EXHIBIT 6.06
ART SERVICES Agreement
This AGREEMENT made as of the 14th day of April, 1999, by and between
SHOWSTAR ENTERTAINMENT CORPORATION, a Colorado corporation (the "Company"), and
XXXXXXX XXXX ("Expert").
WHEREAS, the Company and Expert mutually desire that the Company organize a new
division, to be known as ARTSTAR (subject to availability of such name and
xxxx), for the purpose of establishing and operating an Internet website for the
marketing and sale of private collections of artworks as well as other types of
collectibles and memorabilia and the providing of services (including
appraisals, authentication, acquisition and disposal advice, restoration and
other related services), education and experiences related to the visual arts;
WHEREAS, the Company and Expert mutually desire that Expert be retained by
ARTSTAR and that Expert devote his best efforts and attention to the
establishment and successful operation of ARTSTAR;
WHEREAS, the Company and Expert mutually desire that the Company, simultaneously
with execution and delivery of this Agreement, enter into a similar agreement
with XXXXXXX XXX XXXXXX ("Xxxxxx") to provide similar and related art services
to ARTSTAR (Expert and Lisner are herein sometimes referred to collectively as
the Professional Arts Team ("PT")); and
WHEREAS, the Company and Expert mutually desire to set forth the terms of their
intended relationship;
NOW THEREFORE, in consideration of the premises and the terms hereinafter set
forth, the parties, intending to be legally bound, agree as follows:
1. Engagement. The Company hereby engages Expert, and Expert hereby agrees to be
engaged by the Company, to render, to the best of Expert's ability, independent
marketing, advisory and consulting services to the Company upon the terms and
conditions hereinafter set forth.
2. Establishment of ARTSTAR. Promptly following execution of this Agreement by
the parties, the Company agrees to organize a new division named "ARTSTAR" to be
operated for the purposes above described. The Company shall provide to ARTSTAR
website development services, catalog software, auction software, site hosting,
transaction processing, project management and development and implementation of
an Internet marketing campaign.
3. Funding and Management of ARTSTAR. The Company shall provide all funding for
the activities of ARTSTAR consistent will operating plans and budgets mutually
agreed upon by the Company and Expert, which agreement shall not be unreasonably
withheld. In the event that the parties are unable to operate ARTSTAR profitably
within twelve (12) months following the Effective Date (as defined in paragraph
10.1 below), the Company shall have no further obligation to fund ARTSTAR except
to the extent that the Company may elect in its sole discretion. Management of
ARTSTAR shall rest jointly with the Company and the Professional Arts Team,
after reasonable consultation among them.
4 Expert's Duties. Expert's duties shall consist primarily of developing and
building the business of ARTSTAR, including without limitation the following:
(a). Providing to ARTSTAR all valuable intellectual property necessary for the
running of the website as well as services in support of the website, including,
but not limited to, consultation on restoration services, appraisal services,
collection management services and development of content for on-line
educational purposes and exhibitions;
(b). Providing certain services necessary for the support of on-line sales,
including, but not limited to, photographs of items to be offered for sale
together with machine readable computer disks containing their description and
estimated sale values;
(c). Assisting in the development of the marketing campaign; and
(d). Utilizing Expert's personal industry contacts as needed in the
establishment and successful operation of ARTSTAR.
Expert also shall have such other duties as may be reasonably determined from
time to time by the Company. Expert agrees to render all such services
conscientiously and to devote his best efforts abilities thereto and to
ARTSTAR's business and purposes. Expert shall observe all policies and
directives reasonably promulgated from time to time by the Company. The parties
acknowledge that, as contemplated by paragraph 7.6 below, Expert's services
shall be on a non-exclusive basis and that such services shall be performed at
such places and at such times as are mutually agreeable to the parties. Except
as otherwise contemplated by this Agreement, Expert shall not engage in any
activities in conflict with the business and purposes of ARTSTAR or of the
Company's other business as from time to time conducted.
5. Positions to be Held by Expert. Beginning on the Effective Date,
ARTSTAR shall retain Expert as an independent contractor, and Expert shall
accept such retention by ARTSTAR, with the title Vice President of ARTSTAR.
In addition, commencing on the Effective Date, the Company shall appoint
Expert as a new member of its Board of Directors and, during the term of this
Agreement, the Company shall use reasonable efforts to cause Expert to be
reelected to the Board of Directors.
6. Term of Agreement. Expert shall provide the contemplated services
to ARTSTAR for the term described in Section 10 hereof.
7. Compensation. For all services rendered by Expert to ARTSTAR and the
Company under this Agreement or otherwise, ARTSTAR shall compensate Expert as
follows commencing on the Effective Date:
7.1 Base Salary. Base salary at the rate of $7,500 per month
during the first three (3) months of the term of this Agreement, and thereafter
at the rate of $10,000 per month subject, however, to any increase(s) as
determined by the Company. Base salary shall be payable no less often than twice
each month, on the fifteenth and on the last day of each month, in conformity
with the usual salary payment practices of the Company.
7.2 Restricted Stock Grant. Upon the Effective Date, the
Company shall award to Expert Five Hundred Thousand (500,000) shares of the
common stock of the Company ("Grant Shares"), which shall vest in and become
owned by Expert at the rate of 100,000 shares at the end of each successive
three-month period during the term of this Agreement, commencing on the
Effective Date, with the result that all 500,000 Grant Shares shall vest in
and become owned by Expert after the initial fifteen (15) months of the term
of this Agreement. In the event that
Expert's retention by ARTSTAR hereunder terminates before all Grant Shares are
vested, those not vested shall remain the property of the Company and Expert
shall have no right, title or interest therein or any claim against same. The
foregoing notwithstanding, Expert's right to all Grant Shares shall immediately
vest, if Expert is then retained by ARTSTAR hereunder, twenty (20) days before a
Change in Control Event, as defined in paragraph 8.4.2 below.
7.3 Stock Options. In addition to the base salary and Grant
Shares set forth above, the Company shall grant to Expert, upon the Effective
Date, options to purchase common stock of the Company as follows:
Number of Shares Exercise Price
250,000 $1.00 per share
Subject to Expert's continuing to be retained by ARTSTAR hereunder, such options
shall vest in and become exercisable by Expert at the rate of options on 50,000
shares exercisable at $1.00 per share vesting at the end of each successive six
(6) month period during the term of this Agreement, commencing on the Effective
Date. For example, one (1) year after the Effective Date, options on 100,000
shares exercisable at $1.00 per share will have vested. This will result in the
options on all 250,000 shares exercisable at $1.00 per share being entirely vest
in and becoming exercisable by Expert thirty (30) months after the Effective
Date. The foregoing notwithstanding, Expert's right to all of the said options
shall vest and all of the said options shall become immediately exercisable, if
Expert is then retained by ARTSTAR hereunder, twenty (20) days before a Change
in Control Event, as defined in paragraph 8.4.2 below. All of such options, to
the extent not exercised, shall expire ten (10) years after the Effective Date.
Furthermore, Expert shall be included in the group of senior executives
considered for future grants of stock options under stock option plans, if any,
in effect for the Company from time to time.
7.4 Performance Bonus. Expert also shall be entitled to
receive a performance bonus in cash, payable within 90 days following the end
of each fiscal year of ARTSTAR during the term of this Agreement, equivalent
to __________ percent (__%) of the pretax profits of ARTSTAR, if any, during
such fiscal year, as reasonably determined by the Company in accordance with
generally accepted accounting principles consistently applied.
7.5 Benefits. Expert shall be entitled to all fringe
benefits offered generally to the Company's officers and any other benefit
plans established by the Company, subject to the rules and regulations in
effect regarding participation in such benefit plans.
7.6 Old and New Business. The parties acknowledge that Expert
heretofore has been engaged in the business of providing art services similar to
those here contemplated except that such services have not been offered or
provided by means of the Internet. The parties agree that Expert shall continue
to conduct his business as heretofore conducted, as well as to provide his
services to establish and build ARTSTAR. All business generated by or related to
the online business of ARTSTAR shall be the sole business of ARTSTAR and Expert
shall have no separate interest therein (except to the extent of his performance
bonus described in paragraph 7.4 above). All business of Expert after the
Effective Date in his historical art services business as heretofore conducted
shall be and remain the separate business of Expert, provided, however, that in
the event that business subsequent to the Effective Date arguably could be that
of either ARTSTAR or Expert, any such question shall be
resolved in favor of its being that of ARTSTAR with appropriate compensation
being paid to Expert's separate business for all costs, services and expenses
borne or provided by Expert's separate business. Not later than one (1) year
after the Effective Date, the parties will consider whether Expert's separate
business shall be acquired by ARTSTAR, provided, however, that there shall be no
binding obligation on either party to enter into any such transaction unless the
parties, in their sole discretion, at that time enter into definitive agreements
relating to such a transaction.
7.7 Expenses. The Company shall reimburse Expert for all
reasonable business expenses that are deductible by the Company for U.S. federal
income tax purposes and were incurred by Expert in connection with the
performance of his services hereunder; provided, however, that any such
reimbursement in excess of One Thousand U. S. Dollars (US $1,000) shall require
the Company's prior written approval. The Company's obligation to reimburse
Expert for expenses pursuant to this subparagraph shall be subject to the
presentation to the Company by Expert of an itemized account of such
expenditures, together with supporting vouchers, receipts or other documentation
in accordance with the Company's policies as in effect from time to time.
8. Non-Competition and Confidentiality.
8.1 Non-Competition; Small Interests. Except as in provided in
paragraph 7.6 above or 10.4 below, during the term of Expert's retention by
ARTSTAR and for a period of two (2) years thereafter, Expert shall not, directly
or indirectly, be employed by, own, manage, operate, join, control or
participate in the ownership, management, operation or control of or be
connected in any manner with the field of Internet online business intended for
or actually operated in by ARTSTAR. Expert shall be deemed to be connected with
a business if such business is carried on by a partnership in which he is a
general or limited partner, consultant or employee, or a corporation or
association of which he is a shareholder, officer, director, employee, member,
consultant or agent; provided, however, that nothing herein shall prevent the
purchase or ownership by Expert of shares of less than 2% of the outstanding
shares of a publicly or privately held company. Nothing herein shall prevent
Expert from continuing to conduct his historical art services business, except
in connection with doing so online or on the Internet.
8.2 No Solicitation. Commencing as of the Effective Date
and continuing until two years after the termination of Expert's retention by
ARTSTAR, Expert shall not solicit the employment or services of personnel
employed by the Company or by any direct or indirect parent or subsidiary of
the Company. Nothing herein shall prevent Expert from continuing to retain or
employ personnel in connection with his historical art services business,
except in connection with doing so online or on the Internet.
8.3 Non-Disclosure. Expert agrees that he will not, except
to the Company, its subsidiaries and affiliates, communicate or divulge to
any person, firm or corporation, directly or indirectly, any confidential or
proprietary information relating to the business, customers and suppliers or
other affairs of the Company, its parents, subsidiaries and their affiliates.
Without limiting the foregoing, all information concerning procedures and
strategy of the Company, its subsidiaries and parents shall be deemed
confidential and proprietary information. Nothing herein shall prevent Expert
from continuing to conduct his historical art services business, except in
connection with doing so online or on the Internet.
8.4 Change in Control.
8.4.1 Expert acknowledges that Expert's agreement herein not to compete is
essential to the Company and that the Company would not enter into this
Agreement if Expert did not so agree. Expert shall have no obligation under
paragraph 8.1, however, if (i) he leaves his relationship with the Company
following a Change in Control Event, as defined below, (ii) if the Company
terminates this Agreement without cause, or (iii) Expert terminates this
Agreement with Cause.
8.4.2 For purposes of this Agreement, a "Change in Control Event" shall mean (i)
the sale of all or substantially all of the Company's assets or (ii) any
transaction or series of related transactions (including without limitation any
reorganization, merger or consolidation) which results to the shareholders of
the Company (or, if the Company is at least 80% owned by another entity, the
shareholders of the Company's ultimate parent entity, as defined below)
immediately prior to such transaction holding, following such transaction, less
than fifty percent (50%) of the voting power of the surviving or continuing
entity. "Ultimate parent entity" means that entity which directly, or through
one or more other entities, owns eighty percent (80%) or more of the Company's
voting power.
9. Equitable Relief. Expert acknowledges that a breach by him of the
provisions of Section 8 of this Agreement will cause the Company irreparable
harm and that the damages to the Company arising therefrom will not be
determinable. Therefore, Expert agrees that in the event of a breach by Expert
of the terms of Section 8 hereof, the Company shall be entitled, in addition to
any and all other remedies available to it at law or in equity, to injunctive
and other mandatory relief without the need to prove damages, and Expert
consents to such relief in such an event.
10. Term and Termination.
10.1 This Agreement shall become effective on the date it is
executed by both parties (the "Effective Date"). Unless otherwise terminated as
provided in this section 10, the term of this Agreement shall expire on December
31, 2002, provided, however, that the term of this Agreement shall thereafter
automatically renew for successive one-year periods unless either party gives
notice to the other party of non-renewal no later that October 31st in any
calendar year of this Agreement after 2001. Any such notice of non-renewal shall
be deemed a termination without cause for purposes hereof.
10.2 The provisions of paragraph 10.1 notwithstanding, this
Agreement shall terminate upon the occurrence of any one or more of the
following:
a. Death of Expert;
b. Inability of Expert to perform his duties for a period of
60 consecutive days due to sickness, disability or any other cause, unless
Expert is granted a leave of absence by the Company; or
c. For cause as provided in sections 11.1 or 11.2 or 11.3.
10.3 Termination with Cause by the Company, Etc. Expert
shall be entitled to compensation earned through the date of termination if
termination is with cause by the Company, without cause by Expert or because
of Expert's death or disability as provided in sections 7.2(a) or (b).
10.4 Termination without Cause by the Company. In the event
the Company elects to terminate Expert without cause during the term of this
Agreement, Expert shall vest in all stock options due to vest pursuant to
paragraph 7.3 hereof at the end of the quarter during which notice of
termination is given to Expert by the Company plus those scheduled to vest at
the end of the one (1) next succeeding quarter. In addition, Expert shall be
entitled to base salary compensation equal to six (6) months' of base salary, as
severance, from the date of termination without cause. Further, the period of
non-competition and no solicitation under Section 8 shall be reduced to one (1)
in the event of termination of Expert by the Company without cause. However,
termination of Expert without cause under this subparagraph in the final six (6)
months of the term of this Agreement shall entitle Expert to base salary, as
severance, equal to the amount remaining during the term of this Agreement.
Termination without cause by the Company must be preceded by a minimum of a
sixty (60) days' prior written notice of such termination to Expert.
10.5 Resignation by Expert. In the event Expert elects to
terminate his relationship with the Company without cause by resigning, or
otherwise, Expert shall be entitled to no further base salary, Grant Shares or
stock options not theretofore vested as of and from the date of such
termination. Furthermore, termination without cause by Expert must be preceded
by a minimum of a sixty (60) days' prior written notice of such termination to
the Company.
10.6 Continuing Effect. Despite termination of this Agreement,
and irrespective of whether such termination has been effected with or without
cause by either Company or Expert, such termination shall not affect the
continuing enforceability of those provisions hereof that are by intended to
apply after the termination hereof, including without limitation those contained
in sections 8 and 9.
11. Cause and Breach.
11.1 Where reference is made in this Agreement to termination
by the Company with or without cause, "cause" shall mean cause resulting from
actions or inactions of Expert and is limited to the following:
(a) Repeated failure or refusal to carry out the reasonable directions of the
Company, provided such directions are consistent with the duties and obligations
herein set forth to be performed by Expert;
(b) Willful violation of a state or federal law involving the commission of (1)
a crime against the Company materially adversely affecting the Company or (2) a
felony of any kind; or
(c) Expert's medically confirmed misuse or abuse of alcohol or use of any
controlled substance; or
(d) Any material breach by Expert of this Agreement or the falsity of any
material representation or warranty of Expert herein not corrected as provided
in paragraph 11.3 hereof.
11.2 Where reference is made in this Agreement to termination
being by Expert with or without cause, "cause" shall mean any breach of this
Agreement by the Company not corrected as provided in paragraph 11.3 hereof.
11.3 Whenever a breach of this Agreement by either party is
relied upon as a justification for any action taken by the other party pursuant
to any provision of this Agreement (including without limitation termination
hereof), before such action is taken, the party asserting the breach shall give
the other party written notice of the existence and nature of the breach and
such other party shall have the opportunity to correct such breach during the
thirty-day period following such notice. If such cure is effected, then any such
breach shall not be a basis for the party intending to rely thereon.
12. Notices. All notices and other communications in connection with
this Agreement shall be in writing and shall be given by personal delivery or by
registered or certified mail, return receipt requested, addressed as follows:
If to Expert: Xxxxxxx Xxxx
000 Xxxx 00xx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, XX 00000
With a copy to: Xxxxxxx Xxxxxxx, Esq.
00 Xxxxxxxx Xxxxxx XX
Xxx Xxxx, XX 00000
If to the Company: Showstar Entertainment Corporation
300 -- 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
With a copy to: Xxxxx X. Xxxxx, Xx., Esq.
Xxxxxxx & Xxxxx P.L.L.C.
000 Xxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, XX 00000-0000
or to such other address as the party to receive the notice or other
communication shall have designated by notice to the other hereunder. The date
any such notice or other communication shall be deemed hereunder to have been
given shall be five (5) days after the date that it is deposited in the mails,
with proper postage prepaid, or when delivered personally by hand, courier or
otherwise.
13. Assignment.
13.1 Except as provided in paragraph 13.2 hereof, the rights
of either party shall not be assigned or transferred, whether voluntarily or by
operation of law or otherwise, without the other party's prior written consent,
nor shall the duties of either party be delegated in whole or in part, whether
voluntarily or by operation of law or otherwise, without the other party's prior
written consent. Any attempted assignment, transfer or delegation shall be of no
force or effect unless so consented to in writing.
13.2 Notwithstanding paragraph 13.1 hereof, the Company may
assign or delegate all or any part of its rights or obligations under this
Agreement to a direct or indirect subsidiary or direct or indirect parent or to
any entity owned by such a subsidiary or parent, or by merger, consolidation,
sale or transfer of all or substantially all of the Company's assets, provided
that any resulting assignee or transferee agrees in writing to succeed to the
obligations of the Company hereunder. All references to the Company herein shall
include any such permitted assignee, transferee or successor of the Company.
14. Prior Obligations. Expert represents and warrants to the Company
that he can enter into this Agreement and perform his obligations hereunder
without violating any contractual commitment to any other person, and Experts
covenants that in the performance of his duties under this Agreement he will not
use or divulge any information of any person he is lawfully required to maintain
in confidence.
15. Preparation of Agreement. Expert acknowledges that this Agreement
was prepared by attorneys representing the Company. This Agreement will have tax
and other consequences to Expert. Expert acknowledges that he has been advised
by the Company to consult with an attorney, tax advisor and other experts of his
choice before entering into this Agreement and he has done so. Expert further
acknowledges that he has not relied upon any legal or tax advice of the Company
or the Company's attorney in connection with this Agreement.
16. Miscellaneous.
16.1 Waiver. No delay or failure by a party to exercise any
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise expressly
set forth in a writing signed by such party. No consent or waiver, express or
implied, by any Venturer to or of any breach or default by another Venturer in
the performance by the other of its or his obligations hereunder shall be
effective unless made in a writing duly executed by the Venturer giving or
making such consent or waiver. No such consent or waiver shall be deemed or
construed to be consent or waiver to or of any other breach or default in the
performance by such other party of the same or any other obligation of such
Venturer.
16.2 Amendments. To be effective, all changes, additions and
other amendments to this Agreement must be set forth in a writing signed by the
party to be charged, and no oral changes, additions or other amendments hereto
shall be binding upon either party.
16.3 Integration. This Agreement constitutes the entire
agreement between the parties relating to the subject matter hereof and
supersedes and cancels all other prior agreements, understandings,
representations, warranties, inducements or other matters in connection with
such subject matter.
16.4 Severability; Blue Pencil. The unenforceability or
invalidity of any provision of this Agreement in a particular case shall not
render unenforceable or invalid in such case any other provision hereof or such
provision in any other case. If any one or more of the provisions of this
Agreement shall for any reason be deemed excessive as to duration, scope,
activity or subject or shall be otherwise unenforceable, such provision(s) shall
be construed or recast so as to enforce the intent of the parties as herein set
forth to the greatest extent permitted by applicable law.
16.5 Headings. The headings and titles in this Agreement are
for purposes of convenience of reference only and shall not in any way affect
the meaning, interpretation or enforcement of this Agreement.
16.6 Governing Law. This Agreement shall be governed by the
laws of the State of Washington as in effect for contracts made and to be
performed in the State of Washington. The parties hereby submit to the
jurisdiction of the courts of, and the federal courts located in, the State of
Washington for all purposes related to this Agreement and the relationship
between the parties, and such courts shall have exclusive jurisdiction and venue
of the subject matter hereof and thereof.
16.7. Nature of Relationship. The relationship of the parties
shall be only that of independent contractors. The parties do not intend to have
the relationship of employer-employee or of partners and neither party shall
hold itself out as having any such or similar relationship with the other party.
16.8. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
EXPERT: SHOWSTAR ENTERTAINMENT
CORPORATION
/s/ By: /s/
Xxxxxxx Xxxx Xxxx Xxxxx
Chairman and
Chief Executive Officer
