AGREEMENT AND PLAN OF MERGER
AMONG
NETWORK EVENT THEATER, INC.,
NEW INVINO, INC.,
INVINO CORPORATION,
AND
ALL THE STOCKHOLDERS OF
INVINO CORPORATION
Dated October 15, 1999
TABLE OF CONTENTS
PAGE
1. The Merger 1
1.1 The Merger 1
1.2 Effective Time 1
1.3 Closing. 1
1.4 Organizational Documents. 1
1.5 Directors and Officers and Managers 1
1.6 Conversion 2
1.7 Exchange of Certificates Representing NET Common Stock 2
1.8 Tax Consequences 3
2. Representations and Warranties of NET 3
2.1 Organization 3
2.2 Authority for this Agreement 3
2.3 Capitalization 4
2.4 Absence of Certain Changes 5
2.5 Reports 5
2.6 Consents and Approvals; No Violation 5
2.7 Brokers 6
3. Representations and Warranties of the Principals 6
3.1 Organization and Qualification 6
3.2 Capitalization 6
3.3 Authority for this Agreement 6
3.4 Absence of Certain Changes 7
3.5 Financial Statements and other Information 7
3.6 Absence of Undisclosed Liabilities 7
3.7 Consents and Approvals; No Violation 7
3.8 Employee Matters 8
3.9 Litigation, Etc 10
3.10 Tax Matters 10
3.11 Compliance with Law 11
3.12 Contracts 11
3.13 Title to Assets 11
3.14 Related Party Transactions 11
3.15 Permits and Licenses 11
3.16 Banks; Powers of Attorney 12
3.17 Intangible Property 12
3.18 Insurance 12
3.19 Certain Understandings 12
3.20 Brokers 12
3.21 Securities Law Matters 12
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4. Covenants 13
4.1 Confidentiality 13
4.2 Public Announcements 13
4.3 Employment Agreements 13
4.4 Ordinary Course of Business 13
4.5 Restricted Activities and Transactions 14
4.6 Access to Records and Properties; Opportunity to
Ask Questions 15
4.7 Supplements to Written Disclosures and Financial
Statements 15
4.8 Further Assurances 15
4.9 Employee Benefit Matters 15
5. Conditions to the Obligations of Net. 15
5.1 Representations and Warranties True as of Closing 15
5.2 Performance of Covenants 16
5.3 Litigation 16
5.4 No Adverse Change 16
5.5 Consents and Approvals 16
5.6 Certificates 16
5.7 Opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx 16
5.8 Employment Agreements 17
6. Conditions to the Obligations of Invino 17
6.1 Representations and Warranties True as of Closing 17
6.2 Performance of Covenants 17
6.3 Litigation 17
6.4 No Adverse Change 17
6.5 Certificates 17
6.6 Opinion of Proskauer Rose LLP 17
6.8 Merger Certificate 18
7. Indemnification and Related Matters 18
7.1 Indemnification 18
7.2 Related Matters 19
7.3 Time and Manner of Certain Claims 19
7.4 Defense of Claims by Third Parties 19
7.5 Method of Payment 20
7.6 Maximum Liability and Remedies 20
7.7 No Representations or Warranties Except Under
Sections 2 and 3 20
8. Other Agreements 20
8.1 Agreements of Invino and Stockholders 20
8.2 Restrictions on Shares. 22
8.3 Piggyback Registration 22
8.4 Current Public Information 23
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9. Termination, Amendment and Waiver 24
9.1 Termination 24
9.2 Effect of Termination 24
9.3 Amendment 24
9.4 Waiver 24
10. Miscellaneous 24
10.1 Enforcement of the Agreement 24
10.2 Expenses 24
10.3 Validity 25
10.4 Notices 25
10.5 Governing Law 26
10.6 Headings 26
10.7 Parties in Interest 26
10.8 Counterparts 26
10.9 Certain Definitions 26
10.10 Entire Agreement 28
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AGREEMENT AND PLAN OF MERGER
Dated October 15, 1999
----------------------
The parties to this agreement and plan of merger are Network Event
Theater, Inc., a Delaware corporation ("NET"), New Invino, Inc., a Delaware
corporation and a wholly-owned subsidiary of NET ("New Invino"), Invino
Corporation, a Delaware corporation ("Invino"), and all the stockholders of
Invino (collectively, the "Stockholders").
The parties agree as follows:
1. The Merger
1.1 The Merger. At an Effective Time (as defined in section 1.2), upon the
terms of this agreement and subject to the provisions of the Delaware General
Corporation Law (the "Law"), New Invino shall be merged with and into Invino
(the "Merger"). Invino shall be the surviving corporation in the Merger (the
"Surviving Corporation").
1.2 Effective Time. Subject to the provisions of this agreement, the
parties shall cause the Merger to be consummated by filing with the Secretary of
State of the State of Delaware a duly executed and verified certificate of
merger as promptly as practicable, after the satisfaction or waiver of the
conditions set forth in sections 5 and 6, and shall take all other action
required by law to effect the Merger. The Merger shall become effective upon the
filing referred to in the preceding sentence. At the time the Merger becomes
effective (the "Effective Time"), the separate corporate existence of New Invino
shall cease.
1.3 Closing. Subject to earlier termination as provided in section 9,
at 10:00 a.m., New York time, on the third business day following the
satisfaction of the conditions set forth in section 5.5 (or such other time as
Net and Invino may agree), a closing (the "Closing") shall be held at the
offices of Xxxxxxxxx Xxxx XXX, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx (or such other
place as Net and Invino may agree).
1.4 Organizational Documents. The certificate of incorporation and
by-laws of New Invino, as in effect on the date of this agreement, shall be the
certificate of incorporation and by-laws, respectively, of the Surviving
Corporation.
1.5 Directors and Officers and Managers. The persons listed in schedule
1.5 shall be the directors and officers of the Surviving Corporation, until
their respective successors are duly elected and qualified.
1.6 Conversion
(a) At the Effective Time, (i) the shares of common stock, $.001 par
value, of Invino ("Invino Common Stock") and the shares of Series A Preferred
Stock, $.001 par value, of Invino (the "Invino Preferred Stock") issued and
outstanding immediately prior to the Effective Time (other than shares held in
the treasury of Invino, all of which shall be cancelled) shall, by virtue of the
Merger and without any action on the part of any person or entity, be converted
into the right to receive, in the aggregate, a number of shares of common stock,
$.01 par value, of NET ("NET Common Stock") determined by dividing (A)
$9,000,000 by (B) the Average Price (as defined in section 1.6(e)), and (ii)
each share of common stock, $.01 par value, of New Invino issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of any person or entity, be converted into and
become one share of Invino Common Stock.
(b) All NET Common Stock issued in the Merger will be duly authorized,
validly issued and fully paid and non-assessable, and shall be free and clear of
all liens, claims, encumbrances or restrictions ("Liens") (other than any Liens
that may arise from any action of the stockholder to whom the shares are
issued).
(c) The holders of shares of Invino Preferred Stock and Invino Common
Stock (collectively, "Invino Stock") immediately prior to the Effective Time
shall cease to have any rights as stockholders of Invino and their sole right
shall be the right to receive the number of whole shares of NET Common Stock
into which their shares of Invino Stock have been converted pursuant to section
1.6(a).
(d) Invino and the Stockholders shall cause each option or other right
to acquire shares of Invino Common Stock that is outstanding to be cancelled
prior to the Effective Time so that, at the Effective Time, no such option or
right is outstanding.
(e) "Average Price" means the average closing price of a share of NET
Common Stock on the Nasdaq National Market on the 30 trading days immediately
preceding the third day preceding (i) in the case of the shares referred to in
the first sentence of section 1.7, the Closing, or (ii) in the case of a
Quarterly Closing Date referred to in section 1.7, the applicable Quarterly
Closing Date.
1.7 Exchange of Certificates Representing NET Common Stock.
(a) Immediately after the Effective Time, NET shall issue to each of
Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxx Xxxxxx, Xxxxxxx X'Xxxxxxx and Xxxx
Creek Trust (a "Preferred Holder") or each former holder of Invino Common Stock
(a "Common Holder") the number of shares of NET Common Stock set forth opposite
such person's name on schedule 1.7(a).
(b) On each of the first twelve Quarterly Closing Dates (as defined
below) after the Effective Time (beginning December 31, 1999), NET shall issue
to each Common Holder listed on schedule 1.7(b) a number of shares of NET Common
Stock determined in accordance with the
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calculation set forth opposite such person's name on schedule 1.7(b). "Quarterly
Closing Date" means December 31, March 31, June 30 and September 30, unless that
day is a Saturday, Sunday or legal holiday, in which case the Quarterly Closing
Date shall be the first business day thereafter.
(c) NET shall issue the shares of NET Common Stock required to be
issued on the applicable Quarterly Closing Dates under this section 1.7 without
the necessity of any notice or demand by Invino, its former stockholders or
otherwise. In addition, NET shall use reasonable efforts to deliver stock
certificates to the respective Common Holders representing the shares issued to
him or her on each such Quarterly Closing Date within three days of the
applicable Quarterly Closing Date, and shall, in any event, deliver such stock
certificates not later than 10 days after the applicable Quarterly Closing Date.
1.8 Tax Consequences. The parties intend that the Merger constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
(the "Code"), and that this agreement constitute a "plan of reorganization"
within the meaning of section 368(a) of the Code. The parties agree to maintain
all of their books and records, and to prepare and file all federal, state and
local income tax returns and schedules thereto, in a manner consistent with the
Merger being qualified as a reverse triangular merger under section 368(a)(2)(E)
of the Code. The parties have taken no action and shall take no action
inconsistent with the Merger being treated as a tax free reorganization within
the meaning of section 368(a)(2)(E) of the Code. Each party shall provide the
other(s) such information, reports, returns, statements and schedules as may be
reasonably required to assist the other(s) in accounting for and reporting the
Merger being so qualified.
2. Representations and Warranties of NET. NET represents and warrants to Invino
as follows:
2.1 Organization. Each of NET and New Invino is a duly incorporated and
validly existing corporation in good standing under the law of the state of
Delaware, with the corporate power and authority to own its properties and
conduct its business as now being conducted.
2.2 Authority for this Agreement. Each of NET and New Invino has the
requisite corporate power and authority to execute and deliver this agreement
and the other agreements to be executed and delivered by it pursuant to this
agreement (collectively, the "Agreements") and to consummate the transactions
contemplated by the Agreements. Except for corporate proceedings that have
already occurred, no corporate proceedings on the part of NET or New Invino are
necessary to authorize the Agreements or to consummate the transactions so
contemplated. This agreement has been duly and validly executed and delivered by
each of NET and New Invino, and, when the other Agreements are executed and
delivered by the parties to them and assuming each Agreement constitutes the
valid and binding obligation of each of the parties to them (other than NET and
New Invino), each Agreement will constitute a valid and binding agreement of
each of NET and New Invino that is a party to it, enforceable against each of
them in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject to general principles of equity (whether considered in a
proceeding in equity or at law).
3
2.3 Capitalization
(a) The authorized capital stock of NET consists of 32,000,000 shares
of NET Common Stock and 1,000,000 shares of preferred stock, $.01 par value (the
"Preferred Stock"). As of the close of business on September 16, 1999,
16,987,421 shares of NET Common Stock were issued and outstanding; no shares of
Preferred Stock were issued or outstanding; no shares of NET Common Stock were
held in NET's treasury; and there were outstanding options and warrants to
purchase an aggregate of 1,449,987 shares of NET Common Stock. Since September
16, 1999, the Company has not (i) issued any shares of NET Common Stock, other
than upon the exercise of options or warrants then outstanding, (ii) granted any
options, warrants or other rights to purchase shares of NET Common Stock or
(iii) split, combined or reclassified any of its shares of capital stock. All
the outstanding shares of NET Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are free of preemptive rights.
Except as set forth in this section 2.2, on the date of this agreement, there
are no outstanding (i) shares of capital stock or other voting securities of
NET, (ii) securities of NET convertible into or exchangeable for shares of
capital stock or voting securities of NET or (iii) except for securities
issuable in connection with the Merger referred to in section 6.1(b), options,
warrants, rights or other agreements or commitments to acquire from NET, or
obligations of NET to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of NET,
or obligations of NET to grant, extend or enter into any subscription, warrant,
right, convertible or exchangeable security or other similar agreement or
commitment (the items in clauses (i), (ii) and (iii), collectively, the "NET
Securities"). There are no outstanding obligations of NET or any subsidiary of
NET to repurchase, redeem or otherwise acquire any NET Securities. It is
understood and agreed that, when reference is made to a subsidiary or
subsidiaries in this section 2, that term does not include Common Places, LLC
("CP"). The authorized capital stock of New Invino consists of 100 shares of
common stock, $.01 par value, all of which are issued and outstanding and owned
by NET.
(b) Except for the pledge of shares of certain of NET's subsidiaries to
First Union National Bank to secure certain loans, NET is, directly or
indirectly, the record and beneficial owner of all the outstanding shares of
capital stock of each of its subsidiaries, free and clear of any Lien, and there
are no irrevocable proxies with respect to any such shares. There are no
outstanding (i) securities of NET or any of its subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities or ownership
interests in any subsidiary, or (ii) options, warrants or other rights to
acquire from NET or any of its subsidiaries, or other obligations of NET or any
of its subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable for
any capital stock, voting securities or ownership interests in, any of its
subsidiaries, or other obligations of NET or any of its subsidiaries to grant,
extend or enter into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment (the items in
clauses (i) and (ii), collectively, the "Subsidiary Securities"). There are no
outstanding obligations of NET or any of its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding Subsidiary Securities.
2.4 Absence of Certain Changes . Except as disclosed in the SEC Reports (as
defined in section 2.5), since March 31, 1999, NET and its subsidiaries taken as
a whole have not suffered any Material Adverse Effect.
4
2.5 Reports
(a) NET has filed with the Securities and Exchange Commission (the
"SEC") all forms, reports and documents required to be filed by it pursuant to
applicable law, all of which have complied as of their respective filing dates
in all material respects with all applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules under the Exchange Act.
None of the filings by NET with the SEC (the "SEC Reports"), including, without
limitation, any financial statements or schedules included or incorporated by
reference in the SEC Reports, at the time filed, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. NET is in compliance in all material respects with all reporting and
filing requirements of the Exchange Act.
(b) The consolidated financial statements of NET included (or
incorporated by reference) in the SEC Reports have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis (except to the extent set forth in those financial statements,
including the notes, if any) and present fairly in all material respects the
consolidated financial position of NET as of their respective dates, and the
consolidated results of operations and changes in financial condition and cash
flows for the periods presented, subject, in the case of the unaudited interim
financial statements, to normal, recurring, year-end adjustments. The
consolidated balance sheet of NET as of June 30, 1999 and the notes thereto
included in the SEC Reports reflect all liabilities required by generally
accepted accounting principles applied on a consistent basis to be reflected
therein.
2.6 Consents and Approvals; No Violation. Neither the execution and
delivery of the Agreements by NET or New Invino nor the consummation of the
transactions contemplated by the Agreements will (a) conflict with or result in
a breach of any provision of the certificate of incorporation or by-laws of NET
or any of its subsidiaries; (b) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (i) pursuant to the Exchange Act or (ii) the filing of a
certificate of merger pursuant to the Law; (c) result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which NET or any of its subsidiaries is a party or
by which any of them or any of their assets are bound, except where such default
would not reasonably be expected to have a Material Adverse Effect; or (d)
violate in any respect any order, writ, injunction, decree, statute, rule or
regulation applicable to NET or any of its subsidiaries or by which any portion
of their assets are bound, except where such violation would not reasonably be
expected to have a Material Adverse Effect.
2.7 Brokers. No broker, finder or other investment banker is entitled to
receive any brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement based upon
agreements made by or on behalf of NET or any of its subsidiaries.
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3. Representations and Warranties of the Principals. The Principals (as
defined in section 4.3) severally represent and warrant to NET as follows:
3.1 Organization and Qualification. Invino is a duly incorporated and
validly existing corporation in good standing under the law of the state of
Delaware, with the corporate power and authority to own its properties and
conduct its business as now being conducted, and is duly qualified and in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the character of the properties owned or held under lease by it or the
nature of the business transacted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not have
a Material Adverse Effect.
3.2 Capitalization. There are 2,157,627 shares of Invino Common Stock and
47,011 shares of Invino Preferred Stock issued and outstanding, and there are no
outstanding options to purchase shares of Invino Common Stock. All the
outstanding shares of Invino Stock have been duly authorized and validly issued
and are fully paid and nonassessable and are free of preemptive rights. Except
as set forth in this section 3.2 or in schedule 3.2, there are no outstanding
(i) shares of capital stock or voting securities of Invino, (ii) securities of
Invino convertible into or exchangeable for capital stock or voting securities
of Invino or (iii) options, warrants, rights or other agreements or commitments
to acquire from Invino, or obligations of Invino to issue, any capital stock or
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Invino, or obligations of Invino to grant, extend
or enter into any subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment (the items in clauses (i),
(ii) and (iii), collectively, the "Invino Securities"). Except as set forth in
schedule 3.2, there are no outstanding obligations of Invino to repurchase,
redeem or otherwise acquire any Invino Securities, and there are no other
outstanding equity related awards. Except as set forth in schedule 3.2, there
are no voting trusts or other agreements or understandings to which Invino is a
party with respect to the voting of capital stock of Invino. Invino does not own
or have any liability or obligation to acquire any securities or other interest
in any other business or entity.
3.3 Authority for this Agreement. Invino has the corporate power and
authority to execute and deliver this agreement and to consummate the
transactions contemplated by this agreement. The execution and delivery of this
agreement by Invino and the consummation by Invino of the transactions
contemplated by this agreement have been duly and validly authorized and no
other proceedings on the part of Invino are necessary to authorize this
agreement or to consummate the transactions so contemplated. This agreement has
been duly and validly executed and delivered by Invino and each Stockholder and,
when the other Agreements are executed and delivered by the parties to them
(other than Invino and the Stockholders), each Agreement constitutes or will
constitute a valid and binding agreement of each of Invino and the Stockholders
that is a party to it, enforceable against each of them in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and subject to
general principles of equity (whether considered in a proceeding in equity or at
law).
3.4 Absence of Certain Changes. Except as set forth in schedule 3.4, since
June 30, 1999: (a) Invino has not suffered any Material Adverse Effect, (b)
Invino has conducted its business only in the ordinary course consistent with
past practice and (c) there has not been (i) any declaration,
6
setting aside or payment of any dividend or other distribution in respect of
Invino Stock or any repurchase, redemption or other acquisition by Invino of any
outstanding Invino Stock or other securities in, or other ownership interests
in, Invino; (ii) any entry into any written employment agreement with, or any
increase in the rate or terms (including, without limitation, any acceleration
of the right to receive payment pursuant to arrangements set forth in schedule
3.4) of compensation payable or to become payable by Invino to, its employees or
officers; (iii) any increase in the rate or terms (including, without
limitation, any acceleration of the right to receive payment) of any bonus,
insurance, pension or other employee benefit plan, payment or arrangement made
to, for or with any such employees or officers, except increases occurring in
the ordinary course of business or as required by law or as necessary to
maintain tax-qualified status; or (iv) any action by Invino that, if taken after
the date of this agreement, would constitute a breach of section 4.4 or 4.5.
3.5 Financial Statements and other Information. The financial statements of
Invino listed in schedule 3.5, copies of which previously have been furnished to
NET, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except to the extent set forth in
those financial statements, including the notes, if any) and present fairly in
all material respects the financial position of Invino as of their respective
dates, and the results of operations and changes in financial condition and cash
flows for the periods presented, subject to normal, recurring, year-end
adjustments. At September 30, 1999, Invino's stockholders' accumulated deficit
was $35,500.
3.6 Absence of Undisclosed Liabilities. As of the date of this agreement,
Invino does not have any liability or obligation of any kind, whether accrued,
absolute, contingent or otherwise, other than (a) liabilities and obligations
under leases, commitments and other agreements entered into in the ordinary
course of business (which, to the extent required by this agreement, are set
forth in the schedules to this agreement), (b) accounts payable and accrued
expenses incurred in the ordinary course of business and (c) the liabilities set
forth in schedule 3.6. At the Effective Time, the sum of all Invino's
liabilities will not exceed $200,000. Invino does not know of any basis for the
assertion against it of any material liability as of the date of this agreement.
3.7 Consents and Approvals; No Violation. Neither the execution and
delivery of the Agreements by Invino or any Stockholder nor the consummation of
the transactions contemplated by the Agreements will (a) conflict with or result
in a breach of any provision of the certificate of incorporation or by-laws of
Invino; (b) require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except (i)
pursuant to the Exchange Act or the Securities Act of 1933 (the "Act") in
connection with any required registration of any shares of NET Common Stock
issued under this agreement or (ii) the filing of a certificate of merger
pursuant to the Law; (c) result in a material default (or give rise to any right
of termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any material note, license, agreement or other instrument or
obligation to which Invino or any Stockholder is a party or by which Invino or
any Stockholder or any of its or their assets are bound; or (d) violate in any
material respect any material order, writ, injunction, decree, statute, rule or
regulation applicable to Invino or any Stockholder or by which any material
portion of its or their assets are bound.
7
3.8 Employee Matters
(a) For purposes of this agreement, the term "Plan" refers to the
following maintained on behalf of any employee of Invino (whether current,
former or retired), or their beneficiaries, by Invino, or any entity that would
be deemed a "single employer" with Invino under section 414(b), (c), (m) or (o)
of the Internal Revenue Code (the "Code") or section 4001 of the Employee
Retirement Income Security Act of 1974 ("ERISA") (an "ERISA Affiliate"): any
"employee benefit plan" (within the meaning of section 3(3) of ERISA), or any
other plan, program, agreement or commitment, an employment, consulting or
deferred compensation agreement, or an executive compensation, incentive bonus
or other bonus, employee pension, profit-sharing, savings, retirement, stock
option, stock purchase, severance pay, life, health, disability or accident
insurance plan. Schedule 3.8(a) lists each Plan.
(b) Neither Invino nor any of the ERISA Affiliates nor any of their
respective predecessors has ever contributed to or contributes to, or otherwise
participated in or participates in any "multiemployer plan" (within the meaning
of section 4001(a)(3) of ERISA or section 414(f) of the Code), any single
employer pension plan (within the meaning of section 4001(a)(15) of ERISA) that
is subject to sections 4063 and 4064 of ERISA or any plan that is subject to
Title IV of ERISA or section 412 of the Code.
(c) Invino, each ERISA Affiliate, each Plan and each "plan sponsor"
(within the meaning of section 3(16) of ERISA) of each "welfare benefit plan"
(within the meaning of section 3(1) of ERISA) has complied in all respects with
the requirements of section 4980B of the Code and Title I, Subtitle B, Part 6 of
ERISA, except for a failure or failures to comply that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(d) With respect to each Plan:
(i) each Plan intended to qualify under section 401(a) of the Code
has been qualified since its inception and has received a determination letter
from the Internal Revenue Service (the "IRS") to the effect that the Plan is
qualified under section 401 of the Code and any trust maintained pursuant to the
Plan is exempt from federal income taxation under section 501 of the Code and
nothing has occurred that would cause the loss of such qualification or
exemption or the imposition of any material penalty or tax liability upon of the
remedial amendment period will apply, for a determination letter from the IRS
pursuant to Revenue Procedure 93-39, for each Plan intended to qualify under
section 401(a) of the Code;
(ii) no event has occurred in connection with which Invino or any
ERISA Affiliate could be subject to any material liability under ERISA, the Code
or any other law, regulation or governmental order applicable to any Plan,
including, without limitation, section 406, 409, 502(i) or 502(l) of ERISA, or
section 4975 of the Code; and
(iii) each material Plan complies in all material respects with the
applicable requirements of ERISA and the Code.
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(e) Invino has furnished NET with respect to each Plan:
(i) a copy of each annual report, if required by ERISA to be
prepared, with respect to the Plan, together with a copy of all financial
statements for each Plan, if required by ERISA to be prepared;
(ii) a copy of the most recent Summary Plan Description, together
with each Summary of Material Modifications, required under ERISA with respect
to the Plan, and, unless the Plan is embodied entirely in an insurance policy to
which Invino is a party, a true and complete copy of the Plan; and
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust or other
funding agreement and the latest related financial statements, if any.
(f) Except as set forth in schedule 3.8(f), Invino has not announced
any plan or commitment to create any additional Plans or, except in the ordinary
course of business in accordance with its customary practices or as required by
law or as necessary to maintain tax-qualified status, to amend or modify any
Plan.
(g) Except as set forth in schedule 3.8(g), Invino is not a party to
any collective bargaining agreement.
(h) Except as set forth in schedule 3.8(h), the consummation of the
transactions contemplated by this agreement will not give rise to any liability
for severance pay, unemployment compensation, termination pay or withdrawal
Eliability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any current, former, or retired employee or
their beneficiaries solely by reason of such transactions. No amounts payable
under any Plan will fail to be deductible for federal income tax purposes by
virtue of section 280G of the Code.
(i) Except as set forth in schedule 3.8(i), neither Invino nor any
ERISA Affiliate maintains, contributes to or in any way provides for any
benefits (other than under section 4980B of the Code, the Federal Social
Security Act or a plan qualified under section 401(a) of the Code) to any
current or future retiree or terminated employee.
(j) Schedule 3.8(j) sets forth (i) the name of each employee,
independent contractor and consulting or similar firm employed or engaged by
Invino, (ii) the title and a brief description of responsibilities of each such
person or firm, (iii) the location in which each such person or firm ordinarily
performs services for Invino, (iv) the approximate number of hours per week each
such person or firm performs services for Invino and (v) each such person's or
firm's salary or other compensation.
3.9 Litigation, Etc. Except as set forth in schedule 3.9, there is no
claim, action, proceeding or governmental investigation pending or, to the
knowledge of Invino or the Principals, threatened against Invino before any
court or governmental or regulatory authority that, individually
9
or in the aggregate, (a) could reasonably be expected to have a Material Adverse
Effect or (b) has had or could reasonably be expected to have a material adverse
effect on the ability of Invino to consummate the transactions contemplated by
this agreement or in any manner challenges or seeks to prevent, enjoin or delay
the Merger.
3.10 Tax Matters
(a) Except as set forth in schedule 3.10(a):
(i) all returns and reports relating to Taxes required to be filed
with respect to Invino or any of its income, properties or operations have been
duly filed in a timely manner (taking into account all extensions of due dates),
and, to the knowledge of Invino and the Stockholders, all information in such
returns, declarations and reports is true, correct and complete in all material
respects;
(ii) all Taxes attributable to Invino that were shown to be due and
payable on such returns and reports have been paid;
(iii) there is no claim or assessment pending or, to the knowledge
of Invino and the Stockholders, threatened against Invino for any alleged
material deficiency in Taxes attributable to Invino;
(iv) Invino has satisfied in all material respects for all periods
all applicable withholding Tax requirements (including, without limitation,
income, social security and employment tax withholding for all types of
compensation); and
(v) Invino has furnished NET complete and accurate copies of all
Tax returns, and all related amendments, filed by or on behalf of Invino.
(b) Except as set forth in schedule 3.10(b), there are no agreements in
effect to extend the period of limitations for the assessment or collection of
any income, franchise or other Tax for which Invino may be liable.
3.11. Compliance with Law. Except as set forth in schedule 3.11, to the
knowledge of Invino and the Principals, Invino is not in conflict with, or in
default or violation of, any law, rule or regulation (including, but not limited
to, any applicable law, rule or regulation respecting employment and employment
practices, terms and conditions of employment and wages and hours), or any
order, judgment or decree applicable to Invino or by which any property or asset
of Invino is bound or affected, except where such conflicts, defaults or
violations, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
3.12 Contracts. Schedule 3.12 contains an accurate and complete list of:
(a) all Invino's commitments and other agreements for the purchase of materials,
supplies, equipment, and software, other than commitments and other agreements
that were entered into in the ordinary course of business and involve an
expenditure by Invino of less than $10,000 for any one commitment or two
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or more related commitments; (b) all notes and agreements relating to any
indebtedness of Invino; (c) all leases or other rental agreements under which
Invino is either lessor or lessee; and (d) all Invino's other agreements,
commitments and understandings (written or oral) that require payment by Invino
of more than $10,000 individually. True and complete copies of all written
leases, commitments and other agreements referred to on in schedule 3.12 have
been delivered or made available to NET. There are no material breaches or
defaults by Invino under any such agreements, and, to the knowledge of Invino,
there are no material breaches or defaults by the other party under any such
agreements, and, to the knowledge of Invino, all such agreements are in full
force and effect and are binding obligations of the parties to such agreements.
3.13 Title to Assets. Except as set forth in schedule 3.13 and except for
the Lien, if any, of current taxes not yet due and payable, Invino has valid
title, free and clear of any Lien, to all the assets, tangible and intangible,
used in or needed to conduct Invino's business, and those assets will be
sufficient to enable it to continue after the Effective Time to operate all
aspects of its business in the manner in which it has been operated. Except as
set forth in schedule 3.13, Invino owns, free and clear of any Lien, all rights
to its Grapevine software, and no other party has any rights with respect to the
ownership, use, exploitation or operation of such software; and the parties
listed in schedule 3.13A have assigned to Invino all their rights to such
software.
3.14 Related Party Transactions. Except as set forth in schedule 3.14,
Invino does not owe any amount to, or have any contract with or commitment to,
or use any property (real or personal) in its business owned or leased by, any
of its stockholders, or any director, officer, employee, agent or representative
of Invino or any of their respective affiliates.
3.15 Permits and Licenses. Invino has all permits, licenses, franchises and
other authorizations ("Licenses") necessary for the conduct of its business, and
all such Licenses are valid and in full force and effect, except where the
failure to have such Licenses would not have a Material Adverse Effect. All
Licenses held by Invino that are material to its business are set forth in
schedule 3.15. Any License of Invino to use any software is valid and, to the
knowledge of Invino and the Principals, does not infringe the property rights of
any third party. Except as set forth in schedule 3.15, Invino has not granted to
any person or entity any interest, as licensee or otherwise, in any of its owned
software or databases or in any of its lists.
3.16 Banks; Powers of Attorney. Schedule 3.16 sets forth (a) the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which Invino maintains safe deposit boxes or accounts
of any nature and the names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto, and (b) the names of all persons
to whom Invino has granted a power of attorney, together with a description
thereof. Invino has provided NET with true and complete copies of all bank
statements received by it prior to the date of this agreement.
3.17 Intangible Property. Schedule 3.17 (a) sets forth a complete list of
the trademarks, trade names, copyrights and logos used by Invino in its business
as presently conducted. Invino owns, free and clear of any Lien, each of those
trademarks, trade names, copyrights and logos (including registrations and
applications for registration of any of them), and they constitute all the
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trademarks, copyrights, trade names and logos necessary for the continued
operation of Invino's business in a manner consistent with past practice. Except
as set forth on schedule 3.17(b), to the knowledge of Invino and the Principals,
Invino is not infringing upon any trademark, trade name, copyright or other
rights of any third party; no proceedings are pending or, to the knowledge of
Invino, overtly threatened alleging any such infringement; and no claim has been
received by Invino alleging any such infringement. To the knowledge of Invino
and the Principals, there is no violation by others of any right of Invino with
respect to any trademark, trade name or copyright.
3.18 Insurance. Schedule 3.18 sets forth a complete list of all the
insurance policies held by Invino, specifying with respect to each policy the
policy limit, type of coverage, location of the property covered, annual
premium, premium payment date and expiration date. True and complete copies of
all those policies have been made available to NET.
3.19 Certain Understandings. Schedule 3.19 sets forth a brief description of
the status of Invino's negotiations to provide services to the parties named in
schedule 3.19 and any letters of understanding or similar documents Invino and
any such parties have entered into.
3.20 Brokers. No broker, finder or other investment banker is entitled to
receive any brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement based upon
agreements made by or on behalf of Invino.
3.21 Securities Law Matters
(a) Except for the Stockholders listed in schedule 3.21, each
Stockholder is an accredited investor within the meaning of Regulation D under
the Act. Each Stockholder, by virtue of his experience in evaluating and
investing in private placement transactions of securities of companies similar
to NET, is capable of evaluating the merits and risks of his investment in NET
and has the capacity to protect his own interests. Each Stockholder has had
access to NET's senior management and has had the opportunity to conduct such
due diligence review as he has deemed appropriate.
(b) Each Stockholder is acquiring the shares of NET Common Stock for
investment for his own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution of any part of those
shares. Each Stockholder understands that those shares have not been registered
under the Act or applicable state and other securities laws by reason of a
specific exemption from the registration provisions of the Act and applicable
state and other securities laws, the availability of which depends upon, among
other things, the bona fide nature of the Stockholder's investment intent and
the accuracy of his representations in this section.
(c) Each Stockholder acknowledges and understands that he must bear the
economic risk of this investment for an indefinite period of time because the
shares he is acquiring must be held indefinitely, unless subsequently registered
under the Act and applicable state and other laws or unless an exemption from
registration is available. Each Stockholder understands that any transfer agent
of NET will be issued stop-transfer instructions with respect to the shares,
unless any
12
transfer is subsequently registered under the Act and applicable state and other
securities laws or unless an exemption from registration is available.
4. Covenants
4.1 Confidentiality. In the event of termination of this agreement, NET
shall return to Invino, and Invino and the Stockholders shall return to NET, all
non-public documents, work papers and other material (including, to the extent
practicable, all copies) obtained pursuant to this agreement or in connection
with the transactions contemplated by this agreement. The parties shall use all
reasonable efforts to keep confidential any information obtained pursuant to
this agreement or in connection with the transactions contemplated by this
agreement, unless such information is readily ascertainable from public or
published information or trade sources or is otherwise available to a particular
party as a creditor or stockholder of another party.
4.2 Public Announcements. NET shall not make, issue or release any other
public announcement concerning the terms, conditions or status of the
transactions contemplated by this agreement, without giving Invino reasonable
advance notice and making a good faith attempt to obtain the prior approval of
Invino with respect to the contents of such announcement, which approval shall
not be unreasonably withheld or delayed. Invino shall not make, issue or release
any public announcement concerning the terms, conditions or status of the
transactions contemplated by this agreement, without the prior approval of NET.
4.3 Employment Agreements. Immediately prior to the Effective Time, Malay
Xxxxx, Xxxxx Xxxxxx and Xxxxxxx Xxxxx (the "Principals") shall, and NET shall
cause CP to, execute and deliver employment agreements in the form of exhibit A
(the "Employment Agreements").
4.4 Ordinary Course of Business. From the date of this agreement until the
Effective Time, Invino shall (a) conduct its business in the ordinary course,
consistent with past practice; (b) use its best efforts to preserve all present
relationships with persons having business dealings with it; and (c) use its
best efforts to maintain, preserve and protect its assets and goodwill.
4.5 Restricted Activities and Transactions. From the date of this agreement
until the Effective Time, Invino shall not engage in any of the following
activities or transactions, without the prior written approval NET:
(a) amend its certificate of incorporation or by-laws;
(b) except for issuances of Invino Common Stock pursuant to
outstanding options, issue, sell or deliver, or agree to issue, sell or deliver,
any Invino Stock or any securities convertible into or exchangeable for Invino
Stock, or grant or issue, or agree to grant or issue, any options, warrants,
incentive awards or other rights to acquire any such securities;
(c) borrow or agree to borrow any funds or incur, or assume or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability (absolute or contingent), other than indebtedness for
money borrowed from NET and any other liability incurred
13
in the ordinary course of business, or issue, sell or deliver, or agree to
issue, sell or deliver, any bonds, debentures, notes or other debt securities;
(d) declare or pay any dividend or make any distribution on or in
respect of Invino Stock, whether in cash, stock or property or, directly or
indirectly, redeem, purchase or otherwise acquire any Invino Stock or make any
other distribution of its assets to the holders of Invino Stock;
(e) sell, transfer or acquire, or agree to sell, transfer or acquire,
any properties or assets, tangible or intangible, other than in the ordinary
course of business and for consideration at least equal to the fair market value
of the properties or assets transferred;
(f) except as specifically permitted by this agreement, enter into any
contract, agreement, lease or understanding, other than any contract, agreement,
lease or understanding entered into in the ordinary course of business that is
not material;
(g) grant any increase in compensation, hire any additional employees
or enter into any employment agreement;
(h) become liable for or make any material change in any
profit-sharing, bonus, deferred compensation, insurance, pension, retirement or
other employee or executive benefit plan, payment or arrangement, except as
required by law;
(i) except as contemplated by this agreement, merge or consolidate with
any other entity, or acquire stock or, except in the ordinary course of
business, any business, property or assets of any other person or entity;
(j) except as required by law or by subsequently promulgated generally
accepted accounting principles, alter the manner of keeping its books, accounts
or records, or alter the accounting practices reflected in such books, accounts
or records; or
(k) take any other action that would cause any of Invino's
representations and warranties in this agreement not to be true and correct in
all material respects on and as of the Effective Time with the same force and
effect as if made on and as of the Effective Time.
4.6 Access to Records and Properties; Opportunity to Ask Questions. From
the date of this agreement until the Effective Time, Invino shall make available
for inspection by NET or its representatives, and NET shall make available for
inspection by Invino or its representatives, during normal business hours, the
premises, corporate records, books of account, contracts and all other documents
of reasonably requested by NET and its authorized employees, counsel and
auditors in order to permit them to make a reasonable inspection and examination
of the business and affairs of Invino or NET, as the case may be. Each of Invino
and NET shall cause its managerial employees, counsel and independent
accountants to be available upon reasonable notice to answer questions of NET's
or Invino's representatives, as the case may be, concerning its business and
affairs, and shall cause them to make available all relevant books and records
in connection with
14
such inspection and examination, provided that these activities are conducted in
a manner that does not unreasonably interfere with the other's business.
4.7 Supplements to Written Disclosures and Financial Statements. From the
date of this agreement until the Effective Time, Invino shall promptly deliver
to NET any information concerning events subsequent to the date of this
agreement necessary to supplement the representations and warranties of Invino
in this agreement in order that the information be kept current, complete and
accurate in all material respects, it being understood and agreed that the
delivery of such information shall not constitute a waiver by NET of any rights
as a result of a misrepresentation or breach of warranty in section 3.
4.8 Further Assurances. Each party shall (a) promptly execute and deliver
such instruments and take such other action as the others may reasonably request
to carry out this agreement, and (b) from the date of this agreement until the
Effective Time, use all reasonable best efforts promptly to obtain the consents
of all parties to all agreements and other documents necessary for the
consummation of the transactions contemplated by this agreement.
4.9 Employee Benefit Matters. For purposes of any employee benefit plan,
program or arrangement (including vacation policy) maintained by NET or CP after
the Effective Time, the current employees of Invino shall be credited for past
services with Invino for vesting and eligibility purposes (and accrual of
vacation under any vacation policy) under NET's or CP's plans, programs and
arrangements. Schedule 4.9 sets forth the employees of Invino and their accrued
vacation time.
5. Conditions to the Obligations of Net. The obligation of Net to consummate
the Merger pursuant to this agreement is subject to the satisfaction (or waiver
by Net) of each of the following conditions on or before the Closing:
5.1 Representations and Warranties True as of Closing. The representations
and warranties of Invino in this agreement shall be true and correct in all
material respects at the Closing with the same force and effect as if made at
the Closing, except for changes specifically permitted or contemplated by this
agreement.
5.2 Performance of Covenants. Invino shall have performed and complied with
each covenant and agreement required by this agreement to be performed or
complied with by it prior to or at the Closing.
5.3 Litigation. No injunction shall be threatened by a governmental agency
to restrain, or shall be in effect restraining, the consummation of the Merger
or the transactions contemplated by this agreement.
5.4 No Adverse Change. Since the date of this agreement, there shall have
occurred no material adverse change in the financial condition, results of
operations or business of Invino taken as a whole.
15
5.5 Consents and Approvals. All authorizations, consents, waivers,
approvals or other action required to be obtained by Invino in connection with
the execution, delivery and performance of this agreement by Invino and the
consummation by Invino of the transactions contemplated by this agreement, or
required to prevent a conflict with, breach of, or default, right of termination
or acceleration of performance under, any term of any lease, contract, note or
other document or instrument to which it is a party or by which it is bound
shall have been duly obtained, and shall be in form and substance reasonably
satisfactory to counsel to Net, and copies shall have been delivered to Net.
5.6 Certificates. Invino shall have delivered to Net a certificate, dated
the date of the Closing, of its chief executive officer confirming satisfaction
of the conditions set forth in sections 5.1, 5.2, 5.3, 5.4 and 5.5, and a
certificate of a duly authorized officer of Invino setting forth the resolutions
of the board of directors and the stockholders authorizing the execution and
delivery of this agreement and the consummation of the transactions contemplated
by this agreement, and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Closing.
5.7 Opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx . Invino shall have delivered to
Net an opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx, dated the date of the Closing, to
the effect that:
(a) Invino is a corporation validly existing and in good standing under
the law of the state of Delaware and has the corporate power and authority to
own and operate its properties and to carry on its business as being conducted;
(b) Invino has the corporate power and authority to execute, deliver
and perform this agreement and to consummate the transactions contemplated by
this agreement; all necessary board of director and stockholder action has been
taken on the part of Invino to authorize and approve this agreement and the
transactions contemplated by this agreement; and this agreement has been duly
executed and delivered by Invino and is valid and binding on Invino in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally and
subject to general principles of equity (whether considered in a proceeding in
equity or at law); and
(c) the execution, delivery and performance of this agreement by Invino
and the consummation by Invino of the transactions contemplated by this
agreement will not result in a breach or a violation by Invino of, or constitute
a default by Invino under, the certificate of incorporation or by-laws of Invino
or any judgment, decree, order or governmental permit or license known to such
counsel to which Invino is a party or by which Invino is bound.
5.8 Employment Agreements. The Principals shall have executed and delivered
the respective Employment Agreements.
6. Conditions to the Obligations of Invino. The obligation of Invino to
consummate the Merger pursuant to this agreement is subject to the satisfaction
(or waiver by Invino) of each of the following conditions on or before the
Closing:
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6.1 Representations and Warranties True as of Closing. The representations
and warranties of Net in this agreement shall be true and correct in all
material respects at the Closing with the same force and effect as if made at
the Closing, except for changes specifically permitted or contemplated by this
agreement.
6.2 Performance of Covenants. Net shall have performed and complied in all
material respects with each covenant and agreement required by this agreement to
be performed or complied with by it prior to or at the of Closing.
6.3 Litigation. No injunction shall be threatened by a governmental agency
to restrain, or shall be in effect restraining, the consummation of the Merger
or the transactions contemplated by this agreement.
6.4 No Adverse Change. Since the date of this agreement, there shall have
occurred no material adverse change in the financial condition, results of
operations or business of Net and its subsidiaries taken as a whole.
6.5 Certificates. Each of New Invino and Net shall have delivered to Invino
a certificate, dated the date of the Closing, of its chief executive officer
confirming satisfaction of the conditions set forth in sections 6.1, 6.2, 6.3
and 6.4, and a certificate of a duly authorized officer of Net or New Invino, as
the case may be, setting forth the resolutions of the board of directors of Net
or New Invino, as the case may be, authorizing the execution and delivery of
this agreement and the consummation of the transactions contemplated by this
agreement, and certifying that such resolutions were duly adopted and have not
been rescinded or amended as of the Closing.
6.6 Opinion of Proskauer Rose LLP. Net shall have delivered to Invino an
opinion of Proskauer Rose LLP, dated the date of the Closing, to the effect
that:
(a) Net is a corporation validly existing and in good standing under
the law of the state of Delaware and has the corporate power and authority to
own and operate its properties and to carry on its business as being conducted;
(b) Net has the corporate power and authority to execute, deliver and
perform this agreement and to consummate the transactions contemplated by this
agreement; all necessary corporate, stockholder and other action has been taken
on the part of Net to authorize and approve this agreement and the transactions
contemplated by this agreement; and this agreement has been duly executed and
delivered by Net and is valid and binding on Net in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and subject to general principles of
equity (whether considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this agreement by Net
and the consummation by Net of the transactions contemplated by this agreement
will not result in a breach or a violation by it of, or constitute a default by
it under, its certificate of incorporation or by-laws,
17
or any judgment, decree, order, or governmental permit or license known to such
counsel to which it is a party or by which it is bound;
(d) Net has full legal power and authority to issue and deliver the
shares of Net Common Stock in the manner contemplated by this agreement, and,
upon the issuance of such shares in accordance with this agreement, such shares
will be duly authorized, validly issued, fully paid and nonassessable.
(e) Assuming that all the conditions and requirements of Rule 144 under
the Act, as in effect on the date of the Closing, are met and satisfied, other
than the conditions specified in paragraph (d) of Rule 144, any shares of NET
Common Stock issued to any Stockholder pursuant to section 1.7(b) may be sold
under Rule 144 at any time after the first anniversary of the Effective Time
(assuming that, at the time of sale, Rule 144, as in effect on the date of this
agreement, is then in effect).
6.7 Employment Agreements. CP shall have executed and delivered the
Employment Agreements.
6.8 Merger Certificate. New Invino shall have executed and delivered to
Invino a counterpart to the certificate of merger, in the form of exhibit 6.9,
to be filed with the secretary of state of the state of Delaware in connection
with the Merger.
7. Indemnification and Related Matters
7.1 Indemnification
(a) The Stockholders, other than the Preferred Holders, shall indemnify
and hold NET harmless from and against all losses, liabilities, damages and
expenses (including reasonable attorneys' fees), net of any insurance proceeds,
resulting from any breach of warranty, covenant or agreement, or any
misrepresentation, by Invino or the Stockholders under this agreement in
accordance with this section 7.
(b) NET shall indemnify and hold the Stockholders harmless from and
against all losses, liabilities damages and expenses (including reasonable
attorneys' fees) resulting from any breach of warranty covenant or agreement, or
any misrepresentation, by NET under this agreement in accordance with this
section 7.
7.2 Related Matters. Except as specifically set forth in this agreement, no
party has made or shall have liability for any representation or warranty,
express or implied, in connection with the transactions contemplated by this
agreement. The parties agree that the remedies provided in this section 7 are
the exclusive remedies for breach of warranty, covenant and agreement, and
misrepresentation, under this agreement.
7.3 Time and Manner of Certain Claims. The representations, warranties,
covenants and agreements in this agreement shall survive the Effective Time. The
party seeking indemnification
18
(the "Indemnified Party") shall give the party from whom Indemnification (the
"Indemnifying Party") is sought a written notice ("Notice of Claim") within 50
days of the discovery of any matter in respect of which the right to
indemnification contained in this section 7 may be claimed; provided, that the
failure to give such notice within such 50-day period shall not result in a
waiver or loss of any right to bring such claim hereunder after such period.
Notwithstanding the foregoing, failure to give such notice will terminate any
obligation of the Indemnifying Party with respect to such claim to the extent
such failure actually prejudiced the Indemnifying Party. In the event a claim is
pending or threatened or the Indemnified Party has a reasonable belief as to the
validity of the basis for such claim, the Indemnified Party may give written
notice (a "Notice of Possible Claim") of such claim to the Indemnifying Party,
regardless of whether any loss has yet arisen from such claim. However,
notwithstanding anything to the contrary in this agreement, a party shall have
no liability under this agreement for breach of warranty or misrepresentation,
unless a Notice of Claim or Notice of Possible Claim therefor is delivered by
the party seeking to be indemnified prior to the first anniversary of the
Closing, except for any Notice of Claim or Notice of Possible Claim in respect
of breach of warranty or misrepresentation under section 3.1, 3.2, 3.3, the last
sentence of section 3.13, section 3.20 or 3.21 (the "Exception Provisions"), in
which case such date shall be the third anniversary of the Closing. Any Notice
of Claim or Notice of Possible Claim shall set forth the representations,
warranties, covenants and agreements with respect to which the claim is made,
the facts giving rise to and alleged basis for the claim and the amount of
liability, if known, asserted by reason of the claim.
7.4 Defense of Claims by Third Parties. If any claim is made against a
party that, if sustained, would give rise to a liability of another party under
this agreement, the party against whom the claim is made shall promptly cause
notice of the claim to be delivered to the other party or parties and shall
afford the other party or parties and its or their counsel, at such other
party's or parties' sole expense, the opportunity to defend or settle the claim.
The failure to provide the notice referred to above shall not relieve the
indemnifying party of liability under this agreement, except to the extent the
Indemnifying Party has actually been prejudiced by such failure. If any claim is
compromised or settled without the consent of the Indemnifying Party, no
liability shall be imposed on the Indemnifying Party by reason of the claim.
7.5 Method of Payment. Upon consummation of the Merger, and subject to the
provisions of section 7.6, NET shall satisfy all claims for indemnification for
breach of warranty or misrepresentation pursuant to this section 7 solely by
reducing the number of shares of NET Common Stock thereafter otherwise issuable
pursuant to section 1.7 in the order in which such shares otherwise would be
issued (it being understood and agreed that the number of shares issuable to a
particular Stockholder shall be reduced solely by the percentage set forth
beside that Stockholder's name on schedule 7.5). To the extent NET is entitled
to indemnification under this section 7, such shares shall be valued in
accordance with the provisions of section 1.6(e), mutatis mutandis, on the
Quarterly Closing Date when the reduction is to be made, and schedule 7.5 sets
forth an example, for illustrative purposes only, of how such reductions are to
be made.
7.6 Maximum Liability and Remedies. The right of NET to reduce the number
of shares of NET Common Stock otherwise issuable after the Effective Time
pursuant to section 1.7 in accordance with section 7.5 shall be the sole and
exclusive remedies of NET after the Effective Time
19
with respect to any breach of warranty or misrepresentation under this agreement
and no former stockholder, option holder, warrant holder, director, officer,
employee or agent of Invino shall have any personal liability to NET under this
agreement after the Effective Time for breach of warranty or misrepresentation.
Notwithstanding anything to the contrary in this agreement, the Stockholders
shall have no liability for indemnification for breach of warranty or
misrepresentation pursuant to this section 7, until the aggregate losses to NET
exceed $100,000 (the "Deductible"), at which point the Stockholders shall be
liable for all losses in excess of the Deductible amount; provided, however,
that the maximum aggregate liability of the Stockholders under this section 7
for breach of warranty and misrepresentation shall not exceed $800,000 (the
"Maximum Indemnification"); and provided further, however, that, with respect to
indemnification for breach of warranty or misrepresentation under the Exception
Provisions, neither the Deductible nor the Maximum Indemnification limitation
shall apply.
7.7 No Representations or Warranties Except Under Sections 2 and 3. Each
party to this agreement acknowledges, and represents and warrants to the others,
that no party to this agreement is making, or intending to make, any
representation or warranty to any other party, express or implied, except as
expressly set forth in this section 7.7 or in section 2 or 3.
8. Other Agreements
8.1 Agreements of Invino and Stockholders
(a) Neither Invino nor any Stockholder shall, directly or indirectly,
engage in any discussions with any other person or entity (other than NET and
its affiliates) relating to the transactions contemplated by this agreement or
relating to any other acquisition, merger, financing or similar transaction
involving Invino or its business. If a third party seeks to engage in any such
discussion with Invino or any Stockholder, Invino and the Stockholders shall as
promptly as practicable so advise NET.
(b) Each Stockholder shall vote all the shares of NET Common Stock
issued to him under this agreement in favor of the Mergers (as defined in the
agreement and plan of merger dated June 28, 1999 among NET, Common Places, LLC,
YouthStream Media Networks, Inc., Nunet, Inc., Nucommon, Inc., Xxxxxx X. Xxxxx,
Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx) at the stockholders meeting
referred to in section 4.8 of that agreement and against any other transaction
or proposal that might conflict with the consummation of such Mergers.
(c) (i) No Principal may at any time after the Effective Time disclose
to anyone (except in connection with the performance of services for, or
otherwise on behalf of, NET or any of its subsidiaries) or use in competition
with NET or any of its subsidiaries any confidential information or trade
secrets with respect to the business of NET or any of its subsidiaries;
provided, however, any such individual may disclose confidential information or
trade secrets to the extent required by applicable law.
(ii) No Principal may, as long as he is an employee of CP or any of
its affiliates and for a period of 18 months thereafter, directly or indirectly,
solicit for employment or
20
hire any person who, during the 12-month period preceding the date of
solicitation or hiring, was an employee of CP or any of its affiliates.
(iii) No Principal may, during the Applicable Restricted Period (as
defined below), except through CP or any of its affiliates, directly or
indirectly, engage or be interested in (A) the business of developing or
operating an Internet portal or hub targeted primarily to individuals between
the ages of 16 and 25, (B) the business of developing or operating an instant
messaging system, either text or voice based, (C) any business directly
competitive with any business CP or any of its affiliates is engaged in at the
time of his termination of employment and in which he was directly, materially
involved during his employment (it being understood and agreed that CP and its
affiliates shall not be deemed to have been engaged, at the time of his
termination of employment, in any Abandoned Business (as defined below) or any
New Market Business (as defined below)) or (D) any business directly competitive
with a business developed from a project in which he was directly, materially
involved during his employment (it being understood and agreed that CP and its
affiliates shall not be deemed to have been engaged, at the time of his
termination of employment, in any Abandoned Business or any New Market Business)
(any such business referred to in (A), (B), (C) or (D), a "Restricted
Business"); provided, however, that nothing in this paragraph shall limit the
right of any such individual to be employed by a media or Internet company whose
businesses include a Restricted Business, as long as he does not provide any
services to that Restricted Business. For this purpose, a person shall be deemed
to be directly or indirectly engaged or interested in a business or entity, if
he is engaged or interested in that business or entity as a stockholder, member,
partner, individual proprietor, director, officer, employee, agent, lender,
consultant or otherwise, but not if his interest is limited solely to the
ownership of 5% or less of any class of the equity or debt securities of a
corporation as to which he has only a passive role. As used in this agreement,
(I) the term "Applicable Restricted Period" means (y) the period during which
the Principal is an employee of the Company or any of its affiliates, and (z)
the period beginning immediately thereafter and terminating (1) 24 months later,
in the case of (A) above, (2) 36 months later, in the case of (B) above, and (3)
18 months later, in the case of (C) and (D) above, (II) the term "Abandoned
Business" means any business in which CP and all its affiliates shall have
ceased to engage, other than as a result of a sale, transfer or other
disposition thereof to a third party, and (III) the term "New Market Business"
means a business that does not, and is not foreseeably intended to, penetrate a
particular market in which CP or any of its affiliates engage or a market to
which a particular market in which CP or any of its affiliates engage would
foreseeably be expected to extend.
(iv) Each Principal acknowledges that the remedy at law for breach
of the provisions of this section 6.1(c) would be inadequate and that, in
addition to any other remedy NET or any of its subsidiaries or CP or any of its
affiliates may have, it would be entitled to an injunction restraining any such
breach or threatened breach, without any bond or other security being required
and without the necessity of showing actual damages or economic loss.
8.2 Restrictions on Shares. Prior to July 1, 2000, the Stockholders may not
sell or otherwise dispose of any shares of NET Common Stock issued to them under
this agreement, except that (a) after December 31, 1999 and before April 1,
2000, the Stockholders may, in the aggregate, sell or otherwise dispose of an
aggregate of 83,000 shares, and (b) after December 31, 1999 and before July 1,
2000, the Stockholders may, in the aggregate, sell or otherwise dispose of an
aggregate
22
of up to 100,000 shares (including any shares sold or otherwise disposed of
under the preceding clause (a)).
8.3 Piggyback Registration. (a) If the transactions contemplated by the
agreement and plan of merger referred to in section 8.1(b) are not consummated
by February 28, 2000 and NET at any time thereafter proposes for any reason to
register shares of NET Common Stock under the Act (other than on Form S-4 or S-8
under the Act or any successor forms), and at such time any Stockholder is not
permitted to sell all the shares of NET Common Stock issued to him or her under
section 1 pursuant to Rule 144(k) under the Act, then NET shall promptly give
written notice to the Stockholders of its intention so to register such shares
and, upon the written request, delivered to NET within 10 days after delivery of
any such notice by NET, of the Stockholders to include in such registration
shares of NET Common Stock issued pursuant to section 1 (which request shall
specify the number of shares proposed to be included in such registration), NET
shall use its best efforts to cause all such shares to be included in such
registration on the same terms and conditions as the securities otherwise being
sold in such registration; provided, however, that, if the managing underwriter
advises NET that the inclusion of all shares requested to be included in such
registration would interfere with the successful marketing (including pricing)
of any other shares proposed to be registered by NET, then the number of shares
proposed to be included in such registration shall be included in the following
order of priority:
(i) first, the shares to be issued by NET;
(ii) second, the other shares requested to be included in such
registration (or, if necessary, pro rata among the holders
thereof, based upon the number of shares requested to be
registered by each such holder).
The Stockholders may include shares of NET Common Stock in a registration
pursuant to this section 8.3 on one occasion only; provided, however, that, if
the Stockholders wish to include shares of NET Common Stock in a registration
pursuant to this section 8.3 and the number of shares sought to be included
pursuant to this section 8.3 is reduced as set forth above, the Stockholders may
include the shares sought to be, but that were not, included in one or more
additional registrations in accordance with this section 8.3, until all such
shares shall have been so included. In connection with any such registration,
the parties shall cooperate with each other and execute and deliver such
documents and agreements as are customary in the circumstances.
(b) If, at any time, Rule 144 under the Act is not available to a
Stockholder with respect to any shares of NET Common Stock issued pursuant to
section 1.7(b), and assuming that, at the time, all the conditions and
requirements of Rule 144 are met and satisfied (other than those set forth in
paragraphs (d), (e), (f), (h) and (i) of Rule 144)), and NET at any time
thereafter proposes for any reason to register shares of NET Common Stock under
the Act (other than on Form S-4 or S-8 under the Act or any successor forms),
then NET shall promptly give written notice to the Stockholders of its intention
so to register such shares and, upon the written request, delivered to NET
within 10 days after delivery of any such notice by NET, of the Stockholders to
include in such registration shares of NET Common Stock issued pursuant to
section 1.7(b) (which request shall specify the number of shares proposed to be
included in such registration), NET shall use its best
23
efforts to cause all such shares to be included in such registration on the same
terms and conditions as the securities otherwise being sold in such
registration; provided, however, that, if the managing underwriter advises NET
that the inclusion of all shares requested to be included in such registration
would interfere with the successful marketing (including pricing) of any other
shares proposed to be registered by NET, then the number of shares proposed to
be included in such registration shall be included in the following order of
priority:
(i) first, the shares to be issued by NET;
(ii) second, the other shares requested to be included in such
registration (or, if necessary, pro rata among the holders
thereof, based upon the number of shares requested to be
registered by each such holder).
In connection with any such registration, the parties shall cooperate with each
other and execute and deliver such documents and agreements as are customary in
the circumstances.
8.4 Current Public Information. At all times that the Stockholders
beneficially own any shares of NET Common Stock issued pursuant to section
1.7(b) and prior to the fourth anniversary of the Effective Time, NET shall make
available adequate current public information, to the extent required under
paragraph (c) of Rule 144 under the Act.
9. Termination, Amendment and Waiver
9.1 Termination. This agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual consent of NET and Invino; or
(b) by Invino or NET, if the Effective Time shall not have occurred
before October 27, 1999 and such failure is not due to the breach of this
agreement by the party terminating it.
In the event of termination or abandonment of the Merger pursuant to
this section 9.1, written notice of termination shall promptly be given to each
other party to this agreement.
9.2 Effect of Termination. The termination of this agreement under section
9.1 shall not relieve Invino or any Stockholder of any liability for breach of
warranty of this agreement or misrepresentation prior to the date of
termination.
9.3 Amendment. This agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
9.4 Waiver. Any term or provision of this agreement may be waived in
writing at any time by the party that is entitled to the benefits of that term
or provision.
23
10. Miscellaneous
10.1 Enforcement of the Agreement. The parties agree that irreparable damage
would occur in the event any provision of this agreement were not performed in
accordance with its specific terms or were otherwise breached. Accordingly, the
parties agree that they shall be entitled to an injunction to prevent breaches
of this agreement and to enforce specifically the terms and provisions of this
agreement in any federal or state court located in the Borough of Manhattan in
the city of New York (as to which the parties agree to submit to jurisdiction
for the purposes of such action), this being in addition to any other remedy to
which they are entitled at law or in equity.
10.2 Expenses. Each of the parties shall bear its own expenses in connection
with the transactions contemplated by this agreement, and no party shall have
any liability to the others with respect to those expenses; provided, however,
(a) that NET shall cause the costs and expenses incurred by the Stockholders in
connection with the consummation of the transactions contemplated by this
agreement and approved by Invino (up to a maximum of $100,000) to be paid by
Invino promptly after the Closing, and (b) if NET shall have terminated this
agreement and, at the time of such termination, the conditions specified in
sections 5.1, 5.2, 5.3 and 5.4 were satisfied, then NET shall reimburse Invino
for its actual legal expenses incurred in connection with the transactions
contemplated by this agreement, up to a maximum of $10,000.
10.3 Validity. The invalidity or unenforceability of any provision of this
agreement shall not affect the validity or enforceability of any other provision
of this agreement, which shall remain in full force and effect, unless the
invalidity or unenforceability of such provision would (a) result in such a
material change to this agreement as to be unreasonable, or (b) materially or
adversely frustrate the obligations of the parties in this agreement as
originally written.
10.4 Notices. All notices, requests, claims, demands and other
communications under this agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
if to NET or New Invino,
to it at:
c/o Network Event Theater, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Executive Vice President
and Chief Financial Officer
Fax No.: (000) 000-0000
if to a Stockholder, to him or her at the address listed in
schedule 10.4.
24
if to Invino, to it at:
000 Xxxxxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Malay Xxxxx
Chief Executive Officer
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Fax No.: (000) 000-0000
or to such other address as the person or entity to whom notice is given may
have previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt of notice of the change).
10.5 Governing Law. This agreement shall be governed by and construed in
accordance with the law of the state of New York, regardless of the law that
might otherwise govern under principles of conflicts of laws applicable to this
agreement, except that the provisions of this agreement subject to the Law shall
be governed by and construed in accordance with the Law.
10.6 Headings. The headings in this agreement are for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this agreement.
10.7 Parties in Interest. This agreement shall be binding upon and inure
solely to the benefit of each party to this agreement and its successors and
assigns, including, with respect to NET, the survivor of the Mergers, and
nothing in this agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature under or by reason of this
agreement.
10.8 Counterparts. This agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
10.9 Certain Definitions
(a) An "affiliate" of a person or entity is a person or entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such person or entity, and
"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a person or entity,
whether through the ownership of voting securities, by contract or otherwise.
25
(b) "Material Adverse Effect" means any adverse change in the business
or financial condition of a company or its subsidiaries that is material to that
company and its subsidiaries taken as a whole.
(c) A "subsidiary" of any entity is another entity a majority of the
outstanding voting securities of which are beneficially owned by the first
entity.
(d) "Tax" means all taxes or similar governmental charges, duties,
imposts or levies (including, without limitation, income taxes, franchise taxes,
gross receipt taxes, occupation taxes, real and personal property taxes,
transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad
valorem taxes, withholding taxes, employee withholding taxes, worker's
compensation, payroll taxes, unemployment insurance, social security, minimum
taxes, customs duties or windfall profits taxes), together with any related
liabilities, penalties, fines, additions to tax or interest, imposed by any
country, any state, county, provincial or local government or any subdivision or
agency of any of the foregoing.
10.10 Entire Agreement. This agreement and the schedule and exhibits to
this agreement constitute the entire agreement among the parties with respect to
their subject matter and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to that subject matter.
NETWORK EVENT THEATER, INC.
By:---------------------------------
NEW INVINO, INC.
By:---------------------------------
INVINO CORPORATION
By:---------------------------------
-----------------------------------
Malay Xxxxx, Individually
-----------------------------------
Xxxxx Xxxxxx, Individually
26
-----------------------------------
Xxxx X. Xxxxxxx, Individually
-----------------------------------
Xxxxxx X. Xxxxxxxx, Individually
-----------------------------------
Xxxx Xxxxxx, Individually
-----------------------------------
Xxxxxxx X'Xxxxxxx, Individually
-----------------------------------
Xxxxxxx X. Xxxxx, Xx., Individually
-----------------------------------
Xxxxx X.X. Xxxxxxxxx, Individually
-----------------------------------
Xxxxx X. Xxxx, Individually
-----------------------------------
Xxxxxxx Xxxx Xxxxxx, Individually
XXXX CREEK TRUST
By:--------------------------------
Name:
Title:
27
EMPLOYMENT AGREEMENT
Dated October 15, 1999
The parties to this agreement are Malay Xxxxx residing at 000
Xxxxxxxxxxxx Xxx. #0, Xxxxxx, Xxxxxxxxxxxxx 00000 (the "Executive"), and Common
Places, LLC, a Delaware limited liability company with its principal office at
c/o Network Event Theater, Inc. 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Company").
The Company wishes to secure the services of the Executive, and the
Executive has agreed to serve the Company, on the terms set forth in this
agreement.
It is therefore agreed as follows:
1. Employment. During the term of the Executive's employment under this
agreement, the Company shall employ the Executive, and the Executive shall serve
the Company, as Director of Product Marketing, Student Services. The Executive
shall report to Xxxxxx Xxxxxxxx, Vice-President of Business Development, Product
Marketing, and Programs, and shall perform the duties and responsibilities set
forth on schedule 1 and such other duties as are assigned to him from time to
time by the Vice-President of Business Development, Product Marketing, and
Programs that are not inconsistent with his duties as Director of Product
Marketing, Student Services, as set forth on schedule 1. The Executive shall
devote substantially all his business time to the performance of his duties
under this agreement.
2. Term of Employment. The term of the Executive's employment under
this agreement shall commence on the date of this agreement and, subject to
earlier termination upon the Executive's death or disability pursuant to section
5.1 or pursuant to section 6, shall continue until the third anniversary of the
date of this agreement.
3. Compensation. As cash consideration for his services under this
agreement, the Executive shall be entitled to a salary at the rate of $105,000 a
year, payable in equal installments in accordance with the Company's customary
payroll practices for its employees. In addition, the Executive shall be
entitled to an annual bonus of $20,000, payable not less frequently than
quarterly, subject to the Executive fulfilling obligations that he and the
Company mutually agree upon from time to time. Following the end of each fiscal
year during the term, the Company's board of directors may increase (but not
decrease) the Executive's salary or grant the Executive additional bonuses based
on his performance during that year.
4. Reimbursement of Expenses; Fringe Benefits.
4.1 Expenses. The Company shall reimburse the Executive for all
reasonable expenses incurred by the Executive in connection with the performance
of his duties, upon presentation of appropriate vouchers covering the expenses.
4.2 Fringe Benefits. The Executive (and his immediate family) shall
be entitled to participate in medical, dental, disability, life insurance and
other fringe benefits and executive perquisites at the same levels as comparable
employees of the Company.
4.3 Option. Upon execution and delivery of this agreement, the
Company is granting the Executive options to purchase common units in the
Company pursuant to the Company's 1999 Unit Plan in accordance with a letter
agreement dated the date of this agreement among the parties to the letter
agreement.
5. Disability or Death.
5.1 Disability. If, as the result of any physical or mental
disability, the Executive shall fail or be unable to perform his duties for a
total of 180 days in any 12-month period, the Company may, by notice to the
Executive, terminate his employment under this agreement as of the date of the
notice.
5.2 Payments on Disability. If the Executive's employment is
terminated pursuant to section 5.1, the Executive shall be paid, in full
discharge of all the Company's obligations to the Executive, the Executive's
full salary and accrued bonus, if any, under section 3, and his fringe benefits
under section 4, for one month following the date of termination (or, if a
shorter period, the remainder of the term), less the amount of any disability
payments received by him under any disability insurance coverage provided to him
by the Company. If the Executive shall request, the Company shall, at the
Executive's expense, keep the Executive and his immediate family on all medical,
dental and other plans they previously enjoyed under this agreement for the
minimum period required under applicable law.
5.3 Payments on Death. The Executive's employment under this
agreement shall be terminated upon his death and the Executive's estate shall be
paid, in full discharge of all the Company's obligations to the Executive, the
Executive's full salary and accrued bonus, if any, under section 3 for three
months following the date of termination (or, if a shorter period, the remainder
of the term), plus the proceeds of any life insurance policy purchased by the
Company on the Executive's life and payable to the Executive's heirs and estate.
If the Executive's immediate family shall request, the Company shall, at the
expense of the Executive's immediate family, keep them on all medical, dental
and other plans they previously enjoyed under this agreement for the minimum
period required under applicable law.
2
6. Termination.
6.1. Payments Upon Termination for Cause or Voluntary Resignation.
The Company may terminate the Executive's employment under this agreement for
cause (as defined in section 6.3). If the Executive's employment under this
agreement is terminated for cause pursuant to section 6.1 or by the Executive's
voluntary resignation (other than for Good Reason, as defined in section 6.3),
the Company shall pay the Executive, in full discharge of its obligations to the
Executive under this agreement, the accrued amount of the salary and accrued
bonus, if any, and benefits due to him through the date of termination and the
amount of all expense reimbursements due for periods prior to termination.
6.2. Payments Upon Termination for Other Reasons. If the Executive's
employment under this agreement is terminated by the Company for any reason
other than for cause pursuant to section 6.1 or death or disability pursuant to
section 5, or if the Executive's employment under this agreement is terminated
by the Executive for Good Reason, the Company shall pay the Executive (a) to the
extent not previously paid (and not subject to proration, offsets or claims of
any kind), if, as and when otherwise payable, all salary payable pursuant to
section 3 through the remainder of the term, and (b) to the extent not
previously paid (and not subject to proration, offsets or claims of any kind),
all bonuses, if any, previously authorized by the Company's board of directors.
In addition, upon the request of the Executive, the Company shall, at the
Executive's expense, keep the Executive and his immediate family on all medical,
dental and other plans they have enjoyed under this agreement through the
minimum period required under applicable law. None of the payments provided for
in this section 6.2 shall be reduced by any amounts earned or received by the
Executive from any third party at any time. Without limiting the generality of
the foregoing, in the case of any termination of employment for any reason other
than pursuant to section 6.1, there shall be no requirement on the part of the
Executive to mitigate damages.
6.3 Definitions. As used in this agreement:
(a) the term "cause" shall be limited to mean: (i) the conviction
of the Executive of a felony, (ii) the conviction of the Executive for a crime
involving any financial impropriety or moral turpitude or that would materially
interfere with the Executive's ability to perform his services required under
this agreement or otherwise be materially injurious to the Company, (iii) the
use of alcohol or drugs by the Executive to an extent that materially interferes
with the Executive's ability to perform his services required under this
agreement or otherwise is materially injurious to the Company or (iv) the
willful and knowing breach by the Executive in a material respect of his
obligations under this agreement after 20 days notice and an opportunity to cure
and after a hearing before the board with the Executive's counsel permitted to
be present at such hearing; and
(b) the term "Good Reason" shall be limited to mean the
occurrence, without the express written consent of the Executive, of any of the
following circumstances: (i) a significant adverse alteration in the Executive's
status in the Company, in the nature of the Executive's responsibilities or in
the material conditions of the Executive's employment; (ii) a
3
reduction by the Company in the Executive's annual basic salary or benefits as
provided for in this agreement; (iii) the Company requiring that the Executive
be based at a location more than 100 miles from his residence on the date of
this agreement, except for required travel on the Company's business; and (iv)
the Company's breach of any of its material obligations under this agreement and
the continuation of that breach for 20 days after written notice by the
Executive to the Company.
7. Confidential Information. The Executive shall not, directly or
indirectly, either during his employment by the Company or at any time
thereafter, disclose to anyone or use (except as authorized in the regular
course of the Company's business) any information acquired by him during his
employment with respect to any of the Company's trade secrets or other
confidential information (it being understood, however, that nothing in this
agreement shall be deemed to prohibit the Executive from disclosing such
information as he is required to disclose in response to a court order or other
legal process, and, in any such case, he shall afford the Company as much
opportunity as practicable to intervene in order to limit the information
required to be disclosed or subject to a protective order any information so
disclosed). For this purpose, information that is either generally known to the
public or that is not used, developed or obtained in connection with the
Company's actual or anticipated business shall not be considered a trade secret
or confidential information.
8. Non-Competition, etc
8.1 Non-Competition. The Executive shall not, during the Applicable
Restricted Period (as defined below), except through the Company or any of its
affiliates, directly or indirectly, engage or be interested in (a) the business
of developing or operating an Internet portal or hub targeted primarily to
individuals between the ages of 16 and 25, (b) the business of developing or
operating an instant messaging system, either text or voice based, (c) any
business directly competitive with any business the Company or any of its
affiliates is engaged in at the time of his termination of employment and in
which he was directly, materially involved during his employment (it being
understood and agreed that the Company and its affiliates shall not be deemed to
have been engaged, at the time of his termination of employment, in any
Abandoned Business (as defined below) or any New Market Business (as defined
below)) or (d) any business directly competitive with a business developed from
a project in which he was directly, materially involved during his employment
(it being understood and agreed that the Company and its affiliates shall not be
deemed to have been engaged, at the time of his termination of employment, in
any Abandoned Business or any New Market Business) (any such business referred
to in (a), (b), (c) or (d), a "Restricted Business"); provided, however, that
nothing in this paragraph shall limit the right of any such individual to be
employed by a media or Internet company whose businesses include a Restricted
Business, as long as he does not provide any services to that Restricted
Business. For this purpose, a person shall be deemed to be directly or
indirectly engaged or interested in a business or entity, if he is engaged or
interested in that business or entity as a stockholder, member, partner,
individual proprietor, director, officer, employee, agent, lender, consultant or
otherwise, but not if his interest is limited solely to the ownership of 5% or
less of any class of the equity or debt securities of a corporation as to which
he has only a passive role. As used in this agreement, (I) the term "Applicable
Restricted Period" means (y) the period during which the Executive is an
employee of the Company or any of its affiliates, and (z) the period beginning
immediately thereafter and
4
terminating (i) 24 months later, in the case of (a) above, (ii) 36 months later,
in the case of (b) above, and (iii) 18 months later, in the case of (c) and (d)
above, (II) the term "Abandoned Business means any business in which the Company
and all its affiliates shall have ceased to engage, other than as a result of a
sale, transfer or other disposition thereof to a third party, and (III) the term
"New Market Business" means a business that does not, and is not foreseeably
intended to, penetrate a particular market in which the Company or any of its
affiliates engage or a market to which a particular market in which the Company
or any of its affiliates engage would foreseeably be expected to extend.
8.2 Non-Solicitation.The Executive shall not, as long as he is an
employee of the Company or any of its affiliates and for a period of 18 months
thereafter, directly or indirectly, solicit for employment or hire any person
who, during the 12-month period preceding the date of solicitation or hiring,
was an employee of the Company or any of its affiliates.
8.3 Injunction. The Executive acknowledges that the remedy at law
for the breach of the provisions of section 8.1 or 8.2 would be inadequate and
that, in addition to any other remedy the Company may have, it shall be entitled
to an injunction restraining any such breach or threatened breach, without bond
or other security being required and without the necessity of showing actual
damages or economic loss.
8.4 Governing Law. Notwithstanding the provisions of section 9.6,
this section 8 shall be governed by New York law; provided, however, if this
section 8.4 is, for any reason unenforceable, this section 8.4 shall be governed
by section 9.6.
9. Miscellaneous.
9.1. Headings. The section headings of this agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this agreement.
9.2. Notices. All notices and other communications under this
agreement shall be in writing and shall be deemed given when delivered
personally or mailed by registered mail, return receipt requested, to the
parties at their respective addresses set forth above (or to such other address
as a party may have specified by notice given to the other party pursuant to
this provision) with a copy, in the case of any notice to the Executive, to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
9.3. Separability. The invalidity or unenforceability of any
provision of this agreement shall not affect the validity or enforceability of
any other provision of this agreement, which shall remain in full force and
effect.
5
9.4. Waiver. Either party may waive compliance by the other party
with any provision of this agreement. The failure of a party to insist on strict
adherence to any term of this agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this agreement. No waiver of any
provision shall be construed as a waiver of any other provision. Any waiver must
be in writing.
9.5. Assignment. Neither party may assign any of its rights or
delegate any of its duties under this agreement (other than as contemplated by
this agreement) without the prior consent of the other and any assignment or
delegation in violation of this prohibition shall be void. This agreement shall
be binding upon and inure solely to the benefit of each party to this agreement
and its respective successors, executors, administrators, heirs and permitted
assigns, including, with respect to the Company, the survivor of the Mergers (as
defined in the agreement and plan of merger dated June 28, 1999 among Network
Event Theater, Inc., the Company, YouthStream Media Networks, Inc., Nunet, Inc.,
Nucommon, Inc. and certain individuals).
9.6. Governing Law. This agreement shall be governed by and in
accordance with the substantive law of the Commonwealth of Massachusetts
applicable to agreements made and to be performed in Massachusetts, without
giving effect to the conflict of laws principles of such Commonwealth.
9.7. Entire Agreement. This agreement contains, and is intended as,
a complete statement of all the terms of the arrangements between the parties
with respect to the matters provided for, supersedes any previous agreements and
understandings between the parties with respect to those matters and cannot be
changed or terminated orally.
9.8 Counterparts. This agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
COMMON PLACES, LLC
By:----------------------------
-------------------------------
Xxxxx Xxxxx
0
Schedule 1
Director of Product Marketing, Student Services: Xxxxx Xxxxx
0. Interfaces with customers, users, and industry resources to determine
requirements and resulting products for the student services portions of the
YouthStream web sites.
2. Coordinator and facilitator of product plan with product development,
product management, production, sales, business development, campus operations
and marketing communications.
3. Creates Product Plan, which is an overview of web site and product
functionality and priorities for Executive Committee approval, then implements
it.
4. Analyzes competitive offerings and integrates into the Product Plan.
5. Oversees product marketing literature content.
6. Coordinates with Programs Group the promotion of the site to the target
users.
7
EMPLOYMENT AGREEMENT
Dated October 15, 1999
The parties to this agreement are Xxxxx Xxxxxx, residing at 000
Xxxxxxxxx X'Xxxxx Xxxxxxx, Xxx. #000, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the
"Executive"), and Common Places, LLC, a Delaware limited liability company with
its principal office at c/o Network Event Theater, Inc. 000 Xxxxx Xxxxxx, 0xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company").
The Company wishes to secure the services of the Executive, and the
Executive has agreed to serve the Company, on the terms set forth in this
agreement.
It is therefore agreed as follows:
1. Employment. During the term of the Executive's employment under this
agreement, the Company shall employ the Executive, and the Executive shall serve
the Company, as Director of Communications Services. The Executive shall report
to Xxxx Xxxxxx, Chief Technical Officer, and shall perform the duties and
responsibilities set forth on schedule 1 and such other duties as are assigned
to him from time to time by the Chief Technical Officer that are not
inconsistent with his duties as Director of Communications Services, as set
forth on schedule 1. The Executive shall devote substantially all his business
time to the performance of his duties under this agreement.
2. Term of Employment. The term of the Executive's employment under
this agreement shall commence on the date of this agreement and, subject to
earlier termination upon the Executive's death or disability pursuant to section
5.1 or pursuant to section 6, shall continue until the third anniversary of the
date of this agreement.
3. Compensation. As cash consideration for his services under this
agreement, the Executive shall be entitled to a salary at the rate of $105,000 a
year, payable in equal installments in accordance with the Company's customary
payroll practices for its employees. In addition, the Executive shall be
entitled to an annual bonus of $20,000, payable not less frequently than
quarterly, subject to the Executive fulfilling obligations that he and the
Company mutually agree upon from time to time. Following the end of each fiscal
year during the term, the Company's board of directors may increase (but not
decrease) the Executive's salary or grant the Executive additional bonuses based
on his performance during that year.
4. Reimbursement of Expenses; Fringe Benefits.
4.1 Expenses. The Company shall reimburse the Executive for all
reasonable expenses incurred by the Executive in connection with the performance
of his duties, upon presentation of appropriate vouchers covering the expenses.
4.2 Fringe Benefits. The Executive (and his immediate family) shall
be entitled to participate in medical, dental, disability, life insurance and
other fringe benefits and executive perquisites at the same levels as comparable
employees of the Company.
4.3 Option. Upon execution and delivery of this agreement, the
Company is granting the Executive options to purchase common units in the
Company pursuant to the Company's 1999 Unit Plan in accordance with a letter
agreement dated the date of this agreement among the parties to the letter
agreement.
5. Disability or Death.
5.1 Disability. If, as the result of any physical or mental
disability, the Executive shall fail or be unable to perform his duties for a
total of 180 days in any 12-month period, the Company may, by notice to the
Executive, terminate his employment under this agreement as of the date of the
notice.
5.2 Payments on Disability. If the Executive's employment is
terminated pursuant to section 5.1, the Executive shall be paid, in full
discharge of all the Company's obligations to the Executive, the Executive's
full salary and accrued bonus, if any, under section 3, and his fringe benefits
under section 4, for one month following the date of termination (or, if a
shorter period, the remainder of the term), less the amount of any disability
payments received by him under any disability insurance coverage provided to him
by the Company. If the Executive shall request, the Company shall, at the
Executive's expense, keep the Executive and his immediate family on all medical,
dental and other plans they previously enjoyed under this agreement for the
minimum period required under applicable law.
5.3 Payments on Death. The Executive's employment under this
agreement shall be terminated upon his death and the Executive's estate shall be
paid, in full discharge of all the Company's obligations to the Executive, the
Executive's full salary and accrued bonus, if any, under section 3 for three
months following the date of termination (or, if a shorter period, the remainder
of the term), plus the proceeds of any life insurance policy purchased by the
Company on the Executive's life and payable to the Executive's heirs and estate.
If the Executive's immediate family shall request, the Company shall, at the
expense of the Executive's immediate family, keep them on all medical, dental
and other plans they previously enjoyed under this agreement for the minimum
period required under applicable law.
2
6. Termination.
6.1. Payments Upon Termination for Cause or Voluntary Resignation.
The Company may terminate the Executive's employment under this agreement for
cause (as defined in section 6.3). If the Executive's employment under this
agreement is terminated for cause pursuant to section 6.1 or by the Executive's
voluntary resignation (other than for Good Reason, as defined in section 6.3),
the Company shall pay the Executive, in full discharge of its obligations to the
Executive under this agreement, the accrued amount of the salary and accrued
bonus, if any, and benefits due to him through the date of termination and the
amount of all expense reimbursements due for periods prior to termination.
6.2. Payments Upon Termination for Other Reasons. If the Executive's
employment under this agreement is terminated by the Company for any reason
other than for cause pursuant to section 6.1 or death or disability pursuant to
section 5, or if the Executive's employment under this agreement is terminated
by the Executive for Good Reason, the Company shall pay the Executive (a) to the
extent not previously paid (and not subject to proration, offsets or claims of
any kind), if, as and when otherwise payable, all salary payable pursuant to
section 3 through the remainder of the term, and (b) to the extent not
previously paid (and not subject to proration, offsets or claims of any kind),
all bonuses, if any, previously authorized by the Company's board of directors.
In addition, upon the request of the Executive, the Company shall, at the
Executive's expense, keep the Executive and his immediate family on all medical,
dental and other plans they have enjoyed under this agreement through the
minimum period required under applicable law. None of the payments provided for
in this section 6.2 shall be reduced by any amounts earned or received by the
Executive from any third party at any time. Without limiting the generality of
the foregoing, in the case of any termination of employment for any reason other
than pursuant to section 6.1, there shall be no requirement on the part of the
Executive to mitigate damages.
6.3 Definitions. As used in this agreement:
(a) the term "cause" shall be limited to mean: (i) the
conviction of the Executive of a felony, (ii) the conviction of the Executive
for a crime involving any financial impropriety or moral turpitude or that would
materially interfere with the Executive's ability to perform his services
required under this agreement or otherwise be materially injurious to the
Company, (iii) the use of alcohol or drugs by the Executive to an extent that
materially interferes with the Executive's ability to perform his services
required under this agreement or otherwise is materially injurious to the
Company or (iv) the willful and knowing breach by the Executive in a material
respect of his obligations under this agreement after 20 days notice and an
opportunity to cure and after a hearing before the board with the Executive's
counsel permitted to be present at such hearing; and
(b) the term "Good Reason" shall be limited to mean the
occurrence, without the express written consent of the Executive, of any of the
following circumstances: (i) a significant adverse alteration in the Executive's
status in the Company, in the nature of the Executive's responsibilities or in
the material conditions of the Executive's employment; (ii) a
3
reduction by the Company in the Executive's annual basic salary or benefits as
provided for in this agreement; (iii) the Company requiring that the Executive
be based at a location more than 100 miles from his residence on the date of
this agreement, except for required travel on the Company's business; and (iv)
the Company's breach of any of its material obligations under this agreement and
the continuation of that breach for 20 days after written notice by the
Executive to the Company.
7. Confidential Information. The Executive shall not, directly or
indirectly, either during his employment by the Company or at any time
thereafter, disclose to anyone or use (except as authorized in the regular
course of the Company's business) any information acquired by him during his
employment with respect to any of the Company's trade secrets or other
confidential information (it being understood, however, that nothing in this
agreement shall be deemed to prohibit the Executive from disclosing such
information as he is required to disclose in response to a court order or other
legal process, and, in any such case, he shall afford the Company as much
opportunity as practicable to intervene in order to limit the information
required to be disclosed or subject to a protective order any information so
disclosed). For this purpose, information that is either generally known to the
public or that is not used, developed or obtained in connection with the
Company's actual or anticipated business shall not be considered a trade secret
or confidential information.
8. Non-Competition, etc
8.1 Non-Competition. The Executive shall not, during the Applicable
Restricted Period (as defined below), except through the Company or any of its
affiliates, directly or indirectly, engage or be interested in (a) the business
of developing or operating an Internet portal or hub targeted primarily to
individuals between the ages of 16 and 25, (b) the business of developing or
operating an instant messaging system, either text or voice based, (c) any
business directly competitive with any business the Company or any of its
affiliates is engaged in at the time of his termination of employment and in
which he was directly, materially involved during his employment (it being
understood and agreed that the Company and its affiliates shall not be deemed to
have been engaged, at the time of his termination of employment, in any
Abandoned Business (as defined below) or any New Market Business (as defined
below)) or (d) any business directly competitive with a business developed from
a project in which he was directly, materially involved during his employment
(it being understood and agreed that the Company and its affiliates shall not be
deemed to have been engaged, at the time of his termination of employment, in
any Abandoned Business or any New Market Business) (any such business referred
to in (a), (b), (c) or (d), a "Restricted Business"); provided, however, that
nothing in this paragraph shall limit the right of any such individual to be
employed by a media or Internet company whose businesses include a Restricted
Business, as long as he does not provide any services to that Restricted
Business. For this purpose, a person shall be deemed to be directly or
indirectly engaged or interested in a business or entity, if he is engaged or
interested in that business or entity as a stockholder, member, partner,
individual proprietor, director, officer, employee, agent, lender, consultant or
otherwise, but not if his interest is limited solely to the ownership of 5% or
less of any class of the equity or debt securities of a corporation as to which
he has only a passive role. As used in this agreement, (I) the term "Applicable
Restricted Period" means (y) the period during which the Executive is an
employee of the Company or any of its affiliates, and (z) the period beginning
immediately thereafter and
4
terminating (i) 24 months later, in the case of (a) above, (ii) 36 months later,
in the case of (b) above, and (iii) 18 months later, in the case of (c) and (d)
above, (II) the term "Abandoned Business means any business in which the Company
and all its affiliates shall have ceased to engage, other than as a result of a
sale, transfer or other disposition thereof to a third party, and (III) the term
"New Market Business" means a business that does not, and is not foreseeably
intended to, penetrate a particular market in which the Company or any of its
affiliates engage or a market to which a particular market in which the Company
or any of its affiliates engage would foreseeably be expected to extend.
8.2 Non-Solicitation. The Executive shall not, as long as he is an
employee of the Company or any of its affiliates and for a period of 18 months
thereafter, directly or indirectly, solicit for employment or hire any person
who, during the 12-month period preceding the date of solicitation or hiring,
was an employee of the Company or any of its affiliates.
8.3 Injunction. The Executive acknowledges that the remedy at law
for the breach of the provisions of section 8.1 or 8.2 would be inadequate and
that, in addition to any other remedy the Company may have, it shall be entitled
to an injunction restraining any such breach or threatened breach, without bond
or other security being required and without the necessity of showing actual
damages or economic loss.
8.4 Governing Law. Notwithstanding the provisions of section 9.6,
this section 8 shall be governed by New York law; provided, however, if this
section 8.4 is, for any reason unenforceable, this section 8.4 shall be governed
by section 9.6.
9. Miscellaneous.
9.1. Headings. The section headings of this agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this agreement.
9.2. Notices. All notices and other communications under this
agreement shall be in writing and shall be deemed given when delivered
personally or mailed by registered mail, return receipt requested, to the
parties at their respective addresses set forth above (or to such other address
as a party may have specified by notice given to the other party pursuant to
this provision) with a copy, in the case of any notice to the Executive, to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
9.3. Separability. The invalidity or unenforceability of any
provision of this agreement shall not affect the validity or enforceability of
any other provision of this agreement, which shall remain in full force and
effect.
5
9.4. Waiver. Either party may waive compliance by the other party
with any provision of this agreement. The failure of a party to insist on strict
adherence to any term of this agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this agreement. No waiver of any
provision shall be construed as a waiver of any other provision. Any waiver must
be in writing.
9.5. Assignment. Neither party may assign any of its rights or
delegate any of its duties under this agreement (other than as contemplated by
this agreement) without the prior consent of the other and any assignment or
delegation in violation of this prohibition shall be void. This agreement shall
be binding upon and inure solely to the benefit of each party to this agreement
and its respective successors, executors, administrators, heirs and permitted
assigns, including, with respect to the Company, the survivor of the Mergers (as
defined in the agreement and plan of merger dated June 28, 1999 among Network
Event Theater, Inc., the Company, YouthStream Media Networks, Inc., Nunet, Inc.,
Nucommon, Inc. and certain individuals).
9.6. Governing Law. This agreement shall be governed by and in
accordance with the substantive law of the Commonwealth of Massachusetts
applicable to agreements made and to be performed in Massachusetts, without
giving effect to the conflict of laws principles of such Commonwealth.
9.7. Entire Agreement. This agreement contains, and is intended as,
a complete statement of all the terms of the arrangements between the parties
with respect to the matters provided for, supersedes any previous agreements and
understandings between the parties with respect to those matters and cannot be
changed or terminated orally.
9.8 Counterparts. This agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
COMMON PLACES, LLC
By:----------------------------
-------------------------------
Xxxxx Xxxxxx
6
Schedule 1
Director of Communications Services: Xxxxx Xxxxxx
1. Leading the future architecture and development of the Invino Instant
Messaging Service.
2. Hiring and building the Communications Services engineering team.
3. Leading the Communications Services division in the architecture and
development of YouthStream's communications services.
7
EMPLOYMENT AGREEMENT
Dated October 15, 1999
The parties to this agreement are Xxxxxxx X. Xxxxx, Xx., residing at 0
Xxxxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxxxxx 00000 (the "Executive"), and
Common Places, LLC, a Delaware limited liability company with its principal
office at c/o Network Event Theater, Inc. 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (the "Company").
The Company wishes to secure the services of the Executive, and the
Executive has agreed to serve the Company, on the terms set forth in this
agreement.
It is therefore agreed as follows:
1. Employment. During the term of the Executive's employment under this
agreement, the Company shall employ the Executive, and the Executive shall serve
the Company, as Director of Business Development. The Executive shall report to
Xxxxxx Xxxxxxxx, VicePresident of Business Development, Product Marketing, and
Programs, and shall perform the duties and responsibilities set forth on
schedule 1 and such other duties as are assigned to him from time to time by the
Vice-President of Business Development, Product Marketing, and Programs that are
not inconsistent with his duties as Director of Business Development, as set
forth on schedule 1. The Executive shall devote substantially all his business
time to the performance of his duties under this agreement.
2. Term of Employment. The term of the Executive's employment under
this agreement shall commence on the date of this agreement and, subject to
earlier termination upon the Executive's death or disability pursuant to section
5.1 or pursuant to section 6, shall continue until the third anniversary of the
date of this agreement.
3. Compensation. As cash consideration for his services under this
agreement, the Executive shall be entitled to a salary at the rate of $90,000 a
year, payable in equal installments in accordance with the Company's customary
payroll practices for its employees. In addition, the Executive shall be
entitled to an annual bonus of $40,000, payable not less frequently than
quarterly, subject to the Executive fulfilling obligations that he and the
Company mutually agree upon from time to time. Following the end of each fiscal
year during the term, the Company's board of directors may increase (but not
decrease) the Executive's salary or grant the Executive additional bonuses based
on his performance during that year.
4. Reimbursement of Expenses; Fringe Benefits.
4.1 Expenses. The Company shall reimburse the Executive for all
reasonable expenses incurred by the Executive in connection with the performance
of his duties, upon presentation of appropriate vouchers covering the expenses.
4.2 Fringe Benefits. The Executive (and his immediate family) shall
be entitled to participate in medical, dental, disability, life insurance and
other fringe benefits and executive perquisites at the same levels as
comparable employees of the Company.
4.3 Option. Upon execution and delivery of this agreement, the
Company is granting the Executive options to purchase common units in the
Company pursuant to the Company's 1999 Unit Plan in accordance with a letter
agreement dated the date of this agreement among the parties to the letter
agreement.
5. Disability or Death.
5.1 Disability. If, as the result of any physical or mental
disability, the Executive shall fail or be unable to perform his duties for a
total of 180 days in any 12-month period, the Company may, by notice to the
Executive, terminate his employment under this agreement as of the date of the
notice.
5.2 Payments on Disability. If the Executive's employment is
terminated pursuant to section 5.1, the Executive shall be paid, in full
discharge of all the Company's obligations to the Executive, the Executive's
full salary and accrued bonus, if any, under section 3, and his fringe benefits
under section 4, for one month following the date of termination (or, if a
shorter period, the remainder of the term), less the amount of any disability
payments received by him under any disability insurance coverage provided to him
by the Company. If the Executive shall request, the Company shall, at the
Executive's expense, keep the Executive and his immediate family on all medical,
dental and other plans they previously enjoyed under this agreement for the
minimum period required under applicable law.
5.3 Payments on Death. The Executive's employment under this
agreement shall be terminated upon his death and the Executive's estate shall be
paid, in full discharge of all the Company's obligations to the Executive, the
Executive's full salary and accrued bonus, if any, under section 3 for three
months following the date of termination (or, if a shorter period, the remainder
of the term), plus the proceeds of any life insurance policy purchased by the
Company on the Executive's life and payable to the Executive's heirs and estate.
If the Executive's immediate family shall request, the Company shall, at the
expense of the Executive's immediate family, keep them on all medical, dental
and other plans they previously enjoyed under this agreement for the minimum
period required under applicable law.
2
6. Termination.
6.1. Payments Upon Termination for Cause or Voluntary Resignation.
The Company may terminate the Executive's employment under this agreement for
cause (as defined in section 6.3). If the Executive's employment under this
agreement is terminated for cause pursuant to section 6.1 or by the Executive's
voluntary resignation (other than for Good Reason, as defined in section 6.3),
the Company shall pay the Executive, in full discharge of its obligations to the
Executive under this agreement, the accrued amount of the salary and accrued
bonus, if any, and benefits due to him through the date of termination and the
amount of all expense reimbursements due for periods prior to termination.
6.2. Payments Upon Termination for Other Reasons. If the
Executive's employment under this agreement is terminated by the Company for any
reason other than for cause pursuant to section 6.1 or death or disability
pursuant to section 5, or if the Executive's employment under this agreement is
terminated by the Executive for Good Reason, the Company shall pay the Executive
(a) to the extent not previously paid (and not subject to proration, offsets or
claims of any kind), if, as and when otherwise payable, all salary payable
pursuant to section 3 through the remainder of the term, and (b) to the extent
not previously paid (and not subject to proration, offsets or claims of any
kind), all bonuses, if any, previously authorized by the Company's board of
directors. In addition, upon the request of the Executive, the Company shall, at
the Executive's expense, keep the Executive and his immediate family on all
medical, dental and other plans they have enjoyed under this agreement through
the minimum period required under applicable law. None of the payments provided
for in this section 6.2 shall be reduced by any amounts earned or received by
the Executive from any third party at any time. Without limiting the generality
of the foregoing, in the case of any termination of employment for any reason
other than pursuant to section 6.1, there shall be no requirement on the part of
the Executive to mitigate damages.
6.3 Definitions. As used in this agreement:
(a) the term "cause" shall be limited to mean: (i) the
conviction of the Executive of a felony, (ii) the conviction of the Executive
for a crime involving any financial impropriety or moral turpitude or that would
materially interfere with the Executive's ability to perform his services
required under this agreement or otherwise be materially injurious to the
Company, (iii) the use of alcohol or drugs by the Executive to an extent that
materially interferes with the Executive's ability to perform his services
required under this agreement or otherwise is materially injurious to the
Company or (iv) the willful and knowing breach by the Executive in a material
respect of his obligations under this agreement after 20 days notice and an
opportunity to cure and after a hearing before the board with the Executive's
counsel permitted to be present at such hearing; and
(b) the term "Good Reason" shall be limited to mean the
occurrence, without the express written consent of the Executive, of any of the
following circumstances: (i) a significant adverse alteration in the Executive's
status in the Company, in the nature of the Executive's responsibilities or in
the material conditions of the Executive's employment; (ii) a
3
reduction by the Company in the Executive's annual basic salary or benefits as
provided for in this agreement; (iii) the Company requiring that the Executive
be based at a location more than 100 miles from his residence on the date of
this agreement, except for required travel on the Company's business; and (iv)
the Company's breach of any of its material obligations under this agreement and
the continuation of that breach for 20 days after written notice by the
Executive to the Company.
7. Confidential Information. The Executive shall not, directly or
indirectly, either during his employment by the Company or at any time
thereafter, disclose to anyone or use (except as authorized in the regular
course of the Company's business) any information acquired by him during his
employment with respect to any of the Company's trade secrets or other
confidential information (it being understood, however, that nothing in this
agreement shall be deemed to prohibit the Executive from disclosing such
information as he is required to disclose in response to a court order or other
legal process, and, in any such case, he shall afford the Company as much
opportunity as practicable to intervene in order to limit the information
required to be disclosed or subject to a protective order any information so
disclosed). For this purpose, information that is either generally known to the
public or that is not used, developed or obtained in connection with the
Company's actual or anticipated business shall not be considered a trade secret
or confidential information.
8. Non-Competition, etc
8.1 Non-Competition. The Executive shall not, during the Applicable
Restricted Period (as defined below), except through the Company or any of its
affiliates, directly or indirectly, engage or be interested in (a) the business
of developing or operating an Internet portal or hub targeted primarily to
individuals between the ages of 16 and 25, (b) the business of developing or
operating an instant messaging system, either text or voice based, (c) any
business directly competitive with any business the Company or any of its
affiliates is engaged in at the time of his termination of employment and in
which he was directly, materially involved during his employment (it being
understood and agreed that the Company and its affiliates shall not be deemed to
have been engaged, at the time of his termination of employment, in any
Abandoned Business (as defined below) or any New Market Business (as defined
below)) or (d) any business directly competitive with a business developed from
a project in which he was directly, materially involved during his employment
(it being understood and agreed that the Company and its affiliates shall not be
deemed to have been engaged, at the time of his termination of employment, in
any Abandoned Business or any New Market Business) (any such business referred
to in (a), (b), (c) or (d), a "Restricted Business"); provided, however, that
nothing in this paragraph shall limit the right of any such individual to be
employed by a media or Internet company whose businesses include a Restricted
Business, as long as he does not provide any services to that Restricted
Business. For this purpose, a person shall be deemed to be directly or
indirectly engaged or interested in a business or entity, if he is engaged or
interested in that business or entity as a stockholder, member, partner,
individual proprietor, director, officer, employee, agent, lender, consultant or
otherwise, but not if his interest is limited solely to the ownership of 5% or
less of any class of the equity or debt securities of a corporation as to which
he has only a passive role. As used in this agreement, (I) the term "Applicable
Restricted Period" means (y) the period during which the Executive is an
employee of the Company or any of its affiliates, and (z) the period beginning
immediately thereafter and
4
terminating (i) 24 months later, in the case of (a) above, (ii) 36 months later,
in the case of (b) above, and (iii) 18 months later, in the case of (c) and (d)
above, (II) the term "Abandoned Business means any business in which the Company
and all its affiliates shall have ceased to engage, other than as a result of a
sale, transfer or other disposition thereof to a third party, and (III) the term
"New Market Business" means a business that does not, and is not foreseeably
intended to, penetrate a particular market in which the Company or any of its
affiliates engage or a market to which a particular market in which the Company
or any of its affiliates engage would foreseeably be expected to extend.
8.2 Non-Solicitation. The Executive shall not, as long as he is an
employee of the Company or any of its affiliates and for a period of 18 months
thereafter, directly or indirectly, solicit for employment or hire any person
who, during the 12-month period preceding the date of solicitation or hiring,
was an employee of the Company or any of its affiliates.
8.3 Injunction. The Executive acknowledges that the remedy at law
for the breach of the provisions of section 8.1 or 8.2 would be inadequate and
that, in addition to any other remedy the Company may have, it shall be entitled
to an injunction restraining any such breach or threatened breach, without bond
or other security being required and without the necessity of showing actual
damages or economic loss.
8.4 Governing Law. Notwithstanding the provisions of section 9.6,
this section 8 shall be governed by New York law; provided, however, if this
section 8.4 is, for any reason unenforceable, this section 8.4 shall be governed
by section 9.6.
9. Miscellaneous.
9.1. Headings. The section headings of this agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this agreement.
9.2. Notices. All notices and other communications under this
agreement shall be in writing and shall be deemed given when delivered
personally or mailed by registered mail, return receipt requested, to the
parties at their respective addresses set forth above (or to such other address
as a party may have specified by notice given to the other party pursuant to
this provision) with a copy, in the case of any notice to the Executive, to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
9.3. Separability. The invalidity or unenforceability of any
provision of this agreement shall not affect the validity or enforceability of
any other provision of this agreement, which shall remain in full force and
effect.
5
9.4. Waiver. Either party may waive compliance by the other party
with any provision of this agreement. The failure of a party to insist on strict
adherence to any term of this agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this agreement. No waiver of any
provision shall be construed as a waiver of any other provision. Any waiver must
be in writing.
9.5. Assignment. Neither party may assign any of its rights or
delegate any of its duties under this agreement (other than as contemplated by
this agreement) without the prior consent of the other and any assignment or
delegation in violation of this prohibition shall be void. This agreement shall
be binding upon and inure solely to the benefit of each party to this agreement
and its respective successors, executors, administrators, heirs and permitted
assigns, including, with respect to the Company, the survivor of the Mergers (as
defined in the agreement and plan of merger dated June 28, 1999 among Network
Event Theater, Inc., the Company, YouthStream Media Networks, Inc., Nunet, Inc.,
Nucommon, Inc. and certain individuals).
9.6. Governing Law. This agreement shall be governed by and in
accordance with the substantive law of the Commonwealth of Massachusetts
applicable to agreements made and to be performed in Massachusetts, without
giving effect to the conflict of laws principles of such Commonwealth.
9.7. Entire Agreement. This agreement contains, and is intended
as, a complete statement of all the terms of the arrangements between the
parties with respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to those matters
and cannot be changed or terminated orally.
9.8 Counterparts. This agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
COMMON PLACES, LLC
By:----------------------------
-------------------------------
Xxxxxxx X. Xxxxx, Xx.
6
Schedule 1
Director of Business Development: Xxxxxxx X. Xxxxx
1. Manages third party content, services, software and tools acquisition
through the contractual process with a primary focus on strategic partnerships
and Distance Learning areas of the site(s).
2. Manages Invino, WebDorm, School Platform & other Joint Ventures Web services
from an ongoing business perspective.
3. Additional Focus: ISP's, Automobiles, Housing, Shopping Search, Hardgoods
(electronics, toys, home products).
7
As of October 15, 1999
Mr. Xxxxx Xxxxxx
Mr. Malay Xxxxx
Xx. Xxxxxxx X. Xxxxx, Xx.
Xx. Xxxxxxx Xxxx Xxxxxx
c/o Invino Corporation
000 Xxxxxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Re: Options
Gentlemen:
Reference is hereby made to those certain employment agreements dated
as of October 15, 1999 (each referred to herein as an "Employment Agreement")
between each of Messrs. Hunter, Kundu, Tyler and Common Places, LLC, a Delaware
limited liability company ("CP"). The CP Board of Directors has granted, as of
the date hereof, options (the "Options") to each of you to purchase CP common
units under CP's 1999 Unit Option Plan in the form previously provided to each
of you (the "Plan") in the amount set forth opposite your names listed below at
an exercise price of $19.3575 per unit:
Name No. of Units
---- ------------
Xxxxx Xxxxxx 64,574
Malay Xxxxx 64,574
Xxxxxxx X. Xxxxx, Xx. 36,162
Xxxxxxx Xxxx Xxxxxx 15,498
As of October 15, 1999
Page 2
The parties agree that promptly after the date hereof (and in no event
later than 45 days following the date hereof) each of you will execute an Option
Agreement with CP containing the terms and conditions of the Options. Each
Option Agreement will be in substantially the same form executed by CP's other
optionees under the Plan and in no event shall the Options contain terms less
favorable than those granted to other employee optionees; provided however, each
Option Agreement shall contain the following terms:
1. Vesting. One-third of the Options granted to each of you will vest
and be exercisable on or after October 15, 2000; and the remaining two-thirds of
the Options granted to each of you shall vest ratably on a quarterly basis over
the following two years. In the event that all other optionees granted options
under the Plan receive vesting on a quarterly basis during the first year after
the date of grant, each of your Options shall also be amended to provide for
quarterly vesting during the period commencing on the date hereof and ending
October 15, 2000.
2. Acceleration of Vesting and Extended Exercise Period. Upon
termination of your employment with CP (i) by you for Good Reason (as such term
is defined in your Employment Agreement, or in the case of Xx. Xxxxxx, such term
shall also have the same meaning set forth in the Employment Agreements), or
(ii) by CP without Cause (as such term is defined in your Employment Agreement,
or in the case of Xx. Xxxxxx, such term shall also have the same meaning as set
forth in the Employment Agreements), then the vesting of all Options granted to
you shall be accelerated such that all Options granted to you will be
exercisable for a period of nine months after the date of such termination.
3. Upon consummation of the mergers contemplated by that certain
Agreement and Plan of Merger dated June 28, 1999 (the "CP Merger Agreement")
among Network Event Theater, Inc., CP, Youthstream Media Networks, Inc.
("Youthstream") and certain other parties, the Options shall be deemed to
constitute options to acquire shares of common stock of Youthstream in
accordance with the terms of Section 1.6 of the CP Merger Agreement.
This side letter shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts. This side letter may be
executed in one or more counterparts, all of which when taken together shall be
considered one original agreement.
As of October 15, 1999
Page 3
If the foregoing correctly sets forth your understanding, please sign
where indicated below.
Sincerely,
COMMON PLACES, LLC
By: ----------------------------------------
Name:
Title:
YOUTHSTREAM MEDIA NETWORKS, INC.
By: ----------------------------------------
Name:
Title:
Accepted and agreed to
this 15th day of October, 1999
----------------------------------
Xxxxx Xxxxxx
----------------------------------
Malay Xxxxx
----------------------------------
Xxxxxxx X. Xxxxx, Xx.
----------------------------------
Xxxxxxx Xxxx Xxxxxx
