duly
elected and qualified. No decrease in the number of Directors constituting the
Board shall shorten the term of any incumbent Director.
SECTION 3.4. RESIGNATION; REMOVAL. Any Director may resign at any time
by giving written notice thereof to the Board of Directors. Any such
resignation will take effect as of its date unless some other date is specified
therein, in which event it will be effective as of that date. The acceptance of
such resignation will not be necessary to make it effective. The Board of
Directors may, by majority vote of the Directors then in office, remove a
Director for cause. The owners of a majority of the outstanding shares of
capital stock may remove any Director for cause by a vote at an annual meeting
(or, if permitted by the Corporation's Certificate of Incorporation and these
Bylaws, by a consent of the stockholders in lieu of a meeting).
SECTION 3.5. COMPENSATION. The Board of Directors shall have the
authority to fix the compensation of Directors for their services. A Director
may also serve the Company in other capacities and receive compensation
therefor.
ARTICLE IV
MEETINGS OF THE BOARD
SECTION 4.1. REGULAR MEETINGS. The Board of Directors will meet each
year immediately following the annual meeting of the stockholders to appoint
the members of such committees of the Board of Directors as the Board may deem
necessary or advisable, to elect officers for the ensuing year, and to transact
such other business as may properly come before the Board of Directors at such
meeting. No notice of such meeting will be necessary to the newly
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elected Directors in order legally to constitute the meeting provided a quorum
will be present. Regular meetings may be held at such other times as shall be
designated by the Board of Directors without notice to the Directors.
SECTION 4.2. SPECIAL MEETINGS. Special meetings of the Board of
Directors will be held whenever called by the Chairman of the Board, Chief
Executive Officer, chairman of the Executive Committee or by two or more
Directors. Notice of each meeting will be given at least two (2) days prior to
the date of the meeting either personally or by telephone, facsimile or
telecopy (with proof of transmission) to each Director, and will state the
purpose, place, day and hour of the meeting. Waiver by a Director in writing of
notice of a Directors meeting, signed by the Director, whether before or after
the time of said meeting, shall be equivalent to the giving of such notice.
Except as provided in Section 9.3, attendance by a Director, whether in person
or by proxy, at a Directors' meeting shall constitute a waiver of notice of
such meeting of which the Director had no notice.
SECTION 4.3. QUORUM AND VOTING. At all meetings of the Board of
Directors (except in the case of a meeting convened for the purpose specified
in Section 3.3 of these Bylaws) a majority of the number of the Directors will
be necessary and sufficient to constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum will be the act of the Board of Directors. If a quorum
will not be present at any such meeting of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum will be present.
SECTION 4.4. TELEPHONE MEETINGS. Subject to the provisions of
applicable law and these Bylaws regarding notice of meetings, the Directors may
participate in and hold a meeting using conference telephone or similar
communications equipment by means of which all persons participating in a
meeting can hear each other simultaneously, and participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting. A
Director so attending will be deemed present at the meeting for all purposes
including the determination of whether a quorum is present except when a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground the meeting was not lawfully called
or convened.
SECTION 4.5. ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting if a consent in writing, setting forth the action so taken,
is signed by all the members of the Board of Directors.
SECTION 4.6. ATTENDANCE FEES. Directors will not receive any stated
salary, as such, for their services, but by resolution of the Board of
Directors a fixed sum and expenses of attendance may be allowed for attendance
at each regular or special meeting of the Board of Directors; however, this
provision will not preclude any Director from serving the Company in any other
capacity and receiving compensation therefor.
SECTION 4.7. INTEREST OF DIRECTORS IN CONTRACTS. Any contract or other
transaction between the Company and one (1) or more of its Directors, or
between the Company and any
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firm of which one or more of its Directors are members or employees, or in
which they are interested, or between the Company and any corporation or
association of which one or more of its Directors are shareholders, members,
directors, officers or employees, or in which they are interested, shall be
valid for all purposes, notwithstanding the presence of such Director or
Directors at the meeting of the Board of Directors of the Company, which acts
upon, or in reference to, such contract or transaction, and notwithstanding
their participation in such action, if the fact of such interest shall be
disclosed or known to the Board of Directors and the Board of Directors shall,
nevertheless, authorize, approve, and ratify such contract or transaction by a
vote of a majority of the Directors present, such interested Director or
Directors to be counted in determining whether a quorum is present, but not to
be counted in calculating the majority of such quorum necessary to carry such
vote. This Section shall not be construed to invalidate any contract or other
transaction which would otherwise be valid under the common and statutory law
applicable thereto.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE COMMITTEE. The Board of Directors by resolution
may designate one or more Directors to constitute an Executive Committee, which
committee, to the extent provided in such resolution, will have and may
exercise all of the powers and authority of the Board of Directors in the
management of the business and affairs of the Company, except where action of
the Board of Directors is required by statute. Unless expressly authorized by
resolution of the Board of Directors, no committee shall have the power or
authority to (a) amend the Certificate of Incorporation, (b) adopt an agreement
of merger or consolidation, (c) recommend to the shareholders the sale, lease
or exchange of all or substantially all of the Company's property and assets,
(d) recommend to the stockholders a dissolution of the Company or a revocation
of a dissolution, or (e) amend the Bylaws of the Company.
SECTION 5.2. OTHER COMMITTEES. The Board of Directors may by
resolution create other committees for such terms and with such powers and
duties as the Board shall deem appropriate.
SECTION 5.3. ORGANIZATION OF COMMITTEES. The chairman of each
committee of the Board of Directors will be chosen by the members thereof. Each
committee will elect a Secretary, who will be either a member of the committee
or the secretary of the Company. The chairman of each committee will preside at
all meetings of such committee.
SECTION 5.4. MEETINGS. Regular meetings of each committee may be held
without the giving of notice of time and a place will have been established by
the committee for such meetings. Special meetings (and, if the requirements of
the preceding sentence have not been met, regular meetings) will be called in
the manner provided as respect to notices of special meetings of the Board of
Directors.
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SECTION 5.5. QUORUM AND MANNER OF ACTING. Subject to the provisions of
applicable law and these Bylaws regarding notice of meetings, the members of
each committee may participate in and hold a meeting using conference telephone
or similar communications equipment by means of which all persons participating
in a meeting can hear each other simultaneously, and participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting. A
member so attending will be deemed present at the meeting for all purposes
including the determination of whether a quorum is present except when a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground the meeting was not lawfully called
or convened. The act of a majority of the members so present at a meeting at
which a quorum is present will be the act of such committee. The members of
each committee will act only as a committee, and will have no power or
authority, as such, by virtue of their membership on the committee.
SECTION 5.6. ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken by any committee may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all the
members of the committee.
SECTION 5.7. RECORD OF COMMITTEE ACTION; REPORTS. Each committee will
maintain a record, which need not be in the form of complete minutes, of the
action taken by it at each meeting, which record will include the date, time,
and place of the meeting, the names of the members present and absent, the
action considered, and the number of votes cast for and against the adoption of
the action considered. All action by each committee will be reported to the
Board of Directors at its meeting next succeeding such action, such report to
be in sufficient detail as to enable the Board to be informed of the conduct of
the Company's business and affairs since the last meeting of the Board.
SECTION 5.8. REMOVAL. Any member of any committee may be removed from
such committee, either with or without cause, at any time, by resolution
adopted by a majority of the whole Board of Directors at any meeting of the
board.
SECTION 5.9. VACANCIES. Any vacancy in any committee will be filled by
the Board of Directors in the manner prescribed by these Bylaws for the
original appointment of the members of such committee.
ARTICLE VI.
OFFICERS
SECTION 6.1. APPOINTMENT AND TERM OF OFFICE. The officers of the
Company may consist of a President, a Secretary, and a Treasurer, and there may
be a Chief Executive Officer, one or more Senior Vice Presidents, one or more
Executive Vice Presidents, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers as may
be appointed by the Board in its discretion. One of the Directors may also be
chosen Chairman of the Board. Each of such officers will be chosen annually by
the Board of
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Directors at its regular meeting immediately following the annual meeting of
stockholders and, subject to any earlier resignation or removal, will hold
office until the next annual meeting of stockholders or until his earlier
death, resignation, retirement, disqualification, or removal from office and
until his successor shall have been duly elected and qualified. Two or more
offices may be held by the same person.
SECTION 6.2. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors, with or without
cause, whenever in its judgment the best interests of the Company will be
served thereby, but such removal will be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent will not of itself create contract rights.
SECTION 6.3. VACANCIES. Whenever any vacancy shall occur in any office
of any officer by death, resignation, increase in the number of officers of the
Company, or otherwise, the same shall be filled by vote of a majority of the
Directors for the unexpired portion of the term.
SECTION 6.4. COMPENSATION. The compensation of all officers of the
Company shall be determined by the Board of Directors and may be altered by the
Board from time to time, except as otherwise provided by contract, and no
officer shall be prevented from receiving such compensation by reason of the
fact such officer is also a Director of the Company. All officers shall be
entitled to be paid or reimbursed for all costs and expenditures incurred in
the Company's business.
SECTION 6.5. POWERS AND DUTIES. The powers and duties of the officers
will be those usually pertaining to their respective offices, subject to the
general direction and supervision of the Board of Directors. Such powers and
duties will include the following:
a. Chairman of the Board. The Chairman of the Board, if
one is designated, shall be selected among the members of the
Board of Directors and will preside when present at all
meetings of the Board of Directors and of the stockholders.
The Chairman of the Board shall be available to consult with
and advise the officers of the Corporation with respect to
the conduct of the business and affairs of the Corporation
and shall have such other powers and duties as designated in
accordance with these Bylaws and as from time to time may be
assigned by the Board of Directors. The Chairman of the Board
shall be the highest officer of the Corporation and, subject
to the control of the Board of Directors, shall in general
supervise and control all business and affairs of the
Corporation.
b. President. The President, if one is designated,
shall be the Chief Executive Officer of the Company unless a
Chief Executive Officer is otherwise designated by the Board
of Directors. The President will be responsible for general
supervision of the affairs, properties, and operations of the
Company, and over its several officers and be the Company's
general manager responsible for the management and control in
the ordinary course of the business of the Company.
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<PAGE> 11
The President may execute and deliver in the name and on
behalf of the Company, deeds, mortgages, leases, assignments,
bonds, notes, bills of sale, assignments, releases, receipts,
contracts or other instruments of any kind or character
authorized by the Board of Directors. Unless otherwise
directed by the Board, the President shall attend in person
or by substitute or by proxy and act and vote on behalf of
the Company at all meetings of the stockholders of any
corporation in which the Company holds stock. The President
may appoint or employ and discharge employees and agents of
the Company and fix their compensation.
c. Vice Presidents. Each Vice President, Senior Vice
President and Executive Vice President, if any are
designated, will perform the duties prescribed or delegated
by the President or by the Board of Directors, and at the
request of the President or the Board of Directors, will
perform as well the duties of the President's office.
d. Secretary. The Secretary, if one is designated, will
give notice to and attend all meetings and keep the minutes
of all of the proceedings at all meetings of the Board of
Directors and all meetings of the stockholders and will be
the custodian of all corporate records and of the seal of the
Company. The Secretary will see that all notices required to
be given to the stockholders and to the Board of Directors
are duly given in accordance with these Bylaws or as required
by law. It shall also be the duty of the Secretary to attest,
by personal signature and the seal of the Company, all stock
certificates issued by the Company and to keep a stock ledger
in which shall be correctly recorded all transactions
pertaining to the capital stock of the Company. The Secretary
shall also attest, by personal signature and the seal of the
Company, all deeds, conveyances, or other instruments
requiring the seal of the Company. The person holding the
office of Secretary shall also perform, under the direction
and subject to the control of the President and the Board of
Directors, such other duties as may be assigned to such
officer. Unless a transfer agent is appointed, the Secretary
shall also keep or cause to be kept at any such office the
stock and transfer records, which shall contain the names of
all stockholders and the record address and the amount of
stock held by each, for inspection by stockholders. Any such
inspection by a stockholder of the articles of organization,
bylaws, records of meetings of the incorporators or
stockholders, or the stock and transfer records must be at a
reasonable time and for a proper purpose, but not to secure a
list of stockholders for the purpose of selling said list or
copies thereof or of using the same for a purpose other than
in the interest of the applicant, as a stockholder, relative
to the affairs of the Company. Said copies and records need
not all be kept in the same office. In the absence of the
appointment of a Treasurer for the Company, the Secretary
shall perform the duties of the Treasurer.
e. General Counsel. The General Counsel, if one is
designated, shall establish legal policy and see that all
legal affairs of the Company are properly
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<PAGE> 12
handled. The General Counsel shall report to the President or
the Chief Executive Officer, as the case may be.
f. Any Assistant Secretary shall have the powers and
perform the duties of the Secretary in his absence or in case
of his inability to act and shall have such other powers and
duties as the directors may from time to time prescribe. If
neither the Secretary nor any Assistant Secretary is present
at any meeting of the stockholders, a temporary Secretary to
be designated by the person presiding at the meeting shall
perform the duties of the Secretary.
g. Treasurer. The Treasurer will be the principal
accounting and financial officer of the Company and will have
active control of and shall be responsible for all matters
pertaining to the accounts and finances of the Company. The
Treasurer will have charge of the corporate funds and
securities and will keep a record of the property and
indebtedness of the Company. If required by the Board of
Directors, the Treasurer will give bond for the faithful
discharge of duties in such sum and with such surety or
sureties as the Board may require. The Treasurer shall keep
such monies and securities of the Company as may be entrusted
to his keeping and account for the same. The Treasurer shall
be prepared at all times to give information as to the
condition of the Company and shall make a detailed annual
report of the entire business and financial condition of the
Company. The person holding the office of Treasurer shall
also perform, under the direction and subject to the control
of the President and the Board of Directors, such other
duties as may be assigned by either of such officers. The
duties of the Treasurer may also be performed by any
Assistant Treasurer.
h. Other Officers. The Board of Directors may appoint
such other officers, agents or employees as it may deem
necessary for the conduct of the business of the Company. In
addition, the Board may authorize the President or other
officers to appoint such agents or employees as they deem
necessary for the conduct of the business of the Company.
SECTION 6.6. RESIGNATIONS. Any officer may resign at any time by
giving written notice thereof to the Board of Directors. Any such resignation
will take effect as of its date unless some other date is specified therein, in
which event it will be effective as of that date. The acceptance of such
resignation will not be necessary to make it effective.
ARTICLE VII
SHARES OF STOCK AND THEIR TRANSFER; BOOKS
SECTION 7.1. FORMS OF CERTIFICATES. Shares of the capital stock of the
Company will be represented by certificates in such form, not inconsistent with
law or with the Certificate of Incorporation of the Company, as will be
approved by the Board of Directors, and will be signed
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<PAGE> 13
by the Chairman of the Board, Chief Executive Officer, President or a Vice
President and the Secretary, an Assistant Secretary, the Treasurer or an
Assistant Treasurer and sealed with the seal of the Company. Such seal may be
facsimile, engraved or printed. Where any such certificate is countersigned by
a transfer agent or by a registrar, the signature of such Chairman of the
Board, Chief Executive Officer, President, Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer upon such certificate may be
facsimiles, engraved or printed. Such certificates shall be delivered
representing all shares to which stockholders are entitled.
SECTION 7.2. ISSUANCE. Shares of stock with par value (both treasury
and authorized but unissued) may be issued for such consideration (not less
than par value) and to such persons as the Board of Directors may determine
from time to time. Shares of stock without par value may be issued for such
consideration as is determined from time to time by the Board of Directors.
Shares may not be issued until the full amount of the consideration, fixed as
provided by law, has been paid.
SECTION 7.3. PAYMENT FOR SHARES.
a. The consideration for the issuance of shares shall consist
of cash, services rendered (including services actually performed for
the Company) or real or personal property (tangible or intangible) or
any combination thereof actually received. Neither promissory notes
nor the promise of future services shall constitute payment for
shares.
b. In the absence of actual fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration
received shall be conclusive.
c. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be
considered fully paid and nonassessable.
d. The consideration received for shares shall be allocated
by the Board of Directors, in accordance with law, between stated
capital and capital surplus accounts.
SECTION 7.4. TRANSFER OF SHARES. Shares of stock of the Company will
be transferred only on the stock books of the Company by the holder of record
thereof in person, or by a duly authorized attorney, upon the endorsement and
surrender of the certificate therefor.
SECTION 7.5. STOCKHOLDERS OF RECORD. Stockholders of record entitled
to vote at any meeting of stockholders or entitled to receive payment of any
dividend or to any allotment of rights or to exercise the rights in respect of
any change or conversion or exchange of capital stock will be determined
according to the Company's stock ledger and, if so determined by the Board of
Directors in the manner provided by statute, will be such stockholders of
record (a) at the date fixed for closing the stock transfer books, or (b) as of
the date of record.
SECTION 7.6. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of
Directors may direct the issuance of new or duplicate stock certificates in
place of lost, stolen or destroyed certificates, upon being furnished with
evidence satisfactory to it of the loss, theft or destruction
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<PAGE> 14
and upon being furnished with indemnity satisfactory to it. The Board of
Directors may delegate to any officer authority to administer the provisions of
this Section.
SECTION 7.7. CLOSING OF STOCK TRANSFER BOOKS. The Board of Directors
will have power, in its discretion, either (a) to close the stock transfer
books of the Company (i) for a period not exceeding sixty (60) days nor less
than ten (10) days preceding (A) the date of any meeting of stockholders, (B)
the date for the payment of any dividend, (C) the date for the allotment of
rights, or (D) the date when change or conversion or exchange of capital stock
will go into effect, (ii) for a period not exceeding sixty (60) days nor less
than ten (10) days in connection with obtaining the consent of stockholders for
any purpose; or (b) to fix a date, not more than sixty (60) days nor less than
ten (10) days before (i) any stockholders' meeting, (ii) the date for the
payment of any dividend, (iii) the date for the allotment of rights, or (iv)
the date when any change or conversion or exchange of capital stock will go
into effect as a record date for the determination of the stockholders entitled
to notice of, and to vote at, any such meeting and at any adjournment thereof,
or entitled to receive payment of any such dividend, (B) to any such allotment
of rights, (C) to exercise the rights in respect of such change, conversion, or
exchange of capital stock, or (D) to give such consent, and in such case such
stockholders and only such stockholders as will be stockholders of record on
the date so fixed will be entitled to notice of and to vote at such meeting and
at any adjournment thereof, or to receive payment of such dividend, or to
exercise rights, or to give such consent as the case may be, notwithstanding
any transfer of any stock on the books of the Company after such record date
fixed as aforesaid.
SECTION 7.8. REGULATIONS. The Board of Directors may make such rules
and regulations as it may deem expedient concerning the issuance, transfer and
registration of certificates of stock. The Board of Directors may appoint one
or more transfer agents or registrars, or both, and may require all
certificates of stock to bear the signature of either or both.
SECTION 7.9. EXAMINATION OF BOOKS BY STOCKHOLDERS. The original or
duplicate stock ledger of the Company containing the names and addresses of the
stockholders and the number of shares held by them and the other books and
records of the Company will, at all times during the usual hours of business,
be available for inspection at its principal office, and any stockholder, upon
compliance with the conditions set forth in and to the extent authorized by
Section 220 of the General Corporation Law of the State of Delaware, will have
the right to inspect such books and records.
ARTICLE VIII
INDEMNIFICATION; INSURANCE
SECTION 8.1. INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party to or is involved in any threatened,
pending or completed action suit or proceeding, whether civil, criminal or
investigative (a "proceeding"), by reason of the fact that he or a person for
whom he is the legal representative is or was a director, officer, employee or
agent of the Company or is or was serving at the request of the Corporation as
a director,
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<PAGE> 15
officer, employee, trustee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise (including service with respect to
employee benefit plans) whether the basis of such proceeding is alleged action
in his official capacity as a director, officer, employee or agent, or in any
other capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the Company to the fullest extent permitted
by the General Corporation Law of the State of Delaware against all expenses,
liability and loss (including attorneys' fees, judgments, fines, special excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith. Such right shall
be a contract right and shall include the right to require advancement by the
Company of attorneys' fees and other expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that the
payment of such expenses incurred by a Director or officer of the Company in
his capacity as a Director or officer (and not in any other capacity in which
service was or is rendered by such person while a Director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made by the Company only
upon delivery to the corporation of an undertaking, by or on behalf of such
Director or officer, to repay all amount so advanced if it should be determined
ultimately that such Director or officer is not entitled to be indemnified
under this section or otherwise.
SECTION 8.2. INDEMNIFICATION NOT EXCLUSIVE. The indemnification and
advancement of expenses provided by this Article VIII shall not be deemed
exclusive of any other rights to which a person seeking indemnification may be
entitled under the Certificate of Incorporation, any agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 8.3. INSURANCE. By action of its Board of Directors,
notwithstanding any interest of the Directors in the action, to the full extent
permitted by the General Corporation Law of the State of Delaware, the Company
may purchase and maintain insurance, in such amounts and against such risks as
the Board of Directors deems appropriate, on behalf of any person who is or was
a Director, advisory Director, officer, employee or agent of the Company, or of
any entity a majority of the voting stock of which is owned by the Company, or
who is or was serving at the request of the Company as a Director, advisory
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of the
status as such, whether or not the Company would have the power or would be
required to indemnify such person against such liability under the provisions
of this Article, or of the Certificate of Incorporation or of the General
Corporation Law of the State of Delaware.
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<PAGE> 16
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. AMENDMENTS. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by a majority vote of the Board of
Directors at any regular meeting of the Board or at any special meeting of the
Board if notice of proposed alteration or repeal be contained in the notice of
such special meeting.
SECTION 9.2. METHODS OF NOTICE. Whenever any notice is required to be
given in writing to any stockholder pursuant to any statute, the Certificate of
Incorporation or these Bylaws, it will not be construed to require personal or
actual notice, and such notice will be deemed for all purposes to have been
sufficiently given at the time the same is deposited in the United States mail
or recognized overnight courier service with postage thereon prepaid, addressed
to the stockholder at such address as appears on the books of the Company.
Whenever any notice may be or is required to be given as (a) personally to any
Director, it will be deemed for all purposes to have been sufficiently given
either (i) three (3) days following the date the same is deposited in the
United States mail with postage prepaid thereon (ii) the day following the date
the same is delivered to any recognized overnight courier service, or (iii) to
the date the same is personally delivered, or (b) by facsimile to any Director,
it will be deemed for all purposes to have been sufficiently given at the time
the same is properly transmitted (with proof of transmission).
SECTION 9.3. WAIVER OF NOTICE. The giving of any notice of the time,
place or purpose of holding any meeting of stockholders or Directors and any
requirement as to publication thereof, whether statutory or otherwise, will be
waived by the attendance at such meeting by any person entitled to receive such
notice except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened and may be waived by
such person by an instrument in writing executed and filed with the records of
the meeting, either before or after the holding thereof.
SECTION 9.4. SEAL. The seal of the Company shall be in such form as
shall be adopted and approved from time to time by the Board of Directors. The
seal may be used by causing it, or a facsimile thereof, to be impressed,
affixed, imprinted or in any manner reproduced. The Board of Directors may
determine not to adopt a seal for the Company, in which case any documents or
instruments providing for the use of a seal shall be valid despite the lack of
a corporate seal.
SECTION 9.5. SECURITIES OF OTHER CORPORATIONS. The CEO, the CFO,
President or any Vice President of the Company shall have power and authority
to transfer, endorse for transfer, vote, consent or take any other action with
respect to any securities of another issuer which may be held or owned by the
Company and to make, execute and deliver any waiver, proxy or consent with
respect to any such securities.
SECTION 9.6. FISCAL YEAR. The fiscal year of the Company shall be
fixed by resolution of the Board of Directors.
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<PAGE> 17
SECTION 9.7. DIVIDENDS. Dividends upon the outstanding stock of the
Company, subject to the provisions of the statutes and the Certificate of
Incorporation, may be declared by the Board of Directors at any regular or
special meeting. Dividends may be declared and paid in cash, in property or in
shares of the Company, or in any combination thereof.
SECTION 9.8. RESERVES. There may be created from time to time by
resolution of the Board of Directors, out of funds of the Company available for
dividends, such reserve or reserves as the Directors from time to time in their
discretion think proper (a) to provide for contingencies, (b) to equalize
dividends, (c) to repair or maintain any property of the Company, or (d) for
such other purpose as the Directors shall think beneficial to the Company, and
the Directors may modify or abolish any such reserve in the manner in which it
was created.
SECTION 9.9. SIGNATURE OF NEGOTIABLE INSTRUMENTS. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents, and in such manner,
as are prescribed by resolution (whether general or special) of the Board of
Directors or the executive committee.
SECTION 9.10. SURETY BONDS. Such officers and agents of the Company
(if any) as the Board of Directors may direct from time to time shall be bonded
for the faithful performance of their duties and for the restoration to the
Company, in case of their death, resignation, disqualification or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Company, in
such amounts and by such surety companies as the Board of Directors may
determine. The premiums on such bonds shall be paid by the Company, and the
bonds so furnished shall be in the custody of the Secretary.
SECTION 9.11. LOANS AND GUARANTIES. The Company may lend money to,
guaranty obligations of, and otherwise assist its Directors, officers and
employees if the Board of Directors determines such loans, guaranties or
assistance reasonably may be expected to benefit, directly or indirectly, the
Company.
SECTION 9.12. RELATION TO CERTIFICATE OF INCORPORATION. These Bylaws
are subject to, and governed by, the Certificate of Incorporation.
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<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
eVENTURES GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (This "Agreement") is made and
entered into as of April 4, 2000, by and among eVENTURES GROUP, INC., a Delaware
corporation (the "Company"), and the persons and entities signatories hereto
(collectively, the "Stockholders"), as holders of shares of common stock, par
value $0.00002 per share, of the Company ("Common Stock").
WITNESSETH:
WHEREAS, the Company and the Stockholders have entered into that
certain Common Stock Subscription Agreement dated on or about April 4, 2000 (the
"Subscription Agreement"), pursuant to which the Stockholders acquired shares of
Common Stock (the "Shares") in the amounts set forth on Schedule I hereto; and
WHEREAS, in connection with the Subscription Agreement, the parties
have agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement and in the Subscription Agreement, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. REGISTRABLE SHARES. For purposes of this Agreement, "Registrable
Shares" shall mean, at any time, and with respect to any Stockholder or
Qualified Transferee (as defined in Section 9(g) below), any Restricted
Securities (as defined below) held by such Stockholder or Qualified Transferee,
and "Holder" shall mean any Stockholder or Qualified Transferee holding
Registrable Shares. As to any particular Registrable Shares, once issued, such
Registrable Shares shall cease to be Registrable Shares (1) when such
Registrable Shares have been registered under the Securities Act of 1933, as
amended or any successor Federal statute (the "Act"), the Registration Statement
in connection therewith has been declared effective by the Securities and
Exchange Commission or any successor agency thereto (the "SEC") and they have
been disposed of pursuant to and in the manner described in such effective
Registration Statement, (2) when such Registrable Shares are sold or distributed
pursuant to Rule 144 (as defined below), (3) when such Registrable Shares have
ceased to be outstanding, or (4) when such Registrable Shares have been
transferred to a person or entity other than a Qualified Transferee. For
purposes of this Agreement, the term "Restricted Securities" shall mean, at any
time and with respect to any Stockholder or Qualified Transferee, the Shares and
any Common Stock received on or with respect to any of the Shares, including
Common Stock received by way of stock split or stock dividend or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, which are held by such Stockholder or Qualified Transferee and
which theretofor have not been sold to the public pursuant to a Registration
Statement or transferred pursuant to Rule 144. For purposes of this Agreement,
the term "Registration Statement" shall
<PAGE> 2
mean any registration statement of the Company which covers any of the
Registrable Shares, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus (as defined below) contained therein, all exhibits thereto and all
material incorporated by reference therein. For purposes of this Agreement, the
term "Prospectus" shall mean the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
Prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Shares and, in
each case, by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein. For purposes of this Agreement, the term
"Rule 144" shall mean Rule 144 promulgated under the Act or any successor or
similar rule thereto, as may be enacted by the SEC from time to time.
2. FORM S-3 ELIGIBILITY. The Company hereby covenants and agrees
that is shall prepare and timely file all such filings in a timely manner and
otherwise as required by the Act, the Exchange Act and the rules and
regulations promulgated under the Act and the Exchange Act, from the date
hereof and throughout the term of this Agreement.
3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. If the Company proposes to register
any of its securities under the Act (other than pursuant to (i) a
registration solely in connection with an employee benefit or stock
ownership plan on Form S-8 or any comparable or successor form, (ii) a
registration solely in connection with an acquisition consummated in a
manner which would permit registration of such securities to the
public on Form S-4 or any comparable or successor form or (iii) a
"shelf" or similar registration for use solely in connection with
future acquisitions), and the registration form to be used may be used
for the registration of Registrable Shares (a "Piggyback
Registration"), the Company will give prompt written notice to all
Holders of Registrable Shares of its intention to effect such a
registration (each a "Piggyback Notice"). Subject to Section 3(b)
below, the Company will include in such registration all Registrable
Shares that Holders of Registrable Shares request the Company to
include in such registration by written notice given to the Company
within twenty (20) days after the date of sending of the Piggyback
Notice.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration relates to an underwritten public offering of equity
securities by the Company and the managing underwriter or underwriters
for such offering advise the Company in writing that in their opinion
the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the Company, the Company
will include in such registration (i) first, the securities proposed
to be sold by the Company, (ii) second, the securities proposed to be
sold by any other persons with registration rights senior to those of
the Holders, (iii) third, the securities requested to be included in
such registration, including (a) Registrable Shares and (b) other
securities held by persons with registration rights equal to those of
<PAGE> 3
the Holders, pro rata among the Holders of such Registrable Shares and
such persons on the basis of the number of shares owned by each such
Holder and each such person, provided that any unused share allocation
of any such Holder or such person not fully participating shall be
reallocated pro rata among the Holders of Registrable Shares and such
persons on the basis of the number of shares being sold by each such
Holder and each such person in such registration, and (iv) fourth,
other securities requested to be included in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration relates to an underwritten public offering of equity
securities held solely by other shareholders of the Company's
securities and the managing underwriter or underwriters advise the
Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which
can be sold in an orderly manner in such offering within a price range
acceptable to the persons (as defined below) initially requesting such
registration, the Company will include in such registration (i) first,
the securities requested to be included therein by the persons
requesting such registration, (ii) second, the securities proposed to
be sold by any other persons with registration rights senior to those
of the Holders, (iii) third, the Registrable Shares requested to be
included in such registration, pro rata among the Holders of such
Registrable Shares on the basis of the number of shares owned by each
such Holder, provided that any unused share allocation of any such
Holder not fully participating shall be reallocated pro rata among the
Holders of Registrable Shares on the basis of the number of shares
being sold by each such Holder in such registration, and (iv) fourth,
other securities requested to be included in such registration.
(d) OUTSTANDING REGISTRATION RIGHTS OBLIGATIONS. The Company
has provided to the Investors copies of all outstanding agreements
under which it may be obligated to register securities of the Company
(the "Outstanding Agreements") and/or has directed the Investors to
copies of the Outstanding Agreements that have been publicly filed.
As the Company understands the terms of the Outstanding Agreements,
no person or entity has rights under the Outstanding Agreements that
would be "senior" (as that term is used in Sections 3(c) and 3(d)) to
those of the Holders hereunder other than the persons and entities
listed on Schedule I to that certain Registration Rights Agreement,
dated as of September 22, 1999, between the Company and such persons
and entities (the "September 1999 Holders"). The Company has granted
demand registration rights pursuant to such Registration Rights
Agreement and also pursuant to that certain Registration Rights
Agreement, dated as of March 10, 2000, between the Company and the
persons and entities listed on Schedule I thereto. The September 1999
Holders further must approve any participation by other persons or
entities, including the Holders hereunder, in demand registrations
undertaken at their request.
4. REGISTRATION PROCEDURES. Whenever the Holders of Registrable Shares
have requested that any Registrable Shares be registered pursuant to this
Agreement, the Company will use its commercially reasonable efforts to effect
the registration and the sale of such Registrable Shares in accordance with the
intended method of distribution thereof and will as expeditiously as possible:
<PAGE> 4
(i) prepare and file with the Commission a Registration
Statement with respect to such Registrable Shares on any appropriate
form under the Act, which form shall be selected by the Company and
shall be available for the sale of Registrable Shares in accordance
with the intended method or methods of distribution thereof and use
its commercially reasonable efforts to cause such Registration
Statement to become effective, provided that before filing a
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the
Holders of a majority of the Registrable Shares included in such
Registration Statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement and
supplements to the Prospectus used in connection therewith (and to
file the Prospectus, as so supplemented, under Rule 424 under the
Act, if required) as may be necessary to keep such Registration
Statement effective for a period of up to six (6) months, and comply
with the provisions of the Act with respect to the disposition of all
securities included in such Registration Statement during such period
in accordance with the intended methods of distribution by the
selling Holders thereof set forth in such Registration Statement or
supplement to such Prospectus;
(iii) furnish to each selling Holder of Registrable Shares such
number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits), the
Prospectus included in such Registration Statement (including each
preliminary Prospectus) and such other documents as such selling
Holder may reasonably request in order to facilitate the disposition
of the Registrable Shares owned by such selling Holder, the Company
consents to the use of the Prospectus and any amendment or supplement
thereto by a seller of Registrable Shares and the underwriters, if
any, in connection with the offering and sale of the Registrable
Shares covered by the Prospectus and any amendment or supplement
thereto;
(iv) notify the selling Holders of Registrable Shares and the
managing underwriter or underwriters, if any, promptly and (if
requested by any such Stockholder) confirm such advice in writing,
(A) when a Prospectus, including any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same
has become effective, (B) of any request by the Commission for
amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (E) of the
existence of any fact which results in a Registration Statement, a
Prospectus or any document incorporated therein by reference
containing an untrue statement of a material fact or omitting to
state a material fact
<PAGE> 5
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(v) use its commercially reasonable efforts to register or
qualify such Registrable Shares under such other securities or "blue
sky" laws of such jurisdictions as any selling Holder reasonably
requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such selling Holder to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such selling Holder, provided that the Company will
not be required (A) to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this subparagraph, (B) to subject itself to taxation in any such
jurisdiction, or (C) to consent to general service of process in any
such jurisdiction;
(vi) notify each selling Holder of such Registrable Shares, at
any time when a Prospectus relating thereto is required to be
delivered under the Act, of the happening of any event referred to in
clause (iv)(E) of this Section 4, and, at the request of any such
seller, prepare a supplement to such Prospectus or a post-effective
amendment to such Registration Statement and furnish to each seller
of Registrable Shares a reasonable number of copies of such
supplement or amendment so that, as thereafter delivered to the
purchasers of such Registrable Shares, such Prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(vii) use its commercially reasonable efforts to cause all such
Registrable Shares to be listed on each securities exchange on which
similar securities issued by the Company are then listed and to be
qualified for trading on each system on which similar securities
issued by the Company are from time to time qualified;
(viii) provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such
Registration Statement and thereafter maintain such transfer agent
and registrar;
(ix) cooperate with each seller of Registrable Shares and the
managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Shares to be
sold pursuant to the Registration Statement, which certificates, if
so required by any securities exchange upon which any Registrable
Shares are listed, shall be penned, lithographed or engraved, or
produced by any combination of such methods, on steel engraved
borders, and in such denominations and registered in such names as
each seller of Registrable Shares or the managing underwriters, if
any, may request at least two Business Days prior to the sale of
Registrable Shares pursuant to the Registration Statement;
(x) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
Holders of a majority of the Registrable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Shares, including
using its best
<PAGE> 6
efforts to cause its officers to participate in "road shows" and
other information meetings organized by the managing underwriter and
in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration: (A) make such representations and warranties to each
seller of Registrable Shares, and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in underwritten offerings; and (B) the Company shall
deliver such documents and certificates as may be reasonably
requested by each seller of Registrable Shares, and the managing
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant hereto and to evidence
compliance with any conditions contained in the underwriting
agreement or other agreement entered into by the Company;
(xi) in connection with an underwritten offering, use its
commercially reasonable efforts to (A) obtain opinions of counsel to
the Company and updates thereof, which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, addressed to the underwriters, covering the matters
customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such
underwriters; and (B) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public accountants,
addressed to the underwriters, such letters to be in customary form
and covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with underwritten
offerings; make available for inspection during normal business hours
by any underwriter participating in any disposition pursuant to a
registration statement, and any attorney or accountant retained by
such underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by such underwriter, attorney or accountant in
connection with such registration statement; provided that such
underwriters execute prior thereto an agreement with the Company that
all such records, information or documents shall be kept confidential
by such persons unless (1) disclosure of such records, information or
documents is required by law or by a court or administrative order or
(2) such records, information or documents are or become (but only
when they become) generally available to the public other than as a
result of disclosure in violation of this paragraph; and make
available for inspection by any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all
information reasonably requested by any such underwriter, attorney,
accountant or agent in connection with such registration statement;
(xii) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission
and make available to its security holders, as soon as reasonably
practicable but no later than fifteen (15) months after the effective
date of the Registration Statement, an earnings statement covering a
period of twelve (12)
<PAGE> 7
months beginning after the effective date of the Registration
Statement, in a manner which satisfies the provisions of Section 11(a)
of the Act and Rule 158 thereunder;
(xiii) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Shares included in
such registration statement for sale in any jurisdiction, the Company
will use its commercially reasonable efforts promptly to obtain the
withdrawal of such order;
(xiv) provide a CUSIP number for all Registrable Shares, not
later than the effective date of the applicable registration
statement;
(xv) cooperate with each seller of Registrable Shares and each
underwriter participating in the disposition of such Registrable
Shares and their respective counsel in connection with any filings
required to be made with the National Association of Securities
Dealers, Inc.0; and
(xvi) take all other steps reasonably necessary to effect the
registration of the Registrable Shares contemplated hereby.
Notwithstanding anything set forth herein, the Company shall be entitled to
withdraw a Registration Statement in its sole and exclusive discretion at any
time prior to its becoming effective.
5. REGISTRATION EXPENSES.
(a) DEFINITION. The term "Registration Expenses" means any
expenses incident to the Company's performance of or compliance with
this Agreement, including, without limitation, all registration and
filing fees, listing fees, fees and expenses of compliance with
securities or "blue sky" laws, printing expenses, messenger and
delivery expenses, internal expenses, the fees and expenses of counsel
for the Company (but not the fees and expenses of counsel to the
Holders of the Registrable Shares included in such registration) and
all independent certified public accountants, underwriting fees and
expenses (excluding discounts and commissions attributable to the
Registrable Shares, which shall be paid by the selling Holders out of
the proceeds of the offering) and the fees and expenses of any other
persons (as defined below) retained by the Company. For purposes of
this Agreement, the term "person" shall be construed as broadly as
possible and shall include an individual or natural person, a
partnership (including a limited liability partnership), a company, an
association, a joint stock company, a limited liability company, a
trust, a joint venture, an unincorporated entity and a governmental
authority.
(b) PAYMENT. The Company shall pay the Registration Expenses in
connection with any and all Piggyback Registrations.
<PAGE> 8
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify,
to the extent permitted by law, each Holder of Registrable Shares, such
Holder's general and limited partners, officers and directors and each person
who controls such Holder (within the meaning of the Act) against all losses,
claims, damages, liabilities and expenses caused by (i) any untrue or alleged
untrue statement of material fact contained in any Registration Statement,
Prospectus or preliminary Prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
furnished in writing to the Company by such Holder expressly for use therein or
(ii) any violation or alleged violation by the Company of the Act, the Exchange
Act, any state securities law or any rule or regulation promulgated under the
Act, the Exchange Act or any state securities law. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each person who controls such underwriters (within
the meaning of the Act) to the same extent as provided above with respect to
the indemnification of the Holders of Registrable Shares.
(b) INDEMNIFICATION BY HOLDERS. In connection with any Registration
Statement in which a Holder of Registrable Shares is participating, each such
Holder will furnish to the Company in writing such information and affidavits
as the Company reasonably requests for use in connection with any such
Registration Statement or Prospectus and, to the extent permitted by law, will
indemnify the Company, its directors and officers and each person who controls
the Company (within the meaning of the Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the Registration Statement, Prospectus
or preliminary Prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any written
information or affidavit so furnished in writing by such Holder; provided, that
the obligation to indemnify will be individual to each Holder and will be
limited to the net amount of proceeds received by such Holder from the sale of
Registrable Shares pursuant to such registration statement.
(c) NOTICE; DEFENSE OF CLAIMS. Any person entitled to indemnification
hereunder will (i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification; provided, that the
failure to so notify the indemnifying party shall not relieve the indemnifying
party of any liability that it may have to the indemnified party hereunder
(except to the extent that the indemnifying party is materially prejudiced by
reason of such failure) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject
<PAGE> 9
to any liability for any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably withheld or delayed). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
special and one local counsel for all parties indemnified by such indemnifying
party with respect to such claim.
(d) CONTRIBUTION. If the indemnification provided for in this Section
5 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Registrable Shares or
(ii) if the allocation provided for by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other hand in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. The obligation to
contribute will be individual to each Holder of Registrable Shares and will be
limited to the amount by which the net amount of proceeds received by such
Holder from the sale of Registrable Shares exceeds the amount of losses,
liabilities, damages, and expenses which such Holder has otherwise been
required to pay by reason of such statements or omissions.
(e) SURVIVAL. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of securities.
(f) UNDERWRITING AGREEMENT. To the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the provisions of this Section 6, and the Holder indemnifying or seeking
indemnification is a party thereto, the provisions contained in the
underwriting agreement shall control.
(g) NON-EXCLUSIVITY. The obligations of the Company under this Section
6 shall be in addition to any liability which the Company may otherwise have to
any indemnified person under this Section 6 and shall be in addition to any
liability which such indemnified person may otherwise have to the Company. The
remedies provided in
<PAGE> 10
this Section 6 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at
law or in equity.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No person may
participate in any registration hereunder which is underwritten unless such
person (i) agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the person or persons entitled hereunder
to approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
Holder of Registrable Shares included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such Holder,
such Holder's title to its Registrable Shares and such Holder's intended method
of distribution, and (iii) if requested by the managing underwriter or
underwriters or the Demanding Persons (as defined in the Registration Rights
Agreement, dated as of September 22, 1999, among the Company and the persons
and entities set forth on Schedule 1 thereto), agrees not to sell Registrable
Shares or other securities held by such Holder in any transaction other than
pursuant to such underwriting for such period following the effective date of
the registration statement relating to such underwriting for such period as is
determined by either the Board of Directors or the Demanding Persons.
8. STOCKHOLDER LOCK-UP; AGREEMENT NOT TO SELL.
(a) LOCK-UP AND AGREEMENT NOT TO SELL. Prior to the first
annual anniversary of the date hereof, no Holder of Registrable Shares
may make any public sale of Registrable Shares (pursuant to a
Registration Statement, Rule 144 or otherwise), subject to the
following exceptions; provided, however, that (i) all officers,
directors and holders of one percent (1%) or more of the diluted
equity of the Company (other than (a) those individuals granted stock
options by the Company pursuant to the 1999 Omnibus Securities Plan
and (b) those individuals to be granted stock options by the Company
as set forth on the Schedule of Exceptions to the Subscription
Agreement) and all holders of registration rights under other
agreements with the Company have entered into similar agreements and
(ii) any discretionary waiver or termination of the restrictions of
any such agreement (including this Agreement) with respect to 0.25% or
more (in the aggregate) of the Company's equity securities by the
Company, or the managing underwriter, shall apply to all persons
subject to such agreements on a pro rata basis.
(b) EXCEPTIONS. Nothing herein or in the Subscription
Agreement shall prevent a Holder:
(i) (A) that is a partnership or corporation from
making a distribution of Registrable Shares to the partners or
shareholders thereof that are otherwise in compliance with
applicable securities laws, so long as such permitted
distributees agree to be bound by the terms and conditions of
this Section 8; (B) that desires to sell any Registrable
Shares in a private transaction in compliance with applicable
securities laws from consummating such a sale so long as the
purchaser in any
<PAGE> 11
private sale agrees in writing to be bound by the restrictions
set forth in this Section 8; or (C) that is an individual,
from making a transfer of Registrable Shares by gift, will or
the laws of descent and distribution, subject to the
restrictions set forth in this Section 8; or
(ii) from including Registrable Shares in a Piggyback
Registration under the terms and conditions set forth in Section 3
above.
9. MISCELLANEOUS.
(a) INFORMATION AND REPORTING.
(i) The Company shall, at all times during which it is
neither subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, nor exempt from reporting pursuant to Rule
12g3-2(b) under the Exchange Act, upon the written request of any
Stockholder, provide in writing to such Stockholder and to any
prospective transferee of the Registrable Shares of such Stockholder
the information concerning the Company described in Rule 144A(d)(4) or
any successor rule under the Act ("Rule 144A Information"). The
Company's obligations under this Section 9(a)(i) shall at all times be
contingent upon receipt from the prospective transferee of Registrable
Shares of a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other
than persons who will assist such transferee in evaluating the
purchase of any Registrable Shares.
(ii) The Company shall timely file such information,
documents and reports as the Commission may require or prescribe under
Section 13 of the Exchange Act. The Company shall timely file such
information, documents and reports which a corporation, partnership or
other entity subject to Section 13 or 15(d) (whichever is applicable)
of the Exchange Act is required to file. The Company shall promptly
upon request furnish any Holder of Registrable Shares (a) a written
statement by the Company that it has complied with the reporting
requirements of Section 13 or 15(d) of the Exchange Act, (b) a copy of
the most recent annual or quarterly report of the Company, and (c)
such other reports and documents filed by the Company with the
Commission as such Holder may reasonably request in availing itself of
an exemption for the sale of Registrable Shares without registration
under the Act. The Company acknowledges and agrees that the purposes
of the requirements contained in this Section 9(a)(ii) are to enable
any such Holder to comply with the current public information
requirement contained in paragraph (c) of Rule 144, should such Holder
ever wish to dispose of any of the securities of the Company acquired
by it without registration under the Act in reliance upon Rule 144 (or
any other similar exemptive provision), and to qualify the Company for
the use of registration statements on Form S-3. In addition, the
Company shall take such other measures and file such other
information, documents and reports, as shall hereafter be
<PAGE> 12
required by the Commission as a condition to the availability of Rule
144 (or any similar exemptive provision hereafter in effect) and the
use of Form S-3. The Company also covenants to use its commercially
reasonable efforts, to the extent that it is reasonably within its
power to do so, to qualify for the use of Form S-3.
(b) NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Holders of Registrable Shares in this
Agreement, provided, however, that other purchasers of Shares from the Company
may become Holders and parties to this Agreement by executing and delivering to
the Company a signature page to this Agreement.
(c) ADJUSTMENTS AFFECTING REGISTRABLE SHARES. The Company will not
take any action, or permit any change to occur, with respect to its securities
for the purpose of materially and adversely affecting the ability of the
Holders of Registrable Shares to include such Registrable Shares in a
registration undertaken pursuant to this Agreement or materially and adversely
affecting the marketability of such Registrable Shares in any such registration
(including, without limitation, effecting a stock split or a combination of
shares); provided that this Section 9(c) shall not apply to actions or changes
with respect to the Company's business, balance sheet, earnings or revenue
where the effect of such actions or changes on marketability of the Registrable
Shares is not material.
(d) NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed effectively given
when delivered personally or by facsimile transmission or by overnight delivery
service or 72 hours after being mailed by first class certified or registered
mail, return receipt requested, postage prepaid:
(i) If to the Company, c/o Stuart Chasanoff, 1601 Elm Street,
Suite 4000, Dallas, Texas 75201, or at such other address or addresses
as may have been furnished in writing by the Company to the
Stockholders with a copy to (which shall not constitute notice): White
& Case LLP, 1155 Avenue of the Americas, New York, NY 10036,
Attention: Kevin Keogh, Esq. (Fax: 212-354-8113).
(ii) If to a Stockholder, to it at its address as set forth
in the Subscription Agreement, or at such other address or addresses
as may have been furnished in writing by such Stockholder.
(e) REMEDIES. Any person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for
<PAGE> 13
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
(f) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or cancellation of this Agreement shall be
effective unless made in writing signed by the Company and the Holders of a
majority of the shares of Registrable Shares; provided that no amendment may be
made to Sections 8 that adversely affects the rights of the Holders or to this
Section 9(f) unless agreed upon by the Company and the Holders of all the
Registrable Shares, and that provided that no amendment that materially and
adversely affects the rights of any Holder shall be made without the consent of
such Holder.
(g) ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Shares pursuant to this Agreement may be assigned (but
only with all related obligations) by a Stockholder to any transferee (a
"Qualified Transferee") that is an Affiliate (as defined below) or, if not an
Affiliate, acquires from a Stockholder either (i) 100,000 or more Registrable
Shares or (ii) if less than 100,000 Registrable Shares are owned by a
Stockholder at the time of a transfer, all of the Registrable Shares owned by
such Stockholder, in either case in connection with the permitted transfer of
Registrable Shares. Such assignment shall not affect the rights of Holders
hereunder which shall remain in full force in accordance with the terms hereof.
Any transferring Stockholder shall provide the Company with prior written
notice of such transfer(s)/assignment(s); provided, however, that the failure
to provide such notice shall not be deemed to preclude assignment hereunder. As
used herein, "Affiliate" shall mean (i) a person or entity that, directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, a Stockholder or (ii) if a Stockholder is a
partnership, a partner, retired partner, or estate of a partner or retired
partner, of such partnership, so long as such any transfer or recertification
of Registrable Shares is in accordance with the transferee's interest in such
partnership and is without consideration.
(h) SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(i) ENTIRE AGREEMENT. This Agreement embodies the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements relating to such subject matter.
(j) HEADINGS. The headings of this Agreement are for convenience only
and do not constitute a part of this Agreement.
(k) GOVERNING LAW. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of Delaware
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
(l) FURTHER ASSURANCES. Each party to this Agreement hereby covenants
and agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary or appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated hereby.
(m) COUNTERPARTS. This Agreement may be executed by facsimile and in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall be one and the same document.
(Signature Page Follows)
<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
COMPANY:
-------
eVENTURES GROUP, INC.
By: /s/ STUART CHASANOFF
Name: Stuart Chasanoff
Title: Vice President -- Business Development,
General Counsel and Secretary
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
[SIGNATURE PAGE FOR EACH STOCKHOLDER FOLLOWS]
<PAGE> 15
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first written above.
LIBERTY MEDIA CORPORATION
By: /s/ ROBERT R. BENNETT
Name: Robert R. Bennett
Title: President and Chief Executive Officer
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 16
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
CHASE EQUITY ASSOCIATES, LP
By: Chase Capital Partners, its general partner
By: /s/ CHRIS BEHRENS
Name: Chris Behrens
Title: General Partner
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 17
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
PAUL CAPITAL PARTNERS VI, L.P.
By: Paul Capital Management, L.L.C., its managing
partner
By: /s/ DAVID E. PARK
Name: David E. Park, III
Title: Managing Member
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 18
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
PCP ASSOCIATES, L.P.
By: Paul Capital Management, L.L.C.,
its managing partner
By: /s/ DAVID E. PARK
Name: David E. Park, III
Title: Managing Member
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 19
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
BANCBOSTON CAPITAL INC.
By: /s/ LEE J. TESCONI
Name: Lee J. Tesconi
Title: Managing Director
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 20
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
J.F. SHEA CO., INC., as Nominee 2000-59
By: /s/ EDMUND H. SHEA
Name: Edmund H. Shea, Jr.
Title: Vice President
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 21
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P.
By: Blackstone Management Associates III LLC, its
General Partner
By: /s/ MARK GALLOGLY
Name: Mark Gallogly
Title: Member
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 22
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
BLACKSTONE OFFSHORE CAPITAL
PARTNERS III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ MARK GALLOGLY
Name: Mark Gallogly
Title: Member
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 23
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ MARK GALLOGLY
Name: Mark Gallogly
Title: Member
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 24
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
THE GOLDMAN SACHS GROUP, INC.
By: /s/ RICHARD A FRIEDMAN
Name: Richard Friedman
Title: Vice President
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 25
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
BRAZOS eVENTURES ACQUISITION, LLC
By: /s/ RANDALL S. FOJTASEK
Name: Randall S. Fojtasek
Title: President
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 26
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
MAVERICK FUND LDC
By: /s/ MICHELLE PERRIN
Name: Michelle Penn
Title: Controller. Maverick Capital, Ltd.
Fund Advisor
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 27
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
MAVERICK FUND USA, LTD.
By: /s/ MICHELLE PERRIN
Name: Michelle Perrin
Title: Controller. Maverick Capital, Ltd.
Fund Advisor
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 28
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
MAVERICK FUND II, LTD.
By: /s/ MICHELLE PERRIN
Name:Michelle Perrin
Title:Controller. Maverick Capital, Ltd.
Fund Advisor
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 29
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
EDGEWATER PRIVATE EQUITY FUND III, L.P.
By: Edgewater III Management, L.P., its General
Partner
By: Gordon Management, Inc., its General Partner
By: /s/ BRIAN THOMPSON
Name: Brian Thompson
Title: Vice President
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 30
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
MOORE GLOBAL INVESTMENTS, LTD.
By: /s/ SAVVAS SAVVINDIS
Name: Savvas Savvindis
Title: Director of Operations
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 31
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
REMINGTON INVESTMENT STRATEGIES,
L.P.
By: /s/ SAVVAS SAVVINDIS
Name: Savvas Savvindis
Title: Director of Operations
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 32
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
MELLON VENTURES II, L.P.
By: MVMA II, L.P., its G.P.
By: MVMA, Inc., its G.P.
By: /s/ J.S. RICHARDSON
Name: J.S. Richardson
Title: Managing Director
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 33
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first written above.
FIRST UNION MERCHANT BANKING 2000,
LLC
By: /s/ SCOTT PERPER
Name: Scott Perper
Title: Managing Partner
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 34
SCHEDULE 1
STOCKHOLDER SHARES OF COMMON STOCK
----------- ----------------------
Chase Equity Associates, LP 217,391
Paul Capital Partners VI, L.P. 185,935
PCP Associates, L.P. 31,456
BancBoston Capital Inc. 173,913
J.F. Shea Co., Inc. as Nominee 2000- 130,435
59
Blackstone Family Investment 13,044
Partnership III L.P.
Blackstone Offshore Capital Partners 31,379
III L.P.
Blackstone Capital Partners III 172,968
Merchant Banking Fund L.P.
The Goldman Sachs Group, Inc. 86,956
Brazos eVentures Acquisition, LLC 217,391
Maverick Fund LDC 143,109
Maverick Fund USA Ltd. 61,805
Maverick Fund II, Ltd. 12,477
Edgewater Private Equity Fund III, 173,914
L.P.
Moore Global Investments Ltd. 104,348
Remington Investment Strategies, 26,087
L.P.
Mellon Ventures II, L.P. 217,391
First Union Merchant Banking 2000, 326,087
LLC -------
TOTAL 2,326,086
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of April 4, 2000,
by and between, eVENTURES GROUP, INC., a Delaware corporation, with its
principal office at 300 Crescent Court, Suite 800, Dallas, Texas 75201 (the
"COMPANY"), and JEFFREY A. MARCUS residing at 6801 Turtle Creek Blvd., Dallas,
Texas 75205 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective April 3, 2000 (the "COMMENCEMENT DATE"), the Company
desires to employ Executive as its Chairman and Chief Executive Officer, and
Executive desires to accept such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement as
to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on April 2, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as the Chairman of the Board and Chief
Executive Officer of the Company (the "CHIEF EXECUTIVE OFFICER"), reporting
directly to the Board of Directors of the Company (the "BOARD"). During the
Employment Term, the Company shall use its reasonable best efforts to
nominate Executive to serve as Chairman of the Board and upon such
nomination, Executive shall agree to so serve. If requested by the Board,
Executive shall also serve on committees of the Board, subject to
Executive's consent (which consent shall not be unreasonably withheld),
and/or as an executive, officer and director of subsidiaries of the Company
without additional compensation and subject to any policy of the
Compensation Committee of the Company's Board (the "COMPENSATION
COMMITTEE") with regard to retention or turnover of the director's fees.
(b) Executive shall have such duties and authority, consistent with
his position, as shall be assigned to him from time to time by the Board.
Executive shall be responsible for, and have control over, the operations
of the Company, subject to supervision only by the Board and the applicable
requirements of the Delaware General Corporation Law.
(c) During the Employment Term, Executive shall devote substantially
all of his business time and efforts to the performance of his duties
hereunder. Nothing contained herein shall be construed to prohibit
Executive from (i) owning less than ten
1
<PAGE> 2
percent (10%) of the outstanding securities of any publicly traded entity,
(ii) pursuing any business opportunity that is not in Competition, as such
term is defined in Section 10(b) below, with the Company or its
subsidiaries or any portfolio company in which the Company or its
subsidiaries hold securities (other than entities in which the Company or
its subsidiaries make a nominal investment) (provided the time devoted by
Executive to such personal investment does not materially interfere with
Executive's duties hereunder), (iii) continuing service as a consultant of
Broadband NOW, in the same capacity and extent as Executive rendered such
service immediately prior to the Commencement Date, or (iv) continuing
service on any board of directors on which Executive serves as of the
Commencement Date or service as a director of a company that is not in
Competition with the Company or its subsidiaries or any portfolio company
in which the Company or its subsidiaries hold securities (other than
entities in which the Company or its subsidiaries make a nominal
investment), provided, however, that Executive shall not hold more than
five (5) board seats of for-profit businesses at any time exclusive of his
membership on the Board or the board of directors of any subsidiary or
affiliate of the Company (such activities described in clause (i), (ii),
(iii) or (iv) immediately preceding being herein referred to as the
"ALLOWED ACTIVITIES"). Executive shall be entitled to retain any
consideration that he receives from service permitted by clauses (iii) and
(iv) of the immediately preceding sentence on any board of directors of a
corporation unrelated to the Company. For purposes of this Section 2(c) and
Section 10(b) to the extent expressly applicable, a "nominal investment" of
the Company or its subsidiaries will be determined in relation to the size
of investments made from time to time by the Company or its subsidiaries in
its portfolio companies (including, without limitation, investments made in
exchange for cash, securities or services rendered).
3. Base Salary. During the Employment Term, the Company shall pay
Executive a Base Salary at the annual rate of Two Hundred Thousand Dollars
($200,000). Base Salary shall be payable in accordance with the usual payroll
practices of the Company. Executive's Base Salary may be reviewed annually by
the Board or the Compensation Committee and may be increased, but not decreased,
from time to time by the Board or the Compensation Committee. The Base Salary as
determined as aforesaid, from time to time for the applicable fiscal year shall
constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be entitled to participate in an incentive
bonus plan established by the Company on such terms and conditions, and
subject to such standards, as shall be determined from time to time in the
sole discretion of the Board or the Compensation Committee. Such incentive
bonus for any such fiscal year shall be payable in cash and shall not be
greater than fifty percent (50%) of Executive's rate of Base Salary in
effect for the fiscal year to which such incentive bonus relates. During
the Employment Term, the Company shall maintain an incentive bonus plan
providing a target bonus equal to not less than fifty percent (50%) of
Executive's rate of Base Salary in effect for the fiscal year to which the
bonus relates.
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<PAGE> 3
(b) Stock Options. The Company hereby grants to Executive stock
options (the "STOCK OPTIONS") to purchase 3,910,000 shares of Common Stock
of the Company. The Stock Options shall be granted pursuant to a stock
option award agreement or agreements between Executive and the Company
substantially in the form attached hereto as Exhibit "B" (the "STOCK OPTION
GRANTS"). The exercise price for such Stock Options shall be equal to
$23.00 per share of Common Stock. Subject to the terms and provisions of
the Stock Option Grants, the Stock Options shall become exercisable on the
dates indicated below as to that number of shares of Common Stock of the
Company as set forth below opposite each such date.
<TABLE>
<CAPTION>
Date Number of Shares
------------- ----------------
<S> <C>
July 2, 2000 977,500
April 2, 2001 977,500
April 2, 2002 977,500
April 2, 2003 977,500
</TABLE>
The foregoing schedule to the contrary notwithstanding, the Stock Options
shall become fully and immediately exercisable in the event the Employment
Term terminates prior to the Expiration Date by reason of termination of
the Executive's employment hereunder by Executive for Good Reason or by the
Company without Cause (as such terms are hereinafter defined). The Stock
Options shall in all events expire on the date ten years after the
Commencement Date, if not terminated or canceled earlier. The Executive
shall be permitted to transfer the Stock Options to the Executive's
immediate family members and/or lineal descendents (or a trust or family
limited partnership established solely for the benefit of any such
immediate family member and/or lineal descendent). Notwithstanding anything
in the Stock Option Grants to the contrary, to the extent any provisions
contained therein are inconsistent with or differ from the explicit terms
and conditions of this Agreement, the terms and conditions of this
Agreement shall control. To the extent this Agreement does not specifically
address an issue or term set forth in the Stock Option Grants, then the
provisions and terms of the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option Grants,
the number of shares covered by, and the option price per share of, the
Stock Options will be subject to adjustment by the Company for any stock
split, reclassification, combination or similar change in the Company's
capital stock.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit plans
and arrangements and fringe benefits and perquisites generally maintained
by the Company from time to time for the benefit of senior executive
officers of the Company of a comparable level, in each case in accordance
with their respective terms as in effect from time to time (other than any
special arrangement entered into by contract with an executive or that
applies on a grandfathered basis).
3
<PAGE> 4
Without limiting the foregoing, the Company shall pay all premiums for
Executive and his dependent family members under health, hospitalization,
disability, dental, life and other employee benefit plans that the Company
may have in effect from time to time. Executive acknowledges that the
Company does not currently provide a profit sharing plan, and has no
current intention of providing profit sharing benefits to its employees.
(b) During the Employment Term, Executive shall be entitled to at
least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect from time to time. Executive shall also be
entitled to such periods of sick leave as is customarily provided by the
Company to its senior executive employees.
(c) If the Company shall provide employment-related benefits of the
type described in this Section 5 to any other senior executive of the
Company in an aggregate amount greater, or on more favorable terms and
conditions, on an aggregate basis, than such benefits are provided to
Executive, Executive shall be provided such benefits in a substantially
comparable amount and/or under the substantially comparable terms and
conditions, as applicable, on an aggregate basis.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive, subject to such pre-approval procedures as may be established from
time to time by the Board, in the performance of his duties hereunder, in
accordance with the Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the earliest
to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by the Company
due to Executive's Disability (as defined in Exhibit "A")
pursuant to Section 7(b) hereof;
(iii) the termination of Executive's employment by Executive for
Good Reason (as defined in Exhibit "A") pursuant to Section
7(c) hereof,
(iv) the termination of Executive's employment by the Company
without Cause (as defined in Exhibit "A") pursuant to
Section 7(e) hereof;
(v) the termination of employment by Executive without Good
Reason upon thirty (30) days prior written notice pursuant
to Section 7(f) hereof; or
4
<PAGE> 5
(vi) the termination of Executive's employment by the Company
for Cause pursuant to Section 7(d) hereof.
(b) Disability. If Executive is unable to perform his material duties
hereunder due to a physical or mental condition and the Company desires to
terminate Executive's employment for Disability (as defined in Exhibit
"A"), the Company shall deliver to Executive a written Notice of Disability
Termination (herein so called), effective upon the date (the "DISABILITY
TERMINATION DATE") which is the later of (i) the date such condition
becomes a Disability or (ii) thirty (30) days following the delivery of the
Notice of Disability Termination; provided that the Disability Termination
Date shall be suspended, and the Employment Term shall not terminate, so
long as Executive returns to the full performance of his duties by and
following such date.
(c) Termination for Good Reason. A Termination for Good Reason (herein
so called) means a termination by Executive by written notice given within
thirty (30) days after Executive knows of the occurrence of the Good Reason
event, unless such circumstances are corrected prior to the date of
termination specified in the Notice of Termination for Good Reason and the
Company informs Executive of such correction prior to such date. In such
event, the Employment Term shall not terminate. A Notice of Termination for
Good Reason shall mean a notice that shall indicate the specific Good
Reason event in Section (d) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis
for Termination for Good Reason. The failure by Executive to set forth in
the Notice of Termination for Good Reason any facts or circumstances which
contribute to the showing of Good Reason shall not waive any right of
Executive hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his rights hereunder. The Notice of Termination
for Good Reason shall provide for a date of termination not less than
thirty (30) nor more than sixty (60) days after the date such Notice of
Termination for Good Reason is given.
(d) Cause. Executive's employment hereunder may be terminated by the
Company for Cause following delivery to Executive of a Notice of
Termination (as defined in this Section 7(d)) and a meeting of the Board at
which Executive is given the opportunity to appear. A Notice of Termination
for Cause (herein so called) shall mean a notice that shall indicate the
specific termination provision in Section (a) of Exhibit "A" relied upon
and shall set forth in reasonable detail the facts and circumstances which
provide for a basis for Termination for Cause. The effective date of
termination for a Termination for Cause shall be the date indicated in the
Notice of Termination. Any purported Termination for Cause which is held by
a court by a non-appealable final judgment not to have been based on the
grounds set forth in this Agreement or not to have followed the procedures
set forth in this Agreement shall be deemed a termination by the Company
without Cause.
(e) Termination without Cause. The Company may terminate its
employment of Executive for reasons other than Cause at any time upon
thirty (30) days prior written notice.
5
<PAGE> 6
(f) Voluntary Resignation. Executive may terminate his employment with
the Company at any time upon thirty (30) days prior written notice.
8. Consequences of Termination of Employment. Executive shall be entitled
to the following compensation from the Company (in lieu of all other sums owed
or payable to Executive) upon the termination of employment as described below:
(a) Death, Disability, Voluntary Resignation without Good Reason or by
the Company with Cause. If Executive's employment and the Employment Term
are terminated (1) by reason of Executive's death or Disability, (2) by
Executive without Good Reason or (3) by the Company for Cause, the
employment period under this Agreement shall terminate without further
obligations to Executive or Executive's legal representatives under this
Agreement except for: (i) any Base Salary earned but unpaid, any accrued
but unused vacation pay payable pursuant to the Company's policies and any
unreimbursed business expenses payable pursuant to Section 6 (which
amounts, in the case of the death of Executive, shall be promptly paid in a
lump sum to Executive's estate), (ii) any other amounts or benefits earned,
accrued and owing to Executive under the then applicable employee benefit
plans, long term incentive plans or equity plans and programs of the
Company, including, without limitation, any earned but unpaid incentive
bonus for any prior completed fiscal year, and (iii) except in the case of
a termination by the Company for Cause or by Executive without Good Reason,
a pro-rata portion (based on the number of days Executive is employed by
the Company during the fiscal year of such termination) of Executive's
incentive bonus earned for the fiscal year in which termination occurs,
which, in any case, shall be paid in accordance with the applicable plans,
programs and agreements, and any unpaid reimbursable business expenses
(such amounts referred to in clauses (i) and (ii), collectively, the
"ACCRUED AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by Company
without Cause. If Executive's employment and the Employment Term are
terminated (i) by Executive for Good Reason, or (ii) by the Company without
Cause (and other than for Disability or as a result of expiration of the
Employment Term), Executive shall be entitled to receive the Accrued
Amounts and shall, subject to Sections 9(b), 9(c) and 10 hereof, be
entitled to receive equal monthly payments of an amount equal to his
monthly rate of Base Salary in effect at the time of such termination plus
his incentive bonus paid for the most recently ended fiscal year (provided,
however, if Executive was employed hereunder for only a portion of such
prior fiscal year, such bonus shall be annualized for purposes of this
calculation, and, if no bonus was paid for such prior fiscal year, the
current fiscal year's bonus, at 100 percent of target, shall be deemed to
be the incentive bonus paid for the most recently ended fiscal year for
purposes of this calculation) divided by twelve (12) for a period equal to
the greater of (x) twelve (12) months or (y) the remaining period of time
from the date of such termination through the Expiration Date (the
"Severance Payments"). Notwithstanding the immediately preceding sentence
to the contrary, if Executive's employment is terminated by the Company
without Cause (and other than for Disability or as a result of expiration
of the Employment Term), or if Executive terminates his employment for Good
Reason, the Severance Payments shall be paid to Executive in a lump-sum
following such termination.
6
<PAGE> 7
(c) Termination Upon Expiration of Employment Term. If Executive's
employment with the Company terminates on the Expiration Date by reason of
expiration of the Employment Term, Executive shall be entitled to receive
the Accrued Amounts and shall, subject to Sections 9(b), 9(c) and 10
hereof, be entitled to receive equal monthly payments of an amount equal to
his monthly rate of Base Salary in effect immediately prior to the
Expiration Date plus his incentive bonus paid for the most recently ended
fiscal year divided by twelve (12) for a period of twelve (12) months.
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under Section 8,
Executive shall be under no obligation to seek other employment and there
shall be no offset against any amounts due Executive under this Agreement
on account of any remuneration attributable to any subsequent employment
that Executive may obtain. Any amounts due under Section 8 are in the
nature of severance payments and are not in the nature of a penalty. Such
amounts are inclusive, and in lieu of any amounts payable under any other
salary continuation or cash severance arrangement of the Company and to the
extent paid or provided under any other such arrangement shall be offset
from the amount due hereunder.
(b) (i) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) or (c) hereunder he will
execute, deliver and not revoke (within the time period permitted by
applicable law) a release of all claims of any kind whatsoever against the
Company, its affiliates, officers, directors, employees, agents and
shareholders in the then standard form being used by the Company for senior
executives (but without release of the right of indemnification hereunder
or under the Company's By-laws or rights under benefit or equity plans that
by their terms are intended to survive termination of his employment or
claims that the Company fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to Executive's
agreements under Section 10 hereof, the Company will execute and
deliver a release of all claims of any kind whatsoever against
Executive (but without release of claims that Executive fulfill his
obligations under this Agreement). The Company's release under this
paragraph (b)(ii) of this Section 9 shall be executed and delivered
simultaneously with the execution and delivery of Executive's release
under paragraph (b)(i) of this Section 9. The releases referred to in
this paragraph (b) of this Section 9 shall apply to all claims
described in this paragraph existing from the beginning of time
through the date of each party's execution of his or its release.
(c) Upon any termination of employment, Executive hereby resigns
as an officer and director of the Company, any subsidiary and any affiliate
and as a fiduciary of any benefit plan of any of the foregoing. Executive
shall promptly execute any further documentation thereof as requested by
the Company and, if Executive is to receive any
7
<PAGE> 8
payments from the Company, execution of such further documentation
shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a) (i) Executive acknowledges that as a result of his employment
by the Company, Executive will obtain secret and confidential
information as to the Company and its affiliates and create
relationships with customers, suppliers and other persons dealing with
the Company and its affiliates and the Company and its affiliates will
suffer irreparable damage, which would be difficult to ascertain, if
Executive should use such confidential information or take advantage
of such relationships and that because of the nature of the
information that will be known to or obtained by Executive and the
relationships created it is necessary for the Company and its
affiliates to be protected by the prohibition against Competition as
set forth herein, as well as the confidentiality restrictions set
forth herein.
(ii) Executive acknowledges (A) that the retention of
nonclerical employees, employed by the Company and its affiliates
in which the Company and its affiliates have invested training
and depends on for the operation of their businesses, is
important to the businesses of the Company and its affiliates,
and (B) that Executive will obtain unique information as to such
employees as an executive of the Company and will develop a
unique relationship with such persons as a result of being an
executive of the Company. Therefore, it is necessary for the
Company and its affiliates to be protected from Executive's
Solicitation (defined below) of such employees as set forth
below.
(iii) Executive acknowledges that the provisions of this
Agreement are reasonable and necessary for the protection of the
businesses of the Company and its affiliates and that part of the
compensation paid under this Agreement and the agreement to pay
severance in certain instances is in consideration for the
agreements in this Section 10.
(b) COMPETITION shall mean: participating, directly or
indirectly, as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender with
equity participation, consultant or in any capacity whatsoever
(within the United States of America, or in any country where the
Company or its affiliates do business) in a Competing Business;
provided, however, that such participation shall not include (i) the
ownership of not more than ten percent (10%) of the total outstanding
stock of a publicly held company; (ii) following a termination of
Executive's employment hereunder, the ownership of not more than five
percent (5%) of the total outstanding stock of a private company if
Executive is neither a member of, or represented on, the board of
directors of such private company and does not have an executive
officer role in such private company; (iii) the Allowed Activities;
or (iv) any activity engaged in with the prior written approval of
the Board. As used herein, "Competing Business" means any business
that the Company and/or its subsidiaries and/or any entity in which
the Company and/or its subsidiaries holds securities (other
8
<PAGE> 9
than entities in which the Company or its subsidiaries make a "nominal
investment" (determined as described in Section 2(c) hereof)) are engaged
in (I) from time to time (while Executive is employed by the Company) or
(II) at the time of termination (upon termination of Executive's
employment) (consisting principally of the services described in the
Company's Registration Statement on Form 10 under the Securities Exchange
Act of 1934, as amended, and any amendments thereof). For purposes of the
immediately preceding sentence, but solely following a termination of
Executive's employment hereunder, the Company and its subsidiaries shall be
deemed to have made a "nominal investment" in an entity if, at the time of
such termination of employment, the Company and its subsidiaries own or
control less than ten percent (10%) of the outstanding equity interests, on
a fully diluted basis, of such entity. The Company shall furnish Executive
with a list of all Competing Businesses on or promptly following
termination of his employment hereunder.
(c) SOLICITATION shall, subject to paragraph (g) of this Section 10
mean: recruiting, soliciting or inducing, of any nonclerical employee or
employees of the Company or its affiliates to terminate their employment
with the Company or its affiliates or hiring or assisting another person or
entity to hire any nonclerical employee of the Company or its affiliates or
any person who within twelve (12) months before had been a nonclerical
employee of the Company or its affiliates and were recruited or solicited
for such employment or other retention while an employee of the Company;
provided, however, that solicitation shall not include any of the foregoing
activities engaged in with the prior written approval of the Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a period
of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable. In the event that the agreements in this Section 10 shall be
determined by any court of competent jurisdiction to be unenforceable by
reason of their extending for too great a period of time or over too great
a geographical area or by reason of their being too extensive in any other
respect, they shall be interpreted to extend only over the maximum period
of time for which they may be enforceable and/or over the maximum
geographical area as to which they may be enforceable and/or to the maximum
extent in all other respects as to which they may be enforceable, all as
determined by such court in such action.
(e) During the Employment Term and for two (2) years following a
termination of Executive's employment for any reason whatsoever, whether by
the Company or by Executive and whether or not for Cause, Good Reason or
non-extension of the Employment Term, Executive shall hold in a fiduciary
capacity for the benefit of the Company and its affiliates all secret or
confidential information, knowledge or data relating to the Company and its
affiliates, and their respective businesses, including any confidential
information as to customers of the Company and its affiliates, (i) obtained
by Executive during his employment by the Company and its affiliates and
(ii) not otherwise public knowledge or known within the applicable
industry. Executive shall not, without
9
<PAGE> 10
prior written consent of the Company, unless compelled pursuant to the
order of a court or other governmental or legal body having jurisdiction
over such matter, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In the
event Executive is compelled by order of a court or other governmental or
legal body to communicate or divulge any such information, knowledge or
data to anyone other than the foregoing, he shall promptly notify the
Company of any such order and he shall cooperate fully with the Company in
protecting such information (at the Company's expense) to the extent
possible under applicable law. In the event Executive's cooperation with
the Company's protection of such information is required in accordance with
the immediately preceding sentence, the Company shall pay or reimburse
reasonable expenses, costs and fees incurred by Executive to provide such
cooperation (against reasonable documentation therefor in accordance with
Company policies).
(f) Upon termination of his employment with the Company and its
affiliates, or at any time as the Company may request, Executive will
promptly deliver to the Company, as requested, all documents (whether
prepared by the Company, an affiliate, Executive or a third party) relating
to the Company, an affiliate or any of their businesses or property which
he may possess or have under his direction or control other than documents
provided to Executive in his capacity as a participant in any employee
benefit plan, policy or program of the Company or any agreement by and
between Executive and the Company with regard to Executive's employment or
severance.
(g) During the Employment Term and for two (2) years following a
termination of Executive's employment for any reason whatsoever, whether by
the Company or by Executive and whether or not for Cause, Good Reason or
non-extension of the Employment Term, Executive will not engage in
Solicitation; provided, however, that if Executive's employment and the
Employment Term are terminated by Executive for Good Reason, or by the
Company without Cause, or due to non-extension of the Employment Term and
the Company fails to make a good faith offer for continued employment, then
Solicitation shall not include any of the activities described in paragraph
(c) of this Section 10 with respect to any employee of Marcus & Partners
immediately prior to the Commencement Date who became an employee of the
Company, including, without limitation, the following three individuals:
Thomas P. McMillin, Daniel J. Wilson, and Chad E. Coben; provided further,
however, that if Executive's employment and the Employment Term are
terminated due to non-extension of the Employment Term and the Company has
made a good faith offer for continued employment, then Solicitation shall
not include any of the activities described in paragraph (c) of this
Section 10 engaged in after nine (9) months following the date of such
termination with respect to any employee of Marcus & Partners immediately
prior to the Commencement Date who became an employee of the Company,
including, without limitation, the following three individuals: Thomas P.
McMillin, Daniel J. Wilson, and Chad E. Coben.
(h) During the Employment Term and for the Restricted Period (as
hereinafter defined) following a termination of Executive's employment,
Executive will not enter into Competition with the Company. The Restricted
Period shall be (i) for a termination
10
<PAGE> 11
for Cause, twelve (12) months from the date of such termination; (ii)
for a termination as a result of the voluntary resignation of
Executive without Good Reason, twelve (12) months from the date of
termination; and (iii) for termination as a result of expiration or
non-renewal of this Agreement, after the Company has made a good faith
offer for continued employment, nine (9) months following the date of
termination. For avoidance of doubt, there shall be no Restricted
Period following termination of Executive's employment without Cause
by the Company (and other than for Disability or as a result of
expiration of the Employment Term) or for Good Reason by Executive or
if the Employment Term expires and the Company fails to make a good
faith offer for continued employment.
(i) In the event of a breach or potential breach of this Section
10, Executive acknowledges that the Company and its affiliates will be
caused irreparable injury and that money damages may not be an
adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at
law) to have the provisions of this Section 10 enforced. It is hereby
acknowledged that the provisions of this Section 10 are for the
benefit of the Company and all of the affiliates of the Company and
each such entity may enforce the provisions of this Section 10 and
only the applicable entity can waive the rights hereunder with respect
to its confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of
breach of this Section 10 by Executive, while he is receiving amounts
under Section 8(b) or (c) hereof, Executive shall not be entitled to
receive any future amounts pursuant to Section 8(b) or (c) hereof
after the earlier to occur of (i) ninety (90) days following the
Company's notification of Executive of its good faith determination of
such breach, specifying in reasonable detail the grounds for such
determination, and (ii) a final determination by an arbitrator or
court of competent jurisdiction of such breach, and, upon such final
determination, which is not appealable, he shall reimburse the Company
for any amounts previously paid to Executive pursuant to Section 8(b)
or (c) hereof.
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended
and as applicable, for any action or inaction of Executive while serving as
an officer and director of the Company or, at the Company's request, as an
officer or director of any subsidiary or affiliate of the Company or as a
fiduciary of any benefit plan. The Company shall cover Executive under
directors and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount and to the
same extent as the Company covers its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company copyrights,
trade secrets, proprietary information, patents, unpatented
inventions, trademarks, service marks, processes, techniques, methods,
know-how, flow charts, diagrams, computer programs and/or databases,
and any and all significant conceptions and ideas for
11
<PAGE> 12
inventions, improvements and valuable discoveries, whether patentable or
not (all of the foregoing, collectively, "INTELLECTUAL PROPERTY"), which
are conceived, created, developed or made by Executive, solely or jointly
with another, during the period of employment or within one (1) year
thereafter, and which are substantially related to the business or
activities of the Company or its subsidiaries which Executive conceived,
created, developed or made as a result of his employment by the Company or
any of its subsidiaries. Executive hereby assigns and agrees to assign all
of his right, title and interest throughout the world in any Intellectual
Property to the Company or its nominee. Whenever requested to do so by the
Company, Executive shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and
obtain registrations of copyrights or marks, or Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest in Intellectual Property.
(b) Executive agrees that he will not, during or after the Employment
Term, disclose the specific terms of the Company's relationships or
agreements with its significant vendors or customers or any other
significant material trade secrets of the Company, whether in existence or
proposed (other than any of the foregoing that becomes public knowledge
other than through disclosure by Executive), to any person, firm,
partnership, corporation or business for any reason or purpose whatsoever,
except as is disclosed in the ordinary course of business, unless compelled
by a court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the non-prevailing party
shall pay all reasonable attorney, accountant and other professional fees and
reasonable expenses incurred by the prevailing party associated with such claim.
14. Certain Additional Payments. Executive shall be grossed up for any
excise tax payable under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), in accordance with Exhibit C attached hereto.
15. Resolution of Disputes. The parties shall use their best efforts and
good will to settle all disputes by amicable negotiations. The Company and
Executive agree, for purposes of the resolution of any disputes under this
Agreement, that such disputes shall be settled by arbitration in Dallas, Texas,
or such other place agreed to by the parties, in accordance with the rules and
procedures of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel consisting of
one to three arbitrators, each of whom shall be impartial. All arbitrators
shall be appointed in the first instance by agreement between the parties
hereto. If the parties cannot agree upon a single arbitrator, each of the
Company and the Executive shall be entitled to appoint one arbitrator.
These two appointed arbitrators shall then appoint a third arbitrator by
their mutual agreement.
(b) An arbitration may be commenced by either party to this Agreement
by the service of a written request for arbitration upon the other affected
party. Such request
12
<PAGE> 13
for arbitration shall summarize the controversy or claim to be arbitrated.
If the panel of arbitrators is not appointed within thirty (30) days
following such service, either party may apply to any court within the
State of Texas for an order appointing arbitrators qualified as set forth
below. No request for arbitration shall be valid if it relates to a claim,
dispute, disagreement or controversy that would have been time barred under
the applicable statute of limitations had such claim, dispute, disagreement
or controversy been submitted to the courts of the State of Texas.
(c) The parties hereby expressly waive punitive damages, and under no
circumstances shall an award contain any amount that in any way reflects
punitive damages.
(d) Judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without reference to
principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the instruments
contemplated herein, contain the entire understanding of the parties with
respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements between the Company
and Executive with respect thereto. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with
respect to the subject matter herein other than those expressly set forth
herein and therein. This Agreement may not be altered, modified, or amended
except by written instrument signed by the parties hereto.
(c) Construction and Severability. If any provision of this Agreement
shall be held invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties
undertake to implement all efforts which are necessary, desirable and
sufficient to amend, supplement or substitute all and any such invalid,
illegal or unenforceable provisions with enforceable and valid provisions
which would produce as nearly as may be possible the result previously
intended by the parties without renegotiation of any material terms and
conditions stipulated herein.
(d) No Waiver. Any failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a
waiver of such party's rights or deprive such party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement. Any such waiver must be in writing and signed by Executive or an
authorized officer of the Company, as the case may be.
(e) Assignment. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable by the Company only to an entity which
is owned, directly
13
<PAGE> 14
or indirectly, in whole or in part by the Company or by any successor to
the Company or an acquirer of all or substantially all of the assets of the
Company or all or substantially all of the assets of a group of
subsidiaries and divisions of the Company, provided such entity or acquirer
promptly assumes all of the obligations hereunder of the Company in a
writing delivered to Executive and otherwise complies with the provisions
hereof with regard to such assumption. Upon such assignment and assumption,
all references to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries. This
Agreement shall inure to the beneficiaries and permitted assignees of the
parties hereto. In the event of Executive's death while receiving amounts
payable pursuant to Section 8(b) hereof, any remaining amounts shall be
paid to Executive's estate.
(g) Communications. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when faxed or delivered, or
(ii) two (2) business days after being mailed by United States registered
or certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the initial page of this Agreement,
provided that all notices to the Company shall be directed to the attention
of the General Counsel and Secretary of the Company, or to such other
address as any party may have furnished to the other in writing in
accordance herewith. Notice of change of address shall be effective only
upon receipt.
(h) Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such Federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or
regulation.
(i) Survivorship. The respective rights and obligations of the parties
hereunder, including without limitation Section 10 and Section 11 hereof,
shall survive any termination of Executive's employment to the extent
necessary to the agreed preservation of such rights and obligations.
(j) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
(l) Executive's Representation. Executive represents and warrants to
the Company that there is no legal impediment to him entering into this
Agreement, and entering into this Agreement will not violate any agreement
to which he is a party or any other legal restrictions, and he has provided
to the Company true and complete copies of any agreements or covenants to
which he is a party that could restrict or adversely affect his performance
under this Agreement. Executive further represents and warrants that in
14
<PAGE> 15
performing his duties hereunder he will not wrongfully use or disclose any
confidential information of any prior employer or other person or entity.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
COMPANY:
--------
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Clark K. Hunt
----------------------------------------------
Name: Clark K. Hunt
--------------------------------------------
Title: Chairman of Compensation Committee
-------------------------------------------
EXECUTIVE:
----------
/s/ Jeffrey A. Marcus
------------------------------------------------
JEFFREY A. MARCUS
16
<PAGE> 17
EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
JEFFREY A. MARCUS
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE" shall be
limited to the following:
(i) Executive's willful misconduct with regard to the Company
or its affiliates or their business, assets or employees
(including, without limitation, Executive's fraud or
embezzlement), or Executive's willful misconduct other than
the foregoing, which in any case has a material adverse
impact on the Company or its affiliates, whether economic,
or reputationwise or otherwise, each as determined by the
Board, and which is not fully rectified or cured, if
susceptible to rectification or cure, within thirty (30)
days after written notice is given to Executive; provided,
however, that this clause (i) shall not include an action
or omission of Executive done or omitted to be done in his
good faith exercise of business judgment or in good faith
reliance on advice of legal counsel to the Company;
(ii) Executive's conviction of, or pleading nolo contendere to,
a felony or other crime involving fraud or dishonesty;
(iii) Executive's refusal or willful failure to follow the lawful
written direction of the Board which is not remedied within
ten (10) business days after receipt by Executive of a
written notice specifying the details thereto;
(iv) Executive's breach of Section 10 or Section 12 hereof,
which has a material adverse economic impact on the Company
or its affiliates, as determined by the Board; or
(v) the representations or warranties in Section 16(l) hereof
prove false, which has a material adverse economic impact
on the Company or its affiliates, as determined by the
Board.
(b) Change in Control. For purposes of this Agreement, the term "CHANGE IN
CONTROL" shall mean the occurrence of any of the following:
1
<PAGE> 18
(i) any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 ("Act") (other
than (a) Permitted Assignees, (b) the Company, (c) any
trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or (d) any company
owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their
ownership of Common Stock of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined
voting power of the Company's then outstanding securities.
Permitted Assignees shall mean the holders of the equity
securities (whether or not voting) of any shareholder of
the Company owning more than fifteen percent (15%) of the
Company on the date after the date of execution of this
Agreement, so long as the voting power and disposition
authority with respect to the securities of such holders is
held directly or indirectly by any two or three of the
following individuals: Barrett N. Wissman, Clark K. Hunt or
James R. Holland;
(ii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a
person who has entered into an agreement with the Company
to effect a transaction described in clause (i), (iii), or
(iv) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the
beginning of the two-year period or whose election or
nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the
Board;
(iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than fifty percent (50%) of the combined voting power
of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or the sale or disposition by
the Company of assets where the proceeds thereof are not
2
<PAGE> 19
retained by the Company, in a single transaction or a
series of related transactions, that result in a 66-2/3
percent or greater decline in the enterprise value of the
Company, valued based on the weighted average fair market
value of any outstanding class of stock of the Company plus
the book value of the outstanding indebtedness of the
Company.
(c) Disability. For purposes of this Agreement, "DISABILITY" shall mean if
Executive is unable to perform his material duties pursuant to this Agreement,
as determined by the Board, because of mental or physical incapacity, including,
without limitation, alcoholism or drug abuse, which requires a leave of absence
in excess of ninety (90) consecutive days in any twelve (12) month period.
(d) Good Reason. For purposes of this Agreement, "GOOD REASON" shall mean
the occurrence, without Executive's express written consent, in the case of (i),
(ii), (iii), (iv) or (v), of any of the following circumstances:
(i) (a) any demotion of Executive from his position as Chairman
and Chief Executive Officer, (b) any assignment of duties
to Executive materially and adversely inconsistent with
Executive's position as Chairman and Chief Executive
Officer, or (c) any material adverse change in the job
duties, reporting relationship, benefits, perquisites, or
office accommodations of the Executive (except, in any
case, in connection with the termination of Executive's
employment for Cause or due to Disability or as a result of
Executive's death, or temporarily as a result of
Executive's illness or other absence);
(ii) a failure by the Company to pay to Executive any amounts
due under this Agreement in accordance with the terms
hereof;
(iii) the failure to elect and maintain Executive as a member of
the Board and as Chairman of the Board at any time during
the Employment Term;
(iv) any other material breach by the Company of this Agreement;
(v) relocation of the Company's headquarters following the
Commencement Date;
(vi) a Change in Control; or
(vii) any claim, litigation, investigation or other legal action
by a governmental agency or other third party arising out
of the operations of the Company and its subsidiaries prior
to the Commencement Date which would reasonably be expected
to have
3
<PAGE> 20
a material adverse effect on the financial condition,
operations or prospects of the Company and its subsidiaries
or would reasonably be expected to result in a material
liability for any or all of the officers and directors of
the Company and its subsidiaries (whether or not indemnified
or insured); provided that to the extent this clause relates
to any filings made by the Company and its subsidiaries with
the Securities and Exchange Commission prior to the
Commencement Date, this clause also applies to such filing
in the form in which it is ultimately declared effective.
4
<PAGE> 21
EXHIBIT "B"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
JEFFREY A. MARCUS
STOCK OPTION GRANTS
5
<PAGE> 22
EXHIBIT "C"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
JEFFREY A. MARCUS
GROSS-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this Exhibit C is
a part:
(a) In the event that Executive shall become entitled to payments and/or
benefits provided by this Agreement or any other amounts in the "nature of
compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership or effective control covered by Section 280G(b)(2) of
the Code or any person affiliated with the Company or such person) as a result
of such change in ownership or effective control (collectively the "Company
Payments"), and such Company Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code, the Company shall pay to Executive,
subject to required withholding, at the time specified in subsection (d) below
an additional amount (the "Gross-up Payment") such that the net amount retained
by Executive, after deduction of any Excise Tax on the Company Payments and on
the Gross-Up Payment provided for under this paragraph (a) and any U.S. federal,
state, and local income or payroll tax upon the Gross-up Payment provided for by
this paragraph (a), but before deduction for any U.S. federal, state, and local
income or payroll tax on the Company Payments, shall be equal to the Company
Payments.
(b) In the event that the Excise Tax is subsequently determined by the
Company to be less than the amount taken into account hereunder at the time the
Gross-up Payment is made, Executive shall repay to the Company, at the time that
the amount of such reduction in Excise Tax is finally determined, the portion of
the prior Gross-up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S. federal, state and
local income tax imposed on the portion of the Gross-up Payment being repaid by
Executive), plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is later
determined by the Company or the Internal Revenue Service to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-up Payment), the Company shall make an additional
Gross-up Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
(c) The Gross-up Payment or portion thereof provided for in subsection (c)
above shall be paid not later than the thirtieth (30th) day following delivery
by Executive to the Company of notice that an event that subjects Executive to
the Excise Tax has occurred; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be
6
<PAGE> 23
finally determined on or before such day, the Company shall pay to Executive on
such day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code)
promptly following such time as the amount thereof has been determined. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to Executive, payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(d) In the event of any controversy with the Internal Revenue Service (or
other taxing authority) with regard to the Excise Tax, Executive shall permit
the Company to control issues related to the Excise Tax, but Executive shall
control any other issues. In the event of any conference with any taxing
authority as to the Excise Tax or associated income taxes, Executive shall
permit the representative of the Company to accompany Executive, and Executive
and Executive's representative shall cooperate with the Company and its
representative.
(e) The Company and Executive shall promptly deliver to each other copies
of any written communications, and summaries of any verbal communications, with
any taxing authority regarding the Excise Tax covered by this Exhibit C.
7
<PAGE> 1
EXHIBIT 10.2
eVENTURES GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made and
entered into by and between eVENTURES GROUP, INC., a Delaware corporation (the
"COMPANY"), and JEFFREY A. MARCUS (the "OPTIONEE"), effective April 4, 2000 (the
"DATE OF GRANT").
1. GRANT OF OPTION. The Company hereby grants to the Optionee and the
Optionee hereby accepts, subject to the terms and conditions hereof, the right
and option to purchase from the Company (the "OPTION") all or any part of an
aggregate of 3,910,000 shares of the Company's common stock, par value $0.00002
per share (the "COMMON STOCK"), at a per share purchase price equal to
Twenty-Three Dollars and no cents ($23.00) per share (the "EXERCISE PRICE"), as
such shares and Exercise Price may be adjusted in accordance with Section 9
below. The Option is not granted pursuant to the Company's 1999 Omnibus
Securities Plan. The Option shall not be treated as an incentive stock option as
defined in Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXPIRATION AND TERMINATION OF THE OPTION. The Option will expire at
the end of business on April 4, 2010, ten (10) years from the Date of Grant of
the Option (the "EXPIRATION DATE"). In the event of termination of the
Optionee's employment with the Company, any Vested Portion (as defined in
Section 3 below) of the Option on the date of such termination may be exercised
at any time prior to the Expiration Date, and the Option shall terminate as to
the shares of Common Stock covered by the remaining, unvested portion of the
Option. The Option may not be exercised after its expiration or termination.
3. VESTING. On each Measurement Date set forth in Column 1 below, the
Option shall vest and become exercisable for the corresponding percentage set
forth in Column 2 below of the total number of shares of Common Stock set forth
in paragraph 1 hereof. The "VESTED PORTION" of the Option as of any particular
date shall be the cumulative total of all shares for which the Option has become
exercisable on or prior to that date in accordance with the following schedule.
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
Percentage of Total Option
Shares Vesting
Measurement Date on Measurement Date
-------------------------------------------------------------
<S> <C>
July 2, 2000 Twenty-Five Percent (25%)
-------------------------------------------------------------
April 2, 2001 Twenty-Five Percent (25%)
-------------------------------------------------------------
April 2, 2002 Twenty-Five Percent (25%)
-------------------------------------------------------------
April 2, 2003 Twenty-Five Percent (25%)
-------------------------------------------------------------
</TABLE>
PAGE 1
<PAGE> 2
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company is terminated by the Company without "Cause" (other than for
"Disability") or by the Optionee for "Good Reason" (as such terms are defined in
the Employment Agreement between the Optionee and the Company), the Option shall
become fully and immediately exercisable and the "Vested Portion" of the Option
shall mean one hundred percent (100%) of the total number of shares of Common
Stock set forth in paragraph 1 hereof.
4. EXERCISE OF THE OPTION. The Vested Portion of the Option may be
exercised, to the extent not previously exercised, in whole or in part, at any
time or from time to time prior to the expiration or termination of the Option,
except that no Option shall be exercisable except in respect to whole shares,
and not less than one hundred (100) shares may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the Option. Exercise shall be accomplished by providing the
Company with written notice in the form of Exhibit "A" attached hereto, which
notice shall be irrevocable when delivered and effective upon payment in full of
the Exercise Price and any amounts required for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under this Agreement.
5. PAYMENT OF EXERCISE PRICE. Upon any exercise of the Option, the
total Exercise Price for the number of shares for which the Option is then being
exercised and the amount of any Federal, state and local withholding taxes
imposed thereon shall be paid in full to the Company in cash or, if permitted by
applicable law and subject to such limitations or conditions as the
Administering Body (as defined in Section 8 hereof) may prescribe, (a) with
shares of Common Stock that have been owned for at least six months by the
Optionee (or by the Optionee and his spouse jointly) having a total fair market
value (as determined by the Administering Body ("FAIR MARKET VALUE")) on the
date of such exercise equal to the total Exercise Price of such shares and the
amount of such withholding, or (b) in a broker-assisted or similar transaction
in which the total Exercise Price of such shares and the amount of such
withholding is not received by the Company until promptly after exercise, or
using a combination of the foregoing forms of consideration.
6. TRANSFERABILITY OF OPTION. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided,
however, that the Optionee may transfer the Option as a gift to the Optionee's
spouse, children, or grandchildren or a trust or family limited partnership
established solely for the benefit of, or of which the partners comprise only,
any such spouse, children or grandchildren. The transfer of the Option and any
transferred Option shall be subject to the same terms and conditions that were
applicable to the Option immediately prior to its transfer. No transfer of the
Option shall be effective unless the Company shall have been furnished with
written notice of such transfer at least 30 days in advance thereof and a copy
of such evidence as the Administering Body may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions hereof. Any attempted transfer, assignment, pledge or other
disposition or levy, attachment or similar process with respect to the Option
not specifically permitted herein shall be null and void without effect.
PAGE 2
<PAGE> 3
7. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors of the Company (the "BOARD")
or any Stock Plan Committee appointed by the Board (the "ADMINISTERING BODY").
The Optionee agrees that the decisions of such Administering Body concerning
administration and interpretation of this Agreement and the Option shall be
final, binding and conclusive on all persons. No member of the Board or the
Stock Plan Committee, nor any person participating in any determination of any
question under this Agreement, shall have any liability, in the absence of gross
negligence or willful misconduct, to any party for any action taken or not taken
in connection with this Agreement.
8. ADJUSTMENTS. If (a) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (b) the value of the outstanding shares of Common Stock
is reduced by reason of an extraordinary dividend payable in cash or property,
an appropriate and proportionate adjustment shall be made by the Administering
Body in the number and kind of shares or other securities subject to the Option
and/or the Exercise Price for each share or other unit of any other securities
subject to the Option. No fractional interests will be issued under the Option
resulting from any such adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of Common
Stock otherwise issuable as a result of such adjustments.
9. REGISTRATION. The Company shall (i) file a registration statement,
at the Company's option, on Form S-1, S-3 or S-8 under the Securities Act of
1933, as amended, which includes a reoffer prospectus, on the date which is the
earlier of (a) 90 days after the date it is first eligible to use Form S-3 or
S-8 or (b) January 15, 2001; (ii) use its best efforts, where effectiveness is
not automatic after the passage of time, to have such registration statement
declared effective within 90 days after such registration statement was filed;
and (iii) use its best efforts to maintain the effectiveness of such
registration statement or a successor registration statement (which includes a
reoffer prospectus) during the term of the Option.
10. NOTICES. Any notice hereunder to the Company shall be addressed to
it at 300 Crescent Court, Suite 800, Dallas, Texas 75201, Attention: General
Counsel, and any notice hereunder to the Optionee shall be addressed to the
Optionee at 6801 Turtle Creek Blvd., Dallas, Texas 75205, subject to the right
of either party to designate at any time hereafter in writing some other
address.
11. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof.
PAGE 3
<PAGE> 4
12. SEVERABILITY. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. MODIFICATION. This Agreement may not be modified or amended, nor
may any provision hereof be waived, in any way except in writing signed by the
parties hereto.
14. COUNTERPARTS. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company by its duly authorized officer, and by the Optionee in acceptance of the
above-mentioned Option, subject to the terms and conditions of this Agreement,
all as of the day and year first above written.
Signature Page Following
PAGE 4
<PAGE> 5
SIGNATURE PAGE FOR eVENTURES GROUP, INC., NONQUALIFIED STOCK
OPTION AGREEMENT
Signature page for eVentures Group, Inc., Nonqualified Stock Option Agreement
dated April 4, 2000.
COMPANY:
eVENTURES GROUP, INC.
BY: /s/ Stuart J. Chasanoff
-----------------------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate
Development and Legal Affairs
OPTIONEE:
/s/ Jeffrey A. Marcus
---------------------------------------
Printed Name: Jeffrey A. Marcus
-------------------------------
PAGE 5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXERCISE
UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
To: eVentures Group, Inc. (the "COMPANY")
From:
------------------------------------
Date:
------------------------------------
Pursuant to the Nonqualified Stock Option Agreement (the "AGREEMENT")
(capitalized terms used without definition herein have the meanings given such
terms in the Agreement) between the Company and myself effective
______________________, I hereby exercise my Option as follows:
<TABLE>
<S> <C>
Number of shares of Common Stock I wish to purchase under the
Option
------------------
Exercise Price per share $
------------------
Total Exercise Price $
------------------
"Vested Portion" of Option (see definition in Section 3 of the
Agreement)
------------------
Number of shares I have previously purchased by exercising the
Option
------------------
Expiration Date of the Option
------------------
</TABLE>
I hereby represent, warrant, and covenant to the Company that:
a. I am acquiring the Common Stock for my own account, for investment,
and not for distribution or resale, and I will make no transfer of such Common
Stock except in compliance with applicable federal and state securities laws.
b. I can bear the economic risk of the investment in the Common Stock
resulting from this exercise of the Option, including a total loss of my
investment.
c. I am experienced in business and financial matters and am capable of
(i) evaluating the merits and risks of an investment in the Common Stock; (ii)
making an informed investment decision regarding exercise of the Option; and
(iii) protecting my interests in connection therewith.
d. Any subsequent offer for sale or distribution of any of the shares
of Common Stock shall be made only pursuant to (i) a registration statement on
an appropriate form under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), which registration statement has
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<PAGE> 7
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, I shall, prior to any offer for sale or sale of such shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Administering Body, from counsel for or approved by the Administering Body, as
to the applicability of such exemption thereto.
I acknowledge that I must pay the total Exercise Price in full and make
appropriate arrangements for the payment of all federal, state and local tax
withholdings due with respect to the Option exercised herein, before the stock
certificate evidencing the shares of Common Stock resulting from this exercise
of the Option will be issued to me.
Attached in full payment of the total Exercise Price for the Option
exercised herein is ( ) a check made payable to the Company in the amount of
$___________________ and/or ( ) a stock certificate for _______ shares of Common
Stock that have been owned by me or by me and my spouse jointly for at least six
months, with a duly completed stock power attached with a total Fair Market
Value on the date hereof equal to the total Exercise Price.
Also attached in full payment of all withholding tax obligations
arising from exercise of the Option is (___) a check made payable to the Company
in the amount of such required withholding and/or (____) a stock certificate for
____ shares of Common Stock that have been owned by me or by me and my spouse
jointly for at least six months, with a duly completed stock power attached,
with a total Fair Market Value on the date hereof equal to the amount of such
required withholding.
Signature Page Following
2
<PAGE> 8
SIGNATURE PAGE FOR "EXHIBIT A", NOTICE OF EXERCISE UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
Signature page for "Exhibit A", Notice of Exercise under Nonqualified Stock
Option Agreement dated _________________, 2000.
OPTIONEE:
----------------------------------------
Name:
-----------------------------------
RECEIVED BY THE COMPANY:
----------------------------------------
Name:
-----------------------------------
Date:
-----------------------------------
3
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of April 4,
2000, by and between, EVENTURES GROUP, INC., a Delaware corporation, with its
principal office at 300 Crescent Court, Suite 800, Dallas, Texas 75201 (the
"COMPANY"), and THOMAS P. MCMILLIN residing at 6706 Stefani Drive, Dallas, Texas
75225 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective April 3, 2000 (the "COMMENCEMENT DATE"), the Company
desires to employ Executive as its Executive Vice President, and Executive
desires to accept such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement
as to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on April 2, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as the Executive Vice President of
the Company (the "EXECUTIVE VICE PRESIDENT"), reporting directly to the
Chief Executive Officer of the Company (the "CHIEF EXECUTIVE OFFICER").
If requested by the Board of Directors of the Company (the "BOARD") or
the Chief Executive Officer, Executive shall also serve on the Board
and committees thereof, as an executive, officer and director of
subsidiaries of the Company and/or as a director of associated
companies of the Company without additional compensation and subject to
any policy of the Compensation Committee of the Company's Board (the
"COMPENSATION COMMITTEE") with regard to retention or turnover of the
director's fees.
(b) Executive shall have such duties and authority, consistent
with his position, as shall be assigned to him from time to time by the
Chief Executive Officer.
(c) During the Employment Term, Executive shall devote
substantially all of his business time and efforts to the performance
of his duties hereunder. Nothing contained herein shall be construed to
prohibit Executive from (i) owning less than ten percent (10%) of the
outstanding securities of any publicly traded entity, (ii) pursuing any
business opportunity that is not in Competition, as such term is
defined in Section 10(b) below, with the Company or its subsidiaries or
any portfolio company in which the Company or its subsidiaries hold
securities (other than entities in which the Company or
1
<PAGE> 2
its subsidiaries make a nominal investment) (provided the time devoted
by Executive to such personal investment does not materially interfere
with Executive's duties hereunder), (iii) continuing service as a
consultant of Broadband NOW, in the same capacity and extent as
Executive rendered such service immediately prior to the Commencement
Date, (iv) continuing service on the boards of directors of the
companies set forth on Exhibit "D" attached hereto or, with the written
consent of the Board, on the board of directors of any other company
that is not in Competition with the Company or its subsidiaries or any
portfolio company in which the Company or its subsidiaries hold
securities (other than entities in which the Company or its
subsidiaries make a nominal investment), or (v) service on the boards
of directors of a reasonable number of charitable organizations so long
as such service is not inconsistent with his position and duties
hereunder (such activities described in clause (i), (ii), (iii), (iv)
or (v) immediately preceding being herein referred to as the "ALLOWED
ACTIVITIES"). Executive shall be entitled to retain any consideration
that he receives from service permitted by clauses (iii) and (iv) of
the immediately preceding sentence on any board of directors of a
corporation unrelated to the Company. For purposes of this Section 2(c)
and Section 10(b) to the extent expressly applicable, a "nominal
investment" of the Company or its subsidiaries will be determined in
relation to the size of investments made from time to time by the
Company or its subsidiaries in its portfolio companies (including,
without limitation, investments made in exchange for cash, securities
or services rendered).
3. Base Salary. During the Employment Term, the Company shall pay
Executive a Base Salary at the annual rate of One Hundred Eighty Thousand
Dollars ($180,000). Base Salary shall be payable in accordance with the usual
payroll practices of the Company. Executive's Base Salary may be reviewed
annually by the Board or the Compensation Committee and may be increased, but
not decreased, from time to time by the Board or the Compensation Committee. The
Base Salary as determined as aforesaid, from time to time for the applicable
fiscal year shall constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be entitled to participate in an
incentive bonus plan established by the Company on such terms and
conditions, and subject to such standards, as shall be determined from
time to time in the sole discretion of the Board or the Compensation
Committee. Such incentive bonus for any such fiscal year shall be
payable in cash and shall not be greater than fifty percent (50%) of
Executive's rate of Base Salary in effect for the fiscal year to which
such incentive bonus relates. During the Employment Term, the Company
shall maintain an incentive bonus plan providing a target bonus equal
to not less than fifty percent (50%) of Executive's rate of Base Salary
in effect for the fiscal year to which the bonus relates.
(b) Stock Options. The Company hereby grants to Executive
stock options (the "STOCK OPTIONS") to purchase 1,360,000 shares of
Common Stock of the Company. The Stock Options shall be granted
pursuant to a stock option award agreement or agreements between
Executive and the Company substantially in the form attached hereto as
Exhibit "B" (the "STOCK OPTION GRANTS"). The exercise price for such
Stock Options
2
<PAGE> 3
shall be equal to $23.00 per share of Common Stock. Subject to the
terms and provisions of the Stock Option Grants, the Stock Options
shall become exercisable on the dates indicated below as to that number
of shares of Common Stock of the Company as set forth below opposite
each such date.
<TABLE>
<CAPTION>
Date Number of Shares
---- ----------------
<S> <C>
July 2, 2000 340,000
April 2, 2001 340,000
April 2, 2002 340,000
April 2, 2003 340,000
</TABLE>
The foregoing schedule to the contrary notwithstanding, the Stock
Options shall become fully and immediately exercisable in the event the
Employment Term terminates prior to the Expiration Date by reason of
termination of the Executive's employment hereunder by Executive for
Good Reason or by the Company without Cause (as such terms are
hereinafter defined). The Stock Options shall in all events expire on
the date ten years after the Commencement Date, if not terminated or
canceled earlier. The Executive shall be permitted to transfer the
Stock Options to the Executive's immediate family members and/or lineal
descendents (or a trust or family limited partnership established
solely for the benefit of any such immediate family member and/or
lineal descendent). Notwithstanding anything in the Stock Option Grants
to the contrary, to the extent any provisions contained therein are
inconsistent with or differ from the explicit terms and conditions of
this Agreement, the terms and conditions of this Agreement shall
control. To the extent this Agreement does not specifically address an
issue or term set forth in the Stock Option Grants, then the provisions
and terms of the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option
Grants, the number of shares covered by, and the option price per share
of, the Stock Options will be subject to adjustment by the Company for
any stock split, reclassification, combination or similar change in the
Company's capital stock.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit
plans and arrangements and fringe benefits and perquisites generally
maintained by the Company from time to time for the benefit of senior
executive officers of the Company of a comparable level, in each case
in accordance with their respective terms as in effect from time to
time (other than any special arrangement entered into by contract with
an executive or that applies on a grandfathered basis). Without
limiting the foregoing, the Company shall pay all premiums for
Executive and his dependent family members under health,
hospitalization, disability, dental, life and other employee benefit
plans that the Company may have in effect from time to time. Executive
acknowledges that the Company does not currently provide a profit
sharing plan, and has no current intention of providing profit sharing
benefits to its employees.
3
<PAGE> 4
(b) During the Employment Term, Executive shall be entitled to
at least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect from time to time. Executive shall also be
entitled to such periods of sick leave as is customarily provided by
the Company to its senior executive employees.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive, subject to such pre-approval procedures as may be established from
time to time by the Board, in the performance of his duties hereunder, in
accordance with the Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the
earliest to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by
the Company due to Executive's Disability
(as defined in Exhibit "A") pursuant to
Section 7(b) hereof;
(iii) the termination of Executive's employment by
Executive for Good Reason (as defined in
Exhibit "A") pursuant to Section 7(c)
hereof,
(iv) the termination of Executive's employment by
the Company without Cause (as defined in
Exhibit "A") pursuant to Section 7(e)
hereof;
(v) the termination of employment by Executive
without Good Reason upon thirty (30) days
prior written notice pursuant to Section
7(f) hereof; or
(vi) the termination of Executive's employment by
the Company for Cause pursuant to Section
7(d) hereof.
(b) Disability. If Executive is unable to perform his material
duties hereunder due to a physical or mental condition and the Company
desires to terminate Executive's employment for Disability (as defined
in Exhibit "A"), the Company shall deliver to Executive a written
Notice of Disability Termination (herein so called), effective upon the
date (the "DISABILITY TERMINATION DATE") which is the later of (i) the
date such condition becomes a Disability or (ii) thirty (30) days
following the delivery of the Notice of Disability Termination;
provided that the Disability Termination Date shall be suspended, and
the Employment Term shall not terminate, so long as Executive returns
to the full performance of his duties by and following such date.
(c) Termination for Good Reason. A Termination for Good Reason
(herein so called) means a termination by Executive by written notice
given within thirty (30) days
4
<PAGE> 5
after Executive knows of the occurrence of the Good Reason event,
unless such circumstances are corrected prior to the date of
termination specified in the Notice of Termination for Good Reason and
the Company informs Executive of such correction prior to such date. In
such event, the Employment Term shall not terminate. A Notice of
Termination for Good Reason shall mean a notice that shall indicate the
specific Good Reason event in Section (d) of Exhibit "A" relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for Termination for Good Reason. The failure
by Executive to set forth in the Notice of Termination for Good Reason
any facts or circumstances which contribute to the showing of Good
Reason shall not waive any right of Executive hereunder or preclude
Executive from asserting such fact or circumstance in enforcing his
rights hereunder. The Notice of Termination for Good Reason shall
provide for a date of termination not less than thirty (30) nor more
than sixty (60) days after the date such Notice of Termination for Good
Reason is given.
(d) Cause. Subject to the notification provisions of this
Section 7(d), Executive's employment hereunder may be terminated by the
Company for Cause. A Notice of Termination for Cause (herein so called)
shall mean a notice that shall indicate the specific termination
provision in Section (a) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances which provide for a
basis for Termination for Cause. The effective date of termination for
a Termination for Cause shall be the date indicated in the Notice of
Termination. Any purported Termination for Cause which is held by a
court by a non-appealable final judgment not to have been based on the
grounds set forth in this Agreement or not to have followed the
procedures set forth in this Agreement shall be deemed a termination by
the Company without Cause.
(e) Termination without Cause. The Company may terminate its
employment of Executive for reasons other than Cause at any time upon
thirty (30) days prior written notice.
(f) Voluntary Resignation. Executive may terminate his
employment with the Company at any time upon thirty (30) days prior
written notice.
8. Consequences of Termination of Employment. Executive shall be
entitled to the following compensation from the Company (in lieu of all other
sums owed or payable to Executive) upon the termination of employment as
described below:
(a) Death, Disability, Voluntary Resignation without Good
Reason or by the Company with Cause. If Executive's employment and the
Employment Term are terminated (1) by reason of Executive's death or
Disability, (2) by Executive without Good Reason or (3) by the Company
for Cause, the employment period under this Agreement shall terminate
without further obligations to Executive or Executive's legal
representatives under this Agreement except for: (i) any Base Salary
earned but unpaid, any accrued but unused vacation pay payable pursuant
to the Company's policies and any unreimbursed business expenses
payable pursuant to Section 6 (which amounts, in the case of the death
of Executive, shall be promptly paid in a lump sum to Executive's
estate), (ii) any other amounts or benefits earned, accrued and owing
to Executive under the then applicable employee benefit plans, long
term incentive plans or equity plans and
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<PAGE> 6
programs of the Company, including, without limitation, any earned but
unpaid incentive bonus for any prior completed fiscal year, and (iii)
except in the case of a termination by the Company for Cause or by
Executive without Good Reason, a pro-rata portion (based on the number
of days Executive is employed by the Company during the fiscal year of
such termination) of Executive's incentive bonus earned for the fiscal
year in which termination occurs, which, in any case, shall be paid in
accordance with the applicable plans, programs and agreements, and any
unpaid reimbursable business expenses (such amounts referred to in
clauses (i) and (ii), collectively, the "ACCRUED AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by
Company without Cause. If Executive's employment and the Employment
Term are terminated (i) by Executive for Good Reason, or (ii) by the
Company without Cause (and other than for Disability or as a result of
expiration of the Employment Term), Executive shall be entitled to
receive the Accrued Amounts and shall, subject to Sections 9(b), 9(c)
and 10 hereof, be entitled to receive equal monthly payments of an
amount equal to his monthly rate of Base Salary in effect at the time
of such termination plus his incentive bonus paid for the most recently
ended fiscal year (provided, however, if Executive was employed
hereunder for only a portion of such prior fiscal year, such bonus
shall be annualized for purposes of this calculation, and, if no bonus
was paid for such prior fiscal year, the current fiscal year's bonus,
at 100 percent of target, shall be deemed to be the incentive bonus
paid for the most recently ended fiscal year for purposes of this
calculation) divided by twelve (12) for a period equal to the greater
of (x) twelve (12) months or (y) the remaining period of time from the
date of such termination through the Expiration Date. Notwithstanding
the immediately preceding sentence to the contrary, (1) if Executive's
employment is terminated by the Company without Cause (and other than
for Disability or as a result of expiration of the Employment Term), or
if Executive terminates his employment for Good Reason, other than Good
Reason as defined in clause (i)(b) or clause (iv) of Section (d) of
Exhibit "A", the Severance Payments shall be paid to Executive in a
lump-sum following such termination, and (2) if Executive terminates
his employment for Good Reason as defined in clause (i)(b) or clause
(iv) of Section (d) of Exhibit "A", he shall, following the date which
is six (6) months following the date of such termination, upon his
request, receive payment in a lump-sum of the Severance Payments
remaining unpaid on such date.
(c) Termination Upon Expiration of Employment Term. If
Executive's employment with the Company terminates on the Expiration
Date by reason of expiration of the Employment Term, Executive shall be
entitled to receive the Accrued Amounts and shall, subject to Sections
9(b), 9(c) and 10 hereof, be entitled to receive equal monthly payments
of an amount equal to his monthly rate of Base Salary in effect
immediately prior to the Expiration Date plus his incentive bonus paid
for the most recently ended fiscal year divided by twelve (12) for a
period of twelve (12) months.
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
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<PAGE> 7
attributable to any subsequent employment that Executive may obtain.
Any amounts due under Section 8 are in the nature of severance payments
and are not in the nature of a penalty. Such amounts are inclusive, and
in lieu of any amounts payable under any other salary continuation or
cash severance arrangement of the Company and to the extent paid or
provided under any other such arrangement shall be offset from the
amount due hereunder.
(b)(i) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) or (c) hereunder he
will execute, deliver and not revoke (within the time period permitted
by applicable law) a release of all claims of any kind whatsoever
against the Company, its affiliates, officers, directors, employees,
agents and shareholders in the then standard form being used by the
Company for senior executives (but without release of the right of
indemnification hereunder or under the Company's By-laws or rights
under benefit or equity plans that by their terms are intended to
survive termination of his employment or claims that the Company
fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to
Executive's agreements under Section 10 hereof, the Company
will execute and deliver a release of all claims of any kind
whatsoever against Executive (but without release of claims
that Executive fulfill his obligations under this Agreement).
The Company's release under this paragraph (b)(ii) of this
Section 9 shall be executed and delivered simultaneously with
the execution and delivery of Executive's release under
paragraph (b)(i) of this Section 9. The releases referred to
in this paragraph (b) of this Section 9 shall apply to all
claims described in this paragraph existing from the beginning
of time through the date of each party's execution of his or
its release.
(c) Upon any termination of employment, Executive hereby
resigns as an officer and director of the Company, any subsidiary and
any affiliate and as a fiduciary of any benefit plan of any of the
foregoing. Executive shall promptly execute any further documentation
thereof as requested by the Company and, if Executive is to receive any
payments from the Company, execution of such further documentation
shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a)(i) Executive acknowledges that as a result of his
employment by the Company, Executive will obtain secret and
confidential information as to the Company and its affiliates and
create relationships with customers, suppliers and other persons
dealing with the Company and its affiliates and the Company and its
affiliates will suffer irreparable damage, which would be difficult to
ascertain, if Executive should use such confidential information or
take advantage of such relationships and that because of the nature of
the information that will be known to or obtained by Executive and the
relationships created it is necessary for the Company and its
affiliates to be protected by
7
<PAGE> 8
the prohibition against Competition as set forth herein, as well as the
confidentiality restrictions set forth herein.
(ii) Executive acknowledges (A) that the retention of
nonclerical employees, employed by the Company and its
affiliates in which the Company and its affiliates have
invested training and depends on for the operation of their
businesses, is important to the businesses of the Company and
its affiliates, and (B) that Executive will obtain unique
information as to such employees as an executive of the
Company and will develop a unique relationship with such
persons as a result of being an executive of the Company.
Therefore, it is necessary for the Company and its affiliates
to be protected from Executive's Solicitation (defined below)
of such employees as set forth below.
(iii) Executive acknowledges that the provisions of
this Agreement are reasonable and necessary for the protection
of the businesses of the Company and its affiliates and that
part of the compensation paid under this Agreement and the
agreement to pay severance in certain instances is in
consideration for the agreements in this Section 10.
(b) COMPETITION shall mean: participating, directly or
indirectly, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender with equity
participation, consultant or in any capacity whatsoever (within the
United States of America, or in any country where the Company or its
affiliates do business) in a Competing Business; provided, however,
that such participation shall not include (i) the ownership of not more
than ten percent (10%) of the total outstanding stock of a publicly
held company; (ii) following a termination of Executive's employment
hereunder, the ownership of not more than five percent (5%) of the
total outstanding stock of a private company if Executive is neither a
member of, or represented on, the board of directors of such private
company and does not have an executive officer role in such private
company; (iii) the Allowed Activities; or (iv) any activity engaged in
with the prior written approval of the Board. As used herein,
"Competing Business" means any business that the Company and/or its
subsidiaries and/or any entity in which the Company and/or its
subsidiaries holds securities (other than entities in which the Company
or its subsidiaries make a "nominal investment" (determined as
described in Section 2(c) hereof)) are engaged in (I) from time to time
(while Executive is employed by the Company) or (II) at the time of
termination (upon termination of Executive's employment) (consisting
principally of the services described in the Company's Registration
Statement on Form 10 under the Securities Exchange Act of 1934, as
amended, and any amendments thereof). For purposes of the immediately
preceding sentence, but solely following a termination of Executive's
employment hereunder, the Company and its subsidiaries shall be deemed
to have made a "nominal investment" in an entity if, at the time of
such termination of employment, the Company and its subsidiaries own or
control less than ten percent (10%) of the outstanding equity
interests, on a fully diluted basis, of such entity. The Company shall
furnish Executive with a list of all Competing Businesses on or
promptly following termination of his employment hereunder.
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<PAGE> 9
(c) SOLICITATION shall mean: recruiting, soliciting or
inducing, of any nonclerical employee or employees of the Company or
its affiliates to terminate their employment with the Company or its
affiliates or hiring or assisting another person or entity to hire any
nonclerical employee of the Company or its affiliates or any person who
within twelve (12) months before had been a nonclerical employee of the
Company or its affiliates and were recruited or solicited for such
employment or other retention while an employee of the Company,
provided, however, that solicitation shall not include any of the
foregoing activities engaged in with the prior written approval of the
Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad
a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it
may be enforceable. In the event that the agreements in this Section 10
shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of
time or over too great a geographical area or by reason of their being
too extensive in any other respect, they shall be interpreted to extend
only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be
enforceable and/or to the maximum extent in all other respects as to
which they may be enforceable, all as determined by such court in such
action.
(e) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive shall
hold in a fiduciary capacity for the benefit of the Company and its
affiliates all secret or confidential information, knowledge or data
relating to the Company and its affiliates, and their respective
businesses, including any confidential information as to customers of
the Company and its affiliates, (i) obtained by Executive during his
employment by the Company and its affiliates and (ii) not otherwise
public knowledge or known within the applicable industry. Executive
shall not, without prior written consent of the Company, unless
compelled pursuant to the order of a court or other governmental or
legal body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the
Company and those designated by it. In the event Executive is compelled
by order of a court or other governmental or legal body to communicate
or divulge any such information, knowledge or data to anyone other than
the foregoing, he shall promptly notify the Company of any such order
and he shall cooperate fully with the Company in protecting such
information (at the Company's expense) to the extent possible under
applicable law.
(f) Upon termination of his employment with the Company and
its affiliates, or at any time as the Company may request, Executive
will promptly deliver to the Company, as requested, all documents
(whether prepared by the Company, an affiliate, Executive or a third
party) relating to the Company, an affiliate or any of their businesses
or property which he may possess or have under his direction or control
other than documents provided to Executive in his capacity as a
participant in any employee benefit
9
<PAGE> 10
plan, policy or program of the Company or any agreement by and between
Executive and the Company with regard to Executive's employment or
severance.
(g) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive will not
engage in Solicitation.
(h) During the Employment Term and for the Restricted Period
(as hereinafter defined) following a termination of Executive's
employment, Executive will not enter into Competition with the Company.
The Restricted Period shall be (i) for a termination for Cause, twelve
(12) months following the date of termination, (ii) for termination
without Cause by the Company, or by Executive for Good Reason, as
defined in clause (i)(b) or clause (iv) of Section (d) of Exhibit "A",
the period in which the Company is making payments to Executive as
specified in Section 8(b) above, (iii) for a termination as a result of
the voluntary resignation of Executive without Good Reason, twelve (12)
months from the date of termination; and (iv) termination as a result
of expiration or non-renewal of this Agreement, after the Company has
made a good faith offer for continued employment, nine (9) months
following the date of termination. For avoidance of doubt, there shall
be no Restricted Period following termination of Executive's employment
without Cause by the Company (and other than for Disability or as a
result of expiration of the Employment Term) or for Good Reason by
Executive (other than as defined in clause (i)(b) or clause (iv) of
Section (d) of Exhibit "A"), or if the Employment Term expires and the
Company fails to make a good faith offer for continued employment.
(i) In the event of a breach or potential breach of this
Section 10, Executive acknowledges that the Company and its affiliates
will be caused irreparable injury and that money damages may not be an
adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at
law) to have the provisions of this Section 10 enforced. It is hereby
acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such
entity may enforce the provisions of this Section 10 and only the
applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of
breach of this Section 10 by Executive, while he is receiving amounts
under Section 8(b) or (c) hereof, Executive shall not be entitled to
receive any future amounts pursuant to Section 8(b) or (c) hereof after
the earlier to occur of (i) ninety (90) days following the Company's
notification of Executive of its good faith determination of such
breach, specifying in reasonable detail the grounds for such
determination, and (ii) a final determination by an arbitrator or court
of competent jurisdiction of such breach, and, upon such final
determination, which is not appealable, he shall reimburse the Company
for any amounts previously paid to Executive pursuant to Section 8(b)
or (c) hereof.
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<PAGE> 11
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended and
as applicable, for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any subsidiary or affiliate of the Company or as a fiduciary of
any benefit plan. The Company shall cover Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent as the Company covers
its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company
copyrights, trade secrets, proprietary information, patents, unpatented
inventions, trademarks, service marks, processes, techniques, methods,
know-how, flow charts, diagrams, computer programs and/or databases,
and any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not (all
of the foregoing, collectively, "INTELLECTUAL PROPERTY"), which are
conceived, created, developed or made by Executive, solely or jointly
with another, during the period of employment or within one (1) year
thereafter, and which are substantially related to the business or
activities of the Company or its subsidiaries which Executive
conceived, created, developed or made as a result of his employment by
the Company or any of its subsidiaries. Executive hereby assigns and
agrees to assign all of his right, title and interest throughout the
world in any Intellectual Property to the Company or its nominee.
Whenever requested to do so by the Company, Executive shall execute any
and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain registrations of
copyrights or marks, or Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest in
Intellectual Property.
(b) Executive agrees that he will not, during or after the
Employment Term, disclose the specific terms of the Company's
relationships or agreements with its significant vendors or customers
or any other significant material trade secrets of the Company, whether
in existence or proposed (other than any of the foregoing that becomes
public knowledge other than through disclosure by Executive), to any
person, firm, partnership, corporation or business for any reason or
purpose whatsoever, except as is disclosed in the ordinary course of
business, unless compelled by a court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred in such dispute unless the finder of fact determines that the
Company is the prevailing party in such dispute.
14. Certain Additional Payments. Executive shall be grossed up for any
excise tax payable under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), in accordance with Exhibit C attached hereto.
11
<PAGE> 12
15. Resolution of Disputes. The parties shall use their best efforts
and good will to settle all disputes by amicable negotiations. The Company and
Executive agree, for purposes of the resolution of any disputes under this
Agreement, that such disputes shall be settled by arbitration in Dallas, Texas,
or such other place agreed to by the parties, in accordance with the rules and
procedures of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel
consisting of one to three arbitrators, each of whom shall be
impartial. All arbitrators shall be appointed in the first instance by
agreement between the parties hereto. If the parties cannot agree upon
a single arbitrator, each of the Company and the Executive shall be
entitled to appoint one arbitrator. These two appointed arbitrators
shall then appoint a third arbitrator by their mutual agreement.
(b) An arbitration may be commenced by either party to this
Agreement by the service of a written request for arbitration upon the
other affected party. Such request for arbitration shall summarize the
controversy or claim to be arbitrated. If the panel of arbitrators is
not appointed within thirty (30) days following such service, either
party may apply to any court within the State of Texas for an order
appointing arbitrators qualified as set forth below. No request for
arbitration shall be valid if it relates to a claim, dispute,
disagreement or controversy that would have been time barred under the
applicable statute of limitations had such claim, dispute, disagreement
or controversy been submitted to the courts of the State of Texas.
(c) The parties hereby expressly waive punitive damages, and
under no circumstances shall an award contain any amount that in any
way reflects punitive damages.
(d) Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without
reference to principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of
the parties with respect to the employment of Executive by the Company
from and after the Commencement Date and supersedes any prior
agreements between the Company and Executive with respect thereto.
There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein and therein. This
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and
12
<PAGE> 13
enforceability of the remaining provisions contained herein shall not
in any way be affected or impaired, and the parties undertake to
implement all efforts which are necessary, desirable and sufficient to
amend, supplement or substitute all and any such invalid, illegal or
unenforceable provisions with enforceable and valid provisions which
would produce as nearly as may be possible the result previously
intended by the parties without renegotiation of any material terms and
conditions stipulated herein.
(d) No Waiver. Any failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any such waiver must be in writing and
signed by Executive or an authorized officer of the Company, as the
case may be.
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an
entity which is owned, directly or indirectly, in whole or in part by
the Company or by any successor to the Company or an acquirer of all or
substantially all of the assets of the Company or all or substantially
all of the assets of a group of subsidiaries and divisions of the
Company, provided such entity or acquirer promptly assumes all of the
obligations hereunder of the Company in a writing delivered to
Executive and otherwise complies with the provisions hereof with regard
to such assumption. Upon such assignment and assumption, all references
to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the beneficiaries and permitted assignees
of the parties hereto. In the event of Executive's death while
receiving amounts payable pursuant to Section 8(b) hereof, any
remaining amounts shall be paid to Executive's estate.
(g) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when faxed or
delivered, or (ii) two (2) business days after being mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the initial
page of this Agreement, provided that all notices to the Company shall
be directed to the attention of the General Counsel and Secretary of
the Company, or to such other address as any party may have furnished
to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.
(h) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
(i) Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 10 and Section
11 hereof, shall survive any termination of Executive's employment to
the extent necessary to the agreed preservation of such rights and
obligations.
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<PAGE> 14
(j) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control
or affect the meaning or construction of any provision of this
Agreement.
(l) Executive's Representation. Executive represents and
warrants to the Company that there is no legal impediment to him
entering into this Agreement, and entering into this Agreement will not
violate any agreement to which he is a party or any other legal
restrictions, and he has provided to the Company true and complete
copies of any agreements or covenants to which he is a party that could
restrict or adversely affect his performance under this Agreement.
Executive further represents and warrants that in performing his duties
hereunder he will not wrongfully use or disclose any confidential
information of any prior employer or other person or entity.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMPANY:
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Clark K. Hunt
---------------------------------------
Name: Clark K. Hunt
---------------------------------------
Title: Chairman of the Compensation Committee
---------------------------------------
EXECUTIVE:
/s/ Thomas P. McMillin
-----------------------------------------------
THOMAS P. MCMILLIN
15
<PAGE> 16
EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
EVENTURES GROUP, INC.
AND
THOMAS P. MCMILLIN
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE" shall be
limited to the following:
(i) Executive's willful misconduct with regard to the
Company or its affiliates or their business, assets
or employees (including, without limitation,
Executive's fraud or embezzlement), or Executive's
willful misconduct other than the foregoing, which in
any case has a material adverse impact on the Company
or its affiliates, whether economic, or
reputationwise or otherwise, each as determined by
the Board, and which is not fully rectified or cured,
if susceptible to rectification or cure, within
thirty (30) days after written notice is given to
Executive; provided, however, that this clause (i)
shall not include an action or omission of Executive
done or omitted to be done in his good faith exercise
of business judgment or in good faith reliance on
advice of legal counsel to the Company;
(ii) Executive's conviction of, or pleading nolo
contendere to, a felony or other crime involving
fraud or dishonesty;
(iii) Executive's refusal or willful failure to follow the
lawful written direction of the Board, the Chief
Executive Officer or his designee which is not
remedied within ten (10) business days after receipt
by Executive of a written notice specifying the
details thereto;
(iv) Executive's breach of Section 10 or Section 12
hereof, which has a material adverse economic impact
on the Company or its affiliates, as determined by
the Board; or
(v) the representations or warranties in Section 16(l)
hereof prove false, which has a material adverse
economic impact on the Company or its affiliates, as
determined by the Board.
(b) Change in Control. For purposes of this Agreement, the term "CHANGE
IN CONTROL" shall mean the occurrence of any of the following:
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<PAGE> 17
(i) any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934
("Act") (other than (a) Permitted Assignees, (b) the
Company, (c) any trustee or other fiduciary holding
securities under any employee benefit plan of the
Company, or (d) any company owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership
of Common Stock of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more
of the combined voting power of the Company's then
outstanding securities. Permitted Assignees shall
mean the holders of the equity securities (whether or
not voting) of any shareholder of the Company owning
more than fifteen percent (15%) of the Company on the
date after the date of execution of this Agreement,
so long as the voting power and disposition authority
with respect to the securities of such holders is
held directly or indirectly by any two or three of
the following individuals: Barrett N. Wissman, Clark
K. Hunt or James R. Holland;
(ii) during any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other
than a director designated by a person who has
entered into an agreement with the Company to effect
a transaction described in clause (i), (iii), or (iv)
of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the
directors then still in office who either were
directors at the beginning of the two-year period or
whose election or nomination for election was
previously so approved, cease for any reason to
constitute at least a majority of the Board;
(iii) a merger or consolidation of the Company with any
other corporation, other than a merger or
consolidation which would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) more than
fifty percent (50%) of the combined voting power of
the voting securities of the Company or such
surviving entity outstanding immediately after such
merger or consolidation; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or the sale or
disposition by the Company of assets where the
proceeds thereof are not retained by
2
<PAGE> 18
the Company, in a single transaction or a series of
related transactions, that result in a 66-2/3 percent
or greater decline in the enterprise value of the
Company, valued based on the weighted average fair
market value of any outstanding class of stock of the
Company plus the book value of the outstanding
indebtedness of the Company.
(c) Disability. For purposes of this Agreement, "DISABILITY" shall mean
if Executive is unable to perform his material duties pursuant to this
Agreement, as determined by the Board, because of mental or physical incapacity,
including, without limitation, alcoholism or drug abuse, which requires a leave
of absence in excess of ninety (90) consecutive days in any twelve (12) month
period.
(d) Good Reason. For purposes of this Agreement, "GOOD REASON" shall
mean the occurrence, without Executive's express written consent, in the case of
(i), (ii), (iii) or (iv), of any of the following circumstances:
(i) (a) any material demotion of Executive from his
position as Executive Vice President or (b) any
assignment of duties to Executive materially and
adversely inconsistent with Executive's position as
Executive Vice President (except in connection with
the termination of Executive's employment for Cause
or due to Disability or as a result of Executive's
death, or temporarily as a result of Executive's
illness or other absence);
(ii) a failure by the Company to pay to Executive any
amounts due under this Agreement in accordance with
the terms hereof, which failure is not cured within
fifteen (15) days following receipt by the Company of
written notice from Executive of such failure;
(iii) the termination of Jeffrey A. Marcus' ("Marcus")
employment with the Company under any circumstances
other than death, "Disability," termination by the
Company with "Cause," or termination by Marcus
without "Good Reason," as each such term is defined
in that certain Employment Agreement made as of April
3, 2000, by and between the Company and Marcus;
(iv) any other material breach by the Company of this
Agreement that remains uncured for fifteen (15) days
after written notice thereof by Executive to the
Company;
(v) a Change in Control; or
(vi) the Board requires Executive to relocate to an area
other than the Dallas, Texas greater metropolitan
area; or if the Company's
3
<PAGE> 19
corporate headquarters are located in an area other
than the Dallas, Texas greater metropolitan area, to
an area more than fifty (50) miles from the Company's
corporate headquarters, and Executive declines to so
relocate.
4
<PAGE> 20
EXHIBIT "B"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
EVENTURES GROUP, INC.
AND
THOMAS P. MCMILLIN
STOCK OPTION GRANTS
5
<PAGE> 21
EXHIBIT "C"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
EVENTURES GROUP, INC.
AND
THOMAS P. MCMILLIN
GROSS-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this Exhibit C is
a part:
(a) In the event that Executive shall become entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
"nature of compensation" (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership or effective control covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to
Executive, subject to required withholding, at the time specified in subsection
(d) below an additional amount (the "Gross-up Payment") such that the net amount
retained by Executive, after deduction of any Excise Tax on the Company Payments
and on the Gross-Up Payment provided for under this paragraph (a) and any U.S.
federal, state, and local income or payroll tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any U.S. federal,
state, and local income or payroll tax on the Company Payments, shall be equal
to the Company Payments.
(b) In the event that the Excise Tax is subsequently
determined by the Company to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the prior Gross-up Payment attributable to such
reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by Executive), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is later determined by the Company or the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up Payment),
the Company shall make an additional Gross-up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following delivery by Executive to the Company of notice that an event that
subjects Executive to the Excise Tax has occurred; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be
6
<PAGE> 22
finally determined on or before such day, the Company shall pay to Executive on
such day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code)
promptly following such time as the amount thereof has been determined. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to Executive, payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(d) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise Tax, Executive
shall permit the Company to control issues related to the Excise Tax, but
Executive shall control any other issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of the Company to accompany Executive, and
Executive and Executive's representative shall cooperate with the Company and
its representative.
(e) The Company and Executive shall promptly deliver to each
other copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit C.
7
<PAGE> 1
EXHIBIT 10.4
eVENTURES GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made and
entered into by and between eVENTURES GROUP, INC., a Delaware corporation (the
"COMPANY"), and THOMAS P. MCMILLIN (the "OPTIONEE"), effective April 4, 2000
(the "DATE OF GRANT").
1. GRANT OF OPTION. The Company hereby grants to the Optionee and the
Optionee hereby accepts, subject to the terms and conditions hereof, the right
and option to purchase from the Company (the "OPTION") all or any part of an
aggregate of 1,360,000 shares of the Company's common stock, par value $0.00002
per share (the "COMMON STOCK"), at a per share purchase price equal to
Twenty-Three Dollars and no cents ($23.00) per share (the "EXERCISE PRICE"), as
such shares and Exercise Price may be adjusted in accordance with Section 9
below. The Option is not granted pursuant to the Company's 1999 Omnibus
Securities Plan. The Option shall not be treated as an incentive stock option as
defined in Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXPIRATION AND TERMINATION OF THE OPTION. The Option will expire at
the end of business on April 4, 2010, ten (10) years from the Date of Grant of
the Option (the "EXPIRATION DATE"). In the event of termination of the
Optionee's employment with the Company, any Vested Portion (as defined in
Section 3 below) of the Option on the date of such termination may be exercised
at any time prior to the Expiration Date, and the Option shall terminate as to
the shares of Common Stock covered by the remaining, unvested portion of the
Option. The Option may not be exercised after its expiration or termination.
3. VESTING. On each Measurement Date set forth in Column 1 below, the
Option shall vest and become exercisable for the corresponding percentage set
forth in Column 2 below of the total number of shares of Common Stock set forth
in paragraph 1 hereof. The "VESTED PORTION" of the Option as of any particular
date shall be the cumulative total of all shares for which the Option has become
exercisable on or prior to that date in accordance with the following schedule.
<TABLE>
<CAPTION>
-------------------------------------------------------------
COLUMN 1 COLUMN 2
Percentage of Total Option
Shares Vesting
Measurement Date on Measurement Date
-------------------------------------------------------------
<S> <C>
July 2, 2000 Twenty-Five Percent (25%)
-------------------------------------------------------------
April 2, 2001 Twenty-Five Percent (25%)
-------------------------------------------------------------
April 2, 2002 Twenty-Five Percent (25%)
-------------------------------------------------------------
April 2, 2003 Twenty-Five Percent (25%)
-------------------------------------------------------------
</TABLE>
PAGE 1
<PAGE> 2
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company is terminated by the Company without "Cause" (other than for
"Disability") or by the Optionee for "Good Reason" (as such terms are defined in
the Employment Agreement between the Optionee and the Company), the Option shall
become fully and immediately exercisable and the "Vested Portion" of the Option
shall mean one hundred percent (100%) of the total number of shares of Common
Stock set forth in paragraph 1 hereof.
4. EXERCISE OF THE OPTION. The Vested Portion of the Option may be
exercised, to the extent not previously exercised, in whole or in part, at any
time or from time to time prior to the expiration or termination of the Option,
except that no Option shall be exercisable except in respect to whole shares,
and not less than one hundred (100) shares may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the Option. Exercise shall be accomplished by providing the
Company with written notice in the form of Exhibit "A" attached hereto, which
notice shall be irrevocable when delivered and effective upon payment in full of
the Exercise Price and any amounts required for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under this Agreement.
5. PAYMENT OF EXERCISE PRICE. Upon any exercise of the Option, the
total Exercise Price for the number of shares for which the Option is then being
exercised and the amount of any Federal, state and local withholding taxes
imposed thereon shall be paid in full to the Company in cash or, if permitted by
applicable law and subject to such limitations or conditions as the
Administering Body (as defined in Section 8 hereof) may prescribe, (a) with
shares of Common Stock that have been owned for at least six months by the
Optionee (or by the Optionee and his spouse jointly) having a total fair market
value (as determined by the Administering Body ("FAIR MARKET VALUE")) on the
date of such exercise equal to the total Exercise Price of such shares and the
amount of such withholding, or (b) in a broker-assisted or similar transaction
in which the total Exercise Price of such shares and the amount of such
withholding is not received by the Company until promptly after exercise, or
using a combination of the foregoing forms of consideration.
6. TRANSFERABILITY OF OPTION. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided,
however, that the Optionee may transfer the Option as a gift to the Optionee's
spouse, children, or grandchildren or a trust or family limited partnership
established solely for the benefit of, or of which the partners comprise only,
any such spouse, children or grandchildren. The transfer of the Option and any
transferred Option shall be subject to the same terms and conditions that were
applicable to the Option immediately prior to its transfer. No transfer of the
Option shall be effective unless the Company shall have been furnished with
written notice of such transfer at least 30 days in advance thereof and a copy
of such evidence as the Administering Body may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions hereof. Any attempted transfer, assignment, pledge or other
disposition or levy, attachment or similar process with respect to the Option
not specifically permitted herein shall be null and void without effect.
PAGE 2
<PAGE> 3
7. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors of the Company (the "BOARD")
or any Stock Plan Committee appointed by the Board (the "ADMINISTERING BODY").
The Optionee agrees that the decisions of such Administering Body concerning
administration and interpretation of this Agreement and the Option shall be
final, binding and conclusive on all persons. No member of the Board or the
Stock Plan Committee, nor any person participating in any determination of any
question under this Agreement, shall have any liability, in the absence of gross
negligence or willful misconduct, to any party for any action taken or not taken
in connection with this Agreement.
8. ADJUSTMENTS. If (a) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (b) the value of the outstanding shares of Common Stock
is reduced by reason of an extraordinary dividend payable in cash or property,
an appropriate and proportionate adjustment shall be made by the Administering
Body in the number and kind of shares or other securities subject to the Option
and/or the Exercise Price for each share or other unit of any other securities
subject to the Option. No fractional interests will be issued under the Option
resulting from any such adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of Common
Stock otherwise issuable as a result of such adjustments.
9. REGISTRATION. The Company shall (i) file a registration statement,
at the Company's option, on Form S-1, S-3 or S-8 under the Securities Act of
1933, as amended, which includes a reoffer prospectus, on the date which is the
earlier of (a) 90 days after the date it is first eligible to use Form S-3 or
S-8 or (b) January 15, 2001; (ii) use its best efforts, where effectiveness is
not automatic after the passage of time, to have such registration statement
declared effective within 90 days after such registration statement was filed;
and (iii) use its best efforts to maintain the effectiveness of such
registration statement or a successor registration statement (which includes a
reoffer prospectus) during the term of the Option.
10. NOTICES. Any notice hereunder to the Company shall be addressed to
it at 300 Crescent Court, Suite 800, Dallas, Texas 75201, Attention: General
Counsel, and any notice hereunder to the Optionee shall be addressed to the
Optionee at 6706 Stefani Drive, Dallas, Texas 75225, subject to the right of
either party to designate at any time hereafter in writing some other address.
11. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof.
PAGE 3
<PAGE> 4
12. SEVERABILITY. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. MODIFICATION. This Agreement may not be modified or amended, nor
may any provision hereof be waived, in any way except in writing signed by the
parties hereto.
14. COUNTERPARTS. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company by its duly authorized officer, and by the Optionee in acceptance of the
above-mentioned Option, subject to the terms and conditions of this Agreement,
all as of the day and year first above written.
Signature Page Following
PAGE 4
<PAGE> 5
SIGNATURE PAGE FOR eVENTURES GROUP, INC., NONQUALIFIED STOCK
OPTION AGREEMENT
Signature page for eVentures Group, Inc., Nonqualified Stock Option Agreement
dated April 4, 2000.
COMPANY:
eVENTURES GROUP, INC.
BY: /s/ Stuart J. Chasanoff
-------------------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate
Development and Legal Affairs
OPTIONEE:
/s/ Thomas P. McMillin
----------------------------------------
Printed Name: Thomas P. McMillin
---------------------------
PAGE 5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXERCISE
UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
To: eVentures Group, Inc. (the "COMPANY")
From:
------------------------------------
Date:
------------------------------------
Pursuant to the Nonqualified Stock Option Agreement (the "AGREEMENT")
(capitalized terms used without definition herein have the meanings given such
terms in the Agreement) between the Company and myself effective
______________________, I hereby exercise my Option as follows:
<TABLE>
<S> <C>
Number of shares of Common Stock I wish to purchase under the
Option
------------------
Exercise Price per share $
------------------
Total Exercise Price $
------------------
"Vested Portion" of Option (see definition in Section 3 of the
Agreement)
------------------
Number of shares I have previously purchased by exercising the
Option
------------------
Expiration Date of the Option
------------------
</TABLE>
I hereby represent, warrant, and covenant to the Company that:
a. I am acquiring the Common Stock for my own account, for investment,
and not for distribution or resale, and I will make no transfer of such Common
Stock except in compliance with applicable federal and state securities laws.
b. I can bear the economic risk of the investment in the Common Stock
resulting from this exercise of the Option, including a total loss of my
investment.
c. I am experienced in business and financial matters and am capable of
(i) evaluating the merits and risks of an investment in the Common Stock; (ii)
making an informed investment decision regarding exercise of the Option; and
(iii) protecting my interests in connection therewith.
d. Any subsequent offer for sale or distribution of any of the shares
of Common Stock shall be made only pursuant to (i) a registration statement on
an appropriate form under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), which registration statement has
1
<PAGE> 7
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, I shall, prior to any offer for sale or sale of such shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Administering Body, from counsel for or approved by the Administering Body, as
to the applicability of such exemption thereto.
I acknowledge that I must pay the total Exercise Price in full and make
appropriate arrangements for the payment of all federal, state and local tax
withholdings due with respect to the Option exercised herein, before the stock
certificate evidencing the shares of Common Stock resulting from this exercise
of the Option will be issued to me.
Attached in full payment of the total Exercise Price for the Option
exercised herein is ( ) a check made payable to the Company in the amount of
$___________________ and/or ( ) a stock certificate for _______ shares of Common
Stock that have been owned by me or by me and my spouse jointly for at least six
months, with a duly completed stock power attached with a total Fair Market
Value on the date hereof equal to the total Exercise Price.
Also attached in full payment of all withholding tax obligations
arising from exercise of the Option is (___) a check made payable to the Company
in the amount of such required withholding and/or (____) a stock certificate for
____ shares of Common Stock that have been owned by me or by me and my spouse
jointly for at least six months, with a duly completed stock power attached,
with a total Fair Market Value on the date hereof equal to the amount of such
required withholding.
Signature Page Following
2
<PAGE> 8
SIGNATURE PAGE FOR "EXHIBIT A", NOTICE OF EXERCISE UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
Signature page for "Exhibit A", Notice of Exercise under Nonqualified Stock
Option Agreement dated _________________, 2000.
OPTIONEE:
-----------------------------------
Name:
------------------------------
RECEIVED BY THE COMPANY:
-----------------------------------
Name:
------------------------------
Date:
------------------------------
3
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of April 4, 2000,
by and between, eVENTURES GROUP, INC., a Delaware corporation, with its
principal office at 300 Crescent Court, Suite 800, Dallas, Texas 75201 (the
"COMPANY"), and DANIEL J. WILSON residing at 5416 Wateka Drive, Dallas, Texas
75209 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective April 3, 2000 (the "COMMENCEMENT DATE"), the Company
desires to employ Executive as its Senior Vice President, and Executive desires
to accept such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement as
to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on April 2, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as a Senior Vice President of the Company
(the "SENIOR VICE PRESIDENT"), reporting directly to the Chief Executive
Officer or President of the Company (the "CHIEF EXECUTIVE OFFICER"), with
functional responsibility for acquisitions, investments and operational
oversight. If requested by the Board of Directors of the Company (the
"BOARD") or the Chief Executive Officer, Executive shall also serve on the
Board and committees thereof, as an executive, officer and director of
subsidiaries of the Company and/or as a director of associated companies of
the Company without additional compensation and subject to any policy of
the Compensation Committee of the Company's Board (the "COMPENSATION
COMMITTEE") with regard to retention or turnover of the director's fees.
(b) Executive shall have such duties and authority, consistent with
his position, as shall be assigned to him from time to time by the Chief
Executive Officer.
(c) During the Employment Term, Executive shall devote substantially
all of his business time and efforts to the performance of his duties
hereunder. Nothing contained herein shall be construed to prohibit
Executive from (i) owning less than ten percent (10%) of the outstanding
securities of any publicly traded entity, (ii) pursuing any business
opportunity that is not in Competition, as such term is defined in Section
10(b) below, with the Company or its subsidiaries or any portfolio company
in which the
1
<PAGE> 2
Company or its subsidiaries hold securities (other than entities in which
the Company or its subsidiaries make a nominal investment) (provided the
time devoted by Executive to such personal investment does not materially
interfere with Executive's duties hereunder), (iii) continuing service as a
consultant of Broadband NOW, in the same capacity and extent as Executive
rendered such service immediately prior to the Commencement Date, (iv)
continuing service on the boards of directors of the companies set forth on
Exhibit "D" attached hereto or, with the written consent of the Board, on
the board of directors of any other company that is not in Competition with
the Company or its subsidiaries or any portfolio company in which the
Company or its subsidiaries hold securities (other than entities in which
the Company or its subsidiaries make a nominal investment), or (v) service
on the boards of directors of a reasonable number of charitable
organizations so long as such service is not inconsistent with his position
and duties hereunder (such activities described in clause (i), (ii), (iii),
(iv) or (v) immediately preceding being herein referred to as the "ALLOWED
ACTIVITIES"). Executive shall be entitled to retain any consideration that
he receives from service permitted by clauses (iii) and (iv) of the
immediately preceding sentence on any board of directors of a corporation
unrelated to the Company. For purposes of this Section 2(c) and Section
10(b) to the extent expressly applicable, a "nominal investment" of the
Company or its subsidiaries will be determined in relation to the size of
investments made from time to time by the Company or its subsidiaries in
its portfolio companies (including, without limitation, investments made in
exchange for cash, securities or services rendered).
3. Base Salary. During the Employment Term, the Company shall pay Executive
a Base Salary at the annual rate of One Hundred Eighty Thousand Dollars
($180,000). Base Salary shall be payable in accordance with the usual payroll
practices of the Company. Executive's Base Salary may be reviewed annually by
the Board or the Compensation Committee and may be increased, but not decreased,
from time to time by the Board or the Compensation Committee. The Base Salary as
determined as aforesaid, from time to time for the applicable fiscal year shall
constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be entitled to participate in an incentive
bonus plan established by the Company on such terms and conditions, and
subject to such standards, as shall be determined from time to time in the
sole discretion of the Board or the Compensation Committee. Such incentive
bonus for any such fiscal year shall be payable in cash and shall not be
greater than fifty percent (50%) of Executive's rate of Base Salary in
effect for the fiscal year to which such incentive bonus relates. During
the Employment Term, the Company shall maintain an incentive bonus plan
providing a target bonus equal to not less than fifty percent (50%) of
Executive's rate of Base Salary in effect for the fiscal year to which the
bonus relates.
(b) Stock Options. The Company hereby grants to Executive stock
options (the "STOCK OPTIONS") to purchase 1,020,000 shares of Common Stock
of the Company. The Stock Options shall be granted pursuant to a stock
option award agreement or agreements between Executive and the Company
substantially in the form attached hereto
2
<PAGE> 3
as Exhibit "B" (the "STOCK OPTION GRANTS"). The exercise price for such
Stock Options shall be equal to $23.00 per share of Common Stock. Subject
to the terms and provisions of the Stock Option Grants, the Stock Options
shall become exercisable on the dates indicated below as to that number of
shares of Common Stock of the Company as set forth below opposite each such
date.
<TABLE>
<CAPTION>
Date Number of Shares
---- ----------------
<S> <C>
July 2, 2000 255,000
April 2, 2001 255,000
April 2, 2002 255,000
April 2, 2003 255,000
</TABLE>
The foregoing schedule to the contrary notwithstanding, the Stock Options
shall become fully exercisable in the event the Employment Term terminates
prior to the Expiration Date by reason of termination of the Executive's
employment hereunder by Executive for Good Reason or by the Company without
Cause (as such terms are hereinafter defined). The Stock Options shall in
all events expire on the date ten years after the Commencement Date, if not
terminated or canceled earlier. The Executive shall be permitted to
transfer the Stock Options to the Executive's immediate family members
and/or lineal descendents (or a trust or family limited partnership
established solely for the benefit of any such immediate family member
and/or lineal descendent). Notwithstanding anything in the Stock Option
Grants to the contrary, to the extent any provisions contained therein are
inconsistent with or differ from the explicit terms and conditions of this
Agreement, the terms and conditions of this Agreement shall control. To the
extent this Agreement does not specifically address an issue or term set
forth in the Stock Option Grants, then the provisions and terms of the
Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option Grants,
the number of shares covered by, and the option price per share of, the
Stock Options will be subject to adjustment by the Company for any stock
split, reclassification, combination or similar change in the Company's
capital stock.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit plans
and arrangements and fringe benefits and perquisites generally maintained
by the Company from time to time for the benefit of senior executive
officers of the Company of a comparable level, in each case in accordance
with their respective terms as in effect from time to time (other than any
special arrangement entered into by contract with an executive or that
applies on a grandfathered basis). Without limiting the foregoing, the
Company shall pay all premiums for Executive and his dependent family
members under health, hospitalization, disability, dental, life and other
employee benefit plans that the Company may have in effect from time to
time.
3
<PAGE> 4
Executive acknowledges that the Company does not currently provide a profit
sharing plan, and has no current intention of providing profit sharing
benefits to its employees.
(b) During the Employment Term, Executive shall be entitled to at
least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect from time to time. Executive shall also be
entitled to such periods of sick leave as is customarily provided by the
Company to its senior executive employees.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive, subject to such pre-approval procedures as may be established from
time to time by the Board, in the performance of his duties hereunder, in
accordance with the Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the earliest
to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by the Company
due to Executive's Disability (as defined in Exhibit
"A") pursuant to Section 7(b) hereof;
(iii) the termination of Executive's employment by Executive
for Good Reason (as defined in Exhibit "A") pursuant to
Section 7(c) hereof,
(iv) the termination of Executive's employment by the Company
without Cause (as defined in Exhibit "A") pursuant to
Section 7(e) hereof;
(v) the termination of employment by Executive without Good
Reason upon thirty (30) days prior written notice
pursuant to Section 7(f) hereof; or
(vi) the termination of Executive's employment by the Company
for Cause pursuant to Section 7(d) hereof.
(b) Disability. If Executive is unable to perform his material duties
hereunder due to a physical or mental condition and the Company desires to
terminate Executive's employment for Disability (as defined in Exhibit
"A"), the Company shall deliver to Executive a written Notice of Disability
Termination (herein so called), effective upon the date (the "DISABILITY
TERMINATION DATE") which is the later of (i) the date such condition
becomes a Disability or (ii) thirty (30) days following the delivery of the
Notice of Disability Termination; provided that the Disability Termination
Date shall be
4
<PAGE> 5
suspended, and the Employment Term shall not terminate, so long as
Executive returns to the full performance of his duties by and following
such date.
(c) Termination for Good Reason. A Termination for Good Reason (herein
so called) means a termination by Executive by written notice given within
thirty (30) days after Executive knows of the occurrence of the Good Reason
event, unless such circumstances are corrected prior to the date of
termination specified in the Notice of Termination for Good Reason and the
Company informs Executive of such correction prior to such date. In such
event, the Employment Term shall not terminate. A Notice of Termination for
Good Reason shall mean a notice that shall indicate the specific Good
Reason event in Section (d) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis
for Termination for Good Reason. The failure by Executive to set forth in
the Notice of Termination for Good Reason any facts or circumstances which
contribute to the showing of Good Reason shall not waive any right of
Executive hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his rights hereunder. The Notice of Termination
for Good Reason shall provide for a date of termination not less than
thirty (30) nor more than sixty (60) days after the date such Notice of
Termination for Good Reason is given.
(d) Cause. Subject to the notification provisions of this Section
7(d), Executive's employment hereunder may be terminated by the Company for
Cause. A Notice of Termination for Cause (herein so called) shall mean a
notice that shall indicate the specific termination provision in Section
(a) of Exhibit "A" relied upon and shall set forth in reasonable detail the
facts and circumstances which provide for a basis for Termination for
Cause. The effective date of termination for a Termination for Cause shall
be the date indicated in the Notice of Termination. Any purported
Termination for Cause which is held by a court by a non-appealable final
judgment not to have been based on the grounds set forth in this Agreement
or not to have followed the procedures set forth in this Agreement shall be
deemed a termination by the Company without Cause.
(e) Termination without Cause. The Company may terminate its
employment of Executive for reasons other than Cause at any time upon
thirty (30) days prior written notice.
(f) Voluntary Resignation. Executive may terminate his employment with
the Company at any time upon thirty (30) days prior written notice.
8. Consequences of Termination of Employment. Executive shall be entitled
to the following compensation from the Company (in lieu of all other sums owed
or payable to Executive) upon the termination of employment as described below:
(a) Death, Disability, Voluntary Resignation without Good Reason or by
the Company with Cause. If Executive's employment and the Employment Term
are terminated (1) by reason of Executive's death or Disability, (2) by
Executive without Good Reason or (3) by the Company for Cause, the
employment period under this Agreement shall terminate without further
obligations to Executive or Executive's legal representatives under this
Agreement except for: (i) any Base Salary earned but unpaid,
5
<PAGE> 6
any accrued but unused vacation pay payable pursuant to the Company's
policies and any unreimbursed business expenses payable pursuant to Section
6 (which amounts, in the case of the death of Executive, shall be promptly
paid in a lump sum to Executive's estate), (ii) any other amounts or
benefits earned, accrued and owing to Executive under the then applicable
employee benefit plans, long term incentive plans or equity plans and
programs of the Company, including, without limitation, any earned but
unpaid incentive bonus for any prior completed fiscal year, and (iii)
except in the case of a termination by the Company for Cause or by
Executive without Good Reason, a pro-rata portion (based on the number of
days Executive is employed by the Company during the fiscal year of such
termination) of Executive's incentive bonus earned for the fiscal year in
which termination occurs, which, in any case, shall be paid in accordance
with the applicable plans, programs and agreements, and any unpaid
reimbursable business expenses (such amounts referred to in clauses (i) and
(ii) collectively, the "ACCRUED AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by Company
without Cause. If Executive's employment and the Employment Term are
terminated (i) by Executive for Good Reason, or (ii) by the Company without
Cause (and other than for Disability or as a result of expiration of the
Employment Term), Executive shall be entitled to receive the Accrued
Amounts and shall, subject to Sections 9(b), 9(c) and 10 hereof, be
entitled to receive equal monthly payments of an amount equal to his
monthly rate of Base Salary in effect at the time of such termination plus
his incentive bonus paid for the most recently ended fiscal year (provided,
however, if Executive was employed hereunder for only a portion of such
prior fiscal year, such bonus shall be annualized for purposes of this
calculation, and, if no bonus was paid for such prior fiscal year, the
current fiscal year's bonus, at 100 percent of target, shall be deemed to
be the incentive bonus paid for the most recently ended fiscal year for
purposes of this calculation) divided by twelve (12) for a period equal to
the greater of (x) six (6) months or (y) the remaining period of time from
the date of such termination through the Expiration Date.
(c) Termination as a Result of Nonextension of Employment Term. If
Executive's employment with the Company terminates on the Expiration Date
by reason of expiration of the Employment Term and the Company's failure to
offer to extend the Employment Term, Executive shall be entitled to receive
the Accrued Amounts and shall, subject to Sections 9(b), 9(c) and 10
hereof, be entitled to receive equal monthly payments of an amount equal to
his monthly rate of Base Salary in effect immediately prior to the
Expiration Date plus his incentive bonus paid for the most recently ended
fiscal year divided by twelve (12) for a period of six (6) months.
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under Section 8,
Executive shall be under no obligation to seek other employment and there
shall be no offset against any amounts due Executive under this Agreement
on account of any remuneration attributable to any subsequent employment
that Executive may obtain. Any amounts due under Section 8 are in the
nature of severance payments and are not in the nature of a penalty. Such
amounts are inclusive, and in lieu of any amounts payable under any other
salary continuation or cash severance arrangement of the Company and to the
extent paid
6
<PAGE> 7
or provided under any other such arrangement shall be offset from the
amount due hereunder.
(b) (i) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) or (c) hereunder he will
execute, deliver and not revoke (within the time period permitted by
applicable law) a release of all claims of any kind whatsoever against the
Company, its affiliates, officers, directors, employees, agents and
shareholders in the then standard form being used by the Company for senior
executives (but without release of the right of indemnification hereunder
or under the Company's By-laws or rights under benefit or equity plans that
by their terms are intended to survive termination of his employment or
claims that the Company fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to Executive's
agreements under Section 10 hereof, the Company will execute and
deliver a release of all claims of any kind whatsoever against
Executive (but without release of claims that Executive fulfill his
obligations under this Agreement). The Company's release under this
paragraph (b)(ii) of this Section 9 shall be executed and delivered
simultaneously with the execution and delivery of Executive's release
under paragraph (b)(i) of this Section 9. The releases referred to in
this paragraph (b) of this Section 9 shall apply to all claims
described in this paragraph existing from the beginning of time
through the date of each party's execution of his or its release.(c)
Upon any termination of employment, Executive hereby resigns as an
officer and director of the Company, any subsidiary and any affiliate
and as a fiduciary of any benefit plan of any of the foregoing.
Executive shall promptly execute any further documentation thereof as
requested by the Company and, if Executive is to receive any payments
from the Company, execution of such further documentation shall be a
condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of the
Company.
(a) (i) Executive acknowledges that as a result of his employment by
the Company, Executive will obtain secret and confidential information as
to the Company and its affiliates and create relationships with customers,
suppliers and other persons dealing with the Company and its affiliates and
the Company and its affiliates will suffer irreparable damage, which would
be difficult to ascertain, if Executive should use such confidential
information or take advantage of such relationships and that because of the
nature of the information that will be known to or obtained by Executive
and the relationships created it is necessary for the Company and its
affiliates to be protected by the prohibition against Competition as set
forth herein, as well as the confidentiality restrictions set forth herein.
(ii) Executive acknowledges (A) that the retention of nonclerical
employees, employed by the Company and its affiliates in which the
Company and its affiliates have invested training and depends on for
the operation of their businesses, is important to the businesses of
the Company and its affiliates, and
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<PAGE> 8
(B) that Executive will obtain unique information as to such employees
as an executive of the Company and will develop a unique relationship
with such persons as a result of being an executive of the Company.
Therefore, it is necessary for the Company and its affiliates to be
protected from Executive's Solicitation (defined below) of such
employees as set forth below.
(iii) Executive acknowledges that the provisions of this
Agreement are reasonable and necessary for the protection of the
businesses of the Company and its affiliates and that part of the
compensation paid under this Agreement and the agreement to pay
severance in certain instances is in consideration for the agreements
in this Section 10.
(b) COMPETITION shall mean: participating, directly or indirectly, as
an individual proprietor, partner, stockholder, officer, employee,
director, joint venturer, investor, lender with equity participation,
consultant or in any capacity whatsoever (within the United States of
America, or in any country where the Company or its affiliates do business)
in a Competing Business; provided, however, that such participation shall
not include (i) the ownership of not more than ten percent (10%) of the
total outstanding stock of a publicly held company; (ii) following a
termination of Executive's employment hereunder, the ownership of not more
than five percent (5%) of the total outstanding stock of a private company
if Executive is neither a member of, or represented on, the board of
directors of such private company and does not have an executive officer
role in such private company; (iii) the Allowed Activities; or (iv) any
activity engaged in with the prior written approval of the Board. As used
herein, "Competing Business" means any business that the Company and/or its
subsidiaries and/or any entity in which the Company and/or its subsidiaries
holds securities (other than entities in which the Company or its
subsidiaries make a "nominal investment" (determined as described in
Section 2(c) hereof)) are engaged in (I) from time to time (while Executive
is employed by the Company) or (II) at the time of termination (upon
termination of Executive's employment) (consisting principally of the
services described in the Company's Registration Statement on Form 10 under
the Securities Exchange Act of 1934, as amended, and any amendments
thereof). For purposes of the immediately preceding sentence, but solely
following a termination of Executive's employment hereunder, the Company
and its subsidiaries shall be deemed to have made a "nominal investment" in
an entity if, at the time of such termination of employment, the Company
and its subsidiaries own or control less than ten percent (10%) of the
outstanding equity interests, on a fully diluted basis, of such entity. The
Company shall furnish Executive with a list of all Competing Businesses on
or promptly following termination of his employment hereunder.
(c) SOLICITATION shall mean: recruiting, soliciting or inducing, of
any nonclerical employee or employees of the Company or its affiliates to
terminate their employment with the Company or its affiliates or hiring or
assisting another person or entity to hire any nonclerical employee of the
Company or its affiliates or any person who within twelve (12) months
before had been a nonclerical employee of the Company or its affiliates and
were recruited or solicited for such employment or other retention while an
8
<PAGE> 9
employee of the Company, provided, however, that solicitation shall not
include any of the foregoing activities engaged in with the prior written
approval of the Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a period
of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable. In the event that the agreements in this Section 10 shall be
determined by any court of competent jurisdiction to be unenforceable by
reason of their extending for too great a period of time or over too great
a geographical area or by reason of their being too extensive in any other
respect, they shall be interpreted to extend only over the maximum period
of time for which they may be enforceable and/or over the maximum
geographical area as to which they may be enforceable and/or to the maximum
extent in all other respects as to which they may be enforceable, all as
determined by such court in such action.
(e) During the Employment Term and for two (2) years following a
termination of Executive's employment for any reason whatsoever, whether by
the Company or by Executive and whether or not for Cause, Good Reason or
non-extension of the Employment Term, Executive shall hold in a fiduciary
capacity for the benefit of the Company and its affiliates all secret or
confidential information, knowledge or data relating to the Company and its
affiliates, and their respective businesses, including any confidential
information as to customers of the Company and its affiliates, (i) obtained
by Executive during his employment by the Company and its affiliates and
(ii) not otherwise public knowledge or known within the applicable
industry. Executive shall not, without prior written consent of the
Company, unless compelled pursuant to the order of a court or other
governmental or legal body having jurisdiction over such matter,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. In the event Executive
is compelled by order of a court or other governmental or legal body to
communicate or divulge any such information, knowledge or data to anyone
other than the foregoing, he shall promptly notify the Company of any such
order and he shall cooperate fully with the Company in protecting such
information (at the Company's expense) to the extent possible under
applicable law.
(f) Upon termination of his employment with the Company and its
affiliates, or at any time as the Company may request, Executive will
promptly deliver to the Company, as requested, all documents (whether
prepared by the Company, an affiliate, Executive or a third party) relating
to the Company, an affiliate or any of their businesses or property which
he may possess or have under his direction or control other than documents
provided to Executive in his capacity as a participant in any employee
benefit plan, policy or program of the Company or any agreement by and
between Executive and the Company with regard to Executive's employment or
severance.
(g) During the Employment Term and for two (2) years following a
termination of Executive's employment for any reason whatsoever, whether by
the
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<PAGE> 10
Company or by Executive and whether or not for Cause, Good Reason or
non-extension of the Employment Term, Executive will not engage in
Solicitation.
(h) During the Employment Term and for the Restricted Period (as
hereinafter defined) following a termination of Executive's employment,
Executive will not enter into Competition with the Company. The Restricted
Period shall be (i) for a termination for Cause, twelve (12) months
following the date of termination; (ii) for termination without Cause by
the Company, or for Good Reason by Executive, the period in which the
Company is making payments to Executive as specified in Section 8(b) above;
(iii) for a termination as a result of the voluntary resignation of
Executive without Good Reason, six (6) months from the date of termination;
and (iv) termination as a result of expiration or non-renewal of this
Agreement, after the Company has made a good faith offer for continued
employment, six (6) months following the date of termination.
Notwithstanding the immediately preceding sentence to the contrary, (1) if
the Company terminates Executive's employment without Cause (other than as
a result of expiration of the Employment Term), and the Executive waives,
in writing, at any time after such termination, his right to receive any
future amounts under Section 8(b) hereof, there shall be no Restricted
Period following such termination of employment and waiver, (2) if
Executive terminates his employment for Good Reason, and, after a period of
six (6) months following the date of such termination, the Executive
waives, in writing, at any time after such six-month period, his right to
receive any future amounts that would otherwise be payable after the
expiration of such six-month period under Section 8(b) hereof, the
Restricted Period shall terminate following such six-month period and
waiver, and (3) if the Employment Term expires and the Company fails to
make a good faith offer for continued employment, there shall be no
Restricted Period following such termination of employment.
(i) In the event of a breach or potential breach of this Section 10,
Executive acknowledges that the Company and its affiliates will be caused
irreparable injury and that money damages may not be an adequate remedy and
agree that the Company and its affiliates shall be entitled to injunctive
relief (in addition to its other remedies at law) to have the provisions of
this Section 10 enforced. It is hereby acknowledged that the provisions of
this Section 10 are for the benefit of the Company and all of the
affiliates of the Company and each such entity may enforce the provisions
of this Section 10 and only the applicable entity can waive the rights
hereunder with respect to its confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any other
remedies provided herein or at law or in equity, in the event of breach of
this Section 10 by Executive, while he is receiving amounts under Section
8(b) or (c) hereof, Executive shall not be entitled to receive any future
amounts pursuant to Section 8(b) or (c) hereof after the earlier to occur
of (i) ninety (90) days following the Company's notification of Executive
of its good faith determination of such breach, specifying in reasonable
detail the grounds for such determination, and (ii) a final determination
by an arbitrator or court of competent jurisdiction of such breach, and,
upon such final determination, which is not
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<PAGE> 11
appealable, he shall reimburse the Company for any amounts previously paid
to Executive pursuant to Section 8(b) or (c) hereof.
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended and
as applicable, for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any subsidiary or affiliate of the Company or as a fiduciary of
any benefit plan. The Company shall cover Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent as the Company covers
its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company copyrights, trade
secrets, proprietary information, patents, unpatented inventions,
trademarks, service marks, processes, techniques, methods, know-how, flow
charts, diagrams, computer programs and/or databases, and any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not (all of the foregoing, collectively,
"INTELLECTUAL PROPERTY"), which are conceived, created, developed or made
by Executive, solely or jointly with another, during the period of
employment or within one (1) year thereafter, and which are substantially
related to the business or activities of the Company or its subsidiaries
which Executive conceived, created, developed or made as a result of his
employment by the Company or any of its subsidiaries. Executive hereby
assigns and agrees to assign all of his right, title and interest
throughout the world in any Intellectual Property to the Company or its
nominee. Whenever requested to do so by the Company, Executive shall
execute any and all applications, assignments or other instruments that the
Company shall deem necessary to apply for and obtain registrations of
copyrights or marks, or Letters Patent of the United States or any foreign
country or to otherwise protect the Company's interest in Intellectual
Property.
(b) Executive agrees that he will not, during or after the Employment
Term, disclose the specific terms of the Company's relationships or
agreements with its significant vendors or customers or any other
significant material trade secrets of the Company, whether in existence or
proposed (other than any of the foregoing that becomes public knowledge
other than through disclosure by Executive), to any person, firm,
partnership, corporation or business for any reason or purpose whatsoever,
except as is disclosed in the ordinary course of business, unless compelled
by a court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred in such dispute unless the finder of fact determines that the
Company is the prevailing party in such dispute.
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<PAGE> 12
14. Certain Additional Payments. Executive shall be grossed up for any
excise tax payable under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), in accordance with Exhibit C attached hereto.
15. Resolution of Disputes. The parties shall use their best efforts and
good will to settle all disputes by amicable negotiations. The Company and
Executive agree, for purposes of the resolution of any disputes under this
Agreement, that such disputes shall be settled by arbitration in Dallas, Texas,
or such other place agreed to by the parties, in accordance with the rules and
procedures of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel consisting of
one to three arbitrators, each of whom shall be impartial. All arbitrators
shall be appointed in the first instance by agreement between the parties
hereto. If the parties cannot agree upon a single arbitrator, each of the
Company and the Executive shall be entitled to appoint one arbitrator.
These two appointed arbitrators shall then appoint a third arbitrator by
their mutual agreement.
(b) An arbitration may be commenced by either party to this Agreement
by the service of a written request for arbitration upon the other affected
party. Such request for arbitration shall summarize the controversy or
claim to be arbitrated. If the panel of arbitrators is not appointed within
thirty (30) days following such service, either party may apply to any
court within the State of Texas for an order appointing arbitrators
qualified as set forth below. No request for arbitration shall be valid if
it relates to a claim, dispute, disagreement or controversy that would have
been time barred under the applicable statute of limitations had such
claim, dispute, disagreement or controversy been submitted to the courts of
the State of Texas.
(c) The parties hereby expressly waive punitive damages, and under no
circumstances shall an award contain any amount that in any way reflects
punitive damages.
(d) Judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without reference to
principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the instruments
contemplated herein, contain the entire understanding of the parties with
respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements between the Company
and Executive with respect thereto. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with
respect to the subject matter herein other than those
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<PAGE> 13
expressly set forth herein and therein. This Agreement may not be altered,
modified, or amended except by written instrument signed by the parties
hereto.
(c) Construction and Severability. If any provision of this Agreement
shall be held invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties
undertake to implement all efforts which are necessary, desirable and
sufficient to amend, supplement or substitute all and any such invalid,
illegal or unenforceable provisions with enforceable and valid provisions
which would produce as nearly as may be possible the result previously
intended by the parties without renegotiation of any material terms and
conditions stipulated herein.
(d) No Waiver. Any failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a
waiver of such party's rights or deprive such party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement. Any such waiver must be in writing and signed by Executive or an
authorized officer of the Company, as the case may be.
(e) Assignment. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable by the Company only to an entity which
is owned, directly or indirectly, in whole or in part by the Company or by
any successor to the Company or an acquirer of all or substantially all of
the assets of the Company or all or substantially all of the assets of a
group of subsidiaries and divisions of the Company, provided such entity or
acquirer promptly assumes all of the obligations hereunder of the Company
in a writing delivered to Executive and otherwise complies with the
provisions hereof with regard to such assumption. Upon such assignment and
assumption, all references to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries. This
Agreement shall inure to the beneficiaries and permitted assignees of the
parties hereto. In the event of Executive's death while receiving amounts
payable pursuant to Section 8(b) hereof, any remaining amounts shall be
paid to Executive's estate.
(g) Communications. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when faxed or delivered, or
(ii) two (2) business days after being mailed by United States registered
or certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the initial page of this Agreement,
provided that all notices to the Company shall be directed to the attention
of the General Counsel and Secretary of the Company, or to such other
address as any party may have furnished to the other in writing in
accordance herewith. Notice of change of address shall be effective only
upon receipt.
(h) Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such Federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or
regulation.
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<PAGE> 14
(i) Survivorship. The respective rights and obligations of the parties
hereunder, including without limitation Section 10 and Section 11 hereof,
shall survive any termination of Executive's employment to the extent
necessary to the agreed preservation of such rights and obligations.
(j) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
(l) Executive's Representation. Executive represents and warrants to
the Company that there is no legal impediment to him entering into this
Agreement, and entering into this Agreement will not violate any agreement
to which he is a party or any other legal restrictions, and he has provided
to the Company true and complete copies of any agreements or covenants to
which he is a party that could restrict or adversely affect his performance
under this Agreement. Executive further represents and warrants that in
performing his duties hereunder he will not wrongfully use or disclose any
confidential information of any prior employer or other person or entity.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
COMPANY:
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Clark K. Hunt
----------------------------------------
Name: Clark K. Hunt
--------------------------------------
Title:Chairman of the Compensation Committee
--------------------------------------
EXECUTIVE:
/s/ Daniel J. Wilson
--------------------------------------------
DANIEL J. WILSON
15
<PAGE> 16
EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
DANIEL J. WILSON
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE" shall be
limited to the following:
(i) Executive's willful misconduct or gross negligence with
regard to the Company or its affiliates or their
business, assets or employees (including, without
limitation, Executive's fraud, embezzlement or other act
of dishonesty with regard to the Company or its
affiliates), or Executive's willful misconduct other
than the foregoing, which in any case has a material
adverse impact on the Company or its affiliates, whether
economic, or reputationwise or otherwise, each as
determined by the Board, and which is not fully
rectified or cured, if susceptible to rectification or
cure, within thirty (30) days after written notice is
given to Executive; provided, however, that this clause
(i) shall not include an action or omission of Executive
done or omitted to be done in his good faith exercise of
business judgment or in good faith reliance on advice of
legal counsel to the Company;
(ii) Executive's conviction of, or pleading nolo contendere
to, a felony or other crime involving fraud, dishonesty
or moral turpitude or which carries a minimum prison
sentence upon conviction of one (1) year or longer;
(iii) Executive's refusal or willful failure to follow the
lawful written direction of the Board, the Chief
Executive Officer or his designee which is not remedied
within ten (10) business days after receipt by Executive
of a written notice specifying the details thereto;
(iv) Executive's breach of Section 10 or Section 12 hereof,
which has a material adverse economic impact on the
Company or its affiliates, as determined by the Board;
(v) the representations or warranties in Section 16(l)
hereof prove false, which has a material adverse
economic impact on the Company or its affiliates, as
determined by the Board; or
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<PAGE> 17
(vi) any other breach by Executive of this Agreement, which
has a material adverse impact on the Company or its
affiliates, whether economic, or reputationwise or
otherwise, each as determined by the Board, that remains
uncured for thirty (30) days after written notice is
given to Executive.
(b) Change in Control. For purposes of this Agreement, the term
"CHANGE IN CONTROL" shall mean the occurrence of any of the following:
(i) any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 ("Act")
(other than (a) Permitted Assignees, (b) the Company,
(c) any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or (d)
any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of Common Stock of the
Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing
fifty percent (50 %) or more of the combined voting
power of the Company's then outstanding securities.
Permitted Assignees shall mean the holders of the equity
securities (whether or not voting) of any shareholder of
the Company owning more than fifteen percent (15%) of
the Company on the date after the date of execution of
this Agreement, so long as the voting power and
disposition authority with respect to the securities of
such holders is held directly or indirectly by any two
or three of the following individuals: Barrett N.
Wissman, Clark K. Hunt or James R. Holland;
(ii) during any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of
the two-year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) more than fifty percent (50%) of the
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<PAGE> 18
combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately
after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or the sale or
disposition by the Company of assets where the proceeds
thereof are not retained by the Company, in a single
transaction or a series of related transactions, that
result in a 66-2/3 percent or greater decline in the
enterprise value of the Company, valued based on the
weighted average fair market value of any outstanding
class of stock of the Company plus the book value of the
outstanding indebtedness of the Company.
(c) Disability. For purposes of this Agreement, "DISABILITY" shall
mean if Executive is unable to perform his material duties pursuant to this
Agreement, as determined by the Board, because of mental or physical incapacity,
including, without limitation, alcoholism or drug abuse, which requires a leave
of absence in excess of ninety (90) consecutive days in any twelve (12) month
period.
(d) Good Reason. For purposes of this Agreement, "GOOD REASON" shall
mean the occurrence, without Executive's express written consent, in the case of
(i), (ii), (iii) or (iv), of any of the following circumstances:
(i) (a) any material demotion of Executive from his position
as Senior Vice President or (b) any assignment of duties
to Executive materially and adversely inconsistent with
Executive's position as Senior Vice President (except in
connection with the termination of Executive's
employment for Cause or due to Disability or as a result
of Executive's death, or temporarily as a result of
Executive's illness or other absence);
(ii) a failure by the Company to pay to Executive any amounts
due under this Agreement in accordance with the terms
hereof, which failure is not cured within fifteen (15)
days following receipt by the Company of written notice
from Executive of such failure;
(iii) the termination of Jeffrey A. Marcus' ("Marcus")
employment with the Company under any circumstances
other than death, "Disability," termination by the
Company with "Cause," or termination by Marcus without
"Good Reason," as each such term is defined in that
certain Employment Agreement made as of April 3, 2000,
by and between the Company and Marcus;
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(iv) any other material breach by the Company of this
Agreement that remains uncured for fifteen (15) days
after written notice thereof by Executive to the
Company; or
(v) following a Change in Control, the Board requires
Executive to relocate to an area other than the Dallas,
Texas greater metropolitan area; or if the Company's
corporate headquarters are located in an area other than
the Dallas, Texas greater metropolitan area, to an area
more than fifty (50) miles from the Company's corporate
headquarters, and Executive declines to so relocate.
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<PAGE> 20
EXHIBIT "B"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
DANIEL J. WILSON
STOCK OPTION GRANTS
5
<PAGE> 21
EXHIBIT "C"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
DANIEL J. WILSON
GROSS-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this Exhibit C is
a part:
(a) In the event that Executive shall become entitled to payments
and/or benefits provided by this Agreement or any other amounts in the "nature
of compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership or effective control covered by Section 280G(b)(2) of
the Code or any person affiliated with the Company or such person) as a result
of such change in ownership or effective control (collectively the "Company
Payments"), and such Company Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code, the Company shall pay to Executive,
subject to required withholding, at the time specified in subsection (d) below
an additional amount (the "Gross-up Payment") such that the net amount retained
by Executive, after deduction of any Excise Tax on the Company Payments and on
the Gross-up Payment provided for under this paragraph (a) and any U.S. federal,
state, and local income or payroll tax upon the Gross-up Payment provided for by
this paragraph (a), but before deduction for any U.S. federal, state, and local
income or payroll tax on the Company Payments, shall be equal to the Company
Payments.
(b) In the event that the Excise Tax is subsequently determined by the
Company to be less than the amount taken into account hereunder at the time the
Gross-up Payment is made, Executive shall repay to the Company, at the time that
the amount of such reduction in Excise Tax is finally determined, the portion of
the prior Gross-up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S. federal, state and
local income tax imposed on the portion of the Gross-up Payment being repaid by
Executive), plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is later
determined by the Company or the Internal Revenue Service to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-up Payment), the Company shall make an additional
Gross-up Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
(c) The Gross-up Payment or portion thereof provided for in subsection
(c) above shall be paid not later than the thirtieth (30th) day following
delivery by Executive to the Company of notice that an event that subjects
Executive to the Excise Tax has occurred; provided, however, that if the amount
of such Gross-up Payment or portion thereof cannot be finally determined on or
before such day, the Company shall pay to Executive on such day an estimate, as
determined in good faith by the Company, of the minimum amount of such
6
<PAGE> 22
payments and shall pay the remainder of such payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) promptly following such
time as the amount thereof has been determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to Executive, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(d) In the event of any controversy with the Internal Revenue Service
(or other taxing authority) with regard to the Excise Tax, Executive shall
permit the Company to control issues related to the Excise Tax, but Executive
shall control any other issues. In the event of any conference with any taxing
authority as to the Excise Tax or associated income taxes, Executive shall
permit the representative of the Company to accompany Executive, and Executive
and Executive's representative shall cooperate with the Company and its
representative.
(e) The Company and Executive shall promptly deliver to each other
copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit C.
7
<PAGE> 1
EXHIBIT 10.6
eVENTURES GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made and
entered into by and between eVENTURES GROUP, INC., a Delaware corporation (the
"COMPANY"), and DANIEL J. WILSON (the "OPTIONEE"), effective April 4, 2000 (the
"DATE OF GRANT").
1. GRANT OF OPTION. The Company hereby grants to the Optionee and the
Optionee hereby accepts, subject to the terms and conditions hereof, the right
and option to purchase from the Company (the "OPTION") all or any part of an
aggregate of 1,020,000 shares of the Company's common stock, par value $0.00002
per share (the "COMMON STOCK"), at a per share purchase price equal to
Twenty-Three Dollars and no cents ($23.00) per share (the "EXERCISE PRICE"), as
such shares and Exercise Price may be adjusted in accordance with Section 9
below. The Option is not granted pursuant to the Company's 1999 Omnibus
Securities Plan. The Option shall not be treated as an incentive stock option as
defined in Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXPIRATION AND TERMINATION OF THE OPTION. The Option will expire at
the end of business on April 4, 2010, ten (10) years from the Date of Grant of
the Option (the "EXPIRATION DATE"). In the event of termination of the
Optionee's employment with the Company, any Vested Portion (as defined in
Section 3 below) of the Option on the date of such termination may be exercised
at any time prior to the Expiration Date, and the Option shall terminate as to
the shares of Common Stock covered by the remaining, unvested portion of the
Option. The Option may not be exercised after its expiration or termination.
3. VESTING. On each Measurement Date set forth in Column 1 below, the
Option shall vest and become exercisable for the corresponding percentage set
forth in Column 2 below of the total number of shares of Common Stock set forth
in paragraph 1 hereof. The "VESTED PORTION" of the Option as of any particular
date shall be the cumulative total of all shares for which the Option has become
exercisable on or prior to that date in accordance with the following schedule.
<TABLE>
<CAPTION>
-----------------------------------------------------
COLUMN 1 COLUMN 2
Percentage of Total Option
Shares Vesting
Measurement Date on Measurement Date
---------------- ----------------------------
<S> <C>
July 2, 2000 Twenty-Five Percent (25%)
April 2, 2001 Twenty-Five Percent (25%)
April 2, 2002 Twenty-Five Percent (25%)
April 2, 2003 Twenty-Five Percent (25%)
-----------------------------------------------------
</TABLE>
PAGE 1
<PAGE> 2
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company is terminated by the Company without "Cause" (other than for
"Disability") or by the Optionee for "Good Reason" (as such terms are defined in
the Employment Agreement between the Optionee and the Company), the Option shall
become fully and immediately exercisable and the "Vested Portion" of the Option
shall mean one hundred percent (100%) of the total number of shares of Common
Stock set forth in paragraph 1 hereof.
4. EXERCISE OF THE OPTION. The Vested Portion of the Option may be
exercised, to the extent not previously exercised, in whole or in part, at any
time or from time to time prior to the expiration or termination of the Option,
except that no Option shall be exercisable except in respect to whole shares,
and not less than one hundred (100) shares may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the Option. Exercise shall be accomplished by providing the
Company with written notice in the form of Exhibit "A" attached hereto, which
notice shall be irrevocable when delivered and effective upon payment in full of
the Exercise Price and any amounts required for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under this Agreement.
5. PAYMENT OF EXERCISE PRICE. Upon any exercise of the Option, the
total Exercise Price for the number of shares for which the Option is then being
exercised and the amount of any Federal, state and local withholding taxes
imposed thereon shall be paid in full to the Company in cash or, if permitted by
applicable law and subject to such limitations or conditions as the
Administering Body (as defined in Section 8 hereof) may prescribe, (a) with
shares of Common Stock that have been owned for at least six months by the
Optionee (or by the Optionee and his spouse jointly) having a total fair market
value (as determined by the Administering Body ("FAIR MARKET VALUE")) on the
date of such exercise equal to the total Exercise Price of such shares and the
amount of such withholding, or (b) in a broker-assisted or similar transaction
in which the total Exercise Price of such shares and the amount of such
withholding is not received by the Company until promptly after exercise, or
using a combination of the foregoing forms of consideration.
6. TRANSFERABILITY OF OPTION. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided,
however, that the Optionee may transfer the Option as a gift to the Optionee's
spouse, children, or grandchildren or a trust or family limited partnership
established solely for the benefit of, or of which the partners comprise only,
any such spouse, children or grandchildren. The transfer of the Option and any
transferred Option shall be subject to the same terms and conditions that were
applicable to the Option immediately prior to its transfer. No transfer of the
Option shall be effective unless the Company shall have been furnished with
written notice of such transfer at least 30 days in advance thereof and a copy
of such evidence as the Administering Body may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions hereof. Any attempted transfer, assignment, pledge or other
disposition or levy, attachment or similar process with respect to the Option
not specifically permitted herein shall be null and void without effect.
PAGE 2
<PAGE> 3
7. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors of the Company (the "BOARD")
or any Stock Plan Committee appointed by the Board (the "ADMINISTERING BODY").
The Optionee agrees that the decisions of such Administering Body concerning
administration and interpretation of this Agreement and the Option shall be
final, binding and conclusive on all persons. No member of the Board or the
Stock Plan Committee, nor any person participating in any determination of any
question under this Agreement, shall have any liability, in the absence of gross
negligence or willful misconduct, to any party for any action taken or not taken
in connection with this Agreement.
8. ADJUSTMENTS. If (a) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (b) the value of the outstanding shares of Common Stock
is reduced by reason of an extraordinary dividend payable in cash or property,
an appropriate and proportionate adjustment shall be made by the Administering
Body in the number and kind of shares or other securities subject to the Option
and/or the Exercise Price for each share or other unit of any other securities
subject to the Option. No fractional interests will be issued under the Option
resulting from any such adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of Common
Stock otherwise issuable as a result of such adjustments.
9. REGISTRATION. The Company shall (i) file a registration statement,
at the Company's option, on Form S-1, S-3 or S-8 under the Securities Act of
1933, as amended, which includes a reoffer prospectus, on the date which is the
earlier of (a) 90 days after the date it is first eligible to use Form S-3 or
S-8 or (b) January 15, 2001; (ii) use its best efforts, where effectiveness is
not automatic after the passage of time, to have such registration statement
declared effective within 90 days after such registration statement was filed;
and (iii) use its best efforts to maintain the effectiveness of such
registration statement or a successor registration statement (which includes a
reoffer prospectus) during the term of the Option.
10. NOTICES. Any notice hereunder to the Company shall be addressed to
it at 300 Crescent Court, Suite 800, Dallas, Texas 75201, Attention: General
Counsel, and any notice hereunder to the Optionee shall be addressed to the
Optionee at 5416 Wateka Drive, Dallas, Texas 75209, subject to the right of
either party to designate at any time hereafter in writing some other address.
11. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof.
PAGE 3
<PAGE> 4
12. SEVERABILITY. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. MODIFICATION. This Agreement may not be modified or amended, nor
may any provision hereof be waived, in any way except in writing signed by the
parties hereto.
14. COUNTERPARTS. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company by its duly authorized officer, and by the Optionee in acceptance of the
above-mentioned Option, subject to the terms and conditions of this Agreement,
all as of the day and year first above written.
Signature Page Following
PAGE 4
<PAGE> 5
SIGNATURE PAGE FOR eVENTURES GROUP, INC., NONQUALIFIED STOCK
OPTION AGREEMENT
Signature page for eVentures Group, Inc., Nonqualified Stock Option Agreement
dated April 4, 2000.
COMPANY:
eVENTURES GROUP, INC.
BY: /s/ Stuart J. Chasanoff
---------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate
Development and Legal Affairs
OPTIONEE:
/s/ Daniel J. Wilson
----------------------------
Printed Name: Daniel J. Wilson
--------------------
PAGE 5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXERCISE
UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
To: eVentures Group, Inc. (the "COMPANY")
From:
--------------------------------
Date:
--------------------------------
Pursuant to the Nonqualified Stock Option Agreement (the "AGREEMENT")
(capitalized terms used without definition herein have the meanings given such
terms in the Agreement) between the Company and myself effective
______________________, I hereby exercise my Option as follows:
<TABLE>
<S> <C>
- - ---------------------------------------------------------------------------------
Number of shares of Common Stock I wish to purchase under the Option
- - ------------------------------------------------------------------------- ------
Exercise Price per share $
- - ------------------------------------------------------------------------- ------
Total Exercise Price $
- - ------------------------------------------------------------------------- ------
"Vested Portion" of Option (see definition in Section 3 of the Agreement)
- - ------------------------------------------------------------------------- ------
Number of shares I have previously purchased by exercising the Option
- - ------------------------------------------------------------------------- ------
Expiration Date of the Option
- - ------------------------------------------------------------------------- ------
</TABLE>
I hereby represent, warrant, and covenant to the Company that:
a. I am acquiring the Common Stock for my own account, for
investment, and not for distribution or resale, and I will make no transfer of
such Common Stock except in compliance with applicable federal and state
securities laws.
b. I can bear the economic risk of the investment in the Common
Stock resulting from this exercise of the Option, including a total loss of my
investment.
c. I am experienced in business and financial matters and am
capable of (i) evaluating the merits and risks of an investment in the Common
Stock; (ii) making an informed investment decision regarding exercise of the
Option; and (iii) protecting my interests in connection therewith.
d. Any subsequent offer for sale or distribution of any of the
shares of Common Stock shall be made only pursuant to (i) a registration
statement on an appropriate form under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), which registration statement has
1
<PAGE> 7
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, I shall, prior to any offer for sale or sale of such shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Administering Body, from counsel for or approved by the Administering Body, as
to the applicability of such exemption thereto.
I acknowledge that I must pay the total Exercise Price in full and make
appropriate arrangements for the payment of all federal, state and local tax
withholdings due with respect to the Option exercised herein, before the stock
certificate evidencing the shares of Common Stock resulting from this exercise
of the Option will be issued to me.
Attached in full payment of the total Exercise Price for the Option
exercised herein is ( ) a check made payable to the Company in the amount of
$___________________ and/or ( ) a stock certificate for _______ shares of Common
Stock that have been owned by me or by me and my spouse jointly for at least six
months, with a duly completed stock power attached with a total Fair Market
Value on the date hereof equal to the total Exercise Price.
Also attached in full payment of all withholding tax obligations
arising from exercise of the Option is (___) a check made payable to the Company
in the amount of such required withholding and/or (____) a stock certificate for
____ shares of Common Stock that have been owned by me or by me and my spouse
jointly for at least six months, with a duly completed stock power attached,
with a total Fair Market Value on the date hereof equal to the amount of such
required withholding.
Signature Page Following
2
<PAGE> 8
SIGNATURE PAGE FOR "EXHIBIT A", NOTICE OF EXERCISE UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
Signature page for "Exhibit A", Notice of Exercise under Nonqualified Stock
Option Agreement dated _________________, 2000.
OPTIONEE:
----------------------------------
Name:
-----------------------------
RECEIVED BY THE COMPANY:
----------------------------------
Name:
-----------------------------
Date:
-----------------------------
3
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of April 4,
2000, by and between, EVENTURES GROUP, INC., a Delaware corporation, with its
principal office at 300 Crescent Court, Suite 800, Dallas, Texas 75201 (the
"COMPANY"), and CHAD E. COBEN residing at 6715 Norway Road, Dallas, Texas 75230
("EXECUTIVE").
WITNESSETH:
WHEREAS, effective April 3, 2000 (the "COMMENCEMENT DATE"), the Company
desires to employ Executive as its Senior Vice President, and Executive desires
to accept such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement
as to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on April 2, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as a Senior Vice President of the
Company (the "SENIOR VICE PRESIDENT"), reporting directly to the Chief
Executive Officer or President of the Company (the "CHIEF EXECUTIVE
OFFICER"), with functional responsibility for acquisitions, investments
and operational oversight. If requested by the Board of Directors of
the Company (the "BOARD") or the Chief Executive Officer, Executive
shall also serve on the Board and committees thereof, as an executive,
officer and director of subsidiaries of the Company and/or as a
director of associated companies of the Company without additional
compensation and subject to any policy of the Compensation Committee of
the Company's Board (the "COMPENSATION COMMITTEE") with regard to
retention or turnover of the director's fees.
(b) Executive shall have such duties and authority, consistent
with his position, as shall be assigned to him from time to time by the
Chief Executive Officer.
(c) During the Employment Term, Executive shall devote
substantially all of his business time and efforts to the performance
of his duties hereunder. Nothing contained herein shall be construed to
prohibit Executive from (i) owning less than ten percent (10%) of the
outstanding securities of any publicly traded entity, (ii) pursuing any
business opportunity that is not in Competition, as such term is
defined in Section 10(b) below, with the Company or its subsidiaries or
any portfolio company in which the
1
<PAGE> 2
Company or its subsidiaries hold securities (other than entities in
which the Company or its subsidiaries make a nominal investment)
(provided the time devoted by Executive to such personal investment
does not materially interfere with Executive's duties hereunder), (iii)
continuing service as a consultant of Broadband NOW, in the same
capacity and extent as Executive rendered such service immediately
prior to the Commencement Date, (iv) continuing service on the boards
of directors of the companies set forth on Exhibit "D" attached hereto
or, with the written consent of the Board, on the board of directors of
any other company that is not in Competition with the Company or its
subsidiaries or any portfolio company in which the Company or its
subsidiaries hold securities (other than entities in which the Company
or its subsidiaries make a nominal investment), or (v) service on the
boards of directors of a reasonable number of charitable organizations
so long as such service is not inconsistent with his position and
duties hereunder (such activities described in clause (i), (ii), (iii),
(iv) or (v) immediately preceding being herein referred to as the
"ALLOWED ACTIVITIES"). Executive shall be entitled to retain any
consideration that he receives from service permitted by clauses (iii)
and (iv) of the immediately preceding sentence on any board of
directors of a corporation unrelated to the Company. For purposes of
this Section 2(c) and Section 10(b) to the extent expressly applicable,
a "nominal investment" of the Company or its subsidiaries will be
determined in relation to the size of investments made from time to
time by the Company or its subsidiaries in its portfolio companies
(including, without limitation, investments made in exchange for cash,
securities or services rendered).
3. Base Salary. During the Employment Term, the Company shall pay
Executive a Base Salary at the annual rate of One Hundred Eighty Thousand
Dollars ($180,000). Base Salary shall be payable in accordance with the usual
payroll practices of the Company. Executive's Base Salary may be reviewed
annually by the Board or the Compensation Committee and may be increased, but
not decreased, from time to time by the Board or the Compensation Committee. The
Base Salary as determined as aforesaid, from time to time for the applicable
fiscal year shall constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be entitled to participate in an
incentive bonus plan established by the Company on such terms and
conditions, and subject to such standards, as shall be determined from
time to time in the sole discretion of the Board or the Compensation
Committee. Such incentive bonus for any such fiscal year shall be
payable in cash and shall not be greater than fifty percent (50%) of
Executive's rate of Base Salary in effect for the fiscal year to which
such incentive bonus relates. During the Employment Term, the Company
shall maintain an incentive bonus plan providing a target bonus equal
to not less than fifty percent (50%) of Executive's rate of Base Salary
in effect for the fiscal year to which the bonus relates.
(b) Stock Options. The Company hereby grants to Executive
stock options (the "STOCK OPTIONS") to purchase 510,000 shares of
Common Stock of the Company. The Stock Options shall be granted
pursuant to a stock option award agreement or agreements between
Executive and the Company substantially in the form attached hereto
2
<PAGE> 3
as Exhibit "B" (the "STOCK OPTION GRANTS"). The exercise price for such
Stock Options shall be equal to $23.00 per share of Common Stock.
Subject to the terms and provisions of the Stock Option Grants, the
Stock Options shall become exercisable on the dates indicated below as
to that number of shares of Common Stock of the Company as set forth
below opposite each such date.
<TABLE>
<CAPTION>
Date Number of Shares
---- ----------------
<S> <C>
July 2, 2000 127,500
April 2, 2001 127,500
April 2, 2002 127,500
April 2, 2003 127,500
</TABLE>
The foregoing schedule to the contrary notwithstanding, the Stock
Options shall become fully and immediately exercisable in the event the
Employment Term terminates prior to the Expiration Date by reason of
termination of the Executive's employment hereunder by Executive for
Good Reason or by the Company without Cause (as such terms are
hereinafter defined). The Stock Options shall in all events expire on
the date ten years after the Commencement Date, if not terminated or
canceled earlier. The Executive shall be permitted to transfer the
Stock Options to the Executive's immediate family members and/or lineal
descendents (or a trust or family limited partnership established
solely for the benefit of any such immediate family member and/or
lineal descendent). Notwithstanding anything in the Stock Option Grants
to the contrary, to the extent any provisions contained therein are
inconsistent with or differ from the explicit terms and conditions of
this Agreement, the terms and conditions of this Agreement shall
control. To the extent this Agreement does not specifically address an
issue or term set forth in the Stock Option Grants, then the provisions
and terms of the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option
Grants, the number of shares covered by, and the option price per share
of, the Stock Options will be subject to adjustment by the Company for
any stock split, reclassification, combination or similar change in the
Company's capital stock.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit
plans and arrangements and fringe benefits and perquisites generally
maintained by the Company from time to time for the benefit of senior
executive officers of the Company of a comparable level, in each case
in accordance with their respective terms as in effect from time to
time (other than any special arrangement entered into by contract with
an executive or that applies on a grandfathered basis). Without
limiting the foregoing, the Company shall pay all premiums for
Executive and his dependent family members under health,
hospitalization, disability, dental, life and other employee benefit
plans that the Company may have in effect from time to time.
3
<PAGE> 4
Executive acknowledges that the Company does not currently provide a
profit sharing plan, and has no current intention of providing profit
sharing benefits to its employees.
(b) During the Employment Term, Executive shall be entitled to
at least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect from time to time. Executive shall also be
entitled to such periods of sick leave as is customarily provided by
the Company to its senior executive employees.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive, subject to such pre-approval procedures as may be established from
time to time by the Board, in the performance of his duties hereunder, in
accordance with the Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the
earliest to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by the
Company due to Executive's Disability (as defined in
Exhibit "A") pursuant to Section 7(b) hereof;
(iii) the termination of Executive's employment by
Executive for Good Reason (as defined in Exhibit
"A") pursuant to Section 7(c) hereof,
(iv) the termination of Executive's employment by the
Company without Cause (as defined in Exhibit "A")
pursuant to Section 7(e) hereof;
(v) the termination of employment by Executive without
Good Reason upon thirty (30) days prior written
notice pursuant to Section 7(f) hereof; or
(vi) the termination of Executive's employment by the
Company for Cause pursuant to Section 7(d) hereof.
(b) Disability. If Executive is unable to perform his material
duties hereunder due to a physical or mental condition and the Company
desires to terminate Executive's employment for Disability (as defined
in Exhibit "A"), the Company shall deliver to Executive a written
Notice of Disability Termination (herein so called), effective upon the
date (the "DISABILITY TERMINATION DATE") which is the later of (i) the
date such condition becomes a Disability or (ii) thirty (30) days
following the delivery of the Notice of Disability Termination;
provided that the Disability Termination Date shall be
4
<PAGE> 5
suspended, and the Employment Term shall not terminate, so long as
Executive returns to the full performance of his duties by and
following such date.
(c) Termination for Good Reason. A Termination for Good Reason
(herein so called) means a termination by Executive by written notice
given within thirty (30) days after Executive knows of the occurrence
of the Good Reason event, unless such circumstances are corrected prior
to the date of termination specified in the Notice of Termination for
Good Reason and the Company informs Executive of such correction prior
to such date. In such event, the Employment Term shall not terminate. A
Notice of Termination for Good Reason shall mean a notice that shall
indicate the specific Good Reason event in Section (d) of Exhibit "A"
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for Good
Reason. The failure by Executive to set forth in the Notice of
Termination for Good Reason any facts or circumstances which contribute
to the showing of Good Reason shall not waive any right of Executive
hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his rights hereunder. The Notice of
Termination for Good Reason shall provide for a date of termination not
less than thirty (30) nor more than sixty (60) days after the date such
Notice of Termination for Good Reason is given.
(d) Cause. Subject to the notification provisions of this
Section 7(d), Executive's employment hereunder may be terminated by the
Company for Cause. A Notice of Termination for Cause (herein so called)
shall mean a notice that shall indicate the specific termination
provision in Section (a) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances which provide for a
basis for Termination for Cause. The effective date of termination for
a Termination for Cause shall be the date indicated in the Notice of
Termination. Any purported Termination for Cause which is held by a
court by a non-appealable final judgment not to have been based on the
grounds set forth in this Agreement or not to have followed the
procedures set forth in this Agreement shall be deemed a termination by
the Company without Cause.
(e) Termination without Cause. The Company may terminate its
employment of Executive for reasons other than Cause at any time upon
thirty (30) days prior written notice.
(f) Voluntary Resignation. Executive may terminate his
employment with the Company at any time upon thirty (30) days prior
written notice.
8. Consequences of Termination of Employment. Executive shall be
entitled to the following compensation from the Company (in lieu of all other
sums owed or payable to Executive) upon the termination of employment as
described below:
(a) Death, Disability, Voluntary Resignation without Good
Reason or by the Company with Cause. If Executive's employment and the
Employment Term are terminated (1) by reason of Executive's death or
Disability, (2) by Executive without Good Reason or (3) by the Company
for Cause, the employment period under this Agreement shall terminate
without further obligations to Executive or Executive's legal
representatives under this Agreement except for: (i) any Base Salary
earned but unpaid,
5
<PAGE> 6
any accrued but unused vacation pay payable pursuant to the Company's
policies and any unreimbursed business expenses payable pursuant to
Section 6 (which amounts, in the case of the death of Executive, shall
be promptly paid in a lump sum to Executive's estate), (ii) any other
amounts or benefits earned, accrued and owing to Executive under the
then applicable employee benefit plans, long term incentive plans or
equity plans and programs of the Company, including, without
limitation, any earned but unpaid incentive bonus for any prior
completed fiscal year, and (iii) except in the case of a termination by
the Company for Cause or by Executive without Good Reason, a pro-rata
portion (based on the number of days Executive is employed by the
Company during the fiscal year of such termination) of Executive's
incentive bonus earned for the fiscal year in which termination occurs,
which, in any case, shall be paid in accordance with the applicable
plans, programs and agreements, and any unpaid reimbursable business
expenses (such amounts referred to in clauses (i) and (ii),
collectively, the "ACCRUED AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by
Company without Cause. If Executive's employment and the Employment
Term are terminated (i) by Executive for Good Reason, or (ii) by the
Company without Cause (and other than for Disability or as a result of
expiration of the Employment Term), Executive shall be entitled to
receive the Accrued Amounts and shall, subject to Sections 9(b), 9(c)
and 10 hereof, be entitled to receive equal monthly payments of an
amount equal to his monthly rate of Base Salary in effect at the time
of such termination plus his incentive bonus paid for the most recently
ended fiscal year (provided, however, if Executive was employed
hereunder for only a portion of such prior fiscal year, such bonus
shall be annualized for purposes of this calculation, and, if no bonus
was paid for such prior fiscal year, the current fiscal year's bonus,
at 100 percent of target, shall be deemed to be the incentive bonus
paid for the most recently ended fiscal year for purposes of this
calculation) divided by twelve (12) for a period equal to the greater
of (x) six (6) months or (y) the remaining period of time from the date
of such termination through the Expiration Date.
(c) Termination as a Result of Nonextension of Employment
Term. If Executive's employment with the Company terminates on the
Expiration Date by reason of expiration of the Employment Term and the
Company's failure to offer to extend the Employment Term, Executive
shall be entitled to receive the Accrued Amounts and shall, subject to
Sections 9(b), 9(c) and 10 hereof, be entitled to receive equal monthly
payments of an amount equal to his monthly rate of Base Salary in
effect immediately prior to the Expiration Date plus his incentive
bonus paid for the most recently ended fiscal year divided by twelve
(12) for a period of six (6) months.
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.
Any amounts due under Section 8 are in the nature of severance payments
and are not in the nature of a penalty. Such amounts are inclusive, and
in lieu of any amounts payable under any other salary continuation or
cash severance arrangement of the Company and to the extent paid
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<PAGE> 7
or provided under any other such arrangement shall be offset from the
amount due hereunder.
(b) (i) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) or (c) hereunder he
will execute, deliver and not revoke (within the time period permitted
by applicable law) a release of all claims of any kind whatsoever
against the Company, its affiliates, officers, directors, employees,
agents and shareholders in the then standard form being used by the
Company for senior executives (but without release of the right of
indemnification hereunder or under the Company's By-laws or rights
under benefit or equity plans that by their terms are intended to
survive termination of his employment or claims that the Company
fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to
Executive's agreements under Section 10 hereof, the Company
will execute and deliver a release of all claims of any kind
whatsoever against Executive (but without release of claims
that Executive fulfill his obligations under this Agreement).
The Company's release under this paragraph (b)(ii) of this
Section 9 shall be executed and delivered simultaneously with
the execution and delivery of Executive's release under
paragraph (b)(i) of this Section 9. The releases referred to
in this paragraph (b) of this Section 9 shall apply to all
claims described in this paragraph existing from the beginning
of time through the date of each party's execution of his or
its release.
(c) Upon any termination of employment, Executive hereby
resigns as an officer and director of the Company, any subsidiary and
any affiliate and as a fiduciary of any benefit plan of any of the
foregoing. Executive shall promptly execute any further documentation
thereof as requested by the Company and, if Executive is to receive any
payments from the Company, execution of such further documentation
shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a) (i) Executive acknowledges that as a result of his
employment by the Company, Executive will obtain secret and
confidential information as to the Company and its affiliates and
create relationships with customers, suppliers and other persons
dealing with the Company and its affiliates and the Company and its
affiliates will suffer irreparable damage, which would be difficult to
ascertain, if Executive should use such confidential information or
take advantage of such relationships and that because of the nature of
the information that will be known to or obtained by Executive and the
relationships created it is necessary for the Company and its
affiliates to be protected by the prohibition against Competition as
set forth herein, as well as the confidentiality restrictions set forth
herein.
(ii) Executive acknowledges (A) that the retention of
nonclerical employees, employed by the Company and its
affiliates in which the Company
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<PAGE> 8
and its affiliates have invested training and depends on for
the operation of their businesses, is important to the
businesses of the Company and its affiliates, and (B) that
Executive will obtain unique information as to such employees
as an executive of the Company and will develop a unique
relationship with such persons as a result of being an
executive of the Company. Therefore, it is necessary for the
Company and its affiliates to be protected from Executive's
Solicitation (defined below) of such employees as set forth
below.
(iii) Executive acknowledges that the provisions of
this Agreement are reasonable and necessary for the protection
of the businesses of the Company and its affiliates and that
part of the compensation paid under this Agreement and the
agreement to pay severance in certain instances is in
consideration for the agreements in this Section 10.
(b) COMPETITION shall mean: participating, directly or
indirectly, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender with equity
participation, consultant or in any capacity whatsoever (within the
United States of America, or in any country where the Company or its
affiliates do business) in a Competing Business; provided, however,
that such participation shall not include (i) the ownership of not more
than ten percent (10%) of the total outstanding stock of a publicly
held company; (ii) following a termination of Executive's employment
hereunder, the ownership of not more than five percent (5%) of the
total outstanding stock of a private company if Executive is neither a
member of, or represented on, the board of directors of such private
company and does not have an executive officer role in such private
company; (iii) the Allowed Activities; or (iv) any activity engaged in
with the prior written approval of the Board. As used herein,
"Competing Business" means any business that the Company and/or its
subsidiaries and/or any entity in which the Company and/or its
subsidiaries holds securities (other than entities in which the Company
or its subsidiaries make a "nominal investment" (determined as
described in Section 2(c) hereof)) are engaged in (I) from time to time
(while Executive is employed by the Company) or (II) at the time of
termination (upon termination of Executive's employment) (consisting
principally of the services described in the Company's Registration
Statement on Form 10 under the Securities Exchange Act of 1934, as
amended, and any amendments thereof). For purposes of the immediately
preceding sentence, but solely following a termination of Executive's
employment hereunder, the Company and its subsidiaries shall be deemed
to have made a "nominal investment" in an entity if, at the time of
such termination of employment, the Company and its subsidiaries own or
control less than ten percent (10%) of the outstanding equity
interests, on a fully diluted basis, of such entity. The Company shall
furnish Executive with a list of all Competing Businesses on or
promptly following termination of his employment hereunder.
(c) SOLICITATION shall mean: recruiting, soliciting or
inducing, of any nonclerical employee or employees of the Company or
its affiliates to terminate their employment with the Company or its
affiliates or hiring or assisting another person or entity to hire any
nonclerical employee of the Company or its affiliates or any person who
within twelve (12) months before had been a nonclerical employee of the
Company or its
8
<PAGE> 9
affiliates and were recruited or solicited for such employment or other
retention while an employee of the Company, provided, however, that
solicitation shall not include any of the foregoing activities engaged
in with the prior written approval of the Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad
a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it
may be enforceable. In the event that the agreements in this Section 10
shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of
time or over too great a geographical area or by reason of their being
too extensive in any other respect, they shall be interpreted to extend
only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be
enforceable and/or to the maximum extent in all other respects as to
which they may be enforceable, all as determined by such court in such
action.
(e) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive shall
hold in a fiduciary capacity for the benefit of the Company and its
affiliates all secret or confidential information, knowledge or data
relating to the Company and its affiliates, and their respective
businesses, including any confidential information as to customers of
the Company and its affiliates, (i) obtained by Executive during his
employment by the Company and its affiliates and (ii) not otherwise
public knowledge or known within the applicable industry. Executive
shall not, without prior written consent of the Company, unless
compelled pursuant to the order of a court or other governmental or
legal body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the
Company and those designated by it. In the event Executive is compelled
by order of a court or other governmental or legal body to communicate
or divulge any such information, knowledge or data to anyone other than
the foregoing, he shall promptly notify the Company of any such order
and he shall cooperate fully with the Company in protecting such
information (at the Company's expense) to the extent possible under
applicable law.
(f) Upon termination of his employment with the Company and
its affiliates, or at any time as the Company may request, Executive
will promptly deliver to the Company, as requested, all documents
(whether prepared by the Company, an affiliate, Executive or a third
party) relating to the Company, an affiliate or any of their businesses
or property which he may possess or have under his direction or control
other than documents provided to Executive in his capacity as a
participant in any employee benefit plan, policy or program of the
Company or any agreement by and between Executive and the Company with
regard to Executive's employment or severance.
(g) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the
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<PAGE> 10
Company or by Executive and whether or not for Cause, Good Reason or
non-extension of the Employment Term, Executive will not engage in
Solicitation.
(h) During the Employment Term and for the Restricted Period
(as hereinafter defined) following a termination of Executive's
employment, Executive will not enter into Competition with the Company.
The Restricted Period shall be (i) for a termination for Cause, twelve
(12) months following the date of termination; (ii) for termination
without Cause by the Company, or for Good Reason by Executive, the
period in which the Company is making payments to Executive as
specified in Section 8(b) above; (iii) for a termination as a result of
the voluntary resignation of Executive without Good Reason, six (6)
months from the date of termination; and (iv) termination as a result
of expiration or non-renewal of this Agreement, after the Company has
made a good faith offer for continued employment, six (6) months
following the date of termination. Notwithstanding the immediately
preceding sentence to the contrary, (1) if the Company terminates
Executive's employment without Cause (other than as a result of
expiration of the Employment Term), and the Executive waives, in
writing, at any time after such termination, his right to receive any
future amounts under Section 8(b) hereof, there shall be no Restricted
Period following such termination of employment and waiver, (2) if
Executive terminates his employment for Good Reason, and, after a
period of six (6) months following the date of such termination, the
Executive waives, in writing, at any time after such six-month period,
his right to receive any future amounts that would otherwise be payable
after the expiration of such six-month period under Section 8(b)
hereof, the Restricted Period shall terminate following such six-month
period and waiver, and (3) if the Employment Term expires and the
Company fails to make a good faith offer for continued employment,
there shall be no Restricted Period following such termination of
employment.
(i) In the event of a breach or potential breach of this
Section 10, Executive acknowledges that the Company and its affiliates
will be caused irreparable injury and that money damages may not be an
adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at
law) to have the provisions of this Section 10 enforced. It is hereby
acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such
entity may enforce the provisions of this Section 10 and only the
applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of
breach of this Section 10 by Executive, while he is receiving amounts
under Section 8(b) or (c) hereof, Executive shall not be entitled to
receive any future amounts pursuant to Section 8(b) or (c) hereof after
the earlier to occur of (i) ninety (90) days following the Company's
notification of Executive of its good faith determination of such
breach, specifying in reasonable detail the grounds for such
determination, and (ii) a final determination by an arbitrator or court
of competent jurisdiction of such breach, and, upon such final
determination, which is not
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<PAGE> 11
appealable, he shall reimburse the Company for any amounts previously
paid to Executive pursuant to Section 8(b) or (c) hereof.
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended and
as applicable, for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any subsidiary or affiliate of the Company or as a fiduciary of
any benefit plan. The Company shall cover Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent as the Company covers
its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company
copyrights, trade secrets, proprietary information, patents, unpatented
inventions, trademarks, service marks, processes, techniques, methods,
know-how, flow charts, diagrams, computer programs and/or databases,
and any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not (all
of the foregoing, collectively, "INTELLECTUAL PROPERTY"), which are
conceived, created, developed or made by Executive, solely or jointly
with another, during the period of employment or within one (1) year
thereafter, and which are substantially related to the business or
activities of the Company or its subsidiaries which Executive
conceived, created, developed or made as a result of his employment by
the Company or any of its subsidiaries. Executive hereby assigns and
agrees to assign all of his right, title and interest throughout the
world in any Intellectual Property to the Company or its nominee.
Whenever requested to do so by the Company, Executive shall execute any
and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain registrations of
copyrights or marks, or Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest in
Intellectual Property.
(b) Executive agrees that he will not, during or after the
Employment Term, disclose the specific terms of the Company's
relationships or agreements with its significant vendors or customers
or any other significant material trade secrets of the Company, whether
in existence or proposed (other than any of the foregoing that becomes
public knowledge other than through disclosure by Executive), to any
person, firm, partnership, corporation or business for any reason or
purpose whatsoever, except as is disclosed in the ordinary course of
business, unless compelled by a court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred in such dispute unless the finder of fact determines that the
Company is the prevailing party in such dispute.
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14. Certain Additional Payments. Executive shall be grossed up for any
excise tax payable under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), in accordance with Exhibit C attached hereto.
15. Resolution of Disputes. The parties shall use their best efforts
and good will to settle all disputes by amicable negotiations. The Company and
Executive agree, for purposes of the resolution of any disputes under this
Agreement, that such disputes shall be settled by arbitration in Dallas, Texas,
or such other place agreed to by the parties, in accordance with the rules and
procedures of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel
consisting of one to three arbitrators, each of whom shall be
impartial. All arbitrators shall be appointed in the first instance by
agreement between the parties hereto. If the parties cannot agree upon
a single arbitrator, each of the Company and the Executive shall be
entitled to appoint one arbitrator. These two appointed arbitrators
shall then appoint a third arbitrator by their mutual agreement.
(b) An arbitration may be commenced by either party to this
Agreement by the service of a written request for arbitration upon the
other affected party. Such request for arbitration shall summarize the
controversy or claim to be arbitrated. If the panel of arbitrators is
not appointed within thirty (30) days following such service, either
party may apply to any court within the State of Texas for an order
appointing arbitrators qualified as set forth below. No request for
arbitration shall be valid if it relates to a claim, dispute,
disagreement or controversy that would have been time barred under the
applicable statute of limitations had such claim, dispute, disagreement
or controversy been submitted to the courts of the State of Texas.
(c) The parties hereby expressly waive punitive damages, and
under no circumstances shall an award contain any amount that in any
way reflects punitive damages.
(d) Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without
reference to principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of
the parties with respect to the employment of Executive by the Company
from and after the Commencement Date and supersedes any prior
agreements between the Company and Executive with respect thereto.
There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter
herein other than those
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<PAGE> 13
expressly set forth herein and therein. This Agreement may not be
altered, modified, or amended except by written instrument signed by
the parties hereto.
(c) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
or impaired, and the parties undertake to implement all efforts which
are necessary, desirable and sufficient to amend, supplement or
substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as
nearly as may be possible the result previously intended by the parties
without renegotiation of any material terms and conditions stipulated
herein.
(d) No Waiver. Any failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any such waiver must be in writing and
signed by Executive or an authorized officer of the Company, as the
case may be.
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an
entity which is owned, directly or indirectly, in whole or in part by
the Company or by any successor to the Company or an acquirer of all or
substantially all of the assets of the Company or all or substantially
all of the assets of a group of subsidiaries and divisions of the
Company, provided such entity or acquirer promptly assumes all of the
obligations hereunder of the Company in a writing delivered to
Executive and otherwise complies with the provisions hereof with regard
to such assumption. Upon such assignment and assumption, all references
to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the beneficiaries and permitted assignees
of the parties hereto. In the event of Executive's death while
receiving amounts payable pursuant to Section 8(b) hereof, any
remaining amounts shall be paid to Executive's estate.
(g) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when faxed or
delivered, or (ii) two (2) business days after being mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the initial
page of this Agreement, provided that all notices to the Company shall
be directed to the attention of the General Counsel and Secretary of
the Company, or to such other address as any party may have furnished
to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.
(h) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
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(i) Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 10 and Section
11 hereof, shall survive any termination of Executive's employment to
the extent necessary to the agreed preservation of such rights and
obligations.
(j) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control
or affect the meaning or construction of any provision of this
Agreement.
(l) Executive's Representation. Executive represents and
warrants to the Company that there is no legal impediment to him
entering into this Agreement, and entering into this Agreement will not
violate any agreement to which he is a party or any other legal
restrictions, and he has provided to the Company true and complete
copies of any agreements or covenants to which he is a party that could
restrict or adversely affect his performance under this Agreement.
Executive further represents and warrants that in performing his duties
hereunder he will not wrongfully use or disclose any confidential
information of any prior employer or other person or entity.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMPANY:
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Clark K. Hunt
-------------------------------------------
Name: Clark K. Hunt
-----------------------------------------
Title: Chairman of the Compensation Committee
----------------------------------------
EXECUTIVE:
/s/ Chad E. Coben
---------------------------------------------
CHAD E. COBEN
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EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
CHAD E. COBEN
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE"
shall be limited to the following:
(i) Executive's willful misconduct or gross negligence
with regard to the Company or its affiliates or
their business, assets or employees (including,
without limitation, Executive's fraud, embezzlement
or other act of dishonesty with regard to the
Company or its affiliates), or Executive's willful
misconduct other than the foregoing, which in any
case has a material adverse impact on the Company
or its affiliates, whether economic, or
reputationwise or otherwise, each as determined by
the Board, and which is not fully rectified or
cured, if susceptible to rectification or cure,
within thirty (30) days after written notice is
given to Executive; provided, however, that this
clause (i) shall not include an action or omission
of Executive done or omitted to be done in his good
faith exercise of business judgment or in good
faith reliance on advice of legal counsel to the
Company;
(ii) Executive's conviction of, or pleading nolo
contendere to, a felony or other crime involving
fraud, dishonesty or moral turpitude or which
carries a minimum prison sentence upon conviction
of one (1) year or longer;
(iii) Executive's refusal or willful failure to follow
the lawful written direction of the Board, the
Chief Executive Officer or his designee which is
not remedied within ten (10) business days after
receipt by Executive of a written notice specifying
the details thereto;
(iv) Executive's breach of Section 10 or Section 12
hereof, which has a material adverse economic
impact on the Company or its affiliates, as
determined by the Board;
(v) the representations or warranties in Section 16(l)
hereof prove false, which has a material adverse
economic impact on the Company or its affiliates,
as determined by the Board; or
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(vi) any other breach by Executive of this Agreement,
which has a material adverse impact on the Company
or its affiliates, whether economic, or
reputationwise or otherwise, each as determined by
the Board, that remains uncured for thirty (30)
days after written notice is given to Executive.
(b) Change in Control. For purposes of this Agreement, the
term "CHANGE IN CONTROL" shall mean the occurrence of any of the following:
(i) any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934
("Act") (other than (a) Permitted Assignees, (b)
the Company, (c) any trustee or other fiduciary
holding securities under any employee benefit plan
of the Company, or (d) any company owned, directly
or indirectly, by the stockholders of the Company
in substantially the same proportions as their
ownership of Common Stock of the Company) is or
becomes the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of
securities of the Company representing fifty
percent (50 %) or more of the combined voting power
of the Company's then outstanding securities.
Permitted Assignees shall mean the holders of the
equity securities (whether or not voting) of any
shareholder of the Company owning more than fifteen
percent (15%) of the Company on the date after the
date of execution of this Agreement, so long as the
voting power and disposition authority with respect
to the securities of such holders is held directly
or indirectly by any two or three of the following
individuals: Barrett N. Wissman, Clark K. Hunt or
James R. Holland;
(ii) during any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other
than a director designated by a person who has
entered into an agreement with the Company to
effect a transaction described in clause (i),
(iii), or (iv) of this paragraph) whose election by
the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in
office who either were directors at the beginning
of the two-year period or whose election or
nomination for election was previously so approved,
cease for any reason to constitute at least a
majority of the Board;
(iii) a merger or consolidation of the Company with any
other corporation, other than a merger or
consolidation which would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) more
than fifty percent (50%) of the
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combined voting power of the voting securities of
the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or the sale or
disposition by the Company of assets where the
proceeds thereof are not retained by the Company,
in a single transaction or a series of related
transactions, that result in a 66-2/3 percent or
greater decline in the enterprise value of the
Company, valued based on the weighted average fair
market value of any outstanding class of stock of
the Company plus the book value of the outstanding
indebtedness of the Company.
(c) Disability. For purposes of this Agreement, "DISABILITY"
shall mean if Executive is unable to perform his material duties pursuant to
this Agreement, as determined by the Board, because of mental or physical
incapacity, including, without limitation, alcoholism or drug abuse, which
requires a leave of absence in excess of ninety (90) consecutive days in any
twelve (12) month period.
(d) Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean the occurrence, without Executive's express written consent, in the
case of (i), (ii), (iii) or (iv), of any of the following circumstances:
(i) (a) any material demotion of Executive from his
position as Senior Vice President or (b) any
assignment of duties to Executive materially and
adversely inconsistent with Executive's position as
Senior Vice President (except in connection with
the termination of Executive's employment for Cause
or due to Disability or as a result of Executive's
death, or temporarily as a result of Executive's
illness or other absence);
(ii) a failure by the Company to pay to Executive any
amounts due under this Agreement in accordance with
the terms hereof, which failure is not cured within
fifteen (15) days following receipt by the Company
of written notice from Executive of such failure;
(iii) the termination of Jeffrey A. Marcus' ("Marcus")
employment with the Company under any circumstances
other than death, "Disability," termination by the
Company with "Cause," or termination by Marcus
without "Good Reason," as each such term is defined
in that certain Employment Agreement made as of
April 3, 2000, by and between the Company and
Marcus;
3
<PAGE> 19
(iv) any other material breach by the Company of this
Agreement that remains uncured for fifteen (15)
days after written notice thereof by Executive to
the Company; or
(v) following a Change in Control, the Board requires
Executive to relocate to an area other than the
Dallas, Texas greater metropolitan area; or if the
Company's corporate headquarters are located in an
area other than the Dallas, Texas greater
metropolitan area, to an area more than fifty (50)
miles from the Company's corporate headquarters,
and Executive declines to so relocate.
4
<PAGE> 20
EXHIBIT "B"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
CHAD E. COBEN
STOCK OPTION GRANTS
5
<PAGE> 21
EXHIBIT "C"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
CHAD E. COBEN
GROSS-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this Exhibit C is
a part:
(a) In the event that Executive shall become entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
"nature of compensation" (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership or effective control covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to
Executive, subject to required withholding, at the time specified in subsection
(d) below an additional amount (the "Gross-up Payment") such that the net amount
retained by Executive, after deduction of any Excise Tax on the Company Payments
and on the Gross-Up Payment provided for under this paragraph (a) and any U.S.
federal, state, and local income or payroll tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any U.S. federal,
state, and local income or payroll tax on the Company Payments, shall be equal
to the Company Payments.
(b) In the event that the Excise Tax is subsequently
determined by the Company to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the prior Gross-up Payment attributable to such
reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by Executive), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is later determined by the Company or the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up Payment),
the Company shall make an additional Gross-up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following delivery by Executive to the Company of notice that an event that
subjects Executive to the Excise Tax has occurred; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Executive on such day
an estimate, as determined in good faith by the Company, of the minimum amount
of such
6
<PAGE> 22
payments and shall pay the remainder of such payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) promptly following such
time as the amount thereof has been determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to Executive, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(d) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise Tax, Executive
shall permit the Company to control issues related to the Excise Tax, but
Executive shall control any other issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of the Company to accompany Executive, and
Executive and Executive's representative shall cooperate with the Company and
its representative.
(e) The Company and Executive shall promptly deliver to each
other copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit C.
7
<PAGE> 1
EXHIBIT 10.8
eVENTURES GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made and
entered into by and between eVENTURES GROUP, INC., a Delaware corporation (the
"COMPANY"), and CHAD E. COBEN (the "OPTIONEE"), effective April 4, 2000 (the
"DATE OF Grant").
1. GRANT OF OPTION. The Company hereby grants to the Optionee and the
Optionee hereby accepts, subject to the terms and conditions hereof, the right
and option to purchase from the Company (the "OPTION") all or any part of an
aggregate of 510,000 shares of the Company's common stock, par value $0.00002
per share (the "COMMON STOCK"), at a per share purchase price equal to
Twenty-Three Dollars and no cents ($23.00) per share (the "EXERCISE PRICE"), as
such shares and Exercise Price may be adjusted in accordance with Section 9
below. The Option is not granted pursuant to the Company's 1999 Omnibus
Securities Plan. The Option shall not be treated as an incentive stock option as
defined in Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXPIRATION AND TERMINATION OF THE OPTION. The Option will expire at
the end of business on April 4, 2010, ten (10) years from the Date of Grant of
the Option (the "EXPIRATION DATE"). In the event of termination of the
Optionee's employment with the Company, any Vested Portion (as defined in
Section 3 below) of the Option on the date of such termination may be exercised
at any time prior to the Expiration Date, and the Option shall terminate as to
the shares of Common Stock covered by the remaining, unvested portion of the
Option. The Option may not be exercised after its expiration or termination.
3. VESTING. On each Measurement Date set forth in Column 1 below, the
Option shall vest and become exercisable for the corresponding percentage set
forth in Column 2 below of the total number of shares of Common Stock set forth
in paragraph 1 hereof. The "VESTED PORTION" of the Option as of any particular
date shall be the cumulative total of all shares for which the Option has become
exercisable on or prior to that date in accordance with the following schedule.
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
Percentage of Total Option
Measurement Date Shares Vesting
on Measurement Date
- - ---------------------------------- ------------------------------------------
<S> <C>
July 2, 2000 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
April 2, 2001 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
April 2, 2002 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
April 2, 2003 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
</TABLE>
PAGE 1
<PAGE> 2
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company is terminated by the Company without "Cause" (other than for
"Disability") or by the Optionee for "Good Reason" (as such terms are defined
in the Employment Agreement between the Optionee and the Company), the Option
shall become fully and immediately exercisable and the "Vested Portion" of the
Option shall mean one hundred percent (100%) of the total number of shares of
Common Stock set forth in paragraph 1 hereof.
4. EXERCISE OF THE OPTION. The Vested Portion of the Option may be
exercised, to the extent not previously exercised, in whole or in part, at any
time or from time to time prior to the expiration or termination of the Option,
except that no Option shall be exercisable except in respect to whole shares,
and not less than one hundred (100) shares may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the Option. Exercise shall be accomplished by providing the
Company with written notice in the form of Exhibit "A" attached hereto, which
notice shall be irrevocable when delivered and effective upon payment in full of
the Exercise Price and any amounts required for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under this Agreement.
5. PAYMENT OF EXERCISE PRICE. Upon any exercise of the Option, the
total Exercise Price for the number of shares for which the Option is then being
exercised and the amount of any Federal, state and local withholding taxes
imposed thereon shall be paid in full to the Company in cash or, if permitted by
applicable law and subject to such limitations or conditions as the
Administering Body (as defined in Section 8 hereof) may prescribe, (a) with
shares of Common Stock that have been owned for at least six months by the
Optionee (or by the Optionee and his spouse jointly) having a total fair market
value (as determined by the Administering Body ("FAIR MARKET VALUE")) on the
date of such exercise equal to the total Exercise Price of such shares and the
amount of such withholding, or (b) in a broker-assisted or similar transaction
in which the total Exercise Price of such shares and the amount of such
withholding is not received by the Company until promptly after exercise, or
using a combination of the foregoing forms of consideration.
6. TRANSFERABILITY OF OPTION. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided,
however, that the Optionee may transfer the Option as a gift to the Optionee's
spouse, children, or grandchildren or a trust or family limited partnership
established solely for the benefit of, or of which the partners comprise only,
any such spouse, children or grandchildren. The transfer of the Option and any
transferred Option shall be subject to the same terms and conditions that were
applicable to the Option immediately prior to its transfer. No transfer of the
Option shall be effective unless the Company shall have been furnished with
written notice of such transfer at least 30 days in advance thereof and a copy
of such evidence as the Administering Body may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions hereof. Any attempted transfer, assignment, pledge or other
disposition or levy, attachment or similar process with respect to the Option
not specifically permitted herein shall be null and void without effect.
PAGE 2
<PAGE> 3
7. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors of the Company (the "BOARD")
or any Stock Plan Committee appointed by the Board (the "ADMINISTERING BODY").
The Optionee agrees that the decisions of such Administering Body concerning
administration and interpretation of this Agreement and the Option shall be
final, binding and conclusive on all persons. No member of the Board or the
Stock Plan Committee, nor any person participating in any determination of any
question under this Agreement, shall have any liability, in the absence of gross
negligence or willful misconduct, to any party for any action taken or not taken
in connection with this Agreement.
8. ADJUSTMENTS. If (a) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (b) the value of the outstanding shares of Common Stock
is reduced by reason of an extraordinary dividend payable in cash or property,
an appropriate and proportionate adjustment shall be made by the Administering
Body in the number and kind of shares or other securities subject to the Option
and/or the Exercise Price for each share or other unit of any other securities
subject to the Option. No fractional interests will be issued under the Option
resulting from any such adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of Common
Stock otherwise issuable as a result of such adjustments.
9. REGISTRATION. The Company shall (i) file a registration statement,
at the Company's option, on Form S-1, S-3 or S-8 under the Securities Act of
1933, as amended, which includes a reoffer prospectus, on the date which is the
earlier of (a) 90 days after the date it is first eligible to use Form S-3 or
S-8 or (b) January 15, 2001; (ii) use its best efforts, where effectiveness is
not automatic after the passage of time, to have such registration statement
declared effective within 90 days after such registration statement was filed;
and (iii) use its best efforts to maintain the effectiveness of such
registration statement or a successor registration statement (which includes a
reoffer prospectus) during the term of the Option.
10. NOTICES. Any notice hereunder to the Company shall be addressed to
it at 300 Crescent Court, Suite 800, Dallas, Texas 75201, Attention: General
Counsel, and any notice hereunder to the Optionee shall be addressed to the
Optionee at 6715 Norway Road, Dallas, Texas 75230, subject to the right of
either party to designate at any time hereafter in writing some other address.
11. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof.
PAGE 3
<PAGE> 4
12. SEVERABILITY. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. MODIFICATION. This Agreement may not be modified or amended, nor
may any provision hereof be waived, in any way except in writing signed by the
parties hereto.
14. COUNTERPARTS. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company by its duly authorized officer, and by the Optionee in acceptance of the
above-mentioned Option, subject to the terms and conditions of this Agreement,
all as of the day and year first above written.
Signature Page Following
PAGE 4
<PAGE> 5
SIGNATURE PAGE FOR eVENTURES GROUP, INC., NONQUALIFIED STOCK
OPTION AGREEMENT
Signature page for eVentures Group, Inc., Nonqualified Stock Option Agreement
dated April 4, 2000.
COMPANY:
eVENTURES GROUP, INC.
BY: /s/ Stuart J. Chasanoff
-------------------------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate
Development and Legal Affairs
OPTIONEE:
/s/ Chad E. Coben
---------------------------------
Printed Name: Chad E. Coben
--------------------------------
PAGE 5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXERCISE
UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
To: eVentures Group, Inc. (the "COMPANY")
From:
-----------------------
Date:
-----------------------
Pursuant to the Nonqualified Stock Option Agreement (the "AGREEMENT")
(capitalized terms used without definition herein have the meanings given such
terms in the Agreement) between the Company and myself effective
______________________, I hereby exercise my Option as follows:
<TABLE>
<S> <C>
Number of shares of Common Stock I wish to purchase under the Option
------------------
Exercise Price per share $
------------------
Total Exercise Price $
------------------
"Vested Portion" of Option (see definition in Section 3 of the Agreement)
------------------
Number of shares I have previously purchased by exercising the Option
------------------
Expiration Date of the Option
------------------
</TABLE>
I hereby represent, warrant, and covenant to the Company that:
a. I am acquiring the Common Stock for my own account, for investment,
and not for distribution or resale, and I will make no transfer of such Common
Stock except in compliance with applicable federal and state securities laws.
b. I can bear the economic risk of the investment in the Common Stock
resulting from this exercise of the Option, including a total loss of my
investment.
c. I am experienced in business and financial matters and am capable of
(i) evaluating the merits and risks of an investment in the Common Stock; (ii)
making an informed investment decision regarding exercise of the Option; and
(iii) protecting my interests in connection therewith.
d. Any subsequent offer for sale or distribution of any of the shares
of Common Stock shall be made only pursuant to (i) a registration statement on
an appropriate form under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), which registration statement has
1
<PAGE> 7
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, I shall, prior to any offer for sale or sale of such shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Administering Body, from counsel for or approved by the Administering Body, as
to the applicability of such exemption thereto.
I acknowledge that I must pay the total Exercise Price in full and make
appropriate arrangements for the payment of all federal, state and local tax
withholdings due with respect to the Option exercised herein, before the stock
certificate evidencing the shares of Common Stock resulting from this exercise
of the Option will be issued to me.
Attached in full payment of the total Exercise Price for the Option
exercised herein is ( ) a check made payable to the Company in the amount of
$___________________ and/or ( ) a stock certificate for _______ shares of Common
Stock that have been owned by me or by me and my spouse jointly for at least six
months, with a duly completed stock power attached with a total Fair Market
Value on the date hereof equal to the total Exercise Price.
Also attached in full payment of all withholding tax obligations
arising from exercise of the Option is (___) a check made payable to the Company
in the amount of such required withholding and/or (____) a stock certificate for
____ shares of Common Stock that have been owned by me or by me and my spouse
jointly for at least six months, with a duly completed stock power attached,
with a total Fair Market Value on the date hereof equal to the amount of such
required withholding.
Signature Page Following
2
<PAGE> 8
SIGNATURE PAGE FOR "EXHIBIT A", NOTICE OF EXERCISE UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
Signature page for "Exhibit A", Notice of Exercise under Nonqualified Stock
Option Agreement dated _________________, 2000.
OPTIONEE:
-------------------------------
Name:
--------------------------
RECEIVED BY THE COMPANY:
Name:
--------------------------
Date:
--------------------------
3
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of April 4,
2000, by and between, eVENTURES GROUP, INC., a Delaware corporation, with its
principal office at 300 Crescent Court, Suite 800, Dallas, Texas 75201 (the
"COMPANY"), and BARRETT N. WISSMAN residing at 3503 Springbrook, Dallas, Texas
75201 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective April 3, 2000 (the "COMMENCEMENT DATE"), the Company
desires to employ Executive as its President, and Executive desires to accept
such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement
as to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on April 2, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as the President of the Company (the
"PRESIDENT"), reporting directly to the Chief Executive Officer of the
Company (the "CHIEF EXECUTIVE OFFICER"). If requested by the Board of
Directors of the Company (the "BOARD") or the Chief Executive Officer,
Executive shall also serve on the Board and committees thereof, as an
executive, officer and director of subsidiaries of the Company and/or
as a director of associated companies of the Company without additional
compensation and subject to any policy of the Compensation Committee of
the Company's Board (the "COMPENSATION COMMITTEE") with regard to
retention or turnover of the director's fees.
(b) Executive shall have such duties and authority, consistent
with his position, as shall be assigned to him from time to time by the
Chief Executive Officer.
(c) During the Employment Term, Executive shall devote
substantially all of his business time and efforts to the performance
of his duties hereunder. Nothing contained herein shall be construed to
prohibit Executive from (i) owning less than ten percent (10%) of the
outstanding securities of any publicly traded entity, (ii) pursuing any
business opportunity that is not in Competition, as such term is
defined in Section 10(b) below, with the Company or its subsidiaries or
any portfolio company in which the Company or its subsidiaries hold
securities (other than entities in which the Company or its
subsidiaries make a nominal investment) (provided the time devoted by
Executive to such personal investment does not materially interfere
with Executive's duties hereunder),
1
<PAGE> 2
(iii) continuing service as a managing director, manager, partner, or
member, directly or indirectly, of any investment management business
in which Executive serves in such capacity on the Commencement Date,
(iv) continuing service on any board of directors on which Executive
serves as of the Commencement Date or service as a director of a
company that is not in Competition with the Company or its subsidiaries
or any portfolio company in which the Company or its subsidiaries hold
securities (other than entities in which the Company or its
subsidiaries make a nominal investment), provided, however, that
Executive shall not hold more than five (5) board seats at any time
exclusive of his membership (if any) on the Board or the board of
directors of any subsidiary or affiliate of the Company, or (v) service
on the boards of directors of a reasonable number of charitable
organizations so long as such service is not inconsistent with his
position and duties hereunder (such activities described in clause (i),
(ii), (iii), (iv) or (v) immediately preceding being herein referred to
as the "ALLOWED ACTIVITIES"). Executive shall be entitled to retain any
consideration that he receives from service permitted by clauses (iii)
and (iv) of the immediately preceding sentence on any board of
directors of a corporation unrelated to the Company. For purposes
hereof, a "nominal investment" of the Company or its subsidiaries will
be determined in relation to the size of investments made from time to
time by the Company or its subsidiaries in its portfolio companies
(including, without limitation, investments made in exchange for cash,
securities or services rendered).
3. Base Salary. During the Employment Term, the Company shall pay
Executive a Base Salary at the annual rate of One Hundred Ninety Thousand
Dollars ($190,000). Base Salary shall be payable in accordance with the usual
payroll practices of the Company. Executive's Base Salary may be reviewed
annually by the Board or the Compensation Committee and may be increased, but
not decreased, from time to time by the Board or the Compensation Committee. The
Base Salary as determined as aforesaid, from time to time for the applicable
fiscal year shall constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be entitled to participate in an
incentive bonus plan established by the Company on such terms and
conditions, and subject to such standards, as shall be determined from
time to time in the sole discretion of the Board or the Compensation
Committee. Such incentive bonus for any such fiscal year shall be
payable in cash and shall not be greater than fifty percent (50%) of
Executive's rate of Base Salary in effect for the fiscal year to which
such incentive bonus relates. During the Employment Term, the Company
shall maintain an incentive bonus plan providing a target bonus equal
to not less than fifty percent (50%) of Executive's rate of Base Salary
in effect for the fiscal year to which the bonus relates.
(b) Stock Options. The Company hereby grants to Executive
stock options (the "STOCK OPTIONS") to purchase 1,400,000 shares of
Common Stock of the Company. The Stock Options shall be granted
pursuant to a stock option award agreement or agreements between
Executive and the Company substantially in the form attached hereto as
Exhibit "B" (the "STOCK OPTION GRANTS"). The exercise price for such
Stock Options
2
<PAGE> 3
shall be equal to $23.00 per share of Common Stock. Subject to the
terms and provisions of the Stock Option Grants, the Stock Options
shall become exercisable on the dates indicated below as to that number
of shares of Common Stock of the Company as set forth below opposite
each such date.
<TABLE>
<CAPTION>
Date Number of Shares
---- ----------------
<S> <C>
July 2, 2000 350,000
April 2, 2001 350,000
April 2, 2002 350,000
April 2, 2003 350,000
</TABLE>
The foregoing schedule to the contrary notwithstanding, the Stock
Options shall become fully and immediately exercisable in the event the
Employment Term terminates prior to the Expiration Date by reason of
termination of the Executive's employment hereunder by Executive for
Good Reason or by the Company without Cause (as such terms are
hereinafter defined). The Stock Options shall in all events expire on
the date ten years after the Commencement Date, if not terminated or
canceled earlier. The Executive shall be permitted to transfer the
Stock Options to the Executive's immediate family members and/or lineal
descendents (or a trust or family limited partnership established
solely for the benefit of any such immediate family member and/or
lineal descendent). Notwithstanding anything in the Stock Option Grants
to the contrary, to the extent any provisions contained therein are
inconsistent with or differ from the explicit terms and conditions of
this Agreement, the terms and conditions of this Agreement shall
control. To the extent this Agreement does not specifically address an
issue or term set forth in the Stock Option Grants, then the provisions
and terms of the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option
Grants, the number of shares covered by, and the option price per share
of, the Stock Options will be subject to adjustment by the Company for
any stock split, reclassification, combination or similar change in the
Company's capital stock.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit
plans and arrangements and fringe benefits and perquisites generally
maintained by the Company from time to time for the benefit of senior
executive officers of the Company of a comparable level, in each case
in accordance with their respective terms as in effect from time to
time (other than any special arrangement entered into by contract with
an executive or that applies on a grandfathered basis). Without
limiting the foregoing, the Company shall pay all premiums for
Executive and his dependent family members under health,
hospitalization, disability, dental, life and other employee benefit
plans that the Company may have in effect from time to time.
3
<PAGE> 4
Executive acknowledges that the Company does not currently provide a
profit sharing plan, and has no current intention of providing profit
sharing benefits to its employees.
(b) During the Employment Term, Executive shall be entitled to
at least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect from time to time. Executive shall also be
entitled to such periods of sick leave as is customarily provided by
the Company to its senior executive employees.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive, subject to such pre-approval procedures as may be established from
time to time by the Board, in the performance of his duties hereunder, in
accordance with the Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the
earliest to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by the
Company due to Executive's Disability (as defined
in Exhibit "A") pursuant to Section 7(b) hereof;
(iii) the termination of Executive's employment by
Executive for Good Reason (as defined in Exhibit
"A") pursuant to Section 7(c) hereof,
(iv) the termination of Executive's employment by the
Company without Cause (as defined in Exhibit "A")
pursuant to Section 7(e) hereof;
(v) the termination of employment by Executive without
Good Reason upon thirty (30) days prior written
notice pursuant to Section 7(f) hereof; or
(vi) the termination of Executive's employment by the
Company for Cause pursuant to Section 7(d) hereof.
(b) Disability. If Executive is unable to perform his material
duties hereunder due to a physical or mental condition and the Company
desires to terminate Executive's employment for Disability (as defined
in Exhibit "A"), the Company shall deliver to Executive a written
Notice of Disability Termination (herein so called), effective upon the
date (the "DISABILITY TERMINATION DATE") which is the later of (i) the
date such condition becomes a Disability or (ii) thirty (30) days
following the delivery of the Notice of Disability Termination;
provided that the Disability Termination Date shall be
4
<PAGE> 5
suspended, and the Employment Term shall not terminate, so long as
Executive returns to the full performance of his duties by and
following such date.
(c) Termination for Good Reason. A Termination for Good Reason
(herein so called) means a termination by Executive by written notice
given within thirty (30) days after Executive knows of the occurrence
of the Good Reason event, unless such circumstances are corrected prior
to the date of termination specified in the Notice of Termination for
Good Reason and the Company informs Executive of such correction prior
to such date. In such event, the Employment Term shall not terminate. A
Notice of Termination for Good Reason shall mean a notice that shall
indicate the specific Good Reason event in Section (d) of Exhibit "A"
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for Good
Reason. The failure by Executive to set forth in the Notice of
Termination for Good Reason any facts or circumstances which contribute
to the showing of Good Reason shall not waive any right of Executive
hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his rights hereunder. The Notice of
Termination for Good Reason shall provide for a date of termination not
less than thirty (30) nor more than sixty (60) days after the date such
Notice of Termination for Good Reason is given.
(d) Cause. Subject to the notification provisions of this
Section 7(d), Executive's employment hereunder may be terminated by the
Company for Cause. A Notice of Termination for Cause (herein so called)
shall mean a notice that shall indicate the specific termination
provision in Section (a) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances which provide for a
basis for Termination for Cause. The effective date of termination for
a Termination for Cause shall be the date indicated in the Notice of
Termination. Any purported Termination for Cause which is held by a
court by a non-appealable final judgment not to have been based on the
grounds set forth in this Agreement or not to have followed the
procedures set forth in this Agreement shall be deemed a termination by
the Company without Cause.
(e) Termination without Cause. The Company may terminate its
employment of Executive for reasons other than Cause at any time upon
thirty (30) days prior written notice.
(f) Voluntary Resignation. Executive may terminate his
employment with the Company at any time upon thirty (30) days prior
written notice.
8. Consequences of Termination of Employment. Executive shall be
entitled to the following compensation from the Company (in lieu of all other
sums owed or payable to Executive) upon the termination of employment as
described below:
(a) Death, Disability, Voluntary Resignation without Good
Reason or by the Company with Cause. If Executive's employment and the
Employment Term are terminated (1) by reason of Executive's death or
Disability, (2) by Executive without Good Reason or (3) by the Company
for Cause, the employment period under this Agreement shall terminate
without further obligations to Executive or Executive's legal
representatives under this Agreement except for: (i) any Base Salary
earned but unpaid,
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<PAGE> 6
any accrued but unused vacation pay payable pursuant to the Company's
policies and any unreimbursed business expenses payable pursuant to
Section 6 (which amounts, in the case of the death of Executive, shall
be promptly paid in a lump sum to Executive's estate), (ii) any other
amounts or benefits earned, accrued and owing to Executive under the
then applicable employee benefit plans, long term incentive plans or
equity plans and programs of the Company, including, without
limitation, any earned but unpaid incentive bonus for any prior
completed fiscal year, and (iii) except in the case of a termination by
the Company for Cause or by Executive without Good Reason, a pro-rata
portion (based on the number of days Executive is employed by the
Company during the fiscal year of such termination) of Executive's
incentive bonus earned for the fiscal year in which termination occurs,
which, in any case, shall be paid in accordance with the applicable
plans, programs and agreements, and any unpaid reimbursable business
expenses (such amounts referred to in clauses (i) and (ii),
collectively, the "ACCRUED AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by
Company without Cause. If Executive's employment and the Employment
Term are terminated (i) by Executive for Good Reason, or (ii) by the
Company without Cause (and other than for Disability or as a result of
expiration of the Employment Term), Executive shall be entitled to
receive the Accrued Amounts and shall, subject to Sections 9(b), 9(c)
and 10 hereof, be entitled to receive equal monthly payments of an
amount equal to his monthly rate of Base Salary in effect at the time
of such termination plus his incentive bonus paid for the most recently
ended fiscal year (provided, however, if Executive was employed
hereunder for only a portion of such prior fiscal year, such bonus
shall be annualized for purposes of this calculation, and, if no bonus
was paid for such prior fiscal year, the current fiscal year's bonus,
at 100 percent of target, shall be deemed to be the incentive bonus
paid for the most recently ended fiscal year for purposes of this
calculation) divided by twelve (12) for a period equal to the greater
of (x) twelve (12) months or (y) the remaining period of time from the
date of such termination through the Expiration Date. Notwithstanding
the immediately preceding sentence to the contrary, (1) if Executive's
employment is terminated by the Company without Cause (and other than
for Disability or as a result of expiration of the Employment Term), or
if Executive terminates his employment for Good Reason, other than Good
Reason as defined in clause (i)(b) or clause (iv) of Section (d) of
Exhibit "A", the Severance Payments shall be paid to Executive in a
lump-sum following such termination, and (2) if Executive terminates
his employment for Good Reason as defined in clause (i)(b) or clause
(iv) of Section (d) of Exhibit "A", he shall, following the date which
is six (6) months following the date of such termination, upon his
request, receive payment in a lump-sum of the Severance Payments
remaining unpaid on such date.
(c) Termination Upon Expiration of Employment Term. If
Executive's employment with the Company terminates on the Expiration
Date by reason of expiration of the Employment Term, Executive shall be
entitled to receive the Accrued Amounts and shall, subject to Sections
9(b), 9(c) and 10 hereof, be entitled to receive equal monthly payments
of an amount equal to his monthly rate of Base Salary in effect
immediately prior to the Expiration Date plus his incentive bonus paid
for the most recently ended fiscal year divided by twelve (12) for a
period of twelve (12) months.
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<PAGE> 7
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.
Any amounts due under Section 8 are in the nature of severance payments
and are not in the nature of a penalty. Such amounts are inclusive, and
in lieu of any amounts payable under any other salary continuation or
cash severance arrangement of the Company and to the extent paid or
provided under any other such arrangement shall be offset from the
amount due hereunder.
(b) (i) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) or (c) hereunder he
will execute, deliver and not revoke (within the time period permitted
by applicable law) a release of all claims of any kind whatsoever
against the Company, its affiliates, officers, directors, employees,
agents and shareholders in the then standard form being used by the
Company for senior executives (but without release of the right of
indemnification hereunder or under the Company's By-laws or rights
under benefit or equity plans that by their terms are intended to
survive termination of his employment or claims that the Company
fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to
Executive's agreements under Section 10 hereof, the Company
will execute and deliver a release of all claims of any kind
whatsoever against Executive (but without release of claims
that Executive fulfill his obligations under this Agreement).
The Company's release under this paragraph (b)(ii) of this
Section 9 shall be executed and delivered simultaneously with
the execution and delivery of Executive's release under
paragraph (b)(i) of this Section 9. The releases referred to
in this paragraph (b) of this Section 9 shall apply to all
claims described in this paragraph existing from the beginning
of time through the date of each party's execution of his or
its release.
(c) Upon any termination of employment, Executive hereby
resigns as an officer and director of the Company, any subsidiary and
any affiliate and as a fiduciary of any benefit plan of any of the
foregoing. Executive shall promptly execute any further documentation
thereof as requested by the Company and, if Executive is to receive any
payments from the Company, execution of such further documentation
shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a) (i) Executive acknowledges that as a result of his
employment by the Company, Executive will obtain secret and
confidential information as to the Company and its affiliates and
create relationships with customers, suppliers and other persons
dealing with the Company and its affiliates and the Company and its
affiliates will suffer
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<PAGE> 8
irreparable damage, which would be difficult to ascertain, if Executive
should use such confidential information or take advantage of such
relationships and that because of the nature of the information that
will be known to or obtained by Executive and the relationships created
it is necessary for the Company and its affiliates to be protected by
the prohibition against Competition as set forth herein, as well as the
confidentiality restrictions set forth herein.
(ii) Executive acknowledges (A) that the retention of
nonclerical employees, employed by the Company and its
affiliates in which the Company and its affiliates have
invested training and depends on for the operation of their
businesses, is important to the businesses of the Company and
its affiliates, and (B) that Executive will obtain unique
information as to such employees as an executive of the
Company and will develop a unique relationship with such
persons as a result of being an executive of the Company.
Therefore, it is necessary for the Company and its affiliates
to be protected from Executive's Solicitation (defined below)
of such employees as set forth below.
(iii) Executive acknowledges that the provisions of this
Agreement are reasonable and necessary for the protection of
the businesses of the Company and its affiliates and that part
of the compensation paid under this Agreement and the
agreement to pay severance in certain instances is in
consideration for the agreements in this Section 10.
(b) COMPETITION shall mean: participating, directly or
indirectly, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender with equity
participation, consultant or in any capacity whatsoever (within the
United States of America, or in any country where the Company or its
affiliates do business) in a Competing Business; provided, however,
that such participation shall not include (i) the ownership of not more
than ten percent (10%) of the total outstanding stock of a publicly
held company; (ii) following a termination of Executive's employment
hereunder, the ownership of not more than five percent (5%) of the
total outstanding stock of a private company if Executive is neither a
member of, or represented on, the board of directors of such private
company and does not have an executive officer role in such private
company; (iii) the Allowed Activities; or (iv) any activity engaged in
with the prior written approval of the Board. As used herein,
"Competing Business" means any business that the Company and/or its
subsidiaries and/or any entity in which the Company and/or its
subsidiaries holds securities (other than entities in which the Company
or its subsidiaries make a "nominal investment" (determined as
described in Section 2(c) hereof)) are engaged in (I) from time to time
(while Executive is employed by the Company) or (II) at the time of
termination (upon termination of Executive's employment) (consisting
principally of the services described in the Company's Registration
Statement on Form 10 under the Securities Exchange Act of 1934, as
amended, and any amendments thereof). For purposes of the immediately
preceding sentence, but solely following a termination of Executive's
employment hereunder, the Company and its subsidiaries shall be deemed
to have made a "nominal investment" in an entity if, at the time of
such termination of employment, the Company and its subsidiaries own or
control less than ten percent (10%) of the outstanding equity
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<PAGE> 9
interests, on a fully diluted basis, of such entity and are not
represented on the board of directors of such entity. The Company shall
furnish Executive with a list of all Competing Businesses on or
promptly following termination of his employment hereunder.
(c) SOLICITATION shall mean: recruiting, soliciting or
inducing, of any nonclerical employee or employees of the Company or
its affiliates to terminate their employment with the Company or its
affiliates or hiring or assisting another person or entity to hire any
nonclerical employee of the Company or its affiliates or any person who
within twelve (12) months before had been a nonclerical employee of the
Company or its affiliates and were recruited or solicited for such
employment or other retention while an employee of the Company,
provided, however, that solicitation shall not include any of the
foregoing activities engaged in with the prior written approval of the
Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad
a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it
may be enforceable. In the event that the agreements in this Section 10
shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of
time or over too great a geographical area or by reason of their being
too extensive in any other respect, they shall be interpreted to extend
only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be
enforceable and/or to the maximum extent in all other respects as to
which they may be enforceable, all as determined by such court in such
action.
(e) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive shall
hold in a fiduciary capacity for the benefit of the Company and its
affiliates all secret or confidential information, knowledge or data
relating to the Company and its affiliates, and their respective
businesses, including any confidential information as to customers of
the Company and its affiliates, (i) obtained by Executive during his
employment by the Company and its affiliates and (ii) not otherwise
public knowledge or known within the applicable industry. Executive
shall not, without prior written consent of the Company, unless
compelled pursuant to the order of a court or other governmental or
legal body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the
Company and those designated by it. In the event Executive is compelled
by order of a court or other governmental or legal body to communicate
or divulge any such information, knowledge or data to anyone other than
the foregoing, he shall promptly notify the Company of any such order
and he shall cooperate fully with the Company in protecting such
information (at the Company's expense) to the extent possible under
applicable law.
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<PAGE> 10
(f) Upon termination of his employment with the Company and
its affiliates, or at any time as the Company may request, Executive
will promptly deliver to the Company, as requested, all documents
(whether prepared by the Company, an affiliate, Executive or a third
party) relating to the Company, an affiliate or any of their businesses
or property which he may possess or have under his direction or control
other than documents provided to Executive in his capacity as a
participant in any employee benefit plan, policy or program of the
Company or any agreement by and between Executive and the Company with
regard to Executive's employment or severance.
(g) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive will not
engage in Solicitation.
(h) During the Employment Term and for the Restricted Period
(as hereinafter defined) following a termination of Executive's
employment, Executive will not enter into Competition with the Company.
The Restricted Period shall be (i) for a termination for Cause, twelve
(12) months following the date of termination, (ii) for termination
without Cause by the Company, or by Executive for Good Reason, as
defined in clause (i)(b) or clause (iv) of Section (d) of Exhibit "A",
the period in which the Company is making payments to Executive as
specified in Section 8(b) above, (iii) for a termination as a result of
the voluntary resignation of Executive without Good Reason, twelve (12)
months from the date of termination; and (iv) termination as a result
of expiration or non-renewal of this Agreement, after the Company has
made a good faith offer for continued employment, nine (9) months
following the date of termination. For avoidance of doubt, there shall
be no Restricted Period following termination of Executive's employment
without Cause by the Company (and other than for Disability or as a
result of expiration of the Employment Term) or for Good Reason by
Executive (other than as defined in clause (i)(b) or clause (iv) of
Section (d) of Exhibit "A"), or if the Employment Term expires and the
Company fails to make a good faith offer for continued employment.
(i) In the event of a breach or potential breach of this
Section 10, Executive acknowledges that the Company and its affiliates
will be caused irreparable injury and that money damages may not be an
adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at
law) to have the provisions of this Section 10 enforced. It is hereby
acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such
entity may enforce the provisions of this Section 10 and only the
applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of
breach of this Section 10 by Executive, while he is receiving amounts
under Section 8(b) or (c) hereof, Executive shall not be entitled to
receive any future amounts pursuant to Section 8(b) or (c) hereof after
the earlier to occur of (i) ninety (90) days following the Company's
notification of Executive of its good faith determination of such
breach, specifying in reasonable detail
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the grounds for such determination, and (ii) a final determination by
an arbitrator or court of competent jurisdiction of such breach, and,
upon such final determination, which is not appealable, he shall
reimburse the Company for any amounts previously paid to Executive
pursuant to Section 8(b) or (c) hereof.
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended and
as applicable, for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any subsidiary or affiliate of the Company or as a fiduciary of
any benefit plan. The Company shall cover Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent as the Company covers
its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company
copyrights, trade secrets, proprietary information, patents, unpatented
inventions, trademarks, service marks, processes, techniques, methods,
know-how, flow charts, diagrams, computer programs and/or databases,
and any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not (all
of the foregoing, collectively, "INTELLECTUAL PROPERTY"), which are
conceived, created, developed or made by Executive, solely or jointly
with another, during the period of employment or within one (1) year
thereafter, and which are substantially related to the business or
activities of the Company or its subsidiaries which Executive
conceived, created, developed or made as a result of his employment by
the Company or any of its subsidiaries. Executive hereby assigns and
agrees to assign all of his right, title and interest throughout the
world in any Intellectual Property to the Company or its nominee.
Whenever requested to do so by the Company, Executive shall execute any
and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain registrations of
copyrights or marks, or Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest in
Intellectual Property.
(b) Executive agrees that he will not, during or after the
Employment Term, disclose the specific terms of the Company's
relationships or agreements with its significant vendors or customers
or any other significant material trade secrets of the Company, whether
in existence or proposed (other than any of the foregoing that becomes
public knowledge other than through disclosure by Executive), to any
person, firm, partnership, corporation or business for any reason or
purpose whatsoever, except as is disclosed in the ordinary course of
business, unless compelled by a court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney,
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accountant and other professional fees and reasonable expenses incurred in such
dispute unless the finder of fact determines that the Company is the prevailing
party in such dispute.
14. Certain Additional Payments. Executive shall be grossed up for any
excise tax payable under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), in accordance with Exhibit C attached hereto.
15. Resolution of Disputes. The parties shall use their best efforts
and good will to settle all disputes by amicable negotiations. The Company and
Executive agree, for purposes of the resolution of any disputes under this
Agreement, that such disputes shall be settled by arbitration in Dallas, Texas,
or such other place agreed to by the parties, in accordance with the rules and
procedures of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel
consisting of one to three arbitrators, each of whom shall be
impartial. All arbitrators shall be appointed in the first instance by
agreement between the parties hereto. If the parties cannot agree upon
a single arbitrator, each of the Company and the Executive shall be
entitled to appoint one arbitrator. These two appointed arbitrators
shall then appoint a third arbitrator by their mutual agreement.
(b) An arbitration may be commenced by either party to this
Agreement by the service of a written request for arbitration upon the
other affected party. Such request for arbitration shall summarize the
controversy or claim to be arbitrated. If the panel of arbitrators is
not appointed within thirty (30) days following such service, either
party may apply to any court within the State of Texas for an order
appointing arbitrators qualified as set forth below. No request for
arbitration shall be valid if it relates to a claim, dispute,
disagreement or controversy that would have been time barred under the
applicable statute of limitations had such claim, dispute, disagreement
or controversy been submitted to the courts of the State of Texas.
(c) The parties hereby expressly waive punitive damages, and
under no circumstances shall an award contain any amount that in any
way reflects punitive damages.
(d) Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without
reference to principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of
the parties with respect to the employment of Executive by the Company
from and after the Commencement Date and supersedes any prior
agreements between the Company and Executive with respect thereto.
There are no restrictions, agreements, promises, warranties, covenants
or
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undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein and therein. This
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
or impaired, and the parties undertake to implement all efforts which
are necessary, desirable and sufficient to amend, supplement or
substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as
nearly as may be possible the result previously intended by the parties
without renegotiation of any material terms and conditions stipulated
herein.
(d) No Waiver. Any failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any such waiver must be in writing and
signed by Executive or an authorized officer of the Company, as the
case may be.
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an
entity which is owned, directly or indirectly, in whole or in part by
the Company or by any successor to the Company or an acquirer of all or
substantially all of the assets of the Company or all or substantially
all of the assets of a group of subsidiaries and divisions of the
Company, provided such entity or acquirer promptly assumes all of the
obligations hereunder of the Company in a writing delivered to
Executive and otherwise complies with the provisions hereof with regard
to such assumption. Upon such assignment and assumption, all references
to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the beneficiaries and permitted assignees
of the parties hereto. In the event of Executive's death while
receiving amounts payable pursuant to Section 8(b) hereof, any
remaining amounts shall be paid to Executive's estate.
(g) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when faxed or
delivered, or (ii) two (2) business days after being mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the initial
page of this Agreement, provided that all notices to the Company shall
be directed to the attention of the General Counsel and Secretary of
the Company, or to such other address as any party may have furnished
to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.
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(h) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
(i) Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 10 and Section
11 hereof, shall survive any termination of Executive's employment to
the extent necessary to the agreed preservation of such rights and
obligations.
(j) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control
or affect the meaning or construction of any provision of this
Agreement.
(l) Executive's Representation. Executive represents and
warrants to the Company that there is no legal impediment to him
entering into this Agreement, and entering into this Agreement will not
violate any agreement to which he is a party or any other legal
restrictions, and he has provided to the Company true and complete
copies of any agreements or covenants to which he is a party that could
restrict or adversely affect his performance under this Agreement.
Executive further represents and warrants that in performing his duties
hereunder he will not wrongfully use or disclose any confidential
information of any prior employer or other person or entity.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMPANY:
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Jeffrey A. Marcus
-----------------------------------------
Name: Jeffrey A. Marcus
---------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
EXECUTIVE:
/s/ Barrett N. Wissman
--------------------------------------------
BARRETT N. WISSMAN
15
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EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
BARRETT N. WISSMAN
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE"
shall be limited to the following:
(i) Executive's willful misconduct with regard to the
Company or its affiliates or their business, assets
or employees (including, without limitation,
Executive's fraud or embezzlement), or Executive's
willful misconduct other than the foregoing, which
in any case has a material adverse impact on the
Company or its affiliates, whether economic, or
reputationwise or otherwise, each as determined by
the Board, and which is not fully rectified or
cured, if susceptible to rectification or cure,
within thirty (30) days after written notice is
given to Executive; provided, however, that this
clause (i) shall not include an action or omission
of Executive done or omitted to be done in his good
faith exercise of business judgment or in good
faith reliance on advice of legal counsel to the
Company;
(ii) Executive's conviction of, or pleading nolo
contendere to, a felony or other crime involving
fraud or dishonesty;
(iii) Executive's refusal or willful failure to follow
the lawful written direction of the Board, the
Chief Executive Officer or his designee which is
not remedied within ten (10) business days after
receipt by Executive of a written notice specifying
the details thereto;
(iv) Executive's breach of Section 10 or Section 12
hereof, which has a material adverse economic
impact on the Company or its affiliates, as
determined by the Board; or
(v) the representations or warranties in Section 16(l)
hereof prove false, which has a material adverse
economic impact on the Company or its affiliates,
as determined by the Board.
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(b) Change in Control. For purposes of this Agreement, the
term "CHANGE IN CONTROL" shall mean the occurrence of any of the following:
(i) any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934
("Act") (other than (a) Permitted Assignees, (b)
the Company, (c) any trustee or other fiduciary
holding securities under any employee benefit plan
of the Company, or (d) any company owned, directly
or indirectly, by the stockholders of the Company
in substantially the same proportions as their
ownership of Common Stock of the Company) is or
becomes the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of
securities of the Company representing fifty
percent (50 %) or more of the combined voting power
of the Company's then outstanding securities.
Permitted Assignees shall mean the holders of the
equity securities (whether or not voting) of any
shareholder of the Company owning more than fifteen
percent (15%) of the Company on the date after the
date of execution of this Agreement, so long as the
voting power and disposition authority with respect
to the securities of such holders is held directly
or indirectly by any two or three of the following
individuals: Barrett N. Wissman, Clark K. Hunt or
James R. Holland;
(ii) during any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other
than a director designated by a person who has
entered into an agreement with the Company to
effect a transaction described in clause (i),
(iii), or (iv) of this paragraph) whose election by
the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in
office who either were directors at the beginning
of the two-year period or whose election or
nomination for election was previously so approved,
cease for any reason to constitute at least a
majority of the Board;
(iii) a merger or consolidation of the Company with any
other corporation, other than a merger or
consolidation which would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) more
than fifty percent (50%) of the combined voting
power of the voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
2
<PAGE> 18
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or the sale or
disposition by the Company of assets where the
proceeds thereof are not retained by the Company,
in a single transaction or a series of related
transactions, that result in a 66-2/3 percent or
greater decline in the enterprise value of the
Company, valued based on the weighted average fair
market value of any outstanding class of stock of
the Company plus the book value of the outstanding
indebtedness of the Company.
(c) Disability. For purposes of this Agreement, "DISABILITY"
shall mean if Executive is unable to perform his material duties pursuant to
this Agreement, as determined by the Board, because of mental or physical
incapacity, including, without limitation, alcoholism or drug abuse, which
requires a leave of absence in excess of ninety (90) consecutive days in any
twelve (12) month period.
(d) Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean the occurrence, without Executive's express written consent, in the
case of (i), (ii), or (iii), of any of the following circumstances:
(i) (a) any material demotion of Executive from his
position as President or (b) any assignment of
duties to Executive materially and adversely
inconsistent with Executive's position as President
(except in connection with the termination of
Executive's employment for Cause or due to
Disability or as a result of Executive's death, or
temporarily as a result of Executive's illness or
other absence);
(ii) a failure by the Company to pay to Executive any
amounts due under this Agreement in accordance with
the terms hereof, which failure is not cured within
fifteen (15) days following receipt by the Company
of written notice from Executive of such failure;
(iii) any other material breach by the Company of this
Agreement that remains uncured for fifteen (15)
days after written notice thereof by Executive to
the Company;
(iv) a Change in Control; or
(v) the Board requires Executive to relocate to an area
other than the Dallas, Texas greater metropolitan
area; or if the Company's corporate headquarters
are located in an area other than the Dallas, Texas
greater metropolitan area, to an area more than
fifty (50) miles from the Company's corporate
headquarters, and Executive declines to so
relocate.
3
<PAGE> 19
EXHIBIT "B"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
BARRETT N. WISSMAN
STOCK OPTION GRANTS
4
<PAGE> 20
EXHIBIT "C"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
BARRETT N. WISSMAN
GROSS-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this Exhibit C is
a part:
(a) In the event that Executive shall become entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
"nature of compensation" (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership or effective control covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to
Executive, subject to required withholding, at the time specified in subsection
(d) below an additional amount (the "Gross-up Payment") such that the net amount
retained by Executive, after deduction of any Excise Tax on the Company Payments
and on the Gross-Up Payment provided for under this paragraph (a) and any U.S.
federal, state, and local income or payroll tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any U.S. federal,
state, and local income or payroll tax on the Company Payments, shall be equal
to the Company Payments.
(b) In the event that the Excise Tax is subsequently
determined by the Company to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the prior Gross-up Payment attributable to such
reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by Executive), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is later determined by the Company or the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up Payment),
the Company shall make an additional Gross-up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following delivery by Executive to the Company of notice that an event that
subjects Executive to the Excise Tax has occurred; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be
5
<PAGE> 21
finally determined on or before such day, the Company shall pay to Executive on
such day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code)
promptly following such time as the amount thereof has been determined. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to Executive, payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(d) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise Tax, Executive
shall permit the Company to control issues related to the Excise Tax, but
Executive shall control any other issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of the Company to accompany Executive, and
Executive and Executive's representative shall cooperate with the Company and
its representative.
(e) The Company and Executive shall promptly deliver to each
other copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit C.
6
<PAGE> 1
EXHIBIT 10.10
eVENTURES GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made and
entered into by and between eVENTURES GROUP, INC., a Delaware corporation (the
"COMPANY"), and BARRETT N. WISSMAN (the "OPTIONEE"), effective April 4, 2000
(the "DATE OF GRANT").
1. GRANT OF OPTION. The Company hereby grants to the Optionee and the
Optionee hereby accepts, subject to the terms and conditions hereof, the right
and option to purchase from the Company (the "OPTION") all or any part of an
aggregate of 1,400,000 shares of the Company's common stock, par value $0.00002
per share (the "COMMON STOCK"), at a per share purchase price equal to
Twenty-Three Dollars and no cents ($23.00) per share (the "EXERCISE PRICE"), as
such shares and Exercise Price may be adjusted in accordance with Section 9
below. The Option is not granted pursuant to the Company's 1999 Omnibus
Securities Plan. The Option shall not be treated as an incentive stock option as
defined in Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXPIRATION AND TERMINATION OF THE OPTION. The Option will expire at
the end of business on April 4, 2010, ten (10) years from the Date of Grant of
the Option (the "EXPIRATION DATE"). In the event of termination of the
Optionee's employment with the Company, any Vested Portion (as defined in
Section 3 below) of the Option on the date of such termination may be exercised
at any time prior to the Expiration Date, and the Option shall terminate as to
the shares of Common Stock covered by the remaining, unvested portion of the
Option. The Option may not be exercised after its expiration or termination.
3. VESTING. On each Measurement Date set forth in Column 1 below, the
Option shall vest and become exercisable for the corresponding percentage set
forth in Column 2 below of the total number of shares of Common Stock set forth
in paragraph 1 hereof. The "VESTED PORTION" of the Option as of any particular
date shall be the cumulative total of all shares for which the Option has become
exercisable on or prior to that date in accordance with the following schedule.
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
Percentage of Total Option
Shares Vesting
Measurement Date on Measurement Date
- - ---------------------------------- ------------------------------------------
<S> <C>
July 2, 2000 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
April 2, 2001 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
April 2, 2002 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
April 2, 2003 Twenty-Five Percent (25%)
- - ---------------------------------- ------------------------------------------
</TABLE>
PAGE 1
<PAGE> 2
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company is terminated by the Company without "Cause" (other than for
"Disability") or by the Optionee for "Good Reason" (as such terms are defined in
the Employment Agreement between the Optionee and the Company), the Option shall
become fully and immediately exercisable and the "Vested Portion" of the Option
shall mean one hundred percent (100%) of the total number of shares of Common
Stock set forth in paragraph 1 hereof.
4. EXERCISE OF THE OPTION. The Vested Portion of the Option may be
exercised, to the extent not previously exercised, in whole or in part, at any
time or from time to time prior to the expiration or termination of the Option,
except that no Option shall be exercisable except in respect to whole shares,
and not less than one hundred (100) shares may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the Option. Exercise shall be accomplished by providing the
Company with written notice in the form of Exhibit "A" attached hereto, which
notice shall be irrevocable when delivered and effective upon payment in full of
the Exercise Price and any amounts required for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under this Agreement.
5. PAYMENT OF EXERCISE PRICE. Upon any exercise of the Option, the
total Exercise Price for the number of shares for which the Option is then being
exercised and the amount of any Federal, state and local withholding taxes
imposed thereon shall be paid in full to the Company in cash or, if permitted by
applicable law and subject to such limitations or conditions as the
Administering Body (as defined in Section 8 hereof) may prescribe, (a) with
shares of Common Stock that have been owned for at least six months by the
Optionee (or by the Optionee and his spouse jointly) having a total fair market
value (as determined by the Administering Body ("FAIR MARKET VALUE")) on the
date of such exercise equal to the total Exercise Price of such shares and the
amount of such withholding, or (b) in a broker-assisted or similar transaction
in which the total Exercise Price of such shares and the amount of such
withholding is not received by the Company until promptly after exercise, or
using a combination of the foregoing forms of consideration.
6. TRANSFERABILITY OF OPTION. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided,
however, that the Optionee may transfer the Option as a gift to the Optionee's
spouse, children, or grandchildren or a trust or family limited partnership
established solely for the benefit of, or of which the partners comprise only,
any such spouse, children or grandchildren. The transfer of the Option and any
transferred Option shall be subject to the same terms and conditions that were
applicable to the Option immediately prior to its transfer. No transfer of the
Option shall be effective unless the Company shall have been furnished with
written notice of such transfer at least 30 days in advance thereof and a copy
of such evidence as the Administering Body may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions hereof. Any attempted transfer, assignment, pledge or other
disposition or levy, attachment or similar process with respect to the Option
not specifically permitted herein shall be null and void without effect.
PAGE 2
<PAGE> 3
7. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors of the Company (the "BOARD")
or any Stock Plan Committee appointed by the Board (the "ADMINISTERING BODY").
The Optionee agrees that the decisions of such Administering Body concerning
administration and interpretation of this Agreement and the Option shall be
final, binding and conclusive on all persons. No member of the Board or the
Stock Plan Committee, nor any person participating in any determination of any
question under this Agreement, shall have any liability, in the absence of gross
negligence or willful misconduct, to any party for any action taken or not taken
in connection with this Agreement.
8. ADJUSTMENTS. If (a) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (b) the value of the outstanding shares of Common Stock
is reduced by reason of an extraordinary dividend payable in cash or property,
an appropriate and proportionate adjustment shall be made by the Administering
Body in the number and kind of shares or other securities subject to the Option
and/or the Exercise Price for each share or other unit of any other securities
subject to the Option. No fractional interests will be issued under the Option
resulting from any such adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of Common
Stock otherwise issuable as a result of such adjustments.
9. REGISTRATION. The Company shall (i) file a registration statement,
at the Company's option, on Form S-1, S-3 or S-8 under the Securities Act of
1933, as amended, which includes a reoffer prospectus, on the date which is the
earlier of (a) 90 days after the date it is first eligible to use Form S-3 or
S-8 or (b) January 15, 2001; (ii) use its best efforts, where effectiveness is
not automatic after the passage of time, to have such registration statement
declared effective within 90 days after such registration statement was filed;
and (iii) use its best efforts to maintain the effectiveness of such
registration statement or a successor registration statement (which includes a
reoffer prospectus) during the term of the Option.
10. NOTICES. Any notice hereunder to the Company shall be addressed to
it at 300 Crescent Court, Suite 800, Dallas, Texas 75201, Attention: General
Counsel, and any notice hereunder to the Optionee shall be addressed to the
Optionee at 3503 Springbrook, Dallas, Texas 75201, subject to the right of
either party to designate at any time hereafter in writing some other address.
11. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof.
PAGE 3
<PAGE> 4
12. SEVERABILITY. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. MODIFICATION. This Agreement may not be modified or amended, nor
may any provision hereof be waived, in any way except in writing signed by the
parties hereto.
14. COUNTERPARTS. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company by its duly authorized officer, and by the Optionee in acceptance of the
above-mentioned Option, subject to the terms and conditions of this Agreement,
all as of the day and year first above written.
Signature Page Following
PAGE 4
<PAGE> 5
SIGNATURE PAGE FOR eVENTURES GROUP, INC., NONQUALIFIED STOCK
OPTION AGREEMENT
Signature page for eVentures Group, Inc., Nonqualified Stock Option Agreement
dated April 4, 2000.
COMPANY:
eVENTURES GROUP, INC.
BY: /s/ Stuart J. Chasanoff
---------------------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate
Development and Legal Affairs
OPTIONEE:
/s/ Barrett N. Wissman
--------------------------------------
Printed Name: Barrett N. Wissman
-----------------------------
PAGE 5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXERCISE
UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
To: eVentures Group, Inc. (the "COMPANY")
From:
------------------------------
Date:
------------------------------
Pursuant to the Nonqualified Stock Option Agreement (the "AGREEMENT")
(capitalized terms used without definition herein have the meanings given such
terms in the Agreement) between the Company and myself effective
______________________, I hereby exercise my Option as follows:
<TABLE>
<S> <C>
- - ------------------------------------------------------------------------------
Number of shares of Common Stock I wish to purchase under the
Option
- - ------------------------------------------------------------------------------
Exercise Price per share $
- - ------------------------------------------------------------------------------
Total Exercise Price $
- - ------------------------------------------------------------------------------
"Vested Portion" of Option (see definition in Section 3 of the
Agreement)
- - ------------------------------------------------------------------------------
Number of shares I have previously purchased by exercising the
Option
- - ------------------------------------------------------------------------------
Expiration Date of the Option
- - ------------------------------------------------------------------------------
</TABLE>
I hereby represent, warrant, and covenant to the Company that:
a. I am acquiring the Common Stock for my own account, for investment,
and not for distribution or resale, and I will make no transfer of such Common
Stock except in compliance with applicable federal and state securities laws.
b. I can bear the economic risk of the investment in the Common Stock
resulting from this exercise of the Option, including a total loss of my
investment.
c. I am experienced in business and financial matters and am capable of
(i) evaluating the merits and risks of an investment in the Common Stock; (ii)
making an informed investment decision regarding exercise of the Option; and
(iii) protecting my interests in connection therewith.
d. Any subsequent offer for sale or distribution of any of the shares
of Common Stock shall be made only pursuant to (i) a registration statement on
an appropriate form under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), which registration statement has
1
<PAGE> 7
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, I shall, prior to any offer for sale or sale of such shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Administering Body, from counsel for or approved by the Administering Body, as
to the applicability of such exemption thereto.
I acknowledge that I must pay the total Exercise Price in full and make
appropriate arrangements for the payment of all federal, state and local tax
withholdings due with respect to the Option exercised herein, before the stock
certificate evidencing the shares of Common Stock resulting from this exercise
of the Option will be issued to me.
Attached in full payment of the total Exercise Price for the Option
exercised herein is ( ) a check made payable to the Company in the amount of
$___________________ and/or ( ) a stock certificate for _______ shares of Common
Stock that have been owned by me or by me and my spouse jointly for at least six
months, with a duly completed stock power attached with a total Fair Market
Value on the date hereof equal to the total Exercise Price.
Also attached in full payment of all withholding tax obligations
arising from exercise of the Option is (___) a check made payable to the Company
in the amount of such required withholding and/or (____) a stock certificate for
____ shares of Common Stock that have been owned by me or by me and my spouse
jointly for at least six months, with a duly completed stock power attached,
with a total Fair Market Value on the date hereof equal to the amount of such
required withholding.
Signature Page Following
2
<PAGE> 8
SIGNATURE PAGE FOR "EXHIBIT A", NOTICE OF EXERCISE UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
Signature page for "Exhibit A", Notice of Exercise under Nonqualified Stock
Option Agreement dated _________________, 2000.
OPTIONEE:
-------------------------------------
Name:
--------------------------------
RECEIVED BY THE COMPANY:
-------------------------------------
Name:
--------------------------------
Date:
--------------------------------
3
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of April 4,
2000, by and between, eVENTURES GROUP, INC., a Delaware corporation, with its
principal office at 300 Crescent Court, Suite 800, Dallas, Texas 75201 (the
"COMPANY"), and OLAF GUERRAND-HERMES residing at 1 West Sixty-seventh Street,
Apartment 601, New York, New York 10023 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective April 4, 2000 (the "COMMENCEMENT DATE"), the Company
desires to employ Executive as its Senior Vice President, and Executive desires
to accept such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement
as to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on April 4, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as a Senior Vice President of the
Company (the "SENIOR VICE President"), reporting directly to the Chief
Executive Officer or President of the Company (the "CHIEF EXECUTIVE
OFFICER"), with functional responsibility for acquisitions,
investments, operational oversight and the Company's office in New York
City. If requested by the Board of Directors of the Company (the
"BOARD") or the Chief Executive Officer, Executive shall also serve on
the Board and committees thereof, as an executive, officer and director
of subsidiaries of the Company and/or as a director of associated
companies of the Company without additional compensation and subject to
any policy of the Compensation Committee of the Company's Board (the
"COMPENSATION COMMITTEE") with regard to retention or turnover of the
director's fees.
(b) Executive shall have such duties and authority, consistent
with his position, as shall be assigned to him from time to time by the
Chief Executive Officer.
(c) During the Employment Term, Executive shall devote
substantially all of his business time and efforts to the performance
of his duties hereunder. Nothing contained herein shall be construed to
prohibit Executive from (i) owning less than ten percent (10%) of the
outstanding securities of any publicly traded entity, (ii) pursuing any
1
<PAGE> 2
business opportunity that is not in Competition, as such term is
defined in Section 10(b) below, with the Company or its subsidiaries or
any portfolio company in which the Company or its subsidiaries hold
securities (other than entities in which the Company or its
subsidiaries make a nominal investment) (provided the time devoted by
Executive to such personal investment does not materially interfere
with Executive's duties hereunder), (iii) continuing service on the
boards of directors of the companies set forth on Exhibit "D" attached
hereto or, with the written consent of the Board, on the board of
directors of any other company that is not in Competition with the
Company or its subsidiaries or any portfolio company in which the
Company or its subsidiaries hold securities (other than entities in
which the Company or its subsidiaries make a nominal investment), or
(iv) service on the boards of directors of a reasonable number of
charitable organizations so long as such service is not inconsistent
with his position and duties hereunder (such activities described in
clauses (i), (ii), (iii) and (iv) immediately preceding being herein
referred to as the "ALLOWED ACTIVITIES"). Executive shall be entitled
to retain any consideration that he receives from service permitted by
clause (iii) of the immediately preceding sentence on any board of
directors of a corporation unrelated to the Company. For purposes
hereof, a "nominal investment" of the Company or its subsidiaries will
be determined in relation to the size of investments made from time to
time by the Company or its subsidiaries in its portfolio companies
(including, without limitation, investments made in exchange for cash,
securities or services rendered).
3. Base Salary. During the Employment Term, the Company shall pay
Executive a Base Salary at the annual rate of One Hundred Eighty Thousand
Dollars ($180,000). Base Salary shall be payable in accordance with the usual
payroll practices of the Company. Executive's Base Salary may be reviewed
annually by the Board or the Compensation Committee and may be increased, but
not decreased, from time to time by the Board or the Compensation Committee. The
Base Salary as determined as aforesaid, from time to time for the applicable
fiscal year shall constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be entitled to participate in an
incentive bonus plan established by the Company on such terms and
conditions, and subject to such standards, as shall be determined from
time to time in the sole discretion of the Board or the Compensation
Committee. Such incentive bonus for any such fiscal year shall be
payable in cash and shall not be greater than fifty percent (50%) of
Executive's rate of Base Salary in effect for the fiscal year to which
such incentive bonus relates. During the Employment Term, the Company
shall maintain an incentive bonus plan providing a target bonus equal
to not less than fifty percent (50%) of Executive's rate of Base Salary
in effect for the fiscal year to which the bonus relates.
(b) Stock Options. The Company hereby grants to Executive
stock options (the "STOCK OPTIONS") to purchase 900,000 shares of
Common Stock of the Company. The Stock Options shall be granted
pursuant to a stock option award agreement or agreements between
Executive and the Company substantially in the form attached hereto as
Exhibit "B" (the "STOCK OPTION GRANTS"). The exercise price for such
Stock Options
2
<PAGE> 3
shall be equal to $23.00 per share of Common Stock. Subject to the
terms and provisions of the Stock Option Grants, the Stock Options
shall become exercisable on the dates indicated below as to that number
of shares of Common Stock of the Company as set forth below opposite
each such date.
<TABLE>
<CAPTION>
Date Number of Shares
---- ----------------
<S> <C>
July 2, 2000 225,000
April 2, 2001 225,000
April 2, 2002 225,000
April 2, 2003 225,000
</TABLE>
The foregoing schedule to the contrary notwithstanding, the Stock
Options shall become fully and immediately exercisable in the event the
Employment Term terminates prior to the Expiration Date by reason of
termination of the Executive's employment hereunder by Executive for
Good Reason or by the Company without Cause (as such terms are
hereinafter defined). The Stock Options shall in all events expire on
the date ten years after the Commencement Date, if not terminated or
canceled earlier. The Executive shall be permitted to transfer the
Stock Options to the Executive's immediate family members and/or lineal
descendents (or a trust or family limited partnership established
solely for the benefit of any such immediate family member and/or
lineal descendent). Notwithstanding anything in the Stock Option Grants
to the contrary, to the extent any provisions contained therein are
inconsistent with or differ from the explicit terms and conditions of
this Agreement, the terms and conditions of this Agreement shall
control. To the extent this Agreement does not specifically address an
issue or term set forth in the Stock Option Grants, then the provisions
and terms of the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option
Grants, the number of shares covered by, and the option price per share
of, the Stock Options will be subject to adjustment by the Company for
any stock split, reclassification, combination or similar change in the
Company's capital stock.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit
plans and arrangements and fringe benefits and perquisites generally
maintained by the Company from time to time for the benefit of senior
executive officers of the Company of a comparable level, in each case
in accordance with their respective terms as in effect from time to
time (other than any special arrangement entered into by contract with
an executive or that applies on a grandfathered basis). Without
limiting the foregoing, the Company shall pay all premiums for
Executive and his dependent family members under health,
hospitalization, disability, dental, life and other employee benefit
plans that the Company may have in effect from time to time. Executive
acknowledges that the Company does not currently provide a profit
sharing plan, and has no current intention of providing profit sharing
benefits to its employees.
3
<PAGE> 4
(b) During the Employment Term, Executive shall be entitled to
at least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect from time to time. Executive shall also be
entitled to such periods of sick leave as is customarily provided by
the Company to its senior executive employees.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive, subject to such pre-approval procedures as may be established from
time to time by the Board, in the performance of his duties hereunder, in
accordance with the Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the
earliest to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by
the Company due to Executive's Disability
(as defined in Exhibit "A") pursuant to
Section 7(b) hereof;
(iii) the termination of Executive's employment by
Executive for Good Reason (as defined in
Exhibit "A") pursuant to Section 7(c)
hereof,
(iv) the termination of Executive's employment by
the Company without Cause (as defined in
Exhibit "A") pursuant to Section 7(e)
hereof;
(v) the termination of employment by Executive
without Good Reason upon thirty (30) days
prior written notice pursuant to Section
7(f) hereof; or
(vi) the termination of Executive's employment by
the Company for Cause pursuant to Section
7(d) hereof.
(b) Disability. If Executive is unable to perform his material
duties hereunder due to a physical or mental condition and the Company
desires to terminate Executive's employment for Disability (as defined
in Exhibit "A"), the Company shall deliver to Executive a written
Notice of Disability Termination (herein so called), effective upon the
date (the "DISABILITY TERMINATION DATE") which is the later of (i) the
date such condition becomes a Disability or (ii) thirty (30) days
following the delivery of the Notice of Disability Termination;
provided that the Disability Termination Date shall be suspended, and
the Employment Term shall not terminate, so long as Executive returns
to the full performance of his duties by and following such date.
(c) Termination for Good Reason. A Termination for Good Reason
(herein so called) means a termination by Executive by written notice
given within thirty (30) days
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<PAGE> 5
after the occurrence of the Good Reason event, unless such
circumstances are corrected prior to the date of termination specified
in the Notice of Termination for Good Reason, and the Company informs
Executive of such correction prior to such date. In such event, the
Employment Term shall not terminate. A Notice of Termination for Good
Reason shall mean a notice that shall indicate the specific Good Reason
event in Section (c) of Exhibit "A" relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for Termination for Good Reason. The failure by Executive to set
forth in the Notice of Termination for Good Reason any facts or
circumstances which contribute to the showing of Good Reason shall not
waive any right of Executive hereunder or preclude Executive from
asserting such fact or circumstance in enforcing his rights hereunder.
The Notice of Termination for Good Reason shall provide for a date of
termination not less than thirty (30) nor more than sixty (60) days
after the date such Notice of Termination for Good Reason is given.
(d) Cause. Subject to the notification provisions of this
Section 7(d), Executive's employment hereunder may be terminated by the
Company for Cause. A Notice of Termination for Cause (herein so called)
shall mean a notice that shall indicate the specific termination
provision in Section (a) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances which provide for a
basis for Termination for Cause. The effective date of termination for
a Termination for Cause shall be the date indicated in the Notice of
Termination. Any purported Termination for Cause which is held by a
court by a non-appealable final judgment not to have been based on the
grounds set forth in this Agreement or not to have followed the
procedures set forth in this Agreement shall be deemed a termination by
the Company without Cause.
(e) Termination without Cause. The Company may terminate its
employment of Executive for reasons other than Cause at any time upon
thirty (30) days prior written notice.
(f) Voluntary Resignation. Executive may terminate his
employment with the Company at any time upon thirty (30) days prior
written notice.
8. Consequences of Termination of Employment. Executive shall be
entitled to the following compensation from the Company (in lieu of all other
sums owed or payable to Executive) upon the termination of employment as
described below:
(a) Death, Disability, Voluntary Resignation without Good
Reason or by the Company with Cause. If Executive's employment and the
Employment Term are terminated (1) by reason of Executive's death or
Disability, (2) by Executive without Good Reason or (3) by the Company
for Cause, the employment period under this Agreement shall terminate
without further obligations to Executive or Executive's legal
representatives under this Agreement except for: (i) any Base Salary
earned but unpaid, any accrued but unused vacation pay payable pursuant
to the Company's policies and any unreimbursed business expenses
payable pursuant to Section 6 (which amounts, in the case of the death
of Executive, shall be promptly paid in a lump sum to Executive's
estate), (ii) any other amounts or benefits earned, accrued and owing
to Executive under the then applicable employee benefit plans, long
term incentive plans or equity plans and programs of the Company,
including, without limitation, any earned but unpaid incentive
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<PAGE> 6
bonus for any prior completed fiscal year, and (iii) except in the case
of a termination by the Company for Cause or by Executive without Good
Reason, a pro-rata portion (based on the number of days Executive is
employed by the Company during the fiscal year of such termination) of
Executive's incentive bonus earned for the fiscal year in which
termination occurs, which, in any case, shall be paid in accordance
with the applicable plans, programs and agreements, and any unpaid
reimbursable business expenses (such amounts referred to in clauses (i)
and (ii), collectively, the "ACCRUED AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by
Company without Cause. If Executive's employment and the Employment
Term are terminated (i) by Executive for Good Reason, or (ii) by the
Company without Cause (and other than for Disability or as a result of
expiration of the Employment Term), Executive shall be entitled to
receive the Accrued Amounts and shall, subject to Sections 9(b), 9(c)
and 10 hereof, be entitled to receive equal monthly payments of an
amount equal to his monthly rate of Base Salary in effect at the time
of such termination plus his incentive bonus paid for the most recently
ended fiscal year (provided, however, if Executive was employed
hereunder for only a portion of such prior fiscal year, such bonus
shall be annualized for purposes of this calculation, and, if no bonus
was paid for such prior fiscal year, the current fiscal year's bonus,
at 100 percent of target, shall be deemed to be the incentive bonus
paid for the most recently ended fiscal year for purposes of this
calculation) divided by twelve (12), for a period equal to the greater
of (x) six (6) months or (y) the remaining period of time from the date
of such termination through the Expiration Date.
(c) Termination as a Result of Nonextension of Employment
Term. If Executive's employment with the Company terminates on the
Expiration Date by reason of expiration of the Employment Term and the
Company's failure to offer to extend the Employment Term, Executive
shall be entitled to receive the Accrued Amounts and shall, subject to
Sections 9(b), 9(c) and 10 hereof, be entitled to receive equal monthly
payments of an amount equal to his monthly rate of Base Salary in
effect immediately prior to the Expiration Date plus his incentive
bonus paid for the most recently ended fiscal year divided by twelve
(12) for a period of six (6) months.
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.
Any amounts due under Section 8 are in the nature of severance payments
and are not in the nature of a penalty. Such amounts are inclusive, and
in lieu of any amounts payable under any other salary continuation or
cash severance arrangement of the Company and to the extent paid or
provided under any other such arrangement shall be offset from the
amount due hereunder.
(b) (i) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) or (c) hereunder he
will execute, deliver and not revoke (within the time period permitted
by applicable law) a release of all claims of any kind whatsoever
against the Company, its affiliates, officers, directors, employees,
agents
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<PAGE> 7
and shareholders in the then standard form being used by the Company
for senior executives (but without release of the right of
indemnification hereunder or under the Company's By-laws or rights
under benefit or equity plans that by their terms are intended to
survive termination of his employment or claims that the Company
fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to
Executive's agreements under Section 10 hereof, the Company
will execute and deliver a release of all claims of any kind
whatsoever against Executive (but without release of claims
that Executive fulfill his obligations under this Agreement).
The Company's release under this paragraph (b)(ii) of this
Section 9 shall be executed and delivered simultaneously with
the execution and delivery of Executive's release under
paragraph (b)(i) of this Section 9. The releases referred to
in this paragraph (b) of this Section 9 shall apply to all
claims described in this paragraph existing from the beginning
of time through the date of each party's execution of his or
its release.
(c) Upon any termination of employment, Executive hereby
resigns as an officer and director of the Company, any subsidiary and
any affiliate and as a fiduciary of any benefit plan of any of the
foregoing. Executive shall promptly execute any further documentation
thereof as requested by the Company and, if Executive is to receive any
payments from the Company, execution of such further documentation
shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a) (i) Executive acknowledges that as a result of his
employment by the Company, Executive will obtain secret and
confidential information as to the Company and its affiliates and
create relationships with customers, suppliers and other persons
dealing with the Company and its affiliates and the Company and its
affiliates will suffer irreparable damage, which would be difficult to
ascertain, if Executive should use such confidential information or
take advantage of such relationships and that because of the nature of
the information that will be known to or obtained by Executive and the
relationships created it is necessary for the Company and its
affiliates to be protected by the prohibition against Competition as
set forth herein, as well as the confidentiality restrictions set forth
herein.
(ii) Executive acknowledges (A) that the retention of
nonclerical employees, employed by the Company and its
affiliates in which the Company and its affiliates have
invested training and depends on for the operation of their
businesses, is important to the businesses of the Company and
its affiliates, and (B) that Executive will obtain unique
information as to such employees as an executive of the
Company and will develop a unique relationship with such
persons as a result of being an executive of the Company.
Therefore, it is necessary for the Company and its affiliates
to be protected from Executive's Solicitation (defined below)
of such employees as set forth below.
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<PAGE> 8
(iii) Executive acknowledges that the provisions of
this Agreement are reasonable and necessary for the protection
of the businesses of the Company and its affiliates and that
part of the compensation paid under this Agreement and the
agreement to pay severance in certain instances is in
consideration for the agreements in this Section 10.
(b) COMPETITION shall mean: participating, directly or
indirectly, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, consultant or in
any capacity whatsoever (within the United States of America, or in any
country where the Company or its affiliates do business) in a Competing
Business; provided, however, that such participation shall not include
(i) the mere ownership of not more than ten percent (10%) of the total
outstanding stock of a publicly held company; (ii) the Allowed
Activities; or (iii) any activity engaged in with the prior written
approval of the Board. As used herein, "Competing Business" means any
business that the Company and/or its subsidiaries and/or any entity in
which the Company and/or its subsidiaries holds securities (other than
entities in which the Company or its subsidiaries make a nominal
investment) are engaged in (I) from time to time (while Executive is
employed by the Company) or (II) at the time of termination (upon
termination of Executive's employment) (consisting principally of the
services described in the Company's Registration Statement on Form 10
under the Securities Exchange Act of 1934, as amended, and any
amendments thereof).
(c) SOLICITATION shall mean: recruiting, soliciting or
inducing, of any nonclerical employee or employees of the Company or
its affiliates to terminate their employment with, or otherwise cease
their relationship with, the Company or its affiliates or hiring or
assisting another person or entity to hire any nonclerical employee of
the Company or its affiliates or any person who within twelve (12)
months before had been a nonclerical employee of the Company or its
affiliates and were recruited or solicited for such employment or other
retention while an employee of the Company, provided, however, that
solicitation shall not include any of the foregoing activities engaged
in with the prior written approval of the Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad
a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it
may be enforceable. In the event that the agreements in this Section 10
shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of
time or over too great a geographical area or by reason of their being
too extensive in any other respect, they shall be interpreted to extend
only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be
enforceable and/or to the maximum extent in all other respects as to
which they may be enforceable, all as determined by such court in such
action.
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<PAGE> 9
(e) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive shall
hold in a fiduciary capacity for the benefit of the Company and its
affiliates all secret or confidential information, knowledge or data
relating to the Company and its affiliates, and their respective
businesses, including any confidential information as to customers of
the Company and its affiliates, (i) obtained by Executive during his
employment by the Company and its affiliates and (ii) not otherwise
public knowledge or known within the applicable industry. Executive
shall not, without prior written consent of the Company, unless
compelled pursuant to the order of a court or other governmental or
legal body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the
Company and those designated by it. In the event Executive is compelled
by order of a court or other governmental or legal body to communicate
or divulge any such information, knowledge or data to anyone other than
the foregoing, he shall promptly notify the Company of any such order
and he shall cooperate fully with the Company in protecting such
information (at the Company's expense) to the extent possible under
applicable law.
(f) Upon termination of his employment with the Company and
its affiliates, or at any time as the Company may request, Executive
will promptly deliver to the Company, as requested, all documents
(whether prepared by the Company, an affiliate, Executive or a third
party) relating to the Company, an affiliate or any of their businesses
or property which he may possess or have under his direction or control
other than documents provided to Executive in his capacity as a
participant in any employee benefit plan, policy or program of the
Company or any agreement by and between Executive and the Company with
regard to Executive's employment or severance.
(g) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive will not
engage in Solicitation.
(h) During the Employment Term and for the Restricted Period
(as hereinafter defined) following a termination of Executive's
employment, Executive will not enter into Competition with the Company.
The Restricted Period shall be (i) for a termination for Cause, twelve
(12) months following the date of termination, (ii) for termination
without Cause by the Company, or by Executive for Good Reason, the
period in which the Company is making payments to Executive as
specified in Section 8(b) above, and (iii) for a termination as a
result of the voluntary resignation of Executive without Good Reason or
expiration or non-renewal of this Agreement, twelve (12) months
following the date of such termination. Notwithstanding the immediately
preceding sentence to the contrary, if the Company terminates
Executive's employment without Cause (other than as a result of
expiration of the Employment Term), or if Executive terminates his
employment for Good Reason, and, after a period of six (6) months
following the date of either such termination, Executive waives, in
writing, at any time after such six-month period, his right to receive
any future amounts that would otherwise be payable after the
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<PAGE> 10
expiration of such six-month period under Section 8(b) hereof, the
Restricted Period shall terminate following such six-month period and
waiver.
(i) In the event of a breach or potential breach of this
Section 10, Executive acknowledges that the Company and its affiliates
will be caused irreparable injury and that money damages may not be an
adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at
law) to have the provisions of this Section 10 enforced. It is hereby
acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such
entity may enforce the provisions of this Section 10 and only the
applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of
breach of this Section 10 by Executive, while he is receiving amounts
under Section 8(b) or (c) hereof, Executive shall not be entitled to
receive any future amounts pursuant to Section 8(b) or (c) hereof after
the earlier to occur of (i) ninety (90) days following the Company's
notification of Executive of its good faith determination of such
breach, specifying in reasonable detail the grounds for such
determination, and (ii) a final determination by an arbitrator or court
of competent jurisdiction of such breach, and, upon such final
determination, which is not appealable, Executive shall reimburse the
Company for any amounts previously paid to Executive pursuant to
Section 8(b) or (c) hereof.
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended and
as applicable, for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any subsidiary or affiliate of the Company or as a fiduciary of
any benefit plan. The Company shall cover Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent as the Company covers
its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company
copyrights, trade secrets, proprietary information, patents, unpatented
inventions, trademarks, service marks, processes, techniques, methods,
know-how, flow charts, diagrams, computer programs and/or databases,
and any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not (all
of the foregoing, collectively, "INTELLECTUAL PROPERTY"), which are
conceived, created, developed or made by Executive, solely or jointly
with another, during the period of employment or within one (1) year
thereafter, and which are substantially related to the business or
activities of the Company or its subsidiaries which Executive
conceived, created, developed or made as a result of his employment by
the Company or any of its subsidiaries. Executive hereby assigns and
agrees to assign all of his right, title and interest throughout the
world in any Intellectual Property to the Company or its nominee.
Whenever requested to do so by the Company, Executive shall execute any
and all
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<PAGE> 11
applications, assignments or other instruments that the Company shall
deem necessary to apply for and obtain registrations of copyrights or
marks, or Letters Patent of the United States or any foreign country or
to otherwise protect the Company's interest in Intellectual Property.
(b) Executive agrees that he will not, during or after the
Employment Term, disclose the specific terms of the Company's
relationships or agreements with its significant vendors or customers
or any other significant material trade secrets of the Company, whether
in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever, except as is
disclosed in the ordinary course of business, unless compelled by a
court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred in such dispute unless the finder of fact determines that the
Company is the prevailing party in such dispute.
14. Certain Additional Payments. Executive shall be grossed up for any
excise tax payable under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), in accordance with Exhibit C attached hereto.
15. Resolution of Disputes. The parties shall use their best efforts
and good will to settle all disputes by amicable negotiations. The Company and
Executive agree, for purposes of the resolution of any disputes under this
Agreement, that such disputes shall be settled by arbitration in New York, New
York, or such other place agreed to by the parties, in accordance with the rules
and procedures of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel
consisting of one to three arbitrators, each of whom shall be
impartial. All arbitrators shall be appointed in the first instance by
agreement between the parties hereto. If the parties cannot agree upon
a single arbitrator, each of the Company and the Executive shall be
entitled to appoint one arbitrator. These two appointed arbitrators
shall then appoint a third arbitrator by their mutual agreement.
(b) An arbitration may be commenced by either party to this
Agreement by the service of a written request for arbitration upon the
other affected party. Such request for arbitration shall summarize the
controversy or claim to be arbitrated. If the panel of arbitrators is
not appointed within thirty (30) days following such service, either
party may apply to any court within the State of New York for an order
appointing arbitrators qualified as set forth below. No request for
arbitration shall be valid if it relates to a claim, dispute,
disagreement or controversy that would have been time barred under the
applicable statute of limitations had such claim, dispute, disagreement
or controversy been submitted to the courts of the State of New York.
(c) The parties hereby expressly waive punitive damages, and
under no circumstances shall an award contain any amount that in any
way reflects punitive damages.
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<PAGE> 12
(d) Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without
reference to principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of
the parties with respect to the employment of Executive by the Company
from and after the Commencement Date and supersedes any prior
agreements between the Company and Executive with respect thereto.
There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein and therein. This
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
or impaired, and the parties undertake to implement all efforts which
are necessary, desirable and sufficient to amend, supplement or
substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as
nearly as may be possible the result previously intended by the parties
without renegotiation of any material terms and conditions stipulated
herein.
(d) No Waiver. Any failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any such waiver must be in writing and
signed by Executive or an authorized officer of the Company, as the
case may be.
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an
entity which is owned, directly or indirectly, in whole or in part by
the Company or by any successor to the Company or an acquirer of all or
substantially all of the assets of the Company or all or substantially
all of the assets of a group of subsidiaries and divisions of the
Company, provided such entity or acquirer promptly assumes all of the
obligations hereunder of the Company in a writing delivered to
Executive and otherwise complies with the provisions hereof with regard
to such assumption. Upon such assignment and assumption, all references
to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the beneficiaries and permitted assignees
of the parties hereto. In the event of Executive's death while
receiving amounts payable pursuant to Section 8(b) hereof, any
remaining amounts shall be paid to Executive's estate.
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<PAGE> 13
(g) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when faxed or
delivered, or (ii) two (2) business days after being mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the initial
page of this Agreement, provided that all notices to the Company shall
be directed to the attention of the General Counsel and Secretary of
the Company, or to such other address as any party may have furnished
to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.
(h) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
(i) Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 10 and Section
11 hereof, shall survive any termination of Executive's employment to
the extent necessary to the agreed preservation of such rights and
obligations.
(j) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control
or affect the meaning or construction of any provision of this
Agreement.
(l) Executive's Representation. Executive represents and
warrants to the Company that there is no legal impediment to him
entering into, or performing his obligations under this Agreement and
neither entering into this Agreement nor performing services hereunder
will violate any agreement to which he is a party or any other legal
restrictions. Executive further represents and warrants that in
performing his duties hereunder he will not use or disclose any
confidential information of any prior employer or other person or
entity.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMPANY:
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Thomas P. McMillin
----------------------------------------
Name: Thomas P. McMillin
--------------------------------------
Title: Executive Vice President
-------------------------------------
EXECUTIVE:
/s/ Olaf Guerrand-Hermes
-------------------------------------------
OLAF GUERRAND-HERMES
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EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
OLAF GUERRAND-HERMES
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE"
shall be limited to the following:
(i) Executive's willful misconduct or gross
negligence with regard to the Company or its
affiliates or their business, assets or
employees (including, without limitation,
Executive's fraud, embezzlement or other act
of dishonesty with regard to the Company or
its affiliates), or Executive's willful
misconduct other than the foregoing, which
in any case has a material adverse impact on
the Company or its affiliates, whether
economic, or reputationwise or otherwise,
each as determined by the Board, and which
is not fully rectified or cured, if
susceptible to rectification or cure, within
thirty (30) days after written notice is
given to Executive; provided, however, that
this clause (i) shall not include an action
or omission of Executive done or omitted to
be done in his good faith exercise of
business judgment or in good faith reliance
on advice of legal counsel to the Company;
(ii) Executive's conviction of, or pleading nolo
contendere to, a felony or other crime
involving fraud, dishonesty or moral
turpitude or which carries a minimum prison
sentence upon conviction of one (1) year or
longer;
(iii) Executive's refusal or willful failure to
follow the lawful written direction of the
Board, the President or his designee which
is not remedied within ten (10) business
days after receipt by Executive of a written
notice specifying the details thereto;
(iv) Executive's breach of a fiduciary duty owed
to the Company or its affiliates, including,
but not limited to, Section 10 or Section 12
hereof, as determined by the Board;
(v) the representations or warranties in Section
16(l) hereof prove false, which has a
material adverse economic impact on the
Company or its affiliates, as determined by
the Board; or
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(vi) any other breach by Executive of this
Agreement, which has a material adverse
impact on the Company or its affiliates,
whether economic, reputationwise or
otherwise, each as determined by the Board,
that remains uncured for thirty (30) days
after written notice is given to Executive.
(b) Disability. For purposes of this Agreement, "DISABILITY"
shall mean if Executive is unable to perform his material duties pursuant to
this Agreement, as determined by the Board, because of mental or physical
incapacity, including, without limitation, alcoholism or drug abuse, which
requires a leave of absence in excess of ninety (90) consecutive days in any
twelve (12) month period.
(c) Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean the occurrence, without Executive's express written consent, in the
case of (i), (ii), or (iii), of any of the following circumstances:
(i) (a) any material demotion of Executive from
his position as Senior Vice President or (b)
any assignment of duties to Executive
materially and adversely inconsistent with
Executive's position as Senior Vice
President (except in connection with the
termination of Executive's employment for
Cause or due to Disability or as a result of
Executive's death, or temporarily as a
result of Executive's illness or other
absence);
(ii) a failure by the Company to pay to Executive
any amounts due under this Agreement in
accordance with the terms hereof, which
failure is not cured within fifteen (15)
days following receipt by the Company of
written notice from Executive of such
failure;
(iii) any other material breach by the Company of
this Agreement that remains uncured for
fifteen (15) days after written notice
thereof by Executive to the Company; or
(iv) the Board requires Executive to relocate to
an area other than the New York City greater
metropolitan area, and Executive declines to
so relocate.
2
<PAGE> 17
EXHIBIT "B"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
OLAF GUERRAND-HERMES
STOCK OPTION GRANTS
3
<PAGE> 18
EXHIBIT "C"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
OLAF GUERRAND-HERMES
GROSS-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this Exhibit C is
a part:
(a) In the event that Executive shall become entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
"nature of compensation" (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership or effective control covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to
Executive, subject to required withholding, at the time specified in subsection
(d) below an additional amount (the "Gross-up Payment") such that the net amount
retained by Executive, after deduction of any Excise Tax on the Company Payments
and on the Gross-Up Payment provided for under this paragraph (a) and any U.S.
federal, state, and local income or payroll tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any U.S. federal,
state, and local income or payroll tax on the Company Payments, shall be equal
to the Company Payments.
(b) In the event that the Excise Tax is subsequently
determined by the Company to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the prior Gross-up Payment attributable to such
reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by Executive), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is later determined by the Company or the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up Payment),
the Company shall make an additional Gross-up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following delivery by Executive to the Company of notice that an event that
subjects Executive to the Excise Tax has occurred; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Executive on such day
an estimate, as determined in good faith by the Company, of the minimum amount
of such payments
4
<PAGE> 19
and shall pay the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) promptly following such time as
the amount thereof has been determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(d) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise Tax, Executive
shall permit the Company to control issues related to the Excise Tax, but
Executive shall control any other issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of the Company to accompany Executive, and
Executive and Executive's representative shall cooperate with the Company and
its representative.
(e) The Company and Executive shall promptly deliver to each
other copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit C.
5
<PAGE> 1
EXHIBIT 10.12
eVENTURES GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made and
entered into by and between eVENTURES GROUP, INC., a Delaware corporation (the
"COMPANY"), and OLAF GUERRAND-HERMES (the "OPTIONEE"), effective April 4, 2000
(the "DATE OF GRANT").
1. GRANT OF OPTION. The Company hereby grants to the Optionee and the
Optionee hereby accepts, subject to the terms and conditions hereof, the right
and option to purchase from the Company (the "OPTION") all or any part of an
aggregate of 900,000 shares of the Company's common stock, par value $0.00002
per share (the "COMMON STOCK"), at a per share purchase price equal to
Twenty-Three Dollars and no cents ($23.00) per share (the "EXERCISE PRICE"), as
such shares and Exercise Price may be adjusted in accordance with Section 9
below. The Option is not granted pursuant to the Company's 1999 Omnibus
Securities Plan. The Option shall not be treated as an incentive stock option as
defined in Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXPIRATION AND TERMINATION OF THE OPTION. The Option will expire at
the end of business on April 4, 2010, ten (10) years from the Date of Grant of
the Option (the "EXPIRATION DATE"). In the event of termination of the
Optionee's employment with the Company, any Vested Portion (as defined in
Section 3 below) of the Option on the date of such termination may be exercised
at any time prior to the Expiration Date, and the Option shall terminate as to
the shares of Common Stock covered by the remaining, unvested portion of the
Option. The Option may not be exercised after its expiration or termination.
3. VESTING. On each Measurement Date set forth in Column 1 below, the
Option shall vest and become exercisable for the corresponding percentage set
forth in Column 2 below of the total number of shares of Common Stock set forth
in paragraph 1 hereof. The "VESTED PORTION" of the Option as of any particular
date shall be the cumulative total of all shares for which the Option has become
exercisable on or prior to that date in accordance with the following schedule.
<TABLE>
<CAPTION>
--------------------------------------------------
COLUMN 1 COLUMN 2
Percentage of Total Option
Shares Vesting
Measurement Date on Measurement Date
---------------- ---------------------------
<S> <C>
July 2, 2000 Twenty-Five Percent (25%)
April 2, 2001 Twenty-Five Percent (25%)
April 2, 2002 Twenty-Five Percent (25%)
April 2, 2003 Twenty-Five Percent (25%)
--------------------------------------------------
</TABLE>
PAGE 1
<PAGE> 2
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company is terminated by the Company without "Cause" (other than for
"Disability") or by the Optionee for "Good Reason" (as such terms are defined in
the Employment Agreement between the Optionee and the Company), the Option shall
become fully and immediately exercisable and the "Vested Portion" of the Option
shall mean one hundred percent (100%) of the total number of shares of Common
Stock set forth in paragraph 1 hereof.
4. EXERCISE OF THE OPTION. The Vested Portion of the Option may be
exercised, to the extent not previously exercised, in whole or in part, at any
time or from time to time prior to the expiration or termination of the Option,
except that no Option shall be exercisable except in respect to whole shares,
and not less than one hundred (100) shares may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the Option. Exercise shall be accomplished by providing the
Company with written notice in the form of Exhibit "A" attached hereto, which
notice shall be irrevocable when delivered and effective upon payment in full of
the Exercise Price and any amounts required for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under this Agreement.
5. PAYMENT OF EXERCISE PRICE. Upon any exercise of the Option, the
total Exercise Price for the number of shares for which the Option is then being
exercised and the amount of any Federal, state and local withholding taxes
imposed thereon shall be paid in full to the Company in cash or, if permitted by
applicable law and subject to such limitations or conditions as the
Administering Body (as defined in Section 8 hereof) may prescribe, (a) with
shares of Common Stock that have been owned for at least six months by the
Optionee (or by the Optionee and his spouse jointly) having a total fair market
value (as determined by the Administering Body ("FAIR MARKET VALUE")) on the
date of such exercise equal to the total Exercise Price of such shares and the
amount of such withholding, or (b) in a broker-assisted or similar transaction
in which the total Exercise Price of such shares and the amount of such
withholding is not received by the Company until promptly after exercise, or
using a combination of the foregoing forms of consideration.
6. TRANSFERABILITY OF OPTION. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided,
however, that the Optionee may transfer the Option as a gift to the Optionee's
spouse, children, or grandchildren or a trust or family limited partnership
established solely for the benefit of, or of which the partners comprise only,
any such spouse, children or grandchildren. The transfer of the Option and any
transferred Option shall be subject to the same terms and conditions that were
applicable to the Option immediately prior to its transfer. No transfer of the
Option shall be effective unless the Company shall have been furnished with
written notice of such transfer at least 30 days in advance thereof and a copy
of such evidence as the Administering Body may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions hereof. Any attempted transfer, assignment, pledge or other
disposition or levy, attachment or similar process with respect to the Option
not specifically permitted herein shall be null and void without effect.
PAGE 2
<PAGE> 3
7. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors of the Company (the "BOARD")
or any Stock Plan Committee appointed by the Board (the "ADMINISTERING BODY").
The Optionee agrees that the decisions of such Administering Body concerning
administration and interpretation of this Agreement and the Option shall be
final, binding and conclusive on all persons. No member of the Board or the
Stock Plan Committee, nor any person participating in any determination of any
question under this Agreement, shall have any liability, in the absence of gross
negligence or willful misconduct, to any party for any action taken or not taken
in connection with this Agreement.
8. ADJUSTMENTS. If (a) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (b) the value of the outstanding shares of Common Stock
is reduced by reason of an extraordinary dividend payable in cash or property,
an appropriate and proportionate adjustment shall be made by the Administering
Body in the number and kind of shares or other securities subject to the Option
and/or the Exercise Price for each share or other unit of any other securities
subject to the Option. No fractional interests will be issued under the Option
resulting from any such adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of Common
Stock otherwise issuable as a result of such adjustments.
9. REGISTRATION. The Company shall (i) file a registration statement,
at the Company's option, on Form S-1, S-3 or S-8 under the Securities Act of
1933, as amended, which includes a reoffer prospectus, on the date which is the
earlier of (a) 90 days after the date it is first eligible to use Form S-3 or
S-8 or (b) January 15, 2001; (ii) use its best efforts, where effectiveness is
not automatic after the passage of time, to have such registration statement
declared effective within 90 days after such registration statement was filed;
and (iii) use its best efforts to maintain the effectiveness of such
registration statement or a successor registration statement (which includes a
reoffer prospectus) during the term of the Option.
10. NOTICES. Any notice hereunder to the Company shall be addressed to
it at 300 Crescent Court, Suite 800, Dallas, Texas 75201, Attention: General
Counsel, and any notice hereunder to the Optionee shall be addressed to the
Optionee at One West 67th Street, Apt. 601, New York, NY 10023, subject to the
right of either party to designate at any time hereafter in writing some other
address.
11. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof.
PAGE 3
<PAGE> 4
12. SEVERABILITY. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. MODIFICATION. This Agreement may not be modified or amended, nor
may any provision hereof be waived, in any way except in writing signed by the
parties hereto.
14. COUNTERPARTS. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company by its duly authorized officer, and by the Optionee in acceptance of the
above-mentioned Option, subject to the terms and conditions of this Agreement,
all as of the day and year first above written.
Signature Page Following
PAGE 4
<PAGE> 5
SIGNATURE PAGE FOR eVENTURES GROUP, INC., NONQUALIFIED STOCK
OPTION AGREEMENT
Signature page for eVentures Group, Inc., Nonqualified Stock Option Agreement
dated April 4, 2000.
COMPANY:
eVENTURES GROUP, INC.
BY: /s/ Stuart J. Chasanoff
----------------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate
Development and Legal Affairs
OPTIONEE:
/s/ Olaf Guerrand-Hermes
---------------------------------------
Printed Name: Olaf Guerrand-Hermes
------------------------
PAGE 5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXERCISE
UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
To: eVentures Group, Inc. (the "COMPANY")
From:
---------------------------------------
Date:
---------------------------------------
Pursuant to the Nonqualified Stock Option Agreement (the "AGREEMENT")
(capitalized terms used without definition herein have the meanings given such
terms in the Agreement) between the Company and myself effective
______________________, I hereby exercise my Option as follows:
<TABLE>
<S> <C>
Number of shares of Common Stock I wish to purchase under the Option
- - ------------------------------------------------------------------------- ------
Exercise Price per share $
- - ------------------------------------------------------------------------- ------
Total Exercise Price $
- - ------------------------------------------------------------------------- ------
"Vested Portion" of Option (see definition in Section 3 of the Agreement)
- - ------------------------------------------------------------------------- ------
Number of shares I have previously purchased by exercising the Option
- - ------------------------------------------------------------------------- ------
Expiration Date of the Option
- - ------------------------------------------------------------------------- ------
</TABLE>
I hereby represent, warrant, and covenant to the Company that:
a. I am acquiring the Common Stock for my own account, for
investment, and not for distribution or resale, and I will make no transfer of
such Common Stock except in compliance with applicable federal and state
securities laws.
b. I can bear the economic risk of the investment in the Common
Stock resulting from this exercise of the Option, including a total loss of my
investment.
c. I am experienced in business and financial matters and am
capable of (i) evaluating the merits and risks of an investment in the Common
Stock; (ii) making an informed investment decision regarding exercise of the
Option; and (iii) protecting my interests in connection therewith.
d. Any subsequent offer for sale or distribution of any of the
shares of Common Stock shall be made only pursuant to (i) a registration
statement on an appropriate form under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), which registration statement has
1
<PAGE> 7
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, I shall, prior to any offer for sale or sale of such shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Administering Body, from counsel for or approved by the Administering Body, as
to the applicability of such exemption thereto.
I acknowledge that I must pay the total Exercise Price in full and make
appropriate arrangements for the payment of all federal, state and local tax
withholdings due with respect to the Option exercised herein, before the stock
certificate evidencing the shares of Common Stock resulting from this exercise
of the Option will be issued to me.
Attached in full payment of the total Exercise Price for the Option
exercised herein is ( ) a check made payable to the Company in the amount of
$___________________ and/or ( ) a stock certificate for _______ shares of Common
Stock that have been owned by me or by me and my spouse jointly for at least six
months, with a duly completed stock power attached with a total Fair Market
Value on the date hereof equal to the total Exercise Price.
Also attached in full payment of all withholding tax obligations
arising from exercise of the Option is (___) a check made payable to the Company
in the amount of such required withholding and/or (____) a stock certificate for
____ shares of Common Stock that have been owned by me or by me and my spouse
jointly for at least six months, with a duly completed stock power attached,
with a total Fair Market Value on the date hereof equal to the amount of such
required withholding.
Signature Page Following
2
<PAGE> 8
SIGNATURE PAGE FOR "EXHIBIT A", NOTICE OF EXERCISE UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
Signature page for "Exhibit A", Notice of Exercise under Nonqualified Stock
Option Agreement dated _________________, 2000.
OPTIONEE:
----------------------------------
Name:
-----------------------------
RECEIVED BY THE COMPANY:
----------------------------------
Name:
-----------------------------
Date:
-----------------------------
3
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of April 17,
2000, by and between, eVENTURES GROUP, INC., a Delaware corporation, with its
principal office at 300 Crescent Court, Suite 800, Dallas, Texas 75201 (the
"COMPANY"), and SUSIE C. HOLLIDAY residing at 500 Ravenaux Drive, Southlake,
Texas 76092 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective April 17, 2000 (the "COMMENCEMENT DATE"), the
Company desires to employ Executive as its Senior Vice President - Accounting
and Administration, and Executive desires to accept such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement
as to the terms of her employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "EMPLOYMENT TERM") commencing on the Commencement Date
and ending on April 17, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as Senior Vice President -
Accounting and Administration of the Company (the "SENIOR VICE
PRESIDENT"), reporting directly to the Executive Vice President of the
Company (the "EXECUTIVE VICE PRESIDENT"). If requested by the Board of
Directors of the Company (the "BOARD") or the Executive Vice President,
Executive shall also serve on the Board and committees thereof, as an
executive, officer and director of subsidiaries of the Company and/or
as a director of associated companies of the Company without additional
compensation and subject to any policy of the Compensation Committee of
the Company's Board (the "COMPENSATION COMMITTEE") with regard to
retention or turnover of the director's fees.
(b) Executive shall have such duties and authority, consistent
with her position, as shall be assigned to her from time to time by the
Executive Vice President.
(c) During the Employment Term, Executive shall devote
substantially all of her business time and efforts to the performance
of her duties hereunder. Nothing contained herein shall be construed to
prohibit Executive from (i) owning less than ten percent (10%) of the
outstanding securities of any publicly traded entity, or (ii) pursuing
any business opportunity that is not in Competition, as such term is
defined in
1
<PAGE> 2
Section 10(b) below, with the Company or its subsidiaries or any
portfolio company in which the Company or its subsidiaries hold
securities (other than entities in which the Company or its
subsidiaries make a nominal investment) (provided the time devoted by
Executive to such personal investment does not materially interfere
with Executive's duties hereunder) (such activities being herein
referred to as the "ALLOWED ACTIVITIES"). For purposes hereof, a
"nominal investment" of the Company or its subsidiaries will be
determined in relation to the size of investments made from time to
time by the Company or its subsidiaries in its portfolio companies
(including, without limitation, investments made in exchange for cash,
securities or services rendered).
3. Base Salary. Subject to the remaining terms of this Section 3,
during the Employment Term, the Company shall pay Executive a Base Salary at the
annual rate of One Hundred Fifty Thousand Dollars ($150,000). Base Salary shall
be payable in accordance with the usual payroll practices of the Company.
Executive's Base Salary may be reviewed annually by the Board or the
Compensation Committee and may be increased, but not decreased, from time to
time by the Board or the Compensation Committee; provided, however, that the
Base Salary shall be increased beginning on the first anniversary of the
Commencement Date and on each successive anniversary date thereafter during the
Employment Term, in each case, at the annual rate of increase of the Consumer
Price Index as measured by the United State Department of Labor, Bureau of Labor
Statistics, All Items, Consumer Price Index for All Urban Consumers (the "CPI").
In determining the amount of any such annual increase, the base shall be the CPI
for the first day of the calendar year preceding the year for which the Base
Salary increase is being calculated, and such base shall be compared with the
CPI as of the last day of such year. If the CPI is no longer published in
substantially its current form by the U.S. Department of Labor, then a successor
index shall be substituted by mutual agreement of the Company and Executive. The
Base Salary as determined as aforesaid, from time to time for the applicable
fiscal year shall constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the
Employment Term, Executive shall be entitled to participate in an
incentive bonus plan established by the Company on such terms and
conditions, and subject to such standards, as shall be determined from
time to time in the sole discretion of the Board or the Compensation
Committee. Such incentive bonus for any such fiscal year shall be
payable in cash and shall not be greater than twenty-five percent (25%)
of Executive's rate of Base Salary in effect for the fiscal year to
which such incentive bonus relates. During the Employment Term, the
Company shall maintain an incentive bonus plan providing a target bonus
equal to not less than twenty-five percent (25%) of Executive's rate of
Base Salary in effect for the fiscal year to which the bonus relates.
(b) Stock Options. The Company hereby grants to Executive
stock options (the "STOCK OPTIONS") to purchase 200,000 shares of
Common Stock of the Company. The Stock Options shall be granted
pursuant to a stock option award agreement or agreements between
Executive and the Company substantially in the form attached hereto as
Exhibit "B" (the "STOCK OPTION GRANTS"). The exercise price for such
Stock Options shall be $18.00 per share of Common Stock. Subject to the
terms and provisions of the
2
<PAGE> 3
Stock Option Grants, the Stock Options shall become exercisable on the
dates indicated below as to that number of shares of Common Stock of
the Company as set forth below opposite each such date.
<TABLE>
<CAPTION>
Date Number of Shares
---- ----------------
<S> <C>
April 17, 2001 66,667
April 17, 2002 66,667
April 17, 2003 66,666
</TABLE>
The foregoing schedule to the contrary notwithstanding, the Stock
Options shall become fully and immediately exercisable in the event the
Employment Term terminates prior to the Expiration Date by reason of
termination of the Executive's employment hereunder by Executive for
Good Reason or by the Company without Cause (as such terms are
hereinafter defined). The Stock Options shall in all events expire on
the date ten years after the Commencement Date, if not terminated or
canceled earlier. The Executive shall be permitted to transfer the
Stock Options to the Executive's immediate family members and/or lineal
descendents (or a trust or family limited partnership established
solely for the benefit of any such immediate family member and/or
lineal descendent). Notwithstanding anything in the Stock Option Grants
to the contrary, to the extent any provisions contained therein are
inconsistent with or differ from the explicit terms and conditions of
this Agreement, the terms and conditions of this Agreement shall
control. To the extent this Agreement does not specifically address an
issue or term set forth in the Stock Option Grants, then the provisions
and terms of the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option
Grants, the number of shares covered by, and the option price per share
of, the Stock Options will be subject to adjustment by the Company for
any stock split, reclassification, combination or similar change in the
Company's capital stock.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive
compensation, retirement, savings, welfare and other employee benefit
plans and arrangements and fringe benefits and perquisites generally
maintained by the Company from time to time for the benefit of senior
executive officers of the Company of a comparable level, in each case
in accordance with their respective terms as in effect from time to
time (other than any special arrangement entered into by contract with
an executive or that applies on a grandfathered basis). Without
limiting the foregoing, the Company shall pay all premiums for
Executive and her dependent family members under health,
hospitalization, disability, dental, life and other employee benefit
plans that the Company may have in effect from time to time. Executive
acknowledges that the Company does not currently provide a profit
sharing plan, and has no current intention of providing profit sharing
benefits to its employees.
(b) During the Employment Term, Executive shall be entitled to
at least three (3) weeks paid vacation each year in accordance with the
Company's policies in effect
3
<PAGE> 4
from time to time. Executive shall also be entitled to such periods of
sick leave as is customarily provided by the Company to its senior
executive employees.
6. Business Expenses. The Company shall reimburse Executive for the
reasonable travel, entertainment and other business expenses incurred by
Executive, subject to such pre-approval procedures as may be established from
time to time by the Board, in the performance of her duties hereunder, in
accordance with the Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall
terminate as provided in Section 1 hereof or, if earlier, upon the
earliest to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by
the Company due to Executive's Disability
(as defined in Exhibit "A") pursuant to
Section 7(b) hereof;
(iii) the termination of Executive's employment by
Executive for Good Reason (as defined in
Exhibit "A") pursuant to Section 7(c)
hereof,
(iv) the termination of Executive's employment by
the Company without Cause (as defined in
Exhibit "A") pursuant to Section 7(e)
hereof;
(v) the termination of employment by Executive
without Good Reason upon thirty (30) days
prior written notice pursuant to Section
7(f) hereof; or
(vi) the termination of Executive's employment by
the Company for Cause pursuant to Section
7(d) hereof.
(b) Disability. If Executive is unable to perform her material
duties hereunder due to a physical or mental condition and the Company
desires to terminate Executive's employment for Disability (as defined
in Exhibit "A"), the Company shall deliver to Executive a written
Notice of Disability Termination (herein so called), effective upon the
date (the "DISABILITY TERMINATION DATE") which is the later of (i) the
date such condition becomes a Disability or (ii) thirty (30) days
following the delivery of the Notice of Disability Termination;
provided that the Disability Termination Date shall be suspended, and
the Employment Term shall not terminate, so long as Executive returns
to the full performance of her duties by and following such date.
(c) Termination for Good Reason. A Termination for Good Reason
(herein so called) means a termination by Executive by written notice
given within thirty (30) days after the occurrence of the Good Reason
event, unless such circumstances are corrected prior to the date of
termination specified in the Notice of Termination for Good Reason,
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<PAGE> 5
and the Company informs Executive of such correction prior to such
date. In such event, the Employment Term shall not terminate. A Notice
of Termination for Good Reason shall mean a notice that shall indicate
the specific Good Reason event in Section (c) of Exhibit "A" relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for Good
Reason. The failure by Executive to set forth in the Notice of
Termination for Good Reason any facts or circumstances which contribute
to the showing of Good Reason shall not waive any right of Executive
hereunder or preclude Executive from asserting such fact or
circumstance in enforcing her rights hereunder. The Notice of
Termination for Good Reason shall provide for a date of termination not
less than thirty (30) nor more than sixty (60) days after the date such
Notice of Termination for Good Reason is given.
(d) Cause. Subject to the notification provisions of this
Section 7(d), Executive's employment hereunder may be terminated by the
Company for Cause. A Notice of Termination for Cause (herein so called)
shall mean a notice that shall indicate the specific termination
provision in Section (a) of Exhibit "A" relied upon and shall set forth
in reasonable detail the facts and circumstances which provide for a
basis for Termination for Cause. The effective date of termination for
a Termination for Cause shall be the date indicated in the Notice of
Termination. Any purported Termination for Cause which is held by a
court by a non-appealable final judgment not to have been based on the
grounds set forth in this Agreement or not to have followed the
procedures set forth in this Agreement shall be deemed a termination by
the Company without Cause.
(e) Termination without Cause. The Company may terminate its
employment of Executive for reasons other than Cause at any time upon
thirty (30) days prior written notice.
(f) Voluntary Resignation. Executive may terminate her
employment with the Company at any time upon thirty (30) days prior
written notice.
8. Consequences of Termination of Employment. Executive shall be
entitled to the following compensation from the Company (in lieu of all other
sums owed or payable to Executive) upon the termination of employment as
described below:
(a) Death, Disability, Voluntary Resignation without Good
Reason or by the Company with Cause. If Executive's employment and the
Employment Term are terminated (1) by reason of Executive's death or
Disability, (2) by Executive without Good Reason or (3) by the Company
for Cause, the employment period under this Agreement shall terminate
without further obligations to Executive or Executive's legal
representatives under this Agreement except for: (i) any Base Salary
earned but unpaid, any accrued but unused vacation pay payable pursuant
to the Company's policies and any unreimbursed business expenses
payable pursuant to Section 6 (which amounts, in the case of the death
of Executive, shall be promptly paid in a lump sum to Executive's
estate), (ii) any other amounts or benefits earned, accrued and owing
to Executive under the then applicable employee benefit plans, long
term incentive plans or equity plans and programs of the Company,
including, without limitation, any earned but unpaid incentive bonus
for any prior completed fiscal year, and (iii) except in the case of a
termination by the Company for Cause or by Executive without Good
Reason, a pro-rata portion (based
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<PAGE> 6
on the number of days Executive is employed by the Company during the
fiscal year of such termination) of Executive's incentive bonus earned
for the fiscal year in which termination occurs, which, in any case,
shall be paid in accordance with the applicable plans, programs and
agreements, and any unpaid reimbursable business expenses (such amounts
referred to in clauses (i) and (ii), collectively, the "ACCRUED
AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by
Company without Cause. If Executive's employment and the Employment
Term are terminated (i) by Executive for Good Reason, or (ii) by the
Company without Cause (and other than for Disability or as a result of
expiration of the Employment Term), Executive shall be entitled to
receive the Accrued Amounts and shall, subject to Sections 9(b), 9(c)
and 10 hereof, be entitled to receive equal monthly payments of an
amount equal to her monthly rate of Base Salary in effect at the time
of such termination plus her incentive bonus paid for the most recently
ended fiscal year (provided, however, if Executive was employed
hereunder for only a portion of such prior fiscal year, such bonus
shall be annualized for purposes of this calculation, and, if no bonus
was paid for such prior fiscal year, the current fiscal year's bonus,
at 100 percent of target, shall be deemed to be the incentive bonus
paid for the most recently ended fiscal year for purposes of this
calculation) divided by twelve (12), for a period equal to the greater
of (x) six (6) months or (y) the remaining period of time from the date
of such termination through the Expiration Date.
(c) Termination as a Result of Nonextension of Employment
Term. If Executive's employment with the Company terminates on the
Expiration Date by reason of expiration of the Employment Term and the
Company's failure to offer to extend the Employment Term, Executive
shall be entitled to receive the Accrued Amounts and shall, subject to
Sections 9(b), 9(c) and 10 hereof, be entitled to receive equal monthly
payments of an amount equal to her monthly rate of Base Salary in
effect immediately prior to the Expiration Date plus her incentive
bonus paid for the most recently ended fiscal year divided by twelve
(12) for a period of six (6) months.
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.
Any amounts due under Section 8 are in the nature of severance payments
and are not in the nature of a penalty. Such amounts are inclusive, and
in lieu of any amounts payable under any other salary continuation or
cash severance arrangement of the Company and to the extent paid or
provided under any other such arrangement shall be offset from the
amount due hereunder.
(b) (i) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(b) or (c) hereunder she
will execute, deliver and not revoke (within the time period permitted
by applicable law) a release of all claims of any kind whatsoever
against the Company, its affiliates, officers, directors, employees,
agents and shareholders in the then standard form being used by the
Company for senior executives (but without release of the right of
indemnification hereunder or under the
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<PAGE> 7
Company's By-laws or rights under benefit or equity plans that by their
terms are intended to survive termination of her employment or claims
that the Company fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to
Executive's agreements under Section 10 hereof, the Company
will execute and deliver a release of all claims of any kind
whatsoever against Executive (but without release of claims
that Executive fulfill her obligations under this Agreement).
The Company's release under this paragraph (b)(ii) of this
Section 9 shall be executed and delivered simultaneously with
the execution and delivery of Executive's release under
paragraph (b)(i) of this Section 9. The releases referred to
in this paragraph (b) of this Section 9 shall apply to all
claims described in this paragraph existing from the beginning
of time through the date of each party's execution of her or
its release.
(c) Upon any termination of employment, Executive hereby
resigns as an officer and director of the Company, any subsidiary and
any affiliate and as a fiduciary of any benefit plan of any of the
foregoing. Executive shall promptly execute any further documentation
thereof as requested by the Company and, if Executive is to receive any
payments from the Company, execution of such further documentation
shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a) (i) Executive acknowledges that as a result of her
employment by the Company, Executive will obtain secret and
confidential information as to the Company and its affiliates and
create relationships with customers, suppliers and other persons
dealing with the Company and its affiliates and the Company and its
affiliates will suffer irreparable damage, which would be difficult to
ascertain, if Executive should use such confidential information or
take advantage of such relationships and that because of the nature of
the information that will be known to or obtained by Executive and the
relationships created it is necessary for the Company and its
affiliates to be protected by the prohibition against Competition as
set forth herein, as well as the confidentiality restrictions set forth
herein.
(ii) Executive acknowledges (A) that the retention of
nonclerical employees, employed by the Company and its
affiliates in which the Company and its affiliates have
invested training and depends on for the operation of their
businesses, is important to the businesses of the Company and
its affiliates, and (B) that Executive will obtain unique
information as to such employees as an executive of the
Company and will develop a unique relationship with such
persons as a result of being an executive of the Company.
Therefore, it is necessary for the Company and its affiliates
to be protected from Executive's Solicitation (defined below)
of such employees as set forth below.
(iii) Executive acknowledges that the provisions of
this Agreement are reasonable and necessary for the protection
of the businesses of the Company and
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<PAGE> 8
its affiliates and that part of the compensation paid under
this Agreement and the agreement to pay severance in certain
instances is in consideration for the agreements in this
Section 10.
(b) COMPETITION shall mean: participating, directly or
indirectly, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, consultant or in
any capacity whatsoever (within the United States of America, or in any
country where the Company or its affiliates do business) in a Competing
Business; provided, however, that such participation shall not include
(i) the mere ownership of not more than ten percent (10%) of the total
outstanding stock of a publicly held company; (ii) the Allowed
Activities; or (iii) any activity engaged in with the prior written
approval of the Board. As used herein, "Competing Business" means any
business that the Company and/or its subsidiaries and/or any entity in
which the Company and/or its subsidiaries holds securities (other than
entities in which the Company or its subsidiaries make a nominal
investment) are engaged in (I) from time to time (while Executive is
employed by the Company) or (II) at the time of termination (upon
termination of Executive's employment) (consisting principally of the
services described in the Company's Registration Statement on Form 10
under the Securities Exchange Act of 1934, as amended, and any
amendments thereof).
(c) SOLICITATION shall mean: recruiting, soliciting or
inducing, of any nonclerical employee or employees of the Company or
its affiliates to terminate their employment with, or otherwise cease
their relationship with, the Company or its affiliates or hiring or
assisting another person or entity to hire any nonclerical employee of
the Company or its affiliates or any person who within twelve (12)
months before had been a nonclerical employee of the Company or its
affiliates and were recruited or solicited for such employment or other
retention while an employee of the Company, provided, however, that
solicitation shall not include any of the foregoing activities engaged
in with the prior written approval of the Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad
a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it
may be enforceable. In the event that the agreements in this Section 10
shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of
time or over too great a geographical area or by reason of their being
too extensive in any other respect, they shall be interpreted to extend
only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be
enforceable and/or to the maximum extent in all other respects as to
which they may be enforceable, all as determined by such court in such
action.
(e) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension
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<PAGE> 9
of the Employment Term, Executive shall hold in a fiduciary capacity
for the benefit of the Company and its affiliates all secret or
confidential information, knowledge or data relating to the Company and
its affiliates, and their respective businesses, including any
confidential information as to customers of the Company and its
affiliates, (i) obtained by Executive during her employment by the
Company and its affiliates and (ii) not otherwise public knowledge or
known within the applicable industry. Executive shall not, without
prior written consent of the Company, unless compelled pursuant to the
order of a court or other governmental or legal body having
jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company and
those designated by it. In the event Executive is compelled by order of
a court or other governmental or legal body to communicate or divulge
any such information, knowledge or data to anyone other than the
foregoing, she shall promptly notify the Company of any such order and
she shall cooperate fully with the Company in protecting such
information (at the Company's expense) to the extent possible under
applicable law.
(f) Upon termination of her employment with the Company and
its affiliates, or at any time as the Company may request, Executive
will promptly deliver to the Company, as requested, all documents
(whether prepared by the Company, an affiliate, Executive or a third
party) relating to the Company, an affiliate or any of their businesses
or property which she may possess or have under her direction or
control other than documents provided to Executive in her capacity as a
participant in any employee benefit plan, policy or program of the
Company or any agreement by and between Executive and the Company with
regard to Executive's employment or severance.
(g) During the Employment Term and for two (2) years following
a termination of Executive's employment for any reason whatsoever,
whether by the Company or by Executive and whether or not for Cause,
Good Reason or non-extension of the Employment Term, Executive will not
engage in Solicitation.
(h) During the Employment Term and for the Restricted Period
(as hereinafter defined) following a termination of Executive's
employment, Executive will not enter into Competition with the Company.
The Restricted Period shall be (i) for a termination for Cause, twelve
(12) months following the date of termination, (ii) for termination
without Cause by the Company, or by Executive for Good Reason, the
period in which the Company is making payments to Executive as
specified in Section 8(b) above, and (iii) for a termination as a
result of the voluntary resignation of Executive without Good Reason or
expiration or non-renewal of this Agreement, twelve (12) months
following the date of such termination. Notwithstanding the immediately
preceding sentence to the contrary, if the Company terminates
Executive's employment without Cause (other than as a result of
expiration of the Employment Term), or if Executive terminates her
employment for Good Reason, and, after a period of six (6) months
following the date of either such termination, Executive waives, in
writing, at any time after such six-month period, her right to receive
any future amounts that would otherwise be payable after the expiration
of such six-month period under Section 8(b) hereof, the Restricted
Period shall terminate following such six-month period and waiver.
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<PAGE> 10
(i) In the event of a breach or potential breach of this
Section 10, Executive acknowledges that the Company and its affiliates
will be caused irreparable injury and that money damages may not be an
adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at
law) to have the provisions of this Section 10 enforced. It is hereby
acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such
entity may enforce the provisions of this Section 10 and only the
applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
(j) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of
breach of this Section 10 by Executive, while she is receiving amounts
under Section 8(b) or (c) hereof, Executive shall not be entitled to
receive any future amounts pursuant to Section 8(b) or (c) hereof after
the earlier to occur of (i) ninety (90) days following the Company's
notification of Executive of its good faith determination of such
breach, specifying in reasonable detail the grounds for such
determination, and (ii) a final determination by an arbitrator or court
of competent jurisdiction of such breach, and, upon such final
determination, which is not appealable, Executive shall reimburse the
Company for any amounts previously paid to Executive pursuant to
Section 8(b) or (c) hereof.
11. Indemnification. The Company shall indemnify and hold harmless
Executive to the extent provided in the Certificate of Incorporation, the
By-Laws of the Company and the Delaware General Corporation Law as amended and
as applicable, for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any subsidiary or affiliate of the Company or as a fiduciary of
any benefit plan. The Company shall cover Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent as the Company covers
its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company
copyrights, trade secrets, proprietary information, patents, unpatented
inventions, trademarks, service marks, processes, techniques, methods,
know-how, flow charts, diagrams, computer programs and/or databases,
and any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not (all
of the foregoing, collectively, "INTELLECTUAL PROPERTY"), which are
conceived, created, developed or made by Executive, solely or jointly
with another, during the period of employment or within one (1) year
thereafter, and which are substantially related to the business or
activities of the Company or its subsidiaries which Executive
conceived, created, developed or made as a result of her employment by
the Company or any of its subsidiaries. Executive hereby assigns and
agrees to assign all of her right, title and interest throughout the
world in any Intellectual Property to the Company or its nominee.
Whenever requested to do so by the Company, Executive shall execute any
and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain registrations of
copyrights or marks, or Letters Patent of the United
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<PAGE> 11
States or any foreign country or to otherwise protect the Company's
interest in Intellectual Property.
(b) Executive agrees that she will not, during or after the
Employment Term, disclose the specific terms of the Company's
relationships or agreements with its significant vendors or customers
or any other significant material trade secrets of the Company, whether
in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever, except as is
disclosed in the ordinary course of business, unless compelled by a
court order upon advice of counsel.
13. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred in such dispute unless the finder of fact determines that the
Company is the prevailing party in such dispute.
14. Certain Additional Payments. Executive shall be grossed up for any
excise tax payable under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), in accordance with Exhibit C attached hereto.
15. Resolution of Disputes. The parties shall use their best efforts
and good will to settle all disputes by amicable negotiations. The Company and
Executive agree, for purposes of the resolution of any disputes under this
Agreement, that such disputes shall be settled by arbitration in Dallas, Texas,
or such other place agreed to by the parties, in accordance with the rules and
procedures of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel
consisting of one to three arbitrators, each of whom shall be
impartial. All arbitrators shall be appointed in the first instance by
agreement between the parties hereto. If the parties cannot agree upon
a single arbitrator, each of the Company and the Executive shall be
entitled to appoint one arbitrator. These two appointed arbitrators
shall then appoint a third arbitrator by their mutual agreement.
(b) An arbitration may be commenced by either party to this
Agreement by the service of a written request for arbitration upon the
other affected party. Such request for arbitration shall summarize the
controversy or claim to be arbitrated. If the panel of arbitrators is
not appointed within thirty (30) days following such service, either
party may apply to any court within the State of Texas for an order
appointing arbitrators qualified as set forth below. No request for
arbitration shall be valid if it relates to a claim, dispute,
disagreement or controversy that would have been time barred under the
applicable statute of limitations had such claim, dispute, disagreement
or controversy been submitted to the courts of the State of Texas.
(c) The parties hereby expressly waive punitive damages, and
under no circumstances shall an award contain any amount that in any
way reflects punitive damages.
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<PAGE> 12
(d) Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without
reference to principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of
the parties with respect to the employment of Executive by the Company
from and after the Commencement Date and supersedes any prior
agreements between the Company and Executive with respect thereto.
There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein and therein. This
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
or impaired, and the parties undertake to implement all efforts which
are necessary, desirable and sufficient to amend, supplement or
substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as
nearly as may be possible the result previously intended by the parties
without renegotiation of any material terms and conditions stipulated
herein.
(d) No Waiver. Any failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any such waiver must be in writing and
signed by Executive or an authorized officer of the Company, as the
case may be.
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an
entity which is owned, directly or indirectly, in whole or in part by
the Company or by any successor to the Company or an acquirer of all or
substantially all of the assets of the Company or all or substantially
all of the assets of a group of subsidiaries and divisions of the
Company, provided such entity or acquirer promptly assumes all of the
obligations hereunder of the Company in a writing delivered to
Executive and otherwise complies with the provisions hereof with regard
to such assumption. Upon such assignment and assumption, all references
to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the beneficiaries and permitted assignees
of the parties hereto. In the event of Executive's death while
receiving amounts payable pursuant to Section 8(b) hereof, any
remaining amounts shall be paid to Executive's estate.
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<PAGE> 13
(g) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when faxed or
delivered, or (ii) two (2) business days after being mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the initial
page of this Agreement, provided that all notices to the Company shall
be directed to the attention of the General Counsel and Secretary of
the Company, or to such other address as any party may have furnished
to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.
(h) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
(i) Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 10 and Section
11 hereof, shall survive any termination of Executive's employment to
the extent necessary to the agreed preservation of such rights and
obligations.
(j) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control
or affect the meaning or construction of any provision of this
Agreement.
(l) Executive's Representation. Executive represents and
warrants to the Company that there is no legal impediment to her
entering into, or performing her obligations under this Agreement and
neither entering into this Agreement nor performing services hereunder
will violate any agreement to which she is a party or any other legal
restrictions. Executive further represents and warrants that in
performing her duties hereunder she will not use or disclose any
confidential information of any prior employer or other person or
entity.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMPANY:
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Thomas P. McMillin
--------------------------------------
Name: Thomas P. McMillin
------------------------------------
Title: Executive Vice President
-----------------------------------
EXECUTIVE:
/s/ Susie C. Holliday
-----------------------------------------
SUSIE C. HOLLIDAY
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<PAGE> 15
EXHIBIT "A"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
SUSIE C. HOLLIDAY
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE"
shall be limited to the following:
(i) Executive's willful misconduct or gross
negligence with regard to the Company or its
affiliates or their business, assets or
employees (including, without limitation,
Executive's fraud, embezzlement or other act
of dishonesty with regard to the Company or
its affiliates), or Executive's willful
misconduct other than the foregoing, which
in any case has a material adverse impact on
the Company or its affiliates, whether
economic, or reputationwise or otherwise,
each as determined by the Board, and which
is not fully rectified or cured, if
susceptible to rectification or cure, within
thirty (30) days after written notice is
given to Executive; provided, however, that
this clause (i) shall not include an action
or omission of Executive done or omitted to
be done in her good faith exercise of
business judgment or in good faith reliance
on advice of legal counsel to the Company;
(ii) Executive's conviction of, or pleading nolo
contendere to, a felony or other crime
involving fraud, dishonesty or moral
turpitude or which carries a minimum prison
sentence upon conviction of one (1) year or
longer;
(iii) Executive's refusal or willful failure to
follow the lawful written direction of the
Board, the Executive Vice President or his
designee which is not remedied within ten
(10) business days after receipt by
Executive of a written notice specifying the
details thereto;
(iv) Executive's breach of a fiduciary duty owed
to the Company or its affiliates, including,
but not limited to, Section 10 or Section 12
hereof, as determined by the Board;
(v) the representations or warranties in Section
16(l) hereof prove false, which has a
material adverse economic impact on the
Company or its affiliates, as determined by
the Board; or
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<PAGE> 16
(vi) any other breach by Executive of this
Agreement, which has a material adverse
impact on the Company or its affiliates,
whether economic, reputationwise or
otherwise, each as determined by the Board,
that remains uncured for thirty (30) days
after written notice is given to Executive.
(b) Disability. For purposes of this Agreement, "DISABILITY"
shall mean if Executive is unable to perform her material duties pursuant to
this Agreement, as determined by the Board, because of mental or physical
incapacity, including, without limitation, alcoholism or drug abuse, which
requires a leave of absence in excess of ninety (90) consecutive days in any
twelve (12) month period.
(c) Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean the occurrence, without Executive's express written consent, in the
case of (i), (ii), or (iii), of any of the following circumstances:
(i) (a) any material demotion of Executive from
her position as Senior Vice President -
Accounting and Administration or (b) any
assignment of duties to Executive materially
and adversely inconsistent with Executive's
position as Senior Vice President -
Accounting and Administration (except in
connection with the termination of
Executive's employment for Cause or due to
Disability or as a result of Executive's
death, or temporarily as a result of
Executive's illness or other absence);
(ii) a failure by the Company to pay to Executive
any amounts due under this Agreement in
accordance with the terms hereof, which
failure is not cured within fifteen (15)
days following receipt by the Company of
written notice from Executive of such
failure;
(iii) any other material breach by the Company of
this Agreement that remains uncured for
fifteen (15) days after written notice
thereof by Executive to the Company; or
(iv) the Board requires Executive to relocate to
an area other than the Dallas, Texas greater
metropolitan area, and Executive declines to
so relocate.
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<PAGE> 17
EXHIBIT "B"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
SUSIE C. HOLLIDAY
STOCK OPTION GRANTS
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<PAGE> 18
EXHIBIT "C"
TO THE
EMPLOYMENT AGREEMENT
BETWEEN
eVENTURES GROUP, INC.
AND
SUSIE C. HOLLIDAY
GROSS-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this Exhibit C is
a part:
(a) In the event that Executive shall become entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
"nature of compensation" (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership or effective control covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to
Executive, subject to required withholding, at the time specified in subsection
(d) below an additional amount (the "Gross-up Payment") such that the net amount
retained by Executive, after deduction of any Excise Tax on the Company Payments
and on the Gross-Up Payment provided for under this paragraph (a) and any U.S.
federal, state, and local income or payroll tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any U.S. federal,
state, and local income or payroll tax on the Company Payments, shall be equal
to the Company Payments.
(b) In the event that the Excise Tax is subsequently
determined by the Company to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the prior Gross-up Payment attributable to such
reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by Executive), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is later determined by the Company or the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up Payment),
the Company shall make an additional Gross-up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following delivery by Executive to the Company of notice that an event that
subjects Executive to the Excise Tax has occurred; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Executive on such day
an estimate, as determined in good faith by the Company, of the minimum amount
of such payments
4
<PAGE> 19
and shall pay the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) promptly following such time as
the amount thereof has been determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(d) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise Tax, Executive
shall permit the Company to control issues related to the Excise Tax, but
Executive shall control any other issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of the Company to accompany Executive, and
Executive and Executive's representative shall cooperate with the Company and
its representative.
(e) The Company and Executive shall promptly deliver to each
other copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit C.
5
<PAGE> 1
EXHIBIT 10.14
eVENTURES GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made and
entered into by and between eVENTURES GROUP, INC., a Delaware corporation (the
"COMPANY"), and SUSAN (SUSIE) C. HOLLIDAY (the "OPTIONEE"), effective April 17,
2000 (the "DATE OF GRANT").
1. GRANT OF OPTION. The Company hereby grants to the Optionee and the
Optionee hereby accepts, subject to the terms and conditions hereof, the right
and option to purchase from the Company (the "OPTION") all or any part of an
aggregate of 200,000 shares of the Company's common stock, par value $0.00002
per share (the "COMMON STOCK"), at a per share purchase price equal to Eighteen
Dollars and no cents ($18.00) per share (the "EXERCISE PRICE"), as such shares
and Exercise Price may be adjusted in accordance with Section 9 below. The
Option is not granted pursuant to the Company's 1999 Omnibus Securities Plan.
The Option shall not be treated as an incentive stock option as defined in
Section 422 of the Internal Revenue Code of 1986, as amended.
2. EXPIRATION AND TERMINATION OF THE OPTION. The Option will expire at
the end of business on April 17, 2010, ten (10) years from the Date of Grant of
the Option (the "EXPIRATION DATE"). In the event of termination of the
Optionee's employment with the Company, any Vested Portion (as defined in
Section 3 below) of the Option on the date of such termination may be exercised
at any time prior to the Expiration Date, and the Option shall terminate as to
the shares of Common Stock covered by the remaining, unvested portion of the
Option. The Option may not be exercised after its expiration or termination.
3. VESTING. On each Measurement Date set forth in Column 1 below, the
Option shall vest and become exercisable for the corresponding percentage set
forth in Column 2 below of the total number of shares of Common Stock set forth
in paragraph 1 hereof. The "VESTED PORTION" of the Option as of any particular
date shall be the cumulative total of all shares for which the Option has become
exercisable on or prior to that date in accordance with the following schedule.
<TABLE>
<CAPTION>
-------------------------------------------------------------
COLUMN 1 COLUMN 2
Percentage of Total Option
Shares Vesting
Measurement Date on Measurement Date
-------------------------------------------------------------
<S> <C>
April 17, 2001 One-third annually
-------------------------------------------------------------
April 17, 2002 One-third annually
-------------------------------------------------------------
April 17, 2003 One-third annually
-------------------------------------------------------------
</TABLE>
PAGE 1
<PAGE> 2
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company is terminated by the Company without "Cause" (other than for
"Disability") or by the Optionee for "Good Reason" (as such terms are defined in
the Employment Agreement between the Optionee and the Company), the Option shall
become fully and immediately exercisable and the "Vested Portion" of the Option
shall mean one hundred percent (100%) of the total number of shares of Common
Stock set forth in paragraph 1 hereof.
4. EXERCISE OF THE OPTION. The Vested Portion of the Option may be
exercised, to the extent not previously exercised, in whole or in part, at any
time or from time to time prior to the expiration or termination of the Option,
except that no Option shall be exercisable except in respect to whole shares,
and not less than one hundred (100) shares may be purchased at one time unless
the number purchased is the total number at the time available for purchase
under the terms of the Option. Exercise shall be accomplished by providing the
Company with written notice in the form of Exhibit "A" attached hereto, which
notice shall be irrevocable when delivered and effective upon payment in full of
the Exercise Price and any amounts required for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under this Agreement.
5. PAYMENT OF EXERCISE PRICE. Upon any exercise of the Option, the
total Exercise Price for the number of shares for which the Option is then being
exercised and the amount of any Federal, state and local withholding taxes
imposed thereon shall be paid in full to the Company in cash or, if permitted by
applicable law and subject to such limitations or conditions as the
Administering Body (as defined in Section 8 hereof) may prescribe, (a) with
shares of Common Stock that have been owned for at least six months by the
Optionee (or by the Optionee and his spouse jointly) having a total fair market
value (as determined by the Administering Body ("FAIR MARKET VALUE")) on the
date of such exercise equal to the total Exercise Price of such shares and the
amount of such withholding, or (b) in a broker-assisted or similar transaction
in which the total Exercise Price of such shares and the amount of such
withholding is not received by the Company until promptly after exercise, or
using a combination of the foregoing forms of consideration.
6. TRANSFERABILITY OF OPTION. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided,
however, that the Optionee may transfer the Option as a gift to the Optionee's
spouse, children, or grandchildren or a trust or family limited partnership
established solely for the benefit of, or of which the partners comprise only,
any such spouse, children or grandchildren. The transfer of the Option and any
transferred Option shall be subject to the same terms and conditions that were
applicable to the Option immediately prior to its transfer. No transfer of the
Option shall be effective unless the Company shall have been furnished with
written notice of such transfer at least 30 days in advance thereof and a copy
of such evidence as the Administering Body may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions hereof. Any attempted transfer, assignment, pledge or other
disposition or levy, attachment or similar process with respect to the Option
not specifically permitted herein shall be null and void without effect.
PAGE 2
<PAGE> 3
7. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors of the Company (the "BOARD")
or any Stock Plan Committee appointed by the Board (the "ADMINISTERING BODY").
The Optionee agrees that the decisions of such Administering Body concerning
administration and interpretation of this Agreement and the Option shall be
final, binding and conclusive on all persons. No member of the Board or the
Stock Plan Committee, nor any person participating in any determination of any
question under this Agreement, shall have any liability, in the absence of gross
negligence or willful misconduct, to any party for any action taken or not taken
in connection with this Agreement.
8. ADJUSTMENTS. If (a) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (b) the value of the outstanding shares of Common Stock
is reduced by reason of an extraordinary dividend payable in cash or property,
an appropriate and proportionate adjustment shall be made by the Administering
Body in the number and kind of shares or other securities subject to the Option
and/or the Exercise Price for each share or other unit of any other securities
subject to the Option. No fractional interests will be issued under the Option
resulting from any such adjustments, but the Administering Body, in its sole
discretion, may make a cash payment in lieu of any fractional shares of Common
Stock otherwise issuable as a result of such adjustments.
9. REGISTRATION. The Company shall (i) file a registration statement,
at the Company's option, on Form S-1, S-3 or S-8 under the Securities Act of
1933, as amended, which includes a reoffer prospectus, on the date which is the
earlier of (a) 90 days after the date it is first eligible to use Form S-3 or
S-8 or (b) January 15, 2001; (ii) use its best efforts, where effectiveness is
not automatic after the passage of time, to have such registration statement
declared effective within 90 days after such registration statement was filed;
and (iii) use its best efforts to maintain the effectiveness of such
registration statement or a successor registration statement (which includes a
reoffer prospectus) during the term of the Option.
10. NOTICES. Any notice hereunder to the Company shall be addressed to
it at 300 Crescent Court, Suite 800, Dallas, Texas 75201, Attention: General
Counsel, and any notice hereunder to the Optionee shall be addressed to the
Optionee at 500 Ravenaux Dr., Southlake, Texas 76092, subject to the right of
either party to designate at any time hereafter in writing some other address.
11. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof.
PAGE 3
<PAGE> 4
12. SEVERABILITY. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. MODIFICATION. This Agreement may not be modified or amended, nor
may any provision hereof be waived, in any way except in writing signed by the
parties hereto.
14. COUNTERPARTS. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company by its duly authorized officer, and by the Optionee in acceptance of the
above-mentioned Option, subject to the terms and conditions of this Agreement,
all as of the day and year first above written.
Signature Page Following
PAGE 4
<PAGE> 5
SIGNATURE PAGE FOR eVENTURES GROUP, INC., NONQUALIFIED STOCK
OPTION AGREEMENT
Signature page for eVentures Group, Inc., Nonqualified Stock Option Agreement
dated April 17, 2000.
COMPANY:
eVENTURES GROUP, INC.
BY: /s/ Stuart J. Chasanoff
-----------------------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate
Development and Legal Affairs
OPTIONEE:
/s/ Susan C. Holliday
-----------------------------------------
Printed Name: Susan C. Holliday
----------------------------
PAGE 5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXERCISE
UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
To: eVentures Group, Inc. (the "COMPANY")
From:
-------------------------------------
Date:
-------------------------------------
Pursuant to the Nonqualified Stock Option Agreement (the "AGREEMENT")
(capitalized terms used without definition herein have the meanings given such
terms in the Agreement) between the Company and myself effective
______________________, I hereby exercise my Option as follows:
<TABLE>
<S> <C>
Number of shares of Common Stock I wish to purchase under the
Option
------------------
Exercise Price per share $
------------------
Total Exercise Price $
------------------
"Vested Portion" of Option (see definition in Section 3 of the
Agreement)
------------------
Number of shares I have previously purchased by exercising the
Option
------------------
Expiration Date of the Option
------------------
</TABLE>
I hereby represent, warrant, and covenant to the Company that:
a. I am acquiring the Common Stock for my own account, for investment,
and not for distribution or resale, and I will make no transfer of such Common
Stock except in compliance with applicable federal and state securities laws.
b. I can bear the economic risk of the investment in the Common Stock
resulting from this exercise of the Option, including a total loss of my
investment.
c. I am experienced in business and financial matters and am capable of
(i) evaluating the merits and risks of an investment in the Common Stock; (ii)
making an informed investment decision regarding exercise of the Option; and
(iii) protecting my interests in connection therewith.
d. Any subsequent offer for sale or distribution of any of the shares
of Common Stock shall be made only pursuant to (i) a registration statement on
an appropriate form under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), which registration statement has
1
<PAGE> 7
become effective and is current with regard to the shares being offered or sold,
or (ii) a specific exemption from the registration requirements of the
Securities Act, it being understood that to the extent any such exemption is
claimed, I shall, prior to any offer for sale or sale of such shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Administering Body, from counsel for or approved by the Administering Body, as
to the applicability of such exemption thereto.
I acknowledge that I must pay the total Exercise Price in full and make
appropriate arrangements for the payment of all federal, state and local tax
withholdings due with respect to the Option exercised herein, before the stock
certificate evidencing the shares of Common Stock resulting from this exercise
of the Option will be issued to me.
Attached in full payment of the total Exercise Price for the Option
exercised herein is ( ) a check made payable to the Company in the amount of
$___________________ and/or ( ) a stock certificate for _______ shares of Common
Stock that have been owned by me or by me and my spouse jointly for at least six
months, with a duly completed stock power attached with a total Fair Market
Value on the date hereof equal to the total Exercise Price.
Also attached in full payment of all withholding tax obligations
arising from exercise of the Option is (___) a check made payable to the Company
in the amount of such required withholding and/or (____) a stock certificate for
____ shares of Common Stock that have been owned by me or by me and my spouse
jointly for at least six months, with a duly completed stock power attached,
with a total Fair Market Value on the date hereof equal to the amount of such
required withholding.
Signature Page Following
2
<PAGE> 8
SIGNATURE PAGE FOR "EXHIBIT A", NOTICE OF EXERCISE UNDER
NONQUALIFIED STOCK OPTION AGREEMENT
Signature page for "Exhibit A", Notice of Exercise under Nonqualified Stock
Option Agreement dated _________________, 2000.
OPTIONEE:
---------------------------------------
Name:
----------------------------------
RECEIVED BY THE COMPANY:
---------------------------------------
Name:
----------------------------------
Date:
----------------------------------
3
<PAGE> 1
EXHIBIT 10.15
eVENTURES GROUP, INC.
COMMON STOCK SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement"), dated as of
April 4, 2000, has been executed by eVentures Group, Inc., a Delaware
corporation (the "Company") and the investors listed on Schedule 1 hereto
(collectively herein referred to as the "Investors") in connection with the
private placement of shares of common stock, par value $0.00002 per share
("Common Stock") of the Company.
1. AGREEMENT TO SUBSCRIBE; PAYMENT.
Each Investor, severally and not jointly, hereby offers to
subscribe for the number of shares of Common Stock set forth next to such
Investor's name on Schedule 1 hereto (the "Shares").
The Shares will be sold to each Investor at a price of $23.00
per share, for a total purchase price (the "Purchase Price") set forth next to
such Investor's name on Schedule 1 hereto.
The Company and each Investor understand that the closing of
the purchase and sale of the Shares as to each Investor is scheduled to occur at
2:00 p.m., Dallas time, on April 4, 2000, or on such other date as the parties
agree, but in no event later than 5:00 p.m., Dallas time, on April 17, 2000 (the
"Closing Date"). Payment of the Purchase Price of each Investor shall be made by
wire transfer of immediately available funds to the account (the "Escrow
Account") at Chase Bank of Texas, National Association (the "Escrow Agent")
established pursuant to the terms of the Escrow Agreement, dated on or about
April 4, 2000, by and between the Company and the Escrow Agent. Funds deposited
to the Escrow Account may be released to the Company from the Escrow Account
when such account accrues funds of at least $40 million. Regardless of the
amount deposited by Investors into the Escrow Account, the Company agrees not to
withdraw funds from the Escrow Account until each of Jeff Marcus, Tom McMillin,
Dan Wilson and Chad Coben have executed employment agreements with the Company.
After such release of funds, payment of the Purchase Price may be made to the
Company by wire transfer of immediately available funds to an account determined
by the Company and any Investor paying its Purchase Price at such time. In the
event that the Escrow Account does not accrue funds of at least $40 million as
of 5:00 p.m., Dallas time, on April 17, 2000, the Purchase Price for the Shares
previously remitted by Investors, together with interest thereon at a rate of
eight percent (8%) annually, shall be refunded to the Investors no later than
April 25, 2000.
The Investors acknowledge that the offer and sale of the
Shares hereunder is being made pursuant to a private placement of up to
5,000,000 Shares (the "Placement"). The Company represents that each Investor
party hereto that is paying a Purchase Price of less than $25 million shall
participate in the Placement under terms and conditions as favorable as the
terms and conditions of each other Investor participating in the Placement that
is paying a
<PAGE> 2
Purchase Price of more than $25 million. The Investors acknowledge
that, up to and including the Closing Date, other investors may subscribe for
Shares by executing a signature page to this Agreement, whereby any such person
shall become an "Investor" under the terms and conditions of this Agreement.
The Company agrees to allow the Investors to enforce the
Company's rights under the Escrow Agreement, to the extent permitted by the
Escrow Agreement, if the Company fails to exercise such rights within a
reasonable time.
THE INVESTORS UNDERSTAND THAT THIS INVESTMENT IN THE COMPANY
IS ILLIQUID AND INVOLVES A HIGH DEGREE OF SPECULATIVE RISK.
2. QUALIFICATIONS OF INVESTOR.
(a) Accredited Investor Status. Each Investor, severally and
not jointly, hereby represents and warrants to the Company that it is an
"accredited investor", as defined in Rule 501 under the Securities Act of 1933
(the "Act"), and it has executed a letter to that effect addressed to the
Company, in the form attached as Exhibit 1.
(b) Sophisticated Investor Status. Each Investor, severally
and not jointly, hereby represents and warrants to the Company that alone, or
with his purchaser representative (as defined in Rule 501 under the Act), if
any, such Investor has such knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of this
transaction and of an investment in the Company.
(c) Investor Suitability; Illiquidity; Ability to Bear Loss.
If an Investor is a natural person, such Investor has a net worth of at least
$1,000,000 (exclusive of home, furnishings, and automobiles) or such Investor
had during the two most recent years an annual gross income of at least
$200,000, and has a reasonable expectation of having an annual gross income of
at least $200,000 during the current year.
The overall commitment of each Investor to purchase securities
which are not readily marketable is not disproportionate to such Investor's net
worth, and the investment in the Shares will not cause such Investor's overall
commitment to become excessive.
Each Investor has adequate means of providing for current
needs and personal contingencies, has no need for liquidity in his or her
investment in the Shares, and can sustain a complete loss of the investment in
the Shares.
(d) Entity Investors. If the Investor is other than a natural
person, such Investor represents and warrants that: (i) it has not been formed,
re-formed, or recapitalized for the specific purpose of purchasing the Shares,
or if it has been formed or re-formed for such purpose, each of its beneficial
owners of equity securities or equity interests (including partners, in the case
of a partnership) is an "accredited investor," as defined in Rule 501(a) under
the Act; (ii) it has been duly formed and is validly existing under the laws of
the jurisdiction of its formation, with full power and authority to enter into
the transactions contemplated by this
-2-
<PAGE> 3
Agreement; and (iii) this Agreement has been duly and validly authorized,
executed, and delivered by it and, when executed and delivered by the Company,
will constitute the valid, binding, and enforceable agreement of such entity,
subject to general equitable principles (whether considered in a proceeding in
equity or at law)
3. ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION.
(a) Receipt of Information. Each Investor has received and
carefully reviewed the Registration Statement on Form 10 filed by the Company
with the Securities and Exchange Commission on December 20, 1999, as amended on
March 8, 2000, including the unaudited and audited financial statements and
unaudited pro forma financial statements of the Company included therein
(together with all amendments to the date hereof, the "Form 10"). Each Investor
has carefully reviewed and fully considered the contents of the Form 10,
including, without limitation, the material set forth under the caption "Risk
Factors".
(b) Independent Investigation; Access. Each Investor, in
making the decision to purchase the Shares subscribed for, has relied upon
independent investigations made by such Investor, the financial and legal
advisors to the Investor (if any) and its purchaser representative (if any), and
each Investor and such representative (if any) has, prior to any sale to the
Investors, been given access and the opportunity to examine all material books
and records of the Company, all material contracts and documents relating to
this offering, and an opportunity to ask questions of and to receive answers
from the Company, any officer, director or employee of the Company, or any
person acting on its behalf concerning the Company and its businesses, the terms
and conditions of this offering or any other matter set forth in the Form 10 and
an opportunity to obtain any additional information, to the extent the Company
possesses such information or can acquire it without unreasonable effort or
expense, necessary to verify the accuracy of the information set forth in the
Form 10.
Each Investor and its advisors, if any, has had access to (i)
all public materials requested by such Investor relating to the business,
finances, and operation of the Company, and (ii) materials relating to the offer
and sale of the Shares and (iii) anything set forth in the Form 10 that has been
requested. Each Investor and its advisors, if any, have received complete and
satisfactory answers to any such inquiries.
(c) No Other Representations. Each Investor acknowledges that
it has not relied on any representation made to such Investor or such Investor's
purchaser representative (if any) concerning the Shares, the Company, its
business or prospects, or other matters, except as set forth in this Agreement,
in the Form 10 and in the other written materials referred to in Sections 3(a)
and (b) above.
(d) Adequacy of Investigation. Each Investor acknowledges that
it is subscribing for the Shares after what it deems to be adequate
investigation of the business, finances, and prospects of the Company by such
Investor and such Investor's advisors, if any.
-3-
<PAGE> 4
(e) No Governmental Recommendation or Approval. Each Investor
understands that no federal or state agency has passed on or made any
recommendation or endorsement of the Shares.
4. INVESTMENT REPRESENTATIONS.
(a) Shares Not Registered; Indefinite Holding. Each Investor
has been advised by the Company, and understands, that it must bear the economic
risk of an investment in the Shares for an indefinite period of time because the
Shares have not been registered under the Act and the Company is under no
obligation to register the Shares other than as set forth in the registration
rights agreement dated as of the date hereof, among the Company and the
Investors (the "Registration Rights Agreement"). Therefore, the Shares must be
held by the undersigned unless they are subsequently registered under the Act or
an exemption from such registration is available for the transfer of the Shares.
Notwithstanding the foregoing, the Investors agree (as
provided in paragraph 4(c) below), not to sell or otherwise transfer or dispose
of any Shares except as permitted by the Registration Rights Agreement.
(b) Purchase for Own Account. Each Investor represents that
the Shares are being acquired solely for its own account for investment and not
with a view toward, or for resale in connection with, any distribution (as that
term is used in the Act and the rules and regulations thereunder) of all or any
portion thereof.
(c) No Disposition of Shares Without Securities Law
Compliance. Except as permitted by the Registration Rights Agreement, each
Investor agrees not to subdivide the Shares or to offer, sell or otherwise
transfer or dispose of any of the Shares in the absence of an effective
registration statement under the Act covering such disposition, or an opinion of
counsel, satisfactory to the Company and its counsel, to the effect that
registration under the Act is not required for such transfer or disposition;
provided, however, that an Investor may transfer Registrable Shares to an
Affiliate (as defined in the Registration Rights Agreement) without the
requirement that such Investor or Affiliate deliver a legal opinion to the
Company confirming that such transfer may be made without registration under
federal or state securities laws, unless the Company reasonably believes that
such transfer would violate federal or state securities laws.
(d) Stop-Transfer and Legends on Certificates. (i) Each
Investor further understands that a stop-transfer order will be placed on the
stock-transfer books of the Company respecting the certificates evidencing the
Shares, and such certificates shall bear, until such time as the Shares shall
have been registered under the Act or have been transferred in accordance with
such an opinion of counsel, the following legends or ones substantially similar
thereto:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED, EXCEPT (1) ACCORDING TO AN OPINION OF
COUNSEL SATISFACTORY TO EVENTURES
-4-
<PAGE> 5
GROUP, INC., IN A TRANSACTION THAT IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
FURTHER, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE RESOLD AS PROVIDED IN A REGISTRATION RIGHTS AGREEMENT
BETWEEN EVENTURES GROUP, INC. AND THE ORIGINAL PURCHASER OF
THESE SHARES, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT
THE OFFICES OF EVENTURES GROUP, INC.
as well as any legend that may be required under any applicable state law.
(ii) The foregoing legend shall be removed from the
certificates representing any Shares, at the request of the holder thereof, at
such time as (A) they are sold pursuant to an effective registration statement,
(B) they become eligible for resale pursuant to Rule 144(k), or (C) an opinion
of counsel reasonably satisfactory to the Company is obtained to the effect that
the proposed transfer is exempt from the Act; provided that in the case of
clauses (B) and (C) the holder is permitted to transfer the Securities pursuant
to Section 8 of the Registration Rights Agreement. The portion of the legend
referring to the Registration Rights Agreement shall be eliminated at such time
as Section 8 of that agreement ceases to be applicable.
(e) "Private-Offering" Exemption, Reliance on Representations.
Each Investor understands that the offer and sale of the Shares is not being
registered under the Act in reliance on the so-called "private offering"
exemption provided by Section 4(2) of the Act and/or Regulation D promulgated
pursuant to the Act and that the Company is basing its reliance on that
exemption in part on the representations, warranties, statements, and agreements
contained herein and in those of other investors contained in similar
subscription agreements.
Each Investor further understands that other investors are
making their investment in reliance on the representations, warranties,
statements, and agreements of the other Investors.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY.
(a) Corporate Organization, Etc. The Company and each of
AxisTel Communications, Inc. ("AxisTel"), a wholly-owned subsidiary of the
Company, and e.Volve Technology Group, Inc. ("e.Volve"), a wholly-owned
subsidiary of the Company and Internet Global Services, Inc. ("IGS"), a
wholly-owned subsidiary of the Company (each of AxisTel, e.Volve and IGS, a
"Material Subsidiary," and collectively, the "Material Subsidiaries"), is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. The Company and each Material Subsidiary
has full corporate power and authority to carry on its business as it is now
being conducted and as presently proposed to be conducted and to own, operate
and lease its properties and assets.
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<PAGE> 6
(b) Authorization, Etc. The Company has full corporate power
and authority to enter into this Agreement and the Registration Rights Agreement
and to carry out the transactions contemplated hereby and thereby. The Board of
Directors of the Company has duly authorized the execution, delivery and
performance of this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement and the Registration Rights Agreement and the transactions
contemplated hereby and thereby. Each of this Agreement and the Registration
Rights Agreement constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
(c) No Violation. The execution, delivery and performance by
the Company of this Agreement, the Registration Rights Agreement and all other
agreements contemplated hereby, and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and will not (i)
require any authorization, consent, approval, exemption or other action by, or
notice to, or filing with any court or other governmental authority having
jurisdiction over the Company or its properties, (ii) result in a violation of,
conflict with, constitute a default under, or result in a breach of, the terms,
conditions or provisions of, the charter or bylaws of the Company, any
applicable law, regulation, order or any contract to which the Company, or its
properties or assets, are subject, including federal or state securities laws
(assuming the truth of the representations of each Investor herein), or (iii)
result in the creation of a lien or encumbrance against any of the property or
assets of the Company or any Material Subsidiary, except that the execution and
delivery of the Registration Rights Agreement requires the consent of certain
shareholders pursuant to the Registration Rights Agreement of the Company dated
as of September 22, 1999, a copy of which is attached as an exhibit to the Form
10, which consent has been received. The Company will comply in all material
respects with all applicable regulations and orders in connection with its
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
(d) Compliance with Applicable Laws; No Material Breach.
Neither the Company nor any Material Subsidiary, are in violation or default of
any provision of their respective Certificates of Incorporation or Bylaws, both
as amended, and except for violations that individually or in the aggregate
would not have a material adverse effect on the Company's or any Material
Subsidiary's properties, assets, business, operations or financial condition
taken as a whole a ("Material Adverse Effect"), the Company and each Material
Subsidiary is in compliance with all applicable United States statutes, laws and
regulations. Except as disclosed in the Form 10, neither the Company nor any
Material Subsidiary has breached or defaulted under, nor does the Company have
any knowledge of any claim or threat that the Company or any Material Subsidiary
has breached or defaulted under, any term or condition of any agreement,
contract, lease, license, instrument or commitment to which the Company or any
Material Subsidiary, as the case may be, is a party or by which it or its
properties or assets are bound that individually or in the aggregate would have
a Material Adverse Effect.
The Company believes that it and its Material Subsidiaries are
in compliance with all material applicable laws in jurisdictions other than the
United States in the operation of their
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<PAGE> 7
businesses. However, the Company is not an expert in the laws of such foreign
jurisdictions and has not secured legal opinions or other definitive evidence
that its operations are compliant under such foreign laws. Accordingly, no
assurances can be given that the Company or its Material Subsidiaries are in
full compliance with all material aspects of the laws of jurisdictions other
than the United States.
(e) Capitalization. The authorized capital stock of the
Company consists of 75,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, par value $0.00002 per share (the "EVG Preferred Stock"), of
which 1,200 shares have been designated Series A Convertible Preferred Stock
(the "Series A Stock"), 25,000 shares have been designated Series B Convertible
Preferred Stock (the "Series B Stock"), and 30,000 shares have been designated
Series C Convertible Preferred Stock (the "Series C Stock"). As of the date
hereof, there are issued and outstanding 45,779,832 shares of Common Stock, no
shares of Series A Stock, 7,000 shares of Series B Stock and 15,570 shares of
Series C Stock. All of the shares of capital stock have been duly authorized,
and are validly issued, fully paid and non-assessable. None of the issued and
outstanding shares of capital stock was issued in violation of any preemptive
rights. Other than as disclosed in the Form 10 or on Schedule 2 attached hereto
(the "Schedule of Exceptions"), there are no options, warrants, convertible or
exchangeable securities or other rights, agreements, arrangements or commitments
of any character relating to the capital stock of the Company or obligating the
Company to issue or sell any shares of capital stock of, or any other interest
in, the Company. Except as disclosed in the Form 10, there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
person. Upon consummation of the transactions contemplated by this Agreement,
the Investors will own the Shares, in each case free and clear of all liens and
encumbrances, other than liens and encumbrances created or suffered by an
Investor. The Shares have been duly authorized. Upon consummation of the
transactions contemplated by this Agreement, the Shares will have been validly
issued, fully paid and non-assessable, and the issuance thereof will not have
been subject to any preemptive rights or made in violation of any applicable
law. All of the shares of capital stock of each Material Subsidiary are duly
authorized and validly issued, fully paid and non-assessable, and have been
approved by all requisite Board of Directors and stockholder action. There are
no voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the
capital stock. Except as provided under those certain Registration Rights
Agreements dated September 22, 1999, November 19, 1999 and December 31, 1999 and
March 10, 2000, the Company is not under any obligation to register under the
Act any of its currently outstanding securities or any securities issuable upon
exercise or conversion of its currently outstanding securities nor is the
Company obligated to register or qualify any such securities under any state
securities or "blue sky" laws.
(f) Ownership of Material Subsidiaries. As of the Closing
Date, the Company owns free and clear of any liens and encumbrances (i) 100% of
the issued and outstanding capital stock of AxisTel, (ii) 100% of the issued and
outstanding capital stock of e.Volve and (iii) 100% of the issued and
outstanding capital stock of IGS which are all the subsidiaries of the Company
material to its business, operations, condition (financial or otherwise) or
prospects.
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<PAGE> 8
(g) Intellectual Property. To the best knowledge of the
Company and other than as disclosed in the Form 10, each of the Company and each
Material Subsidiary owns or possesses valid and binding licenses and other
rights to use all patents, trade secrets, trade names, trademarks, copyrights,
inventions and processes used in their respective businesses other than such
patents, trade secrets, trade names, trademarks, inventions and processes which
the failure to own or possess rights to use would not interfere in any material
respect with the conduct of the business of the Company and its Material
Subsidiaries as currently conducted or as proposed to be conducted, and, to the
best knowledge of the Company, neither the Company nor any Material Subsidiary
has violated or infringed, and neither has received any notice or claim of any
such violation or infringement of, any rights of others with respect thereto.
(h) Litigation. Other than as disclosed in the Form 10, there
is no action, suit, investigation arbitration, mediation or any judicial or
administrative proceeding pending against, or to the knowledge of the Company,
threatened against or affecting, the Company or any Subsidiary before any court
or arbitrator or any governmental body, agency or official (i) which,
individually or in the aggregate, if determined or resolved adversely in
accordance with the plaintiff's demands, could be expected to have a Material
Adverse Effect or (ii) which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement.
(i) Form 10. The Form 10 complies as to form with the
requirements set forth in the rules relating to such Form promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") by the
Securities and Exchange Commission. The Form 10 does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(j) Financial Statements. The audited financial statements of
the Company and its consolidated subsidiaries as at and for the fiscal year
ended June 30, 1999 and the unaudited financial statements of the Company and
its consolidated subsidiaries as at and for the fiscal period ended December 31,
1999 were prepared in accordance with generally accepted accounting practices
consistently applied ("GAAP") (except, with respect to the unaudited financial
statements, for the omission of footnotes, and subject to normal year-end
adjustments) and present fairly the financial position, operating results,
changes in cash flows and changes in stockholders' equity of the Company and its
consolidated subsidiaries as of the dates and for the periods indicated therein.
The consolidated balance sheet of the company as of December 31, 1999 is
referred to herein as the "Balance Sheet".
(k) Absence of Certain Changes. Since December 31, 1999,
except as disclosed in the Form 10 or on the Company's report on Form 8-K filed
with the SEC on March 27, 2000, each of the Company, AxisTel, e.Volve and, to
the knowledge of the Company, IGS, has conducted its respective business only
in, and has not engaged in any material transaction other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
change in the condition (financial or otherwise), properties, business,
operations or results of operations of the Company, AxisTel, e.Volve or, to the
knowledge of the Company, IGS,
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<PAGE> 9
taken as a whole, or any development or combination of developments that,
individually or in the aggregate, has had or would have a Material Adverse
Effect; (ii) any declaration, setting aside or payment of any dividend, or other
distribution in cash, stock or property in respect of the capital stock of the
Company; (iii) any split in the Company's capital stock, combination,
subdivision or reclassification of any of the Company's capital stock or
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock (iv) any change by
the Company or any of its Material Subsidiaries in accounting principles,
practices or methods or (v) except as disclosed in the Schedule of Exceptions,
any increase in the compensation payable by the Company, AxisTel, e.Volve or, to
the knowledge of the Company, IGS, to officers or key employees, or any
amendment to any compensation or benefit plans of the Company, AxisTel, e.Volve
or, to the knowledge of the Company, IGS, except for increases or amendments in
the ordinary or usual course.
(l) Title to Properties; Encumbrances. The Company has good
and valid title to all tangible property and assets set forth in the Balance
Sheet, except as indicated in the notes thereto and except for properties and
assets reflected in the Balance Sheet which have been sold or otherwise disposed
of in the ordinary course of business, in each case, free and clear of any and
all liens other than (i) liens reflected in the Balance Sheet, (ii) liens for
taxes, levies, fees, water and sewer charges and other governmental and similar
charges not yet due and payable or which, or the amount of which, are being
contested in accordance with applicable law and for which adequate allowance has
been made on the Balance Sheet, and (iii) other liens, imperfections in title,
charges, restrictions and other defects, irregularities and encumbrances which,
individually or in the aggregate, do not detract from the value, or interfere
with the present or proposed use, of the property subject thereto or affected
thereby in any material respect.
(m) Taxes. Except as set forth on the Schedule of Exceptions,
the Company and each of the Material Subsidiaries has timely filed its federal
and state tax returns when due and has timely paid all taxes (whether or not
shown as due on such tax returns).
(n) Use of Proceeds. The proceeds of the subscription
contemplated by this Agreement will be used for working capital and other
general corporate purposes.
(o) Investment Company Act. The Company represents and
warrants that, as of March 31, 2000, it is not an Investment Company (as defined
in the Investment Company Act of 1940, as amended).
(p) Private Offering. No form of general solicitation or
advertising was used by the Company or its representatives in connection with
the offer and sale of the Shares. Subject to the accuracy of the Investors'
representations in Section 4, no registration of the Shares, pursuant to the
provisions of the Act or any state securities or "blue sky" laws, will be
required by the offer, sale or issuance of the Shares. The Company agrees that
neither it, nor anyone acting on its behalf, shall offer to sell the Shares or
any other securities of the Company so as to require the registration of the
Shares pursuant to the provisions of the Act or any state securities or "blue
sky" laws, unless such Shares or other securities are so registered.
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<PAGE> 10
(q) Interested Transactions. Except as disclosed in Item 7 of
the Form 10, no officer, director or holder of five percent (5%) or more of the
diluted equity of the Company ,or employee of the Company or any of its
subsidiaries, and no family member of any of the foregoing, is or has any direct
or indirect interest in (i) any customer, supplier or competitor of the Company,
(ii) any person from whom or to whom the Company or any of its subsidiaries
leases any real or personal property, or (iii) any other person with whom the
Company is doing business, whether directly or indirectly (including, without
limitation, a debtor or creditor), whether in existence as of the date hereof or
proposed, other than the ownership of stock of publicly traded corporations that
does not exceed five percent (5%) of the issued and outstanding stock of any
such corporation.
(r) Broker's or Finder's Fee. Neither the Company nor any of
its subsidiaries has paid, become obligated to pay or will become obligated to
pay any fee or commission to any broker, finder or intermediary in connection
with this Agreement, except for fees that may be paid to Crary, Onthank &
O'Neil, LLC. The Investors will have no obligation nor liability with respect to
such fees.
(s) Liabilities. Except as disclosed on the Schedule of
Exceptions, neither the Company nor any of its Material Subsidiaries has any
outstanding claims, liabilities or indebtedness, contingent or otherwise, except
as reflected in the Balance Sheet or referred to in the notes thereto, other
than liabilities to trade creditors incurred subsequent to December 31, 1999 in
the ordinary course of business not involving borrowings by the Company or any
of its Material Subsidiaries. Neither the Company nor any of its Material
Subsidiaries is in default in respect of the terms or conditions of any material
indebtedness.
6. INDEMNIFICATION.
Each Investor agrees severally and not jointly, to indemnify
and hold the Company, its officers, directors, and stockholders or any other
person who may be deemed to "control" the Company harmless from any loss,
liability, claim, damage, or expense arising out of the inaccuracy of any of the
above representations, warranties, or statements of such Investor or the breach
of any of the agreements of such Investor contained herein, and this
indemnification shall survive the purchase and sale of the Shares subscribed for
herein. With respect to each Investor, such indemnification shall not exceed the
Purchase Price paid by such Investor for the Shares purchased hereunder.
The Company agrees to indemnify and hold each of the
Investors, their respective officers, directors, stockholders and partners and
any other person who may be deemed to "control" any Investor harmless from any
loss, liability, claim, damage, or expense arising out of the inaccuracy of any
of the above representations, warranties, or statements of the Company or the
breach of any of the agreements of the Company contained herein, and this
indemnification shall survive the purchase and sale of the Shares subscribed for
herein.
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<PAGE> 11
7. BLUE SKY NOTICES.
Each Investor understands that the Shares may be subject to
notice requirements and other restrictions under state "blue sky" laws.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Each Investor understands that the Company's obligation to
sell the Shares, with respect to each Investor, is conditioned upon:
(a) delivery to the Company by the Escrow Agent of immediately
available funds on the Closing Date, representing the aggregate Purchase Price
for all Shares subscribed for hereunder, and such funds aggregating not less
than $40 million;
(b) the receipt and acceptance by the Company of an executed
copy of this Agreement;
(c) each of the representations made by, and all of the
information provided by, the Investors being true and correct as of the Closing
Date;
(d) the receipt and acceptance by the Company of an executed
copy of the Registration Rights Agreement; and
(e) the receipt with respect to such Investor of a letter in
the form attached as Exhibit 1 whereby such Investor represents and warrants
that it is an "accredited investor", as defined in Rule 501 under the Act.
9. CONDITIONS TO INVESTORS' OBLIGATION TO PURCHASE.
Each Investor's obligation to purchase the Shares in
accordance with the terms of this Agreement is conditioned upon:
(a) delivery to such Investor of certificates evidencing the
Shares against payment of the Purchase Price;
(b) the receipt by such Investor of executed copies of this
Agreement;
(c) each of the representations made by, and all of the
information provided by, the Company being true and correct as though made or
provided on the Closing Date;
(d) the receipt and acceptance by such Investor of executed
copies of the Registration Rights Agreement from each of the parties other than
the Investors;
(e) all authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Shares
pursuant to this Agreement shall be obtained and in effect as of the Closing
Date;
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<PAGE> 12
(f) the receipt by such Investor from the Secretary of the
Company of a certificate certifying the names of the officers of the company
authorized to sign this Agreement, the certificates for the Shares and the other
documents, instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with the true
signatures of such officers, and attaching (A) copies of the charter and bylaws
of the Company certified as true and correct on the date of the Closing, (B) a
copy of the resolutions of the Board of Directors authorizing the issuance of
the Shares to the Investors and the other transactions contemplated hereby and
(C) a good standing certificate issued by the Secretary of State of Delaware
with respect to the Company.
10. INVESTOR STANDSTILL RESTRICTIONS
Prior to the second annual anniversary of the date hereof and
subject to the last sentence of this section, without the prior written consent
of the Company, no Investor shall:
(a) acquire, offer to acquire, or agree to acquire, directly
or indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities of the Company or any
subsidiary thereof, or of any successor to or person in control of the Company,
or any assets of the Company or subsidiary or division thereof or of any such
successor or controlling person, except in the case of any Investor shares of
Common Stock in an aggregate amount up to five percent (5%) of the total
outstanding shares of Common Stock; provided, however, that the provisions of
this Section 10(a) shall not apply to purchases of Common Stock made in the
ordinary course of business of an Investor, if such Investor would be eligible,
as confirmed either (a) by a written opinion of counsel addressed to the Company
and reasonably acceptable to the Company or (b) by the filing of Form 13G under
the Exchange Act; provided further that if on some future date prior to the
second annual anniversary of the date hereof such Investor would not have been
eligible to report such purchase on Form 13G if such purchase had occurred as of
such date (the "Non-Eligibility Date"), then such Investor shall sell to an
unaffiliated party within five (5) days of the Non-Eligibility Date any shares
of Common Stock purchased in reliance on this sentence;
(b) make, or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" to vote (as such terms are used in the rules
of the SEC), or seek to advise or influence any person or entity with respect to
the voting of any voting securities of the Company;
(c) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any extraordinary
transaction involving the Company or any of its securities or assets;
(d) form, join or in any way participate in a "group" as
defined in Section 13(d)(3) of the Exchange Act, as amended, in connection with
any of the foregoing;
(e) seek to propose to influence the Company's management or
policies;
(f) request the Company directly or indirectly, to amend or
waive any provision of this paragraph; or
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<PAGE> 13
(g) make any public disclosure with respect to the foregoing.
Each Investor will promptly advise the Company of any inquiry
or proposal made with respect to any of the foregoing.
The provisions of this Section 10 shall not restrict the
activities of an Investor that is, or is affiliated with, a registered
broker-dealer or registered or exempt financial advisor or registered or exempt
investment company, with respect to transactions effected by the Investor as
agent or broker on behalf of customers of the Investor or such affiliate in
which the Investor does not acquire or dispose of beneficial ownership of any
securities of the Company, including any brokerage, investment advisory,
financial advisory, anti-raid advisory, financing, asset management, trading,
market making, arbitrage and other similar activities conducted in the ordinary
course of its business.
11. AMENDMENT.
No amendment, modification, termination or cancellation of
this Agreement shall be effective unless made in writing signed by the Company
and a majority of the Investors; provided, however, that no amendment that
materially and adversely affects the rights of any Investor shall be made
without the consent of such Investor.
12. SEVERABILITY.
The invalidity and unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company and each Investor acknowledge that the representations and warranties
made by the Company and the Investors shall survive the Closing and consummation
of the transactions contemplated herein.
13. GOVERNING LAW.
This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware without regard to the
principles or policies thereof with respect to conflicts of law.
14. COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
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<PAGE> 14
15. ENTIRE AGREEMENT.
This Agreement and the Registration Rights Agreement
constitute the entire agreement of the parties with respect to the matters
contained herein and may only be amended by a written instrument signed by all
parties hereto and thereto.
[Remainder of page intentionally left blank.]
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<PAGE> 15
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
eVentures Group, Inc.
By: /s/ STUART CHASANOFF
Name: Stuart Chasanoff
Title: Vice President - Business
Development, General Counsel and
Secretary
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 16
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
LIBERTY MEDIA CORPORATION
By: /s/ ROBERT R. BENNETT
Name: Robert R. Bennett
Title: President and Chief Executive
Officer
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 17
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
CHASE EQUITY ASSOCIATES, LP
By: Chase Capital Partners, its general
partner
By: /s/ CHRIS BEHRENS
Name: Chris Behrens
Title: General Partner
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 18
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
PAUL CAPITAL PARTNERS VI, L.P.
By: Paul Capital Management, L.L.C., its
managing partner
By: /s/ DAVID E. PARK
Name: David E. Park, III
Title: Managing Member
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 19
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
PCP ASSOCIATES, L.P.
By: Paul Capital Management, L.L.C., its
managing partner
By: /s/ DAVID E. PARK
Name: David E. Park, III
Title: Managing Member
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 20
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
BANCBOSTON CAPITAL INC.
By: /s/ LEE J. TESCONI
Name: Lee J. Tesconi
Title: Managing Director
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 21
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
J.F. SHEA CO., INC., as Nominee 2000-59
By: /s/ EDMUND H. SHEA
Name: Edmund H. Shea, Jr.
Title: Vice President
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 22
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P.
By: Blackstone Management Associates III
LLC, its General Partner
By: /s/ MARK GALLOGLY
Name: Mark Gallogly
Title: Member
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 23
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
BLACKSTONE OFFSHORE CAPITAL
PARTNERS III L.P.
By: Blackstone Management Associates III
LLC, its General Partner
By: /s/ MARK GALLOGLY
Name: Mark Gallogly
Title: Member
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 24
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING
FUND L.P.
By: Blackstone Management Associates III
LLC, its General Partner
By: /s/ MARK GALLOGLY
Name: Mark Gallogly
Title: Member
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 25
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
THE GOLDMAN SACHS GROUP, INC.
By: /s/ RICHARD A FRIEDMAN
Name: Richard Friedman
Title: Vice President
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 26
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
BRAZOS eVENTURES ACQUISITION,
LLC
By: /s/ RANDALL S. FOJTASEK
Name: Randall S. Fojtasek
Title: President
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 27
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
MAVERICK FUND LDC
By: /s/ MICHELLE PERRIN
Name: Michelle Perrin
Title: Controller. Maverick Capital,
Ltd. Fund Advisor
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 28
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
MAVERICK FUND USA, LTD.
By: /s/ MICHELLE PERRIN
Name: Michelle Perrin
Title: Controller. Maverick Capital,
Ltd. Fund Advisor
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 29
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
MAVERICK FUND II, LTD.
By: /s/ MICHELLE PERRIN
Name: Michelle Perrin
Title: Controller. Maverick Capital,
Ltd. Fund Advisor
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
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<PAGE> 30
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
EDGEWATER PRIVATE EQUITY FUND III, L.P.
By: Edgewater III Management, L.P., its
General Partner
By: Gordon Management, Inc., its General
Partner
By: /s/ BRIAN THOMPSON
Name: Brian Thompson
Title: Vice President
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
-30-
<PAGE> 31
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
MOORE GLOBAL INVESTMENTS, LTD.
By: /s/ SAVVAS SAVVINDIS
Name: Savvas Savvindis
Title: Director of Operations
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
-31-
<PAGE> 32
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
REMINGTON INVESTMENT
STRATEGIES, L.P.
By: /s/ SAVVAS SAVVINDIS
Name: Savvas Savvindis
Title: Director of Operations
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
-32-
<PAGE> 33
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
MELLON VENTURES II, L.P.
By: MVMA II, L.P., its G.P.
By: MVMA, Inc., its G.P.
By: /s/ J.S. RICHARDSON
Name: J.S. Richardson
Title: Managing Director
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
-33-
<PAGE> 34
IN WITNESS WHEREOF this Subscription Agreement was duly
executed on the 4th day of April, 2000.
FIRST UNION MERCHANT BANKING
2000, LLC
By: /s/ SCOTT PERPER
Name: Scott Perper
Title: Managing Partner
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
-34-
<PAGE> 35
SCHEDULE 1
<TABLE>
<CAPTION>
INVESTOR SHARES OF COMMON STOCK PURCHASE PRICE
-------- ---------------------- --------------
<S> <C> <C>
Chase Equity Associates, LP 217,391 $4,999,993
Paul Capital Partners VI, L.P. 185,935 $4,276,505
PCP Associates, L.P. 31,456 $723,488
BancBoston Capital Inc. 173,913 $3,999,999
J.F. Shea Co., Inc. as Nominee 2000-59 130,435 $3,000,005
Blackstone Family Investment 13,044 $300,012
Partnership III L.P.
Blackstone Offshore Capital Partners 31,379 $721,717
III L.P.
Blackstone Capital Partners III 172,968 $3,978,264
Merchant Banking Fund L.P.
The Goldman Sachs Group, Inc. 86,956 $1,999,988
Brazos eVentures Acquisition, LLC 217,391 $4,999,993
Maverick Fund LDC 143,109 $3,291,515.49
Maverick Fund USA Ltd. 61,805 $1,421,519.98
Maverick Fund II, Ltd. 12,477 $286,957.53
Edgewater Private Equity Fund III, L.P. 173,914 $4,000,022
Moore Global Investments Ltd. 104,348 $2,400,004
Remington Investment Strategies, L.P. 26,087 $600,001
Mellon Ventures II, L.P. 217,391 $4,999,993
First Union Merchant Banking 2000, LLC 326,087 $7,500,001
-------- -----------
TOTAL 2,326,086 $53,499,978
</TABLE>
-35-
<PAGE> 36
SCHEDULE 2
Schedule of Exceptions
To
Common Stock Subscription Agreement
The following constitutes an itemization by eVentures Group,
Inc., a Delaware corporation (the "Company"), of those matters that constitute
exceptions to the items set forth in Sections 5(e), 5(k) and 5(m) of the Common
Stock Subscription Agreement, dated as of April ___, 2000 (the "Agreement").
Unless otherwise noted herein, any capitalized term in this Schedule of
Exceptions shall have the same meaning assigned to such term in the Agreement.
SECTION 5(e)
Options, Warrants, Convertible Securities etc.
1. In connection with proposed terms of employment the Company has agreed,
subject to execution of definitive employment agreements and definitive stock
option agreements, to issue the following options to purchase shares of common
stock with an exercise price of $23.00 per share:
<TABLE>
<S> <C>
Jeffrey A. Marcus: 3,910,000
Thomas P. McMillin: 1,360,000
Daniel Wilson: 1,020,000
Chad E. Cohen: 510,000
</TABLE>
Messrs. Marcus, McMillin, Wilson and Coben are referred to herein as
the "Marcus Executives."
These options vest 90 days after the grant date as to 25% of the grant,
on the first anniversary as to 50% of the grant, on the second anniversary as to
75% of the grant and are fully vested on the third anniversary of the grant
date.
2. In connection with the foregoing grants, the Company has also agreed to issue
200,000 options with an exercise price of $23.00 per share to 12 employees.
These options vest equally in 1/3rd increments on the anniversary date of grant
and are fully vested on the third anniversary of the grant date.
3. In connection with proposed terms of employment as President of the Company,
the Company has agreed, subject to execution of a definitive employment
agreement and a definitive stock option agreement, to issue 1,400,000 options to
purchase shares of common stock with an exercise price of $23.00 per share to
Barrett N. Wissman. These options vest 90 days after the
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<PAGE> 37
grant date as to 25% of the grant, on the first anniversary as to 50% of the
grant, on the second anniversary.
4. The Company is in discussions with several other potential senior executives
regarding employment. If such negotiations are successful, the Company
anticipates issuing up to 1,250,000 options on similar terms to those issued to
the Marcus Executives and Mr. Wissman.
5. On March 7, 2000, the Company entered into a non-binding letter of intent to
acquire all of the issued and outstanding shares of common stock, and all
options, warrants and other equity interests in, Advanced Data Analysis &
Preservation Technology, Inc. ("ADAPT"). The purchase price for this acquisition
is $25,750,000, payable in shares of the Company's Common Stock. The number of
shares of Common Stock issuable in this transaction will be determined by
dividing the purchase price by the average of the closing bid and ask prices of
the Common Stock during the time period beginning March 15, 2000 and ending
April 15, 2000, with a minimum price of $20.00 and a maximum price of $50.00.
The Company has also agreed to issue (i) 100,000 stock options under its Omnibus
Securities Plan (the "Plan") to the CEO of ADAPT as part of his proposed
employment as CEO and President of ADAPT following the closing of the
transaction, and (ii) 75,000 stock options under the Plan to certain other key
employees of ADAPT. As of March 31, 2000, the closing of this transaction was
still subject to satisfactory completion of due diligence, execution and
delivery of mutually acceptable documentation and the approval of the
shareholders of ADAPT.
6. In connection with the acquisition of Internet Global Services, Inc. ("IGS"),
the Company issued a total of 900,000 options under the Plan to seven key
executives of IGS. These options have an exercise price of $28.50 per share and
vest in equal 1/3rd increments annually on the anniversary date of the grants.
7. On March 13, 2000, the Company received a conversion notice from Geronimo
Partners, L.P., requesting conversion of 2,500 shares of Series B Convertible
Preferred Stock.
8. The Company has delivered instructions to its transfer agent to issue (i)
12,500 shares of common stock to Jose Antonio Canedo White to complete the
Corpovision Settlement, (ii) 50,000 shares to Mark Graham Grantor Retained
Annuity Trust to complete that entity's subscription for shares on September 28,
1999 and (iii) 181,159 shares issuable upon conversion of 2,500 shares of Series
B Preferred Stock (which conversion was requested on March 13, 2000).
9. Pursuant to the terms of the acquisition of IGS, the Company is obligated to
issue 2,551,087 of common stock. The issuance instructions are not yet complete
and therefore the shares have not yet been issued.
SECTION 5(k)
Increases in Compensation
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<PAGE> 38
In connection with his proposed employment as President of the Company, Mr.
Wissman's compensation is scheduled to increase from $120,000 to $190,000.
SECTION 5(m)
1. The Company has not filed any Federal or state tax returns that may have been
due for its fiscal year ended June 30, 1999.
2. e.Volve Technology Group, Inc. has not filed any Federal or state tax returns
that may have been due for its fiscal year ended May 31, 1999.
-38-
<PAGE> 39
EXHIBIT 1
April __, 2000
eVentures Group, Inc.
1 Evertrust Plaza
Jersey City, NJ 07302
Ladies and Gentlemen:
In connection with the purchase of shares of common stock of
eVentures Group, Inc. (the "Company") pursuant to the Common Stock Subscription
Agreement, dated as the date hereof, among the Company, the undersigned, and the
other investors thereto (the "Subscription Agreement"), the undersigned
represents and warrants that it is an "accredited investor", as defined in Rule
501 under the Securities Act of 1933 (the "Act")), inasmuch as it is:
(Please check all applicable descriptions)
[ ] A bank or savings and loan association, as defined in
the Act, whether acting in its individual or
fiduciary capacity.
[ ] A broker or dealer registered pursuant to the
Securities Exchange Act of 1934.
[ ] An insurance company, as defined in the Act.
[ ] An investment company registered under the Investment
Company Act of 1940.
[ ] A business development company, as defined in the
Investment Company Act of 1940.
[ ] A Small Business Investment Company licensed by the
U.S. Small Business Administration.
[ ] A plan established and maintained by a state, its
political subdivisions, or an agency or
instrumentality of a state or its political
subdivisions for the benefit of its employees, if
such plan has total assets in excess of $5,000,000.
[ ] An employee benefit plan within the meaning of Title
I of the Employment Retirement Income Security Act of
1974 (ERISA), if the investment decision with respect
to this investment is made by a plan fiduciary, as
defined in ERISA, which is either a bank, savings and
loan association, insurance company, or registered
investment advisor, or if the employee benefit plan
has total assets in excess of $5,000,000, or, if a
self-
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<PAGE> 40
directed plan, with investment decisions made solely
by persons that are accredited investors.
[ ] A private business development company, as defined in
the Investment Advisors Act of 1940.
[ ] A tax-exempt organization defined in Section
501(c)(3) of the Internal Revenue Code, or a
corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose
of acquiring the shares offered under the
Subscription Agreement, with total assets in excess
of $5,000,000.
[ ] A director or executive officer of the Company.
[ ] A natural person whose individual net worth (or joint
net worth with that person's spouse) exceeds
$1,000,000.
[ ] A natural person who had an individual income in
excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in
excess of $300,000 in each of those years and who
reasonably expects an income in excess of $200,000 in
the current year.
[ ] A trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
shares offered under the Subscription Agreement,
whose purchase is directed by a sophisticated person
as described in Rule 506(b)(2)(ii) under the Act.
[ ] An entity all the equity owners of which may respond
affirmatively to any of the preceding paragraphs.
The undersigned represents that the information contained herein is complete and
accurate and may be relied upon by the Company and agrees to notify the Company
if the undersigned no longer qualifies for any description checked above.
By:
------------------------------
Name:
Title:
-40-
<PAGE> 1
EXHIBIT 10.16
EXECUTION COPY
ISSUER OPTION AGREEMENT
This Issuer Option Agreement (this "Agreement") is made and entered
into effective this 10th day of April, 2000, by and among eVentures Group, Inc.,
a Delaware corporation (the "Company"), and Samuel L. Litwin (the "Stockholder")
on the terms and conditions set forth below:
WHEREAS, the Stockholder is currently the owner of 1,500,000 shares of
common stock of the Company, par value $0.00002 per share ("Common Stock");
WHEREAS, the Stockholder wishes to grant an option to the Company to
purchase 300,000 shares of Common Stock owned by him, subject to the adjustments
set forth in this Agreement (the "Option Shares");
WHEREAS, the Company wishes to purchase, and the Stockholder wishes to
grant to the Company, an option to purchase the Option Shares from the
Stockholder;
NOW THEREFORE, for good and valuable consideration, the parties agree
as follows:
1. Grant of Option. Upon the terms and subject to the conditions
contained in this Agreement, the Company is entitled, upon written notification
to the Stockholder as provided in Section 6 below, to purchase from the
Stockholder at one or more times prior to the Expiration Date (as defined below)
a portion or all of the Option Shares for an exercise price (the "Exercise
Price") of (a) $15.00 per Option Share for any exercise of the Option during the
period from the date hereof to and including September 22, 2000; and (b) $20.00
per Option Share for any exercise of the Option during the period from and
including September 23, 2000 to and including September 22, 2001 (the "Option").
The Option may be exercised one or more times until all Option Shares have been
transferred to the Company.
2. Purchase Price for Option. The purchase price for the Option shall
be $100,000 (the "Purchase Price"). The Company shall pay the Purchase Price on
the date two days after the date hereof by wire transfer in immediately
available funds to an account designated in writing to the Company by the
Stockholder prior to the date hereof.
3. Expiration of Option. The Option shall expire at 11:59 p.m. on
September 22, 2001, Central Time (United States) (the "Expiration Time").
4. Exercise of Option. The Option may not be exercised:
(a) during any period that the Company is engaged in a
"distribution" as that term is defined in Regulation M promulgated under the
Securities Exchange Act of 1934 ("Regulation M");
<PAGE> 2
(b) during any period that the Stockholder is a "distribution
participant" or an "affiliated purchaser" as those terms are defined in
Regulation M;
(c) during any "restricted period" or "reference period", as
those terms are defined in Regulation M; or
(d) at any time the independent bid price on the Nasdaq (as
defined in Regulation M) stock market for shares of Common Stock (or other
market if the Common Stock is not trading on the Nasdaq) is less than the
Exercise Price then in effect under this Agreement.
5. Adjustment of Option Shares. The number of Option Shares shall be
subject to adjustment as follows:
(a) If the Company:
(i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of Common
Stock into a smaller number of shares;
(iv) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(v) issues by reclassification of its Common Stock
any shares of its Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the surviving corporation),
then the Option Shares immediately prior to such action shall be
adjusted to apply to the aggregate number and kind of shares of Common
Stock (or such shares of capital stock other than Common Stock) of the
Company that the Company would have owned immediately following such
action if the Company had exercised the Option immediately prior to
such action.
(b) The adjustment shall become effective on the record date in
the case of a dividend or distribution and on the effective date in the case of
a subdivision, combination or reclassification.
(c) Whenever the number of Option Shares is adjusted under this
Section 5, the Company shall promptly mail to the Stockholder a notice of such
adjustment.
2
<PAGE> 3
6. Exercise Procedures; Closing.
(a) To exercise the Option with respect to all Option Shares held
by the Stockholder, the Company shall deliver a notice to the Stockholder, prior
to the Expiration Time, indicating that the Company wishes to exercise the
Option for all Option Shares held by the Stockholder, and stating that the
Stockholder is to deliver all Option Shares held by the Stockholder.
(b) To exercise the Option with respect to a portion of the
Option Shares, the Company shall deliver a notice to the Stockholder, prior to
the Exercise Time, indicating that the Company wishes to exercise the Option for
less than all Option Shares and specifying how many Option Shares are to be
delivered by the Stockholder.
(c) Within five days of delivery of such notice pursuant to
Section 6(a) or (b), the Company and the Stockholder shall agree upon a date for
the delivery of Option Shares and payment of the exercise price being paid
therefor (the "Closing"), which shall not be later than ten days from the date
of delivery of such notice. At the Closing, the Company shall tender the
exercise price by wire transfer or cashier's check upon delivery of certificates
representing such number of Option Shares for which the Option has been
exercised.
(d) If the Company exercises the Option for less than all Option
Shares and the Stockholder delivers a certificate or certificates representing
shares in excess of the number of Option Shares for which the Option has been
exercised (the "Excess Shares"), upon delivery of such certificate or
certificates the Company shall or shall cause its transfer agent to issue a new
certificate to the Stockholder representing the Excess Shares.
(e) The Stockholder shall execute such documents and take such
actions as may be necessary to effectuate the transfer of Option Shares to the
Company upon an exercise of the Option.
7. Pro Rata Exercise. The Stockholder acknowledges that the Company is
entering into option agreements with other stockholders on the same terms as
this Agreement and that the Company intends to exercise the Option and the
options under the other option agreements in equal amounts pro rata among the
stockholders.
8. Stop Transfer Order. The Stockholder acknowledges that the Company
may register a stop transfer order in respect of transfers of the Option Shares
other than to the Company in the books and records of the Company which shall be
effective until the Expiration Time.
9. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to the Company as follows, as of the date hereof
and each Closing:
(a) The Stockholder has good and marketable title to the Option
Shares, free and clear of all liens, encumbrances, claims, rights of first
refusal, options, security interests,
3
<PAGE> 4
charges, pledges or restrictions on transfer of any nature whatsoever
(collectively, "Encumbrances"), with the exception of restrictions of transfer
set forth in the Registration Rights Agreement, dated September 22, 1999,
between the Company and certain stockholders of the Company, including the
Stockholder. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the sale, delivery or
transfer by either of them of the Option Shares. Upon the sale of the Option
Shares to the Company at a Closing, the Stockholder will transfer to the Company
the entire legal and beneficial interest in all Option Shares being delivered at
such Closing, free and clear of any Encumbrances. The Stockholder is not a party
to any agreement or understanding with respect to the voting, control or
beneficial ownership of the Option Shares, nor is a proxy in effect for any of
the Option Shares.
(b) This Agreement has been duly and validly executed and
delivered by the Stockholder and constitutes a valid and binding agreement of
the Stockholder, enforceable against the Stockholder in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
(c) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Stockholder is
required in connection with the consummation of the transactions contemplated by
this Agreement.
(d) The execution, delivery and performance of this Agreement
does not and will not violate (i) with or without notice or the lapse of time,
the terms of any contract, agreement, obligation, commitment, license,
indenture, mortgage, deed of trust, loan or credit agreement or any other
agreement or instrument to which the Stockholder is a party or (ii) any
judgment, decree, order, statute, rule or regulation of any federal, state or
local government or agency applicable to the Stockholder.
10. Representations and Warranties of the Company; Transfers. The
Company hereby represents and warrants to the Stockholder, as of the date hereof
and each Closing, that this Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies. The Company will
not transfer, assign or pledge this Agreement in a manner which violates the
Securities Act of 1933 or any other applicable laws.
11. Indemnification. The Stockholder hereby agrees to indemnify, defend
and hold harmless the Company against and in respect of any and all Indemnified
Damages (as defined below) that result to the Company from (i) any breach or
inaccuracy of any representation or
4
<PAGE> 5
warranty or any material omission made by the Stockholder in or pursuant to this
Agreement, and (ii) any breach or default in the performance by the Stockholder
of any of the obligations to be performed by the Stockholder hereunder. For
purposes of this Section 11, the term "Indemnified Damages" means any and all
claims, actions, demands, losses, costs, expenses, liabilities, penalties, and
other damages, including without limitation, reasonable attorneys' fees and
other costs and expenses reasonably incurred in investigating or attempting to
avoid same, in opposing the imposition of the same, and/or in enforcing this
indemnity. The Stockholder shall obtain the prior written consent of the
Company, which shall not be unreasonably withheld, before ceasing to defend
against such claim or entering into any settlement, adjustment, or compromise of
such claim unless such settlement, adjustment, or compromise involves only the
payment of monetary consideration by the Stockholder and does not involve any
admission of fact that might have a material adverse effect on the future
business or operations of the Company or that might reasonably prejudice the
Company in subsequent or other litigation. The Stockholder shall reimburse the
Company on demand for any payment made or damages sustained by the Company at
any time after a Closing, whether based upon the judgment of any court of
competent jurisdiction, pursuant to a bona fide compromise or settlement of
claims, demands or actions, or otherwise in respect of any Indemnified Damages.
12. Miscellaneous.
(a) All notices given, and payments made, hereunder shall be
effectuated by either personal delivery or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to the Company, to:
eVentures Group, Inc.
One Evertrust Plaza, 8th Floor
Jersey City, New Jersey 07302
Attention: Vice President and Chief Financial Officer
Telephone: (201) 200-5515
Facsimile Number: (201) 200-5532
with a copy to:
eVentures Group, Inc.
c/o HW Partners, L.P.
1601 Elm Street, 40th Floor
Dallas, Texas 75201
Attention: General Counsel
Telephone: (214) 720-1608
Facsimile Number: (214) 720-1667
5
<PAGE> 6
If to the Stockholder, to:
AxisTel Communications, Inc.
One Evertrust Plaza, 8th Floor
Jersey City, New Jersey 07302
Telephone: (201) 200-5515
Facsimile Number: (201) 200-5532
(b) All representations and warranties of the Stockholder and the
Company contained in or made pursuant to this Agreement shall be deemed to be
material and shall be deemed to have been relied upon by the party to whom such
representations and warranties are made, as a material inducement to enter into
and close this Agreement and to consummate the transfer of the Option Shares.
The representations and warranties of the Stockholder and the Company contained
in this Agreement shall survive the execution and delivery of this Agreement and
any Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Stockholder or the Company.
(c) The Company may assign all of its rights under this Agreement
at any time, including the right to exercise the Option, without the consent of
the Stockholder, provided that any assignment is made in compliance with all
applicable securities laws. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto, including any
transferee of Option Shares.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(e) This Agreement contains the entire agreement of the parties
with respect to the option described herein, and supersedes all prior and
contemporaneous oral or written agreements, understandings, and the like among
the parties. There shall be no modification or amendment of this Agreement, nor
any waiver of any rights under this Agreement, unless expressly embodied in a
writing signed by the party to be charged.
(f) If one or more of the provisions of this Agreement or any
part of any provision of this Agreement is deemed to be void, voidable or
unenforceable for any reason, the remaining provisions or parts of a provision
will be severable therefrom and remain in full force and effect.
(g) In the event of any demand, action or proceeding arising out
of this Agreement, the prevailing party shall be entitled to an award of
attorneys' fees, costs and expenses (whether or not considered taxable costs) in
addition to any other relief to which he or she may be entitled.
6
<PAGE> 7
(h) The Stockholder acknowledges that monetary damages would not
be an adequate remedy for a failure by the Stockholder to deliver the Option
Shares as provided herein, and agree that the Company shall be entitled to seek
specific performance in such event.
(i) Any dispute related to or arising out of this Agreement shall
be resolved by binding arbitration before, and pursuant to the rules of, the
American Arbitration Association in New York, New York.
* * * *
7
<PAGE> 8
Dated: April 24, 2000 /s/ Barrett N. Wissman President
--------------------------------------------
eVentures Group, Inc.
Dated: April 10, 2000 /s/ Samuel L. Litwin
--------------------------------------------
Samuel L. Litwin
8
<PAGE> 1
EXHIBIT 10.17
EXECUTION COPY
ISSUER OPTION AGREEMENT
This Issuer Option Agreement (this "Agreement") is made and entered
into effective this 10th day of April, 2000, by and among eVentures Group, Inc.,
a Delaware corporation (the "Company"), and Mitchell C. Arthur (the
"Stockholder") on the terms and conditions set forth below:
WHEREAS, the Stockholder is currently the owner of 1,550,000 shares of
common stock of the Company, par value $0.00002 per share ("Common Stock");
WHEREAS, the Stockholder wishes to grant an option to the Company to
purchase 400,000 shares of Common Stock owned by him, subject to the adjustments
set forth in this Agreement (the "Option Shares");
WHEREAS, the Company wishes to purchase, and the Stockholder wishes to
grant to the Company, an option to purchase the Option Shares from the
Stockholder;
NOW THEREFORE, for good and valuable consideration, the parties agree
as follows:
1. Grant of Option. Upon the terms and subject to the conditions
contained in this Agreement, the Company is entitled, upon written notification
to the Stockholder as provided in Section 6 below, to purchase from the
Stockholder at one or more times prior to the Expiration Date (as defined below)
a portion or all of the Option Shares for an exercise price (the "Exercise
Price") of (a) $15.00 per Option Share for any exercise of the Option during the
period from the date hereof to and including September 22, 2000; and (b) $20.00
per Option Share for any exercise of the Option during the period from and
including September 23, 2000 to and including September 22, 2001 (the "Option").
The Option may be exercised one or more times until all Option Shares have been
transferred to the Company.
2. Purchase Price for Option. The purchase price for the Option shall
be $100,000 (the "Purchase Price"). The Company shall pay the Purchase Price on
the date two days after the date hereof by wire transfer in immediately
available funds to an account designated in writing to the Company by the
Stockholder prior to the date hereof.
3. Expiration of Option. The Option shall expire at 11:59 p.m. on
September 22, 2001, Central Time (United States) (the "Expiration Time").
4. Exercise of Option. The Option may not be exercised:
(a) during any period that the Company is engaged in a
"distribution" as that term is defined in Regulation M promulgated under the
Securities Exchange Act of 1934 ("Regulation M");
<PAGE> 2
(b) during any period that the Stockholder is a "distribution
participant" or an "affiliated purchaser" as those terms are defined in
Regulation M;
(c) during any "restricted period" or "reference period", as
those terms are defined in Regulation M; or
(d) at any time the independent bid price on the Nasdaq (as
defined in Regulation M) stock market for shares of Common Stock (or other
market if the Common Stock is not trading on the Nasdaq) is less than the
Exercise Price then in effect under this Agreement.
5. Adjustment of Option Shares. The number of Option Shares shall be
subject to adjustment as follows:
(a) If the Company:
(i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of Common
Stock into a smaller number of shares;
(iv) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(v) issues by reclassification of its Common Stock
any shares of its Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the surviving corporation),
then the Option Shares immediately prior to such action shall be
adjusted to apply to the aggregate number and kind of shares of Common
Stock (or such shares of capital stock other than Common Stock) of the
Company that the Company would have owned immediately following such
action if the Company had exercised the Option immediately prior to
such action.
(b) The adjustment shall become effective on the record date in
the case of a dividend or distribution and on the effective date in the case of
a subdivision, combination or reclassification.
(c) Whenever the number of Option Shares is adjusted under this
Section 5, the Company shall promptly mail to the Stockholder a notice of such
adjustment.
2
<PAGE> 3
6. Exercise Procedures; Closing.
(a) To exercise the Option with respect to all Option Shares held
by the Stockholder, the Company shall deliver a notice to the Stockholder, prior
to the Expiration Time, indicating that the Company wishes to exercise the
Option for all Option Shares held by the Stockholder, and stating that the
Stockholder is to deliver all Option Shares held by the Stockholder.
(b) To exercise the Option with respect to a portion of the
Option Shares, the Company shall deliver a notice to the Stockholder, prior to
the Exercise Time, indicating that the Company wishes to exercise the Option for
less than all Option Shares and specifying how many Option Shares are to be
delivered by the Stockholder.
(c) Within five days of delivery of such notice pursuant to
Section 6(a) or (b), the Company and the Stockholder shall agree upon a date for
the delivery of Option Shares and payment of the exercise price being paid
therefor (the "Closing"), which shall not be later than ten days from the date
of delivery of such notice. At the Closing, the Company shall tender the
exercise price by wire transfer or cashier's check upon delivery of certificates
representing such number of Option Shares for which the Option has been
exercised.
(d) If the Company exercises the Option for less than all Option
Shares and the Stockholder delivers a certificate or certificates representing
shares in excess of the number of Option Shares for which the Option has been
exercised (the "Excess Shares"), upon delivery of such certificate or
certificates the Company shall or shall cause its transfer agent to issue a new
certificate to the Stockholder representing the Excess Shares.
(e) The Stockholder shall execute such documents and take such
actions as may be necessary to effectuate the transfer of Option Shares to the
Company upon an exercise of the Option.
7. Pro Rata Exercise. The Stockholder acknowledges that the Company is
entering into option agreements with other stockholders on the same terms as
this Agreement and that the Company intends to exercise the Option and the
options under the other option agreements in equal amounts pro rata among the
stockholders.
8. Stop Transfer Order. The Stockholder acknowledges that the Company
may register a stop transfer order in respect of transfers of the Option Shares
other than to the Company in the books and records of the Company which shall be
effective until the Expiration Time.
9. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to the Company as follows, as of the date hereof
and each Closing:
(a) The Stockholder has good and marketable title to the Option
Shares, free and clear of all liens, encumbrances, claims, rights of first
refusal, options, security interests,
3
<PAGE> 4
charges, pledges or restrictions on transfer of any nature whatsoever
(collectively, "Encumbrances"), with the exception of restrictions of transfer
set forth in the Registration Rights Agreement, dated September 22, 1999,
between the Company and certain stockholders of the Company, including the
Stockholder. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the sale, delivery or
transfer by either of them of the Option Shares. Upon the sale of the Option
Shares to the Company at a Closing, the Stockholder will transfer to the Company
the entire legal and beneficial interest in all Option Shares being delivered at
such Closing, free and clear of any Encumbrances. The Stockholder is not a party
to any agreement or understanding with respect to the voting, control or
beneficial ownership of the Option Shares, nor is a proxy in effect for any of
the Option Shares.
(b) This Agreement has been duly and validly executed and
delivered by the Stockholder and constitutes a valid and binding agreement of
the Stockholder, enforceable against the Stockholder in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
(c) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Stockholder is
required in connection with the consummation of the transactions contemplated by
this Agreement.
(d) The execution, delivery and performance of this Agreement
does not and will not violate (i) with or without notice or the lapse of time,
the terms of any contract, agreement, obligation, commitment, license,
indenture, mortgage, deed of trust, loan or credit agreement or any other
agreement or instrument to which the Stockholder is a party or (ii) any
judgment, decree, order, statute, rule or regulation of any federal, state or
local government or agency applicable to the Stockholder.
10. Representations and Warranties of the Company; Transfers. The
Company hereby represents and warrants to the Stockholder, as of the date hereof
and each Closing, that this Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies. The Company will
not transfer, assign or pledge this Agreement in a manner which violates the
Securities Act of 1933 or any other applicable laws.
11. Indemnification. The Stockholder hereby agrees to indemnify, defend
and hold harmless the Company against and in respect of any and all Indemnified
Damages (as defined below) that result to the Company from (i) any breach or
inaccuracy of any representation or
4
<PAGE> 5
warranty or any material omission made by the Stockholder in or pursuant to this
Agreement, and (ii) any breach or default in the performance by the Stockholder
of any of the obligations to be performed by the Stockholder hereunder. For
purposes of this Section 11, the term "Indemnified Damages" means any and all
claims, actions, demands, losses, costs, expenses, liabilities, penalties, and
other damages, including without limitation, reasonable attorneys' fees and
other costs and expenses reasonably incurred in investigating or attempting to
avoid same, in opposing the imposition of the same, and/or in enforcing this
indemnity. The Stockholder shall obtain the prior written consent of the
Company, which shall not be unreasonably withheld, before ceasing to defend
against such claim or entering into any settlement, adjustment, or compromise of
such claim unless such settlement, adjustment, or compromise involves only the
payment of monetary consideration by the Stockholder and does not involve any
admission of fact that might have a material adverse effect on the future
business or operations of the Company or that might reasonably prejudice the
Company in subsequent or other litigation. The Stockholder shall reimburse the
Company on demand for any payment made or damages sustained by the Company at
any time after a Closing, whether based upon the judgment of any court of
competent jurisdiction, pursuant to a bona fide compromise or settlement of
claims, demands or actions, or otherwise in respect of any Indemnified Damages.
12. Miscellaneous.
(a) All notices given, and payments made, hereunder shall be
effectuated by either personal delivery or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to the Company, to:
eVentures Group, Inc.
One Evertrust Plaza, 8th Floor
Jersey City, New Jersey 07302
Attention: Vice President and Chief Financial Officer
Telephone: (201) 200-5515
Facsimile Number: (201) 200-5532
with a copy to:
eVentures Group, Inc.
c/o HW Partners, L.P.
1601 Elm Street, 40th Floor
Dallas, Texas 75201
Attention: General Counsel
Telephone: (214) 720-1608
Facsimile Number: (214) 720-1667
5
<PAGE> 6
If to the Stockholder, to:
AxisTel Communications, Inc.
One Evertrust Plaza, 8th Floor
Jersey City, New Jersey 07302
Telephone: (201) 200-5515
Facsimile Number: (201) 200-5532
(b) All representations and warranties of the Stockholder and the
Company contained in or made pursuant to this Agreement shall be deemed to be
material and shall be deemed to have been relied upon by the party to whom such
representations and warranties are made, as a material inducement to enter into
and close this Agreement and to consummate the transfer of the Option Shares.
The representations and warranties of the Stockholder and the Company contained
in this Agreement shall survive the execution and delivery of this Agreement and
any Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Stockholder or the Company.
(c) The Company may assign all of its rights under this Agreement
at any time, including the right to exercise the Option, without the consent of
the Stockholder, provided that any assignment is made in compliance with all
applicable securities laws. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto, including any
transferee of Option Shares.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(e) This Agreement contains the entire agreement of the parties
with respect to the option described herein, and supersedes all prior and
contemporaneous oral or written agreements, understandings, and the like among
the parties. There shall be no modification or amendment of this Agreement, nor
any waiver of any rights under this Agreement, unless expressly embodied in a
writing signed by the party to be charged.
(f) If one or more of the provisions of this Agreement or any
part of any provision of this Agreement is deemed to be void, voidable or
unenforceable for any reason, the remaining provisions or parts of a provision
will be severable therefrom and remain in full force and effect.
(g) In the event of any demand, action or proceeding arising out
of this Agreement, the prevailing party shall be entitled to an award of
attorneys' fees, costs and expenses (whether or not considered taxable costs) in
addition to any other relief to which he or she may be entitled.
6
<PAGE> 7
(h) The Stockholder acknowledges that monetary damages would not
be an adequate remedy for a failure by the Stockholder to deliver the Option
Shares as provided herein, and agree that the Company shall be entitled to seek
specific performance in such event.
(i) Any dispute related to or arising out of this Agreement shall
be resolved by binding arbitration before, and pursuant to the rules of, the
American Arbitration Association in New York, New York.
* * * *
7
<PAGE> 8
Dated: April 24, 2000 /s/ Barrett N. Wissman President
--------------------------------------
eVentures Group, Inc.
Dated: April 10, 2000 /s/ Mitchell C. Arthur
--------------------------------------
Mitchell C. Arthur
8
<PAGE> 1
EXHIBIT 10.18
[CRESCENT LOGO]
Office Lease
Between
CRESCENT REAL ESTATE FUNDING I, L.P.
("LANDLORD")
and
MARCUS & PARTNERS, L.P.
("TENANT")
<PAGE> 2
TABLE OF CONTENTS
PARAGRAPHS:
<TABLE>
<CAPTION>
Page
<S> <C>
1. BUSINESS POINTS ........................................................ -1-
2. INTERPRETING THIS LEASE ................................................ -5-
3. UNDERSTANDING THE PROJECT .............................................. -5-
4. TERM ................................................................... -6-
5. PREPARING THE PREMISES ................................................. -6-
6. RENT AND SECURITY DEPOSIT .............................................. -6-
7. EXCESS OPERATING EXPENSES .............................................. -7-
8. LANDLORD SERVICES ......................................................-10-
9. OCCUPANCY AND CONTROL ..................................................-13-
10. TENANT'S COVENANTS .....................................................-14-
11. REPAIRS, MAINTENANCE AND ALTERATIONS....................................-15-
12. ASSIGNMENT AND SUBLETTING BY TENANT ....................................-17-
13. INDEMNITY ..............................................................-18-
14. INSURANCE ..............................................................-20-
15. FIRE OR CASUALTY .......................................................-22-
16. CONDEMNATION ...........................................................-22-
17. DEFAULTS AND REMEDIES ..................................................-22-
18. END OF TERM ............................................................-25-
19. NOTICES ................................................................-26-
20. LANDLORD'S FINANCING ...................................................-26-
21. RIGHTS RESERVED BY LANDLORD ............................................-27-
22. HAZARDOUS MATERIALS ....................................................-28-
23. LANDLORD'S INTEREST ....................................................-29-
24. EXECUTION AND SIGNING AUTHORITY ........................................-29-
25. QUIET ENJOYMENT ........................................................-29-
</TABLE>
EXHIBITS & RIDERS:
EXHIBIT "A" LEGAL DESCRIPTION OF THE PROJECT
EXHIBIT "B" FLOOR PLAN OF PREMISES
EXHIBIT "C" CONSTRUCTION AGREEMENT
EXHIBIT "D" CERTIFICATE OF ACCEPTANCE OF PREMISES
EXHIBIT "E" RULES AND REGULATIONS
EXHIBIT "F-1" LIABILITY INSURANCE CERTIFICATE
EXHIBIT "F-2" PROPERTY INSURANCE CERTIFICATE
EXHIBIT "F-3" BUSINESS INTERRUPTION INSURANCE WAIVER
RIDER 1 OPTION TO EXTEND
RIDER 3 PREFERENTIAL RIGHT TO LEASE
-i-
<PAGE> 3
OFFICE LEASE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are acknowledged, the Landlord named below leases to the Tenant named
below, and Tenant leases from Landlord, the Premises described below pursuant to
this Office Lease (this "LEASE") entered into effective as of the Date of Lease
specified below:
1. BUSINESS POINTS. The key business terms used in this Lease are defined
as follows:
(a) "DATE OF LEASE" (for reference purposes only): May 20, 1999.
(b) "LANDLORD": CRESCENT REAL ESTATE FUNDING INC. I, L.P.
a Delaware limited partnership
(c) "TENANT": MARCUS & PARTNERS, L.P.,
a Delaware limited partnership
(d) "BUILDING": Office building commonly known as "The
Crescent(R)".
Street Address: 300 Crescent Court
Dallas, Texas 75201
RSF of the Building: 1,134,826.
(e) "PREMISES": Suite 800, on the 8th floor of the Building,
as shown on the floor plan attached as
EXHIBIT "B".
RSF of the Premises: 7,922.
(f) "TERM": 5 years.
(g) "ESTIMATED COMMENCEMENT DATE": June 30, 1999.
(h) "BASE RENT":
<TABLE>
<CAPTION>
Rental Period Annual Base Rental Rate/RSF Monthly Base Rent
- - ------------------- --------------------------- -----------------
<S> <C> <C>
CD to 6/30/00* $31.00 $20,465.17
7/1/00 to 6/30/01* $32.00 $21,125.33
7/1/01 to 6/30/02* $33.00 $21,785.50
7/1/02 to 6/30/03* $34.00 $22,445.67
7/1/03* to ED $35.00 $23,105.83
</TABLE>
-1-
<PAGE> 4
CD = Commencement Date (pursuant to PARAGRAPH 4)
ED = Expiration Date (pursuant to PARAGRAPH 4)
* = Provided, however that in the event that the CD occurs
after June 30, 1999, the initial rental period shall be extended to the date
which is 12 months after the last day of the same calendar month in which the
CD falls, and a corresponding change shall be made to the commencement and
expiration dates of the subsequent rental periods so that each rental period is
for a 12 month period. For example, if the CD occurs on 7/3/99, the initial
rental period shall be from CD to 7/31/00 and the subsequent rental periods
shall be from 8/1/00 to 7/31/01, 8/1/01 to 7/31/02, 8/1/02 to 7/31/03 and 8/1/03
to ED. The Certificate of Acceptance of Premises set forth as EXHIBIT "D" shall
reflect the actual CD, ED and Rental Periods.
(i) "SECURITY DEPOSIT": $-0-.
(j) "BASE YEAR": Calendar year 1999.
(k) "PARKING PERMITS":
(i) UNRESERVED PARKING. Tenant shall take and pay for 16
permits allowing access to unreserved spaces in parking facilities
which Landlord provides for the use of tenants and occupants of the
Project. During the initial Term (and, if applicable, during any
renewal or extension term of this Lease), Tenant shall pay Landlord's
quoted monthly contract rate (as set from time to time) for each
unreserved permit, plus any taxes thereon. Notwithstanding anything to
the contrary contained herein, Tenant may elect not to purchase up to 8
of its 16 permits; provided, however that in the event Tenant does not
purchase all of the 16 parking permits, then Tenant relinquishes its
right to such unpurchased spaces (the "RELINQUISHED SPACES"). In the
event that Tenant subsequently desires to use all or a portion of the
Relinquished Spaces, Tenant shall provide 30 days prior written notice
to Landlord which specifies the number of Relinquished Spaces that
Tenant desires to purchase ("Tenant's Notice"). Landlord shall allow
Tenant to purchase such unreserved and/or reserved parking permits
within 30 days after Tenant's Notice, at Landlord's then-quoted monthly
contract rate.
(ii) RESERVED PARKING. Tenant shall convert 6 unreserved
permits to reserved permits providing access to the parking facilities
serving the Building which are owned or controlled by Landlord in the
following reserved parking spaces: Nos. 286, 352, 353, 354, 357 and
358. During the initial Term (and, if applicable, during any renewal or
extension term of the Lease), Tenant shall pay Landlord its quoted
monthly contract rate (as set from time to time) for such reserved
permits in the designated garage, plus any taxes thereon.
(1) "PERMITTED USE": General office use, subject to PARAGRAPH
9(a).
-2-
<PAGE> 5
(m) ADDRESSES:
LANDLORD'S ADDRESSES FOR NOTICE: LANDLORDS ADDRESS FOR PAYMENTS:
The Crescent P.O. Box 841772
100 Crescent Court, Suite 250 Dallas, Texas 75284-1772
Dallas, Texas 75201
Attn: Property Manager
Telephone: (214) 880-4500
Facsimile: (214) 880-4506 TENANT'S ADDRESS PRIOR TO THE
COMMENCEMENT DATE
with a copy to: 300 Crescent Court, Suite 600
The Crescent Dallas, Texas 75201
200 Crescent Court, Suite 250 Attention: Jeffrey A. Marcus
Dallas, Texas 75201 Telephone: (214) 777-4100
Attn: John L. Zogg, Jr. Facsimile: (214) 777-4104
Telephone: (214) 880-4545
Facsimile: (214) 880-4547
TENANT'S ADDRESS ON AND AFTER
with a copy to: THE COMMENCEMENT DATE:
777 Main Street, Suite 2100 The Premises
Fort Worth, Texas 76102 Attention: Jeffrey A. Marcus
Attn: Legal Department
Telephone: (817) 321-2100
Facsimile: (817) 321-2000
-3-
<PAGE> 6
(n) ADDITIONAL DEFINITIONS: In addition to the key business terms
defined above, an index of the other defined terms used in the text of this
Lease is set forth below, with a cross-reference to the paragraph in this Lease
in which the definition of such term can be found:
<TABLE>
<S> <C> <C> <C>
ABS..................................................... 8(d) Landlord's Reletting Expenses...........................17(d)
ADA..................................................... 2(c) Landlord's Rental Damages...............................17(d)
Alterations.............................................11(c) Minor Alterations.......................................11(c)
Applicable Law...........................................2(c) Operating Expenses.......................................7(b)
Beneficiary......................................... 13(a)(i) Outside Services.........................................8(f)
Building Standard....................................... 2(b) Permitted Use........................................... 9(a)
Certificates...................................... 14(b)(iii) Prime Rate............................................. 17(d)
Claims............................................. 13(a)(ii) Project................................................. 3(a)
Collateral............................................. 17(g) Project Systems.......................................7(b)(i)
Commencement Date...........................................4 Providers...............................................10(d)
Common Areas.............................................3(b) Punchlist Items......................................... 5(b)
Construction Agreement...................................5(a) Relocated Premises..................................... 21(c)
Contamination...........................................22(a) Relocation Date.........................................21(c)
Control.................................................12(a) Rent.....................................................6(a)
Default Rate........................................... 17(b) RSF..................................................... 3(a)
Defend.............................................13(a)(iii) Rules and Regulations................................... 9(b)
EOE..................................................... 7(a) Service Areas........................................... 3(b)
Event of Default....................................... 17(a) Service Interruption.....................................8(e)
Excess Operating Expenses............................... 7(a) State................................................... 2(c)
Expiration Date.............................................4 Substantial Completion........................... 4(e) of the
Fair Rental Value.......................................17(d) Construction Agreement
Hazardous Materials.....................................22(a) Tenant Parties.......................................13(a)(i)
Hold Over...............................................18(c) Tenant's Contribution...................................15(b)
HVAC.................................................... 8(a) Tenant's FF&E.................................... 14(b)(i)(C)
Indemnify......................................... 13(a)(iii) Tenant's Insurable Injuries.........................13(a)(ii)
Insurable Injuries.................................. 13(a(ii) Tenant's Share...........................................7(a)
ISO.................................................13(a)(ii) Transfer............................................... 12(a)
Land.....................................................3(a) Waive............................................. 13(a)(iii)
Landlord Parties.....................................13(a)(i) Work...............................................4(a)of the
Landlord's Contribution.................................15(b) Construction Agreement
Landlord's Mortgagee.......................................20
</TABLE>
-4-
<PAGE> 7
2. INTERPRETING THIS LEASE.
(a) USAGE OF CERTAIN WORDS. Bold italicized print in quotations marks,
e.g., "TRANSFER", indicates definition of a term. A defined term includes all
grammatical variations which are also shown with initial capital letters. For
example, the defined word "Transfer" includes "Transferee", "Transferring",
"Transferred", etc., as grammatically appropriate in the text. Cross-references
to other provisions of this Lease are in bold print following the word
"PARAGRAPH". The word "including" shall not be construed restrictively to limit
or exclude other items not listed. Unless the context otherwise requires, the
singular includes the plural and the plural the singular, and the masculine,
feminine and neuter genders are interchangeable. Unless otherwise specified as a
business day, a "day" means a calendar day.
(b) BUILDING STANDARD. "BUILDING STANDARD" means the type, brand,
quantity or quality of materials, equipment, services, insurance coverages,
methods, scheduling and usages Landlord designates or determines from time to
time to be standard for the Building or the Project.
(c) APPLICABLE LAW. "APPLICABLE LAW" means all laws, statutes,
ordinances, court rulings, regulations, public or private restrictions and
requirements now or hereafter adopted by any governmental or other authority,
board of fire underwriters, utility company, property association, declarant or
similar body, affecting the Project or this Lease, including Title m of The
Americans with Disabilities Act of 1990, the Accessibility Guidelines for
Buildings and Facilities and any other law pertaining to disabilities and
architectural barriers (collectively, "ADA"). THE VALIDITY, PERFORMANCE AND
ENFORCEMENT OF THIS LEASE ARE GOVERNED BY THE APPLICABLE LAW OF THE STATE OR
OTHER JURISDICTION WHERE THE BUILDING IS LOCATED ("STATE"). ALL OBLIGATIONS
UNDER THIS LEASE ARE PERFORMABLE IN THE COUNTY OR OTHER JURISDICTION IN WHICH
THE BUILDING IS LOCATED, WHICH SHALL BE VENUE FOR ALL LEGAL ACTIONS.
(d) ENTIRE AGREEMENT. This Lease contains the parties' entire agreement
regarding the subject matter hereof. There are no representations or warranties
between the parties not contained in this Lease. No amendment of this Lease
shall be effective unless in writing and duly signed by the party against whom
enforcement is sought. Any invalidated provision of this Lease shall be severed
from, and shall not impair the validity of, this Lease. The exhibits and riders
attached hereto are incorporated herein and made a part of this Lease for all
purposes.
3. UNDERSTANDING THE PROJECT.
(a) PROJECT AND RENTABLE AREA. The "Project" consists of the tract of
land described on EXHIBIT "A" (the "LAND"), the Building and all appurtenant
parking facilities, landscaping, fixtures, Common Areas, service buildings and
related improvements now or hereafter constructed thereon or on land acquired by
Landlord (or its affiliates) and added to the Project from time to time. The
"RSF" is the then-current square footage of rentable area of a given space
calculated using Building Standard methods of measurement.
(b) COMMON AREAS AND SERVICE AREAS. Landlord grants Tenant a
non-exclusive right to use the Common Areas during the Term for their intended
purposes, in common with others and subject to the provisions of this Lease.
"COMMON AREAS" are all present and future areas, facilities and equipment in
the Project designated by Landlord for the common use of the occupants of the
Building and their customers, employees and invitees, including tunnels,
walkways, sky bridges and driveways, lobbies, landscaped areas, loading areas,
public corridors, public restrooms, stairs and elevators, and drinking
fountains. "SERVICE AREAS" are all present and future areas, facilities and
equipment serving the Project which are not generally accessible to Tenant or
other occupants of the Building, including mechanical, telecommunications,
electrical and similar rooms, roof, risers and HVAC equipment areas.
-5-
<PAGE> 8
4. TERM. The Term shall commence on the earlier of (a) the date (1)
Substantial Completion of the Work pursuant to the Construction Agreement (if
applicable); and (b) the date Tenant takes possession of [language omitted in
original] the Premises for purposes of conducting business (the "COMMENCEMENT
DATE"), and shall end on the last day of the calendar month in which it would
otherwise expire (the "EXPIRATION DATE"). Landlord shall not be liable or
responsible for Claims made or incurred by Tenant due to any delay in tendering
the Premises. If the Term is extended, the Expiration Date shall be the last day
of the calendar month in which the extended Term would otherwise expire. If the
Lease is terminated prior to the Expiration Date, the effective date of
termination shall become the Expiration Date, except for purposes of PARAGRAPH
17.
5. PREPARING THE PREMISES.
(a) CONDITION. Tenant agrees to accept the Premises "as-is". However,
all improvements, if any, shall be constructed in the Premises, and the cost
thereof paid, in accordance with the "CONSTRUCTION AGREEMENT" attached as
EXHIBIT "C" (if applicable). Except as expressly provided in this Lease or the
Construction Agreement, Landlord has not undertaken to perform any alteration or
improvement to the Premises.
(b) ACCEPTANCE. BY TAKING POSSESSION OF THE PREMISES, AND TO THE
FULLEST EXTENT PROVIDED BY PARAGRAPH 13(f), TENANT WAIVES (i) ANY CLAIMS DUE TO
DEFECTS IN THE PREMISES AND/OR THE PROJECT EXCEPT (A) MINOR FINISH ADJUSTMENTS
IN WORK PERFORMED BY LANDLORD ("PUNCHLIST ITEMS") SPECIFIED IN REASONABLE DETAIL
BY TENANT CONTEMPORANEOUSLY WITH TAKING POSSESSION, AND (B) LATENT DEFECTS IN
LANDLORD'S WORK OF WHICH TENANT NOTIFIES LANDLORD WITHIN (2) DAYS AFTER TAKING
POSSESSION; AND (ii) ALL EXPRESS AND IMPLIED WARRANTIES OF SUITABILITY,
HABITABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE. Except to the extent
otherwise expressly provided in this Lease, Tenant Waives the right to terminate
this Lease due to Punchlist Items or the condition of the Premises, the Building
or the Project. Tenant shall, within 15 days after Landlord's request, execute
and deliver a Certificate of Acceptance of the Premises substantially in the
form attached as EXHIBIT "D".
6. RENT AND SECURITY DEPOSIT.
(a) RENT. Beginning on the Commencement Date, Tenant shall pay Landlord
the Base Rent. The term "RENT" includes Base Rent, Excess Operating Expenses and
any and all other sums payable by Tenant under this Lease. All Rent (plus any
applicable taxes thereon) shall be payable to Landlord at the Address for
Payments set forth above, or to such other place or entity as may from time to
time be designated in writing by Landlord, in lawful money of the United States
of America. Tenant shall pay Landlord monthly installments of Base Rent and
Excess Operating Expenses in advance on or before the first day of each calendar
month during the Term, without deduction, setoff or prior request for payment.
Rent for any partial month shall be prorated on a daily basis based on a 365-day
calendar year. Tenant may make Rent payments by electronic transfer in
accordance with Landlord's instructions.
(b) SECURITY DEPOSIT. [language omitted in original]
- - -------------------------------
(1) which is 10 days after
(2) 270
-6-
<PAGE> 9
7. EXCESS OPERATING EXPENSES.
(a) CALCULATION. During the Term, Tenant shall pay Landlord Tenant's
Share of the amount (prorated for any partial calendar year) by which Operating
Expenses for each calendar year exceed Operating Expenses for the Base Year
("EXCESS OPERATING EXPENSES" or "EOE"). "TENANT'S SHARE" is equal to the RSF of
the Premises divided by the RSF of the Building. Operating Expenses are computed
on an accrual basis in accordance with sound accounting principles consistently
applied. If the Building is less than fully occupied or Building Standard
services are not provided to the entire Building during any calendar year
(including the Base Year), all Operating Expenses which vary directly with
occupancy shall be "grossed-up" by Landlord as if the Building had been fully
occupied and Building Standard services had been provided to the entire Building
during such calendar year.
(b) OPERATING EXPENSES. "OPERATING EXPENSES" are all costs and
expenditures of every kind incurred by Landlord in connection with the
ownership, operation, maintenance, management, repair and protection of the
Project which are directly attributable or reasonably allocable to the Building,
including Landlord's personal property used in connection with the Project and
including all costs and expenditures within the following expense categories:
(i) Operation, maintenance, repair and replacements of any
part of the Project, including the mechanical, electrical, plumbing, HVAC,
vertical transportation, fire prevention and warning and security systems
(collectively, "PROJECT SYSTEMS"); materials and supplies (such as light bulbs
and ballasts); equipment and tools; floor, wall and window coverings; personal
property; required or beneficial easements; and related service agreements and
rental expenses.
(ii) Administrative and management fees, including accounting,
information and professional services (except for negotiations and disputes with
specific tenants not affecting other parties)(3); management office(s); and
wages, salaries, benefits, reimbursable expenses and taxes (or allocations
thereof) for full and part time personnel involved in operation, maintenance and
management(4).
(iii) Janitorial service; window cleaning; waste disposal;
gas, water and sewer charges (including add-ons); and landscaping, including all
applicable tools and supplies.
(iv) Property, liability and other insurance coverages carried
by Landlord, including deductibles and an allocation of a portion of the cost of
blanket insurance policies maintained by Landlord and/or its affiliates.
(v) Real estate taxes, assessments, business taxes, excises,
association dues, fees, levies, charges and other taxes of every kind and nature
whatsoever, general and special, extraordinary and ordinary, foreseen and
unforeseen, including interest on installment payments, which may be levied or
assessed against or arise in connection with ownership, use, occupancy, rental,
operation or possession, or substituted, in whole or in part, for a tax
previously in existence by any
- - ----------------------------
(3) , provided that the management fee shall not exceed the
fees then charged in other buildings of comparable age, size, location
and amenities in the Dallas area
(4) at or below the level of regional property manager and
regional asset manager
-7-
<PAGE> 10
taxing authority [language omitted in original]. Real estate taxes do not
include(5) Landlord's income, franchise(6) or estate taxes (except to the extent
such excluded taxes are assessed in lieu of taxes included above).
(vi) Compliance with Applicable Law, including license, permit
and inspection fees; and all expenses and fees, including(7) attorneys' fees and
court costs, incurred in negotiating or contesting real estate taxes or the
validity and/or applicability of any governmental enactments which may affect
Operating Expenses; provided Landlord shall credit against Operating Expenses
any refunds received from such negotiations or contests to the extent originally
included in Operating Expenses (less Landlord's(8) costs).
(vii) Security services, to the extent provided or contracted
for by Landlord.
(viii) Goods and services purchased from Landlord's
subsidiaries and affiliates to the extent the cost of same is generally
consistent with rates charged by unaffiliated third parties for similar goods
and services (except no such limitation shall apply in emergencies).
(ix) Depreciation (or amortization) of capital expenditures
incurred: (A) to conform with Applicable Law; (B) to provide or maintain
Building Standards; or (C) with the intention of promoting safety or reducing or
controlling increases in Operating Expenses, such as lighting retrofit and
installation of energy management systems. Such expenditures shall be
depreciated or amortized uniformly over a reasonable period of time determined
by Landlord, together with interest on the undepreciated or unamortized balance
at the Prime Rate (as of the date incurred) plus 2%.
(c) EXCLUSIONS. Operating Expenses exclude costs and expenditures in
the following categories:
(i) Leasing commissions, attorneys' fees and other expenses
related to leasing tenant space and constructing improvements for the sole
benefit of an individual tenant.
(ii) ABS goods and services furnished to an individual tenant
of the Project which are separately reimbursable directly to Landlord in
addition to EOE.
(iii) Repairs required because of casualty or condemnation
damage to the extent of insurance or condemnation proceeds actually received by
Landlord.
(iv) Except as provided in PARAGRAPH 7(b)(ix), depreciation,
amortization, interest payments on any encumbrances on the Project and the cost
of capital improvements or additions and replacements.
(v) Electrical service costs paid separately pursuant to
PARAGRAPH 7(e).
- - ----------------------------
(5) (A) any penalties and interest incurred because of the
delinquency by Landlord in timely paying such taxes (unless such
penalties and interest are incurred as a result of Tenant's failure to
timely pay its portion of such taxes or as a result of Landlord's
contesting such taxes in good faith), and (B)
(6) , succession, transfer, gift, corporation, profits
(7) reasonable
(8) actual
-8-
<PAGE> 11
(9) SEE FOOTNOTE BELOW.
(d) ESTIMATED MONTHLY PAYMENTS. During each calendar year of the Term
after the Base Year, Tenant shall pay Landlord, in advance concurrently with
each monthly payment of Base Rent, 1/12th of Landlord's good-faith estimate of
the EOE to be payable by Tenant for such calendar year. By April 30th of the
next calendar year, or as soon thereafter as practical, Landlord shall furnish
Tenant a statement of actual Operating Expenses for the prior calendar year.
Provided no uncured Event of Default then exists hereunder (and no condition
exists which, with the passage of time or giving of notice, would become an
Event of Default), Landlord shall promptly refund any overpayment to Tenant for
the prior calendar year (10) [language omitted in original]. Likewise, Tenant
shall, within 30 days of Landlord's invoice, pay Landlord any underpayment for
the prior calendar year. The foregoing obligations shall survive the Expiration
Date. Landlord may alter its billing procedures at any time (11), including
adjusting estimated EOE based on actual or expected increases in Operating
Expenses. In no event shall Base Rent be reduced if Operating Expenses for any
calendar year are less than Operating Expenses for the Base Year.
(e) ELECTRICAL COSTS. In addition to the foregoing, and as a separate
obligation, Tenant shall pay Landlord Tenant's Share, as defined in the second
sentence of PARAGRAPH 7(a), of the following costs incurred by Landlord which
are directly attributable or reasonably allocable to the Building: (i)
electrical services used in the operation, maintenance and use of the Project;
(ii) sales, use, excise and other taxes assessed by governmental authorities on
electrical services supplied to the Project, and (iii) other costs of providing
electrical services to the Project. Tenant shall, with each monthly
- - --------------------
(9) (f) Costs, penalties and fines incurred due to the
violation by Landlord of the terms and conditions of any lease
pertaining to the Building, except such as may be incurred by Landlord
in contesting in good faith the alleged violation.
(g) principal payments on indebtedness secured by
liens against the Building, or costs of refinancing such indebtedness.
(h) Costs of installing any specialty service, such
as an observatory, broadcasting facility, luncheon club, or athletic or
recreational club.
(i) Interest and penalties due to late payment of any
amounts owed by Landlord, except such as may be incurred as a result of
Tenant's failure to timely pay its portion of such amounts or as a
result of Landlord's contesting such amounts in good faith.
(j) Advertising and promotional expenditures incurred
by Landlord for marketing the Project to prospective tenants.
(k) real estate commissions, attorneys' fees, and
other costs and expenses incurred in connection with the negotiations
with purchasers or potential purchasers of the Building.
(l) Costs, penalties and fines incurred due to the
violation by Landlord of Applicable Law, except such as may be incurred
by Landlord in contesting in good faith the alleged violation.
(10) ;provided, however, that if Tenant is in monetary default
hereunder, at Landlord's option such excess shall be applied against
any amounts Tenant owes to Landlord under this Lease and any remainder
shall be applied against Rent to become due hereunder
(11) upon reasonable written notice to Tenant
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<PAGE> 12
payment of EOE, pay Landlord's monthly estimate of Tenant's Share of such
electrical service costs in the same manner as provided for Operating Expenses
in PARAGRAPH 7(d).
(12) See footnote below.
8. LANDLORD SERVICES.
(a) BASIC SERVICES. Landlord shall, as an Operating Expense, furnish the
following services to the Premises (to which services Landlord may at any time
and from time to time make reasonable changes): (i) running tap water from the
local utility at the supply points provided for general tenant use (13); (ii)
heating, ventilating and air conditioning ("HVAC") on weekdays between 7:00 a.m.
and 7:00 p.m.; Saturdays between 7:00 a.m. and 1:00 p.m., excluding generally
recognized business holidays; (iii) janitorial service 5 days per week
(excluding holidays); (iv) exterior window washing; (v) non-exclusive passenger
elevators sufficient for ingress and egress to the Premises, subject to proper
authorization and the Rules and Regulations; (vi) routine maintenance of the
Common and Service Areas; and (vii) replacement of Building Standard light
bulbs, tubes and ballasts.(14)
- - -------------------
(12) (f) RIGHT TO AUDIT. Within 60 days (the "AUDIT ELECTION
PERIOD") after Landlord furnishes its statement of actual Operating
Expenses for any calendar year (including the Base Year). Tenant may at
its expense during Landlord's normal business hours, elect to audit
Landlord's Operating Expenses for such calendar year only, subject to
the following conditions: (i) the audit shall be prepared by a
certified public accounting firm of recognized national standing; (ii)
in no event shall any audit be performed by a firm retained on a
"contingency fee" basis; (iii) the audit shall commence within 30 days
after Landlord makes Landlord's books and records available to Tenant's
auditor and shall conclude within 60 days after commencement; (iv) the
audit shall be conducted where Landlord maintains its books and records
and shall not unreasonably interfere with the conduct of Landlord's
business; (v) Tenant and its accounting firm shall treat any audit in a
confidential manner and shall each execute Landlord's reasonable
confidentiality agreement for Landlord's benefit prior to commencing
the audit; and (vi) the accounting firms' audit report shall, at no
charge to Landlord, be submitted in draft form for Landlord's review
and reasonable approval before the final approved audit report is
delivered to Landlord. This paragraph shall not be construed to limit
or abate Tenant's obligation to pay Rent when due, including estimated
EOE. Landlord shall refund any overpayment determined by the approved
audit against the next sums due and owing by Tenant (so long as Tenant
is not then in default of any of the terms of this Lease, in which
event such overpayment shall be applied against any amount Tenant owes
as a result of such default). Likewise, Tenant shall pay Landlord any
underpayment determined by the approved audit within 30 days of
determination. The foregoing obligations shall survive the Expiration
Date. If Tenant does not give written notice of its election to audit
Landlord's Operating Expenses during the Audit Election Period,
Landlord's Operating Expenses for the applicable calendar year shall be
deemed approved for all purposes, and Tenant shall have no further
right to review or contest the same. If the approved audit conducted by
Tenant discloses that Landlord's calculation of EOE for the calendar
year under inspection was overstated by more that 5%, then, after
verification, Landlord shall pay Tenant's actual reasonable
out-of-pocket audit and inspection fees applicable to the review of
said calendar year statement within 30 days after receipt of Tenant's
invoice therefor.
(13) and at the points of supply existing within the Premises
as of the Date of Lease
(14) The Building shall be maintained and operated
consistently with comparable office buildings in Dallas, Texas, taking
into account age, size and other relevant operating factors. Tenant
shall not be responsible for the payment of any part of the costs
incurred due to after hours or
(continued...)
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<PAGE> 13
(b) ELECTRICAL SERVICE.
(i) Landlord shall furnish Building Standard electrical
service to the Premises sufficient to operate customary lighting, office
machines and other equipment of similar low electrical consumption. Landlord
may, at any time and from time to time, calculate Tenant's actual electrical
consumption in the Premises either by a survey conducted by a reputable
consultant selected by Landlord, or through separate meters installed,
maintained and read by Landlord, all at Tenant's expense. The cost of ABS
electrical consumption shall be paid by Tenant in accordance with PARAGRAPH
8(d).
(ii) Landlord reserves the right to select the provider of
electrical services to the Building and/or the Project. To the fullest extent
permitted by Applicable Law, Landlord shall have the continuing right, upon 30
days written notice, to change such utility provider and install a submeter for
the Premises at Tenant's expense. (15) All charges and expenses incurred by
Landlord due to any such changes in electrical services, including maintenance,
repairs, installation and related costs, shall be included in the electrical
services costs referenced in PARAGRAPH 7(e), unless paid directly by Tenant.
(iii) If submetering is installed for the Premises, Landlord
may charge for Tenant's actual electrical consumption monthly in arrears at
commercially reasonable rates determined by Landlord, except as to electricity
directly purchased by Tenant from third party providers. Even if the Premises
are submetered, Tenant shall remain obligated to pay Tenant's Share of the cost
of electrical services as provided in PARAGRAPH 7(e), except that Tenant shall
be entitled to a credit against electrical services costs equal to that portion
of the amounts actually paid by Tenant separately and directly to Landlord which
are attributable to Building Standard electrical services submetered to the
Premises.
(c) PARKING. Landlord shall provide the Parking Permits described in
PARAGRAPH 1, which shall allow "in-and-out" privileges to the designated parking
facilities areas or areas using parking access cards or permits, as applicable.
No deductions from the monthly charge shall be made for days on which the
parking facilities are not used by Tenant. Landlord shall have the continuing
right to (16) change the designation of such parking facilities or areas.
Tenant, its employees, contractors and invitees, shall at all times comply with
the applicable parking rules issued from time to time. Neither Tenant nor its
employees shall use any parking spaces designated for visitors or (17) other
occupants of the Project. Tenant shall, within 15 days of Landlord's written
request, furnish Landlord a complete list of license plate numbers for
- - -----------------------
(14) (...continued)
extraordinary usage of electricity or the HVAC systems by other
Building tenants (other than an assignee or sublessee of Tenant).
(15) Landlord agrees to review the Approved Construction
Documents (as defined in Exhibit "C") and inform Tenant of any ABS
electrical requirements which would cause Landlord to require the
Premises to be submetered. If Tenant elects to install any Alterations
during the Term of the Lease, Landlord agrees to likewise inform Tenant
if the Alterations would cause Landlord to require the Premises to be
submetered after Tenant furnishes to Landlord complete plans and
specifications for any proposed Alterations.
(16) reasonably
(17) reserved for
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<PAGE> 14
all vehicles operated by any Tenant Party. Tenant's sole remedy for any period
during which Tenant's use of any Parking Permit is precluded for any reason
shall be abatement of parking charges for such precluded permits.(18)
(d) ABS SERVICES. Building Standard services are furnished based upon
Building Standard (i) leasehold improvements; (ii) population density; (iii)
electrical consumption; (iv) electrical design capacity; and (v) hours of
operation (not to exceed 280 hours per month), and any other applicable
qualifications set forth in this Lease. "ABS" means over and above Building
Standard (including related modifications and equipment changes). All requests
for ABS services, whether HVAC, electrical, janitorial or other services, shall
be made in writing and are subject to Landlord's prior written approval, which
may include, as a condition to such approval, the imposition of restrictions or
other requirements by Landlord. Landlord shall install any equipment or other
modifications necessary to furnish any approved ABS services, all at Tenant's
expense (including all related consulting, acquisition, installation and
maintenance costs). Unless otherwise specified in this Lease, Tenant shall,
within 15 days of invoicing, pay the foregoing expenses and Landlord's
then-quoted standard charges for any ABS services furnished to or necessitated
by any Tenant(19) Party Landlord may withhold its consent to any ABS services
or, having previously granted consent, terminate or suspend any ABS services
(and remove any related equipment or modifications at Tenant's expense), if (A)
Landlord determines the provision or continuation of such ABS services is
unnecessary or could damage the Building or Project Systems, create a dangerous
condition, entail unreasonable Alterations or expense, or disturb other tenants
in the Building; or (B) there exists an Event of Default. ABS HVAC shall be
furnished upon Tenant's written request given no later than 12:00 noon of the
preceding business day.
(e) SERVICE INTERRUPTIONS. Upon interruption of any service furnished
by Landlord under this Lease (a "SERVICE INTERRUPTION") other than a Service
Interruption for scheduled maintenance, tests and inspections, Tenant shall
immediately notify Landlord, in which event Landlord shall use commercially
reasonable efforts to restore such service to the Premises. No Service
Interruption shall (i) constitute a breach by Landlord under this Lease; (ii)
relieve Tenant of any obligation under this Lease (except as provided below); or
(iii) be deemed a constructive eviction of Tenant from the Premises. Commencing
on the(20) 11th consecutive business day of any Service Interruption within
Landlord's control, and except to the extent such Service Interruption is caused
by a Tenant Party, Tenant shall, as its sole remedy, be entitled to an equitable
diminution of Base Rent based upon the pro rata portion of the Premises rendered
unfit for occupancy for the Permitted Use.(21) In the event of any conflict
between this PARAGRAPH 8(e) and the casualty and condemnation provisions of
PARAGRAPHS 15 AND 16, the latter shall control. EXCEPT AS PROVIDED IN THE
PRECEDING SENTENCE, AND TO THE FULLEST EXTENT PROVIDED BY PARAGRAPH 13(f),
TENANT WAIVES ALL CLAIMS AGAINST THE LANDLORD PARTIES ARISING FROM SERVICE
INTERRUPTIONS.
(F) PROVIDERS OF SPECIAL BUILDING SERVICES. Landlord has advised Tenant
that certain building services, including, without limitation, telecommunication
services, valet parking, concierge services and other tenant-serving retail
services may be offered to tenants of the Building by a concessionaire under
contract with Landlord or by a Tenant under
- - -------------------------------
(18) Notwithstanding anything to the contrary contained
herein, Landlord shall use commercially reasonable efforts to provide
substitute parking for any period during which Tenant's use of any
Parking Permit is precluded.
(19) (which shall not exceed Landlord's actual cost plus
Landlord's standard administrative charge therefor)
(20) 6th
(21) Commencing on the 31st consecutive business day of a
Service Interruption which is beyond the control of Landlord, Tenant
shall, as its sole remedy, be entitled to an equitable diminution of
rent based upon the pro rata portion of the Premises which is rendered
unfit for occupancy for the Permitted Use, except to the extent such
Service Interruption is caused by a Tenant Party.
-12-
<PAGE> 15
lease with Landlord (collectively, "Provider"). Tenant shall be permitted to
contract with Provider for the provision of any or all of such services on such
terms and conditions as Tenant and Provider may agree. Tenant acknowledges and
agrees that: (i) Landlord has made no warranty or representation to Tenant with
respect to the availability of any such services provided or to be provided by
Provider, or the quality, reliability or suitability thereof; (ii) Provider is
not acting as the agent or representative of Landlord in the provision of such
services, and Landlord shall have no liability or responsibility for any failure
or inadequacy of such services, or any equipment or facilities used in the
furnishing thereof, or any act or omission of Provider or its agents, employees,
representatives, officers or contractors; (iii) Landlord shall have no
responsibility or liability for the repair, maintenance, furnishing, operation
or removal of any such services, equipment or facilities; and (iv) any contract
or other agreement between Tenant and Provider shall be independent of this
Lease, the obligations of Tenant hereunder, and the rights of Landlord
hereunder, and without limiting the foregoing, no default or failure of Provider
with respect to any such services or facilities, or under any contract or
agreement relating thereto, shall have any effect on this Lease or give to
Tenant any offset or defense to the full and timely performance of its
obligations hereunder, or entitle Tenant to any abatement of Basic Rental or
Additional Rental or any other payment required to be made by Tenant hereunder,
or constitute any actual or constructive eviction of Tenant, or otherwise give
rise to any other claim of any nature against Landlord.
(f) OUTSIDE SERVICES. In no event shall Landlord be required to provide
or arrange for any "OUTSIDE SERVICES", which includes: (i) Premises access
control and other on-Premises security systems; (ii) telephone, data
transmission, television, Internet or other telecommunications services; (iii)
special finish and decor maintenance; (vi) [language omitted in original] (v)
plant rental or maintenance; and (vi) any other services not enumerated in
PARAGRAPHS 8(a), (b) or (c) of this Lease. All providers of Outside Services
("PROVIDERS") shall be required to comply with the Rules and Regulations,
Applicable Law and Landlord's other policies and practices for the Building. At
least [language omitted in original] (22) days before any Provider is scheduled
to begin providing any services enumerated in clauses (i) or (ii) above, and at
least [language omitted in original] (23) days before any Provider is scheduled
to begin providing any services enumerated in clauses (iii) through (vi) above,
Tenant shall deliver information in sufficient detail for Landlord's review and
approval (24) regarding the Provider's identity, financial condition and
capacity to perform the Outside Service and, upon request, any other information
reasonably required by Landlord. TO THE FULLEST EXTENT PROVIDED BY PARAGRAPH
13(f), TENANT WAIVES ALL CLAIMS AGAINST LANDLORD PARTIES FOR [language omitted
in original] ALL CLAIMS ARISING OUT OF THE UNAVAILABILITY OR INTERRUPTION OF OR
DEFECT IN THE OUTSIDE SERVICES.
9. OCCUPANCY AND CONTROL.
(a) PERMITTED USES. The Premises shall be used by Tenant (and its
permitted Transferees) solely for the "PERMITTED USE" consistent with Building
Standard services, population density and hours of operation. Except as provided
below, the following uses are expressly prohibited in the Premises: government
offices or agencies; personnel agencies; collection agencies; credit unions;
data processing, telemarketing or reservation centers; medical treatment and
health care; restaurants and other retail; customer service offices of a public
utility company; or any other purpose which would, in Landlord's reasonable
opinion, impair the reputation or quality of the Building, overburden any of the
Project Systems, Common Areas, Service Areas or parking facilities, impair
Landlord's efforts to lease space or otherwise interfere with the operation of
the Project. Notwithstanding the foregoing, the following ancillary uses shall
be permitted in the Premises only so long as they do not, in the aggregate,
occupy more than 10% of the RSF of the Premises or of any single floor
(whichever is less): (i) the following services provided by Tenant exclusively
to its employees: schools, training and other educational services; credit
unions; and similar employee services; and (ii) the following services directly
and exclusively
- - ---------------------
(22) 30
(23) 15
(24) (which approval shall not be unreasonably withheld)
-13-
<PAGE> 16
supporting Tenant's business: telemarketing; reservations; storage; data
processing; debt collection; and similar support services.
(b) RULES AND REGULATIONS. During the Term, Tenant shall comply with the
"RULES AND REGULATIONS" established by Landlord for the Project, as amended from
time to time. The current Rules and Regulations are attached as EXHIBIT "E".
This Lease shall control in the event of any conflict between this Lease and any
Rules and Regulations.
(c) SIGNAGE. Tenant shall not, without Landlord's prior written
approval(25), paint, affix, erect, display or distribute any signs,
advertisements or notices upon (or visible from) the exterior of the Premises or
elsewhere in the Project, except for Building Standard tenant identification
information permitted by Landlord in the main building directory or adjacent to
the main entrance to the Premises.
(d) CONSENTS. Where Landlord's Consent or approval is required in this
Lease, Landlord may withhold such consent or approval in its sole discretion,
except as otherwise specified in the applicable provision. If Tenant requests
Landlord's consent or approval under any provision of this Lease and Landlord
fails or refuses to give such consent or approval, Tenant's sole remedy shall be
an injunction or an action for specific performance.
10. TENANT'S COVENANTS. Tenant covenants and agrees as follows:
(a) TENANT'S OPERATIONS. Tenant shall, at its expense, promptly comply
with Applicable Law in its use and occupancy of the Premises (including
construction of any Alterations required by Applicable Law). Tenant shall not do
or permit anything to be done in the Premises which shall(26) [language omitted
in original] (i) obstruct or interfere with the operation of the Project or with
the rights of other tenants of the Project; (ii) injure, disturb or annoy other
tenants of the Project, including the emission of offensive odors, noises or
vibrations; (iii) tend to harm the reputation of Landlord or the Project, (iv)
deceive or defraud the public; or (v) increase Landlord's insurance costs.
(b) NO RECORDATION OR LIENS. Tenant shall not record this Lease (or a
memorandum thereof). Tenant shall not in any way encumber any interest in the
Premises or the Project, and shall cause any liens(27) arising from acts or
omissions of, or due to a Claim against, a Tenant Party to be promptly
discharged by payment, bonding or otherwise. If Tenant fails to timely discharge
any such lien, Landlord may, without further notice to Tenant, discharge such
lien in any reasonable manner determined by Landlord on Tenant's behalf and at
Tenant's expense, payable within 30 days of Landlord's invoice.
(c) SECURITY. Tenant shall (i) take reasonable steps to secure the Premises
and the personal property of all Tenant Parties in the Common Areas and parking
facilities of the Project, from unlawful intrusion, theft, fire and other
hazards; (ii) keep and maintain in good working order all ABS security devices
installed in the Premises (such as locks, smoke detectors and burglar alarms),
which shall be integrated with any other Building security systems; and (iii)
cooperate with Landlord and other tenants in the Project on security matters.
Tenant acknowledges that Landlord is not a guarantor of the security or safety
of the Tenant Parties or their property, and that such matters are the
responsibility of Tenant and the local law enforcement authorities.
(d) TAXES. Tenant shall promptly pay directly to the taxing authority all
sales and/or ad valorem taxes now or hereafter levied by separate bill on
Tenant's personal property and ABS leasehold improvements. Tenant Waives all
- - -------------
(25) (which approval shall not be unreasonably withheld)
(26) unreasonably
(27) against the Premises or the Project
-14-
<PAGE> 17
rights under Applicable Law to protest appraised values or receive notice of
reappraisal regarding the Project (including Landlord's personalty),
irrespective of whether Landlord contests same. To the extent such Waiver is
prohibited, Tenant appoints Landlord as Tenant's attorney-in-fact, coupled with
an interest, to appear and take all actions which Tenant would otherwise be
entitled to take under Applicable Law.(28)
(e) THIRD PARTY COMMISSIONS. Tenant represents and warrants that no broker
or agent has represented Tenant in connection with this Lease except The
Staubach Company, which is acting as Tenant's agent in connection with this
Lease. Tenant shall Indemnify and Defend each Landlord Party against any Claims
for real estate commissions or fees in connection with this Lease made by any
party Claiming through Tenant except for The Staubach Company, which shall be
paid by Landlord pursuant to a separate agreement.
(f) ESTOPPEL LETTERS AND FINANCIAL STATEMENTS. Within(29) business days
after written request, Tenant shall execute and deliver to Landlord and/or its
designee (i) a current and complete financial statement for Tenant certified as
true and correct by Tenant's chief financial officer, and/or (ii) an estoppel
letter certifying (A) as true and correct, a copy of this Lease and any
amendments; (B) the then-effective business terms under PARAGRAPH 1; (C) whether
Landlord is in default and, if so, the nature of such default; (D) the date to
which Rent has been paid; and (E) any other matters Landlord; Landlord's
Mortgagee or any prospective purchaser may(30) require; provided such statements
are true and accurate. Tenant's failure to timely execute and return the
requested estoppel letter shall be conclusive evidence of the matters set forth
therein.
11. REPAIRS, MAINTENANCE AND ALTERATIONS.
(a) LANDLORD'S OBLIGATIONS. Except as otherwise provided in this Lease,
Landlord shall maintain the roof, foundation, exterior windows and surfaces,
load-bearing components of the Building and the Project Systems, the cost of all
of which shall be included in Operating Expenses. In addition, Landlord shall
maintain any wiring, ducts, conduit, plumbing or pipes necessary to extend
services from the existing Project Systems to or within the Premises and shall
repair damage caused by a Tenant Party to the roof, foundation, exterior windows
and surfaces, load-bearing components of the Building and the Project Systems,
the cost of all of which items shall not be included in Operating Expenses, but
shall be paid as a direct, reimbursable expense to Landlord by Tenant within(31)
days of Landlord's invoice.
(b) TENANT'S OBLIGATIONS. Tenant shall throughout the Term keep the
Premises and all furnishings, trade fixtures, equipment and leasehold
improvements therein in good condition and repair, including all necessary
repairs and replacements, but excluding ordinary wear and tear and damage from
casualty or condemnation. If Tenant fails to do so within 15 days after written
notice, Landlord may make the necessary repairs or replacements, and Tenant
shall reimburse Landlord therefor, plus a 15% administrative fee, within 15 days
of Landlord's invoice. Tenant shall not in any manner
- - -------------
(28) Notwithstanding the foregoing, Landlord agrees to protest the
appraised value of all or any portion of the Project if so requested by
Tenant, if Landlord determines, in its reasonable judgment that such
protest is appropriate.
(29) 10
(30) reasonably
(31) 20
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<PAGE> 18
deface or injure any part of the Project, and shall, upon demand, pay the(32)
(plus 15%) of Landlord's repair and replacement of any damage or injury caused
by any Tenant Party.(33)
(c) ALTERATIONS. No alterations or improvements to the Premises(34)
(collectively, "ALTERATIONS") shall be made without Landlord's prior written
consent, which shall not be unreasonably withheld. However, in no event shall
(and it shall be reasonable for Landlord to withhold its consent if) any
Alterations (i)(35) interfere with construction in progress or other tenants in
the Project; (ii) adversely affect or alter the Project Systems, structural
integrity or exterior appearance of the Building; (iii) impair Building Standard
services or require ABS services (either during or after such work); (iv) be
visible from the exterior of the Premises or the Building; or (v) be permitted
if any uncured Event of Default then exists (or any condition exists which, with
the passage of time or giving of notice, would become an Event of Default). At
least 15 business days prior to commencing construction, Tenant shall furnish
complete plans and specifications for any proposed Alterations for Landlord's
review and approval. All Alterations shall be constructed at Tenant's expense in
a good and workmanlike manner, and otherwise in compliance with Applicable Law,
the Rules and Regulations, Building Standard construction criteria and
Landlord's other reasonable requirements. Tenant shall also pay a construction
management fee to Landlord equal to(36) of the contract price of all
Alterations. Tenant acknowledges that Landlord is not an architect or engineer,
and that the Alterations will be designed and/or constructed by Landlord using
independent architects, engineers and contractors. Accordingly, Landlord does
not guarantee or warrant that the applicable construction documents will comply
with Applicable Law or be free from errors or omissions, nor that the
Alterations will be free from defects, and Landlord will have no liability
therefor. Upon completion, Tenant shall, at its expense, provide Landlord with
"as built" plans on Landlord's CAD system (or other format(37) requested by
Landlord). So long as Tenant otherwise complies with all provisions of this
Paragraph,(38) [language omitted in original] minor non-structural Alterations
(collectively, "MINOR ALTERATIONS"), the aggregate cost of which does not exceed
[language omitted in original] $10,000 [language omitted in original] in the
Premises in any 12 month period. Minor Alterations may be constructed by Tenant,
so long as Landlord's approved contractors are used, in which event no
construction management fee will be charged.
- - --------------------
(32) actual cost thereof
(33) In no event will Tenant be responsible for any plumbing, pipes,
electrical wiring, switches, fixtures and equipment located in the Premises
but serving another tenant of the Building or for portions of the HVAC,
electrical, mechanical and plumbing systems of the Building not located in
the Premises. Absent a fire or other casualty. Landlord shall meet all of
its obligations in order to keep in full force and effect all certificates
of occupancy for the Building and the parking facility associated
therewith.
(34) other than the Work
(35) unreasonably
(36) 5%
(37) reasonably
(38) Landlord's consent shall not be required for
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<PAGE> 19
12. ASSIGNMENT AND SUBLETTING BY TENANT.
(a) TRANSFER. Tenant shall not, without Landlord's prior written consent in
each instance in accordance with PARAGRAPH 12(c), convey, assign or encumber
this Lease or any interest herein, directly or indirectly, voluntarily or by
operation of law, including the merger or conversion of Tenant with or into
another entity, or sublet all or any portion of the Premises, or permit the use
or occupancy of any part of the Premises by anyone other than Tenant
(collectively, "TRANSFER"). If Tenant is other than an individual, any change in
"control" of Tenant shall constitute a Transfer, and the surviving party in
control shall be the Transferee. "CONTROL" means the direct or indirect power to
direct or cause direction of the management and policies of an entity, whether
through ownership of voting securities, by contract or otherwise. Conversely,
Tenant shall not sublease space from, or assume the lease obligations of,
another tenant in the Project without Landlord's prior written consent.
Following any Transfer, Tenant (and any guarantors) shall remain fully liable
under this Lease(39), [language omitted in original] and Landlord may proceed
directly under this Lease against Tenant (or any guarantor) without first
proceeding against any other party. Tenant shall give Landlord written notice of
any proposed Transfer at least(40) days prior to the anticipated effective date
of the proposed Transfer, which notice shall include a complete detailed written
description of the Transfer; the name, address, business and intended use of the
Transferee; a current [language omitted in original] financial statement for the
Transferee certified by a recognized accounting firm; a copy of the proposed
Transfer document; appropriate evidence of the existence, good standing and
signature authority of the Transferee in the State; and such other pertinent
information as Landlord reasonably requests, together with Landlord's(41)
Transfer processing fee. If the proposed Transferee is subject to any new
requirements under Applicable Law (including ADA), (i) Tenant shall be liable
for any costs or expenses to comply with such requirements, and (ii) to the
extent such requirements require Alterations, Tenant shall deliver for
Landlord's approval plans and specifications complying with such additional
requirements and acceptable security assuring timely, lien-free completion of
construction. If the aggregate consideration paid to Tenant for a Transfer
exceeds that payable by Tenant under this Lease (prorated according to the
Transferred interest), then Tenant shall, within 15 days after receipt, pay(42)
such excess to Landlord.
(b) LANDLORD'S OPTIONS. Within(43) days after receipt of all required
Transfer information, Landlord shall give Tenant written notice of its election
(i) to consent to the Transfer; or (ii) [language omitted in original] (iii) not
to consent to the Transfer, in which event this Lease shall continue in full
force and effect. If Landlord fails to timely make such election, Landlord shall
be deemed to have elected option (iii) above. Any Transfer occurring without
Landlord's consent shall be void and shall constitute an Event of Default
hereunder. In any event, all renewal and expansion options and other
preferential rights under this Lease are personal to the original Tenant under
this Lease and shall not be exercisable by any Transferee. Neither Landlord's
acceptance of any name for listing on the Building directory or other signage,
nor Landlord's acceptance of Rent from any Transferee, shall be deemed, or
substitute for, Landlord's consent to a Transfer.
- - ------------------
(39) (under the terms and conditions of the Lease as it exists on the
date of the Transfer)
(40) 15
(41) standard
(42) 50% of
(43) 15
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<PAGE> 20
(c) CONSENT. Landlord shall not unreasonably withhold(44) consent to any
Transfer (other than an encumbrance of this Lease) pursuant to PARAGRAPH
12(b)(iii). Landlord shall not be deemed to have unreasonably withheld consent
if: (i) Transferee's financial condition is not reasonably satisfactory to
Landlord or does not evidence Transferee's ability to pay its obligations
(including those undertaken in connection with the Transfer) when due; (ii) the
net worth of Transferee (plus any guarantor) is less than that of Tenant (plus
any guarantor) as of the Date of Lease or the effective date of Transfer,
whichever is greater; (iii) Transferee refuses to provide additional security
required by Landlord as a result of a change in financial creditworthiness or
legal structure, such as increased security deposit, guaranties, etc.; (iv)
Transferee's use of the Premises conflicts with the Permitted Use or any
exclusive usage rights granted to any other tenant in the Building; (v) the use,
nature, business, activities or reputation in the business community of
Transferee (or its principals, employees or invitees) are not acceptable to
Landlord; (vi) either the Transfer or any consideration payable to Landlord in
connection therewith adversely affects the real estate investment trust (or
pension fund) qualification tests applicable to Landlord or its affiliates;
(vii) an uncured Event of Default exists under this Lease (or a condition exists
which, with the passage of time or giving of notice, would become an Event of
Default); (viii) Transferee is an occupant of, or Landlord is otherwise engaged
in(45) lease negotiations with Transferee for, other premises in the Project;
(ix) Transferee is or has been involved in a dispute or litigation with any
Landlord Party; or (x) Transferee fails to execute Landlord's then-standard form
of consent document containing an assumption by Transferee of all obligations of
Tenant under this Lease accruing after the date of Transfer.(46)
13. INDEMNITY.
(a) DEFINITIONS.
(i) Parties. The "TENANT PARTIES" are Tenant and its shareholders,
members, managers, partners, directors, officers, employees, agents,
contractors, sublessees, licensees and invitees. The "LANDLORD PARTIES" are
Landlord, the manager of the Building, Landlord's Mortgagee(s) and any
affiliates or subsidiaries of the foregoing, and all of their respective
officers, directors, employees, shareholders, members, partners, agents and
contractors. A "BENEFICIARY" is the intended recipient of the benefits of
another party's Indemnity, Waiver or obligation to Defend.
- - ------------------
(44) or delay
(45) active
(46) Notwithstanding the foregoing, Landlord shall consent to
Transfer to an Affiliate (as defined below) unless: (i) Transferee's use
of the Premises conflicts with the Permitted Use or any exclusive usage
rights granted to any other tenant in the Building (ii) the use, nature,
business, activities or reputation in the business community of Transferee
(or its principals, employees or invitees) are not acceptable to Landlord;
(iii) either the Transfer or any consideration payable to Landlord in
connection therewith adversely affects the real estate investment trust (or
pension fund) qualification tests applicable to Landlord or its affiliates;
(iv) an uncured Event of Default exists under this Lease (or a condition
exists which, with the passage of time or giving of notice, would become an
Event of Default); (v) Transferee is an occupant of, or Landlord is
otherwise engaged in lease negotiations with Transferee for, other
premises in the Project; (vi) Transferee is or has been involved in a
dispute or litigation with any Landlord Party; or (vii) Transferee fails to
execute Landlord's then-standard form of consent document, which will
contain, in the event of an assignment, an assumption by Transferee of all
obligations of Tenant under this Lease accruing after the date of Transfer.
The term "AFFILIATE" means any person or entity controlling, controlled by
or under common control with Tenant.
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<PAGE> 21
(ii) Claims and Injuries. "CLAIMS" means all damages, losses,
injuries, penalties, disbursements, costs, charges, assessments, expenses
(including(47) legal, expert and consulting fees and expenses incurred in
investigating, Defending or prosecuting any allegation, litigation or
proceeding), demands, litigation, settlement payments, causes of action (whether
in tort or contract, in law, at equity or otherwise) or judgments. "INSURABLE
INJURIES" refers to "advertising injury", "bodily injury", "personal injury" and
"property damage" collectively, as such terms are defined in Insurance Services
Office, Inc. ("ISO") form CG 0001 1093 "Commercial General Liability". "TENANT'S
INSURABLE INJURIES" are Insurable Injuries occurring (A) in the Premises or (B)
outside the Premises and caused or suffered by a Tenant Party.
(iii) Indemnify, Waive and Defend. "INDEMNIFY" means to protect and
hold a party harmless from and against a potential Claim and/or to compensate a
party for a Claim actually incurred. "WAIVE" means to knowingly and voluntarily
relinquish a right and/or to release another party from liability. No Waiver
shall occur unless in a written agreement signed by the party against whom the
Waiver is claimed. No Waiver in one instance shall be deemed a Waiver in another
instance, however similar. No demand for or acceptance of partial payment or
performance shall Waive the underlying obligation or breach unless expressly
agreed in writing. "DEFEND" means to provide a competent legal defense of a
Beneficiary against a Claim with counsel reasonably acceptable (and at no cost)
to the Beneficiary.
(b) INDEMNITY REGARDING TENANT'S PERFORMANCE. TO THE FULLEST EXTENT
PROVIDED BY PARAGRAPH 13(f), TENANT SHALL INDEMNIFY AND DEFEND THE LANDLORD
PARTIES AGAINST ALL CLAIMS ARISING, OR ALLEGED TO ARISE, FROM THE FOLLOWING: (i)
ANY ACT OR OMISSION OF ANY TENANT PARTY, INCLUDING THE CONDUCT OF TENANT'S
BUSINESS IN THE PREMISES AND ANY INCREASE IN THE PREMIUM FOR ANY INSURANCE
POLICY CARRIED BY LANDLORD RESULTING THEREFROM; OR (ii) ANY MISREPRESENTATION
MADE BY TENANT OR ANY GUARANTOR OF TENANT'S OBLIGATIONS IN CONNECTION WITH THIS
LEASE.
(c) INDEMNITY REGARDING TENANT'S INSURABLE INJURIES. TO THE FULLEST EXTENT
PROVIDED BY PARAGRAPH 13(f), TENANT SHALL INDEMNIFY AND DEFEND THE LANDLORD
PARTIES AGAINST ALL CLAIMS ARISING, OR ALLEGED TO ARISE, FROM TENANT'S INSURABLE
INJURIES.
(d) INDEMNITY REGARDING LANDLORD'S INSURABLE INJURIES. TO THE FULLEST
EXTENT PROVIDED BY PARAGRAPH 13(f), BUT SUBJECT TO ANY LIMITATIONS CONTAINED
ELSEWHERE IN THIS LEASE, INCLUDING PARAGRAPH 23, LANDLORD SHALL INDEMNIFY AND
DEFEND THE TENANT PARTIES AGAINST ALL CLAIMS ARISING FROM INSURABLE INJURIES
SUFFERED BY THIRD PARTIES IN THE COMMON AREAS OR SERVICE AREAS TO THE EXTENT
CAUSED, OR ALLEGED TO HAVE BEEN CAUSED, BY THE NEGLIGENCE OR WILLFUL MISCONDUCT
OF ANY LANDLORD PARTY, BUT NOT AS TO CLAIMS FOR WHICH THE LANDLORD PARTIES ARE
INDEMNIFIED PURSUANT TO PARAGRAPHS 13(b) AND 13(c).
(e) WAIVERS. TO THE FULLEST EXTENT PROVIDED BY PARAGRAPH 13(f), (i) TENANT
WAIVES ALL CLAIMS AGAINST THE LANDLORD PARTIES ARISING, OR ALLEGED TO ARISE,
FROM (A) TENANT'S INSURABLE INJURIES, (B) ANY INSURABLE INJURIES TO ANY TENANT
PARTY CAUSED BY PARTIES OTHER THAN LANDLORD PARTIES, OR (C) BUSINESS
INTERRUPTION OR LOSS OF USE OF THE PREMISES SUFFERED BY TENANT; AND (ii)
LANDLORD WAIVES ALL CLAIMS AGAINST THE TENANT PARTIES ARISING, OR ALLEGED TO
ARISE, FROM THE DAMAGE TO OR LOSS OF TANGIBLE PROPERTY BELONGING TO A LANDLORD
PARTY.
(f) SCOPE OF INDEMNITIES AND WAIVERS. ALL INDEMNITIES, WAIVERS AND
OBLIGATIONS TO DEFEND, WHEREVER CONTAINED IN THIS LEASE, (i) SHALL BE ENFORCED
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW FOR THE BENEFIT OF THE
APPLICABLE BENEFICIARY THEREOF, REGARDLESS OF ANY EXTRAORDINARY SHIFTING OF
RISKS,
- - ---------------
(47) reasonable
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<PAGE> 22
AND EVEN IF THE APPLICABLE CLAIM IS CAUSED BY THE ACTIVE OR PASSIVE NEGLIGENCE
OR SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF SUCH BENEFICIARY, AND
REGARDLESS OF WHETHER LIABILITY WITHOUT FAULT OR STRICT LIABILITY IS IMPOSED
UPON OR ALLEGED AGAINST SUCH BENEFICIARY, BUT NOT TO THE EXTENT THAT A COURT OF
COMPETENT JURISDICTION HOLDS IN A FINAL JUDGMENT THAT A CLAIM IS CAUSED BY THE
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUCH BENEFICIARY; (ii) ARE INDEPENDENT
OF, AND SHALL NOT BE LIMITED BY, EACH OTHER OR ANY INSURANCE OBLIGATIONS IN THIS
LEASE (WHETHER OR NOT COMPLIED WITH); AND (iii) SHALL SURVIVE THE EXPIRATION
DATE UNTIL ALL RELATED CLAIMS AGAINST THE BENEFICIARIES ARE FULLY AND FINALLY
BARRED BY APPLICABLE LAW. NOTWITHSTANDING THE POTENTIAL FOR EXTRAORDINARY
SHIFTING OF RISK, LANDLORD AND TENANT ACKNOWLEDGE THAT THEY HAVE EXECUTED THIS
LEASE IN MATERIAL RELIANCE UPON INCLUSION OF EACH SUCH INDEMNITY AND WAIVER.
(g) RELIANCE. In reliance on Tenant's Indemnities and Waivers in this Lease
and Tenant's insurance required by PARAGRAPH 14(b), Landlord shall not carry
primary insurance for Tenant's Insurable Injuries. Tenant acknowledges that (i)
if Landlord had been required to carry primary insurance for Tenant's Insurable
Injuries, the Rent payable under this Lease would have been higher; and (ii)
Tenant is relying not on Landlord or Landlord's insurance in order to pay Claims
arising from Tenant's Insurable Injuries, but rather on (A) the insurance
required under PARAGRAPH 14(b) and any additional insurance Tenant has elected
to carry as to Claims covered by insurance, (B) Tenant's own funds as to
deductibles, self-insured retentions under Tenant's insurance and Claims which
exceed Tenant's insurance limits, and (C) third parties (other than Landlord
Parties) as to Claims arising from the third party actions not covered by
Landlord's Indemnity.
14. INSURANCE.
(a) LANDLORD'S INSURANCE. Landlord shall, as an Operating Expense, procure
and maintain (i) commercial general liability insurance with a combined single
limit of at least $5,000,000, and (ii) special form or all risks property
insurance covering the full replacement cost of (A) the shell and core of the
Building, (B) any fixtures and leasehold improvements Landlord is required by
this Lease to restore, and (C) any equipment and other personal property owned
by Landlord and used in connection with the Building.
(b) TENANT'S INSURANCE.
(i) Required Policies. Tenant shall, at its sole expense, procure and
maintain the following insurance coverages throughout the Term:
(A) Commercial general liability insurance on ISO Form CG
0001 1093 or CG 0001 0695 (or, if Tenant has 2 or more locations covered by
the policy and the policy contains a general aggregate limit, ISO form
amendment "Aggregate Limits of Insurance Per Location" CG 2504 1185) in the
amounts and with the coverages described in EXHIBIT "F-1". Landlord Parties
shall be included as "additional insureds" using ISO additional insured
form CG 2026 1185, without modification. A waiver of subrogation in favor
of Landlord Parties using ISO form CG 2404 1093 is also required.
(B) Workers' compensation and employer liability coverage with a
waiver of subrogation in favor of the Landlord Parties on endorsement form
WC 429394 (Texas only) or ISO form WC 000313 (all other states) and in the
amounts and with the coverages described in EXHIBIT "F-1".
(C) "Special form" or "all risks" property insurance on ISO form
CP 1030 (or equivalent Business Owner's Policy) in conformity with EXHIBIT
"F-2" with no exclusions other than standard printed exclusions, including
an ordinance or law coverage endorsement and a waiver of subrogation in
favor of the
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<PAGE> 23
Landlord Parties, and covering 100% replacement cost of Tenant's
furnishings, trade fixtures, equipment and inventory ("TENANT'S FF&E") and
all ABS improvements and Alterations to the Premises. The Landlord Parties
shall be shown as "loss payees as their interests may appear".
(D) (48)income and extra expense coverage for 6 months' income
and expenses with waiver of subrogation in favor of the Landlord Parties.
(ii) Form of Policies and Additional Requirements. All insurance
providers shall maintain ratings of Best's Insurance Guide A/VIII or Standard &
Poor Insurance Solvency Review A-, or better. All carriers must be admitted to
engage in the business of insurance in the State. All policies must be primary,
with the policies of Landlord and Landlord's Mortgagees being excess, secondary
and noncontributing. No cancellation, non-renewal or material modification shall
occur without 30 days' prior written notice by the insurance carrier to Landlord
and Landlord's Mortgagees. Tenant shall reinstate any aggregate limit which is
reduced because of losses paid to below 75% of the limit required by this Lease.
No policy shall contain a deductible or self-insured retention in excess of
$10,000 without Landlord's prior written approval. Tenant shall, at its expense,
also procure and maintain any other insurance coverages Landlord or Landlord's
Mortgagees may(49) require.
(iii) Evidence of Insurance. Commercial general liability and workers'
compensation insurance must be evidenced by ACORD form 25 "Certificate of
Insurance" in the form and substance of EXHIBIT "F-1", and property and business
income insurance must be evidenced by ACORD form 27 "Evidence of Property
Insurance" in the form and substance of EXHIBIT "F-2" (collectively, the
"CERTIFICATES"). The Certificates must be delivered with the executed Lease, and
new Certificates must be delivered no later than 30 days prior to expiration of
the current policies. Copies of endorsements required by this Lease must be
attached to the Certificates delivered to Landlord. If requested in writing by
Landlord, Tenant shall promptly deliver to Landlord a certified copy of any
insurance policies required by this Lease. If the forms of policies,
endorsements, certificates or evidence of insurance required by this Paragraph
are superseded or no longer available, Landlord shall have the right to require
other equivalent or better forms.
(50) SEE FOOTNOTE BELOW.
- - ----------------
(48) [language omitted in original] Business
(49) reasonably
(50) (c) WAIVER OF SUBROGATION. Landlord and Tenant each desire to
avoid liability to the other's property insurance carriers. Notwithstanding
anything in this Lease to the contrary, Landlord and Tenant each Waives any
rights it may have against the other (by way of subrogation or otherwise)
on account of property damage (regardless of whether such property damage
is caused by the negligence or fault of the other party) arising from any
risk covered by the standard special form (or all risks) property insurance
used at the time of the property damage in the State. Each party will have
its property insurance policies properly endorsed, if necessary, to prevent
invalidation of such property insurance coverages by reason of the Waivers
contained in this subparagraph (c). Each party will be responsible for the
deductible or self-insured retention under its property insurance policy.
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<PAGE> 24
15. FIRE OR CASUALTY.
(a) NO RESTORATION. If the Premises or the Building are damaged by fire or
other casualty to the extent that reconstruction cannot reasonably be completed
within(51) after the date of damage, as determined by Landlord, or more than 50%
of the RSF of the Premises becomes untenantable due to casualty damage within
the last 12 months of the Term, then either Landlord or Tenant may, by written
notice given within 90 days of such damage, terminate this Lease, in which event
Tenant shall be entitled to a fair diminution of Base Rent while and to the
extent Tenant is unable to conduct its business in the Premises.
(b) RESTORATION. If this Lease is not so terminated, Landlord shall
reconstruct the Premises and/or the Building to substantially the same condition
as existed immediately prior to the date of damage, except that (i) Landlord
shall not be required to spend more than the insurance proceeds(52) made
available for such purposes by Landlord's Mortgagee, and (ii) Landlord shall
only be required to reconstruct the Building Standard leasehold improvements
existing in the Premises on the date of damage ("LANDLORD'S CONTRIBUTION").
Tenant shall pay the difference between the total cost of reconstructing the
Premises and Landlord's Contribution ("TENANT'S CONTRIBUTION"). Prior to
Landlord's commencement of reconstruction, Tenant shall place Landlord's
estimate of Tenant's Contribution in escrow with Landlord (or furnish Landlord
with other commercially reasonable assurances of payment). Tenant shall be
entitled to a fair diminution of Base Rent while and to the extent Tenant is
unable to conduct its business in the Premises.
16. CONDEMNATION. If any portion of the Premises becomes permanently
untenantable upon condemnation (or conveyance by deed in lieu thereof) of any
portion of the Project, then either Landlord or Tenant may, by written notice
given within 60 days after the date of the taking, terminate this Lease as to
the untenantable portion of the Premises effective as of the date of the taking.
If this Lease is so terminated as to only part of the Premises, Landlord shall
(a) grant a fair diminution of Base Rent; and (b) make all repairs necessary to
convert the remaining Premises to a complete architectural and tenantable unit,
but only to the extent proceeds attributable to the area taken (based on an
equitable allocation excluding any award for land) are made available for such
purpose by Landlord's Mortgagee. Tenant Waives the right to assert any Claim for
the taking (or conveyance by deed in lieu thereof) of any right, interest or
estate under this Lease, and assigns such right to Landlord. However, Tenant
may, to the extent permitted by Applicable Law, pursue a Claim for its moving
expenses, inconvenience and business interruption in a proceeding independent of
Landlord's condemnation suit, so long as Landlord's award is not thereby reduced
or delayed.
17. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULT. Each of the following shall be an "EVENT OF DEFAULT"
under this Lease: (i) Tenant fails to pay any monetary obligation under this
Lease when due; provided that the first(53) during any consecutive 12 month
period shall not be an Event of Default if Tenant pays the amount due within 5
days after written notice from Landlord; or (ii) Tenant fails to comply with any
non-monetary obligation under this Lease within 10 days after written notice or,
if such non-monetary failure is of a nature requiring more than 10 days to cure
using reasonable diligence, fails
- - ----------------
(51) 210 days
(52) and deductible (which shall be included as an Operating Expense)
(53) 2 such failures
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<PAGE> 25
to promptly commence such cure within such 10-day period and thereafter
diligently prosecute same to completion within (54) additional days; or (iii)
the failure to dismiss any petition filed by or against Tenant or any guarantor
under the U.S. Bankruptcy Code (or similar law) within 45 days; or (iv) the
assignment of, or appointment of a receiver or trustee for Tenant's leasehold
interest or substantially all of the assets of Tenant or any guarantor; or (v)
[language omitted in original] (vi) Tenant or any guarantor dissolves, dies,
liquidates or fails to exist in good standing in the State; or (vii) Tenant
becomes or is declared insolvent according to Applicable Law. In addition,
Tenant's failure to comply with any single provision of this Lease more than 2
times during any consecutive 12 month period during the Term, regardless of
cure, shall be an independent Event of Default. Notwithstanding the notice
provisions of clause (ii) above, Landlord shall only be required to give a
single informative notice of default, without further opportunity to cure, upon
the occurrence of an Event of Default arising pursuant to the immediately
preceding sentence or otherwise described in clauses (iii) through (vii) above.
(b) REMEDIES. Upon any Event of Default, Landlord shall have the right: (i)
to terminate this Lease as to all or any interest therein; (ii) to terminate
Tenant's right of possession of all or any part of the Premises (including any
Parking Permits attributable thereto) without terminating this Lease; (iii) to
re-enter the Premises, change or pick locks, alter security devices and lock out
or expel Tenant and any other occupant of the Premises without complying with
Applicable Law, the benefits of which are Waived by Tenant to the fullest extent
permitted; (iv) to remove and store, at Tenant's expense, all property in the
Premises using such lawful force as may be necessary; (v) to apply any Security
Deposit as permitted under this Lease; (vi) to cure such Event of Default for
Tenant at Tenant's expense (plus a 15% administrative fee); (vii) to withhold or
suspend payment of sums Landlord would otherwise be obligated to pay to Tenant
under this Lease, as amended; and/or (viii) to require all future payments to be
made by cashier's check or money order after the first time any check is
returned for insufficient funds, or the second time any sum due hereunder is
more than 5 days late. In addition, Landlord may, without regard to any notice
or cure provision and whether or not an Event of Default exists, (A) impose a
late charge of 10% on any amount not paid within 5 days after becoming due or
20% on any amount not paid within 10 days after becoming due and (B) charge
interest on any amount not paid when due from the due date through the date of
payment at the "DEFAULT RATE", which is the lesser of 18% per annum or the
highest interest rate permitted by Applicable Law. TO THE FULLEST EXTENT
PROVIDED BY PARAGRAPH 13(f), TENANT SHALL INDEMNIFY AND DEFEND LANDLORD PARTIES
AGAINST CLAIMS ARISING FROM ANY BREACH OF TENANT'S OBLIGATIONS UNDER THIS LEASE.
(c) ELECTION OF REMEDIES. Landlord may exercise the foregoing rights and
remedies, as well as any other rights or remedies available under Applicable
Law, without (i) judicial process; (ii) further notice to Tenant; (iii)
incurring liability of any kind to Tenant, including liability for trespass or
conversion; (iv) constituting an eviction of Tenant; (v) releasing Tenant or any
guarantor from any obligation under this Lease; (vi) waiting until the
Expiration Date; or (vii) prejudicing any other right or remedy of Landlord. All
such rights and remedies, together with any rights and remedies available under
Applicable Law, are cumulative with no exercise of any one or more of them
prohibiting or waiving the exercise of any other. Landlord may, at any time
after terminating Tenant's right to possess the Premises without terminating
this Lease, elect to terminate this Lease and thereupon pursue any and all other
rights and remedies otherwise available upon such latter election.
(d) MEASURE OF DAMAGES. If Landlord either terminates this Lease or
terminates Tenant's right to possess the Premises without terminating this
Lease, Tenant shall immediately surrender and vacate the Premises and pay
Landlord (i) the cost of recovering the Premises; (ii) all Rent accrued through
the end of the month in which the termination becomes effective; (iii) all
expenses reasonably incurred by Landlord in enforcing its rights and remedies
under this Lease, including
- - ---------------
(54) 20
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<PAGE> 26
(55) attorneys' fees, court costs and interest at the Default Rate; (iv)
"LANDLORD'S RELETTING EXPENSES" equal to commercially reasonable costs, losses
and expenses incurred by Landlord in reletting all or any portion of the
Premises, including the cost of removing and storing Tenant's FF&E or other
property, repairing and/or demolishing the Premises, removing and/or replacing
Tenant's signage and other fixtures, making the Premises ready for a new tenant,
including the cost of advertising, commissions, architectural fees and leasehold
improvements (even if amortized over a new lease term which exceeds the balance
of the Term), and any allowances and/or concessions provided by Landlord; and
(v) "LANDLORD'S RENTAL DAMAGES" equal to the amount (never less than zero) by
which (A) the total Rent payable by Tenant for the portion of the Term that is
or would be remaining after the month in which the termination becomes effective
exceeds (B) the Fair Rental Value of the Premises for such period. In
calculating Landlord's Rental Damages, each monthly payment of Rent and Fair
Rental Value shall be discounted at the Prime Rate from its respective due date
to its present value as of the date of termination. The "FAIR RENTAL VALUE" is
the total rental that would be received from a comparable tenant for a
comparable lease of premises in the Building of equivalent quality, size,
condition, remaining lease term and location as the Premises, taking into
account rental rates and concessions then generally prevailing in the market
place, the period of time the Premises are reasonably expected to remain vacant
before commencement of rental payments by a suitable new tenant, and all other
relevant factors. If any portion of the Premises is relet, the Fair Rental Value
for such relet portion shall be calculated based upon the rental receivable by
Landlord for the applicable reletting term. The "PRIME RATE" is the "prime" rate
then published by Citibank, N.A., its successors or assigns, or another major
financial institution selected by Landlord. Until the earlier of the termination
of this Lease or the final determination of all damages under this Lease, all
Rent payable under this Lease shall continue to accrue and be payable when due
during the Term. Once the aggregate amount of damages is determined as provided
above, the unpaid balance, if any, shall thereafter accrue interest at the
Default Rate until paid in full.
(e) MITIGATION OF DAMAGES. Upon termination of Tenant's right to possess
the Premises, Landlord shall, to the extent required by Applicable Law (and no
further), use objectively reasonable efforts to mitigate damages by reletting
the Premises. Landlord shall not be deemed to have failed to do so if Landlord
refuses to lease the Premises to a prospective new tenant with respect to whom
Landlord would be entitled to withhold its consent pursuant to PARAGRAPH 12(c),
or who (i) is an affiliate, parent or subsidiary of Tenant; (ii) is not
acceptable to Landlord's Mortgagee(s); (iii) requires improvements to the
Premises to be made at Landlord's expense; or (iv) is unwilling to accept lease
terms then proposed by Landlord, including: (A) leasing for a shorter or longer
term than remains under this Lease, (B) re-configuring or combining the Premises
with other space, (C) taking all or only a part of the Premises, and/or (D)
changing the use of the Premises.
(f) ATTORNEYS' FEES. In any dispute regarding this Lease, the prevailing
party shall be entitled to recover reasonable attorneys' fees, court costs and
expenses from the other party.
(g) LANDLORD'S LIEN. [language omitted in original]
- - ---------------
(55) reasonable
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<PAGE> 27
(h) FORCE MAJEURE. Time is of the essence. If either party is unable to
perform any obligation under this Lease due to unavailability of materials or
equipment, strikes or other labor difficulties, governmental restrictions,
casualties or other causes beyond such party's reasonable control, such
obligation shall be stayed for the duration of such condition. This Paragraph
shall not affect or postpone the payment of Rent or other amounts due, except as
otherwise expressly provided in the attached Construction Agreement (if any).
(56) SEE FOOTNOTE BELOW.
18. END OF TERM.
(a) SURRENDER. Upon the earlier of the Expiration Date or Landlord's
termination of Tenant's right of possession of the Premises, Tenant shall
peaceably surrender the Premises (including all Alterations and leasehold
improvements(57) to Landlord, (58) clean, free of debris and in the same
condition existing as of the Commencement Date, subject to ordinary wear and
tear and except for damage due to casualty and condemnation.
(b) REMOVAL OF IMPROVEMENTS AND TENANT'S PROPERTY. Upon the earlier of the
Expiration Date or Landlord's termination of Tenant's right of possession of the
Premises pursuant to PARAGRAPH 17(b), and except as otherwise expressly provided
in writing by Landlord at the time of installation, (i) all leasehold
improvements and Alterations installed in the Premises, including all built-in
fixtures and cabling, shall become Landlord's property; and (ii) provided there
is no uncured Event of Default, Tenant shall, at its expense, immediately remove
all of Tenant's FF&E from the Premises. However, except as otherwise expressly
provided in writing by Landlord at the time of installation, Landlord may, at
Tenant's expense, remove from the Premises (or require to be removed by Tenant
or an approved third party contractor) any or all Alterations, cabling and/or
ABS leasehold improvements. Tenant shall, within 30 days after Landlord's
invoice, reimburse Landlord for the cost to restore the Premises and otherwise
repair any damage caused by any of the foregoing removal work. All of Tenant's
foregoing obligations shall survive the Expiration Date. If Tenant's FF&E is not
timely removed. Landlord may, upon 10 days written notice to Tenant's address
(which notice Tenant agrees shall be deemed "reasonable"), and to the fullest
extent permitted by Applicable Law: (i) treat such property as abandoned by
Tenant with full rights of ownership in Landlord; (ii) remove and store such
property at Tenant's expense with
- - ----------------
(56) (i) LANDLORD DEFAULT AND TENANT REMEDIES. Except as
otherwise provided in this Lease and specifically subject to PARAGRAPHS
5(b), 20 AND 23, if Landlord fails in the performance of any of Landlord's
obligations under this Lease and such failure continues for 30 days after
Landlord's receipt of written notice thereof from Tenant (or an additional
reasonable time after such receipt of (A) such failure cannot be cured
within such 30 day period, and (B) Landlord commences curing such failure
within such 30 day period and thereafter diligently pursues the curing of
such failure), then Tenant shall be entitled to exercise any remedies that
Tenant may have at law or in equity.
(57) , but not Tenant's FF&E
(58) broom
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<PAGE> 28
reimbursement by Tenant to Landlord upon demand; and/or (iii) sell or dispose of
such property without delivering any proceeds to Tenant. Tenant Waives all
Claims against the Landlord Parties arising from any right available to Tenant
under Applicable Law restricting Landlord's foregoing rights, and the right to
assert any Claim against Landlord for the value or use of any property abandoned
by Tenant in the Premises.
(c) HOLD OVER. If any Tenant Party remains in possession of the Premises
after the Expiration Date, whether or not with Landlord's consent but without
executing a new lease ("HOLD OVER"), the Term shall not be extended, nor shall
any rights or remedies of Landlord be adversely affected, even if Landlord
thereafter accepts Rent. Instead, during the Hold Over, Tenant shall be deemed a
tenant at sufferance (and not a tenant at will or month-to-month tenant) subject
to all provisions of this Lease except that Base Rent and all amounts payable to
Landlord under PARAGRAPH 7 shall be double the greater of (i) the amount payable
during the last month of the Term, or (ii) Landlord's then-quoted rental rate
for comparable space in the Project(59). Either parry may terminate the Hold
Over immediately upon written notice. Tenant shall pay Landlord all damages
incurred by reason of any Hold Over.
19. NOTICES. All notices shall be delivered by hand, reputable overnight courier
or certified mail (return receipt requested), postage prepaid, or by facsimile,
to Landlord at the Addresses for Notice specified in the Business Points (or
such other addresses specified in writing to Tenant); and to Tenant at the
appropriate address specified in the Business Points. Notice shall be deemed
given upon the date of confirmed receipt, if sent by hand, or the next business
day after the date sent, if sent by post(60), overnight courier or
electronically-confirmed facsimile, except that a change of address notice shall
be effective 5 business days after actual receipt. Notices to Tenant addressed
to the Premises may be made by posting on the entrance door of the Premises.
20. LANDLORD'S FINANCING. This Lease is subordinate to all liens, encumbrances,
easements, [language omitted in original] (61) deeds of trust now or hereafter
encumbering the Building, and all refinancings, replacements, modifications,
extensions or consolidations thereof. Tenant shall attorn to any mortgagee,
[language omitted in original] trustee under a deed of trust or purchaser at a
foreclosure or trustee's sale ("LANDLORD'S MORTGAGEE") as "Landlord" under this
Lease. Tenant shall, within 5 business days after Landlord's request, execute
and deliver to Landlord in recordable form whatever true and correct instruments
may be required to evidence such subordination and attornment. [language omitted
in original] Landlord's Mortgagee may at any time subordinate its lien to this
Lease by unilaterally executing a subordinating instrument. Tenant shall not
exercise any right or remedy under this Lease or at law or in equity unless (a)
Tenant gives written notice to Landlord and Landlord's Mortgagee (whose name and
address shall be provided upon request) specifying the exact nature of the
alleged breach and how it may be remedied; and (b) both Landlord and Landlord's
Mortgagee fail to cure same within 30 days after receipt of Tenant's notice
(plus such additional time as Landlord's Mortgagee may require).(62)
(59) ; provided however, so long as no uncured Event of Default exists
under the Lease, the Base Rent and all amount payable to Landlord under
PARAGRAPH 7 shall be increased to only 150% of such greater amount
(60) (if sent by certified mail, return receipt requested)
(61) and
(62) Landlord shall use reasonable efforts, at Landlord's cost, to
obtain Landlord's then-current form of nondisturbance agreement for the
benefit of Tenant.
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<PAGE> 29
21. RIGHTS RESERVED BY LANDLORD. Landlord (and its designated agents,
contractors and managers) shall have the following rights:
(a) ACCESS TO THE PREMISES. To enter the Premises upon reasonable notice
(except in emergencies when no notice is required) for purposes of (i)
inspection; (ii) making repairs, additions, improvements or alterations to the
Premises, any adjoining space or the Building as permitted or required under
this Lease or as Landlord elects; (iii) confirming Tenant's compliance with this
Lease; and (iv) exhibiting the Premises to prospective purchasers, mortgagees or
tenants.(63) During each entry, Landlord shall use reasonable good faith efforts
to minimize interference with Tenant's use of the Premises. In no event shall
Tenant be deemed constructively evicted nor entitled to any abatement of Rent.
Landlord shall at all times retain a mechanical or card key to all doors in or
about the Premises, except Tenant's vaults, safes and other portions of the
Premises reasonably designated by Tenant in writing as "secure areas" (to which
Landlord shall not be required to provide Building Standard maintenance or
janitorial services). In emergencies or if otherwise required to comply with
this Lease, Landlord shall have the right to use any and all means necessary to
open any doors, including doors to any designated secure areas, as may be
reasonably necessary under the circumstances. Landlord may erect scaffolding and
other structures where reasonably required by the character of the work.
(b) PROJECT MODIFICATIONS. To alter, decorate and repair or construct new
improvements upon the Project or any adjacent property, structurally or
otherwise, as determined by Landlord in its sole discretion, including changing
the arrangement, location and/or size of entrances, passageways, doorways,
corridors, elevators, stairs, restrooms and other public components, and to
place, inspect, repair and replace in the Premises (below floors, above ceilings
or next to columns) any utilities, pipes, cables or similar equipment serving
areas outside the Premises, or to rename the Project.(64)
(c) RIGHT TO RELOCATE. To require Tenant, upon 60 days notice, to relocate
the Premises to any other premises within the Building or to other buildings in
the Project ("RELOCATED PREMISES") on a date of relocation (the "RELOCATION
DATE") specified therein.(65) In such event, all reasonable expenses of moving
Tenant and decorating the Relocated Premises with substantially the same
leasehold improvements shall be at the expense of Landlord, including the
physical move, telephone installation and stationery costs.(66) Within(67)
business days following receipt of Landlord's relocation
- - ----------------
(63) However, provided there is no uncured Event of Default under this
Lease, any exhibition of the Premises to prospective tenants prior to the
last 9 months of the Term shall be subject to Tenant's prior consent, which
shall not be unreasonably withheld.
(64) Landlord shall use commercially reasonable efforts to minimize
interference by Landlord or its agents with Tenant's access to, and use and
occupancy of, the Premises for the Permitted Use, so long as such efforts
do not increase the cost or delay performance of any of the foregoing. All
direct costs incurred by Tenant for reprinting stationery and business
cards which bear the name of the Building shall be paid by Landlord within
30 days after receipt of third-party invoices therefor.
(65) The New Premises shall (i) in all respects be substantially the
same or better, as reasonably determined by Landlord and Tenant, in area,
finish and appropriateness for the Permitted Use, (ii) be located no lower
than the 8th floor of the Building, and (iii) have substantially the same
elevator exposure as the Premises.
(66) All moving costs (including the cost to relocate phones,
computers and other systems of similar nature), all costs of reprinting
stationery, cards and other printed material bearing Tenant's
(continued...)
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<PAGE> 30
notice, Tenant shall have the option, effective as of the Relocation Date,
either to enter into an appropriate lease amendment relocating the Premises, or
to terminate the Lease. Failure of Tenant to choose either option shall
constitute Tenant's election to relocate. If Tenant elects to relocate, Landlord
shall have the option to tender the Relocated Premises to Tenant on any date
within a 30 day period prior to or after the Relocation Date, in which event the
Relocation Date shall become the date of tender of possession of the Relocated
Premises. From the Relocation Date through the Expiration Date, the aggregate
Base Rent for the Relocated Premises shall be the same as for the original
Premises.
(d) OTHER RIGHTS. To take such other measures Landlord deems necessary or
advisable for the ongoing operation, management, maintenance, repair and
protection of the Project. Tenant shall fully cooperate with all of such further
measures undertaken by Landlord.
22. HAZARDOUS MATERIALS.
(a) DEFINITION. A "HAZARDOUS MATERIAL" is any toxic, ignitable, reactive or
corrosive substance now or hereafter regulated by any governmental authority,
including any substance defined by Applicable Law as a "hazardous waste",
"extremely hazardous waste", "hazardous substance", "hazardous material" or
"regulated substance". "CONTAMINATION" means any release or disposal of a
Hazardous Material in or about the Premises or the Project which may result in a
fine, use restriction, cost recovery lien, remediation requirement or other
government action or imposition affecting any Landlord Party. For purposes of
this Lease, Claims arising from Contamination shall include diminution in value,
restrictions on use, adverse impact on leasing space, and all costs of site
investigation, remediation, removal and restoration work.
(b) RESTRICTIONS. No Hazardous Material(68) shall be brought upon, kept,
used or disposed of in or about the Premises or the Project by any Tenant Party
without Landlord's prior written consent, unless Tenant (i) demonstrates to
Landlord's reasonable satisfaction that any such Hazardous Material is necessary
in the ordinary course of Tenant's business and shall be used, kept and stored
in compliance with Applicable Law; and (ii) gives Landlord written notice of any
such Hazardous Material, including the current material safety data sheet.
(c) REMEDIATION. If Contamination occurs as a result of an act or omission
of a Tenant Party, Tenant shall, at its expense, promptly take all actions
necessary to return the Premises, the Project and/or any adjoining property to
its condition prior to such Contamination, subject to Landlord's prior written
approval of Tenant's proposed methods, times and procedures for remediation.
Tenant shall provide Landlord reasonably satisfactory evidence that such actions
shall not adversely affect any Landlord Party or Contaminated property. Landlord
may require that a representative of Landlord be present during any such actions
and/or that such actions be taken after business hours. If Tenant fails to take
any
- - ----------------------
(66) (...continued)
address at the Premises if such address changes due to the relocation (but
only the quantity existing immediately prior to the relocation) and all
other out-of-pocket costs directly incurred by Tenant in connection with
relocation to the New Premises, including but not limited to reasonable
decorating and design costs, shall be paid by Landlord within thirty (30)
days after receipt of third party invoices therefor.
(67) 15
(68) (except for de minimis quantities of household cleaning products
used in the ordinary course of Tenant's business at the Premises and that
are used, kept and disposed of in compliance with Applicable Law)
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<PAGE> 31
necessary remediation actions within 30 days after written notice from Landlord
or an authorized governmental agency (or any shorter period required by any
governmental agency), Landlord may take such actions and Tenant shall reimburse
Landlord therefor, plus a 15% administrative fee, within 30 days of Landlord's
invoice.
(D) ASBESTOS DISCLOSURE Landlord advises tenant that (i) based on
asbestos survey reports for the building prepared by ATEC Associates, Inc. dated
March 24, 1994, non-friable asbestos-containing materials are present at The
Crescent(R) in floor tile mastic in service hallways and the retail facility;
(ii) and based on asbestos survey reports reviewed by ATEC and prepared by
CURA, Inc., dated November 14, 1990, non-friable asbestos-containing materials
are present at The Crescent(R) in floor tile and floor tile mastic in the
service elevator lobbies, some public areas, and some lunch rooms of tenant
space.
23. LANDLORD'S INTEREST.
(a) LANDLORD'S LIABILITY. Landlord's liability for failure to perform
its obligations under this Lease shall be recoverable solely out of proceeds
from judicial sale upon execution and levy made against Landlord's interest in
the Building. Except as provided in the preceding sentence, Tenant Waives (i)
all other rights of recovery against any Landlord Party; and (ii) all Claims
against any Landlord Party and Landlord's Mortgagee for consequential, special
or punitive damages allegedly suffered by any Tenant Party, including lost
profits and business interruption. No Landlord Party shall have any personal
liability under this Lease.
(b) CONVEYANCE. Landlord may convey any or all of its interest in this
Lease or the Project at any time. The term "Landlord" means only the owner of
the Landlord's interest in this Lease at the time in question. Immediately upon
conveyance by Landlord of such interest, the conveying party shall be released
from all obligations of "Landlord" thereafter arising under this Lease, and
Tenant shall attorn and look solely to the new Landlord for performance of such
obligations. Upon conveyance, the balance of any Security Deposit shall be
delivered to the new Landlord and Tenant shall thereafter look solely to the new
Landlord for application or return.
24. EXECUTION AND SIGNING AUTHORITY. Draft documents submitted for review do not
convey any right to Tenant in the Premises or other space. This Lease shall
become effective only upon full execution and delivery by all parties and, if
required, upon approval by Landlord's Mortgagee. This Lease may be executed in
counterparts, each of which shall be an original and all of which shall be one
and the same instrument. Each party and its counsel have reviewed and revised
this Lease after arms-length negotiations. Accordingly, the rule of construction
that ambiguities are resolved against the drafting party shall not apply to this
Lease or any amendments hereof. This Lease shall bind and inure to the benefit
of the parties and their respective heirs, executors, administrators, successors
and permitted Transferees, unless otherwise expressly set forth herein. Each
such person or entity executing this Lease for Tenant shall be jointly and
severally bound and liable as "Tenant" under this Lease. If Tenant is a legal
entity, each person signing this Lease for Tenant represents and warrants to
Landlord (who reserves the right to request satisfactory evidence) that he is
authorized to do so without further signature or authorization from such legal
entity; that this Lease is fully binding on Tenant; and that Tenant is qualified
to do business in the State. Except as otherwise expressly extended to the
Landlord Parties or the Tenant Parties in this Lease, no beneficial rights are
given to any third parties by or under this Lease.
25. QUIET ENJOYMENT. So long as Tenant performs its obligations under this
Lease, it shall have the right to occupy the Premises without hindrance from
Landlord or any person lawfully claiming through Landlord, subject to the terms
of this Lease, all superior mortgages, [language omitted in original] deeds of
trust, insurance requirements and Applicable Law.
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<PAGE> 32
26. ADDITIONAL PROVISIONS.
(69) See footnote below.
[Remainder of page intentionally left blank]
- - ----------
(69) (a) CLUB MEMBERSHIPS. At Tenant's written request
("TENANT'S NOTICE") to Landlord at any time during the initial Term,
Landlord agrees to pay, out of the Base Rent payable for the next month
of the Term in which Base Rent is due after Tenant's written notice to
Landlord, directly to The Crescent Club (the "CRESCENT CLUB") and The
Spa at the Crescent (the "SPA") (collectively, the "CLUB") on behalf of
Tenant, the initiation fees in connection with up to 4 memberships to
the Crescent Club and/or the Spa. Tenant may elect all such memberships
to be at The Crescent Club or at The Spa at the Crescent or any
combination thereof, provided that the combined total number of
initiation fees which Landlord shall pay on Tenant's behalf at The
Crescent Club and The Spa at the Crescent shall not exceed 4, and such
election shall be specified in Tenant's Notice. Such memberships shall
be activated on the first day of the month after Tenant's Notice (or as
soon thereafter as practicable), subject to the prior approval of the
Crescent Club and the Spa as applicable. Other than the initiation
fees, all monthly dues and charges (including applicable state and
local taxes) incurred by Tenant or any other person in connection with
the use of such memberships shall be solely the responsibility of
Tenant. Use of the foregoing memberships shall be subject to the Club
rules and regulations and the continued existence of the Club.
(b) CONFIDENTIALITY. Landlord and Tenant agree to hold
the terms of this Lease in strict confidence, and will not disclose,
except for any disclosure required by Applicable Law, such terms to any
person other than the respective partners, directors, officers,
employees, attorneys, accountants, agents, consultants, or financing
sources of Landlord and Tenant, without the prior written consent of
the other party. Notwithstanding the foregoing Landlord may disclose
any information in Landlord's newsletter and in public notices required
by Applicable Law or otherwise traditionally made by publicly-traded
entities to investors and the financial community.
(c) COMMON AREA IMPROVEMENTS. Landlord agrees to (i)
repaint the Common Area corridor on the 8th floor of the Building with
Building Standard paint, and (ii) recarpet the Common Area corridor on
the 8th floor of the Building with Building Standard carpet, at
Landlord's cost and expense, within 6 months of the Date of Lease.
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<PAGE> 33
ACCORDINGLY, the parties execute and deliver this Lease as of the Date
of Lease.
LANDLORD:
CRESCENT REAL ESTATE FUNDING I, L.P., a
Delaware limited partnership
By: CRE Management I Corp., a Delaware
corporation, its general partner
By: /s/ JOHN L. ZOGG, JR.
---------------------------------------
Name: John L. Zogg, Jr.
-------------------------------------
Title: Vice President, Leasing/Marketing
------------------------------------
SPECIAL NOTICE: THIS LEASE CONTAINS WAIVERS AND INDEMNITIES WHICH MAY MATERIALLY
AFFECT TENANT'S RIGHTS AND REMEDIES UNDER APPLICABLE LAW REGARDING THIS LEASE,
INCLUDING "EXPRESS NEGLIGENCE" PROVISIONS IN PARAGRAPH 13(f).
TENANT:
MARCUS & PARTNERS, L.P.,
a Delaware limited partnership
By: Marcus & Partners Holdings, L.L.C.,
a Delaware limited liability company
By: /s/ THOMAS P. MCMILLIN
---------------------------------------
Name: Thomas P. McMillin
Title: V.P.
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<PAGE> 34
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROJECT
Being a tract or parcel of land situated in the City of Dallas, Dallas County,
Texas and being all of Lot 1A, Block 2/948 of The Crescent, an addition to the
City of Dallas as recorded in Volume 83134, Page 5645 of the Deed Records of
Dallas County, Texas, and being more particularly described as follows:
BEGINNING at a 1/2" iron rod with yellow plastic cap stamped "RLG" found for
corner at the intersection of the northeasterly cut-off line between the
easterly right-of-way line of Cedar Springs Road (65 feet from center line) and
the northerly right-of-way line of Pearl Street;
THENCE North 03(degree)42'10" West along said easterly line of Cedar Springs
Road a distance of 197.34 feet to an iron rod and an angle point;
THENCE in an easterly and northeasterly direction leaving said easterly line of
Cedar Springs Road and along a curve to the left whose chord bears North
65(degree)23'58" East having a radius of 767.38 feet, a central angle of
44(degree)02'24" and an arc length of 589.84 feet to a point for corner in the
southwesterly line of Maple Avenue;
THENCE South 45(degree)30'10" East along the said southwesterly line of Maple
Avenue, a distance of 252.08 feet to an iron rod for corner at the intersection
of said southwesterly line of Maple Avenue and the southwesterly cut-off line
between the said southwesterly line of Maple Avenue and the westerly
right-of-way line of McKinney Avenue (variable width);
THENCE South 15(degree)10'40" East along the said cut-off line a distance of
17.26 feet to an 1/2" iron rod with yellow plastic cap stamped "RLG" found for
corner in the said westerly right-of-way line of McKinney Avenue;
THENCE South 15(degree)08'50" West continuing along said westerly line of
McKinney Avenue a distance of 280.77 feet to a chisel mark for corner at the
intersection of the northwesterly cut-off line between the westerly line of
McKinney Avenue and the northerly right-of-way line of Pearl Street.
THENCE South 65(degree)29'45" West along said cut-off line a distance of 12.76
feet to a chisel mark for corner at the intersection of said cut-off line and
the northerly line of Pearl Street (100 feet wide at this point) and the
beginning of a curve to the left;
THENCE in a northwesterly direction along said northerly line of Pearl Street
and along said curve to the left whose chord bears North 76(degree)43'23" West,
having a radius of 586.11 feet, a central angle of 24(degree)09'34" and an arc
length of 247.14 feet to a 1/2" iron rod with yellow plastic cap stamped "RLG"
found at the end of said curve to the left;
THENCE North 88(degree)48'10" West continuing along said northerly line of Pearl
Street a distance of 54.66 feet to a 1/2" iron rod with yellow plastic cap
stamped "RLG" found at the beginning of a curve to the left;
THENCE continuing along said northerly line of Pearl Street in a westerly and
southwesterly direction along said curve to the left, having a radius of 597.32
feet, a central angle of 08(degree)37'00" and an arc length of 89.83 feet to a
chisel mark at the end of said curve to the left;
THENCE South 82(degree)34'50" West continuing along said northerly line of Pearl
Street a distance of 218.03 feet to a chisel mark for corner at the intersection
of the northeasterly cut-off line between said northerly line of Pearl Street
(96 feet wide at this point) and said easterly line of Cedar Springs Road;
THENCE North 50(degree)33'40" West along said cut-off line a distance of 13.68
feet to the POINT OF BEGINNING and containing 193,582 square feet or 4.4440
acres, more or less.
<PAGE> 35
EXHIBIT "B"
FLOOR PLAN OF PREMISES
[FLOORPLAN OF PREMISES]
THE CRESCENT
FLOORS 4 - 10
EXHIBIT A
FLOOR PLAN OF THE PREMISES
<PAGE> 36
EXHIBIT "C"
CONSTRUCTION AGREEMENT
This Construction Agreement is attached as an Exhibit to an Office
Lease dated May 20, 1999 (the "LEASE") between CRESCENT REAL ESTATE FUNDING I,
L.P., as Landlord, and MARCUS & PARTNERS, L.P., as Tenant. Unless otherwise
specified, all capitalized terms used herein shall have the same meanings as in
the Lease.
1. APPROVED CONSTRUCTION DOCUMENTS.
(a) Tenant's Information. No later than May 25, 1999, Tenant shall
submit to Landlord all information necessary for the preparation of complete,
detailed architectural, mechanical, electrical and plumbing drawings and
specifications for construction of the Work (as defined below) in the Premises,
including Tenant's partition and furniture layout, reflected ceiling, telephone
and electrical outlets and equipment rooms, initial Provider(s) of
Telecommunications Services, doors (including hardware and keying schedule),
glass partitions, windows, critical dimensions, structural loads, millwork,
finish schedules, and HVAC and electrical requirements, together with all
supporting information and delivery schedules ("TENANT'S INFORMATION").
(b) Construction Documents. Following Landlord's execution of the Lease
and receipt of Tenant's Information, Landlord's designated
architectural/engineering firm shall prepare and submit to Tenant all finished
and detailed architectural drawings and specifications, including mechanical,
electrical and plumbing drawings (the "CONSTRUCTION DOCUMENTS"). In addition,
Landlord shall advise Tenant of the number of days of Tenant Delay (defined
below) attributable to any extraordinary requirements (if any) contained in
Tenant's Information.
(c) Approved Construction Documents. Within 5 days after receipt, Tenant
shall approve or disapprove and return the Construction Documents to Landlord.
Upon Tenant's approval, the Construction Documents shall become the "APPROVED
CONSTRUCTION DOCUMENTS".
2. PRICING AND BIDS.
(a) Estimates. Following receipt of the Approved Construction Documents,
Landlord will promptly price the construction of the Work (defined below) in
accordance therewith and furnish written price estimates to Tenant.
(b) Approved Pricing. Upon receipt, Tenant shall promptly review such
estimates and complete negotiations with Landlord for any changes or adjustments
thereto. Within 5 business days after such receipt, Tenant shall return the
estimates with written approval or disapproval to Landlord.
(c) Competitive Bids. Landlord shall seek 3 competitive bids from
general contractors from Landlord's approved bidding list. Landlord hereby
approves of James R. Thompson Construction. Only subcontractors from Landlord's
approved subcontractor list shall be allowed to work on the mechanical,
electrical and plumbing components of the Building. Tenant shall be invited to
the bid opening and allowed to participate in the selection of the successful
bidder; provided Landlord shall make the final selection of the general
contractor.
-1-
<PAGE> 37
3. LANDLORD'S CONTRIBUTIONS.
(a) Construction Allowance. Landlord will contribute a sum not to exceed
$25.00 per RSF in the Premises (the "CONSTRUCTION ALLOWANCE"), towards the cost
of constructing the Work (as defined below) in accordance with this Construction
Agreement. Payments shall be made directly to Landlord's contractor performing
the Work. The cost of all space planning, design, consulting or review services
and construction drawings shall be included in the cost of the Work and may be
paid out of the Construction Allowance, to the extent sufficient funds are
available for such purpose.
(b) Moving Costs. Tenant may use a portion of the Construction Allowance
(to the extent such funds are available for such purpose) toward the costs of
relocating Tenant's furniture, equipment, telephones and computers to the
Premises and other costs directly associated with Tenant's relocation, including
computer cabling. Such reimbursement shall be made 30 days after occupancy and
receipt of approved third-party invoices from Tenant.
(b) Unused Allowance(s). Any allowance made available to Tenant under
this Construction Agreement must be utilized for its intended purpose during the
initial Term or be forfeited with no further obligation on the part of Landlord.
4. CONSTRUCTION.
(a) The Work. Subject to the terms of this Construction Agreement,
Landlord agrees to cause permanent leasehold improvements to be constructed in
the Premises (the "WORK") in a good and workmanlike manner in accordance with
the Approved Construction Documents.
(b) General Terms. Tenant acknowledges that Landlord is not an architect
or engineer, and that the Work will be designed and performed by independent
architects, engineers and contractors. Accordingly, Landlord does not guarantee
or warrant that the Approved Construction Documents will comply with Applicable
Law or be free from errors or omissions, nor that the Work will be free from
defects, and Landlord Will have no liability therefor. Landlord agrees to
include a provision in the Construction Contract with the contractor that
contractor shall comply with all Applicable Laws. In the event of such errors,
omissions or defects, and upon Tenant's written request, Landlord will use
commercially reasonable efforts to cooperate with Tenant in enforcing any
applicable warranties. In addition, unless expressly agreed to in writing by
Landlord prior to commencement of the Work, Landlord's approval of the
Construction Documents or the Work shall not be interpreted to Waive or
otherwise modify the terms and provisions of the Lease.
(c) Electrical Design Capacity. The following parameters constitute
Building Standard electrical design capacity: (i) all general purpose lighting
shall be 120 volts and all emergency lighting and night lighting shall be 277
volts; (ii) the connected electrical load of all electrical equipment serving
the Premises shall not exceed an average of 4.0 watts per RSF; (iii) no single
item or component of electrical equipment shall have a rated electrical load
greater than 0.5 kilowatt or require voltage other than 120 volts, single phase
(or 110 volts, depending on available service in the Building); and (iv) no
electrical equipment shall exceed the safe and lawful capacity of the existing
electrical circuit(s) and facilities serving the Premises. Any requirements,
services or equipment in excess or contravention of any of the foregoing
parameters (or any combination thereof) shall constitute ABS electrical services
subject to Landlord's approval and Tenant's compliance with the other applicable
provisions of the Lease, specifically including PARAGRAPH 8(d) thereof. However,
the cost of purchasing and installing any ABS electrical equipment approved by
Landlord (including submeters) shall be paid at Tenant's expense, but may be
paid from the Construction Allowance (if any) as part of the Work.
(d) ADA Compliance. Landlord shall, as an Operating Expense, be
responsible for ADA compliance for the base Building, core areas (including
elevators, Common Areas, Service Areas and the Project's parking facilities) and
all
-2-
<PAGE> 38
points of access into the Project. Tenant shall, at its expense (which may be
paid from the unused portion of the Construction Allowance, if any), be
responsible for ADA compliance in the Premises, including restrooms on any floor
now or hereafter leased or occupied in its entirety by Tenant, its affiliates or
Transferees. Landlord shall not be responsible for determining whether Tenant is
a public accommodation under ADA or whether the Approved Construction Documents
comply with ADA requirements. Such determinations, if desired by Tenant, shall
be the sole responsibility of Tenant.
(e) Substantial Completion.
(i) Definition. Subject to adjustment under PARAGRAPHS
4(e)(iii) and 4(e)(iv), "SUBSTANTIAL COMPLETION" shall occur, with respect to
the Premises, when (A) all of the Work has been completed in accordance with
this Construction Agreement and the Approved Construction Documents, to the
extent that Tenant would have access to the Premises and would be able to
conduct its business in a reasonable manner, and (B) Landlord has obtained final
inspection approval from all appropriate regulatory authorities (if required)
for the Premises, even though adjustments or corrections may be necessary and
Punchlist Items remain to be completed.
(ii) Time of the Essence. Time is of the essence in connection
with the obligations of Landlord and Tenant under this Construction Agreement.
(iii) Tenant Delay. If Landlord is delayed in achieving
Substantial Completion due to a delay caused by a Tenant Party or for any other
cause arising from an act or omission of any Tenant Party, including (A)
Tenant's request for change orders to the Work, (B) Tenant's failure to timely
deliver or approve any required documentation, such as Tenant's Information, if
applicable, Construction Documents, pricing estimates, and the like, (C)
Tenant's failure to pay any Cost Overruns (as defined below), or (D) Tenant's
failure to otherwise respond to any other reasonable Landlord request
(collectively, "TENANT DELAY"), Substantial Completion shall be deemed to have
occurred on the date Substantial Completion would have been achieved but for
such Tenant Delay.
(iv) Other Delay. If Substantial Completion is delayed for any
reason other than Tenant Delay, Substantial Completion shall occur on the date
when actually achieved (subject to adjustment for Tenant Delay).
(v) Landlord Liability. Landlord shall not be liable or
responsible for any Claims incurred (or alleged) by Tenant due to any delay in
achieving Substantial Completion for any reason. However, Tenant's sole and
exclusive remedy for any delay in achieving Substantial Completion for any
reason other than Tenant Delay shall be the resulting postponement (if any) of
the commencement of rental payments under the Lease.
5. COSTS.
(a) Change Orders and Cost Overruns. All change orders must be approved
(which approval shall not be unreasonably withheld or delayed) in advance in
writing by Landlord. Change orders requested by Tenant and approved by Landlord
which delay or increase the cost of the Work shall be paid by Tenant within 15
days of receipt of Landlord's invoice therefor (which payment may be required by
Landlord prior to commencing construction). Except as otherwise expressly
provided in this Construction Agreement, all costs of the Work in excess of the
Construction Allowance (collectively, "COST OVERRUNS") shall be paid by Tenant
to Landlord within 10 days of Landlord's invoice. Landlord may stop or decline
to commence all or any portion of the Work until such payment is received. On or
before the Commencement Date, and as a condition to Tenant's right to take
possession of the Premises, Tenant shall pay Landlord the entire amount of all
Cost Overruns, less any prepaid amounts.
-3-
<PAGE> 39
(b) Construction Management Fee. Within 10 days following the date of
invoice, Tenant shall, for supervision and administration of the construction
and installation of the Work, pay Landlord a construction management fee equal
to 5% of the aggregate contract price for the Work (excluding space planning and
engineering costs), which may be paid from the unused portion of the
Construction Allowance (if any). Tenant's failure to pay such amount when due
shall constitute an Event of Default under the Lease.
-4-
<PAGE> 40
EXHIBIT "D"
CERTIFICATE OF ACCEPTANCE OF PREMISES
Re: Office Lease dated _____________, 1999 (the "LEASE") between CRESCENT
REAL ESTATE FUNDING I, L.P. ("LANDLORD") and MARCUS & PARTNERS, L.P.
("TENANT") for approximately 7,922 RSF of Premises on the 8th floor of
The Crescent(R). Unless otherwise specified, all capitalized terms used
herein shall have the same meanings as in the Lease.
Landlord and Tenant agree that:
1. Except for Punchlist Items if any and latent defects, Landlord
has fully completed all Work required under the terms of the
Lease.
2. The Premises are usable by Tenant as intended; Landlord has no
further obligation to perform any Work or other construction
(except Punchlist Items and correction of latent defects), and
Tenant acknowledges that both the Building and the Premises are
satisfactory in all respects (except Punchlist Items and
correction of latent defects).
3. The Commencement Date of the Lease is _________________, 199_.
4. The Expiration Date of the Lease is the last day of
_______________, _________.
5. The Base Rent for purposes of PARAGRAPH 1(h) of the Lease shall
be as follows:
<TABLE>
<CAPTION>
Rental Period Annual Base Rental Rate/RSF Monthly Base Rent
------------- --------------------------- -----------------
<S> <C> <C>
CD to ______ $31.00 $20,465.17
_____ to ___ $32.00 $21,125.33
_____ to ___ $33.00 $21,785.50
_____ to ___ $34.00 $22,445.67
_____ to ED $35.00 $23,105.83
</TABLE>
6. Tenant's Address at the Premises after the Commencement Date
is:
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Attention:
-----------------------------------------------------
Telephone:( )
---------------------------------------
Facsimile:( )
---------------------------------------
All other terms and conditions of the Lease are ratified and acknowledged to be
uncharged.
EXECUTED as of _______________, 199_.
SAMPLE
(ATTACH APPROPRIATE SIGNATURES)
<PAGE> 41
EXHIBIT "E"
RULES AND REGULATIONS
The following rules and regulations shall apply to the Premises and the
Building, and the parking garage associated therewith and the appurtenances
thereto:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by tenants or used by any tenant for purposes
other than ingress and egress to and from their respective leased premises and
for going from one to another part of the Building.
2. Plumbing, fixtures and appliances shall be used only for the purposes
for which designed, and no sweepings, rubbish, rags or other unsuitable material
shall be thrown or deposited therein. Damage resulting to any such plumbing,
fixtures or appliances from misuse by a tenant or its agents, employees or
invitees, shall be paid by such tenant.
3. No signs, advertisements or notices shall be painted or affixed on or
to any windows or doors or any other part of the Building without the prior
written consent of Landlord. No nails, hooks or screws shall be driven or
inserted in any part of the Building except by Building maintenance personnel.
No curtains or other window treatments shall be placed between the glass and the
Building standard window treatments.
4. Landlord shall provide and maintain an alphabetical directory board
for all tenants in the main lobby of the Building.
5. Landlord shall provide all door locks in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
door locks in its leased premises without Landlord's prior written consent.
Landlord shall furnish to each tenant a reasonable number of keys to such
tenant's leased premises, at such tenant's cost, and no tenant shall make a
duplicate thereof.
6. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material or merchandise which
requires use of elevators or stairways or movement through the Building
entrances or lobby shall be conducted under Landlord's supervision and at such
times and in such manner as Landlord may reasonably require. Each tenant assumes
all risks of and shall be liable for all damage to articles moved and injury to
property or persons engaged or not engaged in such movement, including
equipment, property and personnel of Landlord if damaged or injured as a result
of acts in connection with Landlord carrying out this service for such tenant
unless caused by the negligence of Landlord or its employees.
7. Landlord may prescribe weight limitations and determine the locations
for safes and other heavy equipment or items, which shall in all cases be placed
in the Building so as to distribute weight in a manner acceptable to Landlord
which may include the use of such supporting devices as Landlord may require.
All damages to the Building caused by the installation or removal of any
property of a tenant, or caused by a tenant's property while in the Building,
shall be repaired at the expense of such tenant.
8. Corridor doors, when not in use, shall be kept closed. Nothing shall
be swept or thrown into the corridors, halls, elevator shafts or stairways.
9. Tenant shall not allow any animals (other than animals allowed by law
for purposes of aiding disabled individuals), reptiles, fish or birds to be
brought into, or kept in, on or about the Premises, the Building, or the
Project.
10. No portion of any tenant's leased premises shall at any time be used
or occupied as sleeping or lodging quarters.
<PAGE> 42
11. Tenants shall cooperate with Landlord's employees in keeping its
leased premises neat and clean. Tenants shall not employ any person for the
purpose of such cleaning other than the Building's cleaning and maintenance
personnel.
12. To ensure orderly operation of the Building, no ice, mineral or
other water, towels, newspapers, etc., shall be delivered to any leased premises
except by persons reasonably approved by Landlord.
13. Tenant shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Building or otherwise interfere in any way
with other tenants or persons having business with them.
14. No machinery of any kind (other than normal office equipment) shall
be operated by any tenant in its leased premises without Landlord's prior
written consent, nor shall any tenant use or keep in the Building any flammable
or explosive fluid or substance.
15. Landlord will not be responsible for lost or stolen personal
property, money or jewelry from a tenant's leased premises or from public or
common areas regardless of whether such loss occurs when such premises or areas
are or are not locked against entry.
16. No vending or dispensing machines of any kind may be maintained in
any Premises without the prior written permission of Landlord.
17. All mail chutes located in the Building shall be available for use
by Landlord and all tenants of the Building according to the rules of the United
States Postal Service.
In the event that any of the foregoing rules and regulations conflicts
with a specific provision contained in a tenant's lease, the provision in the
lease shall prevail.
<PAGE> 43
EXHIBIT "F-1"
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
ACORD CERTIFICATE OF LIABILITY INSURANCE DATE(MM/DD/YY)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PRODUCER ADDRESS THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO
RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND,
EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
---------------------------------------------------------------------------
COMPANIES AFFORDING COVERAGE
---------------------------------------------------------------------------
COMPANY
A
- - -----------------------------------------------------------------------------------------------------------------------------------
INSURED COMPANY
B
---------------------------------------------------------------------------
COMPANY
C
---------------------------------------------------------------------------
COMPANY
D
- - -----------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- - -----------------------------------------------------------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY
PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH
THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE
TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- - -----------------------------------------------------------------------------------------------------------------------------------
CO POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
- - -----------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY GENERAL AGGREGATE $1,000,000
------------------------------------
X COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG $1,000,000
--- ------------------------------------
CLAIMS MADE X OCCUR PERSONAL & ADV INJURY $1,000,000
--- --- --- ------------------------------------
OWNER'S & CONTRACTOR'S PROT EACH OCCURRENCE $1,000,000
--- ------------------------------------
___________________________ FIRE DAMAGE (Any one fire)$ 50,000
--- ------------------------------------
MED EXP (Any one person) $ 5,000
- - -----------------------------------------------------------------------------------------------------------------------------------
B AUTOMOBILE LIABILITY
X ANY AUTO COMBINED SINGLE LIMIT $1,000,000
---
ALL OWNED AUTOS ------------------------------------
--- BODILY INJURY $
SCHEDULED AUTOS (Per Person)
--- ------------------------------------
X HIRED AUTOS
--- BODILY INJURY $
X NON-OWNED AUTOS (Per accident)
--- ------------------------------------
---------------------------
--- PROPERTY DAMAGE $
- - -----------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
--- ANY AUTO OTHER THAN AUTO ONLY:
--- ___________________________ EACH ACCIDENT $
--- AGGREGATE $
- - -----------------------------------------------------------------------------------------------------------------------------------
C EXCESS LIABILITY EACH OCCURRENCE $2,000,000
X
--- UMBRELLA FORM AGGREGATE $2,000,000
--- OTHER THAN UMBRELLA FORM $
- - -----------------------------------------------------------------------------------------------------------------------------------
D WORKERS COMPENSATION AND WC STATUTORY
EMPLOYERS' LIABILITY LIMITS OTHER
EL EACH ACCIDENT $1,000,000
THE PROPRIETOR/ ___ INCL EL DISEASE - POLICY LIMIT $1,000,000
PARTNERS/EXECUTIVE EL DISEASE - EA EMPLOYEE $1,000,000
OFFICERS ARE: ___ EXCL
- - -----------------------------------------------------------------------------------------------------------------------------------
OTHER
- - -----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
Crescent Real Estate Funding I, L.P., its successors and/or assigns are Additional Insured's on General Liability & Auto Liability
with Waivers of Subrogation on General Liability, Auto Liability & Employers Liability. Insured's Insurance is Primary w/ Agg. per
Loc.
- - ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
- - ------------------------------------------------------------------------------------------------------------------------------------
Crescent Real Estate Funding I, L.P. SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
7 Mail Street, Suite 2100 EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL
Fort Worth, Texas 76102 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT,
BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY
OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES.
-------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
- - ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-5 (I/95) ACORD CORPORATION 1998
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT "F-2"
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EVIDENCE OF PROPERTY INSURANCE DATE(MM/DD/YY)
- - -----------------------------------------------------------------------------------------------------------------------------------
THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES
AFFORDABLE UNDER THE POLICY.
- - -----------------------------------------------------------------------------------------------------------------------------------
PRODUCER PHONE COMPANY
(A/C. No Ext):
---------------------------------------
CODE: SUB CODE:
- - --------------------------------------------------------------------------
AGENCY
CUSTOMER ID#:
- - --------------------------------------------------------------------------
INSURED
- - -----------------------------------------------------------------------------------------------------------------------------------
LOAN NUMBER POLICY NUMBER
--------------------------------------------------------
EFFECTIVE DATE EXPIRATION DATE CONTINUED UNTIL
TERMINATED
[ ] IF CHECKED
--------------------------------------------------------
THIS REPLACES PRIOR EVIDENCE DATED:
- - -----------------------------------------------------------------------------------------------------------------------------------
PROPERTY INFORMATION
- - -----------------------------------------------------------------------------------------------------------------------------------
LOCATION/ DESCRIPTION
- - -----------------------------------------------------------------------------------------------------------------------------------
COVERAGE INFORMATION
- - -----------------------------------------------------------------------------------------------------------------------------------
COVERAGE/PERILS/FORMS AMOUNT OF INSURANCE DEDUCTIBLE
- - -----------------------------------------------------------------------------------------------------------------------------------
Special Form Property Coverage including
Theft and 100% Replacement Cost on
Furniture, Fixtures & Equipments to
including Inventory, Improvements &
Betterments. Limit Ded.
Business Income w/Extra Expense Limit Ded.
Ordinance/Law Coverage Limit Ded.
- - -----------------------------------------------------------------------------------------------------------------------------------
REMARKS (including Special Conditions)
- - -----------------------------------------------------------------------------------------------------------------------------------
Crescent Real Estate Funding I, L.P., its successors and/or assigns, and Landlord's Mortgagees are loss payees as their interests
may appear and are provided a waiver of subrogation on property & business income coverages.
- - -----------------------------------------------------------------------------------------------------------------------------------
CANCELLATION
- - -----------------------------------------------------------------------------------------------------------------------------------
THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH POLICY PERIOD. SHOULD THE POLICY BE TERMINATED,
THE COMPANY WILL GIVE THE ADDITIONAL INTEREST IDENTIFIED BELOW 30 DAYS WRITTEN NOTICE, AND WILL SEND NOTIFICATION OF ANY
CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST, IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW.
- - -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INTEREST
- - -----------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS [ ] MORTGAGEE [ ] ADDITIONAL INSURED
--------------------------------------------------------
[ ] LOSS PAYEE [W] WAIVER OF SUBROGATION
Crescent Real Estate Funding I, L.P. --------------------------------------------------------
77 Main Street, Suite 2100 LOANS
Fort Worth, TX 76102 --------------------------------------------------------
AUTHORIZED REPRESENTATIVE
-------------------------------------------------------
[SAMPLE]
- - -----------------------------------------------------------------------------------------------------------------------------------
ACORD 27(3/93)
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 45
EXHIBIT "F-3"
BUSINESS INTERRUPTION INSURANCE WAIVER
TERMS & CONDITIONS
[Language omitted]
<PAGE> 46
RIDER NO. 1
OPTION TO EXTEND
A. RENEWAL PERIOD. Tenant may, at its option, extend the Term for 1 renewal
period of up to 5 but not less than 3 years (the "RENEWAL PERIOD") by written
notice to Landlord (the "RENEWAL NOTICE" ) given no earlier than 10 nor later
than 8 months prior to the expiration of the Term (as it may have been
extended), provided that at the time of such notice and at the commencement of
such Renewal Period, (i) Tenant remains in occupancy of the Premises, and (ii)
no uncured Event of Default exists under the Lease (and no condition exists
which, with the passage of time and/or giving of notice, would be an Event of
Default). Such Renewal Period shall commence upon the expiration date of the
initial Term. The Base Rent payable during the Renewal Period shall be at
Landlord's Market Rental Rate, including any projected rate increases over the
applicable Renewal Period. Except as provided in this Rider No. 1, all terms and
conditions of the Lease shall continue to apply during the Renewal Period.
B. ACCEPTANCE. Within 15 days of the Renewal Notice, Landlord shall notify
Tenant of the Market Rental Rate for such Renewal Period (the "Rental Notice").
Tenant may accept the terms set forth in the Rental Notice by written notice
(the "Acceptance Notice") to Landlord given within 15 days after receipt of the
Rental Notice. If Tenant timely delivers its Acceptance Notice, Tenant shall,
within 15 days after receipt, execute a lease amendment confirming the Base Rent
and other terms applicable during the Renewal Period. If Tenant fails timely (i)
to deliver its Acceptance Notice or (ii) to execute and return the required
lease amendment, then this Option to Extend shall automatically expire and be of
no further force or effect. In addition, this Option to Extend shall terminate
upon assignment of this Lease or subletting of all or any part of the Premises.
C. MARKET RENTAL RATE. The "MARKET RENTAL RATE" is the rate (or rates) a willing
tenant would pay and a willing landlord would accept for a comparable
transaction (e.g., renewal, expansion, relocation, etc., as applicable, in
comparable space and in a comparable building) as of the commencement date of
the applicable term, neither being under any compulsion to lease and both having
reasonable knowledge of the relevant facts, considering the highest and most
profitable use if offered for lease in the open market with a reasonable period
of time in which to consummate a transaction. In calculating the Market Rental
Rate, all relevant factors will be taken into account, including the location
and quality of the Building, lease term, amenities of the Project, condition of
the space and any concessions and allowances commonly being offered by Landlord
for comparable transactions in the Project. The parties agree that the best
evidence of the Market Rental Rate will be the rate then charged for comparable
transactions in the Project.
<PAGE> 47
D. CONDITION OF PREMISES. The Preferential Space shall be tendered in an "as-is"
condition. However, all leasehold improvements shall be constructed in the
Expansion Space in accordance with the construction agreement (if any) attached
to the applicable lease amendment. Any allowances shall be prorated for any
delays in the Preferential Space Commencement Date, taking into account the
economic assumptions underlying the terms in the Preferential Rental Notice.
E. PARKING. For the Preferential Space, Tenant shall take and pay for additional
permits allowing access to unreserved spaces in parking facilities which
Landlord provides for the use of tenants and occupants of the Project at a ratio
of 1 space per 500 RSF ("PREFERENTIAL SPACE PERMITS"). Tenant may elect to
convert a portion of the unreserved spaces to reserved spaces on an "as
available" basis. During the initial Term (and, if applicable, during any
renewal or extension term of this Lease), Tenant shall pay Landlord's quoted
monthly contract rate (as set from time to time) for each such unreserved
permit, plus any taxes thereon. Notwithstanding anything to the contrary
contained herein, Tenant may elect not to purchase up to 50% of the Preferential
Space Permits; provided however, that in the event Tenant does not purchase all
of the Preferential Space Permits, then Tenant relinquishes its right to such
unpurchased permits (the "RELINQUISHED PREFERENTIAL SPACE PERMITS"). In the
event that Tenant subsequently desires to use all or a portion of the
Relinquished Preferential Space Permits, Tenant shall provide 30 days prior
written notice to Landlord which specifies the number of Relinquished
Preferential Space Permits that Tenant desires to purchase ("TENANT'S PERMIT
NOTICE"). Landlord shall allow Tenant to purchase such unreserved and/or
reserved parking permits within 30 days after Tenant's Permit Notice, at
Landlord's then-quoted monthly contract rate.
<PAGE> 48
RIDER NO. 3
PREFERENTIAL RIGHT TO LEASE
A. PREFERENTIAL RIGHT TO LEASE. So long as twenty-four months remain in the
initial Term, Tenant shall have a Preferential Right to Lease up to
approximately 13,500 RSF (+/-20%, in Landlord's discretion) on the 8th floor of
the Building, as shown on EXHIBIT "A" to the Lease (the "PREFERENTIAL SPACE"),
at such time as such space becomes Available (as defined below) for direct lease
to a new or existing tenant (whether or not a bona fide offer has been made);
provided no uncured Event of Default exists under the Lease (and no condition
exists which, with the passage of time and/or giving of notice, would be an
Event of Default) and Tenant remains in occupancy of the entire Premises. The
Preferential Space shall be deemed "AVAILABLE" at such time as Landlord decides
to offer the Preferential Space for lease and such space is no longer any of the
following: (i) leased or occupied; (ii) assigned or subleased by the
then-current tenant of the space; (iii) re-leased by the then-current tenant of
the space by renewal, extension or renegotiation (whether agreed to prior to or
after the Date of Lease); or (iv) subject to an expansion option, right of first
refusal, preferential right or similar obligation existing under any other
tenant leases for the Project as of the Date of Lease. This Preferential Right
to Lease shall terminate upon relocation of the Premises to another building or
upon any Transfer as defined in the Lease. The Preferential Space shall be
reduced to the extent Tenant leases any portion thereof, whether or not pursuant
to a formal option provision in the Lease.
B. ACCEPTANCE. Prior to leasing the Preferential Space to a new tenant, Landlord
shall first offer such space in writing to Tenant specifying the amount and
location of such space, the anticipated date of tender of possession, the rental
rate based on the then-quoted rental rates for comparable space in the Project
as of the anticipated Preferential Space Commencement Date (as defined below),
including any projected rate increases over the applicable term, and other
applicable terms (the "PREFERENTIAL RENTAL NOTICE"). Tenant shall have 5 days
within which to accept or reject such offer. If Tenant accepts Landlord's offer,
Tenant shall, within 15 days after Landlord's written request, execute and
return a lease amendment adding the Preferential Space to the Premises for all
purposes under the Lease (including any extensions or renewals) and confirming
the Base Rent and other applicable terms specified in the Preferential Rental
Notice. Such lease amendment may, if applicable, contain a construction
agreement using Landlord's then-current form setting forth the schedule and
other terms and obligations of the parties regarding the construction of any
leasehold improvements in the Preferential Space. If Tenant rejects such offer
or fails timely to (i) accept such offer or (ii) execute and return the required
lease amendment, then Landlord shall have the right to lease the Preferential
Space to a new or existing tenant without further notice or obligation to
Tenant. However, in the event Landlord has not executed a new lease for the
Preferential Space within 180 days after the date of the Preferential Rental
Notice or if the Preferential Space is offered to a new or existing tenant under
economic terms which are greater than 5% more favorable than the terms that were
offered to Tenant under the Preferential Notice, Landlord shall not lease the
Preferential Space to any party without again complying with the provisions of
this Rider No. 3.
C. TENDER OF POSSESSION. The Preferential Space shall be leased for the period
commencing upon Landlord's tender of possession of the Preferential Space in
accordance with Landlord's offer and this Rider (the "PREFERENTIAL SPACE
COMMENCEMENT DATE") and continuing through the expiration or earlier termination
of the Term, as it may be extended or renewed. Landlord shall not be liable for
any delay or failure to tender possession of the Preferential Space by the
anticipated tender date for any reason, including by reason of any holdover
tenant or occupant, nor shall such failure invalidate the Lease or extend the
Term.
<PAGE> 1
EXHIBIT 10.19
FIRST AMENDMENT TO OFFICE LEASE
THIS FIRST AMENDMENT TO OFFICE LEASE (this "First Amendment") is
entered into as of the 28th day of March, 2000, by and between CRESCENT REAL
ESTATE FUNDING I, L.P., a Delaware limited partnership ("Landlord"), and MARCUS
& PARTNERS, L.P., a Delaware limited partnership ("Tenant").
RECITALS:
A. Landlord and Tenant executed that certain Office Lease dated May 20,
1999 (the "Lease"), covering certain space therein designated as Suite 800,
containing approximately 7,922 RSF (the "Original Premises"), located on the 8th
floor of an office building commonly known as The Crescent(R), and located at
300 Crescent Court, Dallas, Dallas County, Texas 75201 (the "Building"). Unless
otherwise expressly provided herein, capitalized terms used herein shall have
the same meanings as designated in the Lease.
B. Landlord and Tenant desire to amend and modify the Lease in certain
respects as provided herein.
AGREEMENT:
In consideration of the sum of Ten Dollars ($10.00), the mutual
covenants and agreements contained herein and in the Lease, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby amend and modify the Lease as follows:
1. Premises. The Lease is hereby modified and amended, effective as of
the Expansion Space Commencement Date (hereinafter defined), to include an
additional 1,455 RSF located on the 8th floor of the Building (the "Expansion
Space") as shown on Exhibit A attached hereto. The term "Expansion Space
Commencement Date" shall mean the date which is ninety (90) days after the
execution of this First Amendment by both Landlord and Tenant, but if Tenant
takes possession of the Expansion Space for the conduct of business before such
date, then the Expansion Space Commencement Date shall be the date Tenant in
fact occupies the Expansion Space. From and after the Expansion Space
Commencement Date, the term "Premises" wherever used in the Lease or in this
First Amendment shall mean the Original Premises, together with the Expansion
Space, collectively consisting of 9,377 RSF. Tenant hereby acknowledges that the
Expansion Space is leased by Tenant subject to all terms and conditions of the
Lease, as modified by this First Amendment.
-1-
<PAGE> 2
2. Base Rent. The Lease is hereby modified and amended to provide that
effective as of Expansion Space Commencement Date, and continuing through and
including July 31, 2004, (i) Tenant's Share shall be increased to include the
RSF of the Expansion Space, and (ii) the Base Rent due and payable for the
Expansion Space shall be as follows:
<TABLE>
<CAPTION>
Rental Period Annual Base Rental Rate/RSF Monthly Base Rent
------------- --------------------------- -----------------
<S> <C> <C>
ESCD to 7/31/00 $31.00 $3,758.75
8/1/00 to 7/31/01 $32.00 $3,880.00
8/1/01 to 7/31/02 $33.00 $4,001.25
8/1/02 to 7/31/03 $34.00 $4,122.50
8/1/03 to 7/31/04 $35.00 $4,243.75
</TABLE>
*ESCD = Expansion Space Commencement Date
Base Rent for any partial month shall be pro-rated on a daily basis.
The Base Rent for the Expansion Space shall be paid in addition to the Base Rent
for the Original Premises, and all rental shall be payable in accordance with
the terms and provisions of the Lease.
3. Parking. In addition to any existing parking rights and obligations
of Tenant under the Lease, Tenant shall take and pay for four (4) additional
unreserved parking permits in the parking structure associated with the Project
at Landlord's quoted monthly contract rate (as set from time to time), plus any
taxes thereon in accordance with the terms and provisions of the Lease. Tenant
shall have the right to convert up to two (2) unreserved permits to reserved
permits providing access to the parking structure associated with the Project in
locations determined by Landlord, in its sole discretion. During the initial
Term (and, if applicable, during any renewal or extension term of the Lease),
Tenant shall pay Landlord its quoted monthly contract rate (as set from time to
time) for such reserved permits in the designated garage, plus any taxes
thereon.
4. Leasehold Improvements. Provided no event of default has occurred,
Landlord agrees to (i) construct leasehold improvements in and upon the
Expansion Space, (ii) contribute a sum not to exceed $3,884.85 (calculated on
the basis of $2.67 per RSF in the Expansion Space) towards the cost of
constructing such leasehold improvements, in accordance with the Construction
Agreement attached hereto as Exhibit B.
5. Broker. Tenant represents and warrants that it has had no dealings
with any real estate broker or agent in connection with this First Amendment.
Tenant and Landlord shall each indemnify the other against all costs, expenses,
attorneys' fees, liens and other liability for commissions or other compensation
claimed by any broker or agent claiming the same by, through or under the
indemnifying party.
6. Time of the Essence. Time is of the essence with respect to Tenant's
execution and delivery of this First Amendment to Landlord. If Tenant fails to
execute and deliver a signed copy
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<PAGE> 3
of this First Amendment to Landlord by 5:00 p.m. (Dallas, Texas time), on March
31, 2000, it shall be deemed null and void and shall have no force or effect,
unless otherwise agreed in writing by Landlord. Landlord's acceptance,
execution and return of this document shall constitute Landlord's agreement to
waive Tenant's failure to meet the foregoing deadline.
7. Miscellaneous. This First Amendment shall become effective only upon
full execution and delivery of this First Amendment by Landlord and Tenant. This
First Amendment contains the parties' entire agreement regarding the subject
matter covered by this First Amendment, and supersedes all prior correspondence,
negotiations, and agreements, if any, whether oral or written, between the
parties concerning such subject matter. There are no contemporaneous oral
agreements, and there are no representations or warranties between the parties
not contained in this First Amendment. Except as modified by this First
Amendment, the terms and provisions of the Lease shall remain in full force and
effect, and the Lease, as modified by this First Amendment, shall be binding
upon and shall inure to the benefit of the parties hereto, their successors and
permitted assigns.
8. Ratification. Tenant hereby ratifies and confirms its obligations
under the Lease and represents and warrants to Landlord that it has no defenses
thereto. Additionally, Tenant further confirms and ratifies that, as of the
date hereof, (a) the Lease is and remains in good standing and full force and
effect, and (b) Tenant has no claims, counterclaims, set-offs or defenses
against Landlord arising out of the Lease or in any way relating thereto or
arising out of any other transaction between Landlord and Tenant.
[Remainder of page intentionally left blank]
-3-
<PAGE> 4
EXECUTED as of the day and year first above written.
LANDLORD: TENANT:
CRESCENT REAL ESTATE FUNDING I, L.P., MARCUS & PARTNERS, L.P.,
a Delaware limited partnership a Delaware limited partnership
By: CRE Management I Corp., By: Marcus & Partners Holdings, L.L.C.,
a Delaware corporation, a Delaware limited liability company
its general partner
By: /s/ JEFFREY A. MARCUS
-------------------------------------
Name: Jeffrey A. Marcus
-----------------------------------
Title:
----------------------------------
By: /s/ JOHN L. ZOGG, JR.
---------------------------
John L. Zogg, Jr.
Vice President--Leasing and
Marketing
-4-
<PAGE> 5
EXHIBIT A
DIAGRAM OF EXPANSION SPACE
THE CRESCENT
FLOORS 4 - 10
[FLOORPLAN]
EXHIBIT A-1
FLOOR PLAN OF THE PREMISES
-1-
<PAGE> 6
EXHIBIT B
CONSTRUCTION AGREEMENT
This Construction Agreement is attached as an Exhibit to that certain
First Amendment to Office Lease (the "FIRST AMENDMENT") between CRESCENT REAL
ESTATE FUNDING I, L.P., as Landlord, and MARCUS & PARTNERS, L.P., as Tenant, for
approximately 1,455 RSF of Expansion Space on the 8th floor of The Crescent(R).
Unless otherwise specified, all capitalized terms used in this Construction
Agreement shall have the same meanings as in the First Amendment.
1. APPROVED CONSTRUCTION DOCUMENTS.
(a) Tenant's Information. No later than 3 weeks following Landlord's
execution of the First Amendment, Tenant shall submit to Landlord all
information necessary for the preparation of complete, detailed architectural,
mechanical, electrical and plumbing drawings and specifications for construction
of the Work (as defined below) in the Expansion Space, including Tenant's
partition and furniture layout, reflected ceiling, telephone and electrical
outlets and equipment rooms, initial provider(s) of Telecommunications Services,
doors (including hardware and keying schedule), glass partitions, windows,
critical dimensions, structural loads, millwork, finish schedules, and HVAC and
electrical requirements, together with all supporting information and delivery
schedules ("TENANT'S INFORMATION").
(b) Construction Documents. Following Landlord's execution of the First
Amendment and receipt of Tenant's Information, Landlord's designated
architectural/engineering firm shall prepare and submit to Tenant all finished
and detailed architectural drawings and specifications, including mechanical,
electrical and plumbing drawings (the "CONSTRUCTION DOCUMENTS"). In addition,
Landlord shall advise Tenant of the number of days of Tenant Delay (as defined
below) attributable to extraordinary requirements (if any) contained in Tenant's
Information.
(c) Approved Construction Documents. Within 5 days after receipt,
Tenant shall (i) approve and return the Construction Documents to Landlord, or
(ii) provide Landlord Tenant's written requested changes to the Construction
Documents, in which event Landlord shall have the Construction Documents revised
(as Landlord deems appropriate) and resubmitted to Tenant for approval within 5
days after receipt. If Tenant fails to provide Landlord Tenant's written
requested changes within the applicable 5 day period, Tenant shall be deemed to
have approved the Construction Documents. Upon Tenant's approval, the
Construction Documents shall become the "APPROVED CONSTRUCTION DOCUMENTS".
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<PAGE> 7
2. PRICING AND BIDS.
(a) Estimates. Following receipt of the Approved Construction
Documents, Landlord will promptly price the construction of the Work (defined
below) in accordance therewith and furnish written price estimates to Tenant.
(b) Approved Pricing. Upon receipt, Tenant shall promptly review such
estimates and complete negotiations with Landlord for any changes or adjustments
thereto. Within 5 business days after such receipt, Tenant shall return the
estimates with written approval or disapproval to Landlord.
(c) Competitive Bids. Landlord shall seek 3 competitive bids from
general contractors from Landlord's approved bidding list. Landlord hereby
approves of James R. Thompson Construction. Only subcontractors from Landlord's
approved subcontractor list shall be allowed to work on the mechanical,
electrical and plumbing components of the Building. Tenant shall be invited to
the bid opening and allowed to participate in the selection of the successful
bidder; provided Landlord shall make the final selection of the general
contractor.
3. LANDLORD'S CONTRIBUTIONS.
(a) Construction Allowance. Landlord will contribute a sum not to
exceed $2.67 per RSF in the Expansion Space (the "CONSTRUCTION ALLOWANCE"),
towards the cost of constructing the Work (as defined below) in accordance with
this Construction Agreement. Payments shall be made directly to Landlord's
contractor performing the Work. The cost of all space planning, design,
consulting or review services and construction drawings shall be included in the
cost of the Work and may be paid out of the Construction Allowance, to the
extent sufficient funds are available for such purpose.
(b) Unused Allowance. Any allowance made available to Tenant under this
Construction Agreement must be utilized for its intended purpose during the
initial Term or be forfeited with no further obligation on the part of Landlord.
4. CONSTRUCTION.
(a) The Work. Subject to the terms of this Construction Agreement,
Landlord agrees to cause permanent leasehold improvements to be constructed in
the Expansion Space (the "WORK") in a good and workmanlike manner in accordance
with the Approved Construction Documents.
(b) General Terms. Tenant acknowledges that Landlord is not an
architect or engineer, and that the Work will be designed and performed by
independent architects, engineers and contractors. Accordingly, Landlord does
not guarantee or warrant that the Approved Construction Documents will comply
with Applicable Law or be free from errors or omissions, nor that the Work will
be free from defects, and Landlord will have no liability therefor. Landlord
agrees to include
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<PAGE> 8
a provision in the Construction Contract with the contractor that contractor
shall comply with all Applicable Laws. In the event of such errors, omissions or
defects, and upon Tenant's written request, Landlord will use commercially
reasonable efforts to cooperate with Tenant in enforcing any applicable
warranties. In addition, unless expressly agreed to in writing by Landlord prior
to commencement of the Work, Landlord's approval of the Construction Documents
or the Work shall not be interpreted to Waive or otherwise modify the terms and
provisions of the Lease.
(c) Electrical Design Capacity. The following parameters constitute
Building Standard electrical design capacity: (i) all general purpose lighting
shall be 120 volts and all emergency lighting and night lighting shall be 277
volts; (ii) the connected electrical load of all electrical equipment serving
the Premises shall not exceed an average of 4.0 watts per RSF; (iii) no single
item or component of electrical equipment shall have a rated electrical load
greater than 0.5 kilowatt or require voltage other than 120 volts, single phase
(or 110 volts, depending on available service in the Building); and (iv) no
electrical equipment shall exceed the safe and lawful capacity of the existing
electrical circuit(s) and facilities serving the Premises. Any requirements,
services or equipment in excess or contravention of any of the foregoing
parameters (or any combination thereof) shall constitute ABS electrical services
subject to Landlord's approval and Tenant's compliance with the other applicable
provisions of the Lease, specifically including PARAGRAPH 8(d) thereof. However,
the cost of purchasing and installing any ABS electrical equipment approved by
Landlord (including submeters) shall be paid at Tenant's expense, but may be
paid from the Construction Allowance (if any) as part of the Work.
(d) ADA Compliance. Landlord shall, as an Operating Expense, be
responsible for ADA compliance for the base Building, core areas (including
elevators, Common Areas, Service Areas and the Project's parking facilities) and
all points of access into the Project. Tenant shall, at its expense (which may
be paid from the unused portion of the Construction Allowance, if any), be
responsible for ADA compliance in the Premises, including restrooms on any floor
now or hereafter leased or occupied in its entirety by Tenant, its affiliates or
Transferees. Landlord shall not be responsible for determining whether Tenant is
a public accommodation under ADA or whether the Approved Construction Documents
comply with ADA requirements. Such determinations, if desired by Tenant, shall
be the sole responsibility of Tenant.
(e) Substantial Completion.
(i) Definition. Subject to adjustment under PARAGRAPHS
4(e)(iii) and 4(e)(iv), "SUBSTANTIAL COMPLETION" shall occur, with respect to
the Expansion Space, when (A) all of the Work has been completed in accordance
with this Construction Agreement and the Approved Construction Documents, to the
extent that Tenant would have access to the Expansion Space and would be able to
conduct its business in a reasonable manner, and (B) Landlord has obtained final
inspection approval from all appropriate regulatory authorities (if required)
for the Expansion Space, even though adjustments or corrections may be necessary
and Punchlist Items remain to be completed.
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<PAGE> 9
(ii) Time of the Essence. Time is of the essence in connection
with the obligations of Landlord and Tenant under this Construction Agreement.
(iii) Tenant Delay. If Landlord is delayed in achieving
Substantial Completion due to a delay caused by a Tenant Party or for any other
cause arising from an act or omission of any Tenant Party, including (A)
Tenant's request for change orders to the Work, (B) Tenant's failure to timely
deliver or approve any required documentation, such as Tenant's Information, if
applicable, Construction Documents, pricing estimates, and the like, (C)
Tenant's failure to pay any Cost Overruns (as defined below), or (D) Tenant's
failure to otherwise respond to any other reasonable Landlord request
(collectively, "TENANT DELAY"), Substantial Completion shall be deemed to have
occurred on the date Substantial Completion would have been achieved but for
such Tenant Delay.
(iv) Other Delay. If Substantial Completion is delayed for any
reason other than Tenant Delay, Substantial Completion shall occur on the date
when actually achieved (subject to adjustment for Tenant Delay).
(v) Landlord Liability. Landlord shall not be liable or
responsible for any Claims incurred (or alleged) by Tenant due to any delay in
achieving Substantial Completion for any reason. However, Tenant's sole and
exclusive remedy for any delay in achieving Substantial Completion for any
reason other than Tenant Delay shall be the resulting postponement (if any) of
the commencement of rental payments under the Lease.
5. COSTS.
(a) Change Orders and Cost Overruns. All change orders must be approved
(which approval shall not be unreasonably withheld or delayed) in advance in
writing by Landlord. Change orders requested by Tenant and approved by Landlord
which delay or increase the cost of the Work shall be paid by Tenant within 15
days of receipt of Landlord's invoice therefor (which payment may be required by
Landlord prior to commencing construction). Except as otherwise expressly
provided in this Construction Agreement, all costs of the Work in excess of the
Construction Allowance (collectively, "COST OVERRUNS") shall be paid by Tenant
to Landlord within 10 days of Landlord's invoice. Landlord may stop or decline
to commence all or any portion of the Work until such payment is received. On or
before the Expansion Space Commencement Date, and as a condition to Tenant's
right to take possession of the Expansion Space, Tenant shall pay Landlord the
entire amount of all Cost Overruns, less any prepaid amounts.
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<PAGE> 1
EXHIBIT 10.20
ASSIGNMENT OF
OFFICE LEASE
THIS ASSIGNMENT OF OFFICE LEASE (this "Assignment") is made as of this 4th
day of April, 2000 (the "Effective Date"), by and between MARCUS & PARTNERS,
L.P., a Delaware limited partnership ("Assignor"), and eVENTURES GROUP, INC.
("Assignee"). Capitalized terms not defined herein shall have the meanings
ascribed to them in the Lease (as defined below).
WITNESSETH:
WHEREAS, Crescent Real Estate Funding I, L.P., a Delaware limited
partnership ("Landlord"), is the owner of that certain office building located
at 300 Crescent Court, Dallas, Texas 75201, which is commonly known as the
"Crescent" (the "Building");
WHEREAS, Landlord and Assignor are parties to that certain Office Lease
dated May 20, 1999, as amended by that certain First Amendment to Office Lease
dated March 28th, 2000 (collectively, the "Lease"), whereby Assignor leases from
Landlord approximately 9,377 rentable square feet on the 8th floor of the
Building; and
WHEREAS, Assignor and Assignee desire to enter into this Assignment in
order to assign the Assignor's rights and interests in the Lease to Assignee and
to evidence Assignee's assumption of Assignor's obligations and liabilities
under the Lease.
ASSIGNMENT:
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor and Assignee agree as follows:
1. Assignment of Lease. Assignor hereby assigns and transfers to Assignee all
of Assignor's right, title, claim and interest in and to the Lease.
2. Assumption. Assignee hereby acknowledges and agrees to all of the terms of
the Lease and accepts the foregoing assignment, and Assignee assumes and
agrees to satisfy and perform, from and after the Effective Date, all the
duties and obligations of the Tenant under the Lease, in accordance with
the terms thereof.
3. Indemnification. Assignee hereby agrees to indemnify and hold Assignor
harmless from (i) any and all duties or obligations of the Tenant under the
Lease arising or occurring after the Effective Date and (ii) any costs,
damages, liabilities or expenses of any nature whatsoever which arise or
occur subsequent to the Effective Date and result from Assignee's failure
or inability to satisfy and/or perform the duties or obligations of the
Tenant under the Lease from and after the Effective Date.
<PAGE> 2
Assignor hereby agrees to indemnify and hold Assignee harmless from (i) any
and all duties or obligations of the Tenant under the Lease arising or
occurring prior to the Effective Date and (ii) any costs, damages,
liabilities or expenses of any nature whatsoever which arise or occur prior
to the Effective Date and result from Assignor's failure or inability to
satisfy and/or perform the duties or obligations of the Tenant under the
Lease prior to the Effective Date.
4. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as
of the Effective Date.
ASSIGNOR: MARCUS & PARTNERS, L.P.,
a Delaware limited partnership
By: J&N Ventures, Inc.,
its general partner
By: /s/ JEFFREY A. MARCUS
-----------------------------------
Jeffrey A. Marcus
President, Chief Executive
Officer, Secretary and Treasurer
ASSIGNEE: eVENTURES GROUP, INC.
By: /s/ STUART CHASANOFF
------------------------------------
Name: Stuart Chasanoff
----------------------------------
Title: Vice President
---------------------------------
2
<PAGE> 1
EXHIBIT 10.21
CONSENT TO ASSIGNMENT
This CONSENT TO ASSIGNMENT (this "CONSENT") is entered into by and
among Landlord, Tenant and Assignee with reference to the following:
1. GENERAL TERMS. All capitalized terms used in this Consent shall have
the same meanings as set forth in the Lease, unless otherwise provided below:
a. "EFFECTIVE DATE": April 4, 2000
b. "LANDLORD": CRESCENT REAL ESTATE FUNDING I, L.P.,
a Delaware limited partnership
c. "TENANT": MARCUS & PARTNERS, L.P.,
a Delaware limited partnership
d. "ASSIGNEE": eVENTURES GROUP, INC.,
a Delaware corporation
e. "LEASE": Office Lease dated May 20, 1999, as it
may have been amended from time to time.
f. "PREMISES": Approximately 9,377 RSF on the 8th floor
of the Building.
g. "BUILDING": The Crescent(R), 100, 200 and 300
Crescent Court, Dallas, Texas.
h. "ASSIGNMENT": Assignment of Office Lease dated
effective as of April 4, 2000.
i. "EXCESS CONSIDERATION": N/A.
2. RECITALS.
a. Tenant is the tenant under the Lease, under which Landlord leased to
Tenant the Premises located in the Building.
b. Tenant desires to assign all of its right, title and interest in the
Lease to Assignee.
c. The terms of the Lease require Landlord's consent to any such
assignment.
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<PAGE> 2
3. LANDLORD'S CONSENT. As of the Effective Date, Landlord consents to the
assignment of all of Tenant's right, title and interest in and under the Lease
to Assignee pursuant to the Assignment, a copy of which is attached as EXHIBIT
"A," subject to the terms and conditions of this Consent.
4. ASSUMPTION. Assignee expressly assumes and agrees to perform all of the
covenants, duties and obligations of Tenant under the Lease. Assignee
acknowledges that it has examined and is familiar with all of the terms and
provisions of the Lease.
5. PROHIBITION AGAINST FURTHER TRANSFER. Assignee shall not, without Landlord's
prior written consent in each instance in accordance with PARAGRAPH 12(c) of the
Lease, (i) convey, assign or encumber the Lease or any interest in the Lease,
directly or indirectly, voluntarily or by operation of law, including the merger
or conversion of Assignee with or into another entity, (ii) sublet all or any
portion of the Premises, or (iii) permit the use or occupancy of any part of the
Premises by anyone other than Assignee (any of the foregoing actions shall be a
"PROHIBITED TRANSFER"). If Assignee is other than an individual, any change in
Control (defined in the following sentence) of Assignee shall constitute a
Prohibited Transfer. "CONTROL" means the direct or indirect power to direct or
cause direction of the management and policies of an entity, whether through
ownership of voting securities, by contract or otherwise. Conversely, Assignee
shall not sublease space from, or assume the lease obligations of, another
tenant in the Building (or, if the Building is part of a multi-building project,
another tenant in such project) without Landlord's prior written consent.
Following any Prohibited Transfer, Assignee (and any guarantors) shall remain
fully liable under the Lease and this Consent under the terms and conditions of
the Lease as it exists on the date of the Prohibited Transfer, and Landlord may
proceed directly under the Lease or this Consent against Assignee (or any
guarantors) without first proceeding against any other party. If Landlord, or an
affiliate of Landlord, is a real estate investment trust under Section 856, et
seq. of the Internal Revenue Code of 1986, as amended ("CODE"), any Prohibited
Transfer will be void ab initio. Assignee hereby confirms that PARAGRAPH 12 of
the Lease remains valid and binding on Assignee.
6. LANDLORD'S OBLIGATIONS. Notwithstanding anything to the contrary contained in
the Assignment, subject to Landlord's release of Tenant set forth in PARAGRAPH
12, neither the Assignment nor this Consent shall (i) enlarge or increase
Landlord's obligations or liability, or (ii) reduce or decrease Landlord's
rights, under the Lease or otherwise. Landlord is not a party to the Assignment
and, therefore, is not bound by any of the terms of the Assignment.
7. EXCESS CONSIDERATION. In the event that the rental and other consideration
payable to Tenant by Assignee under the Assignment exceed the rental payable
under the Lease, then Tenant shall be bound and obligated to pay Landlord the
Excess Consideration set forth in PARAGRAPH 1.i. Tenant's failure to pay to
Landlord such amounts when due shall be an event of default under the Primary
Lease.
8. OPTIONS. Notwithstanding anything to the contrary contained in the Lease,
Landlord agrees that Assignee shall be entitled to exercise any renewal,
expansion, right of first refusal or other similar options or rights afforded to
Tenant under the Lease.
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<PAGE> 3
9. BROKERAGE. Tenant and Assignee each agree to indemnify, defend and hold
Landlord and its designated property management, construction and marketing
firms harmless from and against any and all damage, loss, cost or expense,
including, without limitation, all attorneys' fees and disbursements, incurred
by reason of any claim of or liability to any broker or other person for
commissions or other compensation or charges with respect to the negotiation,
execution and delivery of the Assignment. The obligations of Tenant and Assignee
under this PARAGRAPH 9 shall survive the expiration or sooner termination of the
Lease.
10. OTHER AGREEMENTS. Other than the Lease, the Assignment and this Consent,
there are no other agreements or understandings, whether written or oral,
between Tenant and Assignee with respect to the assignment of the Lease to
Assignee or with respect to Assignee's use and occupancy of the Premises. No
compensation or consideration is payable or will become due and payable to
Tenant or any affiliate of Tenant in connection with the Assignment of Tenant's
leasehold interest other than the consideration expressly set forth in the
Assignment. This Consent shall not be amended orally, but only by an agreement
in writing signed by all parties to this Consent.
11. INDEMNITY. IN ADDITION TO ANY OTHER RIGHT OR REMEDY AVAILABLE TO LANDLORD AT
LAW, IN EQUITY, OR UNDER THE LEASE OR THIS CONSENT FOR ASSIGNEE'S VIOLATION OF
PARAGRAPH 5 OF THIS CONSENT, ASSIGNEE SHALL INDEMNIFY LANDLORD AGAINST ANY
DAMAGES, LOSSES, INJURIES, COSTS, EXPENSES OR LIABILITIES RESULTING FROM THE
FAILURE OF ANY PART OF THE GROSS INCOME FROM THE BUILDING TO QUALIFY AS "RENTS
FROM REAL PROPERTY," AS SUCH TERM IS DEFINED IN SECTION 856(D) OF THE CODE,
BECAUSE OF A PROHIBITED TRANSFER.
12. RELEASE OF TENANT. Notwithstanding anything to the contrary contained in the
Lease, effective as of April 4, 2000 (the effective date of the Assignment),
Tenant shall have no further liability or obligation to Landlord with respect to
the Lease, except for any unperformed obligations under the Lease prior to April
4,2000 and any adjustments required in connection with the payment of Excess
Operating Expenses for the 2000 calendar year (pro rated from January 1, 2000
through April 4,2000) pursuant to PARAGRAPH 7 of the Lease. Accordingly,
Landlord releases Tenant from and against any and all claims arising out of or
relating to the Lease and/or Tenant's use and occupancy of the Premises;
provided, however, all indemnities and all provisions contained in the Lease
with respect to liability insurance coverage by Tenant shall survive April
4,2000 with respect to any and all matters which shall have accrued on or before
April 4, 2000.
13. BINDING EFFECT. This Consent and its provisions shall be binding on and
inure to the benefit of the parties to this Consent and their successors and
permitted assigns.
14. RECORDING. Neither this Consent nor the Assignment may be recorded, without
Landlord's prior written consent.
15. CONFLICTS. In the event of any conflicts among the provisions of the Lease,
the Assignment and this Consent, the provisions of this Consent and the Lease
shall control; and in the event of any
PAGE 3
<PAGE> 4
conflicts between the provisions of the Lease and this Consent, the provisions
of this Consent shall control.
ACCORDINGLY, the parties have executed this Consent as of the
Effective Date.
LANDLORD:
CRESCENT REAL ESTATE FUNDING I, L.P.,
a Delaware limited partnership
By: CRE Management I Corp., a Delaware
corporation, its general partner
By: /s/ John L. Zogg, Jr.
-------------------------------------
Name: John L. Zogg, Jr.
-----------------------------------
Title: Vice President, Leasing/Marketing
----------------------------------
TENANT:
MARCUS & PARTNERS, L.P.,
a Delaware limited partnership
By: J & N Ventures, Inc., its general partner
By: /s/ Jeffrey A. Marcus
-------------------------------------
Name: Jeffrey A. Marcus
-----------------------------------
Title: President, Chief Executive Officer,
Secretary and Treasurer
----------------------------------
ASSIGNEE:
eVENTURES GROUP, INC.,
a Delaware corporation
By: /s/ Jeffrey A. Marcus
-------------------------------------
Name: Jeffrey A. Marcus
-----------------------------------
Title: CEO
----------------------------------
PAGE 4
<PAGE> 5
EXHIBIT A TO CONSENT TO ASSIGNMENT
ASSIGNMENT OF
OFFICE LEASE
THIS ASSIGNMENT OF OFFICE LEASE (this "Assignment") is made as
of this 4th day of April, 2000 (the "Effective Date"), by and between MARCUS &
PARTNERS, L.P., a Delaware limited partnership ("Assignor"), and eVENTURES
GROUP, INC. ("Assignee"). Capitalized terms not defined herein shall have the
meanings ascribed to them in the Lease (as defined below).
WITNESSETH:
WHEREAS, Crescent Real Estate Funding I, L.P., a Delaware
limited partnership ("Landlord"), is the owner of that certain office building
located at 300 Crescent Court, Dallas, Texas 75201, which is commonly known as
the "Crescent" (the "Building");
WHEREAS, Landlord and Assignor are parties to that certain
Office Lease dated May 20, 1999, as amended by that certain First Amendment to
Office Lease dated March 28th, 2000 (collectively, the "Lease"), whereby
Assignor leases from Landlord approximately 9,377 rentable square feet on the
8th floor of the Building; and
WHEREAS, Assignor and Assignee desire to enter into this
Assignment in order to assign the Assignor's rights and interests in the Lease
to Assignee and to evidence Assignee's assumption of Assignor's obligations and
liabilities under the Lease.
ASSIGNMENT:
NOW, THEREFORE, for valuable consideration, the receipt, and
sufficiency of which are hereby acknowledged, Assignor and Assignee agree as
follows:
1. Assignment of Lease. Assignor hereby assigns and transfers to Assignee
all of Assignor's right, title, claim and interest in and to the Lease.
2. Assumption. Assignee hereby acknowledges and agrees to all of the terms
of the Lease and accepts the foregoing assignment, and Assignee assumes
and agrees to satisfy and perform, from and after the Effective Date,
all the duties and obligations of the Tenant under the Lease, in
accordance with the terms thereof.
3. Indemnification. Assignee hereby agrees to indemnify and hold Assignor
harmless from (i) any and all duties or obligations of the Tenant under
the Lease arising or occurring after the Effective Date and (ii) any
costs, damages, liabilities or expenses of any nature whatsoever which
arise or occur subsequent to the Effective Date and result from
Assignee's failure or inability to satisfy and/or perform the duties or
obligations of the Tenant under the Lease from and after the Effective
Date.
<PAGE> 6
Assignor hereby agrees to indemnify and hold Assignee harmless from (i)
any and all duties or obligations of the Tenant under the Lease arising
or occurring prior to the Effective Date and (ii) any costs, damages,
liabilities or expenses of any nature whatsoever which arise or occur
prior to the Effective Date and result from Assignor's failure or
inability to satisfy and/or perform the duties or obligations of the
Tenant under the Lease prior to the Effective Date.
4. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment as of the Effective Date.
ASSIGNOR: MARCUS & PARTNERS, L.P.,
a Delaware limited partnership
By: J&N Ventures, Inc.,
its general partner
By: /s/ JEFFREY A. MARCUS
----------------------------------
Jeffrey A. Marcus
President, Chief Executive
Officer, Secretary and Treasurer
ASSIGNEE: eVENTURES GROUP, INC.
By: /s/ STUART CHASANOFF
--------------------------------------
Name: Stuart Chasanoff
------------------------------------
Title: Vice President
-----------------------------------
2
<PAGE> 1
EXHIBIT 10.22
SECOND AMENDMENT TO OFFICE LEASE
THIS SECOND AMENDMENT TO OFFICE LEASE (this "Second Amendment") is
entered into as of the 24th day of April, 2000, by and between CRESCENT REAL
ESTATE FUNDING I, L.P., a Delaware limited partnership ("Landlord"), and
eVENTURES GROUP, INC., a Delaware corporation ("Tenant").
RECITALS:
A. Landlord and Marcus & Partners, L.P., predecessor-in-interest to
Tenant, executed that certain Office Lease dated May 20, 1999 (the "Original
Lease"), covering certain space therein designated as Suite 800, containing
approximately 7,922 RSF (the "Original Premises"), located on the 8th floor of
an office building commonly known as The Crescent(R), and located at 100, 200
and 300 Crescent Court, Dallas, Dallas County, Texas 75201 (the "Building").
B. The Original Lease has been amended by that certain First Amendment
to Office Lease dated March 28, 2000 (the "First Amendment"), pursuant to which
the Original Premises were expanded to include an additional 1,455 RSF (the
"First Expansion Space").
C. The Original Lease, as modified by the First Amendment is
hereinafter referred to as the "Lease". The Original Premises, together with the
First Expansion Space, collectively consisting of 9,377 RSF, are hereinafter
referred to as the "Existing Premises". Unless otherwise expressly provided
herein, capitalized terms used herein shall have the same meanings as designated
in the Lease.
D. Landlord and Tenant desire to amend and modify the Lease in
certain respects as provided herein.
AGREEMENT:
In consideration of the sum of Ten Dollars ($10.00), the mutual
covenants and agreements contained herein and in the Lease, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby amend and modify the Lease as follows:
1. Premises. The Lease is hereby modified and amended, effective as of
the Second Expansion Space Commencement Date (hereinafter defined), to include
an additional 4,257 RSF designated as Suite 825 and located on the 8th floor of
200 Crescent Court (the "Second Expansion Space") as shown on Exhibit A-1
attached hereto. The term "Second Expansion Space Commencement Date" shall mean
the later of (i) July 1, 2000, or (ii) upon Substantial Completion of the Second
Expansion Space Work (as such terms are defined in the Work Letter attached
hereto
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<PAGE> 2
as Exhibit B), but if Tenant takes possession of the Second Expansion Space
before either such date, then the Second Expansion Space Commencement Date shall
be the date Tenant in fact occupies the Second Expansion Space for the conduct
of business. From and after the Second Expansion Space Commencement Date, the
term "Premises" wherever used in the Lease or in this Second Amendment shall
mean the Existing Premises, together with the Second Expansion Space,
collectively consisting of 13,634 RSF. Tenant hereby acknowledges that the
Second Expansion Space is leased by Tenant subject to all terms and conditions
of the Lease, as modified by this Second Amendment.
2. Base Rent. The Lease is hereby modified and amended to provide that
effective as of Second Expansion Space Commencement Date, and continuing through
and including July 31, 2004, (i) Tenant's Share shall be increased to include
the RSF of the Second Expansion Space, and (ii) the Base Rent due and payable
for the Second Expansion Space shall be as follows:
<TABLE>
<CAPTION>
Rental Period Annual Base Rental Rate/RSF Monthly Base Rent
- - ------------- --------------------------- -----------------
<S> <C> <C>
SESCD to 7/31/00 $31.00 $10,997.25
8/1/00 to 7/31/01 $32.00 $11,352.00
8/1/01 to 7/31/02 $33.00 $11,706.75
8/1/02 to 7/31/03 $34.00 $12,061.50
8/1/03 to 7/31/04 $35.00 $12,416.25
*SESCD = Second Expansion Space Commencement Date
</TABLE>
Base Rent for any partial month shall be pro-rated on a daily basis. The Base
Rent for the Second Expansion Space shall be paid in addition to the Base Rent
for the Existing Premises, and all rental shall be payable in accordance with
the terms and provisions of the Lease.
3. Parking. In addition to any existing parking rights and obligations
of Tenant under the Lease, Tenant shall take and pay for seven (7) additional
unreserved parking permits in the parking structure associated with the Project
at Landlord's quoted monthly contract rate (as set from time to time), plus any
taxes thereon in accordance with the terms and provisions of the Lease. Tenant
shall have the right to convert up to three (3) unreserved permits to reserved
permits providing access to the parking structure associated with the Project in
locations determined by Landlord, in its sole discretion. During the initial
Term (and, if applicable, during any renewal or extension term of the Lease),
Tenant shall pay Landlord its quoted monthly contract rate (as set from time to
time) for such reserved permits in the designated garage, plus any taxes
thereon.
4. Leasehold Improvements. Provided no event of default has occurred,
Landlord agrees to (i) construct leasehold improvements in and upon the Second
Expansion Space, (ii) contribute a sum not to exceed $102,168.00 (calculated on
the basis of $24.00 per RSF in the Second Expansion Space) towards the cost
of constructing such leasehold improvements, in accordance with the Construction
Agreement attached hereto as Exhibit B.
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<PAGE> 3
5. Club Memberships. Paragraph 26(a) of the Lease is hereby
modified and amended to provide that effective as of the Second Expansion Space
Commencement Date, at Tenant's written request ("Tenant's Notice") to Landlord
at any time during the initial Term, Landlord agrees to pay, out of the Base
Rent payable for the next month of the Term in which Base Rent is due after
Tenant's written notice to Landlord, directly to The Crescent Club (the
"Crescent Club") and/or The Spa at the Crescent (the "Spa") (collectively, the
"Club") on behalf of Tenant, the initiation fees in connection with up to 2
additional memberships to the Crescent Club and/or the Spa. Tenant may elect all
such memberships to be at The Crescent Club or at The Spa at the Crescent or any
combination thereof, provided that the combined total number of initiation fees
which Landlord shall pay on Tenant's behalf at The Crescent Club and The Spa at
the Crescent shall not exceed 2, and such election shall be specified in
Tenant's Notice. Such memberships shall be activated on the first day of the
month after Tenant's Notice (or as soon thereafter as practicable), subject to
the prior approval of the Crescent Club and the Spa, as applicable. Other than
the initiation fees, all monthly dues and charges (including applicable state
and local taxes) incurred by Tenant or any other person in connection with the
use of such memberships shall be solely the responsibility of Tenant. Use of the
foregoing memberships shall be subject to the Club rules and regulations and the
continued existence of the Club.
6. Expansion Option. Notwithstanding anything to the contrary contained
in Paragraph 12 of the Lease or Rider No. 1 to the Lease, Landlord hereby agrees
that Tenant shall have the option to extend the Lease pursuant to the terms and
provisions of Rider No. 1 to the Lease.
7. Preferential Right to Lease. Rider No. 3 to the Lease is hereby
deleted in its entirety and replaced with Rider No. 3 attached hereto and made a
part hereof.
8. Broker. Tenant represents and warrants that it has had no dealings
with any real estate broker or agent in connection with this Second Amendment.
Tenant and Landlord shall each indemnify the other against all costs, expenses,
attorneys' fees, liens and other liability for commissions or other compensation
claimed by any broker or agent claiming the same by, through or under the
indemnifying party.
9. Time of the Essence. Time is of the essence with respect to Tenant's
execution and delivery of this Second Amendment to Landlord. If Tenant fails to
execute and deliver a signed copy of this Second Amendment to Landlord by
5:00 p.m. (Dallas, Texas time), on April 28, 2000, it shall be deemed null and
void and shall have no force or effect, unless otherwise agreed in writing by
Landlord. Landlord's acceptance, execution and return of this document shall
constitute Landlord's agreement to waive Tenant's failure to meet the foregoing
deadline.
10. Miscellaneous. This Second Amendment shall become effective only
upon full execution and delivery of this Second Amendment by Landlord and
Tenant. This Second Amendment contains the parties' entire agreement regarding
the subject matter covered by this Second Amendment, and supersedes all prior
correspondence, negotiations, and agreements, if any,
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<PAGE> 4
whether oral or written, between the parties concerning such subject matter.
There are no contemporaneous oral agreements, and there are no representations
or warranties between the parties not contained in this Second Amendment. Except
as modified by this Second Amendment, the terms and provisions of the Lease
shall remain in full force and effect, and the Lease, as modified by this Second
Amendment, shall be binding upon and shall inure to the benefit of the parties
hereto, their successors and permitted assigns.
11. Ratification. Tenant hereby ratifies and confirms its obligations
under the Lease and represents and warrants to Landlord that it has no defenses
thereto. Additionally, Tenant further confirms and ratifies that, as of the date
hereof, (a) the Lease is and remains in good standing and full force and effect,
and (b) Tenant has no claims, counterclaims, set-offs or defenses against
Landlord arising out of the Lease or in any way relating thereto or arising out
of any other transaction between Landlord and Tenant.
EXECUTED as of the day and year first above written.
LANDLORD: TENANT:
CRESCENT REAL ESTATE FUNDING I, EVENTURES GROUP, INC.,
L.P, a Delaware limited partnership a Delaware corporation
By: CRE Management I Corp.,
a Delaware corporation,
its general partner By: /s/ JEFFREY A. MARCUS
----------------------------------
Name: Jeffrey A. Marcus
--------------------------------
Title: CEO
-------------------------------
By: /s/ JOHN L. ZOGG, JR.
--------------------------
John L. Zogg, Jr.
Vice President--Leasing and
Marketing
-4-
<PAGE> 5
EXHIBIT A-1
DIAGRAM OF SECOND EXPANSION SPACE
THE CRESCENT
FLOORS 4 - 10
[FLOORPLAN]
EXHIBIT A-1
FLOOR PLAN OF THE PREMISES
-1-
<PAGE> 6
EXHIBIT A-2
DIAGRAM OF PREFERENTIAL SPACE
THE CRESCENT
FLOORS 4 - 10
[FLOORPLAN]
EXHIBIT A-1
FLOOR PLAN OF THE PREMISES
-1-
<PAGE> 7
EXHIBIT B
CONSTRUCTION AGREEMENT
This Construction Agreement is attached as an Exhibit to that certain
Second Amendment to Office Lease (the "SECOND AMENDMENT") between CRESCENT REAL
ESTATE FUNDING I, L.P., as Landlord, and EVENTURES GROUP, INC., as Tenant, for
approximately 4,257 RSF of Second Expansion Space on the 8th floor of The
Crescent(R). Unless otherwise specified, all capitalized terms used in this
Construction Agreement shall have the same meanings as in the Second Amendment.
1. APPROVED CONSTRUCTION DOCUMENTS.
(a) Tenant's Information. No later than 3 weeks following Landlord's
execution of the Second Amendment, Tenant shall submit to Landlord all
information necessary for the preparation of complete, detailed architectural,
mechanical, electrical and plumbing drawings and specifications for construction
of the Work (as defined below) in the Second Expansion Space, including Tenant's
partition and furniture layout, reflected ceiling, telephone and electrical
outlets and equipment rooms, initial provider(s) of Telecommunications Services,
doors (including hardware and keying schedule), glass partitions, windows,
critical dimensions, structural loads, millwork, finish schedules, and HVAC and
electrical requirements, together with all supporting information and delivery
schedules ("TENANT'S INFORMATION").
(b) Construction Documents. Following Landlord's execution of the
Second Amendment and receipt of Tenant's Information, Landlord's designated
architectural/engineering firm shall prepare and submit to Tenant all finished
and detailed architectural drawings and specifications, including mechanical,
electrical and plumbing drawings (the "CONSTRUCTION DOCUMENTS"). In addition,
Landlord shall advise Tenant of the number of days of Tenant Delay (as defined
below) attributable to extraordinary requirements (if any) contained in Tenant's
Information.
(c) Approved Construction Documents. Within 5 days after receipt,
Tenant shall (i) approve and return the Construction Documents to Landlord, or
(ii) provide Landlord Tenant's written requested changes to the Construction
Documents, in which event Landlord shall have the Construction Documents revised
(as Landlord deems appropriate) and resubmitted to Tenant for approval within 5
days after receipt. If Tenant fails to provide Landlord Tenant's written
requested changes within the applicable 5 day period, Tenant shall be deemed to
have approved the Construction Documents. Upon Tenant's approval, the
Construction Documents shall become the "APPROVED CONSTRUCTION DOCUMENTS".
-1-
<PAGE> 8
2. PRICING AND BIDS.
(a) Estimates. Following receipt of the Approved Construction
Documents, Landlord will promptly price the construction of the Work (defined
below) in accordance therewith and furnish written price estimates to Tenant.
(b) Approved Pricing. Upon receipt, Tenant shall promptly review such
estimates and complete negotiations with Landlord for any changes or adjustments
thereto. Within 5 business days after such receipt, Tenant shall return the
estimates with written approval or disapproval to Landlord.
(c) Competitive Bids. Landlord shall seek 3 competitive bids from
general contractors from Landlord's approved bidding list. Landlord hereby
approves of James R. Thompson Construction. Only subcontractors from Landlord's
approved subcontractor list shall be allowed to work on the mechanical,
electrical and plumbing components of the Building. Tenant shall be invited to
the bid opening and allowed to participate in the selection of the successful
bidder; provided Landlord shall make the final selection of the general
contractor.
3. LANDLORD'S CONTRIBUTIONS.
(a) Construction Allowance. Landlord will contribute a sum not to
exceed $24.00 per RSF in the Second Expansion Space (the "CONSTRUCTION
ALLOWANCE"), towards the cost of constructing the Work (as defined below) in
accordance with this Construction Agreement. Payments shall be made directly to
Landlord's contractor performing the Work. The cost of all space planning,
design, consulting or review services and construction drawings shall be
included in the cost of the Work and may be paid out of the Construction
Allowance, to the extent sufficient funds are available for such purpose.
(b) Unused Allowance. Any allowance made available to Tenant under this
Construction Agreement must be utilized for its intended purpose during the
initial Term or be forfeited with no further obligation on the part of Landlord.
4. CONSTRUCTION.
(a) The Work. Subject to the terms of this Construction Agreement,
Landlord agrees to cause permanent leasehold improvements to be constructed in
the Second Expansion Space (the "WORK") in a good and workmanlike manner in
accordance with the Approved Construction Documents.
(b) General Terms. Tenant acknowledges that Landlord is not an
architect or engineer, and that the Work will be designed and performed by
independent architects, engineers and contractors. Accordingly, Landlord does
not guarantee or warrant that the Approved Construction Documents will comply
with Applicable Law or be free from errors or omissions, nor that the Work
-2-
<PAGE> 9
will be free from defects, and Landlord will have no liability therefor.
Landlord agrees to include a provision in the Construction Contract with the
contractor that contractor shall comply with all Applicable Laws. In the event
of such errors, omissions or defects, and upon Tenant's written request,
Landlord will use commercially reasonable efforts to cooperate with Tenant in
enforcing any applicable warranties. In addition, unless expressly agreed to in
writing by Landlord prior to commencement of the Work, Landlord's approval of
the Construction Documents or the Work shall not be interpreted to Waive or
otherwise modify the terms and provisions of the Lease.
(c) Electrical Design Capacity. The following parameters constitute
Building Standard electrical design capacity: (i) all general purpose lighting
shall be 120 volts and all emergency lighting and night lighting shall be 277
volts; (ii) the connected electrical load of all electrical equipment serving
the Premises shall not exceed an average of 4.0 watts per RSF; (iii) no single
item or component of electrical equipment shall have a rated electrical load
greater than 0.5 kilowatt or require voltage other than 120 volts, single phase
(or 110 volts, depending on available service in the Building); and (iv) no
electrical equipment shall exceed the safe and lawful capacity of the existing
electrical circuit(s) and facilities serving the Premises. Any requirements,
services or equipment in excess or contravention of any of the foregoing
parameters (or any combination thereof) shall constitute ABS electrical services
subject to Landlord's approval and Tenant's compliance with the other applicable
provisions of the Lease, specifically including PARAGRAPH 8(d) thereof. However,
the cost of purchasing and installing any ABS electrical equipment approved by
Landlord (including submeters) shall be paid at Tenant's expense, but may be
paid from the Construction Allowance (if any) as part of the Work.
(d) ADA Compliance. Landlord shall, as an Operating Expense, be
responsible for ADA compliance for the base Building, core areas (including
elevators, Common Areas, Service Areas and the Project's parking facilities) and
all points of access into the Project. Tenant shall, at its expense (which may
be paid from the unused portion of the Construction Allowance, if any), be
responsible for ADA compliance in the Premises, including restrooms on any floor
now or hereafter leased or occupied in its entirety by Tenant, its affiliates or
Transferees. Landlord shall not be responsible for determining whether Tenant is
a public accommodation under ADA or whether the Approved Construction Documents
comply with ADA requirements. Such determinations, if desired by Tenant, shall
be the sole responsibility of Tenant.
(e) Substantial Completion.
(i) Definition. Subject to adjustment under PARAGRAPHS 4(e)(iii)
and 4(e)(iv), "SUBSTANTIAL COMPLETION" shall occur, with respect to the Second
Expansion Space, when (A) all of the Work has been completed in accordance with
this Construction Agreement and the Approved Construction Documents, to the
extent that Tenant would have access to the Second Expansion Space and would be
able to conduct its business in a reasonable manner, and (B) Landlord has
obtained final inspection approval from all appropriate regulatory authorities
(if required) for the
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<PAGE> 10
Second Expansion Space, even though adjustments or corrections may be necessary
and Punchlist Items remain to be completed.
(ii) Time of the Essence. Time is of the essence in connection
with the obligations of Landlord and Tenant under this Construction Agreement.
(iii) Tenant Delay. If Landlord is delayed in achieving
Substantial Completion due to a delay caused by a Tenant Party or for any other
cause arising from an act or omission of any Tenant Party, including (A)
Tenant's request for change orders to the Work, (B) Tenant's failure to timely
deliver or approve any required documentation, such as Tenant's Information, if
applicable, Construction Documents, pricing estimates, and the like, (C)
Tenant's failure to pay any Cost Overruns (as defined below), or (D) Tenant's
failure to otherwise respond to any other reasonable Landlord request
(collectively, "TENANT DELAY"), Substantial Completion shall be deemed to have
occurred on the date Substantial Completion would have been achieved but for
such Tenant Delay.
(iv) Other Delay. If Substantial Completion is delayed for any
reason other than Tenant Delay, Substantial Completion shall occur on the date
when actually achieved (subject to adjustment for Tenant Delay).
(v) Landlord Liability. Landlord shall not be liable or
responsible for any Claims incurred (or alleged) by Tenant due to any delay in
achieving Substantial Completion for any reason. However, Tenant's sole and
exclusive remedy for any delay in achieving Substantial Completion for any
reason other than Tenant Delay shall be the resulting postponement (if any) of
the commencement of rental payments under the Lease.
5. COSTS.
(a) Change Orders and Cost Overruns. All change orders must be approved
(which approval shall not be unreasonably withheld or delayed) in advance in
writing by Landlord. Change orders requested by Tenant and approved by Landlord
which delay or increase the cost of the Work shall be paid by Tenant within 15
days of receipt of Landlord's invoice therefor (which payment may be required by
Landlord prior to commencing construction). Except as otherwise expressly
provided in this Construction Agreement, all costs of the Work in excess of the
Construction Allowance (collectively, "COST OVERRUNS") shall be paid by Tenant
to Landlord within 10 days of Landlord's invoice. Landlord may stop or decline
to commence all or any portion of the Work until such payment is received. On or
before the Second Expansion Space Commencement Date, and as a condition to
Tenant's right to take possession of the Second Expansion Space, Tenant shall
pay Landlord the entire amount of all Cost Overruns, less any prepaid amounts.
-4-
<PAGE> 11
RIDER NO. 3
PREFERENTIAL RIGHT TO LEASE
A. PREFERENTIAL RIGHT TO LEASE. So long as twenty-four months remain in the
initial Term, Tenant shall have A Preferential Right to Lease up to
approximately 11,400 RSF (+1-20%, in Landlord's discretion) on the 8th floor of
the Building, as shown on EXHIBIT A-2 to the Second Amendment (the "PREFERENTIAL
SPACE"), at such time as such space becomes Available (as defined below) for
direct lease to a new or existing tenant (whether or not a bona fide offer has
been made); provided no uncured Event of Default exists under the Lease (and no
condition exists which, with the passage of time and/or giving of notice, would
be an Event of Default) and Tenant remains in occupancy of the entire Premises.
The Preferential Space shall be deemed "AVAILABLE" at such time as Landlord
decides to offer the Preferential Space for lease and such space is no longer
any of the following: (i) leased or occupied; (ii) assigned or subleased by the
then-current tenant of the space; (iii) re-leased by the then-current tenant of
the space by renewal, extension or renegotiation (whether agreed to prior to or
after the Date of Lease); or (iv) subject to an expansion option, right of first
refusal, preferential right or similar obligation existing under any other
tenant leases for the Project as of the Date of Lease. This Preferential Right
to Lease shall terminate upon relocation of the Premises to another building or
upon any Transfer as defined in the Lease. The Preferential Space shall be
reduced to the extent Tenant leases any portion thereof, whether or not pursuant
to a formal option provision in the Lease.
B. ACCEPTANCE. Prior to leasing the Preferential Space to a new tenant, Landlord
shall first offer such space in writing to Tenant specifying the amount and
location of such space, the anticipated date of tender of possession, the rental
rate based on the then-quoted rental rates for comparable space in the Project
as of the anticipated Preferential Space Commencement Date (as defined below),
including any projected rate increases over the applicable term, and other
applicable terms (the "PREFERENTIAL RENTAL NOTICE"). Tenant shall have 5 days
within which to accept or reject such offer. If Tenant accepts Landlord's offer,
Tenant shall, within 15 days after Landlord's written request, execute and
return a lease amendment adding the Preferential Space to the Premises for all
purposes under the Lease (including any extensions or renewals) and confirming
the Base Rent and other applicable terms specified in the Preferential Rental
Notice. Such lease amendment may, if applicable, contain a construction
agreement using Landlord's then-current form setting forth the schedule and
other terms and obligations of the parties regarding the construction of any
leasehold improvements in the Preferential Space. If Tenant rejects such offer
or fails timely to (i) accept such offer or (ii) execute and return the required
lease amendment, then Landlord shall have the right to lease the Preferential
Space to a new or existing tenant without further notice or obligation to
Tenant. However, in the event Landlord has not executed a new lease for the
Preferential Space within 180 days after the date of the Preferential Rental
Notice or if the Preferential Space is offered to a new or existing tenant under
economic terms which are greater than 5% more favorable than the terms that were
offered to Tenant under the Preferential Notice, Landlord shall not lease the
Preferential Space to any party without again complying with the provisions of
this Rider No. 3.
C. TENDER OF POSSESSION. The Preferential Space shall be leased for the period
commencing upon Landlord's tender of possession of the Preferential Space in
accordance with Landlord's offer and this Rider (the "PREFERENTIAL SPACE
COMMENCEMENT DATE") and continuing through the expiration or earlier
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termination of the Term, as it may be extended or renewed. Landlord shall not be
liable for any delay or failure to tender possession of the Preferential Space
by the anticipated tender date for any reason, including by reason of any
holdover tenant or occupant, nor shall such failure invalidate the Lease or
extend the Term.
D. CONDITION OF PREMISES. The Preferential Space shall be tendered in an "as-is"
condition. However, all leasehold improvements shall be constructed in the
Expansion Space in accordance with the construction agreement (if any) attached
to the applicable lease amendment. Any allowances shall be prorated for any
delays in the Preferential Space Commencement Date, taking into account the
economic assumptions underlying the terms in the Preferential Rental Notice.
E. PARKING. For the Preferential Space, Tenant shall take and pay for
additional permits allowing access to unreserved spaces in parking facilities
which Landlord provides for the use of tenants and occupants of the Project at a
ratio of 1 space per 500 RSF ("PREFERENTIAL SPACE PERMITS"). Tenant may elect
to convert a portion of the unreserved spaces to reserved spaces on an "as
available" basis. During the initial Term (and, if applicable, during any
renewal or extension term of this Lease), Tenant shall pay Landlord's quoted
monthly contract rate (as set from time to time) for each such unreserved
permit, plus any taxes thereon. Notwithstanding anything to the contrary
contained herein, Tenant may elect not to purchase up to 50% of the Preferential
Space Permits; provided however, that in the event Tenant does not purchase all
of the Preferential Space Permits, then Tenant relinquishes its right to such
unpurchased permits (the "RELINQUISHED PREFERENTIAL SPACE PERMITS"). In the
event that Tenant subsequently desires to use all or a portion of the
Relinquished Preferential Space Permits, Tenant shall provide 30 days prior
written notice to Landlord which specifies the number of Relinquished
Preferential Space Permits that Tenant desires to purchase ("TENANT'S PERMIT
NOTICE"). Landlord shall allow Tenant to purchase such unreserved and/or
reserved parking permits within 30 days after Tenant's Permit Notice, at
Landlord's then-quoted monthly contract rate.
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EXHIBIT 10.23
EXECUTION COPY
This STOCK PURCHASE AGREEMENT is dated as of May 3, 2000 (this
"Agreement"), by and between PhoneFree.com Inc., a Delaware corporation (the
"Company"), and the Purchasers listed on Schedule I hereof (each, a "Purchaser"
and collectively, the "Purchasers").
WHEREAS, the Company proposes, subject to the terms and conditions set
forth herein, to issue and sell to the Purchasers 5,322,271 shares of a newly
authorized class of the Company's capital stock to be called the "Series A
Cumulative Convertible Preferred Stock", par value $.001 per share (the "Series
A Preferred Stock"), having the rights, designations and preferences as set
forth in the Certificate of Designation attached as Exhibit A hereto (the
"Certificate of Designation");
WHEREAS, subject to the terms and conditions set forth herein, the
Purchasers desire to purchase such shares of Series A Preferred Stock;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For the purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Law" means (a) any foreign, United States Federal, state
or local law, statute, rule, regulation, order, writ, injunction, judgment,
decree or permit of any Governmental Authority and (b) any rule or listing
requirement of any applicable national securities exchange or national
securities association or Commission recognized trading market on which
securities issued by the Company or any of its Subsidiaries are listed or
quoted.
"Business Day" means any day other than a Saturday, a Sunday, the day
after Thanksgiving or a day when banks in The City of New York are authorized by
Applicable Law to be closed.
<PAGE> 2
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock and (ii) with respect to any
other Person, any and all partnership, membership or other equity interests of
such Person.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the Common Stock, par value $0.001 per share, of
the Company.
"Contract" means any contract, lease, loan agreement, mortgage,
security agreement, trust indenture, note, bond, or other agreement (whether
written or oral) or instrument.
"Equity Documents" means this Agreement and the Investor Rights
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Authority" means (i) any foreign, Federal, state or
local court or governmental or regulatory agency or authority, (ii) any
arbitration board, tribunal or mediator and (iii) with respect to any Person,
any national securities exchange or national securities association or
Commission recognized trading market on which securities issued by such Person
or any of its Subsidiaries are listed or quoted.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations.
"Intellectual Property" means all patents, trade marks, copyrights,
service marks, and applications and registrations therefor, and all trade names,
domain names, web sites, inventions, products, mask works, ideas, systems,
processes, formulae, source and object codes, data, software, programs, other
works of authorship, know-how, improvements, discoveries, developments, methods,
designs and techniques.
"Investor Rights Agreement" means the Investor Rights Agreement, to be
dated as of the Closing Date, to be entered into by and between the Company and
the Purchasers, in the form attached hereto as Exhibit B.
"Lien" means any mortgage, pledge, lien, security interest, claim,
restriction, charge or encumbrance of any kind.
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"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
the Company and its Subsidiaries, taken as a whole, or a material adverse effect
on the ability of the Company to perform its obligations under the Equity
Documents.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" means the Company's preferred stock, par value $.001
per share.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Shares" means the shares of Series A Preferred Stock to be issued and
sold by the Company to the Purchasers pursuant to Section 2.1 hereof.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of the voting power of whose capital stock with voting power, under
ordinary circumstances, to elect directors is at the time, directly or
indirectly, owned by such Person, by a subsidiary of such Person, or by such
Person and one or more subsidiaries of such Person, (ii) a partnership in which
such Person or a subsidiary of such Person is, at the date of determination, a
general partner of such partnership and has the power to direct the policies and
management of such partnership or (iii) any other Person in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (A) at
least a majority ownership interest or (B) the power to elect or direct the
election of a majority of the members of the board of directors or other
governing body of such Person.
"Transaction" means the transaction contemplated by this Agreement.
"Tax" as used in this Agreement, means any of the Taxes, and "Taxes"
means, with respect to any Person, all income taxes (including any tax on or
based upon net income, gross income, income as specially defined, earnings,
profits or selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits tax, alternative or add-on minimum tax, customs duties and
other tax, fees, assessments or charges of any kind whatsoever, together with
all interest and penalties, additions to tax and other additional amounts
imposed by any taxing authority (domestic or foreign) on such Person (if any).
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(b) As used in this Agreement, the following terms shall have the
meanings given thereto in the Sections set forth opposite such terms:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Agreement Preamble
Balance Sheet 3.5
Balance Sheet Date 3.5
Certificate of Designation Recitals
Closing 2.2
Closing Date 2.2
Code 3.21
Company Preamble
ERISA 3.20
Financial Statements 3.5
Issuance 2.1
Notices 8.2
Purchasers Preamble
Purchase Price 2.1
Series A Preferred Stock Recitals
</TABLE>
ARTICLE II
SALE AND PURCHASE
2.1 AGREEMENT TO SELL AND TO PURCHASE; PURCHASE PRICE.
(a) On the Closing Date, and upon the terms and subject to the conditions
set forth in this Agreement, the Company shall issue and sell to the Purchasers,
and the Purchasers shall purchase and accept from the Company, 5,322,271 Shares
(the "Issuance"), for an aggregate purchase price of $37,679,441 (the "Purchase
Price"), payable (i) by wire transfer of immediately available funds or next day
funds to a bank account or bank accounts designated by the Company as provided
in Section 2.2(a)(i) or (ii) in the case of certain Promissory Notes aggregating
$10,000,000 in principal amount held by eVentures Group, Inc., TeKBanC.com
Limited and Brazos PhoneFree.com Acquisition LLC, by the cancellation of such
Promissory Note to the extent the obligations under such Note are converted, in
exchange for 1,438,797 Shares in the aggregate. Each Purchaser shall purchase
such number of Shares in exchange for such share of the Purchase Price as is set
forth opposite the Purchaser's name on Schedule I hereto.
(b) Also on the Closing Date, and upon the terms and subject to the
conditions set forth in this Agreement, the Company shall issue to each
Purchaser (or group of affiliated Purchasers) who has invested at least
$7,500,000 in cash on the Closing Date to purchase
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<PAGE> 5
Series A Preferred Stock a warrant to purchase 100,000 shares of Common Stock at
an exercise price of $7.11 per share, the form of which is attached as Exhibit C
to this Agreement (each, a "Warrant" and collectively, the "Warrants").
2.2 CLOSING.
The closing of the Issuance (the "Closing") shall take place on a date to
be specified by the Company and the Purchasers, which shall be no later than the
later of (A) the second Business Day after the date as of which all of the
conditions set forth in Article VII hereof shall have been satisfied (or, to the
extent permitted, waived by the party or parties entitled to the benefit
thereof) and (B) five Business Days after the date hereof or at such other time
and date as the parties hereto shall agree in writing (such date and time, the
"Closing Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza,
New York, New York 10112 or at such other place as the parties hereto shall
agree in writing.
At the Closing:
(a) Each Purchaser shall deliver:
(i) against delivery of a certificate or certificates
representing the Shares being acquired by it, an amount equal to its share
of the Purchase Price via (i) wire transfer of immediately available funds
to such bank account as the Company shall designate not later than two
Business Days prior to the Closing Date and/or (ii) delivery of such
documents as are necessary to effect the cancellation of any part of any
Promissory Note referred to in Section 2.1(ii) to the extent converted; and
(ii) an executed counterpart of the Investor Rights Agreement.
(b) The Company shall deliver to each Purchaser:
(i) against payment of such Purchaser's share of the Purchase
Price, a certificate or certificates representing the Shares being acquired
by such Purchaser, which shall be in definitive form and registered in the
name of such Purchaser or its nominee or designee and in a single
certificate or in such other denominations as such Purchaser shall request
not later than two Business Days prior to the Closing Date;
(ii) in the case of Purchaser's (or group of affiliated
Purchasers') receiving a Warrant pursuant to Section 2.1(b), against
payment of such Purchaser's (or group of affiliated Purchasers') share of
the Purchase Price, an executed Warrant.
(iii) an opinion of Chadbourne & Parke LLP, special counsel to
the Company, dated the Closing Date, in the form attached as Exhibit D
hereto;
(iv) an officer's certificate of the Company as contemplated by
Section 7.2(e);
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(v) a certificate of the secretary of the Company covering such
matters as are customarily covered by such certificates, in form and
substance reasonably acceptable to the Purchasers;
(vi) a long-form good standing certificate of the Company issued
by the Secretary of State of the State of Delaware; and
(vii) an executed counterpart of a copy of the Investor Rights
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers on the date
hereof and on and as of the Closing Date as follows. To the extent any of the
following representations and warranties are limited to matters within the
knowledge of the Company, any such matter shall be deemed to be within the
knowledge of the Company if such matter is within the actual knowledge of Jan
Horsfall, Jeffrey Fuhrman, Donovan Burke or Alan Buckmaster or such knowledge as
a prudent person in their respective positions would be expected to possess
taking into account the nature and maturity of the business and their length of
employment with the Company.
3.1 ORGANIZATION AND STANDING.
(a) The Company and each of its Subsidiaries is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has all requisite power and authority to carry on its business
as and in the places where it is now being conducted and to own, license, lease
and operate its properties and assets as and in the places where the properties
and assets are owned, licensed, leased and operated. The Company and each of its
Subsidiaries is duly qualified to transact business as a foreign entity and is
in good standing in each jurisdiction in which the character of the properties
owned or leased by it or the nature of its business makes such qualification
necessary, except for jurisdictions where a failure to so qualify or be in good
standing would not have a Material Adverse Effect.
(b) All of the outstanding shares of Capital Stock of each Subsidiary
of the Company have been validly issued and are fully paid and non-assessable
and are owned directly or indirectly by the Company, free and clear of all
Liens. The Company does not own of record or beneficially any equity interest in
any Person except as provided on Schedule 3.1(b) hereof.
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(c) The Company has delivered to each Purchaser true and complete
copies of the Company's Certificate of Incorporation, as amended to date (the
"Company Certificate of Incorporation"), and By-laws, as in effect on the date
hereof.
3.2 CAPITAL STOCK.
(a) As of the date of this Agreement and as of the Closing Date, the
authorized Capital Stock of the Company consists solely of 20,000,000 shares of
Common Stock, par value $0.001 per share, of which 11,251,514 shares were issued
and outstanding as of the close of business on May 3, 2000 and 5,000,000 shares
of Preferred Stock of which no shares were issued or outstanding as of the date
hereof. Following the filing of the Certificate of Designation and an Amendment
to the Company's Certificate of Incorporation substantially in the form set
forth as Exhibit E hereto with the Secretary of State of the State of Delaware,
effective as of the date hereof, the authorized Capital Stock of the Company
shall consist solely of 30,000,000 shares of Common Stock, par value $0.001 per
share, of which 11,251,514 shares shall be issued and outstanding and 15,000,000
shares of Preferred Stock, of which 7,200,000 shares will be designated as
Series A Preferred Stock. A sufficient number of shares of Common Stock are
reserved for issuance upon exercise of outstanding warrants and options,
including the Warrants, or upon conversion of outstanding securities including
the Shares. Each share of Capital Stock of the Company that will be issued and
outstanding immediately following the Closing, including without limitation the
Shares, will be duly authorized and validly issued and fully paid and
nonassessable, and the issuance thereof will not have been subject to any
preemptive rights or made in violation of any Applicable Law. The Shares will be
issued free and clear of any Liens and with no restrictions on the voting rights
or the transfer thereof (other than pursuant to (i) the Investor Rights
Agreement and (ii) Applicable Law).
(b) Except for the Warrants and as set forth on Schedule 3.2, as of
the date of this Agreement, there are, and immediately upon consummation of the
Closing there will be, (i) no outstanding subscriptions, options, warrants,
calls, agreements, conversion rights, exchange rights, preemptive rights or
other rights (whether contingent or not) to subscribe for, purchase or acquire
any issued or unissued shares of Capital Stock of the Company or any of its
Subsidiaries, (ii) no authorized or outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Company or
any of its Subsidiaries, (iii) no rights, contracts, commitments or arrangements
(contingent or otherwise) obligating the Company or any of its Subsidiaries to
either (A) redeem, purchase or otherwise acquire, or offer to purchase, redeem,
or otherwise acquire, any outstanding shares of, or any outstanding warrants or
rights of any kind to acquire any shares of, or any outstanding securities that
are convertible into or exchangeable for any shares of, Capital Stock of the
Company or any of its Subsidiaries, or (B) pay any dividend or make any
distribution in respect of any shares of, or any outstanding securities that are
convertible or exchangeable for any shares of, Capital Stock of the Company or
any of its Subsidiaries, (iv) no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
its securities under the Securities Act and (v) no restrictions upon, or
Contracts or understandings
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<PAGE> 8
of the Company or any of its Subsidiaries, or, to the knowledge of the Company,
Contracts or understandings of any other Person, with respect to, the voting or
transfer of any shares of Capital Stock of the Company or any of its
Subsidiaries. There are no securities or instruments containing antidilution or
similar provisions that will be triggered by the consummation of the
Transactions. Except as set forth on Schedule 3.2, to the knowledge of the
Company, no party has any right of first refusal, right of first offer, right of
co-sale or other similar right regarding the securities of the Company or any of
its Subsidiaries. There are no provisions of the Certificate of Incorporation,
as amended, or the By-laws of the Company, no agreements to which the Company is
a party and no agreements by which the Company or any of its Subsidiaries are
bound, that would (x) require the vote of the holders of more than a majority of
the shares of the Company's issued and outstanding Common Stock to take or
prevent any corporate action, or (y) entitle any party to nominate or elect any
director of the Company or require any of the Company's stockholders to vote for
any such nominee or other person as a director of the Company.
(c) The holders of the Shares will, upon issuance thereof, have the
rights set forth for the Series A Preferred Stock in the Certificate of
Designation (subject to the limitations and qualifications set forth therein and
under the General Corporation Law of the State of Delaware (the "DGCL")).
3.3 AUTHORIZATION; ENFORCEABILITY.
The Company has the power and authority to execute, deliver and perform its
obligations under each of the Equity Documents, and has taken all action
necessary to authorize the execution, delivery and performance by it of each of
the Equity Documents and to consummate the Transaction. No other corporate or
stockholder proceeding on the part of the Company or any of its Subsidiaries is
necessary for such execution, delivery, performance and consummation. The
Company has duly executed and delivered this Agreement and, at the Closing, the
Company will have duly executed and delivered the other Equity Document. This
Agreement constitutes, and the other Equity Document when executed and delivered
by the Company will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, or other laws of general application affecting enforcement of
creditors' rights, (b) general principles of equity that restrict the
availability of equitable remedies, or (c) limitation on indemnity obligations
imposed by the Securities Act.
3.4 NO VIOLATION; CONSENTS.
(a) The execution, delivery and performance by the Company of each of
the Equity Documents and the consummation by the Company of the Transaction,
including the issuance, sale and delivery of the Shares, do not and will not (i)
contravene any Applicable Law; (ii) violate, result in a breach of or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under
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<PAGE> 9
any material Contract to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound or to which any of
their respective material assets are subject, or (iii) result in the creation or
imposition of any Lien upon any of the material assets of the Company or any of
its Subsidiaries, or (iv) conflict with or violate any provision of the
Certificate of Incorporation or By-laws of the Company currently in effect or in
effect as of the Closing.
(b) Except for the filing of the Certificate of Designation with the
Secretary of State of the State of Delaware, which filing shall be made
immediately prior to the Closing, no consent, authorization or order of, or
filing or registration with, any Governmental Authority or other Person is
required to be obtained or made by the Company or any of its Subsidiaries for
the execution, delivery or performance of the Equity Documents or the
consummation by the Company of the Transactions except as have been obtained or
where the failure to obtain such consents, authorizations or orders, or make
such filings or registrations, would not, individually or in the aggregate, have
a Material Adverse Effect or a material adverse effect on the ability of the
Company to consummate the Transactions.
3.5 FINANCIAL STATEMENTS.
Attached as Schedule 3.5 is the unaudited balance sheet of the Company
as of December 31, 1999 (the "Balance Sheet Date") and the related unaudited
statement of operations for the period June 14, 1999 (date of inception) through
December 31, 1999 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the period indicated and present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and the
results of its operations, cash flows and changes in stockholders' equity
(deficit) for the period June 14, 1999 (date of inception) through December 31,
1999, except that such statements do not include all statements and footnotes
required by GAAP and do not include the (a) recognition and amortization of
intangible assets and equity related to the acquisition of the assets of Big
Bits Software, Inc. in June 1999 and (b) recognition of warrants issued to
non-employees, officers and directors. The Financial Statements are currently
being audited by a nationally recognized accounting firm. The Company does not
expect, based on its best knowledge, that the audited financial statements, when
completed, will differ materially from the Financial Statements. Except as
reflected in the Financial Statements and except for matters set forth on
Schedule 3.8 and current liabilities incurred in the ordinary course of business
since the Balance Sheet Date, the Company does not have any material
liabilities, obligations or commitments of any nature (whether accrued,
absolute, contingent, unasserted or otherwise).
3.6 PRIVATE OFFERING.
Based, in part, on the Purchasers' representations in Section 4.2, the
offer and sale of the Shares is exempt from the registration and prospectus
delivery requirements of the Securities Act. Neither the Company, nor anyone
acting on behalf of it, has offered or sold or
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will offer or sell any securities, or has taken or will take any other action
(including, without limitation, any offering of any securities of the Company
under circumstances that would require, under the Securities Act, the
integration of such offering with the offering and sale of the Shares), that
would subject the Issuance to the registration provisions of the Securities Act.
3.7 DISCLOSURE.
No representation or warranty by the Company hereunder and no information
furnished or to be furnished by the Company to the Purchasers pursuant hereto or
in connection with the Transactions contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
3.8 MATERIAL ADVERSE CHANGE.
Except as set forth on Schedule 3.8, since the Balance Sheet Date,
except in connection with the transactions contemplated by the Equity Documents,
there has not been:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company or its Subsidiaries from that reflected in the
Financial Statements, other than changes in the ordinary course of business,
none of which individually or in the aggregate has had or is expected to have a
Material Adverse Effect;
(b) Any resignation or termination of any key officers of the Company
or any of its Subsidiaries; and the Company has not received written or verbal
notice of any impending resignation or termination of employment of any such
officer;
(c) Any waiver by the Company or any of its Subsidiaries of a valuable
right or of a material debt owed to it;
(d) Any direct or indirect loan made by the Company or any of its
Subsidiaries to any stockholder, consultant, employee, officer or director, or
to any Person other than advances made in the ordinary course of business;
(e) Any material change in any compensation arrangement or agreement
with any consultant, employee, officer, director or stockholder of the Company
or any of its Subsidiaries other than in the ordinary course of business;
(f) Any debt, obligation or liability incurred, assumed or guaranteed
by the Company or any of its Subsidiaries, other than any debt, obligation or
liability incurred in the ordinary course of business;
(g) Any sale, assignment or transfer of any Intellectual Property;
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(h) Any change in any material Contract which has had or could
reasonably be expected to have a Material Adverse Effect;
(i) Any other event or condition of any character that, either
individually or cumulatively, has had or could reasonably be expected to have a
Material Adverse Effect;
(j) any casualty loss or damage with respect to any of the assets of
the Company or any of its Subsidiaries which in the aggregate have a replacement
cost of more than $100,000, whether or not such loss or damage shall have been
covered by insurance;
(k) any change in any method of accounting or accounting practice or
policy used by the Company, other than such changes required by GAAP; or
(l) any redemption of, or dividend or distribution to the holders of,
Capital Stock of the Company or any of its Subsidiaries.
3.9 LITIGATION.
Except as set forth on Schedule 3.9, there are not any (a) outstanding
judgments against or affecting the Company or any of its Subsidiaries, (b)
actions, suits, arbitrations or other legal or administrative proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or (c) investigations by any Governmental
Authority that are, to the knowledge of the Company, pending or threatened
against or affecting the Company or any of its Subsidiaries that (i) in any
manner challenge or seek to prevent, enjoin, alter or materially delay the
Transactions or (ii) if resolved adversely to the Company or any of its
Subsidiaries, would have, individually or in the aggregate, a Material Adverse
Effect or would give rise to a material liability of the Company or any of its
Subsidiaries, or the imposition of a Lien on any of the material properties or
assets of the Company or any of its Subsidiaries. There is no pending action,
suit, arbitration or other proceeding which has been brought by or on behalf of
the Company or any of its Subsidiaries.
3.10 PERMITS AND LICENSES.
The Company and its Subsidiaries have obtained all governmental permits,
licenses, franchises and authorizations required for the Company and its
Subsidiaries to conduct their respective businesses as currently conducted,
except for those of which the failure to obtain would not have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is in default
under any of such governmental permits, license, franchises or authorizations.
3.11 ABSENCE OF BREACH.
There has not been a breach or any default in any obligation to be
performed by the Company or any of its Subsidiaries under any material Contract
to which the Company or any of its Subsidiaries is a party, and neither the
Company nor any of its Subsidiaries has waived
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any substantial right under any such Contract (except any such breach, default
or waiver that would not have a Material Adverse Effect).
3.12 BROKERS.
Except as set forth on Schedule 3.12, there is no agent, broker, investment
banker, Person or firm who or which has acted on behalf of or under the
authority of the Company or any of its stockholders who will be entitled to any
brokerage, finder's or investment banker's fee or commission directly or
indirectly from the Company or any of its Subsidiaries in connection with any of
the transactions contemplated hereby. The Purchasers will not incur any
liability or obligation to any Person as a result of any matter required to be
disclosed on Schedule 3.12.
3.13 CONTRACTS AND OTHER COMMITMENTS.
Except as set forth on Schedule 3.13, neither the Company nor any of its
Subsidiaries is bound by any Contract other than (i) Contracts for the purchase
of supplies and services that were entered into in the ordinary course of
business, involving aggregate consideration not in excess of $50,000, and
extending for not more than one (1) year beyond the date hereof, (ii) sales
Contracts entered into in the ordinary course of business, and (iii) Contracts
terminable at will by the Company on no more than thirty days' notice without
cost or liability to the Company or any of its Subsidiaries and that do not
involve any employment or consulting arrangement involving total annual salary
compensation in excess of $75,000 and are not material to the conduct of the
business of the Company or any of its Subsidiaries. For the purpose of this
paragraph, employment and consulting Contracts (other than those that involve
annual salary compensation in excess of $75,000) and Contracts with labor
unions, and license agreements and any other agreements relating to the
acquisition or disposition of Intellectual Property or other proprietary rights
or technology (other than standard end-user license agreements) shall not be
considered to be Contracts entered into in the ordinary course of business. The
Company has made available true, correct and complete copies of all Contracts
listed or required to be listed on Schedule 3.13, and all such Contracts are in
full force and effect.
3.14 RELATED-PARTY TRANSACTIONS.
Except as disclosed in Schedule 3.14, no employee, officer, stockholder,
director or current or former Affiliate of the Company or member of his or her
immediate family is indebted to the Company or any of its Subsidiaries, nor is
the Company or any of its Subsidiaries indebted (or committed to make loans or
extend or guarantee credit) to any of them, other than (i) for payment of salary
for services rendered, (ii) reimbursement for reasonable expenses incurred on
behalf of the Company or its Subsidiaries, (iii) for other standard employee
benefits made generally available to all employees and directors and (iv)
pursuant to stock option agreements, including without limitation, those
incorporated into employment agreements. To the Company's knowledge, none of
such Persons has any direct or indirect ownership interest in any Person with
which the Company or any of its
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Subsidiaries is affiliated or with which the Company or any of its Subsidiaries
has a business relationship, or any Person that competes with the Company or any
of its Subsidiaries, except that employees, stockholders, officers, or directors
of the Company and members of their immediate families may own less than 5% of
the stock in publicly traded companies that may compete with the business of the
Company and its Subsidiaries. To the Company's knowledge, no employee, officer,
director, or stockholder or current or former Affiliate of the Company or any
member of their immediate families has a direct or indirect interest in any
material Contract or transaction with the Company or any of its Subsidiaries,
except for agreements described on Schedule 3.14.
3.15 REGISTRATION RIGHTS.
As of the date hereof and immediately following the Closing, except (i) as
set forth in Schedule 3.15, (ii) as provided under the Equity Documents and
(iii) as contemplated by Section 5.9 hereof, the Company and its Subsidiaries
are not and will not be under any obligation and have not granted any rights to
register under the Securities Act any of their presently outstanding securities
or any of their securities that may subsequently be issued.
3.16 TITLE TO PROPERTY AND ASSETS; LEASES.
Except for (i) Liens for current taxes not yet delinquent, and for Liens
imposed by law and incurred in the ordinary course of business for obligations
not past due to carriers, warehousemen, laborers, materialmen and the like, (ii)
Liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, or (iii) minor defects in title, none of which,
individually or in the aggregate, materially interferes with the use of such
property, the Company and each of its Subsidiaries has good and marketable title
to its property and assets free and clear of all Liens. With respect to the
property and assets it leases, the Company and each of its Subsidiaries is in
compliance with such leases in all material respects and, to the best of its
knowledge, holds a valid leasehold interest free of any Liens subject to clauses
(i) through (iii) above. Schedule 3.16 attached hereto lists the real property
lease agreements between the Company, as tenant, and the applicable landlord.
The Company enjoys peaceful and undisturbed possession of all leases necessary
in any material respect for the use of its respective properties and assets,
none of which impairs in any material respect the occupation of such properties
or assets.
3.17 INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 3.17(a)(i), the Company and its
Subsidiaries own or are licensed to use all patents, trademarks, copyrights,
service marks, and applications and registrations therefor, and all trade names,
domain names, web sites, customer lists, trade secrets, proprietary processes
and formulae, inventions, know-how, other confidential and proprietary
information, and other industrial and Intellectual Property rights necessary to
permit the Company and its Subsidiaries to carry on their business as presently
conducted in all material respects. The Company and its Subsidiaries have the
right to bring infringement actions with respect to all patents, trademarks,
copyrights, service marks, trade
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names, domain names, trade secrets, proprietary processes and formulae,
inventions, know how and other confidential and proprietary information that
they own. All registered patents, copyrights, trademarks, and service marks
owned by the Company and its Subsidiaries are in full force and effect and are
not subject to any taxes or maintenance fees. Except as set forth on Schedule
3.17(a)(ii), there is no pending or, to the knowledge of the Company, threatened
claim or litigation against the Company or any of its Subsidiaries contesting
the right to use Intellectual Property rights, asserting the misuse of any
thereof, or asserting the infringement or other violation of any Intellectual
Property right of a third party. To the Company's knowledge, the names "i2v2,"
"i2v2.com," "PhoneFree" and "PhoneFree.com" and any associated logos (the
"Marks") do not infringe upon the trademark or other Intellectual Property
rights of any Person. The Company continues to monitor potentially infringing
uses of the Marks, and the Company has not concluded that there are any uses of
the Marks by other Persons that would infringe upon the Company's and its
Subsidiaries' exclusive rights to use the Marks. The Company and its
Subsidiaries have taken all reasonable security measures to protect the secrecy,
confidentiality, and value of their trade secrets, proprietary processes and
formulae, inventions, know-how and other confidential and proprietary
information. Schedule 3.17(a)(iii) lists all of the Intellectual Property of the
Company and its Subsidiaries for which registration applications have been
filed.
(b) No proceedings or claims in which the Company or its Subsidiaries
allege that any Person or entity is infringing upon, or otherwise violating, any
patents, trademarks, copyrights, service marks, and applications and
registrations therefor are pending, and none have been served by, instituted or
asserted by the Company or its Subsidiaries, nor, to the Company's knowledge,
are any proceedings threatened alleging any such violation or infringement, nor
has the Company concluded that there is any valid basis for any such proceedings
or claims.
(c) Except as described on Schedule 3.17(c), standard end-user license
agreements, and standard advertising agreements (but in the case of advertising
agreements, solely with respect to the use of trademarks or tradenames in
connection with the advertising arrangements) there are no outstanding options,
licenses, or agreements of any kind relating to the Intellectual Property of the
Company or any of its Subsidiaries, nor is the Company or any of its
Subsidiaries bound by or a party to any options, licenses, or agreements of any
kind with respect to the Intellectual Property of any other Person.
3.18 YEAR 2000.
(a) All hardware and software products used by the Company or any of
its Subsidiaries in the administration and the business operations of the
Company or any of its Subsidiaries accurately process date data (including, but
not limited to calculating, comparing and sequencing) from, into and between the
twentieth century and the twenty-first century, including leap year
calculations, when used in accordance with the product documentation
accompanying such hardware and software products.
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(b) All software products offered by the Company or any of its
Subsidiaries will be able to accurately process date data (including, but not
limited to calculating, comparing and sequencing) from, into and between the
twentieth century and the twenty-first century, including leap year
calculations, when used in accordance with the product documentation
accompanying such software products.
(c) In making the representations set forth in Sections 3.18(a) and
(b) above, the Company is relying on statements and information provided by
third parties, and cannot be held responsible if such statements and/or
information should prove to be inaccurate or overly optimistic. The Company is
neither the source of, nor can it verify the information provided by such third
parties. If certain critical third party vendors and/or providers experience
difficulties resulting in disruption of service to the Company or its
Subsidiaries or in problems that adversely effect the operation of the products,
it could cause a Material Adverse Effect.
3.19 EMPLOYEES; EMPLOYEE COMPENSATION.
(a) To the Company's knowledge, there is no strike, labor dispute or
union organization activity pending or threatened between it or its
Subsidiaries, on the one hand, and their respective employees, on the other.
None of the employees of the Company or any of its Subsidiaries belongs to any
union or collective bargaining unit. To the Company's knowledge, the Company and
its Subsidiaries have complied in all material respects with all applicable
state and federal equal opportunity and other laws related to employment.
(b) All employee benefits plans and arrangements (regardless of
whether such plans or arrangements are covered by the Employee Retirement Income
Security Act of 1974, as amended, and all regulations promulgated thereunder, as
in effect from time to time ("ERISA")) maintained by or contributed to by the
Company and its Subsidiaries are maintained in compliance in all material
respects with Applicable Law, including any reporting requirements.
(c) To the Company's knowledge, no employee of the Company or any of
its Subsidiaries, nor any consultant with whom the Company or any of its
Subsidiaries has contracted, is, will be, or is alleged by any Person to be, in
violation of any judgment, decree, order, or any material term of any employment
Contract, proprietary information agreement or any other agreement affecting the
right of any such individual to be employed by or contract with the Company or
any other Person, and the continued employment by the Company or its
Subsidiaries of its present employees and the performance of the Contracts of
the Company and its Subsidiaries with their respective independent contractors
will not result in any such violation.
(d) Except as set forth on Schedule 3.19, neither the Company or any
of its Subsidiaries nor any entity considered a single employer with the Company
under Section 4001(a)(14) of ERISA or Section 414(b), (c), (m), (n), or (o) of
the Code is a party to or bound by any currently effective employment Contract,
deferred compensation agreement,
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bonus plan, incentive plan, profit sharing plan, retirement agreement, or other
employee compensation plan or agreement. Subject to general principles related
to wrongful termination of employees, the employment of each officer and
employee of the Company and its Subsidiaries is terminable at the will of the
Company or the applicable Subsidiary of the Company. No consultant or employee
of the Company or any of its Subsidiaries has been granted the right to
continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment.
3.20 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.
Each current and former employee and officer of the Company and each of its
Subsidiaries has executed an agreement with the Company containing valid and
enforceable agreements on the part of each such individual to transfer and
assign to the Company or its Subsidiaries all right, title and interest in all
inventions and know-how conceived by such individuals and related to the
business of the Company and its Subsidiaries, and all such inventions and
know-how constitute or will constitute "works for hire". No current or former
employee or officer has excluded works or inventions made prior to his or her
employment with the Company or any of its Subsidiaries from his or her
assignment of inventions pursuant to such individual's agreement with the
Company. The Company does not believe it is or will be necessary to use any
inventions of any employees (or persons it currently intends to hire) made prior
to their employment by the Company or any of its Subsidiaries.
3.21 TAX RETURNS, PAYMENTS, AND ELECTIONS.
The Company and each of its Subsidiaries have timely filed all tax returns
and reports (federal, state, local and foreign) as required by Applicable Law.
These returns and reports are true and correct in all material respects. The
Company and its Subsidiaries have paid all Taxes and other assessments due,
except those contested in good faith. Neither the Company nor any of its
Subsidiaries have elected, pursuant to the Internal Revenue Code of 1986, as
amended (the "Code"), to be treated as an S corporation or a collapsible
corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has
any such Person made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation, or
amortization) that would have a material effect on the business, properties,
prospects, or financial condition of the Company or any of its Subsidiaries. The
Company and its Subsidiaries have never had any tax deficiency proposed or
assessed against them and have not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
None of the federal income tax returns, state income or franchise tax or sales
or use tax returns of the Company or any of its Subsidiaries has ever been
audited by any Governmental Authority, nor, to the Company's knowledge, has any
taxing authority notified (or threatened) the Company or any of its
Subsidiaries, or orally or in writing, that such taxing authority will or may
audit any such return. The Company and its Subsidiaries have made adequate
provisions in their books of account for all taxes, assessments, and
governmental charges with respect to their business, properties, and operations
for such period. The Company and its Subsidiaries have complied with all
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requirements of the Code, U.S. Treasury regulations and any state, local or
foreign law relating to the payment and withholding of Taxes relating to the
Company and its Subsidiaries, and the Company and its Subsidiaries have, within
the time and in the manner prescribed by Applicable Law, paid over to the proper
taxing authorities all amounts required to be so withheld and paid over relating
to the Company and its Subsidiaries. The charges, reserves and accruals on the
books of the Company and its Subsidiaries in respect of Taxes and other
governmental charges are adequate. The Company is not and has never been part of
a combined, consolidated or unitary group for federal, state, local or foreign
income tax purposes and does not have any liability for the payment of any Taxes
as a result of (i) being a "transferee" (within the meaning of Section 6901 of
the Code or any other Applicable Law) of another Person or (ii) a contractual
arrangement or otherwise.
3.22 INSURANCE.
The Company maintains insurance covering the respective operating risks, if
any, of the Company and its Subsidiaries, of such types and in such amounts and
with such deductibles, in the aggregate, as it believes are customary for other
companies engaged in similar lines of business. All insurance policies held by
the Company are in full force and effect.
3.23 COMPLIANCE WITH LAWS.
(a) The Company and its Subsidiaries are in compliance in all material
respects with all Applicable Laws affecting the business of the Company and its
Subsidiaries, except where the failure to comply would not have a Material
Adverse Effect.
(b) Without limiting the generality of the foregoing, to the best of
its knowledge, the Company and its Subsidiaries are in compliance with any
Applicable Laws relating to the environment or occupational health and safety,
and to the best of its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
Neither the Company nor, to the knowledge of the Company, any other Person
(including, without limitation, any previous owner, lessee or sublessee) has
treated, stored or disposed of any petroleum products, hazardous waste,
hazardous substances, pollutants or contaminants on the real property, or any
real property previously owned, leased, subleased or used by the Company or any
of its Subsidiaries in the operation of its business, in violation of any
applicable foreign, federal, state or local statutes, regulations or ordinances,
or common law, such as would cause a Material Adverse Effect. To the knowledge
of the Company, there have been no releases of petroleum, petroleum products,
hazardous waste, hazardous substances, pollutants or contaminants on, at or from
any assets or properties, including, without limitation, the real property
owned, leased, subleased or used by the Company or any of its Subsidiaries in
the operation of its business during the time such assets or properties were
owned, leased, subleased or used by the Company or any of its Subsidiaries (or,
to the knowledge of the Company, prior to such time), including, without
limitation, any releases of any material amounts of petroleum, petroleum
products, hazardous waste,
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hazardous substances, pollutants or contaminants in violation of any law, such
as would cause a Material Adverse Effect.
3.24 SECTION 83(b) ELECTIONS.
To the Company's knowledge, all individuals who have purchased shares of
the Company's Common Stock under agreements that provide for the vesting of such
shares have filed timely elections under Section 83(b) of the Code and any
analogous provisions of applicable state tax laws.
3.25 REAL PROPERTY HOLDING CORPORATION.
The Company is not a real property holding corporation within the meaning
of Section 897(c)(2) of the Code and any regulations promulgated thereunder.
3.26 PERFORMANCE OF PRODUCT.
The Company's "phonefree.com" Internet telephony product offering performs
in all material respects in accordance with its specifications and the
description of such product set forth on the Company's web site as of the date
hereof. Based on the Company's database records (which to the Company's best
knowledge are accurate), from July 1, 1999 through March 31, 2000, approximately
498,258 users have registered the Internet telephony software provided by the
Company. Based on the Company's database records, as of March 31, 2000, the
Company's Internet telephony product had approximately 754,343 confirmed
registered users and during the three month period ended March 31, 2000, there
were approximately 350,775 new confirmed registered users.
3.27 USE OF PROCEEDS.
The proceeds received by the Company from the sale of the Shares shall be
used by the Company for working capital, to repay outstanding indebtedness and
other general corporate purposes.
3.28 HSR ACT.
The Company is an ultimate parent entity and is not engaged in
manufacturing; per the last regularly prepared balance sheet, the Company
(together with all other entities that it controls directly or indirectly) had
total assets of less than $10 million and as per the last regularly prepared
annual statement of income and expenses, the Company had annual net sales of
less than $100 million, all as determined in accordance with 16 C.F.R. Sections
801.1(a)-(c), 801.1(j) and 801.11.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally and not jointly represents and warrants to
the Company as of the date hereof and as of the Closing Date as follows:
4.1 ORGANIZATION; AUTHORIZATION; ENFORCEABILITY.
Such Purchaser is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all corporate
power and authority to own its properties and assets and to carry on its
business as it is now being conducted and as currently proposed to be conducted.
Such Purchaser has the power to execute, deliver and perform its obligations
under each of the Equity Documents and has taken all action necessary to
authorize the execution, delivery and performance by it of the Equity Documents
and to consummate the Transactions. No other proceedings on the part of such
Purchaser are necessary for such authorization, execution, delivery and
consummation. Such Purchaser has duly executed and delivered this Agreement and,
at the Closing, such Purchaser will have duly executed and delivered each of the
other Equity Documents. This Agreement constitutes, and each of the other Equity
Documents, when executed and delivered by such Purchaser, will constitute, a
legal, valid and binding obligation of such Purchaser enforceable against such
Purchaser in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization, or other laws
of general application affecting enforcement of creditors' rights or (b) general
principles of equity that restrict the availability of equitable remedies.
4.2 PRIVATE PLACEMENT.
(a) Such Purchaser understands that (i) the offering and sale of the
Shares in the Issuance by the Company is intended to be exempt from registration
under the Securities Act pursuant to Section 4(2) thereof, (ii) there is no
existing public or other market for the Shares and (iii) such securities must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration.
(b) Such Purchaser (either alone or together with its advisors) has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Shares
and is capable of bearing the economic risks of such investment.
(c) Such Purchaser is acquiring the Shares to be acquired hereunder
for its own account, for investment and not with a view to the public resale or
distribution thereof in violation of any securities laws.
(d) Such Purchaser (A) has been furnished with or has had access to
the information that it considers necessary or appropriate to make an informed
investment
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decision with respect to the Shares and that it has requested from the Company,
(B) has had an opportunity to discuss with management of the Company the
intended business and financial affairs of the Company and to obtain information
necessary to verify any information furnished to it or to which it had access
and (C) can bear the economic risk of (x) an investment in the Shares
indefinitely and (y) a total loss in respect of such investment.
4.3 NO VIOLATION; CONSENTS.
(a) The execution, delivery and performance by such Purchaser of each
of the Equity Documents and the consummation of the Transaction, do not and will
not contravene any Applicable Law, except for such contraventions as would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Purchaser to timely perform its
obligations under this Agreement. The execution, delivery and performance by
such Purchaser of each of the Equity Documents to which it is a party and the
consummation of the Transaction (i) will not (A) violate, result in a breach of
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any Contract to which such Purchaser is a party or by which such Purchaser are
bound or to which any of their assets is subject, or (B) result in the creation
or imposition of any Lien upon any of the assets of such Purchaser, except for
any such violations, breaches, defaults or Liens that would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the ability of such Purchaser to timely perform its obligations under this
Agreement, and (ii) will not conflict with or violate any provision of the
certificate of incorporation or bylaws of such Purchaser.
(b) No consent, authorization or order of, or filing or registration
with, any Governmental Authority or other Person is required to be obtained or
made by such Purchaser for the execution, delivery and performance by it of any
of the Equity Documents or the consummation of the Transaction, except where the
failure to obtain such consents, authorizations or orders, or make such filings
or registrations, would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of such Purchaser to
timely perform its obligations under this Agreement.
4.4 NO LITIGATION.
There are not any (a) outstanding judgments against or affecting such
Purchaser or any of its Subsidiaries, (b) proceedings pending or, to the
knowledge of such Purchaser, threatened against or affecting such Purchaser or
any of its Subsidiaries or (c) investigations by any Governmental Authority that
are, to the knowledge of such Purchaser, pending or threatened against or
affecting such Purchaser or any of its Subsidiaries that, in any case,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the ability of such Purchaser to timely perform its
obligations under this Agreement.
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4.5 RELIANCE.
No representations or warranties relating to the Company or its
Subsidiaries have been made to such Purchaser by the Company or any officer,
director, employee, stockholder or agent thereof except as set forth in this
Agreement (including any documents attached hereto or referred to herein).
ARTICLE V
COVENANTS OF THE COMPANY
5.1 OPERATION OF BUSINESS.
(a) From the date hereof until the Closing Date, except as set forth
on Schedule 5.1, the Company shall, and shall cause each of its Subsidiaries to:
(i) operate its business in all material respects in the ordinary
course and in compliance with Applicable Laws;
(ii) not adopt any amendment to its certificate of incorporation
or bylaws or comparable organizational documents except as contemplated by
this Agreement;
(iii) not split, combine or reclassify any shares of the
Company's Capital Stock;
(iv) not declare or pay any dividend or distribution (whether in
cash, stock or property) in respect of its Capital Stock or increase the
number of shares subject to the Company's stock incentive and option plans;
(v) not take any action, or knowingly omit to take any action,
that would, or that would reasonably be expected to, result in (A) any of
the representations and warranties of the Company set forth in Article III
becoming untrue or (B) any of the conditions to the obligations of the
Purchasers set forth in Section 7.2 not being satisfied; or
(vi) enter into any agreement or commitment to do any of the
foregoing.
(b) From the date hereof until the Closing, without the consent of the
Purchasers, neither the Company nor any of its Subsidiaries will enter into any
Contract or other arrangement, or any amendment or modification of any Contract
or arrangement, of a type that, if entered into prior to the date hereof, would
be required to be disclosed pursuant to Section 3.12 hereof.
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5.2 ACCESS TO BOOKS AND RECORDS.
The Company and its Subsidiaries shall afford to the Purchasers and the
Purchasers' accountants, counsel and representatives full access upon reasonable
notice during normal business hours throughout the period prior to the Closing
Date (or the earlier termination of this Agreement pursuant to Section 8.4
hereof) to all its properties, books, Contracts, commitments and records
(including, but not limited to, tax returns) and, during such period, shall,
upon request, furnish promptly to the Purchasers (i) a copy of each report,
schedule and other document filed or received by any of them pursuant to the
requirements of Federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as the Purchasers may
reasonably request, provided that no investigation or receipt of information
pursuant to this Section 5.2 shall affect any representation or warranty of the
Company or the conditions to the obligations of the Purchasers.
5.3 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS.
The Company shall (a) subject to the satisfaction of the conditions set
forth in Section 7.1, execute and deliver the Equity Documents and such other
documents, certificates, agreements and other writings, and (b) take such other
actions, in each case, as may be reasonably necessary, desirable or requested by
the Purchasers in order to consummate or implement the Issuance in accordance
with the terms of this Agreement and to cause the conditions set forth in
Section 7.1 to be satisfied.
5.4 COMPLIANCE WITH CONDITIONS; COMMERCIALLY REASONABLE EFFORTS.
The Company shall use all commercially reasonable efforts to cause all of
the obligations imposed upon it in this Agreement to be duly complied with, and
to cause the conditions precedent to the obligations of the Purchasers in
Sections 7.2(a) through (e), (g), (h) and (j) to be satisfied. Upon the terms
and subject to the conditions of this Agreement, the Company will use all
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable consistent
with Applicable Law to consummate and make effective in the most expeditious
manner practicable the Issuance in accordance with the terms of this Agreement.
5.5 CONSENTS AND APPROVALS.
The Company (a) shall use all commercially reasonable efforts to obtain all
necessary consents, waivers, authorizations and approvals of all Governmental
Authorities and of all other Persons required in connection with the execution,
delivery and performance by the Company of the Equity Documents or the
consummation of the Issuance and (b) shall diligently assist and cooperate with
the Purchasers in preparing and filing all documents required to be submitted by
the Purchasers to any Governmental Authority in connection with the Issuance
(which assistance and cooperation shall include, without limitation, timely
furnishing, upon written request, to the Purchasers all information concerning
the Company and the Subsidiaries that counsel to the Purchasers reasonably
determines is required to be
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included in such documents or would be helpful in obtaining any such required
consent, waiver, authorization or approval).
5.6 LEGENDS.
So long as applicable, each certificate representing any portion of the
Shares shall contain, be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable state
securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. SUCH SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS. IN ADDITION, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERS
CONTAINED IN AN INVESTOR RIGHTS AGREEMENT, DATED AS OF MAY 3, 2000.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED FROM THE CORPORATION AT ITS
PRINCIPAL EXECUTIVE OFFICES."
After the above requirement for a legend is no longer applicable with respect to
all or any of the Shares because the applicable Shares are freely transferable
under the Securities Act, the Company shall remove such legend upon request from
a holder of the applicable Shares, if outside counsel for such holder reasonably
determines that the transfer of such Shares is no longer restricted by the
Securities Act and outside counsel for the Company reasonably concurs in such
determination.
5.7 CONFIDENTIALITY.
The Company agrees that, except as required by law or with the prior
written permission of a Purchaser, the Company shall make no public statement
with respect to any transactions or discussions with respect to possible
transactions involving the Company and such Purchaser including, without
limitation, the Transaction, this Agreement, and the other Equity Documents.
5.8 ADDITIONAL CLOSINGS.
The Purchasers hereby acknowledge and agree that the Company may issue up
to an additional 1,877,729 shares of Series A Preferred Stock at a per share
purchase price not less
23
<PAGE> 24
than $7.11 to other purchasers not a party to this Agreement; provided that the
closing of the transactions contemplated by the agreement for sale occurs not
later than 10 business days after the Closing Date. Any such purchaser shall
become a party to this Agreement and to the Investor Rights Agreement. The
Company confirms to each Purchaser that the Company will provide each Purchaser
with copies of any agreement signed and delivered after the date hereof between
the Company and any purchaser of such additional shares of Series A Preferred
Stock which grants such purchaser rights which are greater than or in any
respect more favorable to such investor than the rights granted to the
Purchasers under this Agreement and the Investor Rights Agreement within 10
business days after its execution. Each Purchaser may elect, at its sole option,
to cause any provision of any such agreement to become effective as to such
Purchaser by providing the Company with written notice of such election within
10 business days after the receipt of such agreement by such Purchaser.
5.9 REGISTRATION RIGHTS.
Without the prior written consent of Purchasers holding at least 66 2/3% of
the outstanding shares of Series A Preferred Stock, the Company shall not grant
to any holders of currently outstanding Common Stock any registration rights,
except that (i) to the extent such holders do not currently have such rights,
the Company may grant "piggyback" and S-3 registration rights substantially
identical to those granted to holders of Common Stock having such rights on the
date hereof, it being understood that no such "piggyback" rights shall have a
priority over the rights granted to the Holders of Series A Preferred Stock, and
(ii) the Company may grant no more than one demand registration right for all
common holders which shall not be effective until 270 days after the first date
on which the holders of Series A Preferred Stock are entitled to request that a
demand registration take effect pursuant to Section 2.1(a)(i) of the Investor
Rights Agreement, provided that if the holders of the Series A Preferred Stock
shall agree to any longer lock-up period than the currently effective 180-day
lock-up period following the first underwritten public offering of the Company's
Common Stock, the demand registration right that may be granted to the holders
of Common Stock pursuant hereto shall not be effective until 270 days after the
end of such lock-up period.
5.10 MULTI-TECH SYSTEMS, INC. LITIGATION.
The Company agrees to obtain, and to provide copies to the Purchasers of,
the legal opinion of special patent counsel to the Company opining as to the
non-infringement by the Company, or the invalidity, or both, of the patents
identified in the lawsuit filed on February 15, 2000 against the Company by
Multi-Tech Systems, Inc. within a reasonable time after the Closing but in no
event later than 120 days after the Closing.
ARTICLE VI
COVENANTS OF THE PURCHASERS
Each Purchaser hereby covenants as follows:
24
<PAGE> 25
6.1 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS.
Each Purchaser shall (a) subject to the satisfaction of the conditions set
forth in Section 7.2, execute and deliver each of the Equity Documents and (b)
take such other actions as may be reasonably necessary, desirable or requested
by the Company in order to consummate or implement the Transactions in
accordance with the terms of this Agreement.
6.2 COMPLIANCE WITH CONDITIONS; COMMERCIALLY REASONABLE EFFORTS.
Each Purchaser shall use all commercially reasonable efforts to cause all
of the obligations imposed upon it in this Agreement to be duly complied with,
and to cause the conditions precedent to the obligations of the Company in
Sections 7.1(a) and (b) to be satisfied. Upon the terms and subject to the
conditions of this Agreement, each Purchaser will use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable consistent with
Applicable Law to consummate and make effective in the most expeditious manner
practicable the Transactions in accordance with the terms of this Agreement.
Nothing herein shall be construed to require each Purchaser or any of its
Affiliates to divest or otherwise rearrange the composition of any assets or
agree to any conditions or requirements which are, or are reasonably likely to
be, materially adverse or burdensome to each Purchaser or its Affiliates, as
applicable.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
7.1 CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligations of the Company required to be performed on the Closing Date
shall be subject to the satisfaction or waiver, at or prior to the Closing, of
the following conditions:
(a) The representations and warranties of each Purchaser contained in
this Agreement shall have been true and correct when made and, in addition,
shall be repeated and true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
(b) Each Purchaser shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by such
Purchaser at or prior to the Closing Date.
(c) The Company shall have obtained all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
Persons required in connection with the execution, delivery and performance of
the Equity Documents or the
25
<PAGE> 26
consummation of the Issuance, such waivers to be satisfactory in form and
substance to the Company.
(d) Each Purchaser shall have executed and delivered the Investor
Rights Agreement to the Company.
7.2 CONDITIONS TO THE PURCHASERS' OBLIGATIONS.
The obligations of each Purchaser hereunder required to be performed on the
Closing Date shall be subject to the satisfaction or waiver, at or prior to the
Closing, of the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement (i) shall have been true and correct when made and (ii) shall be
(A) in the case of representations and warranties that are qualified as to
materiality or Material Adverse Effect true and correct and (B) in all other
cases, true and correct in all material respects, in each case, as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
(b) The Company shall have performed in all material respects all of
its obligations and agreements and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with at or
prior to the Closing Date.
(c) The Company shall have executed and delivered the Investor Rights
Agreement to the Purchasers.
(d) The Certificate of Designation shall have been executed and filed
and shall have become effective in accordance with Section 151 of the DGCL.
(e) The Company shall have delivered to the Purchasers a certificate
executed on its behalf by a duly authorized representative, dated the Closing
Date, to the effect that each of the conditions specified in paragraph (a)
through (c) of this Section 7.2 has been satisfied.
(f) No provision of any Applicable Law, injunction, order or decree of
any Governmental Entity shall be in effect which has the effect of making the
Transactions illegal or shall otherwise restrain or prohibit the consummation of
the Transaction.
(g) The Purchasers shall have received an opinion of Chadbourne &
Parke LLP, special counsel to the Company, dated the Closing Date, and addressed
to the Purchasers substantially in the form set forth in Exhibit D hereto.
(h) The Purchasers shall have received certificates representing the
Shares purchased by such Purchaser concurrently with the Company's receipt of
the Purchase Price for such Shares.
26
<PAGE> 27
(i) There shall not have occurred (i) any event, circumstance,
condition, fact, effect or other matter which has had or could reasonably be
expected to have a material adverse effect (x) on the business, assets,
financial condition, prospects, or results of operations of the Company and its
Subsidiaries taken as a whole or (y) on the ability of the Company and its
Subsidiaries to perform on a timely basis any material obligation under this
Agreement or the other Equity Documents or to consummate the Issuance
contemplated hereby; or (ii) any material disruption of or material adverse
change in financial, banking or capital market conditions.
(j) The Company shall have made all filings with, given all notices
to, and received all approvals from, all Governmental Authorities required in
connection with the consummation of the Transactions, unless the failure to make
such filings, give such notices or receive such approvals would not,
individually or in the aggregate, have a Material Adverse Effect or a material
adverse effect on the ability of the Company to consummate the Transactions.
(k) The Purchasers on Schedule I shall have funded at least 75% of the
aggregate cash Purchase Price (excluding debt of the Company which is being
converted into Shares).
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL; INDEMNIFICATION.
(a) Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing for one year
except (i) covenants and agreements that are required to be performed after the
Closing Date which shall survive according to their terms; (ii) Sections 3.1,
3.2(a) and 3.3 which shall survive indefinitely; and (iii) representations and
warranties contained in Sections 3.19(b), 3.19(d) and 3.21 which shall survive
until the respective statutes of limitations run; provided, however, that in no
event shall any representations or warranties contained in this Agreement
survive past the Company's first underwritten public offering of securities.
(b) Indemnification by the Company. The Company (the "Company
Indemnitor") shall indemnify and hold the Purchasers and their stockholders,
directors, officers and employees, if any (collectively, the "Purchaser
Indemnified Parties") harmless from and against, and agree to promptly defend
each of the Purchaser Indemnified Parties from and reimburse each of the
Purchaser Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorneys fees) (collectively, a "Loss") that any of the Purchaser
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with any breach or inaccuracy of any representations
and warranties made by the
27
<PAGE> 28
Company in this Agreement, or in any certificate or affidavit delivered by the
same at the Closing in accordance with the provisions hereof.
(c) Indemnification by the Purchasers. Each Purchaser (each, a
"Purchaser Indemnitor" and together with the Company Indemnitor, the
"Indemnitors") shall indemnify and hold the Company and its stockholders,
directors, officers and employees (collectively, the "Company Indemnified
Parties" and together with the Purchaser Indemnified Parties, the "Indemnified
Parties") harmless from and against, and agree to promptly defend each of the
Company Indemnified Parties from and reimburse each of the Company Indemnified
Parties for, any and all Losses that any of the Company Indemnified Parties may
at any time suffer or incur, or become subject to, as a result of or in
connection with any breach or inaccuracy of any representations and warranties
made by such Purchaser in this Agreement.
(d) Notification of Claims: Election to Defend.
(i) An Indemnified Party entitled to be indemnified by the Indemnitors
pursuant to either Section 8.1(b) or Section 8.1(c) hereof shall notify its
respective Indemnitor in writing of any claim or demand (a "Claim") that
the Indemnified Party has determined has given or could give rise to a
right of indemnification under this Agreement promptly after the
Indemnified Party determines that the Claim exists. The Indemnified Party's
failure to promptly notify the Indemnitor of any such Claim shall not
relieve the Indemnitor of its indemnity obligations under this Agreement,
except to the extent the delay in giving notice of the Claim beyond the
time required materially prejudices the Indemnitor. The amount and
liability for a Claim contained in a notice of Claim shall be deemed final
unless the Indemnitor notifies the Indemnified Party in writing within
thirty (30) days of its receipt of such written notice that it disputes
such Claim. Subject to the Indemnitor's right to defend in good faith third
party claims as hereinafter provided, the Indemnitor shall satisfy its
obligations under this Section 8.1 within thirty (30) days after any such
loss is deemed final. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and
ending on the actual date of payment, at a rate equal to the prime rate
announced from time to time by Citibank, N.A. plus one percent (1%) per
annum, or, if lower, at the highest rate of interest permitted by
applicable law at the time of such payment (the "Rate").
(ii) If the Indemnified Party shall notify the Indemnitor of any Claim
pursuant to Section 8.1(d)(i) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnitor
acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Sections 8.1(d) hereof, the Indemnitor shall have
the right, at its sole cost and expense, to employ counsel of its own
choosing to defend any such Claim asserted against the Indemnified Party.
The Indemnified Party shall have the right to participate in the defense of
any such Claim at its own expense (except as provided in Section
8.1(d)(iii) hereto), but the Indemnitor shall retain control over such
litigation (except as provided
28
<PAGE> 29
in Section 8.1(d)(iii) hereto). The Indemnitor shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due
date for the answer or response to a claim) after the date of the notice of
claim given by the Indemnified Party to the Indemnitor under Sections
8.1(d)(i) hereof of its election to defend in good faith any such third
party Claim. The Indemnified Party shall not settle or compromise any such
Claim asserted by a third party against the Indemnified Party without the
prior written consent of the Indemnitor. The Indemnified Party shall
cooperate with the Indemnitor in connection with any such defense and shall
make available to the Indemnitor or its agents all records and other
materials in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party Claim; provided, however, that
the Indemnitor shall have agreed, in writing, to keep such records and
other materials confidential except to the extent required for defending
the relevant Claim. Whether or not the Indemnitor elects to defend any such
Claim, the Indemnified Party shall have no obligations to do so. Within
thirty (30) days after a final determination (including, without
limitation, a settlement) has been reached with respect to any Claim
contested pursuant to this Section 8.1(d)(ii), the Indemnitor shall satisfy
its obligations with respect thereto. Any amounts paid thereafter shall
include interest thereon for the period commencing at the end of such
30-day period and ending on the actual date of payment, at the Rate.
(iii) Notwithstanding the foregoing, if the Indemnified Party (x)
reasonably believes that its interests with respect to a Claim (or any
material portion thereof) are in conflict with the interests of the
Indemnitor with respect to such Claim (or portion thereof), and (y)
promptly notifies the Indemnitor, in writing, of the nature of such
conflict, then the Indemnified Party shall be entitled to choose, at the
cost and expense of the Indemnitor, its own independent counsel to defend
the Indemnified Party in such Claim, provided that the Indemnitor shall
only be responsible for reasonable attorney's fees and expenses arising
from such litigation.
8.2 NOTICES.
All notices, demands, requests, consents, approvals or other communications
(collectively, "Notices") required or permitted to be given hereunder or which
are given with respect to this Agreement shall be in writing and shall be
personally served, delivered by reputable air courier service with charges
prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice. Notice shall be deemed given on the
date of service or transmission if personally served or transmitted by telegram,
telex or facsimile. Notice otherwise sent as provided herein shall be deemed
given on the next business day following delivery of such notice to a reputable
air courier service.
29
<PAGE> 30
To the Company:
PhoneFree.com Inc.
200 Church Street
New York, New York 10013
Attn: Donovan Burke
Telephone: (212) 571-9955
Fax: (212) 571-9944
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Dennis J. Friedman
Telephone: (212) 408-5100
Fax: (212) 541-5369
To the Purchasers:
At the address set forth beside such Purchaser's name on Schedule I
hereto.
8.3 GOVERNING LAW.
This Agreement shall be governed by, interpreted under, and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.4 TERMINATION.
(a) This Agreement may be terminated as between the Company and the
Purchasers (i) at any time prior to the Closing Date by mutual written agreement
of the Company and the Purchasers, (ii) if the Closing shall not have occurred
on or prior to the date which is seven days from the date hereof, by either the
Company or the Purchasers, at any time after such date, provided that the right
to terminate this Agreement under this Section 8.4(a)(ii) shall not be available
to any party whose failure to fulfill any obligation under this Agreement was
the cause of or resulted in the failure of the Closing to occur on or before
such date, (iii) if any Governmental Authority shall have issued a nonappealable
final order, decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Transactions, by
either the Company or the Purchasers, or (iv) if either the Company or the
Purchasers shall have breached any of its material obligations under this
Agreement, by the non-breaching party. Any party desiring to terminate this
Agreement pursuant to clauses 8.4(a)(ii), (iii), or (iv) shall promptly give
notice of such termination to the other party.
30
<PAGE> 31
(b) If this Agreement is terminated as permitted by Section 8.4(a),
such termination shall be without liability of any party (or any stockholder,
director, officer, partner, employee, agent, consultant or representative of
such party) to any other party to this Agreement; provided that if such
termination shall result from the willful (a) failure of any party to fulfill a
condition to the performance of the obligations of the other party, (b) failure
to perform a covenant of this Agreement or (c) breach by any party hereto of any
representation or warranty contained herein, such failing or breaching party
shall be fully liable for any and all losses (excluding consequential damages)
incurred or suffered by the other party as a result of such failure or breach.
The provisions of this Article VIII shall survive any termination hereof
pursuant to Section 8.4(a).
8.5 ENTIRE AGREEMENT.
This Agreement and the other Equity Documents (including all agreements
entered into pursuant hereto and thereto and all certificates and instruments
delivered pursuant hereto and thereto) constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof.
8.6 MODIFICATIONS AND AMENDMENTS.
No amendment, modification or termination of this Agreement shall be
binding unless executed in writing by the Company and the Purchasers.
8.7 WAIVERS AND EXTENSIONS.
Any party to this Agreement may waive any condition, right, breach or
default that such party has the right to waive, provided that such waiver will
not be effective against the waiving party unless it is in writing, is signed by
such party, and specifically refers to this Agreement. Waivers may be made in
advance or after the right waived has arisen or the breach or default waived has
occurred. Any waiver may be conditional. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained. No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
8.8 TITLES AND HEADINGS.
Titles and headings of sections of this Agreement are for convenience only
and shall not affect the construction of any provision of this Agreement.
31
<PAGE> 32
8.9 EXHIBITS AND SCHEDULES.
Each of the exhibits and schedules referred to herein and attached hereto
is an integral part of this Agreement and is incorporated herein by reference.
8.10 EXPENSES.
Except to the extent otherwise specifically provided herein, each of the
Parties shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that the Company shall pay the
reasonable costs and expenses (including reasonable legal fees and reasonable
fees of accountants and other advisers to the Purchasers) incurred by eVentures
Group, Inc. and Blackstone Capital Partners III Merchant Banking Fund L.P. and
its affiliates not to exceed sixty thousand dollars ($60,000) in the aggregate.
8.11 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.
All public announcements or disclosures relating to the Issuance or this
Agreement shall be made only if mutually agreed upon by the Company and the
Purchasers, except to the extent such disclosure is, in the opinion of counsel,
required by law or by regulation of any applicable national securities exchange
or national securities association or Commission recognized trading market;
provided that (a) any such required disclosure shall only be made, to the extent
consistent with law and regulation of any applicable national stock exchange or
Commission recognized trading market, after consultation with the Purchasers and
the Company and (b) no such announcement or disclosure (except as required by
law or by regulation of any applicable national securities exchange or national
securities association or Commission recognized trading market) shall identify
the Purchasers without the Purchasers' prior consent.
8.12 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES.
This Agreement and the rights, duties and obligations hereunder may not be
assigned or delegated by the Company without the prior written consent of the
Purchasers, and may not be assigned or delegated by the Purchasers without the
Company's prior written consent except that the Purchasers may assign any or all
of their rights and obligations under this Agreement to any one or more of their
Affiliates. Any assignment or delegation of rights, duties or obligations
hereunder made by the Company without the prior written consent of the
Purchasers, shall be void and of no effect. This Agreement and the provisions
hereof shall be binding upon and shall inure to the benefit of each of the
parties and their respective successors and permitted assigns. This Agreement is
not intended to confer any rights or benefits on any Persons other than the
parties hereto, except as expressly set forth in this Section 8.12.
32
<PAGE> 33
8.13 SEVERABILITY.
This Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of this Agreement or of any other term or provision hereof.
Furthermore, in lieu of any such invalid or unenforceable term or provision, the
parties hereto intend that there shall be added as a part of this Agreement a
provision as similar in terms to such invalid or unenforceable provision as may
be possible and be valid and enforceable.
8.14 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
8.15 FURTHER ASSURANCES.
As between the Company and each Purchaser, each party hereto, upon the
request of any other party hereto, shall do all such further acts and execute,
acknowledge and deliver all such further instruments and documents as may be
necessary or desirable to carry out the transactions contemplated by this
Agreement, including, in the case of the Company, such acts, instruments and
documents as may be necessary or desirable to convey and transfer to each
Purchaser the Shares purchased by it.
8.16 REMEDIES CUMULATIVE.
The remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any remedies
against the other party hereto.
33
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PHONEFREE.COM INC.
By:
------------------------------------------
Name:
Title:
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By:
--------------------------------------
Name:
Title:
BLACKSTONE OFFSHORE CAPITAL
PARTNERS III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By:
--------------------------------------
Name:
Title:
<PAGE> 35
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By:
--------------------------------------
Name:
Title:
EVENTURES GROUP, INC.
By:
------------------------------------------
Name:
Title:
EFONE PARTNERS
By: EFO GenPar, Inc.,
its General Partner
By:
--------------------------------------
Name: G. Larry Wallace
Title: President
GERONIMO PARTNERS, L.P.
By: EFO GenPar, Inc.,
its General Partner
By:
--------------------------------------
Name: G. Larry Wallace
Title: President
<PAGE> 36
CCA TELECOM FUND, L.P.
By: CCA Acquisitions, L.L.C.,
its General Partner
By:
--------------------------------------
Name: Sarah Castleman
Title: Managing Partner
MILLENNIUM TECHNOLOGY
VENTURES, L.P.
By: BKS Investment Partners, LLC,
its General Partner
By:
--------------------------------------
Name:
Title:
TEKBANC.COM LIMITED
By:
------------------------------------------
Name:
Title:
BRAZOS PHONEFREE.COM
ACQUISITION, LLC
By:
------------------------------------------
Name:
Title:
<PAGE> 37
--------------------------------------
Daniel L. Burstein
--------------------------------------
Richard A. Kimball, Jr.
--------------------------------------
Charles D. Peebler, Jr.
C&P PHONEFREE INVESTMENT LLC
By:
----------------------------------
Name: Dennis J. Friedman
Title: General Manager
ACTIVATED COMMUNICATION L.P.
By:
----------------------------------
Name:
Title:
<PAGE> 38
SCHEDULE I
PURCHASERS
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASE PRICE
- - ---------------- ------ --------------
<S> <C> <C>
Blackstone Capital Partners III 839,276 $5,967,253
Merchant Banking Fund L.P.
345 Park Avenue
New York, NY 10154
Attention: Mark Gallogly/Michael Chae
Blackstone Offshore Capital Partners III L.P. 152,285 $1,082,747
c/o Blackstone Capital Partners III
Merchant Banking Fund L.P.
345 Park Avenue
New York, NY 10154
Attention: Mark Gallogly/Michael Chae
Blackstone Family Investment Partnership III L.P. 63,291 $450,000
c/o Blackstone Capital Partners III
Merchant Banking Fund L.P.
345 Park Avenue
New York, NY 10154
Attention: Mark Gallogly/Michael Chae
eVentures Group, Inc. 1,406,470 $10,000,000 (cash)
300 Crescent Court, Suite 800
Dallas, TX 75201
Attention: Tom McMillin/Stuart Chasanoff
eVentures Group, Inc. 449,729 $3,035,671(1)
300 Crescent Court, Suite 800
Dallas, TX 75201
Attention: Tom McMillin/Stuart Chasanoff
eFONE Partners 140,647 $1,000,000
2626 Cole Street, Suite 700
Dallas, TX 75204
</TABLE>
- - --------
(1) Represents conversion of Promissory Note dated March 2, 2000 with principal
amount of $3,000,000 and accrued interest.
<PAGE> 39
<TABLE>
<S> <C> <C>
Geronimo Partners, L.P. 140,647 $1,000,000
2626 Cole Street, Suite 700
Dallas, TX 75204
CCA Telecom Fund, L.P. 421,941 $3,000,000
5944 Luther Lane, Suite 307
Dallas, TX 75225
Millennium Technology Ventures, L.P. 421,941 $3,000,000
350 Park Avenue
New York, NY 10022
Attention: Daniel L. Burstein
Daniel L. Burstein 14,065 $100,000
One Langner Lane
Westin, CT 06883
Richard A. Kimball, Jr. 7,032 $50,000
755 Park Avenue, Apt. 10B
New York, NY 10021
TeKBanC.com Limited 705,945 $5,019,266(2)
c/o Kuwait Fund for Arab Economic Development
P.O. Box 2921
13030 Safat
Kuwait
Brazos PhoneFree.com Acquisition, LLC 283,123 $2,013,004(3)
300 Crescent Court, Suite 1740
Dallas, TX 75201
C&P PhoneFree Investment LLC 29,747 $211,500
c/o Chadbourne & Parke LLC
30 Rockefeller Plaza
New York, NY 10112
Attention: Dennis J. Friedman
</TABLE>
- - -----------
(2) Represents conversion of Promissory Note dated March 31, 2000 with principal
amount of $5,000,000 and accrued interest.
(3) Represents conversion of Promissory Note dated April 6, 2000 with principal
amount of $2,000,000 and accrued interest.
<PAGE> 40
<TABLE>
<S> <C> <C>
Activated Communication L.P. 210,970 $1,500,000
767 5th Ave., 50th Floor
New York, NY 10153
Charles D. Peebler, Jr. 35,162 $250,000
40 West 23rd Street
New York, NY 19919
</TABLE>
<PAGE> 41
================================================================================
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
PHONEFREE.COM INC.
AND
THE PURCHASERS LISTED ON SCHEDULE I HERETO
DATED AS OF
MAY 3, 2000
================================================================================
<PAGE> 42
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS .......................................................................................1
ARTICLE II SALE AND PURCHASE.................................................................................4
2.1 AGREEMENT TO SELL AND TO PURCHASE; PURCHASE PRICE..................................................4
2.2 CLOSING............................................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................6
3.1 ORGANIZATION AND STANDING..........................................................................6
3.2 CAPITAL STOCK......................................................................................7
3.3 AUTHORIZATION; ENFORCEABILITY......................................................................8
3.4 NO VIOLATION; CONSENTS.............................................................................8
3.5 FINANCIAL STATEMENTS...............................................................................9
3.6 PRIVATE OFFERING...................................................................................9
3.7 DISCLOSURE........................................................................................10
3.8 MATERIAL ADVERSE CHANGE...........................................................................10
3.9 LITIGATION........................................................................................11
3.10 PERMITS AND LICENSES..............................................................................11
3.11 ABSENCE OF BREACH.................................................................................11
3.12 BROKERS...........................................................................................12
3.13 CONTRACTS AND OTHER COMMITMENTS...................................................................12
3.14 RELATED-PARTY TRANSACTIONS........................................................................12
3.15 REGISTRATION RIGHTS...............................................................................13
3.16 TITLE TO PROPERTY AND ASSETS; LEASES..............................................................13
3.17 INTELLECTUAL PROPERTY.............................................................................13
3.18 YEAR 2000.........................................................................................14
3.19 EMPLOYEES; EMPLOYEE COMPENSATION..................................................................15
3.20 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.................................................16
3.21 TAX RETURNS, PAYMENTS, AND ELECTIONS..............................................................16
3.22 INSURANCE.........................................................................................17
3.23 COMPLIANCE WITH LAWS..............................................................................17
3.24 SECTION 83(B) ELECTIONS...........................................................................18
3.25 REAL PROPERTY HOLDING CORPORATION.................................................................18
3.26 PERFORMANCE OF PRODUCT............................................................................18
3.27 USE OF PROCEEDS...................................................................................18
3.28 HSR ACT...........................................................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.................................................19
4.1 ORGANIZATION; AUTHORIZATION; ENFORCEABILITY.......................................................19
4.2 PRIVATE PLACEMENT.................................................................................19
</TABLE>
i
<PAGE> 43
<TABLE>
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4.3 NO VIOLATION; CONSENTS............................................................................20
4.4 NO LITIGATION.....................................................................................20
4.5 RELIANCE..........................................................................................21
ARTICLE V COVENANTS OF THE COMPANY..........................................................................21
5.1 OPERATION OF BUSINESS.............................................................................21
5.2 ACCESS TO BOOKS AND RECORDS.......................................................................22
5.3 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS.................................................22
5.4 COMPLIANCE WITH CONDITIONS; COMMERCIALLY REASONABLE EFFORTS.......................................22
5.5 CONSENTS AND APPROVALS............................................................................22
5.6 LEGENDS...........................................................................................23
5.7 CONFIDENTIALITY...................................................................................23
5.8 ADDITIONAL CLOSINGS...............................................................................23
5.9 REGISTRATION RIGHTS...............................................................................24
5.10 MULTI-TECH SYSTEMS, INC. LITIGATION...............................................................24
ARTICLE VI COVENANTS OF THE PURCHASERS......................................................................24
6.1 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS.................................................25
6.2 COMPLIANCE WITH CONDITIONS; COMMERCIALLY REASONABLE EFFORTS.......................................25
ARTICLE VII CONDITIONS PRECEDENT TO CLOSING.................................................................25
7.1 CONDITIONS TO THE COMPANY'S OBLIGATIONS...........................................................25
7.2 CONDITIONS TO THE PURCHASERS' OBLIGATIONS.........................................................26
ARTICLE VIII MISCELLANEOUS...................................................................................27
8.1 SURVIVAL; INDEMNIFICATION.........................................................................27
8.2 NOTICES...........................................................................................29
8.3 GOVERNING LAW.....................................................................................30
8.4 TERMINATION.......................................................................................30
8.5 ENTIRE AGREEMENT..................................................................................31
8.6 MODIFICATIONS AND AMENDMENTS......................................................................31
8.7 WAIVERS AND EXTENSIONS............................................................................31
8.8 TITLES AND HEADINGS...............................................................................31
8.9 EXHIBITS AND SCHEDULES............................................................................32
8.10 EXPENSES..........................................................................................32
8.11 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS...........................................................32
8.12 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES..........................................................32
8.13 SEVERABILITY......................................................................................33
8.14 COUNTERPARTS......................................................................................33
8.15 FURTHER ASSURANCES................................................................................33
8.16 REMEDIES CUMULATIVE...............................................................................33
</TABLE>
ii
<PAGE> 44
DISCLOSURE SCHEDULES
Schedule 3.1(b)
Investments
PFree Corporation, a Delaware corporation, is a wholly-owned subsidiary of the
Company which holds no assets.
iii
<PAGE> 45
Schedule 3.2
Capitalization
See the Warrant Agreements in Schedule 3.15 (Registration Rights).
Stockholders Agreement, dated June 14, 1999, among New Paradigm Investors, Ltd.,
Big Bits Software, Inc., Alan Buckmaster, Barrett Wissman and Olaf
Guerrand-Hermes.
Letter Agreement, dated August 4, 1999, from I Capital LLC to i2v2.com Inc.
Options referenced in each of the employment agreements referred to in Schedule
3.20 (Employment Related Contracts).
Options to purchase 153,900 shares granted to Daniel Wissman.
Options to purchase 32,625 shares granted to each of Mark Levitt and Steve
Roebling.
GTGA Option to purchase 403,631 shares of common stock.
Promissory Note, dated March 2, 2000, from i2v2.com Inc. to eVentures Group,
Inc.
Promissory Note, dated March 31, 2000, from PhoneFree.com Inc. to TeKBanC.com
Limited.
Promissory Note, dated April 6, 2000, from PhoneFree.com Inc. to Brazos
PhoneFree.com Acquisition LLC.
Investor's Rights Agreement, dated as of June 25, 1999, between i2v2.com Inc.
and IEO Holdings Limited.
Letter Agreement, dated February 24, 2000, from Alpine Meridian, Inc. to
i2v2.com Inc. granting Alpine the option to purchase 80,000 shares of common
stock.
Letter Agreement, dated March 13, 2000, from Strategy Point to i2v2.com Inc.,
granting a warrant equal to 1.5% of the dollar value received from a financing
with Crimson Capital Corporation.
iv
<PAGE> 46
Schedule 3.5
Financial Statements
See the attached.
v
<PAGE> 47
Schedule 3.8
Material Adverse Change
Robert S. Mitchell, formerly the Chief Operating Officer and Senior Vice
President of Business Development, was terminated in January 2000 - under
paragraph 3.8(b)
Promissory Note, dated March 2, 2000, from i2v2.com Inc. to eVentures Group,
Inc. - under paragraph 3.8(f).
Promissory Note, dated March 31, 2000, from PhoneFree.com Inc. to TeKBanC.com
Limited - under paragraph 3.8(f).
Promissory Note, dated April 6, 2000, from PhoneFree.com Inc. to Brazos
PhoneFree.com Acquisition LLC - under paragraph 3.8(f).
vi
<PAGE> 48
Schedule 3.9
Litigation
Multi-Tech Systems, Inc. v. Net2Phone, Inc., Phonefree.com Inc. et al., Dist. of
Minnesota, Index No. 00-346 DWF/AJB.
vii
<PAGE> 49
Schedule 3.12
Brokers
Letter Agreement, dated February 24, 2000, from Alpine Meridian, Inc. to
i2v2.com Inc.
viii
<PAGE> 50
Schedule 3.13
Material Contracts
See the Agreements in Schedule 3.2 (Capitalization).
See the Agreements in Schedule 3.14 (Related Party Transactions).
See the Agreements in Schedule 3.15 (Registration Rights).
See the Agreements in Schedule 3.16 (Real Property Leases).
See the Agreements in Schedule 3.17(c) (Intellectual Property).
See the Agreements in Schedule 3.19 (Employment Related Contracts).
Employment Contract Termination and Settlement Letter Agreement, dated January
21, 2000, between i2v2.com Inc. and Robert Mitchell.
Stock Purchase Agreement, dated as of June 25, 1999, between i2v2.com Inc. and
IEO Holdings, Limited.
Stock Purchase Agreement dated as of December 7, 1999, among i2v2.com Inc.,
Stuart Subotnick individually and John W. Kluge et al.
Stock Purchase Agreement, dated as of December 15, 1999, between i2v2.com Inc.
and eFone Partners.
Stock Purchase Agreement, dated as of December 21, 1999, between i2v2.com Inc.
and Goff Moore Strategic Partners, L.P.
Stock Purchase Agreement, dated as of December 21, 1999, between i2v2.com Inc.
and GNA Investments I, L.P.
Stock Purchase Agreement, dated as of December 21, 1999, between i2v2.com Inc.
and Fayez Sarofim Investment Partnership No. 5, L.P.
Bill of Sale and General Assignment, dated June 14, 1999, between Big Bits
Software Inc. and i2v2.com Inc.
Stockholders Agreement, dated as of June 14, 1999, among i2v2.com Inc., New
Paradigm Investors, Ltd., Big Bits Software, Inc., Alan Buckmaster, Barrett
Wissman and Olaf Guerrand-Hermes.
Waiver of Preemptive Rights and Amendment to Stockholders Agreement, dated June
14, 1999, among i2v2.com Inc., New Paradigm Investors, Ltd., Big Bits Software,
Inc., Alan Buckmaster, Barrett Wissman and Olaf Guerrand-Hermes.
ix
<PAGE> 51
800 Support Enhanced Services Agreement, dated February 17, 2000, between 900
Support, Inc. and PhoneFree.com Inc.
Service Agreement, dated February 10, 2000, between PhoneFree.com Inc. and
Island Data Corporation.
Reciprocal Nondisclosure Agreement, dated November 10, 1999, between AccessPower
Inc. and i2v2.com Inc.
Net.Caller Sales Agreement, dated as of November 10, 1999, between AccessPower
Inc. and i2v2.com Inc.
Letter Agreement, dated July 12, 1999, from Interactive8, Inc. to i2v2.com Inc.
Letter Agreement, dated as of July 9, 1999, from Hampel/Stefanides to i2v2.com
Inc.
Agreement, dated December 20, 1999, between i2v2.com Inc. and Elite 3K.
Agreement, dated as of January 1, 2000, between i2v2.com Inc. and ORB
Communications and Marketing, Inc.
24/7 Media Inc. Network Affiliation Agreement, dated August 18, 1999, between
24/7 Media, Inc. and i2v2.com Inc.
12-Month WWF Interactive Network Sponsorship between the World Wrestling
Federation and i2v2.com Inc. [undated].
1Q/2Q 2000 Partnership, dated November 11, 1999, between the World Wrestling
Federation and i2v2.com Inc.
Distribution Agreement, dated as of February 29, 2000, between i2v2.com Inc. and
ArabAdForce.
Distribution and Promotion Agreement between i2v2.com Inc. and MilitaryMoves.com
[undated].
x
<PAGE> 52
Schedule 3.14
Related Party Transactions
Promissory Note, dated March 2, 2000, from i2v2.com Inc. to eVentures Group Inc.
xi
<PAGE> 53
Schedule 3.15
Registration Rights
Warrant, dated June 20, 1999, for Robert Levitan to purchase 65,250 shares of
Common Stock at an exercise price equal to $1.53 per share.
Warrant, dated June 20, 1999, for Lance Horn to purchase 65,250 shares of Common
Stock at an exercise price equal to $1.53 per share.
Warrant, dated June 20, 1999, for Adam Lindemann to purchase 65,250 shares of
Common Stock at an exercise price equal to $1.53 per share.
Warrant, dated June 20, 1999, for Mark Burchill to purchase 65,250 shares of
Common Stock at an exercise price equal to $1.53 per share.
Warrant, dated June 20, 1999, for Jan Horsfall to purchase 65,250 shares of
Common Stock at an exercise price equal to $1.53 per share.
Warrant Agreement, dated as of March 2, 2000, between i2v2.com Inc. and
eVentures Group, Inc. to purchase 240,000 shares of Common Stock at the exercise
price of 110% of the Conversion Price (as defined in the Promissory Note).
Warrant Agreement, dated March 31, 2000, between PhoneFree.com Inc. and
TeKBanC.com Limited granting 300,000 warrants at the exercise price of 100% of
the amount raised in the first Equity Financing (as defined therein).
Warrant Agreement, dated April 6, 2000, between PhoneFree.com Inc. and Brazos
PhoneFree.com Acquisition LLC granting 120,000 warrants at the exercise price of
100% of the amount raised in the first Equity Financing (as defined therein).
IEO Investor Rights Agreement, dated as of June 25, 1999, between i2v2.com Inc.
and IEO Holdings, Limited.
Investor's Rights Agreement, dated as of December 7, 1999, i2v2.com Inc., Stuart
Subotnick individually and John W. Kluge et al.
Investor's Rights Agreement, dated as of December 15, 1999, between i2v2.com
Inc. and eFone Partners.
Investor's Rights Agreement, dated as of December 21, 1999, between i2v2.com
Inc. and Goff Moore Strategic Partners, L.P.
Investor's Rights Agreement, dated as of December 21, 1999, between i2v2.com
Inc. and GNA Investments I, L.P.
xii
<PAGE> 54
Investor's Rights Agreement, dated as of December 21, 1999, between i2v2.com
Inc. and Fayez Sarofim Investment Partnership No. 5, L.P.
Promissory Note, dated March 2, 2000, from i2v2.com Inc. to eVentures Group,
Inc.
Promissory Note, dated March 31, 2000, from PhoneFree.com Inc. to TeKBanC.com
Limited.
Promissory Note, dated April 6, 2000, from PhoneFree.com Inc. to Brazos
PhoneFree.com Acquisition LLC.
xiii
<PAGE> 55
Schedule 3.16
Real Property Lease Agreements
Lease for 200 Church Street, dated September 15, 1999, between 200 Church Street
Associates and i2v2.com Inc.
xiv
<PAGE> 56
Schedule 3.17(a)(i)
Intellectual Property
None
xv
<PAGE> 57
Schedule 3.17(a)(ii)
Intellectual Property
Multi-Tech Systems, Inc. v. Net2Phone, Inc., Phonefree.com Inc. et al., Dist. of
Minnesota, Index No. 00-346 DWF/AJB.
xvi
<PAGE> 58
Schedule 3.17(a)(iii)
Intellectual Property
Intellectual Property of the Company for which Registration was filed:
The Company has registered the domain names i2v2.net, i2v2.com,
cyber900.com, virtual900.com, clicktophone.com; webtofone.com; ringthenet.com;
net2dial.com; netphonefree.com; webphonefree.com; videoring.com; freering.com;
hyperphone.com; fonfree.com; phonefree.com; phonefree.net; and web-to-fone.com.
The Company has also filed for the following trademarks:
MARK: PHONEFREE
OWNER NAME: (APPLICANT) Buck, Alan [to be assigned to i2v2.com Inc.]
SERIAL NUMBER: 75-733538
FILING DATE: 06/21/1999
STATUS: PENDING
MARK: PHONEFREE & DESIGN
OWNER NAME: (APPLICANT) Buck, Alan [to be assigned to i2v2.com Inc.]
SERIAL NUMBER: 75-733537
FILING DATE: 06/21/1999
STATUS: PENDING
MARK: PHONEFREE.COM
OWNER NAME: (APPLICANT) I2V2.COM INC.
SERIAL NUMBER: 75834603
FILING DATE: October 29, 1999
STATUS: PENDING
xvii
<PAGE> 59
Schedule 3.17(c)
Intellectual Property
Agreement, dated as of January 1, 2000, between i2v2.com Inc. and ORB
Communications Marketing, Inc.
G.723 Object Code License Agreement, dated as of July 9, 1999, between DSP
Group, Inc. and i2v2.com Inc.
G.723 Patent License Agreement, dated July 9, 1999, between DSP Group, Inc. and
i2v2.com Inc.
Elemedia(R) PX3230S H.323 Protocol Stack Software License and Binary
Distribution Agreement, dated as of July 23, 1999, between Lucent Technologies
Inc. and i2v2.com Inc.
Service Agreement, dated December 30, 1999, between Media Matrix, Inc. and
i2v2.com Inc.
Agreement, dated March 2, 2000, between PhoneFree.com and Hypernix Technologies.
Merchant Agreement, dated December 1, 1999, between Linkshare Corporation and
i2v2.com Inc.
xviii
<PAGE> 60
Schedule 3.19
Employment Related Contracts
Employment Contract Termination and Settlement Letter Agreement, dated January
21, 2000, between i2v2.com Inc. and Robert Mitchell.
The following list includes all the individuals who have executed employment
related contracts:
Victoria Belin was granted an option to purchase 35,000 shares at an exercise
price of $15.00
Nikhil D. Bhanushali was granted an option to purchase 15,000 shares at an
exercise price of $15.00
Alan Buckmaster employment agreement dated June 14, 1999.
Donovan Burke was granted an option to purchase 50,000 shares at an exercise
price of $15.00
Jonah Cohn was granted an option to purchase 15,000 shares at an exercise price
of $15.00
Catherine Cordero was granted an option to purchase 1,500 shares at an exercise
price of $15.00
Susan Devine was granted an option to purchase 2,500 shares at an exercise price
of $15.00
Dawn Doucette was granted an option to purchase 40,000 shares at an exercise
price of $15.00
Avner Elizarov was granted an option to purchase 30,000 shares at an exercise
price of $15.00
Nikiya Farrior was granted an option to purchase 2,000 shares at an exercise
price of $15.00
Traci M. Ford was granted an option to purchase 10,000 shares at an exercise
price of $15.00
Jeffrey Fuhrman was granted warrants equal to 1.5% of total issued and
outstanding common stock calculated on a fully diluted basis as of August 31,
1999
Daniel Gallagher was granted an option to purchase 60,000 shares at an exercise
price of $15.00
Peter Gingold was granted an option to purchase 15,000 shares at an exercise
price of $15.00
Craig Ginman was granted an option to purchase 5,000 shares at an exercise price
of $15.00
Alexander Goykher was granted an option to purchase 10,000 shares at an exercise
price of $15.00
xix
<PAGE> 61
Geoffrey Hatheway was granted an option to purchase 483,792 shares. 241,896 at
an exercise price of $1.72 and 241,896 at an exercise price of $5.00
Daimyon Hayes was granted an option to purchase 2,000 shares at an exercise
price of $15.00
Kenneth Hom was granted an option to purchase 25,000 shares at an exercise price
of $15.00
Jan Horsfall employment agreement dated September 14, 1999.
Ronald Kacmarik was granted an option to purchase 25,000 shares at an exercise
price of $15.00
William Kemp was granted an option to purchase 35,000 shares at an exercise
price of $15.00
Nicholas Liethen was granted an option to purchase 60,000 shares at an exercise
price of $1.72
Edmund Liu was granted an option to purchase 30,000 shares at an exercise price
of $15.00
Brian Madden was granted an option to purchase 20,000 shares at an exercise
price of $15.00
Melanie Maisch was granted an option to purchase 2,000 shares at an exercise
price of $15.00
Joshua Markowitz was granted an option to purchase 10,000 shares at an exercise
price of $15.00
Douglas O'Neill was granted an option to purchase 45,000 shares at an exercise
price of $15.00
Kurt J. Philippin was granted an option to purchase 20,000 shares at an exercise
price of $15.00
Jeffrey Prior was granted an option to purchase 20,000 shares at an exercise
price of $15.00
Jennifer Regnault was granted an option to purchase 7,500 shares at an exercise
price of $15.00
Christopher Richardson was granted an option to purchase 10,000 shares at an
exercise price of $15.00
Aaron Rosen was granted an option to purchase 10,000 shares at an exercise price
of $15.00
David Rosen was granted an option to purchase 10,000 shares at an exercise price
of $15.00
Peter Rufus was granted an option to purchase 10,000 shares at an exercise price
of $15.00
xx
<PAGE> 62
Kenneth J. Schwier was granted an option to purchase 45,000 shares at an
exercise price of $15.00
Natalie Strelovsky was granted an option to purchase 1,500 shares at an exercise
price of $15.00
Matthew Tolan was granted an option to purchase 20,000 shares at an exercise
price of $15.00
Ujjval Vyas was granted an option to purchase 10,000 shares at an exercise price
of $15.00
Theresa Washington was granted an option to purchase 5,000 shares at an exercise
price of $15.00
Grant Watt was granted an option to purchase 42,500 shares at an exercise price
of $15.00
Mark Westlake was granted an option to purchase 60,000 shares at an exercise
price of $15.00
Venu Yeluri was granted an option to purchase 75,000 shares at an exercise price
of $15.00
xxi
<PAGE> 63
Schedule 5.1
Operation of Business
None
xxii
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000 AND THE
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 12,716,576
<SECURITIES> 0
<RECEIVABLES> 2,443,646
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,049,760
<PP&E> 18,698,469
<DEPRECIATION> 2,356,544
<TOTAL-ASSETS> 153,578,163
<CURRENT-LIABILITIES> 13,820,095
<BONDS> 0
0
0
<COMMON> 974
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 153,578,163
<SALES> 16,308,494
<TOTAL-REVENUES> 16,308,494
<CGS> 15,400,305
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (223,717)
<INCOME-PRETAX> (17,817,987)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,817,987)
<EPS-BASIC> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
