EXHIBIT 6.05
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 XXX XXXXXXX ("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 XXXX ("Xxxx") to provide similar and related art services to
ARTSTAR (Expert and Xxxx 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 contract, 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 services of Expert
contracted for prior to the Effective Date ("Old Business") shall be and
remain the business of Expert and the Company shall have no interest therein.
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, other than Old Business, shall
be reflected as revenue of ARTSTAR and
Expert shall be paid the following percentages of such revenues in the following
periods of the term of this Agreement:
Term of Agreement Percentage Paid Expert
Effective Date - 3rd month 80%
4th month - 6th month 60%
7th month - 9th month 40%
10th month - 12th month 20%
After the 12th month 0%
Expenses related to such revenues shall be borne by the parties in the same
proportion as the revenues are shared pursuant to the above schedule. After the
first (1st) year of this Agreement, all of Expert's art services activities
shall be provided through ARTSTAR and shall be fully reflected in ARTSTAR's
revenue, provided, however, that in the event the Company elects to no longer
fund ARTSTAR as permitted by paragraph 3 above, Expert may terminate this
Agreement and continue to operate his historical art services business as his
separate business.
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 fields of 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 Xxx Xxxxxx
00 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxx, 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, provided, however, that commencing one (1) year after the
Effective Date, the relationship of the parties shall be that of employer and
employee.
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 Xxx Liner Xxxx Xxxxx
Chairman and
Chief Executive Officer
